FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 20, 1996
Exact name of registrant as specified in its charter:
Delta and Pine Land Company
State of Incorporation: Delaware
Commission File Number: 000-21788
I.R.S. Employer Identification Number: 62-1040440
Address of Principal Executive Offices (including zip code)
One Cotton Row, Scott, Mississippi 38772
Registrant's telephone number, including area code:
(601) 742-4000
Item 2. Acquisition or Disposition of Assets: Merger of D&PL1,
D&PL2 and D&PL3, wholly-owned subsidiaries of Delta and Pine Land
Company (the "Company"), with and into Arizona Processing, Inc.
("API"), Ellis Brothers Seed, Inc. ("EBS")and Mississippi Seed,
Inc. ("MSI"), respectively, separately and collectively known as
The Sure Grow Companies, effective May 21, 1996, to be accounted
for as a pooling of interests.
1. Agreement Between the D&PL Companies and The Sure Grow
Companies, Sure Grow Shareholders and Sure Grow Principals. On May
21, 1996, pursuant to the Agreement between the D&PL Companies and
The Sure Grow Companies, Sure Grow Shareholders and Sure Grow
Principals dated May 20, 1996 (the "Agreement"), D&PL1, D&PL2, and
D&PL3, wholly-owned subsidiaries of Delta and Pine Land Company
(the "Company"), acquired by merger Arizona Processing, Inc.
("API"), Ellis Brothers Seed, Inc. ("EBS") and Mississippi Seed,
Inc. ("MSI"), respectively.
The Company exchanged 1,548,483 unregistered shares of its common
stock for all of the issued and outstanding shares of API, EBS and
MSI. The merger will be accounted for as a pooling of interests.
API, EBS and MSI will continue to operate as separate subsidiaries
of the Company. All current employees of the acquired companies
are expected to continue their employment.
Item 7. Financial Statements and Exhibits:
(a) Financial statements of businesses acquired:
(1) Sure Grow Companies Combined Audited Balance Sheet as of
August 31, 1994 and the Related Combined Statements of Income
and Retained Earnings and of Combined Cash Flows for the Year
Ended August 31, 1994 and Independent Auditor's Report.
(2) Sure Grow Companies Combined Audited Balance Sheet as of
August 31, 1995 and the Related Combined Statements of Income
and Retained Earnings and of Combined Cash Flows for the Year
Ended August 31, 1995 and Independent Auditor's Report.
(3) Sure Grow Companies Combined Compiled (Unaudited) Interim
Balance Sheet as of May 31, 1996 and the Related Combined
Statements of Income and Cash Flows for the Nine Months Ended
May 31, 1996 and Accountant's Compilation Report.
Note: The financial statements of Sure Grow Seed, Inc. were prepared
using August 31 as its fiscal year end. The financial statements
of Mississippi Seed, Inc., Arizona Processing, Inc. and Ellis
Brothers, Inc. were prepared using June 30 as their fiscal year
ends. If the Company elects to change the Sure Grow Companies'
year ends to August 31, such financial statements will be filed
by amendment.
(b) Pro forma financial information:
(1) Delta and Pine Land Company Pro Forma Consolidated Balance
Sheets (Unaudited)-August 31, 1995 and May 31, 1996
(2) Delta and Pine Land Company Consolidated Statements of
Operations (Unaudited) for the Years Ended August 31,
1993, 1994 and 1995 and for the Nine Months Ended May 31,
1996.
(3) Notes to Pro Forma Consolidated Financial Statements
(Unaudited).
(c) Exhibits:
10.27 Agreement between the D&PL Companies and The
Sure Grow Companies, Sure Grow Shareholders and
Sure Grow Principals dated May 20, 1996.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DELTA AND PINE LAND COMPANY
Date: August 5, 1996 By: /s/ W. Thomas Jagodinski
------------------------
W. Thomas Jagodinski,
Vice President and Treasurer
<PAGE>
SURE GROW COMPANIES COMBINED
CENTRE, ALABAMA
MAY 31, 1996
</PAGE>
<PAGE>
SURE GROW COMPANIES COMBINED
INDEX
Accountant's Compilation Report
Financial Statements (unaudited)
Consolidated Balance Sheets--May 31, 1996
Consolidated Statements of Income--Nine Months Ended
May 31, 1996
Consolidated Statement of Cash Flows--Nine Months Ended
May 31, 1996
</PAGE>
<PAGE>
Certified
Public
Accountants
Goodgame & Associates, P.C.
Accountant's Compilation Report
To the Board of Directors and Stockholders of
Sure Grow Seed, Inc.,
Ellis Brothers Seed, Inc.,
Arizona Processing, Inc., and
Mississippi Seed, Inc.
Centre, Alabama
We have compiled the accompanying combined balance sheet of Sure Grow
Seed, Inc. as of May 31, 1996, including Ellis Brothers Seed, Inc. as of
March 31, 1996, Arizona Processing, Inc. as of March 31, 1996, and
Mississippi Seed, Inc. as of March 31, 1996; and the related combined
statements of income and cash flows for the nine months then ended, in
accordance with Statements of Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We have
not audited or reviewed the accompanying combined financial statements and,
accordingly, do not express an opinion or any other form of assurance on
them.
Management has elected to omit substantially all of the disclosures
required by generally accepted accounting principles. If the omitted
disclosures were included in the financial statements, they might influence
the user's conclusions about the Company's financial position, results
of operations, and cash flows. Accordingly, these financial statements are
not designed for those who are not informed about such matters.
/s/ Goodgame and Associates, P.C.
Anniston, Alabama
June 20, 1996
Post Office Box 128 - Anniston, Alabama 36202 - 205/236-4600
Centre Office 205/927-5382 - FAX 205/236-4670
MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
</PAGE>
<PAGE>
BALANCE SHEET
SURE GROW COMPANIES COMBINED
May 31,
1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,290,199
Receivables 7,693,740
Inventories 6,724,172
Prepaid expenses 462,571
Deferred incomes taxes -0-
Total Current Assets 16,170,682
Property, Plant and Equipment, net 4,682,291
Notes receivable from employees 146,056
Intangible assets, net 75,000
Other assets 578,967
TOTAL ASSETS $21,652,996
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 8,516,168
Accounts payable 2,572,080
Accrued expenses 1,244,650
Income taxes payable 1,049,262
Total Current Liabilities 13,382,160
LONG-TERM DEBT 1,677,210
DEFERRED INCOME TAXES 188,819
STOCKHOLDERS' EQUITY:
Common stock 90,000
Capital in excess of par value 152,000
Retained earnings 6,162,807
Total Stockholders' equity 6,404,807
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $21,652,996
(Unaudited) See Accountant's Compilation Report.
</PAGE>
<PAGE>
STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED
SURE GROW COMPANIES COMBINED
May 31,
1996
Net Sales and Royalties $17,050,347
Costs of Sales 7,654,245
Gross Profit 9,396,102
Operating Expenses
Research and development 225,043
Selling 818,091
General and administrative 5,257,704
Total Operating Expenses 6,300,838
Operating Income 3,095,264
Interest Expense (379,810)
Other 88,105
Income before Income Taxes 2,803,559
Provision for Income Taxes 1,047,116
NET INCOME $ 1,756,443
(Unaudited) See Accountant's Compilation Report.
</PAGE>
<PAGE>
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SURE GROW COMPANIES COMBINED
May 31,
1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,756,443
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 279,774
(Increase) decrease in:
Notes receivable from employees 3,637
Intangible and other assets (41,714)
Change in current assets and liabilities:
Accounts and notes receivable (5,800,197)
Inventories (4,294,441)
Prepaid expenses (417,280)
Accounts payable 6,524
Accrued expenses (536,172)
Income taxes payable 541,320
Other, Net (27,585)
Net cash used in operating activities (8,529,691)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (855,613)
Net cash used in investing activities (855,613)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of short & long term debt (16,353)
Cash dividends -0-
Proceeds from long-term debt 212,556
Proceeds from short-term debt 7,860,091
Additional paid in capital -0-
Net cash provided by financing activities 8,056,294
Net Decrease in Cash & Cash Equivalents (1,329,010)
Cash and Cash Equivalents, beginning 2,619,209
Cash and Cash Equivalents, ending $ 1,290,199
Supplemental Disclosures of Cash Flow Information:
Cash paid during the nine months for:
Interest 379,810
Income Taxes 760,402
(Unaudited) See Accountant's Compilation Report.
</PAGE>
<PAGE>
SURE GROW COMPANIES COMBINED
CENTRE, ALABAMA
AUDITED FINANCIAL STATEMENTS
AUGUST 31, 1995
and
JUNE 30, 1995
</PAGE>
<PAGE>
TABLE OF CONTENTS
SURE GROW COMPANIES COMBINED
Centre, Alabama August 31, 1995
and June 30, 1995
Independent Auditor's Report
Combined Balance Sheets
Combined Income Statements
Combined Statements of Retained Earnings
Combined Statements of Cash Flows
Notes to the Financial Statements
</PAGE>
<PAGE>
Certified
Public
Accountants
Goodgame & Associates, P.C.
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders of
Sure Grow Seed, Inc., Mississippi Seed, Inc.,
Arizona Processing, Inc., and Ellis Brothers Seed, Inc.
Centre, Alabama
We have audited the accompanying combined balance sheet of Sure Grow
Companies as of August 31, 1995 and June 30, 1995 and the related combined
statements of income, retained earnings, and cash flows for the year then
ended. The combined financial statements include the financial statements
of Sure Grow Seed, Inc. as of August 31, 1995 and Mississippi Seed, Inc.,
Arizona Processing, Inc., and Ellis Brothers Seed, Inc., as of June 30,
1995 which are related through common ownership and management. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
combined financial statements based on our audit. We did not audit the
financial statements of Mississippi Seed, Inc. which statements reflect
total assets of $2,487,442 as of June 30, 1995 and total revenues of
$3,303,442 for the year then ended. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as
it relates to the amounts included for Mississippi Seed, Inc., is based
solely on the report of the other auditors.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe our
audit and the report of other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audit and the report of other auditors,
the combined financial statements referred to in the first paragraph present
fairly, in all material respects, the financial position of the Sure Grow
Companies as of August 31, 1995 and June 30, 1995 and the result of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ Goodgame and Associates, P.C.
Anniston, Alabama
October 20, 1995
Post Office Box 128 Anniston, Alabama 36202 - 205/1236-4600
Centre Office 205/927-5382 - FAX 205/236-4670
MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
</PAGE>
<PAGE>
COMBINED BALANCE SHEET
SURE GROW COMPANIES COMBINED
Centre, Alabama
ASSETS
Current Assets
Cash $2,619,209
Accounts receivable - trade (net of
allowance for doubtful accounts) 1,386,912
Inventories 2,429,730
Prepaid taxes 45,292
Total Current Assets 6,481,143
Fixed Assets
Buildings & land 2,596,192
Equipment and furniture 3,727,210
Vehicles 449,640
Less: Accumulated depreciation (2,666,589)
Net Fixed Assets 4,106,453
Other Assets
Trade name and goodwill 75,000
Investments 586,230
Notes Receivable 498,202
Total Other Assets (Net of Amortization) 1,159,432
TOTAL ASSETS $11,747,028
</PAGE>
<PAGE>
August 31, 1995
& June 30, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 2,454,353
Accrued expenses 2,288,764
Notes Payable and Current Portion of long-term debt 650,307
Total Current Liabilities 5,393,424
Long-Term Liabilities
Notes payable 1,514,366
Deferred Income Taxes 384,296
Total Long-Term Liabilities 1,898,662
Total Liabilities 7,292,086
Stockholders' Equity
Common stock 90,000
Paid in capital 152,000
Retained earnings 4,212,942
Total Stockholders' Equity 4,454,942
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,747,028
</PAGE>
<PAGE>
COMBINED INCOME STATEMENTS
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1995 & June 30, 1995
1995
Sales 19,318,049
Cost of Sales 8,520,938
Gross Profit 10,797,111
Operating and Selling Expenses 8,912,350
Income from Operations 1,884,761
Other Income and Expenses (273,685)
Income from operations before provision for income taxes 1,611,076
Provision for Current and Deferred Income Taxes 772,209
Net Income before extraordinary items 838,867
Extraordinary items (Note 11)
(Less applicable income taxes of $17,009) 28,591
NET INCOME $ 867,458
The accompanying notes are an integral part of these financial statements.
</PAGE>
<PAGE>
COMBINED STATEMENTS OF RETAINED EARNINGS
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1995 & June 30, 1995
1995
Balance, beginning of year $3,401,568
Adjustment for the combination and eliminations
of party data (See Note 10) (56,084)
Balance, beginning of year restated 3,345,844
Net income for the year 867,458
BALANCE, END OF YEAR $4,212,942
The accompanying notes are an integral part of these financial statements.
</PAGE>
<PAGE>
COMBINED STATEMENTS OF CASH FLOWS
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1995 & June 30, 1995
1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 867,458
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 427,808
Gain on sale of equipment (2,839)
(Increase) decrease in:
Accounts receivable - trade (380,326)
Inventories (395,058)
Prepaid expenses (2,415)
Increase (decrease) in:
Accounts payable & current notes payable 487,710
Deferred tax liability 248,784
Deferred revenue (23,198)
Accrued expenses 1,688,824
Total Adjustments 2,049,290
Net Cash Provided by Operating Activities 2,916,748
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (1,907,317)
Notes receivable--long-term 139,697
Investments purchased (554,872)
Net Cash (Used) by Investing Activities (2,322,492)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 575,557
Principal payments on long-term debt (154,424)
Equity transferred 204,841
Net Cash Provided by Financing Activities 625,974
Net Increase (Decrease) in Cash 1,220,230
Cash and Cash Equivalents, Beginning of Year 1,398,979
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,619,209
Supplemental Disclosure:
Interest 312,682
Taxes 46,833
The accompanying notes are an integral part of these financial statements.
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1995 & June 30, 1995
NOTE 1 - Summary of Significant Accounting Policies
This summary of significant accounting policies of Sure Grow Companies is
presented to assisted in understanding the combined financial statements.
The financial statements and notes are representations of the Companies
management, who are responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
"Sure Grow Companies Combined" consists of the year end audited financial
statements of Sure Grow Seed, Inc. as of August 31, 1995 and Ellis
Brothers Seed, Inc., Mississippi Seed, Inc. and Arizona Processing, Inc.
as of June 30, 1995. The combined financial statements are adjusted for
intercompany sales, investments, accounts receivable, and accounts payable.
Nature of Operations
Arizona Processing, Inc., Ellis Brothers Seed, Inc. and Mississippi Seed,
Inc. sell and distribute cottonseed as their major product in the Arizona,
Alabama and Mississippi sales markets. Their primary customer is Sure
Grow Seed, Inc. of which the three companies are the sole shareholders.
Sure Grow Seed, Inc. was formed in August of 1992 by the other three
corporations to handle the combined sales efforts for selected varieties
of cottonseed. The company's major customers are three large chemical
companies. These companies represent 63 % of Sure Grow Seed, Inc.'s sales.
Basis of Accounting
Assets, liabilities, income and expenses are recorded using the accrual
basis of accounting.
Inventories
Inventories are stated at the lower of cost or market using the first-in,
first-our cost flow assumption.
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1995 & June 30, 1995
NOTE 1 - Summary of Significant Accounting Policies-Continued
Property and Equipment
Fixed assets are recorded at cost. Depreciation is calculated using the
straight-line and accelerated cost recovery methods over the estimated
useful lives of the assets.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company has considered
only actual cash, and does not consider any debt to be cash equivalents.
Use of Estimates in the Preparation of Financial Statements
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 - Accounts Receivable
Accounts receivable consists of amounts due to the Company from regular
operations. Related party transactions between the four companies have
been eliminated.
Accounts Receivable 1995
Accounts Receivable - Trade $1,242,643
Accounts Receivable - Insurance Settlement 144,269
TOTAL ACCOUNTS RECEIVABLE $1,386,912
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1995 & June 30, 1995
NOTE 2- Accounts Receivable-Continued
Three of the companies use the direct write-off method for bad debts. One
company uses the allowance method. These receivables are reported net of an
allowance for doubtful accounts of $36,843.
NOTE 3- Inventories
Inventories as of August 31,1995 and June 30, 1995 consist of bagged,
delinted and treated cottonseed stored in warehouses in Phoenix (Arizona),
Centre(Alabama) and Tunica (Mississippi). Inventory located in Centre,
Alabama also includes Chemicals and Fertilizer.
Inventory of Cottonseed $1,982,329
Inventory of other items 447,401
Total Inventory $2,429,730
NOTE 4- Investments
Due to management's ability to influence the operating and financial
decisions of Sure Grow Seed, Inc., the investment in Sure Grow Seed,
Inc. by each shareholder is accounted for using the equity method.
Under the equity method, the original investment is recorded at cost
and adjusted periodically to recognize each shareholder's portion of the
subsequent earnings and losses of Sure Grow Seed, Inc. However, the
effect of this method of accounting for investments has been eliminated
in these combined financial statements.
NOTE 5- Notes Payable
Notes Payable consist of (A.) Lines of credit from banks secured by
inventory and accounts receivable and (B.) Installment notes with banks
and individuals secured by the property, plant, equipment, inventory and
receivables of the component companies.
A. Lines of Credit Consist of-
A $4,000,000 Line of Credit with a bank secured by the assets of Sure
Grow Seed, Inc. The balance outstanding at year end of -O-.
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1995 & June 30, 1995
NOTE 5- Notes Payable-Continued
A $3,000,000 Line of Credit with a bank secured by the assets of Ellis
Brothers Seed, Inc. The balance outstanding at year end of $410,000.
A $1,600,000 Line of Credit with a bank secured by the assets of Arizona
Processing, Inc. The balance outstanding at year end of -O-.
B. Installment Notes consist of-
Description Total Current Long-Term
Amount Due Portion Portion
A note to a tractor distributor
for the purchase of equipment
with interest at 9%. 16,838 2,286 14,552
A note secured by property and
equipment of the company,
guaranteed personally by its owner.
Interest at 9% is due quarterly. The
principal is payable in annual installments
due each July 2 through 1999. 750,000 150,000 600,000
Two installment notes, secured
by property and equipment
of the company. Interest at
7.25%. 250,860 12,000 238,860
A note to a stockholder due in annual
installments for 20 years. Interest is
payable annually at the current bank
prime rate. 294,854 12,854 282,000
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1995 & June 30, 1995
Description Total Current Long-term
Amount Due Portion Portion
A note to the Small Business
Administration for disaster
assistance. Interest at
4%. 103,967 5,808 98,159
A note to First Alabama
Bank, original principal
$275,000 matures 8-1-99;
with annual payments
of $55,000 and interest
at a variable rate of
7.25%. 275,000 47,582 227,418
A note to GMAC Financial
Services, original principal
$17,000 matures 11-27-97;
$411.04/month, interest at
a fixed rate of 7.5 %. 10,505 4,265 6,240
A 48 months installment
note to purchase a vehicle.
Interest rate is 9%. 19,293 5,512 13,781
A note payable to a Life
Insurance Company. 5,771
Other notes payable per
Mississippi Seed, Inc.
auditor's report 27,585
TOTAL LONG-TERM DEBT $240,307 $1,514,366
Current portion of long-term debt consists of $240,307 from installment
loans and $410,000 outstanding and due on demand on the lines of credit.
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1995 & June 30, 1995
NOTE 6- Income Taxes
The Companies have adopted SFAS No. 109 "Accounting for Income Taxes."
Among other provisions, this standard requires deferred tax amounts to
be computed using effective corporate incomes tax rates for the years
in which the taxes will be paid or refunds received.
The combined provision for income tax expense at August 31, 1995 and June
30, 1995 consisted of:
Taxes Payable $523,425
Deferred Taxes 248,784
Total $772,209
Deferred taxes arise because of differences in the book and tax basis
of certain assets and liabilities. These differences are referred to as
temporary differences. Deferred tax liabilities are taxes we expect to
pay in future periods. Similarly, deferred assets are taxes we expect
to be refunded in future periods. At August 3 1, 1995 and June 30, 1995
the following temporary differences existed.
Depreciation $328,572
Undistributed Earnings of Investees 519,580
Future Taxable Income $848,152
Applying an effective tax rate to the future income results in a
total deferred the liability of $384,296. The effective rate is comprised
of a federal tax rate of thirty-four percent and a state rate of five
percent for Sure Grow Seed, Inc., Mississippi Seed, Inc. Ellis Brothers
Seed, Inc., and a state rate of nine percent for Arizona Processing, Inc.
NOTE 7 - Extraordinary Items
On May 27, 1995 the Sure Grow Seed, Inc. lost approximately 4,132 bags of
cottonseed due to wind and water damage at a storage facility in Tunica,
Mississippi. The total cost of the seed and packaging destroyed was
$98,669. The insurance company with whom Sure Grow Seed, Inc. maintains
coverage has agreed to reimburse Sure Grow Seed, Inc. for $144,269.
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
NOTE 7 - Extraordinary Items-Continued
This reimbursement constitutes the sales value of the seed less
freight included in the sales price and the policy deductible. Therefore,
a $45,600 gain, net of income tax at an effective rate of 37.3 % or
($17,009), has been recognized as an extraordinary gain of $28,591.
NOTE 8 - Merger and Breeder Contract
On February 21, 1992 Sure Grow Research (a Partnership) contracted
with Robert R. Bridge for his services as a cotton breeder for a minimum
term of 10 years. On June 30, 1995 Sure Grow Research (a Partnership) was
dissolved and it's assets and liabilities including this contract were merged
with Sure Grow Seed, Inc. The net result was a $56,643 increase in
investment in Sure Grow Seed, Inc.
NOTE 9 - Contingencies
Three farmers in Madison County, Mississippi, are asserting a claim
against Sure Grow Seed, Inc., for alleged defective cotton seed sold to them
for planting of the 1995 crop. The attorney for Sure Grow Seed, Inc. advises
that no litigation is pending on this claim at the present time, however,
these farmers have filed a complaint with the Mississippi Department of
Agriculture and that Complaint is now pending. The matter will be referred to
the Arbitration Council, appointed by the Mississippi Commissioner of
Agriculture, and while this arbitration is not binding, it is a
prerequisite to litigation.
Legal council is unable at this time to assess the exposure of Sure Grow
Seed, Inc. on these claims since there is no assessment of the claimed
damage. Investigation of these claims by Sure Grow Seed, Inc., indicates that
the problems experienced by these farmers with their 1995 crop was not the
fault of Sure Grow Seed, Inc., but was due to weather and other causes.
Therefore, no liability for the above referenced claim has been included
in these financial statements.
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
Note 10- Retained Earnings Restatement
Subject to the issuance of combined financial statements of Sure Grow
Companies and elimination of the equity method of accounting for Arizona
Processing, Inc., Ellis Brothers Seed,Inc., and Mississippi Seed, inc.
common ownership and management of Sure Grow Seed, Inc. it was determined
that the cumulative change in beginning retained earnings of the year
ended August 31, 1995 and June 30, 1995 was overstated $56,084.
</PAGE>
<PAGE>
SURE GROW COMPANIES COMBINED
CENTRE, ALABAMA
AUDITED FINANCIAL STATEMENTS
AUGUST 31, 1994
and
JUNE 30, 1994
</PAGE>
<PAGE>
TABLE OF CONTENTS
SURE GROW COMPANIES COMBINED
Centre, Alabama August 31, 1994
and June 30, 1994
Independent Auditor's Report
Combined Balance Sheets
Combined Income Statements
Combined Statements of Retained
Earnings Combined Statements of Cash
Flows Notes to the Financial
Statements
</PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders of
Sure Grow Seed, Inc.
Mississippi Seed, Inc.
Arizona Processing, Inc.
Ellis Brothers Seed, Inc.
Centre, Alabama
We have audited the accompanying combined balance sheet of Sure
Grow Companies as of August 31, 1994 and June 30, 1994 and the related
combined statements of income, retained earnings, and cash flows for the
year then ended. The combined financial statements include the financial
statements of Sure Grow Seed, Inc. as of August 31, 1994 and Mississippi
Seed, Inc., Arizona Processing, Inc., and Ellis Brothers Seed, Inc., as
of June 30, 1994 which are related through common ownership and management.
These combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe our
audit and the report of other auditors provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to in the
first paragraph present fairly, in all material respects, the financial
position of the Sure Grow Companies as of August 31, 1994 and June 30, 1994
and the result of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Goodgame and Associates, P.C.
Anniston, Alabama
July 31, 1996
</PAGE>
<PAGE>
COMBINED BALANCE SHEET
SURE GROW COMPANIES COMBINED
Centre, Alabama
ASSETS
Current Assets
Cash $1,398,978
Accounts receivable - trade (net of
allowance for doubtful accounts) 1,001,138
Inventories 2,034,673
Prepaid taxes 44,940
Total Current Assets 4,479,729
Fixed Assets
Buildings & land 1,613,265
Equipment and furniture 2,897,880
Vehicles 362,369
Less: Accumulated depreciation (2,301,073)
Net Fixed Assets 2,572,441
Other Assets
Trade name and goodwill (Net of Amortization) 126,666
Investments 81,478
Notes Receivable 1,547,673
Total Other Assets 1,755,817
TOTAL ASSETS $ 8,807,987
</PAGE>
<PAGE>
August 31, 1994
& June 30, 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $2,050,000
Accrued expenses 558,180
Notes Payable and Current portion of long-term debt 400,818
Income taxes payable 28,604
Total Current Liabilities 3,037,602
Long-Term Liabilities
Notes payable 2,047,028
Deferred Income Taxes 135,513
Total Long-Term Liabilities 2,182,541
Total Liabilities 5,220,143
Stockholders' Equity
Common stock 90,000
Paid in capital 152,000
Retained earnings 3,345,844
Total Stockholders' Equity 3,587,844
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 8,807,987
The accompanying notes are an integral part of these financial statements.
</PAGE>
<PAGE>
COMBINED INCOME STATEMENTS
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1994 & June 30, 1994
Sales $13,079,882
Cost of Sales 7,489,793
Gross Profit 5,590,089
Operating and Selling Expenses 5,319,064
Income from operations 271,025
Other Income and Expenses (60,107)
Income from operations before provision for income taxes 210,918
Provision for Current and Deferred income Taxes 66,828
NET INCOME $144,090
The accompanying notes are an integral part of these financial statements.
</PAGE>
<PAGE>
COMBINED STATEMENTS OF RETAINED EARNINGS
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1994 & June 30, 1994
Balance, beginning of year $3,246,950
Adjustment for the combination and eliminations
of party data (See Note 8)
(45,196)
Balance, beginning of year restated 3,201,754
Net income for the year 144,090
BALANCE, END OF YEAR $3,345,844
The accompanying notes are an integral part of these financial statements
</PAGE>
<PAGE>
COMBINED STATEMENTS OF CASH FLOWS
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1994 & June 30, 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $144,090
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 351,126
Gain on sale of equipment (72,301)
(Increase) decrease in:
Accounts receivable - trade 1,065,488
Inventories (949,811)
Prepaid expenses (6,710)
Increase (decrease) in:
Accounts payable & current notes payable 1,336,721
Deferred tax liability 32,851
Deferred revenue 23,198
Accrued expenses (115,234)
Other Adjustments (520,348)
Net Cash Provided by Operating Activities 1,289,070
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from equipment sales 133,060
Purchase of equipment (495,886)
Notes Receivable--long-term (128,829)
Investments purchased (220,580)
Net Cash (Used) by Investing Activities (712,235)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 89,162
Principal payments on long-term debt (794,891)
Equity transferred 10,528
Cash value of life insurance (774)
Net Cash Provided by Financing Activities (695,975)
Net Increase (Decrease) in Cash (119,140)
Cash and Cash Equivalents, Beginning of Year 1,518,118
CASH AND CASH EQUIVALENTS, END OF YEAR $1,398,978
Supplemental Disclosure:
Interest 186,481
Taxes 39,031
The accompanying notes are an integral part of these financial statements.
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1994 & June 30, 1994
NOTE 1 - Summary of Significant Accounting Policies
This summary of significant accounting policies of Sure Grow Companies
is presented to assist in understanding the combined financial statements.
The financial statements and notes are representations of the Companies
management, who are responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles and
have been consistently applied in the preparation of the financial
statements.
"Sure Grow Companies Combined" consists of the year end audited financial
statements of Sure Grow Seed, Inc. as of August 31, 1994 and Ellis Brothers
Seed, Inc., Mississippi Seed, Inc. and Arizona Processing, Inc. as of June
30, 1994. The combined financial statements are adjusted for intercompany
sales, investments, accounts receivable, and accounts payable.
