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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 8-K
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 19, 1995
THE SCOTTS COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-19768 31-1199481
(State or Other (Commission File (IRS Employer
Jurisdiction of Number) Identification No.)
Incorporation)
14111 Scottslawn Road, Marysville, Ohio 43041
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including (513) 644-0011
area code:
N/A
(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets.
On May 19, 1995, pursuant to the Amended and Restated
Agreement and Plan of Merger, dated as of May 19, 1995, amending
and restating the original Agreement and Plan of Merger dated as
of January 26, 1995 (as so amended and restated, the
"Agreement"), The Scotts Company (the "Registrant") acquired
(through its wholly-owned subsidiary, ZYX Corporation ("Merger
Sub")) Stern's Miracle-Gro Products, Inc. ("Miracle-Gro
Products"), Miracle-Gro Products Limited ("Miracle-Gro Limited"),
Miracle-Gro Lawn Products, Inc. ("Miracle-Gro Lawn Products") and
the assets of Stern's Nurseries, Inc. ("Nurseries" and,
collectively with Miracle-Gro Products, Miracle-Gro Limited and
Miracle-Gro Lawn Products, the "Miracle-Gro Companies"). The
acquisition was structured as a merger of Merger Subsidiary into
Miracle-Gro Products (the "Merger"), with Miracle-Gro Products
surviving, followed by stock transfers of all of the outstanding
capital stock of Miracle-Gro Limited and Miracle-Gro Lawn
Products to Miracle-Gro Products (the "Subsequent Stock
Transfers") and an asset transfer of all of the assets, but none
of the liabilities, of Nurseries to Miracle-Gro Products (the
"Asset Transfer" and, collectively with the Merger and the
Subsequent Stock Transfers, the "Merger Transactions"). The
Agreement contemplates that, following the Merger, Miracle-Gro
Products will be merged into its wholly-owned subsidiary, Scotts'
Miracle-Gro Products, Inc., which shall be the ultimate surviving
corporation of the Merger Transactions. The Miracle-Gro
Companies market the leading brands of garden plant foods,
Miracle-Gror and Miracidr. The Registrant plans to continue this
business following the Merger Transactions.
By operation of the Merger, each share of capital stock of
Merger Subsidiary was converted into one share of the voting
common stock of Miracle-Gro Products, and the outstanding capital
stock of Miracle-Gro Products was converted into the right to
receive the Registrant's Class A Convertible Preferred Stock (the
"Convertible Preferred Stock") and warrants to acquire common
shares of the Registrant (the "Warrants"), as described below.
As a result of the Merger Transactions, the Registrant became the
owner of all of the outstanding shares of common stock of the
surviving corporation, Miracle-Gro Products, and its wholly-owned
subsidiaries, Miracle-Gro Limited and Miracle-Gro Lawn Products.
Prior to the Merger Transactions, the Miracle-Gro Companies
were privately held by Horace Hagedorn, chairman and chief
executive officer of Miracle-Gro Products, individually, by
members of the Hagedorn family through the Hagedorn Partnership,
L.P. (the "Hagedorn Partnership"), by Community Funds, Inc., a
New York not-for-profit corporation (the "Charity"), as a result
of a charitable donation by Mr. Hagedorn, and by John Kenlon, the
president of Miracle-Gro Products. No member of the Hagedorn
family or Mr. Kenlon had any material relationship with the
Registrant or any of its affiliates, directors or officers,
except that James L. Rogula, a senior vice president of the
Registrant, is a former director of Miracle-Gro Products.
As consideration for the Merger Transactions, Mr. Hagedorn,
the Hagedorn Partnership, the Charity and Mr. Kenlon received, in
the aggregate, $195,000,000 face amount of Convertible Preferred
Stock, convertible at $19 per share (subject to adjustment) into
approximately 35% of the total voting power of the Registrant,
and Warrants to purchase an additional 3,000,000 common shares of
the Registrant, which, if exercised, would enable them to
exercise, together with the Convertible Preferred Stock,
approximately 42% of the total voting power of the Registrant.
The Warrants were issued in three separate series representing
the right to purchase 1,000,000 common shares each at exercise
prices of $21 per share, $25 per share and $29 per share,
respectively. From May 19, 1995, through May 31, 1995, the
Registrant's common shares have traded in the NASDAQ National
Market at prices ranging from approximately $21 to $22 per share.
The closing of the Merger Transactions follows preliminary