Nature of Operations
Arizona Processing, Inc., Ellis Brothers Seed, Inc. and Mississippi Seed,
Inc. sell and distribute cottonseed as their major product in the Arizona,
Alabama and Mississippi sales markets. Their primary customer is Sure Grow
Seed, Inc. of which the three companies are the sole shareholders. Sure
Grow Seed, Inc. was formed in August of 1992 by the other three corporations
to handle the combined sales efforts for selected varieties of cottonseed.
The company's major customers are three large chemical companies. These
companies represent 70%. of Sure Grow Seed, Inc.'s sales.
Basis of Accounting
Assets, liabilities, income and expenses are recorded using the accrual
basis of accounting.
Inventories
Inventories are stated at the lower of cost or market using the first-in,
first-our cost flow assumption.
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1994 & June 30, 1994
NOTE 1 -Summary of Significant Accounting Policies -Continued
Property and Equipment:
Fixed assets are recorded at cost. Depreciation is calculated using the
straight-line and accelerated cost recovery methods over the estimated
useful lives of the assets.
Cash and Cash Equivalents:
For purposes of the statements of cash flows, the Company has considered
only actual cash, and does not consider any debt to be cash equivalents.
Use of Estimates in the Preparation of Financial Statements:
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and the disclosur of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 - Accounts Receivable
Accounts receivable consists of amounts due to the Company from regular
operations. Related party transactions between the four companies have
been eliminated.
Accounts Receivable 1994
Accounts Receivable - Trade $ 681,631
Accounts Receivable - Employees 96,649
Accounts Receivable - Stockholders 226,412
Less. Allowance for Doubtful Accounts (3,554)
TOTAL ACCOUNTS RECEIVABLE $1,001,138
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1994 & June 30, 1994
NOTE 2- Accounts Receivable-Continued
Three of the companies use the direct write-off method for bad debts. One
company uses the allowance method. These receivables are reported net of an
allowance for doubtful accounts of $3,554.
NOTE. 3- Inventories
Inventories as of August 31,1994 and June 30, 1994 consist of bagged,
delinted and treated cottonseed stored in warehouses in Phoenix (Arizona),
Centre (Alabama) and Tunica (Mississippi). Inventory located in Centre,
Alabama also includes Chemical and Fertilizer.
Finished Goods $1,548,291
Raw Materials 67,552
Supplies and Other 418,830
Less Reserves -0-
Total Inventory $2,034,673
NOTE 4- Investments
Due to management's ability to influence the operating and financial
decisions of Sure Grow Seed, Inc., the investment in Sure Grow Seed, Inc.
by each shareholder is accounted for using the equity method. Under the
equity method, the original investment is recorded at cost and adjusted
periodically to recognize each shareholder's portion of the subsequent
earnings and losses of Sure Grow Seed, Inc. However, the effect of this
method of accounting for investments has been eliminated in these combined
financial statements.
NOTE 5- Notes Payable
Notes Payable consist of (A.) Lines of credit from banks secured by
inventory and accounts receivable and (B.) Installment notes with banks
and individuals secured by the property, plant, equipment, inventory and
receivables of the component companies.
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
SURE GROW COMPANIES COMBINED For the years ended
Centre,Alabama August 31, 1995 & June 30, 1995
NOTE 5- Notes Payable-Continued
A. Lines of Credit Consist of:
A $1,000,000 Line of Credit with a bank secured by the assets of Sure
Grow Seed, lnc. The balance outstanding at year end of -O-.
A $3,000,000 Line of Credit with a bank secured by the assets of Ellis
Brothers Seed, Inc. The balance outstanding at year end of $57,573.
A $1,600,000 Line of Credit with a bank secured by the assets of Arizona
Processing, Inc. The balance outstanding at year end is -O-.
B. Installment Notes consist of:
Description Total Current Long-Term
Amount Due Portion Portion
A note to a tractor distributor
for the purchase of equipment
with interest at 9 %. 16,954 2,286 14,668
A note secured by property &
equipment of the company,
guaranteed personally by
its owner. Interest at 9%
is due quarterly. The
principal is payable in annual
installments due each July 2
through 1999. 900,000 300,000 600,000
Installment notes, secured
by property and equipment
of the company. Interest at
7.25%. 171,430 14,285 157,145
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1994 & June 30, 1994
NOTE 5-Notes Payable-Continued
B.Installment Notes-Continued:
Description Total Current Long-Term
Amount Due Portion Portion
A note to a bank due in
annual installments for 20
years. Interest is payable
annually at the current bank
prime rate. 1,050,000 14,742 1,035,258
A note to the Small Business
Administration for disaster
assistance. Interest at 4%. 109,119 5,152 103,967
A installment note to purchase
a vehicle matures 11-27-97;
interest at a fixed rate of
7.5%. 14,487 3,982 10,505
2 48 months installment
note to purchase a vehicle.
Interest rate is 9%, 22,091 2,798 19,293
A note payable to a Life
Insurance Company 6,107
Note due by Mississippi Seed,
Inc. to a related party
Farmers & Planters Gin with
interest at 5%. 72,500 72,500
Other notes payable per
Mississippi Seed, Inc.
auditor's report 27,585
TOTAL LONG-TERM DEBT $343,245 $2,047,028
Current portion of Long-Term debt consists of $343,245 from installment
loans and $57,573 outstanding and due on demand on the lines of credit.
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1994 & June 30, 1994
NOTE 6- Income Taxes
The Companies have adopted SFAS No. 109 "Accounting for Income Taxes,
Among other provisions, this standard requires deferred tax amounts to
be computed using effective corporate incomes tax rates for the years in
which the taxes will be paid or refunds received.
The combined provision for income tax expense at August 31, 1994 and June
30, 1994 consisted of:
Taxes Payable $42,904
Deferred Taxes 23,924
Total $66,828
Deferred taxes arise because of differences in the book and tax basis of
certain assets and liabilities. These differences are referred to as
temporary differences. Deferred tax liabilities are taxes we expect to pay
in future periods. Similarly, deferred assets are taxes we expect to be
refunded in future periods. At August 31, 1994 and June 30, 1994
the following temporary differences existed.
Depreciation $253,302
Undistributed Earnings of Investees 83,244
Future Taxable Income $336,546
Applying an effective tax rate to the future income results in a total
deferred tax liability of $135,513. The effective rate is comprised of a
federal tax rate of thirty-four percent and a state rate of five percent
for Sure Grow Seed, Inc., Mississippi Seed, Inc. Ellis Brothers Seed,
Inc., and a state rate of nine percent for Arizona Processing, Inc.
NOTE 7 - Merger and Breeder Contract
On February 21, 1992 Sure Grow Research (a partnership) contracted with
Robert R. Bridge for his services as a cotton breeder for a minimum term of
10 years. On June 30, 1995, Sure Grow Research (a Partnership) was
dissolved and it's assets and liabilities including this contract were
merged with Sure Grow Seed, Inc. The net result was a $56,643 increase
in investment in Sure Grow Seed, Inc.
</PAGE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
SURE GROW COMPANIES COMBINED For the years ended
Centre, Alabama August 31, 1994 & June 30, 1994
Note 8 - Retained Earnings Restatement
Subject to the issuance of combined financial statements of Sure Grow
Companies and elimination of the equity method of accounting for Arizona
Processing, Inc., Ellis Brothers Seed, Inc., and Mississippi Seed, Inc.
common ownership and management of Sure Grow Seed, Inc. it was determined
that the cumulative change in beginning retained earnings of the year
ended August 31, 1993 and June 30, 1993 was overstated $45,196.
</PAGE>
<PAGE>
DELTA AND PINE LAND COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share amounts)
August 31, May 31,
1995 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,192 $ 5,992
Receivables 5,252 81,129
Inventories 20,168 36,403
Prepaid expenses 1,159 1,215
Deferred income taxes 1,525 1,525
Total current assets 36,296 126,264
PROPERTY, PLANT and EQUIPMENT, net 41,091 50,428
NOTES RECEIVABLE FROM EMPLOYEES 833 421
EXCESS OF COST OVER NET ASSETS OF
BUSINESSES ACQUIRED, net 1,463 5,988
INTANGIBLE ASSETS, net 3,236 3,260
OTHER ASSETS 4,623 4,561
$ 87,542 $ 190,922
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 65 $ 19,437
Accounts payable 6,142 9,186
Accrued expenses 11,746 58,098
Income taxes payable 6,157 10,882
Total current liabilities 24,695 97,603
LONG-TERM DEBT 12,814 16,677
DEFERRED INCOME TAXES 2,173 3,726
STOCKHOLDERS' EQUITY:
Convertible preferred stock, par value
$0.10 per share; 2,000,000 shares
authorized, 450,000 shares issued and
outstanding - 45
Common stock, par value $0.10 per share;
50,000,000 shares authorized;
20,855,655 and 20,957,431 shares issued
and outstanding 2,086 2,096
Capital in excess of par value 12,626 19,538
Retained earnings 32,751 51,027
Cumulative foreign currency translation 397 210
Total stockholders' equity 47,860 72,916
$ 87,542 $ 190,922
See Notes to Pro Forma Consolidated Financial Statements
</PAGE>
<PAGE>
DELTA AND PINE LAND COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE YEARS ENDED AUGUST 31, 1993, 1994 AND 1995
(In thousands, except per share amounts)
AUGUST 31, AUGUST 31, AUGUST 31,
1993 1994 1995
NET SALES AND LICENSING FEES $ 77,605 $ 80,602 $ 97,976
COST OF SALES 43,368 46,073 51,001
GROSS PROFIT 34,237 34,529 46,975
OPERATING EXPENSES:
RESEARCH AND DEVELOPMENT 4,413 5,495 6,260
SELLING 4,894 4,865 5,881
GENERAL AND ADMINISTRATIVE 9,312 11,148 15,564
18,619 21,508 27,705
OPERATING INCOME 15,618 13,020 19,270
INTEREST EXPENSE, NET (2,338) (1,437) (2,163)
OTHER 487 604 554
INCOME BEFORE INCOME TAXES 13,767 12,187 17,661
PROVISION FOR INCOME TAXES 5,149 4,359 6,726
NET INCOME $ 8,618 $ 7,828 $ 10,935
PRIMARY EARNINGS PER SHARE $ 0.44 $ 0.38 $ 0.52
NUMBER OF SHARES USED IN
PRIMARY EARNINGS PER SHARE
CALCULATIONS 19,405 20,849 21,116
See Notes to Pro Forma Consolidated Financial Statements
</PAGE>
<PAGE>
DELTA AND PINE LAND COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED MAY 31, 1996
(In thousands, except per share amounts)
MAY 31,
1996
NET SALES AND LICENSING FEES $ 151,379
COST OF SALES 93,026
GROSS PROFIT 58,353
OPERATING EXPENSES:
RESEARCH AND DEVELOPMENT 6,411
SELLING 6,262
GENERAL AND ADMINISTRATIVE 12,777
25,450
OPERATING INCOME 32,903
INTEREST EXPENSE, NET (1,601)
OTHER 270
INCOME BEFORE INCOME TAXES 31,572
PROVISION FOR INCOME TAXES 11,530
NET INCOME 20,042
DIVIDENDS ON PREFERRED STOCK (25)
NET INCOME APPLICABLE TO COMMON SHARES $ 20,017
PRIMARY EARNINGS PER SHARE $ 0.92
NUMBER OF SHARES USED IN
PRIMARY EARNINGS PER SHARE
CALCULATION 21,774
FULLY DILUTED EARNINGS PER SHARE $ 0.91
NUMBER OF SHARES USED IN
FULLY DILUTED EARNINGS PER
SHARE CALCULATION 21,906
See Notes to Pro Forma Consolidated Financial Statements
</PAGE>
DELTA AND PINE LAND COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
No pro forma adjustments were made to the pro forma consolidated financial
statements.
AGREEMENT
BETWEEN
THE D&PL COMPANIES
AND
THE SURE GROW COMPANIES,
SURE GROW SHAREHOLDERS
AND
SURE GROW PRINCIPALS
Dated
May 20, 1996
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS
1.1 Agreement . . . . . . . . . . . . . . . . . . .
1.2 API . . . . . . . . . . . . . . . . . . . . . .
1.3 API Shareholders . . . . . . . . . . . . . . . .
1.4 Authorized Representatives . . . . . . . . . . .
1.5 Books and Records . . . . . . . . . . . . . . .
1.6 Breeder Seed . . . . . . . . . . . . . . . . . .
1.7 Breeding . . . . . . . . . . . . . . . . . . . .
1.8 Breeding Populations . . . . . . . . . . . . . .
1.9 CERCLA . . . . . . . . . . . . . . . . . . . .
1.10 CERCLIS . . . . . . . . . . . . . . . . . . . .
1.11 Certified Seed . . . . . . . . . . . . . . . . .
1.12 Closing Date . . . . . . . . . . . . . . . . . .
1.13 Code . . . . . . . . . . . . . . . . . . . . .
1.14 Conditioning or To Condition . . . . . . . . . .
1.15 Conditions Precedent . . . . . . . . . . . . . .
1.16 Confidentiality Agreement . . . . . . . . . . .
1.17 Consideration . . . . . . . . . . . . . . . . .
1.18 Contracts . . . . . . . . . . . . . . . . . . .
1.19 Cotton . . . . . . . . . . . . . . . . . . . .
1.20 Cotton Germplasm . . . . . . . . . . . . . . . .
1.21 Cotton Planting Seed . . . . . . . . . . . . . .
1.22 Delinting or To Delint . . . . . . . . . . . . .
1.23 D&PL . . . . . . . . . . . . . . . . . . . . .
1.24 D&PL Common Stock . . . . . . . . . . . . . . .
1.25 D&PL Companies . . . . . . . . . . . . . . . .
1.26 D&PL Entities . . . . . . . . . . . . . . . . .
1.27 D&PL's Products Liability . . . . . . . . . . .
1.28 D&PL Subs . . . . . . . . . . . . . . . . . . .
1.29 Discrimination Laws . . . . . . . . . . . . . .
1.30 EBS . . . . . . . . . . . . . . . . . . . . . .
1.31 EBS Shareholders . . . . . . . . . . . . . . .
1.32 Employee . . . . . . . . . . . . . . . . . . .
1.33 Environmental Claim . . . . . . . . . . . . . .
1.34 Environmental Law . . . . . . . . . . . . . . .
1.35 Environmental Site Assessment Report(s) . . . .
1.36 Equipment . . . . . . . . . . . . . . . . . . .
1.37 ERISA . . . . . . . . . . . . . . . . . . . . .
1.38 Experimental Lines and Strains . . . . . . . . .
1.39 Escrow Holder . . . . . . . . . . . . . . . . .
1.40 Financial Statements . . . . . . . . . . . . . .
(a) Audited Separate Company
Financial Statements . . . . . . . . . . .
(b) Unaudited Separate Company
Financial Statements . . . . . . . . . . .
(c) (i) Audited Combined Financial
Statements . . . . . . . . . . . . . .
(ii) Unaudited Quarterly Combined
Financial Statements . . . . . . . . .
1.41 Foundation Seed . . . . . . . . . . . . . . . .
1.42 GAAP . . . . . . . . . . . . . . . . . . . . .
1.43 GAAS . . . . . . . . . . . . . . . . . . . . .
1.44 Governmental Body . . . . . . . . . . . . . . .
1.45 Hazardous Materials . . . . . . . . . . . . . .
1.46 HSR Act . . . . . . . . . . . . . . . . . . . .
1.47 Indemnification Representative . . . . . . . . .
1.48 Indemnified Party . . . . . . . . . . . . . . .
1.49 Indemnified Taxes . . . . . . . . . . . . . . .
1.50 Indemnifying Party . . . . . . . . . . . . . .
1.51 Intellectual Property . . . . . . . . . . . . .
1.52 Inventory . . . . . . . . . . . . . . . . . . .
1.53 Legal Requirement . . . . . . . . . . . . . . .
1.54 License Agreements . . . . . . . . . . . . . .
1.55 Lien . . . . . . . . . . . . . . . . . . . . .
1.56 Marketing or To Market . . . . . . . . . . . . .
1.57 MSI . . . . . . . . . . . . . . . . . . . . . .
1.58 MSI Shareholders . . . . . . . . . . . . . . .
1.59 NPL . . . . . . . . . . . . . . . . . . . . . .
1.60 Official Seed Certifying Agency . . . . . . . .
1.61 Order . . . . . . . . . . . . . . . . . . . . .
1.62 Permits . . . . . . . . . . . . . . . . . . . .
1.63 Permitted Liens and Title Exceptions . . . . . .
1.64 Pooling-of-Interests . . . . . . . . . . . . . .
1.65 Production or To Produce . . . . . . . . . . . .
1.66 PVPA . . . . . . . . . . . . . . . . . . . . .
1.67 Quality Control . . . . . . . . . . . . . . . .
1.68 RCRA . . . . . . . . . . . . . . . . . . . . .
1.69 Real Property . . . . . . . . . . . . . . . . .
1.70 Registered Seed . . . . . . . . . . . . . . . .
1.71 Regulated Material . . . . . . . . . . . . . . .
1.72 Release . . . . . . . . . . . . . . . . . . . .
1.73 Research . . . . . . . . . . . . . . . . . . .
1.74 SEC . . . . . . . . . . . . . . . . . . . . . .
1.75 SGS . . . . . . . . . . . . . . . . . . . . . .
1.76 SGS Shareholders . . . . . . . . . . . . . . .
1.77 Storing or To Store . . . . . . . . . . . . . .
1.78 Sure Grow Affiliated Assts . . . . . . . . . .
1.79 Sure Grow Companies . . . . . . . . . . . . . .
1.80 Sure Grow Cotton Planting Seed Business . . . .
1.81 Sure Grow Cotton Varieties . . . . . . . . . . .
1.82 Sure Grow Principals . . . . . . . . . . . . . .
1.83 Sure Grow's Products Liability . . . . . . . . .
1.84 Sure Grow Shareholders. . . . . . . . . . . . .
1.85 Tax Contest . . . . . . . . . . . . . . . . . .
1.86 Taxes . . . . . . . . . . . . . . . . . . . . .
1.87 Tax Returns . . . . . . . . . . . . . . . . . .
1.88 Transaction . . . . . . . . . . . . . . . . . .
1.89 Transaction Costs . . . . . . . . . . . . . . .
1.90 Warehousing or To Warehouse . . . . . . . . . .
ARTICLE 2. PLAN OF REORGANIZATION . . . . . . . . . . . . . .
2.1 Plan of Reorganization . . . . . . . . . . . . .
2.2 Merger, Consideration and Conversion
or Cancellation of Shares . . . . . . . . . . .
2.3 Deposit and Endorsement of Certificates . . . .
2.4 Corporate Actions at Closing . . . . . . . . . .
2.5 Restriction on Transfer of D&PL Common Stock . .
ARTICLE 3. CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . .
3.1 Conditions Precedent to Participation by
the D&PL Companies in Closing . . . . . . . . .
3.2 Conditions Precedent to Participation by
Sure Grow Companies and Sure Grow Shareholders
in Closing . . . . . . . . . . . . . . . . . .
3.3 Payment of Transaction Costs . . . . . . . . . .
ARTICLE 4. PRE-CLOSING ACTIVITIES . . . . . . . . . . . . . .
4.1 Operation of Sure Grow Companies' Businesses . .
4.2 Access to Property and Records;
Confidentiality . . . . . . . . . . . . . . . .
4.3 Environmental Conditions and Title . . . . . . .
(a) Environmental Site Assessments . . . . . .
(b) Title Commitments . . . . . . . . . . . . .
(c) Cure of Title Exceptions . . . . . . . . .
(d) Pre-Closing Casualty Damage . . . . . . . .
4.4 Audited and unaudited Financial Statements . . .
4.5 Acquisition of Sure Grow Affiliated Assets . . .
ARTICLE 5. POST-CLOSING ACTIVITIES . . . . . . . . . . . . . .
5.1 Post-Closing Operations . . . . . . . . . . . .
5.2 Continued Employment of Senior Management
of Sure Grow Companies . . . . . . . . . . . .
5.3 Filing of Tax Returns . . . . . . . . . . . . .
5.4 Pooling-of-Interests . . . . . . . . . . . . .
5.5 Cure of Environmental Conditions . . . . . . . .
5.6 Cooperation in the Event of Inquiry
or Litigation . . . . . . . . . . . . . . . . .
5.7 Post-Closing Deliveries of Financial
Statements . . . . . . . . . . . . . . . . . . .
5.8 Releases of Personal Guarantees . . . . . . . .
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF THE
D&PL COMPANIES . . . . . . . . . . . . . . . . . .
6.1 Due Incorporation . . . . . . . . . . . . . . .
6.2 Power and Authority of the D&PL Companies;
Legal and Authorized Transactions . . . . . . .
6.3 Capital Stock and Shareholders of the
D&PL Companies . . . . . . . . . . . . . . . .
6.4 No Conflicts . . . . . . . . . . . . . . . . .
6.5 Full Disclosure . . . . . . . . . . . . . . . .
6.6 Authenticity of Documents . . . . . . . . . . .
6.7 Statements Made . . . . . . . . . . . . . . . .
6.8 No Material Adverse Change . . . . . . . . . . .
6.9 No Broker . . . . . . . . . . . . . . . . . . .
6.10 Additional Representations of
the D&PL Companies . . . . . . . . . . . . . . .
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF THE
SURE GROW COMPANIES
7.1 Due Incorporation . . . . . . . . . . . . . . .
7.2 Power and Authority of the Sure Grow
Companies . . . . . . . . . . . . . . . . . . .
7.3 Capital Stock and Shareholders of the
Sure Grow Companies . . . . . . . . . . . . . .
7.4 No Conflicts . . . . . . . . . . . . . . . . .
7.5 Real Property . . . . . . . . . . . . . . . . .
7.6 Environmental Claims . . . . . . . . . . . . .
(a) Permits . . . . . . . . . . . . . . . . .
(b) Handling of Hazardous Materials . . . . . .
(c) Environmental Liens . . . . . . . . . . . .
7.7 Equipment . . . . . . . . . . . . . . . . . . .
7.8 Seed Rights . . . . . . . . . . . . . . . . . .
7.9 Inventory . . . . . . . . . . . . . . . . . . .
7.10 Compliance with Laws . . . . . . . . . . . . . .
7.11 Actions and Proceedings . . . . . . . . . . . .
7.12 Contracts and License Agreements . . . . . . . .
7.13 Full Disclosure . . . . . . . . . . . . . . . .
7.14 Authenticity of Documents . . . . . . . . . . .
7.15 Statements Made . . . . . . . . . . . . . . . .
7.16 Financial Statements . . . . . . . . . . . . . .
7.17 Liabilities . . . . . . . . . . . . . . . . . .
7.18 Cash Reserves . . . . . . . . . . . . . . . . .
7.19 No Material Adverse Change . . . . . . . . . . .
7.20 Taxes . . . . . . . . . . . . . . . . . . . . .
7.21 Employees . . . . . . . . . . . . . . . . . . .
7.22 Employee Benefit Plans . . . . . . . . . . . . .
(a) ERISA . . . . . . . . . . . . . . . . . .
(b) Pension and Profit Sharing Plan . . . . . .
(c) Title IV Plans . . . . . . . . . . . . . .
(d) Continuation Coverage Requirements
of Health Plan . . . . . . . . . . . . . .
(e) Fines and Penalties . . . . . . . . . . . .
7.23 Physical Damage . . . . . . . . . . . . . . . .
7.24 Insurance . . . . . . . . . . . . . . . . . . .
7.25 No Broker . . . . . . . . . . . . . . . . . . .
7.26 SURE GROW Name . . . . . . . . . . . . . . . .
7.27 Investment Intent . . . . . . . . . . . . . . .
7.28 Additional Representations of Sure Grow
Companies and Sure Grow Shareholders . . . . .
7.29 Representations Relevant to Inapplic-
ability of the HSR Act . . . . . . . . . . . .
ARTICLE 8. INDEMNIFICATION
8.1 Obligation of Sure Grow Shareholders
to Indemnify . . . . . . . . . . . . . . . . .
(a) Indemnity Obligations . . . . . . . . . . .
(b) Limitations on Indemnity Obligations . . .
(c) Tax Indemnity . . . . . . . . . . . . . .
(d) Tax Contest . . . . . . . . . . . . . . . .
8.2 Obligation of the D&PL Companies
to Indemnify . . . . . . . . . . . . . . . . .
(a) Indemnity Obligations . . . . . . . . . . .
(b) Limitations on Indemnity Obligations . . .
8.3 Indemnification Representative . . . . . . . . .
8.4 Notice of Claim by Third Party . . . . . . . . .
8.5 Notice of Loss . . . . . . . . . . . . . . . . .
8.6 Escrow Fund . . . . . . . . . . . . . . . . . .
8.7 Limitations on Claims for Indemnity . . . . . .
8.8 Survival . . . . . . . . . . . . . . . . . . .
8.9 Exclusivity of Remedies . . . . . . . . . . . .
ARTICLE 9. CLOSING
9.1 Place of Closing . . . . . . . . . . . . . . . .
9.2 Closing Date . . . . . . . . . . . . . . . . .
ARTICLE 10. TERMINATION
10.1 Termination of Agreement . . . . . . . . . . .
10.2 Effect of Termination . . . . . . . . . . . . .
ARTICLE 11. ADDITIONAL COVENANTS AND AGREEMENTS
11.1 Expenses of Transaction . . . . . . . . . . . .
11.2 Further Assistance . . . . . . . . . . . . . .
11.3 No Publicity . . . . . . . . . . . . . . . . .
11.4 Further Assurances . . . . . . . . . . . . . . .
11.5 Bulk Sales Laws . . . . . . . . . . . . . . . .
11.6 No Partnership, Joint Venture or Third
Person Beneficiaries . . . . . . . . . . . . .
11.7 Confidentiality Obligations . . . . . . . . . .
ARTICLE 12. MISCELLANEOUS
12.1 Risk of Loss . . . . . . . . . . . . . . . . .
12.2 Authorized Representatives and Notices . . . . .
12.3 Entire Agreement; Conflicting Provisions . . . .
12.4 Knowledge . . . . . . . . . . . . . . . . . . .
12.5 Waivers and Amendments . . . . . . . . . . . . .
12.6 Arbitration and Forum Selection . . . . . . . .
12.7 Governing Law . . . . . . . . . . . . . . . . .
12.8 Assignment . . . . . . . . . . . . . . . . . .
12.9 Invalidity of Particulr Provision . . . . . . .
12.10 Specific Enforcement . . . . . . . . . . . . .
12.11 Counterparts . . . . . . . . . . . . . . . . .
12.12 Schedules . . . . . . . . . . . . . . . . . .
12.13 Headings . . . . . . . . . . . . . . . . . . .
12.14 Gender and Number . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . .
AGREEMENT
This Agreement is made and entered into as of this the 20th day
of May, 1996, among the following:
DELTA AND PINE LAND COMPANY, a Delaware corporation, having its
principal place of business at Scott, Mississippi ("D&PL");
D&PL1, Inc., a Delaware corporation and wholly-owned subsidiary
of D&PL, having its principal place of business at Scott,
Mississippi ("D&PL1");
D&PL2, Inc., a Delaware corporation and wholly-owned subsidiary
of D&PL, having its principal place of business at Scott,
Mississippi ("D&PL2");
D&PL3, Inc., a Delaware corporation and wholly-owned subsidiary
of D&PL, having its principal place of business at Scott,
Mississippi ("D&PL3");
SURE GROW SEED, INC., an Alabama corporation, having its
principal place of business at Centre, Alabama ("SGS");
ARIZONA PROCESSING, INC., an Arizona corporation, having its
principal place of business at Chandler, Arizona ("API");
ELLIS BROTHERS SEED, INC., an Alabama corporation, having its
principal place of business at Centre, Alabama ("EBS");
MISSISSIPPI SEED, INC., a Mississippi corporation, having its
principal place of business at Tunica, Mississippi ("MSI"); and
The shareholders in API, EBS, and MSI who are identified
collectively on Schedules 1.3, 1.31, and 1.58 ("Sure Grow Share
holders") and certain other persons identified in Section 1.82
("Sure Grow Principals").
The above-described entities and persons are hereinafter
referred to collectively as "Parties" and singularly as a "Party" to-
wit:
R E C I T A L S:
WHEREAS, the Parties desire to cause a transaction in which
D&PL1, D&PL2 and D&PL3 will be merged with API, EBS and MSI,
respectively, which shall each survive the merger and whose stock
shall be owned by D&PL, subject to the Conditions Precedent and
under the other terms and conditions set forth in this Agreement;
and
WHEREAS, the Parties intend that the Transaction will be
recognized as a tax-free reorganization under Sec.368(a)(2)(E) of
the Internal Revenue Code and will qualify for accounting purposes
as a Pooling-of-Interests under Generally Accepted Accounting Princi
ples; and
WHEREAS, in connection with the Transaction, the Parties agree
to make certain commitments to one another;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the Parties agree as follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement, the following terms shall be
defined as follows:
1.1 "Agreement" means this Agreement, all attached exhibits
and schedules, and all other documents to be executed pursuant to
this Agreement.
1.2 "API" means Arizona Processing, Inc., an Arizona
corporation, organized under the laws of the State of Arizona with
its principal place of business at Chandler, Arizona.
1.3 "API Shareholders" mean those entities or persons listed
on Schedule 1.3.
1.4 "Authorized Representatives" mean the persons designated
to receive notices and to act on behalf of the respective Parties as
provided in Section 12.2.
1.5 "Books and Records" mean all books, records (in whatever
form stored) and other documents relating to the Sure Grow Cotton
Planting Seed Business, including, but not limited to, trade secrets
and proprietary information pertaining to the Sure Grow Cotton
Planting Seed Business, technology, computer programs and other data
of all types related to Research, Breeding, Production, Delinting,
Conditioning, Quality Control and Marketing (including, without
limitation, sales records, customer lists, and marketing programs)
of Cotton Planting Seed and/or related to the Sure Grow Companies'
business relationship with each other, and with their respective
employees, shareholders, customers, claimants, Governmental Bodies,
and any other persons or entities, and including all copyrights in
and to Books and Records, but excluding, however, any such documents
which contain only information pertaining to the personal business
of one or more of the Sure Grow Shareholders and/or their families
or which is subject to non-disclosure under an attorney-client
privilege between one or more Sure Grow Shareholders and/or their
families and their respective personal counsel, unless such records
contain information about facts which have or could reasonably be
construed to have a material affect on the Sure Grow Cotton Planting
Seed Business.
1.6 "Breeder Seed" means that limited amount of Cotton seed
used by the originating or sponsoring plant breeder in breeding or
maintaining a strain or variety, which is maintained under the
supervision and control of the originating or sponsoring plant
breeder and has never intentionally been made available by any Party
hereto, or, to the best knowledge of the Sure Grow Shareholders and
the Sure Grow Principals by the breeder thereof, for sale to or use
by the general public. Breeder Seed may be used or have been used
for the production of Foundation Seed or Registered Seed.
1.7 "Breeding" means the Sure Grow Companies' entire activity
of propagating plants and recombining genes for the purpose of
improving the characteristics of the plants. Breeding also includes
the multiplication, propagation, maintaining, and increase of
Breeder Seed and Foundation Seed of parental lines in preparation
for production of Cotton Planting Seed.
1.8 "Breeding Populations" mean all of the Sure Grow
Companies' plant propagating materials, including but not limited to
seed of Experimental Lines and Strains, used in Research or
Breeding.
1.9 "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, and the rules
and regulations promulgated thereunder.
1.10 "CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System as provided for by 40
C.F.R. Sec.300.5.
1.11 "Certified Seed" means the direct progeny of Breeder Seed,
Foundation Seed, or Registered Seed produced and handled by the Sure
Grow Companies or persons under contract with them in such way as to
maintain satisfactory genetic identity and purity as approved by the
Official Seed Certifying Agency for identification and sale as
Certified Seed.
1.12 "Closing Date" shall have the meaning set forth in Section
9.2.
1.13 "Code" means the Internal Revenue Code of 1986, as
amended, and all rules and regulations promulgated thereunder.
1.14 "Conditioning" or "To Condition" means the entire activity
of handling, delinting and treating delinted Cotton seed, including,
but not limited to, treating such seed with seed coat chemicals and
bagging of such seed.
1.15 "Conditions Precedent" mean the conditions, expressly set
forth in Article 3, which must be fulfilled or waived by D&PL and
the D&PL Subs and/or the Sure Grow Companies and the Sure Grow
Principals, as applicable, as of the Closing Date as conditions
precedent to the respective Parties' obligations to close the
Transaction described in this Agreement.
1.16 "Confidentiality Agreement" means the Amended and Restated
Confidentiality Agreement dated as of December 26, 1995, attached
hereto as Schedule 1.16.
1.17 "Consideration" shall have the meaning set forth in
Section 2.2.
1.18 "Contracts" mean those certain contracts listed on
Schedule 1.18 and any other contracts or agreements, oral or written
to which the Sure Grow Companies are a party or a third party
beneficiary.
1.19 "Cotton" means plants of the genus Gossypium.
1.20 "Cotton Germplasm" means all genotypes of a species of
Cotton, embodied in Cotton Planting Seed or otherwise.
1.21 "Cotton Planting Seed" means Cotton seed which is intended
for and has been so produced and handled by or for the Sure Grow
Companies as to be suitable for planting to produce Cotton plants in
commercial agriculture.
1.22 "Delinting" or "To Delint" means the entire activity of
separating lint fibers from ginned Cotton seed as a step in
conditioning the Cotton seed for planting and/or for marketing as
Cotton Planting Seed.
1.23 "D&PL" means Delta and Pine Land Company, a corporation
organized under the laws of the State of Delaware with its principal
place of business at Scott, Mississippi.
1.24 "D&PL Common Stock" means voting common stock, of the par
value $.10 per share, as authorized by the Fourth Article of the
Restated Certificate of Incorporation of D&PL, as the same may be
amended from time to time, which shares of stock, except for the
rights and restrictions referred to in Section 2.5, have the same
rights and restrictions in all respects as all other authorized,
issued, and outstanding common stock of D&PL.
1.25 "D&PL Companies" mean each and every one of D&PL and the
D&PL Subs, separately and collectively.
1.26 "D&PL Entities" means each and every one of the D&PL
Companies and any corporation or division thereof or other legal
entity controlled by, controlling or under common control with the
D&PL Companies, their successors or assigns.
1.27 "D&PL's Products Liability" shall mean any actual
liability to which the D&PL Companies, any of the Sure Grow
Companies (as may be in existence after the Closing Date) or the
Sure Grow Shareholders or Sure Grow Principals may become subject
insofar as such liability arises out of or otherwise relates to any
express or implied representation, warranty, agreement or guaranty
to a customer, user or purchaser made or claimed to have been made
by the D&PL Companies or any of the Sure Grow Companies (as may be
in existence after the Closing Date), or an employee with apparent
authority of the D&PL Companies or any of the Sure Grow Companies
(as may be in existence after the Closing Date), or arising out of
or asserted to be arising out of negligence, strict liability or
other rule of law in connection with Producing, Delinting,
Conditioning, Storing or Marketing of such product by the D&PL
Companies or the Sure Grow Companies after the Closing Date.
1.28 "D&PL Subs" means D&PL1, D&PL2 and D&PL3, Delaware corpora
tions, which are wholly-owned subsidiaries of D&PL, with their
principal places of business at Scott, Mississippi.
1.29 "Discrimination Laws" means all federal laws, rules and
regulations relating to age, race, disability and sex discrimination
and harassment set forth in Title VII of the Civil Rights Act of
1964 (42 U.S.C. Sec.2000e), the Americans with Disabilities Act (42
U.S.C. Sec.12102 et seq.), the Age Discrimination in Employment Act
(29 U.S.C. Sec.621 et seq.), and 42 U.S.C. Sec.1981, all as amended,
and any applicable state laws, rules and regulations, if any, on the
same subjects.
1.30 "EBS" means Ellis Brothers Seed, Inc., a corporation
organized under the laws of the State of Alabama, with its principal
place of business at Centre, Alabama.
1.31 "EBS Shareholders" mean those entities or persons listed
on Schedule 1.31.
1.32 "Employee" means any person who is employed by or works
for the Sure Grow Companies full or part time as an officer or
employee, and, in addition, means any person who is providing
Breeding services for the Sure Grow Companies whether as an
employee, independent contractor, or any other capacity.
1.33 "Environmental Claim" means any written claim, demand, or
other communication by any person or Governmental Body alleging or
asserting liability for investigatory costs, clean up costs,
response costs, damages, personal injuries, fines, or penalties
arising out of, based on, or resulting from (a) the presence or
Release into the environment of any Hazardous Materials in excess of
allowable limits under the Environmental Laws, or (b) circumstances
forming a reasonable basis for any violation, or alleged violation,
of any Environmental Law.
1.34 "Environmental Law" means (a) any applicable federal,
state or local law, statute, ordinance, rule, regulation, code,
license, permit, written authorization, written approval, written
consent, legal doctrine, order, directive, executive or administra
tive order, judgment, decree, injunction, requirement or agreement
with any Governmental Body, (i) relating to the protection, preserva
tion or restoration of the environment (which includes, without
limitation, air, water vapor, surface water, ground water, drinking
water supply, structures, soil, surface land, subsurface land, plant
and animal life or any other natural resource), or to human health
or safety, or (ii) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of, Hazardous Materials,
in each case as amended and in effect on the date of this Agreement.
The term Environmental Law includes, without limitation, CERCLA, the
Superfund Amendments and Reauthorization Act, the federal Water
Pollution Control Act of 1972, the federal Clean Air Act, the
federal Clean Water Act, RCRA, the federal Solid Waste Disposal Act
and the federal Toxic Substances Control Act, the federal Insecti
cide, Fungicide and Rodenticide Act, the federal Occupational Safety
and Health Act of 1970, the federal Hazardous Materials
Transportation Act, or any other so-called "Super fund" or "Super
lien" law, each as amended and in effect on the date of this
Agreement and (b) any applicable common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines
such as negligence, nuisance, trespass and strict liability) that
may impose liability or obligations for injuries or damages due to,
or threatened as a result of, the presence of or exposure to any
Hazardous Materials in excess of allowable limits under the
Environmental Laws and in existence as of Closing Date.
1.35 "Environmental Site Assessment Report(s)" means (a) Phase
I Environmental Site Assessment Report, Ellis Brothers Seed, Inc.,
Route 1, Box 310, Ellisville, Alabama 35960, EnSafe Project Number
3005-128, dated January 11, 1996; (b) Phase I Environmental Site
Assessment Report, Arizona Processing and Sure Grow Seed Company,
Riggs and Maricopa Roads, Chandler, Arizona 85248, EnSafe Project
Number 3005-129, dated November 30, 1995; (c) Phase I Environmental
Site Assessment Report, Mississippi Seed, Inc., Highway 61, Tunica,
Mississippi 38676, EnSafe Project Number 3005-130, dated December
18, 1995; and (d) Phase I Environmental Site Assessment Report,
Mississippi Seed, Inc., Highway 61, Shelby, Mississippi 38774,
EnSafe Project Number 3005-130, December 28, 1995.
1.36 "Equipment" means the fixtures, furniture, office
equipment, research equipment, tools, devices, appurtenances,
machinery, vehicles, equipment, materials, and other items of
tangible personal property located at the Real Property, owned by
any of the Sure Grow Companies, and/or regularly used in the Sure
Grow Cotton Planting Seed Business, as listed in Schedule 1.36-A but
expressly excluding those items listed on Schedule 1.36-B. Notwith
standing the foregoing, any item of equipment or other tangible
personal property (other than Inventory) not listed in Schedule 1.36-
B that presently is owned by the Sure Grow Companies and/or being
regularly used in the Sure Grow Cotton Planting Seed Business shall
be included in Equipment.
1.37 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the rules and regulations
promulgated thereunder.
1.38 "Experimental Lines and Strains" means all separate
populations of cotton cultivars, developed by Sure Grow Companies'
breeders or otherwise owned by or used in the Sure Grow Companies'
Breeding program as of August 18, 1995, and at any time since that
date, expressing similar and distinguishable agronomic characteris
tics but which are at a research selection stage where the
individual populations of cultivars have not yet been designated a
Sure Grow Variety.
1.39 "Escrow Holder" shall mean Harris Trust and Savings Bank,
a banking corporation with its principal place of business in
Chicago, Illinois.
1.40 "Financial Statements" shall mean collectively:
(a) "Audited Separate Company Financial Statements",
which shall mean:
(i) with respect to SGS: the independent auditor's
report, dated October 20, 1995, audited balance sheets, income
statements, statements of cash flow, statements of retained
earnings, notes to the financial statements, Schedule I-operating
and selling expenses and Schedule II-gross profit report, as of and
for the years ended August 31, 1994 and August 31, 1995; and
(ii) with respect to API: the independent auditor's
report, dated August 15, 1995, audited balance sheets, income
statements, statements of cash flow, statement of retained earnings,
notes to the financial statements, and operating and selling
expenses, as of and for the years ended June 30, 1994 and June 30,
1995;
(iii) with respect to EBS: the independent auditor's
report, dated August 11, 1995, audited balance sheets, income
statements, statements of cash flow, statement of retained earnings,
notes to the financial statements, and schedules to financial
statements, as of and for the years ended June 30, 1994 and June 30,
1995;
(iv) with respect to MSI: the independent auditor's
report, dated November 30, 1995, audited balance sheets, income
statements, statements of cash flow, statement of retained earnings,
and notes to the financial statements, as of and for the years ended
June 30, 1994 and June 30, 1995;
such Audited Financial Statements for the separate Sure Grow
Companies having been audited by Hughel Goodgame & Associates or
Ellis & Hirsburg, Certified Public Accountants, as applicable; and
(b) "Unaudited Separate Company Financial Statements",
which shall mean:
(i) with respect to SGS:
(A) Unaudited balance sheets, income statements,
and statements of cash flow as of and for the period from September
1, 1995, through the end of the month immediately prior to Closing
Date; and
(B) Unaudited balance sheets, income statements,
statements of cash flow and statements of changes in stockholders'
equity as of and for the three months ended November 30, 1995, and
for the three and six-month periods ended February 29, 1996, and for
the three and nine-month periods ending May 31, 1996; and
(C) Unaudited balance sheet, income statement,
statement of cash flow and statement of changes in stockholders'
equity, as of the Closing Date and for the period from September 1,
1995 through the Closing Date; and
(D) Unaudited balance sheets, income state
ments, statements of cash flow and statements of changes in
stockholders' equity as of and for each of the fiscal quarter ends
in the two-year period ended August 31, 1995; and
(ii) with respect to MSI, EBS and API separate
unaudited financial statements for each of the respective companies
consisting of:
(A) Unaudited balance sheets, income statements,
and statements of cash flow as of and for the period from July 1,
1995, through the end of the month immediately prior to Closing
Date; and
(B) Unaudited balance sheets, income statements,
statements of cash flow and statements of changes in stockholders'
equity as of and for the quarter ended September 30, 1995, and for
the three and six-month periods ended December 31, 1995, and for the
three and nine-month periods ended March 31, 1996; and
(C) Unaudited balance sheets, income statements,
statements of cash flow and statements of retained earnings as of
the Closing Date and for the period from July 1, 1995 through the
Closing Date; and
(D) Unaudited balance sheets, income statements,
statements of cash flow and statements of retained earnings, as of
and for each of the fiscal quarter ends in the two-year period ended
June 30, 1995; and
(c) (i) "Audited Combined Financial Statements", which
shall mean combined financial statements, together with the
independent auditor's report, resulting from the combining of the
Audited Separate Company Financial Statements as described in
Section 1.40(a) for (A) the year ending August 31, 1995, and (B) the
year ending August 31, 1994;
Such Audited Combined Financial Statements shall be
combined on the basis of fiscal years ending August 31 (i.e., June
30 balances will be combined with the August 31 balances). Such
financial statements shall be designated as "Financial Statements
for the Sure Grow Companies" as of and for the years ended August
31, 1995, and August 31, 1994, respectively, and are to be prepared
in accordance with GAAP and Regulations SX and SK, with appropriate
elimination of intercompany and related party transactions made, and
shall be audited and opined on in accordance with GAAS by Hughel
Goodgame & Associates; and
(ii) "Unaudited Quarterly Cmbined Financial
Statements", which shall mean unaudited combined financial
statements resulting from the combining of the Unaudited Separate
Company Financial Statements described in Section 1.40(b)(i)(B) and
(D) and 1.40(b)(ii)(B) and (D) for the applicable corresponding
quarter and period ends (for example, the MSI, API and EBS financial
data for the quarter and period ending September 30, 1994, will be
combined with the SGS financial data for the quarter and period
ending November 30, 1994). Such combined Unaudited Quarterly
Combined Financial Statements shall be prepared on a basis
consistent with GAAP and Regulations SK and SX with appropriate
elimination and accounting for intercompany and related party
transactions.
1.41 "Foundation Seed" means the direct progeny of Breeder Seed
and Foundation Seed of the Sure Grow Companies so handled as to most
nearly maintain specific genetic identity and purity under
conditions designated by the Official Seed Certifying Agency for
identification and labeling as Foundation Seed. Foundation Seed
includes only such seed as has been produced by or under the
supervision of a breeder (a) on the breeding firm's headquarters
farm, (b) on a farm organized as an official branch of the
headquarters breeding firm with a breeder in charge of such
production, or (c) on a farm operated under a contractual agreement
with and under the supervision of the originating or sponsoring
plant breeder. Foundation Seed may be used for the production of
Foundation Seed, Registered Seed, or Certified Seed.
1.42 "GAAP" means generally accepted accounting principles
promulgated by the Accounting Principles Board and/or its successor,
the Financial Accounting Standards Board.
1.43 "GAAS" means generally accepted auditing standards
promulgated by the American Institute of Certified Public Accoun
tants, Committee on Auditing Procedure and/or its successors.
1.44 "Governmental Body" means any federal, state, municipal,
or other governmental department, court, commission, Board, bureau
authority, office, agency, or instrumentality of any nature
whatsoever, provided such Governmental Body has jurisdiction over
the referenced matter.
1.45 "Hazardous Materials" mean Regulated Material and any
other substance which is or reasonably could be detrimental to human
health or safety or to the environment, currently listed, defined,
designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law,
whether by type or by quantity, including any substance containing
any such substance as a component in excess of allowable limits
under the Environmental Laws. Hazardous Materials include, without
limitation, any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste,
industrial substance, oil or petroleum or any derivative or by-
product thereof, radon, radioactive material, asbestos, asbestos-
containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
1.46 "HSR Act" means the Hart-Scott-Rodino Antitrust Improve
ments Act of 1976, as amended from time to time, and the rules and
regulations promulgated thereunder.
1.47 "Indemnification Representative" shall have the meaning
set forth in Section 8.3.
1.48 "Indemnified Party" shall have the meaning set forth in
Sections 8.4 and 8.5.
1.49 "Indemnified Taxes" shall have the meaning set forth in
Section 8.1(c).
1.50 "Indemnifying Party" shall have the meaning set forth in
Sections 8.4 and 8.5.
1.51 "Intellectual Property" means all trademarks, tradenames,
PVPA certificates, pending PVPA applications, and copyrights, if
any, relating to the Sure Grow Cotton Planting Seed Business,
including but not limited to the subject matter identified more
specifically in Schedule 1.51 attached hereto, and including the
goodwill of the Sure Grow Cotton Planting Seed Business symbolized
by the Intellectual Property, if any, and all claims against any
third party for violation of the Sure Grow Companies' rights
protected under the PVPA or under other applicable laws or
regulations protecting Intellectual Property, and any documents or
tangible evidence relating to such claims.
1.52 "Inventory" means all Cotton Germplasm, Breeding
Populations, Breeder Seed, Foundation Seed, Registered Seed, and
Certified Seed, and any other Cotton Planting Seed owned by the Sure
Grow Companies or of which the Sure Grow Companies have the right to
acquire ownership, whether harvested or in production, delinted or
undelinted, conditioned or unconditioned, bagged or in bulk, and all
unused bags, packaging materials, and supplies dedicated to the Sure
Grow Cotton Planting Seed Business.
1.53 "Legal Requirement" means any applicable law, statute,
ordinance, or regulation of any Governmental Body.
1.54 "License Agreements" mean those certain license agreements
listed on Schedule 1.54 and any and all other written license
agreements pertaining to Sure Grow Cotton Varieties.
1.55 "Lien" means any recorded mortgage, lien, pledge, charge,
security interest, judgment, or other encumbrance in or adverse
claim against any asset, tangible or intangible, of the Sure Grow
Companies.
1.56 "Marketing" or "To Market" means the entire activity of
the Sure Grow Companies of selling Cotton Planting Seed, including
but not limited to advertising, promoting, offering for sale,
contracting for sale, selling, transporting, distributing, and
delivering Cotton Planting Seed.
1.57 "MSI" means Mississippi Seed, Inc., a corporation
organized under the laws of the State of Mississippi, with its
principal place of business at Tunica, Mississippi.
1.58 "MSI Shareholders" mean those entities or persons listed
on Schedule 1.58.
1.59 "NPL" means the National Priorities List under CERCLA.
1.60 "Official Seed Certifying Agency" means, with respect to
any particular Cotton Planting Seed, the Governmental Body in the
state in which such Cotton Planting Seed is produced that has
jurisdiction over the production, classification, and certification
of that Cotton Planting Seed.
1.61 "Order" means any written order, injunction, decree or
judgment of any Governmental Body.
1.62 "Permits" mean Permits issued by any Governmental Body to
the Sure Grow Companies, including, but not limited to, the Permits
listed in Schedule 1.62.
1.63 "Permitted Liens and Title Exceptions" mean (a) any Lien
for taxes, special assessments, charges, or levies of a Governmental
Body not yet due (or (i) which are being contested in good faith by
appropriate formal or informal proceedings and or (ii) are in good
faith contemplated to be contested within the applicable time period
permitted for such a contest and with respect to which reserves or
other appropriate provisions are being maintained by the party
liable therefor in accordance with GAAP and the enforcement
(collection) of which is stayed at all times); and (b) standard ALTA
title exceptions; (c) those Liens, title exceptions or other matters
set forth in Schedule 1.63; (d) materialmen's, mechanics, carriers,
warehouseman's, landlord's, workman's, repairman's, employee's, or
other Liens which are not recorded, arising in the ordinary course
of business and which would not typically have been discharged on or
before the relevant date in the ordinary course of business;
(e) Liens against deposits made in the ordinary course of business
in connection with worker's compensation, unemployment compensation
insurance, social security and other like laws or to secure the
performance of leases; and (f) Liens and encumbrances the existence
of which do not, individually or in the aggregate, have any material
or adverse effect on the value, or in any way interfere with the
present or reasonably contemplated use of the property encumbered
thereby.
1.64 "Pooling-of-Interests" means that method of accounting
prescribed in Accounting Principles Board Opinion No. 16 as issued
and amended and interpreted by the APB and its successor entity, the
Financial Accounting Standards Board, as well as Regulations SK and
SX promulgated by the Securities and Exchange Commission.
1.65 "Production" or "To Produce", when used in connection with
Cotton Planting Seed, means all activities (including harvesting and
ginning) of the Sure Grow Companies involved in multiplication,
propagation, and increase of seed to be used as planting seed in
commercial agriculture, which production activities may be carried
out directly by the party involved through its own employees or
indirectly through growers under contract to the party.
1.66 "PVPA" means the United States Plant Variety Protection
Act, 7 USC Sec.2321, et seq, as amended from time to time.
1.67 "Quality Control" means the entire activity of maintain
ing, testing, and verifying the purity, germination, viability and
other qualities of Cotton Planting Seed conducted by the Sure Grow
Companies.
1.68 "RCRA" means the Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto),
as amended from time to time.
1.69 "Real Property" means certain real property, including the
land and buildings, facilities, structures, and improvements
thereon, located in Cherokee County, Alabama, Maricopa County,
Arizona, and Tunica County and Bolivar County, Mississippi, more
particularly described in Schedule 1.69-A but excluding that certain
real property described on Schedule 1.69-B. Notwithstanding the
foregoing, any item of real property not described in Schedule 1.69-
B that presently is owned by and/or being regularly used by the Sure
Grow Companies in the Sure Grow Cotton Planting Seed Business shall
be included in Real Property.
1.70 "Registered Seed" means the direct progeny of Breeder Seed
or Foundation Seed which has been so produced and handled by the
Sure Grow Companies or persons under contract with the Sure Grow
Companies as to maintain genetic identity and purity as required by
the Official Seed Certifying Agency for identification, labeling,
and sale as Registered Seed.
1.71 "Regulated Material" means any hazardous substance, as
defined by Section 101(14) of CERCLA, that is subject to regulation
under any applicable Environmental Law.
1.72 "Release" shall have the meaning given that term by
Section 101(22) of CERCLA.
1.73 "Research" means all forms of inquiry, study, investiga
tion, observation, and experimentation, including genetic modifica
tion and manipulation.
1.74 "SEC" means the Securities and Exchange Commission, an
agency of the United States.
1.75 "SGS" means Sure Grow Seed, Inc., a corporation organized
under the laws of the State of Alabama, with its principal place of
business at Centre, Alabama.
1.76 "SGS Shareholders" mean those entities or persons listed
on Schedule 1.76.
1.77 "Storing" or "To Store" means the activity of the Sure
Grow Companies in the handling and storing of Cotton seed in bulk
prior to Delinting and Conditioning.
1.78 "Sure Grow Affiliated Assets" mean those other assets,
tangible or intangible, if any, regularly used in the Sure Grow
Cotton Planting Seed Business, which are not owned by any of the
Sure Grow Companies (including, without limitation, those assets, if
any, owned or controlled by Sure Grow Research and Associates or
Sure Grow Research & Development Company, a partnership), all of
which are listed on Schedule 1.78-A, but excluding those items
listed on Schedule 1.78-B.
1.79 "Sure Grow Companies" mean each and every one of SGS, API,
EBS and MSI, separately and collectively.
1.80 "Sure Grow Cotton Planting Seed Business" means the entire
activity of the Sure Grow Companies in Research, Breeding,
Production, Storing, Delinting, Conditioning, Quality Control,
Warehousing and Marketing of Cotton Planting Seed and of licensing
other persons to produce, store, delint, condition, warehouse and
market Cotton Planting Seed and all tangible and intangible assets
owned by one or more of the Sure Grow Companies and/or any other
assets, if any, regularly used in or related to such business
activities, including, without limitation, production, delinting,
conditioning and storage facilities, research equipment, Cotton
Germplasm and Breeding Populations, Breeder Seed, Foundation Seed,
Registered Seed, Certified Seed, and other Cotton Planting Seed,
breeding rights, research data and documents, trade secrets, seed
technology, licensing agreements, royalty agreements, and all other
legal and contractual rights relating to Sure Grow's Cotton Planting
Seed Business, and without limiting the generality of the foregoing,
specifically including the following: the Real Property, Equipment,
Inventory, Intellectual Property, License Agreements, Contracts, and
Books and Records, and assets regularly used in the commercial
ginning operation, the retail farm supply operation and the soybean
processing plant of EBS.
1.81 "Sure Grow Cotton Varieties" mean all varieties or
cultivars of Cotton, including, but not limited to, the varieties
listed in Schedule 1.81, seed of which the Sure Grow Companies
marketed in 1995 and/or 1996 in which the Sure Grow Companies have
proprietary rights, and further including, without limitation, all
varieties or cultivars with respect to which the Sure Grow Companies
hold or have applied for PVPA certificates or certificates issued
under similar laws of other nations.
1.82 "Sure Grow Principals" mean, collectively, Richard Flowers
and D. C. ("Dutch") Parker, each an adult resident citizen of Tunica
County, Mississippi.
1.83 "Sure Grow's Products Liability" shall mean any actual
liability to which the Sure Grow Companies (or the D&PL Companies,
or their successors or assigns, as successors to the Sure Grow
Cotton Planting Seed Business) may become subject insofar as such
liability arises out of or otherwise relates to any express or
implied representation, warranty, agreement or guaranty to a
customer, user, or purchaser made or claimed to have been made by
the Sure Grow Companies or an employee with apparent authority of
the Sure Grow Companies, or arising out of or due to, or asserted to
be arising out of negligence, strict liability or other rule of law
in connection with Producing, Delinting, Conditioning, Storing or
Marketing of such product by the Sure Grow Companies prior to the
Closing Date.
1.84 "Sure Grow Shareholders" mean, collectively, the API
Shareholders, the EBS Shareholders and the MSI Shareholders.
1.85 "Tax Contest" shall have the meaning set forth in Section
8.1(d).
1.86 "Taxes" mean, solely with regard to the Sure Grow
Companies, all taxes, charges, fees, levies, penalties or other
assessments imposed by any United States federal, state, local or
foreign taxing authority with applicable jurisdiction, including,
but not limited to, income, excise, property, sales, transfer,
franchise, payroll, gains, withholding, ad valorem, social security
or other taxes, including any interest, penalties or additions
attributable and actually and finally paid with respect to Taxes.
Notwithstanding the foregoing, Taxes shall not include any tax,
interest or penalties, incurred as a result of: (a) any action or
inaction of the Sure Grow Companies or the D&PL entities after the
Closing Date, including, without limitation, any subsequent merger
or any other type of combination which is not a part of this
Transaction; (b) any election or deemed election under any section
of the Code or applicable state, local or other Tax laws and regula
tions applicable to the type of Taxes referred to above in this
Section; or (c) any other matter which would result in Taxes
attributable to periods after the Closing Date.
1.87 "Tax Returns" shall mean any returns, reports, declara
tions, forms, claims for refund or information returns or statements
related to Taxes, including any schedule or attachment thereto, and
including any amendments thereof.
1.88 "Transaction" means the entire transaction between the
Parties hereto contemplated by this Agreement in which all sharehold
ers of API, EBS and MSI will exchange all of the issued and
outstanding stock of API, EBS and MSI for certain D&PL Common Stock,
and D&PL1, D&PL2 and D&PL3 will be merged into API, EBS and MSI,
respectively, as more particularly described in Article 2 hereof.
1.89 "Transaction Costs" means the total of the reasonable out-
of-pocket expenses, (including, but not limited to, attorney's fees,
accountant's fees and other reasonable costs and expenses) directly
related to this Transaction, or the negotiations prior thereto, and
the actions taken in connection herewith, and which are expended
and/or incurred by the Sure Grow Companies, the Sure Grow
Shareholders and/or the Sure Grow Principals commencing on January
10, 1996, and continuing through the execution of this Agreement on
Closing Date, provided that, the foregoing notwithstanding, expenses
incurred pursuant to Section 4.3 shall not be considered to be
Transaction Costs.
1.90 "Warehousing" or "To Warehouse" means, with respect to
Cotton Planting Seed, the activity of handling and storing of bulk
undelinted cotton seed and bagged Cotton Planting Seed after
Delinting, Conditioning and bagging.
ARTICLE 2. PLAN OF REORGANIZATION
2.1 Plan of Reorganization. Subject to satisfaction of the
Conditions Precedent, and on the terms and conditions set forth in
this Agreement, as of the time of the closing on the Closing Date:
(a) D&PL1, D&PL2 and D&PL3 shall be merged with and into
API, EBS and MSI, respectively;
(b) API, EBS and MSI, respectively, shall be the
surviving corporations in the aforementioned mergers;
(c) the separate corporate existence of API, EBS and MSI
shall continue unaffected by the merger; and
(d) at Closing, D&PL1 and API, D&PL2 and EBS and D&PL3
and MSI shall each execute a Certificate of Merger in substantially
the form attached hereto as Schedule 2.1(d). The applicable Certifi
cate of Merger shall be promptly filed with the Secretary of State
in the state of incorporation of each corporation which is a
participant in the Merger and wherever else may be required to
formalize the aforementioned mergers as contemplated in this
Agreement.
2.2 Merger, Consideration and Conversion or Cancellation of
Shares.
(a) At the time of the closing on Closing Date, the
stock of API, EBS and MSI shall, by virtue of the merger and
without action on part of the holder thereof, be converted into
the right to receive One Million Five Hundred Forty-Eight
Thousand Four Hundred Eighty-Three (1,548,483) shares of D&PL
Common Stock (the "Consideration"); provided, further, that the
D&PL Common Stock constituting the Consideration shall be
allocated among the Sure Grow Shareholders as set forth in the
Schedule attached hereto as Schedule 2.2(a), provided, however,
that no fractional shares shall be issued and, in the event that
the proportions of interest set forth in Schedule 2.2(a) might
otherwise result in the issuance of a fractional share of D&PL
Common Stock, the number of shares of D&PL Common Stock to be
issued to the affected shareholder(s) shall be rounded up or down
to the nearest whole share, as the case may be;
(b) All such shares to be converted into D&PL Common
Stock pursuant to Section 2.2(a) shall, by virtue of the mergers
and without any action on the part of the holders thereof, cease
to be outstanding, be cancelled and cease to exist, and each
holder of a certificate representing such shares shall cease to
have any rights with respect thereto, except the right to receive
for such shares, upon surrender of the certificate, in accordance
with Section 2.3, the amount of D&PL Common Stock allocated to
such holder under Section 2.2(a);
(c) Each share of common stock of each of D&PL1, D&PL2 and
D&PL3 issued and outstanding immediately before the closing shall, by
virtue of the mergers and without any action on part of the D&PL Subs,
or the holder thereof, be converted into the same number of shares of
common stock of the surviving corporation with and into which it was
merged. Upon surrender of such certificates to the surviving corpora
tions, new certificates representing shares of voting common stock of
the surviving corporations shall be issued to D&PL; and
(d) On or before Closing Date, D&PL have deposited or shall
transmit for deposit with Escrow Holder, as exchange agent, for the
benefit of the holders of stock that will be converted into D&PL
Common Stock pursuant to Section 2.2(a), a sufficient number of
certificates representing D&PL Common Stock required to effect the
delivery of the aggregate Consideration. Upon receipt of the share
certificates to be transmitted and upon receipt by Escrow Agent of the
issuance notice provided for in the Irrevocable Instructions to
exchange agent attached as Schedule 2.2(d) and subject to the
provisions of Section 8.6 requiring the retention of stock in escrow,
the Escrow Holder, as exchange agent, shall deliver the D&PL Common
Stock contemplated to be issued pursuant to Section 2.2(a) out of this
fund and pursuant to Irrevocable
Instructions to exchange agent in the form attached as Schedule
2.2(d). 2.3 Deposit and Endorsement of Certificates. At closing on
Closing Date, each Sure Grow Shareholder shall deliver to D&PL in
exchange for D&PL Common Stock to be issued pursuant to Section
2.2(a), certificates representing all shares of stock of the Sure Grow
Companies held by such Sure Grow Shareholder. Each certificate for
shares of stock of API, EBS, and MSI which is surrendered for exchange
has been properly endorsed and otherwise in a proper form for transfer
and the Sure Grow Shareholder requesting such exchange has either (i)
affixed any requisite stock transfer stamps to the certificates surren
dered, or (ii) provided funds for their purchase, or (iii) established
to the reasonable satisfaction of D&PL, that such stock transfer
stamps are not due and payable.
2.4 Corporate Actions at Closing.
(a) Effective upon closing on Closing Date, all members of the
respective Boards of Directors of the Sure Grow Companies and all
officers thereof as shown on Schedule 2.4(a)-A shall resign their
positions and shall deliver to the D&PL Companies written confirmation
of their resignations in the form attached as Schedule 2.4(a)-B. The
foregoing notwithstanding, the particular officers of the Sure Grow
Companies identified in Schedule 2.4(a)-C will be elected, effective
immediately after closing, except in the case of such persons who are
Sure Grow Shareholders whose election to such offices shall be
effective immediately after the issuance of the D&PL Common Stock by
the Escrow Agent to the Sure Grow Shareholders, to the corporate
offices set forth on Schedule 2.4(a)-C.
(b) Effective immediately after closing, D&PL, as sole
direct or indirect stockholder of API, EBS, MSI and SGS, the
surviving corporations, shall elect or cause to be elected
persons of its choosing to be elected as directors of each of the
Sure Grow Companies and may, subject to the provisions of Section
2.4(a), cause certain additional persons of its choosing to be
elected as officers of the Sure Grow Companies.
2.5 Restriction on Transfer of D&PL Common Stock. (a) The
D&PL Common Stock constituting Consideration acquired by the Sure
Grow Shareholders, as a result of the Transaction, shall not be
transferable by the Sure Grow Shareholders until it is registered
by D&PL with the SEC under the Securities Act of 1933 as amended
("the Act") unless: (i) the transferring Sure Grow Sharehold
er(s) has furnished D&PL with an opinion of counsel reasonably
acceptable to D&PL that such transfer is exempt from the require
ments of registration, or (ii) such transfer(s) is made after the
passage of two (2) years following the Closing Date and satisfies
any conditions set forth in the Rule 144 Memorandum drafted by
Sam D. Chafetz, Esq., dated May 1, 1996, attached as Schedule 2.5-
A, provided that such conditions set forth in said Memorandum
remain applicable under then existing applicable laws and
regulations upon expiration of such two (2) year period. All
certificates representing D&PL Common Stock issued to the Sure
Grow Shareholders, and any additional, reissued or replacement
certificates subsequently issued with respect thereto, prior to
the registration, shall bear such legends as set forth on
Schedule 2.5-B to indicate such restrictions on transferability.
D&PL shall use its best efforts to file a shelf Registration
Statement under the Act with the SEC with respect to the sale
and/or resale of such stock on the earliest practical date after
September 1, 1996, after audited combined financial statements
for the fiscal year ending August 31, 1996, are available and on
which D&PL can file such a Registration Statement under the then
applicable laws and rules of the SEC. Except as provided in
Section 4.4 and Section 5.7, the costs of preparing, filing,
printing and delivering such Registration Statement shall be
borne by D&PL. Except for registration shares to be issued
pursuant to any D&PL employee benefit plan, D&PL shall not,
without the prior written consent of a majority in interest of
the Sure Grow Shareholders, file a registration statement for the
sale of any other stock of D&PL of any class prior to filing the
registration statement for sale and/or resale of the D&PL Common
Stock to be conveyed to the Sure Grow Shareholders pursuant to
this Agreement, provided, however, D&PL shall be allowed to
simultaneously register for sale other common stock of D&PL with
the registration for sale of the D&PL Common Stock conveyed to
Sure Grow Shareholders.
ARTICLE 3. CONDITIONS PRECEDENT TO CLOSING
3.1 Conditions Precedent to Participation by the D&PL
Companies in Closing.
(a) The obligations of the D&PL Companies to close the
Transaction described in Article 2 are subject to the
fulfillment, upon execution of this Agreement on the Closing
Date, of each of the conditions described in Subsections
3.1(a)(i) through 3.1(a)(viii) (or written waiver thereof by the
D&PL Companies), to-wit:
(i) All representations and warranties of the
Sure Grow Companies and the Sure Grow Shareholders contained in
this Agreement shall be true in all material respects at and as
of the Closing Date and the Sure Grow Companies, the Sure Grow
Shareholders, and the Sure Grow Principals shall have performed
and complied with, in all material respects, the obligations
under this Agreement which are to be performed or complied with
by them under this Agreement prior to or on the Closing Date.
(ii) As of the Closing Date, (A) none of the Sure
Grow Companies and/or the Sure Grow Shareholders shall have taken
(or agreed to take) any action identified in the letters, the
forms of which are attached as Schedule 3.1(a)(ii)-A, 3.1(a)(ii)-
B, and 3.1(a)(ii)-C, which causes Arthur Andersen LLP not to be
able to deliver its written opinion in the form attached as
Schedule 3.1(a)(ii)-D that, as of the Closing Date, there exists
no impediment to the Transaction being accounted for as a Pooling-
of-Interests under GAAP, unless Arthur Andersen LLP shall have
delivered a prior written confirmation that such proposed action
or proposed failure to act would not result in Arthur Andersen
LLP's inability to deliver its opinion stating that it would
still be proper to account for the Transaction as a Pooling-of-
Interests, it being stipulated that the terms and conditions of
this Agreement and matters expressly set forth in this Agreement
and its Schedules, including, but not limited to, the actions
identified in Schedule 3.1(a)(ii)-E have been disclosed to Arthur
Andersen LLP and do not constitute such an impediment and (B) on
the Closing Date, the API Shareholders shall have executed and
delivered to Arthur Andersen LLP a representation letter in the
form attached as Schedule 3.1(a)(ii)-A, the EBS Shareholders
shall have executed and delivered to Arthur Andersen LLP a
representation letter in the form attached as Schedule 3.1(a)(ii)-
B, and the MSI Shareholders shall have executed and delivered to
Arthur Andersen LLP a representation letter in the form attached
as Schedule 3.1(a)(ii)-C, and Arthur Andersen LLP shall have
issued its written opinion in the form attached as Schedule
3.1(a)(ii)-D, at and as of the Closing Date and based upon such
representation letters, that the Transaction shall be treated as
a Pooling-of-Interests in conformity with GAAP.
(iii) At or before closing of the Transaction on the
Closing Date, (a) each of those certain Sure Grow Shareholders and
other key Employees of the Sure Grow Companies, whose names are
listed on Schedule 3.1(a)(iii)-A, shall have entered into a
contract with one or more of the Sure Grow Companies or the D&PL
Companies, effective before or on the Closing Date, in the forms
set forth as Schedules 3.1(a)(iii)-B through F, inclusive, and (b)
each of the Sure Grow Shareholders not listed on Schedule 3.1(a)
(iii)-A and each of the Sure Grow Principals shall have entered
into a contract with the Sure Grow Companies and D&PL, effective
before or on the Closing Date, in the form set forth as Schedule
3.1(a)(iii)-G.
(iv) No environmental condition exists, and no event
has occurred, at any of the Real Property which is not disclosed in
the Environmental Site Assessment Report(s) which would, after
Closing Date, materially and adversely affect the D&PL Companies or
any of the Sure Grow Companies (as may be in existence after the
Closing Date). For purposes of this Section 3.1(a)(iv) only, an
environmental condition or event shall be deemed to have a material
and adverse effect if, in the judgment of a licensed environmental
engineer mutually selected by the D&PL Companies and the Sure Grow
Companies (or if they cannot agree, as determined by a committee of
three licensed environmental engineers, one selected by D&PL
Companies, one selected by the Sure Grow Companies, and the third
selected by the first two (2) such engineers), reasonably exer
cised, there is a risk of liability under applicable Environmental
Laws to any D&PL Company or any Sure Grow Company of One Million
Dollars ($1,000,000.00) or more. Any provisions of this Article
notwithstanding, closing of the Transaction shall not constitute a
waiver by the D&PL Companies of any claims for indemnity under
Article 8 with respect to Environmental Claims.
(v) On or before the Closing Date, the Sure Grow
Companies have delivered to D&PL all of the Financial Statements
described in Section 1.40(a), Section 1.40(b)(i)(A), and Section
1.40(b)(ii)(A).
(vi) D&PL Companies shall have received a written
opinion of counsel, selected by D&PL, addressed to the D&PL
Companies that, at and as of the Closing Date and based on the
representations and warranties made by the Sure Grow Companies and
the Sure Grow Shareholders in Section 7.29, no filing is required
under the HSR Act with respect to the Transaction.
(vii) There is no pending injunction, order, judgment
or civil action prohibiting, restricting or placing conditions upon
(or seeking to prohibit, restrain or place conditions upon the
Transaction), provided, however, that none of the D&PL Companies
shall have the right to give notice pursuant to Section 3.1(b)
because of any injunction, order, judgment or civil action procured
or initiated by one or more of the D&PL Companies.
(viii) This Agreement has not been terminated as
provided in Article 10.
(b) In the event that the D&PL Companies, in their
judgment reasonably exercised in good faith, determine that any one
or more of the Conditions Precedent set forth in Section 3.1(a)
have not been fulfilled as of the Closing Date unless the Parties,
through their Authorized Representatives, mutually agree in writing
to set a subsequent date as the new Closing Date, the D&PL Compa
nies, or any one of them, may, by written notice to each of the
other Parties to this Agreement, cancel the closing and thereupon
all Parties shall be released from all obligations under this Agree
ment.
3.2 Conditions Precedent to Participation by Sure Grow
Companies and Sure Grow Shareholders in Closing.
(a) The obligations of the Sure Grow Companies and Sure
Grow Shareholders to close the Transaction described in Article 2
are subject to the fulfillment, upon execution of this Agreement on
the Closing Date, of each of the conditions described in Subsec
tions 3.2(a)(i) through 3.2(a)(v) (or written waiver thereof by the
Sure Grow Companies and the Sure Grow Shareholders), to-wit:
(i) All representations and warranties of the D&PL
Companies contained in this Agreement shall be true in all material
respects at and as of the Closing Date and the D&PL Companies shall
have performed and complied with, in all material respects,
their obligations under this Agreement which are to be performed or
complied with by them prior to or on the Closing Date.
(ii) Those persons listed on Schedule 3.1(a)(iii)-A
shall have been offered employment agreements in the forms attached
as Schedules 3.1(a)(iii)-B through F, inclusive.
(iii) Sure Grow Companies shall have received a
written opinion of counsel, selected by the Sure Grow Companies,
addressed to the Sure Grow Companies and the Sure Grow Sharehold
ers, that, at and as of the Closing Date and based on the represen
tations and warranties made by the Sure Grow Companies and the Sure
Grow Shareholders in Section 7.29, no filing is required under the
HSR Act with respect to the Transaction.
(iv) There is no pending injunction, order,
judgment or civil action prohibiting, restricting or placing
conditions upon (or seeking to prohibit, restrain or place
conditions upon the Transaction), provided, however, that none of
the Sure Grow Companies and/or the Sure Grow Shareholders shall
have the right to give notice pursuant to Section 3.2(b) because of
any injunction, order, judgment or civil action procured or
initiated by one or more of the Sure Grow Companies and/or the Sure
Grow Shareholders.
(v) This Agreement has not been terminated as
provided in Article 10.
(b) In the event that the Sure Grow Companies and/or the
Sure Grow Shareholders, in their judgment reasonably exercised in
good faith, determine that any one or more of Conditions Precedent
set forth in Section 3.2(a) have not been fulfilled as of the
Closing Date unless the Parties, through their Authorized Represen
tatives, have mutually agreed in writing to set a subsequent date
as a new Closing Date, the Sure Grow Companies and/or the Sure Grow
Shareholders, or any one of them, may, by written notice to each of
the other Parties to this Agreement, cancel the closing and
thereupon all Parties shall be released from all obligations under
this Agreement.
3.3 Payment of Transaction Costs. In the event that this
Agreement is executed but that, upon the Closing Date, all
Conditions Precedent to participation by the D&PL Companies in
closing, as contained in Section 3.1(a) above, are satisfied and in
such event that performance of this Agreement is tendered by the
Sure Grow Companies and the Sure Grow Shareholders and the D&PL
Companies fail or refuse to consummate the Transaction through no
fault of the Sure Grow Companies and/or the Sure Grow Shareholders,
then, as liquidated damages, the D&PL Companies shall fully
reimburse the Sure Grow Companies, the Sure Grow Principals and the
Sure Grow Shareholders in an amount equal to the Transaction Costs.
ARTICLE 4. PRE-CLOSING ACTIVITIES
4.1 Operation of Sure Grow Companies' Businesses. Except as
disclosed on Schedule 4.1, through Closing Date, the Sure Grow
Companies shall have used their good faith reasonable efforts to
preserve their properties, businesses and relationships with
customers, employees and other persons; and, specifically, except
consistent with prior ordinary business practices or except with
the prior written consent of D&PL, between the last day of the
respective fiscal years of each of the Sure Grow Companies (which
date was June 30, 1995, with respect to API, EBS and MSI, and
August 31, 1995, with respect to SGS) and closing on Closing Date,
none of the Sure Grow Companies shall have:
(a) carried on its business other than in the usual and
ordinary course in substantially the same manner as heretofore
conducted;
(b) declared, set aside, made or paid any dividend or
other distribution with respect to its capital stock;
(c) issued, sold, redeemed, repurchased or delivered any
shares of its capital stock or permitted any treasury shares to
become outstanding;
(d) effected any recapitalization, reclassification,
stock dividends, stock split or like change in capitalization or
issued or sold any options or warrants to purchase or rights to
subscribe to any shares of its capital stock;
(e) amended its Certificate or Articles of Incorporation
or By-Laws;
(f) merged with any other corporation or permitted any
other corporation to merge into it or consolidate with any other
corporation;
(g) acquired control over any other firm, corporation,
or organization or created any subsidiary;
(h) failed to comply in any material respect with any
Legal Requirements applicable to it or the conduct of its business
which failure would have a material adverse effect on the opera
tions of the Sure Grow Companies;
(i) waived or released any material right or claim or
cancelled or compromised any material debt or claim;
(j) liquidated or sold or disposed of any assets (other
than in the ordinary course of business) or acquired any assets
(other than in the ordinary course of business or as expressly
required by Section 4.5) provided, however, that EBS shall have,
prior to closing, conveyed to Bert Shattuck Ellis that certain real
estate located in Cherokee County, Alabama, and more particularly
described on Schedule 1.69-B, the record title to which had
appeared to be in EBS but the equitable title to which had been
vested in Bert Shattuck Ellis and provided further that EBS shall
have, prior to closing, conveyed to W. A. Ellis, III, an easement
as more particularly described on Schedule 3.1(a)(ii)-E;
(k) established any new branches or similar facilities
or entered into or modified any leases or other contracts relating
thereto;
(l) increased or agreed to increase the rate of compensa
tion or pay to any officer, director, other Employee or independent
contractor or paid or agreed to pay or provide any bonus or other
benefit or incentives to any of its directors, officers or other
Employees or independent contractors, other than bonuses and/or
compensation increases as set forth on Schedule 4.1(l);
(m) entered into, modified or extended any employment,
collective bargaining or other contracts or agreements with any of
its present or former officers or directors or other Employees
(other than as required by Section 3.1(a)(iii)-A);
(n) entered into (except as may be required by applica
ble law) any pension, retirement, stock option, stock purchase,
savings, profit sharing, deferred compensation, consulting, bonus,
group insurance incentive, or trust, plan, arrangement or contract
related thereto with respect to any of its officers, directors or
other Employees other than in this Agreement or in the Schedules
thereto;
(o) changed its borrowing, investment, asset/liability
management or other material business practices (except as required
by changes in applicable law);
(p) changed its methods of accounting (except as
required to conform to GAAP) or changed any of its methods of
reporting income or deductions for federal or state income tax
purposes, (except as required by changes in law or as required in
connection with the Transaction);
(q) taken any action or entered into any agreement to
take any action identified in Schedules 3.1(a)(ii)-A, 3.1(a)(ii)-B
or 3.1(a)(ii)-C which may cause Arthur Andersen LLP not to be able
to deliver its opinion in the form attached as Schedule 3.1(a)(ii)-
D that, as of the Closing Date, there exists no impediment to the
Transaction being accounted for as a Pooling-of-Interests under
GAAP, unless Arthur Andersen LLP shall have delivered a prior
written confirmation that such proposed action or proposed failure
to act will not result in Arthur Andersen LLP's inability to
deliver its opinion stating that it would still be proper to
account for the Transaction as a Pooling-of-Interests, it being
stipulated that the terms and conditions of this Agreement and
matters expressly set forth in this Agreement and its Schedules,
including, but not limited to the actions identified in Schedule
3.1(a)(ii)-E have been disclosed to Arthur Andersen LLP and do not
constitute such an impediment; and
(r) agreed to do any of the foregoing (except as may be
required by applicable law or judicial or administrative order).
4.2 Access to Property and Records; Confidentiality. During
a period beginning at least fourteen (14) days prior to the Closing
Date, upon reasonable written notice, during ordinary business
hours and subject to applicable laws relating to exchange of
information, the Sure Grow Companies have permitted the D&PL
Companies and those of their representatives, agents, and indepen
dent contractors who have agreed (in writing with a copy to the
Sure Grow Companies) to be bound by the Confidentiality Agreement
as if original parties thereto, reasonable access to the assets of
the Sure Grow Companies and have disclosed and made available to
the D&PL Companies all books, papers and records relating to
assets, stock, ownership, properties, operations, obligations and
liabilities of the Sure Grow Companies, including, but not limited
to, all books of account (including the general ledger), tax
records (including tax returns of the Sure Grow Companies and
schedules thereof), minute books of directors and stockholders'
meetings, organizational documents, By-Laws, contracts, license
agreements, filings, and correspondence with and written notices or
other documents from, any Governmental Body. Prior to closing, the
Sure Grow Companies and/or the Sure Grow Shareholders shall not
have been required to provide access to or disclose information
where such access or disclosure would jeopardize the attor
ney/client privilege of the Sure Grow Companies and/or the Sure
Grow Shareholders (except where the subject of the communication is
material to the Cotton Planting Seed Business of the Sure Grow
Companies and could reasonably be expected to materially impact
D&PL Companies' operation of the Sure Grow Companies after closing
of the Transaction) or would contravene any law, rule, regulation,
judgment, decree or order of any Governmental Body which is
applicable to any of the Sure Grow Companies; provided, however,
that the foregoing notwithstanding, during the due diligence
examination prior to Closing Date, D&PL shall not have had any
access whatsoever to: (i) plans affecting Employees or the business
activities or prospects of the Sure Grow Companies, or (ii) the
Sure Grow Cotton Varieties or the Sure Grow Companies' Cotton
Germplasm and Breeding Populations in the development stage and all
notes, books, and any other records pertaining thereto, but
provided further that the Sure Grow Companies, and the Sure Grow
Shareholders personally, warrant and guarantee that upon consumma
tion of the Transaction on the Closing Date all Cotton Germplasm
and Breeding Populations which were in the possession or control of
breeders working for the Sure Grow Companies as of August 18, 1995,
the progeny thereof, and all notes, books, and any other records
pertaining thereto, will be exclusively in the possession of the
Sure Grow Companies surviving the Transaction as contemplated in
Article 2 and that, to the best of their knowledge, no such Cotton
Germplasm or Breeding Populations have been delivered to or
retained by any person or entity other than authorized Employees of
the Sure Grow Companies, in their capacity as such. The Confidenti
ality Agreement shall apply to all documents and other information
exchanged pursuant to this Section, the provisions of which
Confidentiality Agreement shall survive the closing of the
Transaction or the cancellation of this Agreement, whichever may
occur. The D&PL Companies and its representatives have conducted
such investigations in a manner not to unreasonably interfere with
the normal operations of the Sure Grow Companies.
4.3 Environmental Conditions and Title.
(a) Environmental Site Assessments. During a period of
not less than fourteen (14) days prior to the Closing Date, the
Sure Grow Companies shall have permitted D&PL Companies and/or
their consultants reasonable non-disruptive access during normal
business hours and upon at least twenty-four (24) hours prior
written notice (i) to all environmental records of the Sure Grow
Companies pertaining to the Real Property (excluding those
protected by attorney/client privilege unless such records contain
information which has or could reasonably in good faith be
construed to have a material adverse effect on the Sure Grow Cotton
Planting Seed Business), (ii) to the Real Property to perform site
assessments, and (iii) to any Employee of the Sure Grow Companies
to ascertain compliance with Environmental Laws. The D&PL
Companies have provided the Sure Grow Companies with copies of the
Environmental Site Assessment Reports and a copy of any other
environmental report, if any, created as the result of the D&PL
Companies' investigation of the Sure Grow Cotton Planting Seed
Business or the Real Property immediately upon receipt by the D&PL
Companies and prior to the Closing Date (excluding documents
protected by attorney/client privilege).
(b) Title Commitments. Not less than fourteen (14) days
prior to Closing Date, the Sure Grow Companies have, at their
expense, provided to D&PL Companies commitments for an owner's
title insurance policy (or a leasehold policy in the case of API)
in the name of the Sure Grow Companies, subject to standard ALTA
exceptions and other Permitted Liens and Title Exceptions described
in Section 1.63, for the reasonable and estimated fair market value
of each tract of Real Property as set forth on Schedule 4.3(b).
(c) Cure of Title Exceptions. The Sure Grow Sharehold
ers, at their sole expense and not at the expense of the Sure Grow
Companies, have caused any exception to the title of any of the
Real Property, other than Permitted Liens and Title Exceptions, to
be bonded or insured against, or cleared or released and removed as
exceptions to the applicable title commitment. Any such curative
actions began as soon as practical after receipt by the Sure Grow
Companies of the relevant title commitment and have continued
without interruption until the matter was cured.
(d) Pre-Closing Casualty Damage. The Sure Grow
Companies have notified the D&PL Companies in writing of any damage
or destruction of any material asset(s) of the Sure Grow Cotton
Planting Seed Business by fire, windstorm or other casualty prior
to closing on Closing Date, and the Sure Grow Companies have
(unless otherwise agreed in writing with the D&PL Companies
subsequent to such casualty) commenced the repair or replacement of
such assets and continued such repair or replacement without
interruption until such repair or replacement was completed, using
insurance proceeds and/or other funds of the Sure Grow Companies as
may be reasonably necessary.
4.4 Audited and Unaudited Financial Statements. The Sure
Grow Shareholders, at the expense of the Sure Grow Companies, have
caused the Financial Statements for each of the Sure Grow Companies
described in Sections 1.40(a), 1.40(b)(i)(A), and 1.40(b)(ii)(A),
all of which are to be delivered upon Closing Date, to be prepared
in accordance with GAAP applied on a consistent basis, and with
Regulations SK and SX promulgated by the SEC, so that the same are
suitable for inclusion in SEC filings for the 1994 and 1995 fiscal
years and as needed to meet the requirements of Regulations SK and
SX regarding any stub period Financial Statements required in
connection with this Transaction or the subsequent registration of
the D&PL Common Stock issued to the Sure Grow Shareholders.
4.5 Acquisition of Sure Grow Affiliated Assets. Prior to
Closing Date, the Sure Grow Shareholders, at their own expense and
not at the expense of the Sure Grow Companies, have caused the Sure
Grow Companies to acquire all Sure Grow Affiliated Assets listed on
Schedule 1.78-A, free and clear of all liens, encumbrances or
obligations (except Permitted Liens and Title Exceptions, if any)
which Sure Grow Affiliated Assets shall, after such acquisition, be
regarded as assets of the Sure Grow Cotton Planting Seed Business
and shall be subject to all terms and conditions of this Agreement
which are applicable to the assets of the Sure Grow Cotton Planting
Seed Business.
ARTICLE 5. POST-CLOSING ACTIVITIES
5.1 Post-Closing Operations. After the Closing Date, the
Sure Grow Cotton Planting Seed Business shall be operated as one or
more wholly-owned subsidiary(ies) or division(s) of D&PL for a
period of not less than five (5) years, with the management
personnel described in Schedule 3.1(a)(iii)-A, subject to compli
ance with satisfactory performance and normal standards of fiscal
responsibility and subject to the terms and conditions of the
employment agreements in the forms attached as Schedules 3.1(a)
(iii)-B through F, inclusive. As a wholly-owned subsidiary(ies) or
division(s) of D&PL, the Sure Grow Cotton Planting Seed Business
will be entitled to access all of the technologies pertaining to
transgenic or genetically-engineered cotton plants (as well as all
other technologies relating to the Cotton Planting Seed business)
now owned by or, accessible to D&PL or any of D&PL's wholly-owned
subsidiary companies (collectively the "D&PL Entities"), and/or
available now or in the future to the D&PL Entities under terms of
license agreements with third parties. D&PL will use all reason
able efforts to cause transformation of Sure Grow Cotton Varieties
to incorporate transgenic technologies as expeditiously as possible
to carry out the intent contemplated by this Section 5.1.
5.2 Continued Employment of Senior Management of Sure Grow
Companies. The senior management Employees of the Sure Grow Compa
nies, whose names are listed on Schedule 3.1(a)(iii)-A, shall be
offered employment by one or more of the Sure Grow Companies and/or
the D&PL Companies on and after the Closing Date, on the terms and
conditions of employment agreements in the forms attached as
Schedules 3.1(a)(iii)-B through F, inclusive. Those who accept
such offers and continue employment with the Sure Grow Companies
and/or the D&PL Companies after closing shall, for the period of
such employment, receive annual compensation, including bonuses and
participation in D&PL's qualified and/or non-qualified stock option
plans, as set forth in their respective employment agreements
attached as Schedules 3.1(a)(iii)-B through F, inclusive, and
comparable to that paid to persons in similar positions with D&PL
and shall be subject to the same employment policies and rules,
issued from time to time, applicable to other employees in similar
positions with the D&PL Companies. All other employees of the Sure
Grow Companies (excluding senior management Employees described
above) who continue employment with the D&PL Companies or the Sure
Grow Companies shall be subject to the same employment policies
and rules, issued from time to time, applicable to other employees
in similar positions with the D&PL Companies. This Agreement shall
confer no rights upon any such Employees as employees, or the Sure
Grow Companies or the D&PL Companies as employers; all rights of
any such Employees and employers shall be contained in the said
employment agreements attached as Schedules 3.1(a)(iii)-B through
F, inclusive, as applicable to the above described senior manage
ment employees, or in employment agreements entered into by other
Employees and in applicable employment policies and rules of the
D&PL Companies.
5.3 Filing of Tax Returns.
The Sure Grow Companies will timely file or cause to be
filed all federal and state income tax returns that are due after
the closing on the Closing Date and that are required to be filed
by, or with respect to, the Sure Grow Companies, either separately
or as a member of an affiliated or combined group of corporations,
for all periods ending on or before the Closing Date in accordance
with applicable laws, regulations, and administrative requirements.
Subject to the accuracy and completeness of accounting records
supplied by the Sure Grow Companies and/or the Sure Grow Sharehold
ers and their accountants for periods prior to closing, all such
tax returns will be true, correct and complete in all material
respects when filed.
5.4 Pooling-of-Interests. The Sure Grow Companies have not,
prior to the execution of this Agreement, and shall not, at any
time prior to closing, and the Sure Grow Shareholders have not,
prior to the execution of this Agreement, and shall not, at any
time prior to or subsequent to closing, take (or enter into any
agreement to take) any action identified in any of the representa
tion letters attached as Schedules 3.1(a)(ii)-A, 3.1(a)(ii)-B, and
3.1(a)(ii)-C, which causes an impediment to the Transaction being
accounted for as a Pooling-of-Interests under GAAP, unless Arthur
Andersen LLP shall have delivered a prior written opinion that such
proposed action or proposed failure to act, or agreement to act or
fail to take action, would not result in an impediment to the
Transaction being accounted for as a Pooling-of-Interests, it being
stipulated that the terms and conditions of this Agreement and
matters expressly set forth in this Agreement and its Schedules,
including, but not limited to, the actions identified in Schedule
3.1(a)(ii)-E have been disclosed to Arthur Andersen LLP and do not
constitute such an impediment. Where the letter representation
letters attached as Schedules 3.1(a)(ii)-A, 3.1(a)(ii)-B and
3.1(a)(ii)-C expressly specify a particular time frame, the
covenants contained in this Section 5.4 shall apply to the time
frame so specified.
5.5 Cure of Environmental Conditions. The Sure Grow
Shareholders, at their sole expense and not at the expense of the
Sure Grow Companies, shall cause to be remediated each condition
pertaining to (a) any of the Real Property or (b) any site at which
Hazardous Materials from the Sure Grow Companies' operations have
been disposed of (specifically including at the site described in
Schedule 7.6(b)), that any of the Environmental Site Assessment
Reports shows to be in violation of applicable Environmental Laws,
and, without limiting the generality of the foregoing, shall cause
to be undertaken and completed the "Required Actions" on the
Environmental Action List prepared by Environmental and Safety
Designs, Inc., a copy of which is attached as Schedule 5.5, at a
total cost not to exceed Five Hundred Thousand and no/100 Dollars
($500,000.00) and in accordance with plans approved by the
applicable Governmental Body, and by the D&PL Companies and their
representatives (which approval shall not be unreasonably with
held). Such remediation actions may, at Sure Grow Shareholders'
option, have been commenced prior to the Closing Date and in any
event (if not commenced before Closing Date), shall be commenced as
soon as practical after the Closing Date and, once commenced, shall
continue without interruption until the subject conditions are
remediated. Notwithstanding anything contained in this Agreement
to the contrary, it is hereby understood and agreed by all Parties
that the Sure Grow Shareholders' responsibility hereunder with
regard to remediation of conditions shown in the Environmental Site
Assessment Reports to be in violation of applicable Environmental
Laws and/or shown on the Environmental Action List shall be based
upon the minimum remediation acceptable to the applicable Govern
mental Body with jurisdiction over such remediation. Notwithstand
ing anything in this Agreement to the contrary, any amounts
expended by the Sure Grow Shareholders after closing for the
purpose of remediation of violation of Environmental Laws shall
reduce the amount to remain in escrow pursuant to Section 8.6.
5.6 Cooperation in the Event of Inquiry or Litigation. In
the event that any Government Body commences an inquiry or
litigation, or any other person commences litigation, concerning
the Transaction, each Party shall, at its own expense (except as
may be otherwise provided in Section 3.3), cooperate with the other
Parties and take all appropriate actions, including preparation of
necessary filings, submissions, and responses, to defend the
validity of the Transaction. Each Party shall keep the other
Parties apprised of its actions with respect thereto and shall, in
compliance with applicable laws, cooperate in all reasonable ways
to assure the Transaction is sustained.
5.7 Post-Closing Deliveries of Financial Statements.
(a) It is contemplated that Hughel Goodgame & Associates
or Ellis & Hirsburg, Certified Public Accountants, as applicable,
shall deliver to the Sure Grow Companies, at the expense of the
Sure Grow Companies, and at their customary hourly rates (not less
than $40/hour for Junior, $60/hour for Senior, $80/hour for Manager
and $100/hour for Partner), the following Financial Statements on
or before the dates set out below:
(i) On or before July 1, 1996, those Unaudited
Separate Company Financial Statements described in Sections
1.40(b)(i)(B), 1.40(b)(i)(C), 1.40(b)(ii)(B), and 1.40(b)(ii)(C);
the Audited Combined Financial Statements described in Section
1.40(c)(i)(A) and the Unaudited Quarterly Combined Financial
Statements described in Section 1.40(c)(ii) for the quarter and
three and nine-month periods ending May 31, 1996 and May 31, 1995,
resulting from the combining of the Unaudited Separate Company
Financial Statement for SGS for the quarter and three and nine-
month periods ending May 31, 1996 and May 31, 1995, respectively,
with the Unaudited Separate Company Financial Statements for API,
EBS, and MSI for the quarter and three and nine-month periods
ending March 31, 1996 and March 31, 1995, respectively; and
(ii) On or before July 31, 1996, those Unaudited
Separate Company Financial Statements described in Sections
1.40(b)(i)(D) and 1.40(b)(ii)(D); the Audited Combined Financial
Statements described in Section 1.40(c)(i)(B); and all Unaudited
Quarterly Combined Financial Statements described in Section
1.40(c)(ii) except those delivered on or before July 1, 1996,
pursuant to Section 5.7(a)(i).
The Sure Grow Companies shall retain Hughel Goodgame &
Associates or Ellis & Hirsburg, Certified Public Accountants, as
applicable, to prepare and audit such Financial Statements and the
Sure Grow Shareholders shall, at their expense, cooperate when and
as requested with the Sure Grow Companies and said accountants in
the preparation and auditing of such Financial Statements.
(b) It is contemplated that Hughel Goodgame & Associates
or Ellis & Hirsburg, Certified Public Accountants, as applicable,
shall, at the expense of the Sure Grow Companies, and at their
customary hourly rates (not less than $40/hour for Junior, $60/hour
for Senior, $80/hour for Manager and $100/hour for Partner),
cooperate when and as requested with the D&PL and the Sure Grow
Companies and their accountants to prepare and audit on or before
September 23, 1996, separate and combined financial statements for
the quarters and three and twelve-month periods ending June 30,
1996 for API, EBS and MSI and ending August 31, 1996 for SGS and
the combined Sure Grow Companies. The Sure Grow Shareholders
shall, at their expense, cooperate when and as requested with the
Sure Grow Companies and said accountants in the preparation and
auditing of such Financial Statements.
(c) In the event that Hughel Goodgame & Associates or
Ellis & Hirsburg, Certified Public Accountants, as applicable, do
not deliver any of the Financial Statements described in Section
5.7(a) on or before the due dates thereof, and/or do not cooperate
with D&PL and the Sure Grow Companies and their accountants as
required by Section 5.7(b), time being of the essence, D&PL may, at
their sole option, have such Financial Statements prepared and
audited by accountants selected by D&PL and the Sure Grow Companies
at D&PL's accountants' customary rates for such professional
services and, in such event, the Sure Grow Shareholders shall
reimburse D&PL and the Sure Grow Companies the costs thus incurred,
less an amount equal to reasonably anticipated cost for performance
of the same services by Hughel Goodgame & Associates or Ellis &
Hirsburg, Certified Public Accountants, as applicable, at the same
rates for professional services as such accountants have customari
ly charged the Sure Grow Companies prior to Closing Date.
(d) After the Closing Date, and subject to timely
delivery of Financial Statements, as provided for in Section
5.7(a), and cooperation, as provided for in Section 5.7(b), the
Sure Grow Companies and the D&PL Companies will timely publicly
release those post-merger combined financial results referenced in
Paragraph 6 of Schedules 3.1(a)(ii)-A-C and, contemporaneously with
such public release, will provide each of the Sure Grow Sharehold
ers with written certification in that such financial results have
been publicly released.
5.8 Releases of Personal Guarantees. As soon as reasonably
practical after the Closing Date, the Sure Grow Companies and the
D&PL Companies will cause all the Sure Grow Shareholders and the
Sure Grow Principals to be completely released from any and all
personal guarantees or other obligations entered into by the Sure
Grow Shareholders and/or Sure Grow Principals in connection with
debts or other obligations of the Sure Grow Companies in existence
prior to the Closing Date which are listed in Schedule 5.8,
including (a) the name of the guarantor, (b) the name and address
of the beneficiary of the guarantee, and (c) the current balance of
the obligations thus guaranteed. D&PL hereby acknowledges that,
immediately after the Closing Date, the Sure Grow Shareholders and
Sure Grow Principals intend to give written notification to all
applicable parties regarding termination of such guarantees and/or
other obligations.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF
THE D&PL COMPANIES
The D&PL Companies represent and warrant to the Sure Grow
Companies as of Closing Date, as follows:
6.1 Due Incorporation.
(a) D&PL is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. D&PL has full power and authority to own, lease and
operate its assets, properties and business and to carry on its
business as now conducted, and is fully qualified and in good
standing under the laws of Alabama, Arizona and Mississippi.
(b) The D&PL Subs are corporations duly organized,
validly existing and in good standing under the laws of the State
of Delaware. The D&PL Subs have full power and authority to own,
lease and operate their assets, properties and business and to
carry on their business as now conducted, and are fully qualified
and in good standing under the laws of Alabama, Arizona and
Mississippi to the extent such qualification and good standing is
required to consummate this Transaction.
6.2 Power and Authority of the D&PL Companies; Legal and
Authorized Transactions. The D&PL Companies have the full
corporate power and authority to enter into, execute and deliver
this Agreement and all documents attached hereto and prepared in
connection herewith or other such documents reasonably required to
complete the transaction contemplated herein and to perform fully
their obligations hereunder without, to the best knowledge of the
D&PL Companies, the necessity of any act, approval, or consent of
any person or entity whatsoever. The execution and delivery of
this Agreement and all documents attached hereto and prepared in
connection herewith by the D&PL Companies and the consummation of
the Transaction contemplated hereby have been duly authorized by
all necessary corporate action of the D&PL Companies (including
without limitation the approval of the respective shareholders and
Boards of Directors of the D&PL Companies). This Agreement, upon
due execution and delivery of all documents attached hereto and/or
prepared in connection herewith, constitutes the legal, valid and
binding obligation of D&PL Companies, enforceable against the D&PL
Companies in accordance with the respective terms thereof. All
persons who have executed this Agreement and all documents attached
hereto and prepared in connection herewith on behalf of the D&PL
Companies have been duly authorized to do so by all necessary
corporate action. To the best knowledge of the D&PL Companies, no
approval, agreement or consent of any Governmental Body, and no
approval, agreement, or consent of any other person, is required to
be obtained by D&PL Companies in connection with the execution,
delivery, consummation and performance by the D&PL Companies of
their obligations under this Agreement or any documents attached
hereto and prepared in connection herewith. The representations
and warranties in this Section 6.2 shall not apply to any approvals
which may be required under the HSR Act, with respect to which the
Sure Grow Companies and Sure Grow Shareholders agree to rely upon
the representations and warranties of Section 7.29 and the opinion
of their own counsel described in Section 3.2(a)(iii).
6.3 Capital Stock and Shareholders of the D&PL Companies.
(a) The capital stock of D&PL consists of one class of
voting common stock of $.10 par value per share and one class of
preferred stock of $.10 par value per share. The total number of
authorized shares of common stock and preferred stock of D&PL and
the total number of issued and outstanding shares of common stock
and preferred stock of D&PL, as of the end of D&PL's last fiscal
quarter before the date of this Agreement, are set forth in
Schedule 6.3(a)-A. There have been no stock splits or stock
dividends pertaining to the common stock of D&PL between March 29,
1996 (the record date of most recent stock dividend pertaining to
the common stock of D&PL) and Closing Date. Except as disclosed in
Schedule 6.3(a)-B, D&PL does not have nor is it bound by any
outstanding agreements, options, warrants, calls, commitments, or
other rights of any character calling for the sale, purchase or
issuance of any shares of D&PL Common Stock, preferred stock, or
other securities of D&PL. To the best of D&PL's knowledge, there
are no voting trusts, proxies, or other agreements or understand
ings with respect to voting of the common stock of D&PL. D&PL has
entered into no voting trusts, proxies or other agreements or
understandings with respect to voting of the common stock of D&PL.
D&PL owns equity interests, directly or indirectly, in the corporat
ions, partnerships, limited liability companies, joint ventures, or
other entities listed in Schedule 6.3(a)-C. After registration of
the D&PL Common Stock, and except as may be expressly provided for
in this Agreement and in the Schedules thereto, or as may be
required to comply with applicable laws and regulations, there will
be no restrictions imposed by D&PL on the transferability of the
D&PL Common Stock.
(b) The capital stock of each of the D&PL Subs consists
of the following stock: D&PL1 has one class of voting common stock
of One Dollar ($1.00) par value per share; D&PL2 has one class of
voting common stock of One Dollar ($1.00) par value per share; and
D&PL3 has one class of voting common stock of One Dollar ($1.00)
par value per share. The total number of authorized shares, the
total number of issued and outstanding shares, and the name and
address of each shareholder and the number of shares held by each
shareholder of each of the D&PL Subs is set forth on Schedule
6.3(b). There is no preferred stock of the D&PL Subs nor any other
securities of the D&PL Subs. D&PL Subs do not have nor are they
bound by any outstanding agreements, options, warrants, calls,
commitments, or other rights of any character calling for the sale,
purchase or issuance of any shares of the common stock of D&PL
Subs. There are no voting trusts, proxies, or other agreements or
understandings with respect to voting of the common stock of D&PL
Subs. D&PL Subs do not own any equity interest, directly or
indirectly, in any other corporation, partnership, limited
liability company, joint venture, or other entity.
6.4 No Conflicts. Neither the execution or delivery of this
Agreement or any documents attached hereto and prepared in
connection herewith nor the consummation of the Transaction
contemplated hereby or by any documents attached hereto and/or
prepared in connection herewith will: (a) violate or conflict with,
or result in any breach of any of the terms, conditions, or
provisions of this Agreement, documents attached hereto and/or
prepared in connection herewith, or constitute a default under the
provisions of the Articles of Incorporation or By-Laws of the D&PL
Companies; (b) violate or conflict with any contract, instrument,
arrangement, obligation, commitment, understanding, or agreement to
which any of the D&PL Companies are parties or by which any
property or assets of any of the D&PL Companies are bound; or
(c) violate any judgment, order, injunction, decree or award of any
Governmental Body or, to the best of the D&PL Companies' knowledge,
violate any applicable laws or regulations to which any of the D&PL
Companies are subject. The representations and warranties in this
Section 6.4 shall not apply to any approvals which may be required
under the HSR Act, with respect to which the D&PL Companies agree
to rely upon the representations and warranties of Section 7.29 and
the opinion of their own counsel described in Section 3.1(a)(vi).
6.5 Full Disclosure. The D&PL Companies have provided, not
less than fourteen (14) days before Closing Date, to the Sure Grow
Companies copies of, or the opportunity through their authorized
representatives to examine upon their request, all of the annual
reports on Form 10K, the quarterly reports on Form 10Q, and any
8K's or any amendments thereto since August 31, 1993 pertaining to
D&PL and its business and financial affairs.
6.6 Authenticity of Documents. Each document delivered by or
on behalf of the D&PL Companies in connection with this Agreement,
the negotiations thereof, and the Transaction contemplated hereby
is materially true, materially complete and authentic. The written
information, including financial information, furnished by or on
behalf of the D&PL Companies to the Sure Grow Companies and/or the
Sure Grow Shareholders and/or their representatives in connection
with this Agreement, the negotiations thereof, and the Transaction
contemplated hereby, is materially true and correct and does not
intentionally omit any material facts.
6.7 Statements Made. No representation, warranty, statement
made or information or data provided by the D&PL Companies in this
Agreement or in any Schedule, exhibit, written material, document,
magnetic media, books and records or certificate furnished or to be
furnished by or on behalf of the D&PL Companies in connection with
the Transaction contemplated hereby knowingly contains or knowingly
will contain any untrue statement of material fact or knowingly omi
ts or knowingly will omit to state a material fact, in light of the
circumstances under which it was or will be made, necessary to make
the statements contained herein or therein not misleading;
notwithstanding the foregoing Schedules and other documents may
contain estimates (identified as such) which are made to the
subject Parties' best knowledge.
6.8 No Material Adverse Change. Since August 31, 1995, there
has not been any material adverse change in the business, condi
tion, financial, or otherwise, or results of operations of the D&PL
Companies, other than ordinary seasonal variations or as set forth
in D&PL's public documents furnished to the Sure Grow Companies and
Sure Grow Shareholders.
6.9 No Broker. No broker, finder, agent or similar interme
diary has acted for or on behalf of the D&PL Companies in connec
tion with this Agreement or the Transaction contemplated hereby,
and no broker, finder, agent or similar intermediary is entitled to
any broker's, finder's or similar fee or other commission in
connection therewith based on any agreement, arrangement or
understanding with the D&PL Companies.
6.10 Additional Representations of the D&PL Companies.
The D&PL Companies represent, to the best knowledge of the
D&PL Companies, that:
(a) The fair market value of the D&PL stock and other
consideration received by the Sure Grow Shareholders will be
approximately equal to the aggregate fair market value of API, MSI
and EBS stock surrendered in the Transaction.
(b) There is no plan or intention by any of the D&PL
Companies to sell, exchange, or otherwise dispose of a number of
shares of stock of API, EBS and MSI received in the transaction
that would reduce the D&PL Companies' aggregate ownership of stock
of API, EBS and MSI to a number of shares having a value, as of the
date of the Transaction, of less than fifty percent (50%) of the
value of all of the formerly outstanding stock of API, MSI and EBS
as of the same date. There will be no shares of D&PL stock
exchanged for cash or other property, surrendered by dissenters, or
exchanged for cash in lieu of fractional shares of D&PL stock.
(c) Following the Transaction, API, MSI and EBS will
hold at least ninety percent (90%) of the fair market value of
their respective net assets and at least seventy percent (70%) of
the fair market value of their respective gross assets and at least
ninety percent (90%) of the fair market value of the net assets of
D&PL1, D&PL2 and D&PL3, respectively, and at least seventy percent
(70%) of the fair market value of gross assets of D&PL1, D&PL2 and
D&PL3, respectively, held immediately prior to the Transaction.
There will be no amounts paid by API, MSI and EBS or the D&PL
Companies to dissenters nor any amounts paid by API, MSI or EBS or
the D&PL Companies to Sure Grow Shareholders in cash or other
property nor any redemptions or distributions by API, MSI or EBS or
the D&PL Companies (except regular and normal dividends by D&PL).
Amounts used by API, MSI or EBS or the D&PL Companies to pay
reorganization expenses will be included as assets of API, MSI or
EBS or the D&PL Companies, respectively, immediately prior to the
Transaction.
(d) Prior to the Transaction, D&PL will be in control of
D&PL Subs within the meaning of Section 368(c)(1) of the Code.
(e) D&PL, as the sole shareholder of API, MSI and EBS
after the closing, has no plan or intention to cause API, MSI or
EBS to issue additional shares of their stock that would result in
D&PL losing control of API, MSI or EBS within the meaning of
Section 368(c)(1) of the Code.
(f) D&PL has no plan or intention to reacquire any of
its stock issued in the Transaction.
(g) D&PL has no plan or intention to liquidate API, MSI
or EBS; to merge API, MSI or EBS with or into another corporation
except D&PL1, D&PL2 and D&PL3; to sell or otherwise dispose of the
stock of API, MSI or EBS except for transfers of stock to corpora
tions controlled by D&PL; or to cause API, MSI or EBS to sell or
otherwise dispose of any of their respective assets or of any of
the assets acquired from the D&PL Subs, except for dispositions
made in the ordinary course of business or transfers of assets to a
corporation controlled by API, MSI or EBS.
(h) The liabilities (if any) of the D&PL Subs assumed by
API, MSI and EBS and the liabilities (if any) to which the
transferred assets of the D&PL Subs are subject were incurred by
the D&PL Subs in the ordinary course of its business.
(i) Following the Transaction, API, MSI and EBS will
each continue their historic businesses or use a significant
portion of their historic business assets in a business.
(j) D&PL and D&PL Subs will pay their respective
expenses, if any, incurred in connection with the Transaction.
(k) There is no intercorporate indebtedness existing
between D&PL and any one or more of API, MSI or EBS or between the
D&PL Subs and any one or more of API, MSI or EBS that was issued,
acquired, or will be settled at a discount.
(l) In the Transaction, shares of API, MSI and EBS stock
representing control of API, MSI or EBS, as defined in Section
368(c)(1) of the Code, will be exchanged solely for voting D&PL
Common Stock. There will be no shares of API, MSI and EBS stock
exchanged for cash or other property originating with D&PL.
(m) D&PL does not own, nor has it owned during the past
five (5) years, any shares of the stock of API, MSI or EBS.
(n) None of the compensation received by any shareholder-
employees of API, MSI or EBS will be separate consideration for, or
allocable to, any of their shares of API, MSI or EBS stock; none of
the shares of D&PL stock received by any shareholder-employees will
be separate consideration for, or allocable to, any employment
agreement; and the compensation paid to any shareholder-employees
will be for services actually rendered and will be commensurate
with amounts paid to third parties bargaining at arm's-length for
similar services.
(o) None of D&PL or the D&PL Subs is an investment
company as defined in Section 368(a)(2)(f)(iii) and (iv) of the
Code.
(p) The terms of the Escrow Agreement attached as
Schedule 8.6 do not constitute an impediment to the Transaction
being accounted for as a Pooling-of-Interests under GAAP nor the
Transaction qualifying as one or more tax-free organizations under
the Code.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF
THE SURE GROW COMPANIES
The Sure Grow Companies and the Sure Grow Shareholders
represent and warrant to the D&PL Companies as of the Closing Date,
as follows:
7.1 Due Incorporation.
(a) SGS is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Alabama. SGS has full power and authority to own and operate the
assets, properties and business owned and operated by SGS. SGS is
qualified to transact business and is in good standing in the
jurisdictions listed on Schedule 7.1(a), which, to the best of the
Sure Grow Shareholders' knowledge, are the only jurisdictions where
the failure to be so qualified could have a material adverse effect
on SGS or its respective businesses or assets.
(b) API is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Arizona. API has full power and authority to own and operate the
assets, properties and business owned and operated by API. API is
qualified to transact business and is in good standing in the
jurisdictions listed on Schedule 7.1(b), which, to the best of the
Sure Grow Shareholders' knowledge, are the only jurisdictions where
the failure to be so qualified could have a material adverse effect
on API or its respective businesses or assets.
(c) EBS is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Alabama. EBS has full power and authority to own and operate the
assets, properties and business owned and operated by EBS. EBS is
qualified to transact business and is in good standing in the
jurisdictions listed on Schedule 7.1(c), which, to the best of the
Sure Grow Shareholders' knowledge, are the only jurisdictions where
the failure to be so qualified could have a material adverse effect
on EBS or its respective businesses or assets.
(d) MSI is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Mississippi. MSI has full power and authority to own and operate
the assets, properties and business owned and operated by MSI. MSI
is qualified to transact business and is in good standing in the
jurisdictions listed on Schedule 7.1(d), which, to the best of the
Sure Grow Shareholders' knowledge, are the only jurisdictions where
the failure to be so qualified could have a material adverse effect
on MSI or its respective businesses or assets.
7.2 Power and Authority of the Sure Grow Companies. The Sure
Grow Companies have the full corporate power and authority to enter
into, execute and deliver this Agreement and all documents attached
hereto and prepared in connection herewith or other such documents
reasonably required to complete the Transaction contemplated herein
and to perform fully their obligations hereunder without, to the
best knowledge of the Sure Grow Shareholders, the necessity of any
act, approval, or consent of any person or entity whatsoever. The
execution and delivery of this Agreement, and all documents
attached hereto and prepared in connection, herewith by the Sure
Grow Companies and the consummation of the Transaction contemplated
hereby have been duly authorized by all necessary corporate action
of the Sure Grow Companies (including without limitation the
approval of the respective shareholders and Boards of Directors of
Sure Grow Companies). This Agreement, and upon due execution and
delivery of all documents attached hereto and/or prepared in
connection herewith, constitutes the legal, valid and binding
obligation of the Sure Grow Companies, Sure Grow Shareholders and
the Sure Grow Principals, enforceable against each of the Sure Grow
Companies, Sure Grow Shareholders and the Sure Grow Principals in
accordance with the respective terms thereof. All persons who have
executed this Agreement and all documents attached hereto and
prepared in connection herewith on behalf of the Sure Grow
Companies have been duly authorized to do so by all necessary
corporate action. To the best knowledge of the Sure Grow Companies
and the Sure Grow Shareholders, no approval, agreement, or consent
of any Governmental Body, and no approval, agreement, or consent of
any other person, is required to be obtained by the Sure Grow
Companies in connection with the execution, delivery, consummation
and performance by the Sure Grow Companies of their obligations
under this Agreement or any documents attached hereto and prepared
in connection herewith. The representations and warranties in this
Section 7.2 shall not apply to any approvals which may be required
under the HSR Act, with respect to which the D&PL Companies agree
to rely upon the representations and warranties of Section 7.29 and
the opinion of their own counsel described in Section 3.1(a)(vi).
7.3 Capital Stock and Shareholders of the Sure Grow Compa
nies.
(a) As of the date of this Agreement, the capital stock
of SGS consists of one class of common stock of One Dollar ($1.00)
par value per share. The total number of authorized shares, the
total number of issued and outstanding shares, and the name and
address of each shareholder and the number of shares held by each
shareholder of SGS are set forth Schedule 1.76. Except as
disclosed on Schedule 7.3(a), SGS does not have nor is it bound by
any outstanding agreements, options, warrants, calls, commitments,
or other rights of any character calling for the sale, purchase or
issuance of any shares of the common stock of SGS or other
securities of SGS. Except as disclosed on Schedule 7.3(a), there
are no voting trusts, proxies, or other agreements or understand
ings with respect to voting of the common stock of SGS. SGS does
not own any equity interest, directly or indirectly, in any other
corporation, partnership, limited liability company, joint venture,
or other entity.
(b) The capital stock of API consists of one class of
common stock of One Dollar ($1.00) par value per share. The total
number of authorized shares, the total number of issued and
outstanding shares, and the name and address of each shareholder
and the number of shares held by each shareholder of API are set
forth on Schedule 1.3. Except as disclosed on Schedule 7.3(b), API
does not have nor is it bound by any outstanding agreements,
options, warrants, calls, commitments, or other rights of any
character calling for the sale, purchase or issuance of any shares
of the common stock of API or other securities of API. Except as
disclosed on Schedule 7.3(b), there are no voting trusts, proxies,
or other agreements or understandings with respect to voting of the
common stock of API. API does not own any equity interest,
directly or indirectly, in any other corporation, partnership,
limited liability company, joint venture, or other entity other
than a one-third (1/3) stock ownership interest in SGS.
(c) The capital stock of EBS consists of one class of
common stock of One Hundred Dollars ($100.00) par value per share.
The total number of authorized shares, the total number of issued
and outstanding shares, and the name and address of each sharehold
er and the number of shares held by each shareholder of EBS are set
forth on Schedule 1.31. Except as disclosed on Schedule 7.3(c),
EBS does not have nor is it bound by any outstanding agreements,
options, warrants, calls, commitments, or other rights of any
character calling for the sale, purchase or issuance of any shares
of the common stock of EBS or other securities of EBS. Except as
disclosed on Schedule 7.3(c), there are no voting trusts, proxies,
or other agreements or understandings with respect to voting of the
common stock of EBS. EBS does not own any equity interest,
directly or indirectly, in any other corporation, partnership,
limited liability company, joint venture, or other entity other
than a one-third (1/3) stock ownership interest in SGS.
(d) The capital stock of MSI consists of one class of
common stock of Fifty Dollars ($50.00) par value per share. The
total number of authorized shares, the total number of issued and
outstanding shares, and the name and address of each shareholder
and the number of shares held by each shareholder of MSI are set
forth on Schedule 1.58. Except as disclosed on Schedule 7.3(d),
MSI does not have nor is it bound by any outstanding agreements,
options, warrants, calls, commitments, or other rights of any
character calling for the sale, purchase or issuance of any shares
of the common stock of MSI or other securities of MSI. Except as
disclosed on Schedule 7.3(d), there are no voting trusts, proxies,
or other agreements or understandings with respect to voting of the
common stock of MSI. MSI does not own any equity interest,
directly or indirectly, in any other corporation, partnership,
limited liability company, joint venture, or other entity other
than a one-third (1/3) stock ownership interest in SGS.
(e) As of closing on Closing Date, each of the Agree
ments disclosed on Schedules 7.3(a), 7.3(b), 7.3(c) and 7.3(d) will
be released and cancelled by each of the parties thereto.
7.4 No Conflicts. Neither the execution and delivery of this
Agreement or any documents attached hereto and prepared in connec
tion herewith nor the consummation of the Transaction contemplated
hereby or by any documents attached hereto and/or prepared in
connection herewith will (a) violate or conflict with or result in
a breach of any of the terms, conditions, or provisions of this
Agreement, documents attached hereto, and/or prepared in connection
herewith or constitute a default under any provisions of the
Articles of Incorporation or By-Laws of any of the Sure Grow
Companies, (b) violate or conflict with any contract, instrument,
arrangement, obligation, commitment, understanding, or agreement to
which any of the Sure Grow Companies is a party or by which any
property or assets of any of the Sure Grow Companies are bound, (c)
result in the creation of any lien, charge or encumbrance upon any
of the assets of the Sure Grow Cotton Planting Seed Business, or
(d) violate any judgment, order, injunction, decree or award of any
Governmental Body or, to the best knowledge of the Sure Grow
Companies and the Sure Grow Shareholders, violate any applicable
laws or regulations to which the Sure Grow Companies are subject.
The representations and warranties in this Section 7.4 shall not
apply to any approvals which may be required under the HSR Act,
with respect to which the D&PL Companies agree to rely upon the
representations and warranties of Section 7.29 and the opinion of
their own counsel described in Section 3.1(a)(vi).
7.5 Real Property. Schedule 1.69-A contains a true and compl
ete description of the Real Property. Upon the completion of the
Transaction, the Sure Grow Companies shall have good and marketable
title to all of the Real Property (other than the real estate
listed on Schedule 1.69-B and the leased property listed and
identified as such on Schedule 1.69-A), including leasehold inter
ests, at no additional cost and without additional consents, free
and clear of all Liens, except Permitted Liens and Title Exceptions
described in Section 1.63. To the best of the Sure Grow Companies'
knowledge, all structures, improvements and fixtures on the Real
Property conform in all material respects to any and all applicable
federal, state and local laws, ordinances, rules, and regulations,
excluding Environmental Laws, environmental claims, and other
environmental issues all of which are addressed in Section 7.6.
Excluding Environmental Laws, environmental claims, and any other
environmental issues, all of which are addressed in Section 7.6,
and except as disclosed on the Environmental Site Assessment
Reports the Sure Grow Companies have not received any written
notice of, and the Sure Grow Companies are not presently aware of,
any claim by any person, firm, corporation or other entity, either
private or governmental alleging: (a) that any of the various
purposes for which the Real Property is currently being used
violates any applicable law, ordinance, rule or regulation of any
Governmental Body, (b) that there exists in connection with the
Real Property any material violation of any such law, ordinance,
rule or regulation, or requiring any substantial work, repairs,
construction, alterations or installation, or (c) that there is
pending or threatened any proceeding for the taking of all or any
portion of the Real Property by condemnation or eminent domain.
7.6 Environmental Claims. To the best knowledge of the Sure
Grow Companies and the Sure Grow Shareholders, except as disclosed
in the Environmental Site Assessment Reports and/or Schedule 7.6-B,
within the ten (10) years immediately preceding the date of
execution hereof by SGS, EBS, MSI, and API, the Sure Grow Companies
and their predecessors in interest have complied in all material
respects with all applicable Environmental Laws with respect to any
of the Real Property and any other real property previously owned
or used in any manner (including, without limitation, as a storage
or disposal site) by the Sure Grow Companies. The records provided
by the Sure Grow Companies to the D&PL Companies and/or to
Environmental and Safety Designs, Inc., as agents of the D&PL
Companies, include all material documents in the possession of the
Sure Grow Companies relating to environmental conditions at the
Real Property or any other such real property. Except as disclosed
in the Environmental Site Assessment Reports and/or Schedule 7.6-A,
no unremediated, unsatisfied, or otherwise currently pending
written charge, complaint, action, suit, proceeding, investigation,
claim, demand, inquiry or notice alleging any failure to comply
with any applicable Environmental Law or asserting an Environmental
Claim has been received by the Sure Grow Companies or the Sure Grow
Shareholders from any person, firm, corporation, entity, or Govern
mental Body with respect to any portion of the Real Property or the
Sure Grow Companies' operations nor, to the best knowledge of the
Sure Grow Companies and the Sure Grow Shareholders, is threatened.
Without limiting the generality of the foregoing, the Sure Grow
Companies specifically warrant as follows:
(a) Permits. To the best knowledge of the Sure Grow
Companies and the Sure Grow Shareholders (and without the Sure Grow
Companies and the Sure Grow Shareholders having made specific
inquiry to applicable regulatory authorities, if any, concerning
compliance with permit requirements), within the ten (10) years
immediately preceding the date of execution hereof by SGS, EBS,
MSI, and API, the Sure Grow Companies and their predecessors in
interest have obtained and have listed on Schedule 1.62 all
material Permits which are required under applicable Environmental
Laws in connection with the conduct of the Sure Grow Cotton
Planting Seed Business operations presently conducted, and
conducted during such period, on the Real Property, specifically
including, without limitation, any ponds, tanks, or other facili
ties used for treatment and/or disposal, if any, of effluent from
Delinting on the Real Property, and that to the best knowledge of
the Sure Grow Companies and the Sure Grow Shareholders, the Sure
Grow Companies are in compliance in all material respects with the
terms and conditions of all such Permits.
(b) Handling of Hazardous Materials. Except as
disclosed in the Environmental Site Assessment Reports and/or on
Schedule 7.6-A, to the best knowledge of the Sure Grow Companies
and Sure Grow Shareholders, no Hazardous Materials have been
recycled, treated, stored, disposed of or released by the Sure Grow
Companies on the Real Property or on any other real property (other
than on that certain real estate located in Cherokee County,
Alabama, owned by W. A. Ellis, III, more specifically described on
Schedule 7.6(b)), except in compliance with applicable Environ
mental Laws. Except as disclosed in the Environmental Site
Assessment Reports and/or on Schedule 7.6-A, any Releases have been
remediated in compliance with applicable Environmental Laws. No
written notification of a Release of Hazardous Materials on the
Real Property or on other real property by the Sure Grow Companies
has been filed by or on behalf of the Sure Grow Companies. The
Sure Grow Companies do not own or operate a storage, treatment or
disposal facility on the Real Property requiring a permit under
RCRA, or under any other comparable applicable state or local law,
and, without limiting the foregoing, except as disclosed on the
Environmental Site Assessments Reports and/or on Schedule 7.6-A,
(i) no polychlorinated biphenyl is in use or stored at the Real
Property, (ii) no friable asbestos or friable asbestos-containing
material is present at the Real Property, and (iii) no underground
storage tanks or surface impoundment for Hazardous Materials,
active or abandoned, are present at the Real Property. The Real
Property is not (i) listed on the NPL under CERCLA nor (ii) listed
for possible inclusion on the NPL by the Environmental Protection
Agency in the CERCLIS or any similar state or local list.
(c) Environmental Liens. Except as disclosed in the
Environmental Site Assessment Reports and/or on Schedule 7.6-A, to
the best knowledge of Sure Grow Companies and the Sure Grow
Shareholders, no Liens with respect to the Real Property exist
under or pursuant to any Environmental Law and the Sure Grow Compan
ies have received no written notice from any Governmental Body
regarding any action to subject the Real Property to such a Lien.
Environmental Laws in effect at the time this Agreement is signed
will not require the Sure Grow Companies to place any notice or
restriction related to the presence of Hazardous Materials on the
Real Property in any deed to the Real Property.
7.7 Equipment. Schedule 1.36-A is a complete list of the
Equipment owned by the Sure Grow Companies and/or regularly used in
the Sure Grow Cotton Planting Seed Business. The Sure Grow
Companies have good and marketable title to all of the Equipment,
except such Equipment on Schedule 1.36-A which is designated as
regularly used but not owned by the Sure Grow Companies, subject
only to the Permitted Liens and Title Exceptions and the liens and
encumbrances listed on Schedule 7.7. Upon the consummation of the
Transaction, the Sure Grow Companies will have good and marketable
title to all of the Equipment, in each case, free and clear of any
Lien (except Permitted Liens and Title Exceptions described in
Section 1.63 or the liens and encumbrances listed on Schedule 7.7).
The Equipment is in good working order, ordinary wear and tear
excepted and is adequate and sufficient for the operation of the
Sure Grow Companies' business as presently conducted consistent
with past practices.
7.8 Seed Rights. The Sure Grow Companies are the sole and
exclusive owners of the Cotton Germplasm and Breeding Populations
and upon the closing of the Transaction on the Closing Date, the
Sure Grow Companies will continue to be the sole and exclusive
owner of all rights to the Cotton Germplasm and Breeding Popula
tions. The Sure Grow Companies do not use in their business
including, without limitation, in their Cotton Research and
Breeding programs, any know-how, trade secrets, inventions,
patents, licenses or franchises pertaining thereto which requires
consent of any owner thereof and which consent has not been
obtained. All Breeder Seed, Foundation Seed, Registered Seed and
Certified Seed included in the Inventory are seed of Sure Grow
Cotton Varieties of which the Sure Grow Companies have exclusive
ownership. Schedule 1.81 contains a complete list of Sure Grow
Cotton Varieties. With respect to all Sure Grow Cotton Varieties
listed in Schedule 1.81, the Sure Grow Companies are the exclusive
owners of certificates of Plant Variety Protection properly issued
pursuant to the PVPA, or the Sure Grow Companies have filed timely
applications for protection under the PVPA, or the Sure Grow
Companies have the right to file applications and obtain certifi
cates of protection under the PVPA. True and correct copies of all
PVPA certificates and applications pertaining to the Sure Grow Cott
on Varieties have been provided to D&PL not less than fourteen (14)
days before Closing Date. The Sure Grow Cotton Varieties are free
and clear of all claims or other encumbrances except as expressly
set forth in Schedule 7.8. The Sure Grow Companies have done no
act which constitutes a breach of the rights of any third party
with respect to Sure Grow Cotton Varieties or Cotton Germplasm or
Breeding Populations used by the Sure Grow Companies and/or their
Employees or which would prevent the Sure Grow Companies (and/or,
after closing of the Transaction, the D&PL Companies) from
Producing and Marketing, or licensing others to Produce and Market,
Cotton Planting Seed of Sure Grow Cotton Varieties or of the
progeny of Cotton Germplasm or Breeding Populations used by the
Sure Grow Companies and/or their Employees, nor has any of the Sure
Grow Companies been charged (in writing) with or notified (in
writing) of any infringement or alleged claim of infringement of
any adversely held know-how, trade secret, invention, patent, PVPA
certificate, certificate issued under the plant variety protection
laws of other nations, trademark, trade name, brand name or
copyright relating to Sure Grow Cotton Planting Seed Business and
the Sure Grow Companies and the Sure Grow Shareholders know of no
reasonable basis for any such charge or claim. None of the Sure
Grow Companies is a party to or the beneficiary of, or aware of,
any agreements, consent or understanding which restricts the use by
the Sure Grow Companies, or which will restrict the Sure Grow Com
panies' (and/or, after Closing of the Transaction the D&PL
Companies') Producing or Marketing, or licensing others to Produce
and Market, after consummation of the Transaction on the Closing
Date, seed of the Sure Grow Cotton Varieties or of the Cotton
Germplasm and Breeding Populations, or the progeny thereof.
Further, upon closing of the Transaction on the Closing Date, all
Cotton Germplasm and Breeding Populations which were in the
possession or control of breeders working for the Sure Grow
Companies as of August 18, 1995, the progeny thereof, and all
notes, books, and any other records pertaining thereto, will be
exclusively in the possession of the Sure Grow Companies surviving
the Transaction as contemplated in Article 2 and that, to the best
of their knowledge, no such Cotton Germplasm or Breeding Popula
tions have been delivered to or retained by any person or entity
other than authorized Employees of the Sure Grow Companies, in
their capacity as such.
7.9 Inventory. The Sure Grow Companies have good and
marketable title to the Inventory, and upon the completion of the
Transaction, they will have good and marketable title to all of the
Inventory, free and clear of any Lien (except Permitted Liens and
Title Exceptions and Liens disclosed on Schedule 7.9). Upon the
Closing Date, to the best knowledge of the Sure Grow Companies and
the Sure Grow Shareholders, the Inventory of Breeder Seed,
Foundation Seed, Registered Seed and Certified Seed owned by the
Sure Grow Companies and which has been delinted, conditioned and
bagged will (subject to sampling procedures and statistical toleran
ces permitted by applicable laws and regulations and generally
accepted in the cotton planting seed industry) meet all applicable
state and federal laws and regulations pertaining to Cotton
Planting Seed of that particular class. To the best knowledge of
the Sure Grow Companies and the Sure Grow Shareholders, all of the
Sure Grow Companies' Breeder Seed, Foundation Seed, Registered Seed
and Certified Seed which is in undelinted form upon the Closing
Date is in material compliance (subject to sampling procedures and
statistical tolerances permitted by applicable laws and regulations
and generally accepted in the cotton planting seed industry) with
all applicable state and federal laws and regulations which would
allow it, when delinted and conditioned, consistent with past
business practices and records to be certified for use and sale as
seed of the subject class.
7.10 Compliance with Laws. Except as disclosed in the
Environmental Site Assessment Reports and/or in Sections 7.1, 7.2,
7.6, and 7.20, and/or the Schedules referenced in those sections,
the Sure Grow Companies have complied in all material respects with
all Legal Requirements and orders of every Governmental Body, the
non-compliance with which would have a material adverse effect upon
the continued operation of the Sure Grow Companies' assets.
Schedule 1.62 contains a complete list of all Permits held by the
Sure Grow Companies for the conduct of operations of the Sure Grow
Cotton Planting Seed Business. True and correct copies of all
Permits have been provided to the D&PL Companies. Except as noted
on Schedule 1.62, all such Permits are in full force and effect,
and no material uncured violation of any Permit exists. The
representations and warranties in this Section 7.10 shall not apply
to any approvals which may be required under the HSR Act, with
respect to which the D&PL Companies agree to rely upon the
representations and warranties of Section 7.29 and the opinion of
their own respective counsel described in Section 3.1(a)(vi).
7.11 Actions and Proceedings. Except as disclosed on the
attached Schedule 7.11, there are no outstanding orders, judgments,
injunctions, awards, writs, stays or decrees of any court,
regulatory or Governmental Body or arbitration tribunal against any
of the Sure Grow Companies or their assets. The Sure Grow
Shareholders have received no actual notice of any actions, suits
or claims or legal, administrative or arbitral proceedings or
investigations pending or, to the best knowledge of the Sure Grow
Companies and the Sure Grow Shareholders, threatened against any of
the Sure Grow Companies or their assets.
7.12 Contracts and License Agreements. Schedule 1.18 contains
a true and complete list of all material contracts to which any of
the Sure Grow Companies is a party and/or which relate to the Sure
Grow Cotton Planting Seed Business. Schedule 1.54 contains a true
and complete list of all written License Agreements to which any of
the Sure Grow Companies is a party. None of the Sure Grow
Companies is a party to any non-written license agreement pertain
ing to Cotton Germplasm, Cotton varieties or Cotton Planting Seed.
True and correct copies of all such Contracts and License Agree
ments listed on Schedule 1.18 and Schedule 1.54 have been provided
to the D&PL Companies. All such Contracts and License Agreements
are valid, binding, upon the particular Sure Grow Companies who are
parties thereto, in accordance with their terms, and in full force
and effect; the Sure Grow Companies have materially performed their
obligations thereunder, and, to the best knowledge of the Sure Grow
Companies and the Sure Grow Shareholders, the Sure Grow Companies
are not in material default thereunder; and, to the best knowledge
of the Sure Grow Companies and the Sure Grow Shareholders, no
condition exists which with notice or lapse of time or both would
constitute a material default thereunder.
7.13 Full Disclosure. The Sure Grow Companies have provided
to the D&PL Companies copies of, or the opportunity through their
authorized representatives to examine upon their request, all of
the material documents within the Sure Grow Companies' possession
pertaining to the Sure Grow Cotton Planting Seed Business, except
(a) attorney/client privileged documents (unless such documents
contain information which has or could reasonably be construed to
have a material effect on the Sure Grow Cotton Planting Seed
Business), (b) monthly unaudited financial statements, and (c)
documents and records related to or pertaining to the Sure Grow
Cotton Varieties or the Sure Grow Companies' Cotton Germplasm and
Breeding Populations in the development stage.
7.14 Authenticity of Documents. Each document delivered by or
on behalf of the Sure Grow Companies in connection with this
Agreement, the negotiations thereof, and the Transaction contem
plated hereby is materially true, materially complete and authen
tic. The written information, including financial information,
audited by or furnished by the Sure Grow Companies or by Hughel
Goodgame & Associates or by Ellis & Hirsburg, Certified Public
Accountants, on behalf of the Sure Grow Companies to the D&PL
Companies and/or their representatives in connection with this
Agreement, the negotiations thereof, and the Transaction contem
plated hereby, is materially true and correct and does not
intentionally omit any material facts.
7.15 Statements Made. No representation, warranty, statement
made or information or data provided by the Sure Grow Companies in
this Agreement or in any schedule, exhibit, written material,
document, magnetic media, books and records or certificate
furnished or to be furnished by or on behalf of the Sure Grow
Companies in connection with the Transaction contemplated hereby
knowingly contains or knowingly will contain any untrue statement
of material fact or knowingly omits or knowingly will omit to state
a material fact necessary to make the statements contained herein
or therein not misleading; notwithstanding the foregoing Schedules
and other documents may contain estimates (identified as such)
which are made to the subject Parties' best knowledge. Notwith
standing the foregoing (except as expressly set forth in Section
7.8 concerning rights pertaining to seed), the Sure Grow Companies
make no representation with respect to the prospects of Sure Grow
Companies' Cotton Planting Seed Business, including without
limitation the performance of the Sure Grow Cotton Varieties or
Cotton Germplasm and Breeding Populations in the development stage,
subsequent to the closing, but only as to facts relating thereto at
and prior to the Closing.
7.16 Financial Statements. The Audited Separate Company
Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods presented and
are materially accurate and fairly present in all material respects
the financial position and results of the operations of the individ
ual Sure Grow Companies as of the respective dates thereof. The
Audited Combined Financial Statements shall be prepared in
accordance with GAAP applied on a consistent basis throughout the
periods presented and shall be materially accurate and fairly
present in all material respects the financial position and results
of the operations of the combined Sure Grow Companies as of the
respective dates thereof. All Audited Separate Company Financial
Statements and Audited Combined Financial Statements are (or shall
be) derived from the books and records of the Sure Grow Companies
and (a) have been (or shall be) prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered by
such statements, (b) have been prepared in material accordance with
Regulations SK and SX and (c) are (or shall be) materially accurate
and fairly present in all material respects the financial position
of the Sure Grow Companies on a combined basis as of the respective
dates thereof and the results of their respective operations and
the changes in their respective financial position for the
respective periods covered thereby. The Unaudited Separate Company
Financial Statements and the Unaudited Quarterly Combined Financial
Statements shall, in all material respects, reflect the information
recorded in the books and records of the Sure Grow Companies and
present fairly in all material respects the financial position of
the Sure Grow Companies on a combined basis as of the respective
dates thereon, and present fairly in all material respects the
results of operations and the changes in financial position for the
periods indicated. In accordance with the standards relating to
unaudited financial statements as promulgated by the American
Institute of Certified Public Accountants, the Unaudited Separate
Company Financial Statements and the Unaudited Quarterly Combined
Financial Statements do not and shall not include footnotes and
have not been reviewed by independent public accountants.
7.17 Liabilities. To the best knowledge of the Sure Grow
Companies and the Sure Grow Shareholders, except as otherwise
disclosed on Schedule 7.17 and/or the other Schedules attached here
to and/or on the Financial Statements, the Sure Grow Companies have
no material liabilities or material obligations of any nature,
whether accrued, absolute, contingent, or otherwise, and whether
or not required to be shown on a balance sheet prepared in
accordance with GAAP, exclusive of normal and customary operating
debt incurred in the normal and ordinary course of the Sure Grow
Companies' Cotton Planting Seed Business, including but not limited
to, that debt necessary to acquire current seed inventory and for
routine plant maintenance.
7.18 Cash Reserves. The Sure Grow Companies shall, upon
Closing Date, have sufficient cash, current seed Inventory or other
liquid assets, including accounts receivable, to pay any current
unsecured short term liabilities for normal and customary operating
expenses incurred in the normal and ordinary course of business as
provided for in Section 7.17 and to cover reserves for taxes and
known contingencies.
7.19 No Material Adverse Change. Except as disclosed on
Schedule 7.19, or on any Financial Statements prepared and
delivered to the D&PL Companies, since the last date of the 1995
fiscal years of each of the respective Sure Grow Companies, other
than seasonal changes occurring in the ordinary and normal course
of business, there has not been any material adverse change in the
business, condition, financial or otherwise, prospects or results
of operations of the Sure Grow Companies.
7.20 Taxes.
(a) Except as disclosed on the attached Schedule
7.20(a), the Sure Grow Companies have (i) duly filed (or there has
been duly filed on their behalf) with the appropriate federal,
state, local, and foreign taxing authorities all Tax Returns due
and required to be filed (taking into account any extensions) by or
with respect to the Sure Grow Companies on or before the date
hereof, and (ii) paid in full on a timely basis (or there has been
paid on their behalf) all Taxes shown to be due on such tax
returns. The liability accrued on the Audited Financial Statements
for API, EBS and MSI for fiscal years ending on or before June 30,
1995, and for SGS for fiscal years ending on or before August 31,
1995, for current Taxes for taxable years or periods ending on or
before June 30, 1995 and August 31, 1995, respectively, have been
determined in accordance with GAAP consistently applied.
(b) Except as disclosed on the attached Schedule
7.20(b), the Sure Grow Companies have not received any written
notice of a deficiency or assessment with respect to Taxes from any
federal, state, local, or foreign taxing authority which has not
been fully paid or finally settled. To the best knowledge of the
Sure Grow Companies and the Sure Grow Shareholders, except as
disclosed on Schedule 7.20(b), there are no ongoing audits or
examination of any Tax Return of the Sure Grow Companies. Except
as disclosed on Schedule 7.20(b), no written notice of audit or
examination of any such tax returns has been received by the Sure
Grow Companies. The Sure Grow Companies have not given, and there
has not been given on behalf of the Sure Grow Companies, a waiver
or extension of any statute of limitations relating to the payment
of taxes. Except as disclosed on Schedule 7.20(b), the federal
income tax returns of the Sure Grow Companies have been audited by
the IRS or are closed by the applicable statute of limitations for
all periods through June 30, 1992, for API, EBS and MSI and August
31, 1992, for SGS, and no issue has been raised in writing, or to
the best knowledge of the Sure Grow Companies or any of the Sure
Grow Shareholders, on audit, or in any other proceeding with
respect to Taxes of the Sure Grow Companies by any federal, state,
local, or foreign taxing authority.
(c) The Sure Grow Companies have paid over to the proper
Governmental Bodies all income or other Taxes and amounts required
to be withheld and which are due with respect to salary and other
compensation of directors, officers, and Employees of the Sure Grow
Companies.
(d) Except for Permitted Liens and Title Exceptions, or
any other matters disclosed in this Agreement and/or on the
Schedule attached hereto, there are no Liens with respect to Taxes
upon any of the properties or assets, real or personal, tangible or
intangible, of the Sure Grow Companies.
7.21 Employees.
(a) Schedule 7.21(a) sets forth with respect to each
regular, full-time salaried or hourly Employee of the Sure Grow
Companies as of March 7, 1996, the Employee's name, job title,
annual salary, hourly rate, hire date, and years of service. There
has been no material change in the information on Schedule 7.21(a)
from March 7, 1996, through Closing Date.
(b) Schedule 7.21(b) sets forth (i) all written employ
ment, consulting, severance, retention, termination and similar
agreements and arrangements under which the Sure Grow Companies
currently have any obligation to an Employee or to any former
Employee of the Sure Grow Companies and (ii) all written incentive,
bonus, performance and similar compensatory plans and arrangements
in which Employees of the Sure Grow Companies are eligible to
participate. The Sure Grow Companies have provided to the D&PL
Companies true and complete copies of all plans, agreements, and
arrangements listed on Schedule 7.21(b). There are no non-written
plans, agreements, or arrangements which, if written, would have
been required to be disclosed in accordance with this Section.
(c) To the best knowledge of the Sure Grow Companies and
the Sure Grow Shareholders, and except as disclosed on Schedule
4.1, there are no suits, investigations, claims, or proceedings
pending or threatened relating to or arising out of the employment
of any Employee or former Employee.
(d) None of the Sure Grow Companies is a party to any
collective bargaining agreement. To the best knowledge of the Sure
Grow Companies and the Sure Grow Shareholders, there is no
organizing effort now underway among any Employees of the Sure Grow
Companies and any labor organization.
7.22 Employee Benefit Plans.
(a) ERISA. Except as set forth on Schedule 7.22, none of
the Sure Grow Companies is a party to and does not participate or
has not participated in any written or non-written (i) profit
sharing, deferred compensation, bonus, stock retirement, welfare,
or incentive plan or agreement, whether legally binding or not,
(ii) plan providing for "fringe benefits" to its employees,
including, but not limited to, vacation, sick leave, medical,
hospitalization, life insurance, and other insurance plans, and
related benefits, (iii) other "employee benefit plan" (within the
meaning of Section 3(3) of ERISA or (iv) "multi-employer plan"
(within the meaning of Section 3(37) of ERISA). True, correct and
complete copies of the plan documents and agreements referred to in
Schedule 7.22 and all related summary plan descriptions have been
provided or will be provided to the D&PL Companies before Closing
Date. The Sure Grow Companies are in material compliance with the
applicable provisions of ERISA and the regulations and rulings
issued thereunder with respect to each employee benefit plan
subject thereto and listed on Schedule 7.22, and each has performed
all of its obligations under such plans. To the best knowledge of
the Sure Grow Companies and the Sure Grow Shareholders, there are
no actions, suits or claims (other than routine claims for
benefits) pending or threatened against such plans or the assets of
such plans and no facts exist which could reasonably be expected to
give rise to any actions, suits or claims (other than routine
claims for benefits) against such plans or the assets of such
plans.
(b) Pension and Profit Sharing Plan. The "employee
pension benefit plans" (within the meaning of Section 3(2) of
ERISA), if any, described on Schedule 7.22 have been fully
authorized by the Board of Directors of the Sure Grow Companies.
To the best knowledge of the Sure Grow Companies and Sure Grow
Shareholders: (1) each such plan in all material respects is
qualified in form and operation under Section 401(a) and 501(a) of
the Code to the extent the Code requires such qualification;
(ii) no event has occurred which will or could reasonably be
expected to subject the Sure Grow Companies or any such plans to
tax under Sections 511, 4972, or 4975 of the Code; (iii) no
prohibited transaction (within the meaning of Section 4975 of the
Code or Section 406 of ERISA), or breach of fiduciary responsibili
ty under Title I of the ERISA, which transaction is not exempt or
for which exemption is not available under Section 4975 of the Code
or Section 408 of ERISA, has occurred with respect to any such
plan; (iv) no accumulated funding deficiency, whether or not
waived, exists with respect to any such plan, no condition has
occurred or exists which with the passage of time would be expected
to result in an accumulated funding deficiency as of the last day
of the current plan year of any such plan, and no employer
maintaining the plan has failed to make full payment when due of
all amounts which under the provisions of any such plan are
required to be made as contributions thereto and no excise taxes
are payable under the Code.
The Sure Grow Companies have provided to the D&PL Companies
for each of the employee pension benefit plans (i) a copy of any
Form 5500 which was filed in each of the most recent three plan
years (to the extent applicable), including, without limitation,
all schedules thereto, (ii) a copy of any Form PBGC-1, if applica
ble, which was filed in each of the most recent three (3) plan
years, (iii) the most recent determination letter from the Internal
Revenue Service if obtained prior to the date hereof, (iv) the
consolidated statement of assets and liabilities of each of the
employee pension benefit plans as of its most recent valuation
date, (v) the statement of changes in fund balance and in financial
position or the statement of changes in net assets available for
benefits under each of said plans for the most recently ended plan
year, and (vi) with respect to any such plan which is subject to
Title IV of ERISA, the actuarial report as of the last valuation
date. To the best of the Sure Grow Companies' and the Sure Grow
Shareholders' knowledge, such documents fairly present the
financial condition of each said plan as at such dates and the
results of operations of each of said plans, all on a consistent
basis.
(c) Title IV Plans. With respect to each employee
pension benefit plan (excluding plans not subject to the provisions
of title IV of ERISA), if any, listed on Schedule 7.22 (i) no
employer maintaining the plan has completely or partially withdrawn
from such a pension plan, (ii) there has been no notice of intent
to terminate any such plan filed and no such plan has been
terminated, (iii) to the best knowledge of the Sure Grow Companies
and the Sure Grow Shareholders, the Pension Benefit Guaranty
Corporation ("PBGC") has not instituted proceedings to terminate
any such plan, (iv) to the best knowledge of the Sure Grow
Companies and the Sure Grow Shareholders, no other event or
condition has occurred which constitutes grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any such plan, and (v) to the best knowledge of the
Sure Grow Companies and the Sure Grow Shareholders, all required
premium payments to the PBGC have paid when due, and (vi) to the
best knowledge of the Sure Grow Companies and the Sure Grow
Shareholders, no other reportable event, as described in Section
4043 of ERISA and the regulations thereunder, has occurred with
respect to said plans which event has been reported.
(d) Continuation Coverage Requirements of Health Plan.
All group health plans of the Sure Grow Companies (including any
affiliates which must be taken into account under Section 4980b of
the Code) have been operated in good faith, and substantially in
compliance with the group health plan continuation coverage
requirements of Section 4980B of the Code to the extent such
requirements are applicable.
(e) Fines and Penalties. To the best knowledge of the
Sure Grow Companies and the Sure Grow Shareholders, there are no
fines, penalties, taxes, or related charges under Sections 502(c)
or (k) or (l) or 4071 of ERISA or Chapter 43 or Section 511 of the
Code which are assessable against the Sure Grow Companies.
7.23 Physical Damage. Except as disclosed on Schedule 7.23,
there exists no physical damage (ordinary wear and tear excepted)
to any of the assets of the Sure Grow Cotton Planting Seed Business
owned by the Sure Grow Companies, which physical damage is not
insured against and which physical damage would cause any material
ly adverse effect on the operation, value, or marketability of any
such asset.
7.24 Insurance. Schedule 7.24 lists all of the insurance
policies, binders, and bonds maintained by the Sure Grow Companies,
all of which are in full force and effect except as otherwise
indicated on Schedule 7.24; the Sure Grow Companies are not in
default thereunder; all known claims thereunder have been filed in
due and timely fashion; and to the best knowledge of the Sure Grow
Companies and the Sure Grow Shareholders, all such policies,
binders and bonds will remain in full force and effect after the
Closing Date, unaffected by the Transaction contemplated hereby.
The Sure Grow Companies have provided or will provide before
Closing Date to the D&PL Companies, true, correct and complete
copies of all insurance policies, binders and bonds listed on
Schedule 7.24.
7.25 No Broker. No broker, finder, agent or similar interme
diary has acted for or on behalf of the Sure Grow Companies in
connection with this Agreement or the Transaction contemplated
hereby, and no broker, finder, agent or similar intermediary is
entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement,
arrangement or understanding with the Sure Grow Companies.
7.26 "SURE GROW" Name. The "SURE GROW" name as used by the
Sure Grow Companies for Cotton Planting Seed is not a registered
trademark or trade name. Except as disclosed on Schedule 7.26, to
the best knowledge of the Sure Grow Companies and the Sure Grow
Shareholders, the "SURE GROW" name is free and clear of any known
encumbrances, restrictions, security interests, or third party
rights which would in any way materially interfere with, prevent,
or hinder the use by the Sure Grow Companies or the D&PL Companies
of the name and mark "SURE GROW" for Cotton Planting Seed. To the
best knowledge of the Sure Grow Companies and the Sure Grow
Shareholders, no third party has any right or license to use the
name or mark "SURE GROW" for Cotton Planting Seed. The Sure Grow
Companies have not received any written notice or claim that their
use of the name and mark "SURE GROW" for Cotton Planting Seed
allegedly violates the rights of any third party.
7.27 Investment Intent. The Sure Grow Shareholders are
acquiring the stock of D&PL for investment purposes only and not
with a view to resale or distribution.
7.28 Additional Representations of Sure Grow Companies and
Sure Grow Shareholders.
The Sure Grow Companies and the Sure Grow Shareholders
represent, to their best knowledge, that:
(a) The fair market value of the D&PL Common Stock recei
ved by the Sure Grow Shareholders will be approximately equal to
the aggregate fair market value of the API, MSI and EBS stock
surrendered in the Transaction.
(b) Upon execution of this Agreement on Closing Date,
there is no plan or intention by the Sure Grow Shareholders who own
one percent (1%) or more of the stock of API, MSI or EBS, and to
the best knowledge of the management of the Sure Grow Companies,
there is no present plan or intention on the part of the remaining
Sure Grow Shareholders (if any) to sell, exchange, or otherwise
dispose of a number of shares of D&PL stock received in the
Transaction that would reduce the Sure Grow Shareholders' aggregate
ownership of D&PL stock to a number of shares having a value, as of
the date of the Transaction, of less than fifty percent (50%) of
the value of all of the formerly outstanding shares of API, MSI and
EBS stock as of the same date. There will be no shares of API, MSI
and EBS stock exchanged for cash or other property, surrendered by
dissenters, or exchanged for cash in lieu of fractional shares of
D&PL stock. Shares of API, MSI and EBS stock and shares of D&PL
stock (if any) held by Sure Grow Shareholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the Transaction
will be considered in making this representation.
(c) Subject to Section 3.3, API, MSI and EBS, and the
Sure Grow Shareholders will pay their respective expenses, if any,
incurred in connection with the Transaction.
(d) In the Transaction, shares of API, MSI or EBS stock
representing control of API, MSI or EBS, as defined in Section
368(c)(1) of the Code, will be exchanged solely for voting D&PL
Common Stock. There will be no shares of API, MSI and EBS stock
exchanged for cash or other property originating with D&PL.
(e) At the time of closing of the Transaction, API, MSI
and EBS will not have outstanding any warrants, options, convert
ible securities, or any other type of right pursuant to which any
person could acquire stock in API, MSI or EBS that, if exercised,
or converted, would affect D&PL's acquisition or retention of
control of API, MSI or EBS, as defined in Section 368(c)(1) of the
Code.
(f) The Sure Grow Companies and the Sure Grow Sharehold
ers are not investment companies as defined in Section 368(a)(2)
(f)(iii) and (iv) of the Code.
(g) On the closing of the Transaction, the fair market
value of the assets of API, MSI and EBS will exceed the sum of
their respective liabilities, plus the amount of liabilities, if
any, to which the assets are subject.
(h) API, MSI and EBS are not under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Section
368(a)(3)(a) of the Code.
(i) None of the compensation received by any shareholder-
employee or API, MSI or EBS will be separate consideration for,
or allocable to, any of their shares of API, MSI or EBS stock; none
of the shares of D&PL stock received by any shareholder-employees
will be separate consideration for, or allocable to, any employment
agreement; and the compensation paid to any shareholder-employees
will be for services actually rendered and will be commensurate
with amounts paid to third parties bargaining at arm's-length for
similar services.
7.29 Representations Relevant to Inapplicability of the HSR
Act. As of the execution of this Agreement on Closing Date:
(a) Each of API, MSI, and SGS is its own "ultimate
parent entity" as that term is defined in Section 801.1(a)(3) of
the Premerger Notification Rules.
(b) W. A. Ellis, III, is the "ultimate parent entity" of
EBS as that term is defined in Section 801.1(a)(3) of the Premerger
Notification Rules.
(c) The "annual net sales" and "total assets" of API, as
defined in Section 801.11 of the Premerger Notification Rules, are
each less than $10 million.
(d) The "annual net sales" and "total assets" of EBS, as
defined in Section 801.11 of the Premerger Notification Rules, are
each less than $10 million.
(e) The "annual net sales" and "total assets" of MSI, as
defined in Section 801.11 of the Premerger Notification Rules, are
each less than $10 million.
(f) The "total assets" of SGS, as defined in Section
801.11 of the Premerger Notification Rules, are less than $10
million.
(g) SGS is "not engaged in manufacturing" within the
meaning of Section 7A.(a) of the Clayton Act, 15 U.S.C. 18A, and
SGS does not presently and did not in 1995 derive any revenues
classifiable in the 2-digit SIC major groups 20-39, as set forth in
the 1987 edition of the Standard Industrial Classification Manual.
(h) The "annual net sales" and "total assets" of W. A.
Ellis, III, as defined in Section 801.11 of the Premerger Notifica
tion Rules, are each less than $10,000,000.
(i) True and complete copies of the most recent
regularly prepared annual income statement and the most recent
regularly prepared balance sheet, which are the financial state
ments upon which the foregoing representations and warranties are
based, have been delivered to the D&PL Companies.
ARTICLE 8. INDEMNIFICATION
8.1 Obligation of Sure Grow Shareholders to Indemnify.
(a) Indemnity Obligations. Subject to the provisions of
Section 8.1(b), the Sure Grow Shareholders, severally in proportion
to each of their respective aggregate interests shown on Schedule
8.1(a) and not jointly, shall indemnify, defend and hold harmless
the D&PL Companies and/or any of the Sure Grow Companies (as may be
in existence after the Closing Date), their officers, directors,
employees, affiliates, successors and assigns from and against any
actual losses, liabilities, damages or deficiencies (including,
without limitation, interest, penalties, disbursements and
reasonable, actual and necessary attorneys' fees and expenses),
solely in accordance with claims timely and properly asserted in
accordance with Section 8.4, and arising out of the operation of
the Sure Grow Cotton Planting Seed Business as conducted on or
before the Closing Date or otherwise arising out of this Agreement,
solely with regard to claims based on or due to:
(i) any breach of any representation or warranty or
failure to perform any covenant or agreement (excluding represen
tations, warranties, covenants and agreements regarding Taxes which
are addressed in Sections 8.1(c) and 8.1(d) below and excluding
those representations in Section 7.28 which pertain to matters
within the knowledge or control of the D&PL Companies for which the
Sure Grow Shareholders shall have no liability to the D&PL
Companies and/or the Sure Grow Companies) of the Sure Grow
Companies or the Sure Grow Shareholders contained in this Agreement
or in any document or other writing delivered hereunder;
(ii) except with regard to matters disclosed in
Section 7.10 or the Schedule referenced therein, any liability to
Employees of the Sure Grow Companies arising from their employment
with the Sure Grow Companies, prior to the Closing Date, or the
termination of such employment by the Sure Grow Companies prior to
Closing, including, but not limited to, damages resulting from any
failure by the Sure Grow Companies to comply with the Discrimina
tion Laws prior to the Closing Date, provided, however, that if
such damages result from the failure of the Sure Grow Companies to
comply with Discrimination Laws prior to the Closing Date and such
failure to comply with Discrimination Laws continues after the
Closing Date, then the indemnification by the Sure Grow Sharehold
ers shall be limited to an equitable proportion of the total
liability to such Employee(s) which takes into account the
responsibility of the Sure Grow Companies and/or the Sure Grow
Shareholders for such failure to comply with Discrimination Laws
prior to the Closing Date and the conduct of the Sure Grow
Companies and/or the D&PL Companies with respect to such Employ
ee(s) after the Closing Date;
(iii) employee benefit plan obligations to Employees
of the Sure Grow Companies referred to in Section 7.22, arising
prior to the Closing Date, from such Employee's employment with the
Sure Grow Companies, or the termination of such employment by the
Sure Grow Companies, prior to the Closing Date;
(iv) any Sure Grow Products Liability arising at any
time with respect to any product sold by the Sure Grow Companies on
or before Closing Date;
(v) contamination by Hazardous Materials, if any, of
soil or ground waters or other violations of applicable Environmen
tal Laws arising from any conditions at the Real Property or
activities of the Sure Grow Companies or their predecessors in
interest on or before Closing Date other than the matters disclosed
in Section 7.6, the Schedules referenced therein, and in the
Environmental Site Assessments; and
(vi) any other contract, tort or other claims
pertaining to the Sure Grow Cotton Planting Seed Business arising
from events on or before Closing Date, except as disclosed in this
Agreement and/or on the Schedules attached hereto.
(b) Limitations on Indemnity Obligations. Notwithstand
ing anything contained in this Agreement to the contrary, the
following limitations shall apply to the indemnification obliga
tions of the Sure Grow Shareholders under Section 8.1(a):
(i) The Sure Grow Shareholders shall not be liable
for indemnification under Section 8.1 for breaches of represen
tations and warranties or failures to perform covenants and
agreements (excluding breaches of the representations and warran
ties of Sections 7.3, 7.8, 7.20 and 7.29 or breaches by the Sure
Grow Shareholders on or after the Closing Date of the agreements
and covenants contained in Section 5.4), unless and until the
aggregate of the actual expenses, losses and/or damages arising out
of or attributable to all such breaches or failures exceeds, in the
aggregate, $100,000.00 and then the Sure Grow Shareholders shall be
liable for only those aggregate losses and/or damages which exceed
$100,000.00 and, except with regard to breaches of the representa
tions and warranties set forth in Sections 7.3, 7.8, 7.20 and 7.29
or breaches by the Sure Grow Shareholders on or after the Closing
Date of the agreements and covenants contained in Section 5.4, are
less than an amount equal to the value, as of the Closing Date, of
ten percent (10%) of the shares of D&PL stock received by the Sure
Grow Shareholders as Consideration hereunder; provided, however,
that any indemnification by the Sure Grow Shareholders with regard
to any breaches of the representations and warranties set forth in
Sections 7.3, 7.8, 7.20 and 7.29 or breaches of agreements and
covenants contained in Section 5.4 shall be limited to an amount
equal to the closing bid price for a share of D&PL stock on the
last business day prior to the Closing Date (which is stipulated to
have been $48.25 per share) multiplied by the number of shares of
D&PL Common Stock constituting the Consideration, less the sum of
$5,000,000.00.
(ii) The amount of any losses and/or damages
otherwise payable to the D&PL Companies and/or any of the Sure Grow
Companies (as may be in existence after the Closing Date), any of
their officers, directors, employees, affiliates, successors and
assigns, hereunder shall be reduced by the total of (a) the amount
of any insurance proceeds actually received by the Sure Grow
Companies, the D&PL Companies or any of their officers, directors,
employees, affiliates, successors and assigns as compensation for
the damage or loss caused by the act, omission, fact, or circum
stances giving rise to such claim for indemnification, (b) the tax
benefit received by the Sure Grow Companies and/or the D&PL
Companies by virtue of the use of such loss and/or damages as a
federal, state, or local tax deduction and (c) the amount of any
recovery received in cash or in kind from any third party unrelated
in ownership interest to the Sure Grow Companies and/or to the Sure
Grow Shareholders as compensation for the damage or loss caused by
the act, omission, fact, or circumstances giving rise to such claim
for indemnification.
(c) Tax Indemnity. The Sure Grow Shareholders,
severally in proportion to their respective interests shown on
Schedule 8.1(a) and not jointly, shall pay, indemnify, and hold
harmless the D&PL Companies and any of the Sure Grow Companies (as
may be in existence after the Closing Date) and their successors
and assigns, from and against all liabilities (a) for all assessed
and paid Taxes relating to taxable periods ending on or before June
30, 1995, for API, EBS and MSI and taxable periods ending on or
before August 31, 1995, for SGS, but less all amounts accrued for
Taxes in the Audited Financial Statements of API, EBS and MSI
prepared as of June 30, 1995, and the Audited Financial Statements
of SGS as of August 31, 1995, and (b) for any penalties and
interest assessed and paid on account of breach of the representa
tions and warranties set forth in Section 7.20(c) (the foregoing
are hereinafter referred to as "Indemnified Taxes"). The foregoing
notwithstanding, (i) the Sure Grow Shareholders shall have no
liability for any Taxes, attributable to periods of the Sure Grow
Companies beginning after August 31, 1995, for SGS and after June
30, 1995, for API, EBS and MSI, except as expressly provided for in
subpart (b) of the immediately preceding sentence and (ii) the Sure
Grow Shareholders shall have no obligation or liability hereunder
for any increase in a Tax or Taxes reflected in a tax return of any
of the Sure Grow Companies due on filings prior to Closing Date or
for filing periods since the end of the respective 1995 fiscal
years of each of the Sure Grow Companies that is (a) occasioned by
an amendment by the D&PL or the Sure Grow Companies after the
Closing Date (other than an amendment that is required by a
federal, state, or local taxing agency or authority and with
respect to which the Sure Grow Shareholders shall have been given
all of the rights referred to in Section 8.1(d)), (b) by a change
in the method of accounting or in the treatment of tax items caused
by D&PL or the Sure Grow Companies after the Closing Date or (c) by
elections or other affirmative actions by D&PL or the Sure Grow
Companies, after Closing Date, pertaining to such tax returns of
the Sure Grow Companies. Notwithstanding anything contained herein
to the contrary, any federal, state, or local income tax, capital
gain tax, excise, sales, transfer stamp, documentary and other
similar taxes (together with any interest, additions to the tax, or
penalties with respect thereto) resulting from the transfer and
exchange of the shares of stock of EBS, API and MSI owned by the
EBS Shareholders, the API Shareholders and the MSI Shareholders,
respectively, to D&PL1, D&PL2 and D&PL3, pursuant to the terms and
conditions of this Agreement, shall be borne by the respective EBS
Shareholders, the API Shareholders and the MSI Shareholders.
In the event any dispute between the Indemnified Party and
the Sure Grow Shareholders concerning a claim under this Section
8.1(c) cannot be resolved after good faith negotiations not to
exceed, in the aggregate and whether continuous or not, ninety (90)
calendar days, the dispute shall be referred to Ernst & Young or
another "Big Six" accounting firm (but not Arthur Andersen LLP or
any other firm that any of the Sure Grow Shareholders, the Sure
Grow Companies or the D&PL Companies have employed within the
immediately preceding five (5) years) which is mutually acceptable
to the D&PL Companies and to the Sure Grow Shareholders. The
accounting firm thus engaged, acting as an arbitrator, shall
determine the amount, if any, of Indemnified Taxes due from the
Sure Grow Shareholders to the Sure Grow Companies and/or the D&PL
Companies. Each party to such arbitration shall bear its own
expenses and the parties shall share the cost of the arbitrator's
services ratably according to the arbitrator's decision on the
issues in dispute. For purposes of the calculation of any
indemnity obligations of the Sure Grow Shareholders under this
Section 8.1(c), interest, penalties, or additions to Taxes accruing
after the Closing Date with respect to a liability for Indemnified
Taxes for which the Sure Grow Shareholders shall indemnify the Sure
Grow Companies or the D&PL Companies shall be deemed to be
attributable to a taxable period ending on or before the Closing
Date.
(d) Tax Contest. Following the Closing Date, the D&PL
Companies and/or the Sure Grow Companies shall give prompt written
notice to the Indemnification Representative of all audits,
examinations or proceedings (individually, a "Tax Contest") with
respect to the Sure Grow Companies that are related to the
liability for any Taxes for which the Sure Grow Shareholders could
be required to indemnify the D&PL Companies and/or the Sure Grow
Companies pursuant to Sections 8.1(c) and (d). The Sure Grow
Shareholders, through the Indemnification Representative, shall be
entitled but not required to control and conduct those specific
aspects of a Tax Contest that involve Indemnified Taxes. Costs of
any Tax Contest (or portion thereof) shall be borne by the party
controlling such Tax Contest (or portion thereof). The Sure Grow
Shareholders' right to control and conduct a Tax Contest (or
portion thereof) shall be limited to amounts in dispute which would
be paid by the Sure Grow Shareholders hereunder. With respect to a
Tax Contest (or portion thereof) which the Sure Grow Shareholders
are entitled to control, the Sure Grow Shareholders shall have the
right (but only to the extent such right does not materially impair
the rights of the Sure Grow Companies or the D&PL Companies with
respect to aspects of any Tax Contest (or portion thereof) which
the Sure Grow Companies or the D&PL Companies are entitled to
control) to determine, in their sole discretion, (i) the forum,
administrative or judicial, in which to contest any proposed
adjustment, (ii) the attorney and/or accountant to represent the
tax payer(s) in the Tax Contest, (iii) whether or not to appeal any
decision of any administrative or judicial body, and (iv) whether
to settle any such Tax Contest. The D&PL Companies shall deliver
to the Sure Grow Shareholders any power of attorney required to
allow the Sure Grow Shareholders and their counsel to represent the
Sure Grow Companies and/or the D&PL Companies in connection with
the Tax Contest and shall use their good faith reasonable efforts
to provide the Sure Grow Shareholders with such assistance as may
be reasonably requested by the Sure Grow Shareholders in connection
with the Tax Contest. Notwithstanding the preceding, the Sure Grow
Shareholders shall conduct such Tax Contest in a reasonable manner
with respect to any liability for Indemnified Taxes for which the
Sure Grow Companies and/or the D&PL Companies may be liable. The
Sure Grow Shareholders and the D&PL Companies shall consult in good
faith with each other with respect to the conduct of, and before
entering into any settlement of, any Tax Contest, and neither the
Sure Grow Shareholders nor the Sure Grow Companies and the D&PL
Companies shall consent nor agree to the settlement of any Tax
Contest that may have an adverse impact on the liability for Taxes
of the opposite parties without the prior written consent of the
opposite parties which consent shall not be unreasonably withheld
(provided that this limitation shall, with respect to the Sure Grow
Companies and the D&PL Companies, apply only to settlements of Tax
Contests for which the Sure Grow Companies and the D&PL Companies
are indemnified pursuant to Section 8.1(c)). Any provision of this
Section 8.1(d) notwithstanding, the Sure Grow Shareholders shall
have the right to control the tax contest only if there is
sufficient stock in the escrow account pursuant to Section 8.6 at
the assigned value thereof to pay any asserted tax, interest and
penalty.
8.2 Obligation of the D&PL Companies to Indemnify.
(a) Indemnity Obligations. The D&PL Companies shall
indemnify, defend, and hold harmless each Sure Grow Shareholder and
Sure Grow Principal, who prior to Closing was an officer, director
or employee of one or more of the Sure Grow Companies, and his or
her heirs, personal representatives, successors, and assigns, from
and against any actual losses, liabilities, damages or deficiencies
(including, without limitation, interest, penalties, disbursements
and reasonable, actual and necessary attorneys' fees and expenses)
incurred by such Sure Grow Shareholder or Sure Grow Principal
solely in his or her capacity as an officer, director, or Employee
of the Sure Grow Companies, and solely in accordance with claims
timely and properly asserted in accordance with Section 8.4 and
arising out of the operation by the Sure Grow Companies and/or the
D&PL Companies of the Sure Grow Cotton Planting Seed Business as
conducted after the Closing Date or otherwise arising out of this
Agreement, solely with regard to, claims based on or due to:
(i) any breach of any representation or warranty or
failure to perform any covenant or agreement of the D&PL Companies
(excluding those representations in Section 6.10 which pertain to
matters with the knowledge or control of the Sure Grow Companies
and/or the Sure Grow Shareholders for which the D&PL Companies
shall have no liability to the Sure Grow Shareholders and excluding
breach of any of the representations or warranties contained in
Sections 6.10(d), (f), (g), (h), (i) and (m) with regard to which
all Sure Grow Shareholders shall have any remedies available by
law) contained in this Agreement or in any document or other
writing delivered hereunder;
(ii) any liability to then current or then former
Employees of the Sure Grow Companies arising from their employment,
after the Closing Date, by the Sure Grow Companies and/or the D&PL
Companies, or the termination of such employment, after the Closing
Date, by the Sure Grow Companies and/or the D&PL Companies,
including but not limited to damages resulting from any failure by
the Sure Grow Companies and/or the D&PL Companies to comply with
the Discrimination Laws after the Closing Date, provided, however,
that if such damages result, in part, from the failure of the Sure
Grow Companies to comply with Discrimination Laws prior to the
Closing Date and such failure to comply with Discrimination Laws
continues after the Closing Date, then the indemnification by the
D&PL Companies shall be limited to an equitable proportion of the
total liability to such Employee(s) which takes into account the
responsibility of the D&PL Companies and/or the Sure Grow Companies
for such failure to comply with Discrimination Laws after the
Closing Date and the conduct of the Sure Grow Companies with
respect to such Employee(s) prior to the Closing Date;
(iii) employee benefit plan obligations to Employees
of the Sure Grow Companies arising from their employment, after the
Closing Date, with the Sure Grow Companies and/or the D&PL
Companies, or the termination of such employment;
(iv) any Taxes, or other taxes, interest and
penalties due for activities of the Sure Grow Companies after the
Closing Date;
(v) any D&PL Products Liability arising at any time
with respect to any product sold, handled, conditioned and
distributed by the Sure Grow Companies and/or the D&PL Companies
after the Closing Date;
(vi) infringement of a patent, PVPA certificate,
unfair competition, or trade secret misappropriation, any of which
arise, directly or indirectly, from acts or omissions of the D&PL
Companies or the Sure Grow Companies occurring after the Closing
Date;
(vii) contamination by Hazardous Materials, if any,
of the soil or ground waters or other violations of applicable
Environmental Laws arising from conditions at the Real Property
caused by activities of the D&PL Companies and/or Sure Grow
Companies after Closing Date; and
(viii) any other contract, tort or other claims
arising solely from the operation by the Sure Grow Companies and/or
the D&PL Companies of the Sure Grow Cotton Planting Seed Business
arising from events or activities after Closing Date.
(b) Limitation on Indemnity Obligations. Notwithstand
ing anything contained in this Agreement to the contrary, the
following limitations shall apply to the indemnification obliga
tions of the D&PL Companies under Section 8.2(a):
(i) The D&PL Companies shall not be liable for
indemnification under Section 8.2(a) for breaches of representa
tions and warranties or failures to perform covenants and agree
ments, unless and until the aggregate of the actual expenses,
losses and/or damages arising out of or attributable to all such
breaches or failures (excluding breaches of the representations and
warranties in Section 6.3) exceeds, in the aggregate, $100,000.00
and then the D&PL Companies shall be liable for only those
aggregate losses and/or damages which exceed $100,000.00.
(ii) The amount of any losses and/or damages
otherwise payable to a Sure Grow Shareholder or Sure Grow Principal
or any of his or her heirs, personal representatives, successors
and assigns, hereunder shall be reduced by the total of (a) the
amount of any insurance proceeds actually received by the subject
Sure Grow Principal or his or her heirs, personal representatives,
successors and assigns as compensation for the damage or loss
caused by the act, omission, fact or circumstances giving rise to
such claim for indemnification, (b) the tax refund or tax benefit
as a federal, state, or local tax deduction received by the subject
Sure Grow Shareholder or Sure Grow Principal by virtue of the use
of such loss and/or damages as a federal, state, or local tax
deduction, and (c) the amount of any recovery received in cash or
in kind from any third party unrelated in ownership interest to the
D&PL Companies, as compensation for damage or loss caused by the
act, omission, fact, or circumstances giving rise to such claim for
indemnification.
8.3 Indemnification Representative.
(a) The Sure Grow Shareholders and the Sure Grow
Principals shall be deemed to have appointed, as of the closing,
Watt A. Ellis, III (the "Indemnification Representative") as their
representative for purposes of the indemnification obligations set
forth in this Article 8 and as attorney-in-fact and agent for and
on behalf of each of the Sure Grow Shareholders and the Sure Grow
Principals, with authority to take any and all actions and make any
and all decisions required or permitted to be taken or made by them
under this Article 8 (including the settling of claims). The
Indemnification Representative shall have and is hereby granted by
each of the Sure Grow Shareholders and the Sure Grow Principals
full power and authority as agent of each of the Sure Grow
Shareholders and the Sure Grow Principals to represent the Sure
Grow Shareholders and the Sure Grow Principals, and their succes
sors, heirs, representatives, and assigns with respect to all
matters arising under this Article 8 and any other matters
concerning the Transaction contemplated by this Agreement after the
closing, and all actions taken by the Indemnification Representa
tive in accordance with this Agreement shall be binding upon the
Sure Grow Shareholders and the Sure Grow Principals, and their
successors, heirs, representatives and assigns as if expressly
confirmed and ratified in writing by each of them.
(b) No Indemnification Representative shall incur any
liability with respect to any action or inaction taken by him
except those involving his own willful misconduct or gross
negligence. The Indemnification Representative may, in all
questions arising under this Article 8, rely on the advice of
counsel or certified public accountant and for anything done,
omitted or suffered in good faith by the Indemnification Represen
tative based on such advice, the Indemnification Representative
shall not be liable to anyone. Nothing set forth in this Section
8.3 shall in any way relieve the Sure Grow Shareholders and the
Sure Grow Principals in their capacities as Sure Grow Shareholders
or Sure Grow Principals of their obligations under this Article 8.
(c) In the event of the death or permanent disability of
the Indemnification Representative, or his resignation as Indem
nification Representative, a successor Indemnification Representa
tive shall be appointed, by the Sure Grow Shareholders, acting in
the case of any disagreement among them, by a vote of Sure Grow
Shareholders with an excess of 50% of the total indemnification
liability as set forth in Schedule 8.1(a). Prompt written notice
of such appointment shall be delivered to the D&PL Companies.
Pending the appointment of a successor Indemnification Representa
tive, the Sure Grow Shareholders with an excess of 50% of the
indemnification liability as set forth in Schedule 8.1(a) shall
have the power and authority to act as Indemnification Representa
tive under this Article 8.
(d) Any action taken or decision made by the Indemnifi
cation Representative shall be deemed duly evidenced by a written
instrument executed by the Indemnification Representative.
8.4 Notice of Claim by Third Party. Should any claim by a
third party (including any Governmental Body) covered by the
foregoing indemnities be asserted against any Party entitled to any
indemnity under this Article 8 (the "Indemnified Party"), if the
Indemnified Party is one of the D&PL Companies, the Sure Grow
Companies, their officers, directors, employees, successors or
assigns, it shall notify the Indemnification Representative and, if
the Indemnified Party is anyone else, it shall notify one or more
of the Parties having a duty to indemnify it under this Article 8
hereto (the "Indemnifying Party") in writing within not more than
thirty (30) days after actual notice of such claim is first
received, and shall give the Indemnifying Party, or the Indemnifi
cation Representative in the case of the Sure Grow Shareholders or
Indemnifying Party, an opportunity to defend the same, and the
Indemnified Party shall extend reasonable cooperation to the
Indemnifying Party, or the Indemnification Representative, as
applicable, in connection with such defense. The Indemnified
Party, or the Indemnification Representative, as applicable, may
elect, by notice in writing, to continue to participate through its
own counsel, at its expense, but the Indemnifying Party, or the
Indemnification Representative, as applicable, shall have the right
to control any litigation or settlement negotiations. However, the
Indemnifying Party, or the Indemnification Representative, as
applicable, may not settle any litigation or claim without the
consent of the Indemnified Party, or the Indemnification Represen
tative, as applicable, which shall not be unreasonably withheld,
provided, however, that no consent shall be required if the
settlement involves the payment of money, in an amount not in
excess of the lesser of ten percent (10%) of the value of the
Escrow Funds or Fifty Thousand and no/100 Dollars ($50,000.00),
both with regard to any particular settlement payment and all
settlement payments in the aggregate, by the Indemnifying Party
only. In the event that the Indemnifying Party, or the Indemnifi
cation Representative, as applicable, shall have negotiated a
settlement of any litigation or claim, which proposed settlement is
substantially final and unconditional as to the parties thereto,
other than the consent of the Indemnified Party, or the Indemnifi
cation Representative, as applicable, hereunder, and the Indemni
fied Party, or the Indemnification Representative, as applicable,
shall unreasonably refuse to consent to such settlement, the
liability of the Indemnifying Party hereunder, upon ultimate
disposition of such litigation or claim, shall be limited to the
amount of the proposed settlement which was not accepted or
rejected and any and all reasonable, actual and necessary expenses,
including attorneys' fees, occurring subsequent to the date of such
proposed settlement. Upon the request of the Indemnifying Party,
or the Indemnification Representative, as applicable, said
Indemnified Party shall post a bond sufficient to cover any award
as a result of said litigation or claim. In the event that the
Indemnifying Party, or the Indemnification Representative, as
applicable, fails to defend a claim hereunder within a reasonable
time, the Indemnified Party, or the Indemnification Representative,
as applicable, shall be entitled to assume the defense thereof, and
the Indemnifying Party shall be liable to repay the Indemnified
Party for all of its reasonable, actual and necessary expenses
incurred in connection with said defense (including reasonable
attorneys' fees, court costs and authorized settlement payments or
settlement payments not in excess of ten percent (10%) of the value
of the Escrow Fund, both with regard to any particular settlement
payment and all settlement payments in the aggregate).
8.5 Notice of Loss. Should any loss, other than a claim by a
third party, covered by the foregoing indemnities be sustained by
any party entitled to be indemnified against such loss under this
Article 8, the Indemnified Party or the Indemnification Representa
tive, as applicable, shall give written notice, in the same manner
as provided with respect to notices of third party claims set forth
in Section 8.4 within not more than sixty (60) days after the
Indemnified Party verifies the existence of such loss. Within
thirty (30) days thereafter, the Indemnifying Party, subject to
receipt of reasonable verification of the existence and the amount
of such loss, shall indemnify the Indemnified Party by paying the
Indemnified Party the amount of money required to fully compensate
the Indemnified Party for the amount of such loss.
8.6 Escrow Fund.
(a) As security for their indemnity obligations under
this Article 8, on Closing Date upon consummation of the Trans
action, the Sure Grow Shareholders shall place into an escrow
account with Escrow Holder, as escrow agent, One Hundred Fifty-Five
Thouand Four Hundred Seventy (155,470) shares of D&PL Common Stock.
Such shares shall be held on the terms and conditions and for such
period(s) of time after the Closing Date, and disposed of, all as
provided for in the Escrow Agreement attached as Schedule 8.6(a).
The rights of the D&PL Companies, the Sure Grow Companies, and the
Sure Grow Shareholders under the Escrow Agreement shall be
cumulative with, and not in lieu of, all other rights and remedies
of the D&PL Companies, the Sure Grow Companies, and the Sure Grow
Shareholders.
(b) Notwithstanding any other provisions of this Article
8, the obligations of EBS under that certain promissory note to
Farm Credit Bank of Texas (the "Bank"), dated June 20, 1994 (the
"FCB of Texas Note"), shall be satisfied as provided in Schedule
8.6(b) hereto prior to the invocation of any other remedies.
8.7 Limitations on Claims for Indemnity.
(a) Any other provisions hereof notwithstanding, any
claim for indemnity under this Article 8 must be asserted by
written notice given not later than (i) in the case of claims
involving Taxes, thirty (30) days after the latest date on which
the statute of limitations applicable to the right of the applica
ble taxing authority's right to assert a claim for such Taxes
expires, (ii) with respect to claims for indemnity under Section
8.1(a)(ii) and Section 8.2(a)(ii), thirty (30) days after the date
on which the statute of limitations applicable to the claim against
the Indemnified Party expires, (iii) with respect to claims for
indemnification for breach of representations and warranties under
Sections 7.3 and 7.8, within the applicable statute of limitations
on claims under written contracts, and (iv) with respect to all
other claims for indemnity, within eighteen (18) months after
Closing Date.
(b) Notwithstanding anything contained in this Agreement
to the contrary, in the event that any Indemnified Party asserts a
claim in accordance with this Article 8 before incurring actual
losses or damages with respect thereto or before receiving a
written notice of claim demanding a payment or action that
reasonably could constitute or result in a loss or damages, such
claim asserted by the Indemnified Party shall be of no force and
effect hereunder and shall not entitle such Indemnified Party, its
successors and assigns to any indemnification rights under this
Agreement unless, within three (3) months in the case of a claim
not involving a Governmental Body, or six (6) months in the case of
a claim involving a Governmental Body, such Indemnified Party
either (i) gives subsequent notice of claim within the time period
applicable to such claim or (ii) such Indemnified Party, or its
successor or assigns, has either actually incurred a loss or
damages related to such claim or has received a written notice or
claim from a third party demanding payment or other action that
would constitute or result in a loss or damages.
(c) If written notice of a claim based on a breach of a
representation or warranty or failure to perform a covenant or
agreement or otherwise covered by this Article 8 is given in
accordance with this Article 8 before expiration of the applicable
period, then (notwithstanding the expiration of such time period)
the representation, warranty, covenant or agreement applicable to
such claim shall survive until final resolution of the claim, but
only for the purposes of the resolution of the claim as to which
notice was timely given. After expiration of the applicable time
limits set forth above, no Indemnifying Party shall have any duty
of indemnification other than for claims as to which proper written
notice has been previously and timely given under this Agreement.
8.8 Survival. The representations and warranties of the Sure
Grow Companies, the Sure Grow Shareholders and the D&PL Companies
set forth in this Agreement shall survive the closing and the
consummation of the Transaction contemplated hereby, provided that
each such representation or warranty shall expire on the date that
the time for asserting a claim for indemnification for breach of
that certain representation or warranty as set forth in Section
8.7(a).
8.9 Exclusivity of Remedies. The indemnity provisions of
this Article 8 shall be the exclusive remedy of the D&PL Companies
and the Sure Grow Companies (after closing) against the Sure Grow
Companies, the Sure Grow Shareholders and/or the Sure Grow
Principals for breaches of the representations, warranties and
covenants of the Sure Grow Companies, the Sure Grow Shareholders
and/or the Sure Grow Principals contained in this Agreement and its
Schedules for which remedies are granted under this Article 8. The
indemnity provisions of this Article 8 shall be the exclusive
remedy of the Sure Grow Companies (before closing), and the Sure
Grow Shareholders and the Sure Grow Principals against the D&PL
Companies for breaches of the representations, warranties and
covenants of the D&PL Companies contained in this Agreement and its
Schedules for which remedies are granted under this Article 8.
This Section 8.9 shall not, however, apply to claims arising from
fraud and/or fraudulent misrepresentation or concealment of
material facts.
ARTICLE 9. CLOSING
9.1 Place of Closing. The closing of the Transaction
provided for by this Agreement shall be held at Memphis, Tennessee,
or at such other place as may be mutually agreed upon by Authorized
Representatives of the D&PL Companies and the Sure Grow Companies.
9.2 Closing Date. The Closing Date for the Transaction
provided for by this Agreement shall be the same date on which each
of the Parties has executed this Agreement, as soon as and provided
that all Conditions Precedent as set forth in Section 3.1(a) and
Section 3.2(a) (specifically including, but not limited to, the
delivery of the opinions described in Section 3.1(a)(ii), Section
3.1(a)(vi) and Section 3.2(a)(iii)) have been fulfilled or the
fulfillment thereof has been waived by the applicable Parties;
provided that if on the Closing Date thus established (or any
agreed extension thereof), the Conditions Precedent as specified in
Article 3 are not then fulfilled or the fulfillment thereof has not
been waived by the applicable Parties, the Closing Date may be
delayed by mutual written agreement of the Authorized Representa
tives of the D&PL Companies and the Sure Grow Companies until the
first date on which such Conditions Precedent for closing have been
fulfilled or the fulfillment thereof has been waived by the
applicable Parties.
ARTICLE 10. TERMINATION
10.1 Termination of Agreement. The Parties may terminate this
Agreement prior to the closing as provided below:
(a) The Parties may terminate this Agreement by mutual
written consent.
(b) Unless the Parties through their Authorized
Representatives have mutually agreed to delay the Closing Date as
provided in Section 9.2, the Sure Grow Companies and the Sure Grow
Shareholders may terminate this Agreement by giving written notice
to the D&PL Companies in the event that as of 5:00 p.m. on Closing
Date any of the Conditions Precedent set forth in Section 3.2(a)
has not been fulfilled or the fulfillment thereof has not been
waived by the applicable Parties, and the D&PL Companies may
terminate this Agreement by giving written notice to the Sure Grow
Companies and the Sure Grow Shareholders in the event that as of
5:00 p.m. on Closing Date any of the Conditions Precedent set forth
in Section 3.1(a) has not been fulfilled or the fulfillment thereof
has not been waived by the application Parties; provided, however,
that this right to terminate shall not apply to any Party who has
caused or contributed to the failure of the Transaction to close on
such date.
10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, all obligations of the Parties hereunder
shall terminate without any liability of any Party to any other
Party (except for liability for breach of this Agreement arising
before such termination); provided that the Confidentiality
Agreement shall survive any such termination and provided further,
if Section 3.3 is applicable, D&PL Companies shall reimburse the
Sure Grow Companies, the Sure Grow Principals and the Sure Grow
Shareholders an amount equal to the Transaction Costs.
ARTICLE 11. ADDITIONAL COVENANTS AND AGREEMENTS
The Parties covenant and agree as follows:
11.1 Expenses of Transaction. Except for the Transaction
Costs which the D&PL Companies shall pay to the Sure Grow Companies
and Sure Grow Shareholders in the event the Transaction contemplat
ed by this Agreement does not close under conditions set forth in
Section 3.3, D&PL shall be billed for and shall bear the direct and
indirect expenses incurred by the D&PL Companies, and the Sure Grow
Shareholders shall be billed for and shall bear the direct and
indirect expenses incurred by the Sure Grow Shareholders and the
Sure Grow Companies, in connection with the negotiation and
preparation of this Agreement and the consummation and performance
of the Transaction contemplated hereby, including, without
limitation, attorneys' fees and expenses, accountants' fees and
fees of other professionals conducting due diligence audits and
inspections on behalf of the respective parties, except that the
Sure Grow Companies shall be billed for and shall pay the costs of
professional services rendered by Wilmer, Cutler & Pickering for
legal advise (and reasonable expenses) in connection with this
Transaction up to an aggregate amount of $10,000.00. Without
regard to the provisions of Section 8.1, but subject, when
applicable, to other limitations set forth in this Agreement, the
Sure Grow Shareholders shall be responsible for their own income,
capital gains, transfers, gross receipts, use and all other Taxes,
if any, and as limited in this Agreement, in connection with the
Transaction contemplated hereby; costs of remediating violations of
Environmental Laws, if any; providing title insurance commitments
and clearing title defects as set forth herein, if any; and any
other expenses for which the Sure Grow Shareholders are responsible
under the terms of this Agreement. Without regard to the provi
sions of Section 8.2(b)(i), the D&PL Companies shall be responsible
for all filing and recording fees of whatever kind, documentary
transfer tax stamps, title insurance premiums, and other charges
imposed by title insurers and title insurance company examining
attorneys in connection with issuance of the policies of title
insurance obtained by the D&PL Companies in connection with the
Transaction contemplated hereby and all other costs and expenses of
closing not specifically identified as that of the Sure Grow
Shareholders.
11.2 Further Assistance. The Sure Grow Shareholders will
assist the D&PL Companies in effecting the complete Transaction,
including, without limitation, when reasonable and necessary, the
transfer of title, if applicable, to Real Property, Equipment, and
Inventory, and assignment of any Permits, Contracts, License Agree
ments, certificates, applications, registrations, or other tangible
or intangible property rights. The Sure Grow Shareholders who are
employed by the Sure Grow Companies or the D&PL Companies after the
closing will work with the Sure Grow Companies and the D&PL
Companies in any reasonable manner and only while so employed, and
on terms to be determined but consistent with the purpose and
intent of this Agreement, to transfer and retain for the Sure Grow
Companies and the D&PL Companies after the Transaction the
patronage of customers of the Sure Grow Companies and any other
advantageous business relationships of the Sure Grow Cotton
Planting Seed Business.
11.3 No Publicity. No publicity release or announcement
concerning this Agreement or the Transaction contemplated hereby
shall be issued prior to closing, nor thereafter, without advance
written approval of such issuance, and of the form and substance
thereof, by each of the Parties hereto which approval, if requested
for a post-closing release, shall not be unreasonably withheld;
provided, however, that any Party may timely make any public
disclosure it believes in good faith is required by law or
regulation or is necessary or appropriate to facilitate the closing
of the Transaction (in which case the disclosing party shall so
advise the other Parties in writing and provide them with a copy of
the proposed release as far in advance of disclosure as is
reasonably possible).
11.4 Further Assurances. Each of the Parties shall execute
such documents and other papers and perform such further acts as
reasonably may be required or desirable to carry out the provisions
hereof and the Transaction contemplated hereby.
11.5 Bulk Sales Laws. The Parties agree that no actions are
necessary to comply with the bulk sales laws of any jurisdiction
with respect to the Transaction contemplated by this Agreement.
11.6 No Partnership, Joint Venture or Third Person Beneficia
ries. This Agreement shall not create any partnership, joint
venture, or other similar arrangement between the Sure Grow
Companies, the Sure Grow Shareholders and the D&PL Companies until
and unless the Transaction is consummated. Until closing, the
Sure Grow Companies and the D&PL Companies shall continue to
conduct their existing business as they in their sole judgment and
discretion deem advisable, subject only to specific covenants and
agreements expressly set forth in this Agreement. No term or
provision of this Agreement is for the benefit of any person who is
not a named party hereto (including, without limitation, any
Employee, lender or broker) and no such person shall have any right
or cause of action hereunder.
11.7 Confidentiality Obligations. From and after the Closing
Date, the Sure Grow Companies and the D&PL Companies shall cause
their respective directors, officers, Employees, and advisors, to
continue to treat all information or documents received from the
other Party during the negotiation of this Agreement that concern
such other Party's business, assets, operations and financial
condition as confidential as provided in the Confidentiality
Agreement. The Sure Grow Companies and the Sure Grow Shareholders
and the D&PL Companies shall not use confidential information or
documents obtained from any other Party for any purpose except in
furtherance of the Transaction contemplated hereby.
ARTICLE 12. MISCELLANEOUS
12.1 Risk of Loss. The risk of loss of any asset of the Sure
Grow Cotton Planting Seed Business shall be borne by the Sure Grow
Companies until closing on the Closing Date. In the event of
destruction of any assets by fire or other casualty not fully
covered by insurance, the Consideration shall be adjusted by the
amount of the net uninsured loss resulting from such casualty (as
determined by an independent appraiser selected by the Sure Grow
Shareholders subject to the approval of the D&PL Companies, which
approval will not be unreasonably withheld).
12.2 Authorized Representatives and Notices. Each of the
Parties to this Agreement hereby authorize the person listed below
(or his or her replacement designated as provided below) to act as
its Authorized Representative to take all actions on such Party's
behalf as specified in this Agreement and, except as may be
otherwise provided in Section 8.4, to receive notices and other
communications on behalf of such Party. Any notice or other
communication required or which may be given hereunder shall be in
writing and shall be delivered personally or sent by certified
mail, return receipt requested, postage prepaid, or by overnight
courier, or acknowledged electronic facsimile to the Authorized
Representatives as follows:
Authorized Representative
for any or all of
the D&PL Companies: Murray Robinson
Delta and Pine Land Company
One Cotton Row
Scott, Mississippi 38772
with copy to: Jerome C. Hafter, Esq.
Jenny M. Virden, Esq.
Lake Tindall, LLP
127 South Poplar Street
Post Office Box 918
Greenville, Mississippi 38701
Authorized Representative
for any or all of
the Sure Grow Companies,
the Sure Grow Shareholders,
or the Sure Grow
Principals: W. A. Ellis, III
Sure Grow Seed, Inc.
Route 1, Box 310
Centre, Alabama 35930
with copy to: Bruce L. Gordon, Esq.
Linda J. Peacock, Esq.
Gordon, Silberman, Wiggins &
Childs, P.C.
1400 South Trust Tower
Birmingham, Alabama 35203
Each such Authorized Representative may designate a replacement
Authorized Representative and/or change the address to which
Notices shall be sent by notice given in according with this
provision.
12.3 Entire Agreement; Conflicting Provisions. This Agreement
(including the Schedules and Exhibits hereto) contains the entire
agreement between the Parties with respect to the transaction
contemplated herein and supersedes any prior and contemporaneous
correspondence, discussions, negotiations, and agreements, written
or oral, with respect thereto, except for the Confidentiality
Agreement which shall remain in full force and effect. No
representation or warranty is made by any of the Sure Grow
Companies, the Sure Grow Shareholders or the D&PL Companies except
as set forth in this Agreement and in the Confidentiality Agree
ment.
12.4 Knowledge. The terms "knowledge" or "best knowledge" of
a Party (or words or phrases of similar import) as used in this
Agreement shall mean the actual knowledge of that Party, or in the
case of a corporate entity of any of its officers and directors.
Knowledge of the D&PL Companies means knowledge of any one or more
of the D&PL Companies. Knowledge of the Sure Grow Companies means
knowledge of any one or more of the Sure Grow Companies. Knowledge
of the Sure Grow Shareholders means knowledge of any one of more of
the Sure Grow Shareholders. Knowledge of the Sure Grow Companies
and the Sure Grow Shareholders means knowledge of any one or more
of the Sure Grow Companies or the Sure Grow Shareholders.
12.5 Waivers and Amendments. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended, and the terms
and conditions hereof may be waived, only by a written instrument s
igned by all Parties hereto or, in the case of a waiver, by each
Party waiving compliance. No delay on the part of any Party in
exercising any right, power, or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver by any Party of any
right, power, or privilege hereunder, nor any partial exercise of
any right, power, or privilege hereunder, preclude any other or
further exercise thereof or the exercise of any other right, power
or privilege hereunder.
12.6 Arbitration and Forum Selection. Any claim or dispute
arising out of or relating to this Agreement, excluding indemnity
claims arising under Section 8.1(c) of this Agreement, which is not
disposed of by agreement of the Parties shall be determined by
three (3) arbitrators selected in accordance with the Rules of the
American Arbitration Association. The arbitration shall be
conducted in Memphis, Tennessee, and in accordance with the Rules
of the American Arbitration Association. The findings of such
arbitrators shall be final and binding on the Parties. The non-
prevailing party shall pay the prevailing party's reasonable and
actual attorney's fees and expenses as awarded by the arbitrators.
The Parties agree that the federal and state courts sitting in
Memphis, Tennessee, shall be the exclusive forum for enforcement of
arbitration awards and/or litigation arising from this Agreement,
its negotiation, execution or performance, to the exclusion of all
other courts. All Parties agree to submit to the jurisdiction of
arbitration panels and/or state or federal courts sitting in Memphi
s, Tennessee.
12.7 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware
applicable to agreements made and to be performed within such
State.
12.8 Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the Parties hereto and their
respective heirs, successors and assigns. No Party may assign any
of its rights or obligations hereunder without the prior written
consent of every other Party hereto, which consent may be unreason
ably withheld. No assignment, if consented to, shall relieve the
assigning Party of any of its obligations or liabilities hereunder
unless expressly agreed to otherwise in writing by all Parties
hereto.
12.9 Invalidity of Particular Provision. If any provision of
this Agreement shall be held to be invalid, illegal, or unenforce
able in any respect, the remainder of this Agreement shall not be
affected thereby, and this Agreement shall be legal and valid and
be enforced to the fullest extent permitted by law as if such
invalid, illegal, or unenforceable provision had never been
included herein, unless such invalidity, illegality or unenforce
ability materially frustrates a major purpose of this Agreement, in
which event this Agreement shall be voidable upon election by any
adversely affected Party.
12.10 Specific Enforcement. This Agreement shall be binding
upon each signatory hereto and shall be specifically enforceable,
the Parties recognizing that monetary damages would be inadequate
to compensate a Party injured by the breach thereof.
12.11 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument.
12.12 Schedules. The Schedules to this Agreement are hereby
made a part of this Agreement as if set forth in full herein and
any information contained herein or on any Schedule attached hereto
shall be deemed to be constructively cross-referenced herein and
listed on all Schedules.
12.13 Headings. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in
the interpretation of this Agreement.
12.14 Gender and Number. When used herein the male, female
and neuter gender shall include each other gender, the singular
number shall include the plural, and the plural number shall
include the singular.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
DELTA AND PINE LAND COMPANY
By: /s/Murray Robinson
Its: President
D&PL1
By: /s/Murray Robinson
Its: President
D&PL2
By: /s/Murray Robinson
Its: President
D&PL3
By: /s/ Murray Robinson
Its: President
ARIZONA PROCESSING COMPANY, INC.
By: /s/Watt A. Ellis, Jr.
Its: President
ELLIS BROTHERS SEED, INC.
By: /s/Watt A. Ellis, III
Its: President
MISSISSIPPI SEED, INC.
By: /s/R. B. Flowers
Its: Secretary/Treasurer
SURE GROW SHAREHOLDERS
/s/ W. A. Ellis, Jr.
W. A. ELLIS, JR.
/s/ W. A. Ellis, III
W. A. ELLIS, III
/s/ James E. Ellis
JAMES E. ELLIS
/s/ Earl E. Dykes
EARL E. DYKES
/s/ Richard B. Flowers, Jr.
RICHARD B. FLOWERS, JR.
/s/ Carl R. Russell
CARL R. RUSSELL
/s/ Bert S. Ellis
BERT S. ELLIS
/s/ Joe Hall
JOE HALL
/s/ Suzi P. Carson
SUZI P. CARSON
/s/ Nancy R. Arnold
NANCY R. ARNOLD
/s/ David Mattson Flowers
DAVID MATTSON FLOWERS
/s/ Janet Campbell Flowers Melton
JANET CAMPBELL FLOWERS MELTON
SURE GROW PRINCIPALS:
/s/ Richard B. Flowers
RICHARD B. FLOWERS
/s/ D. C. Parker
D. C. PARKER
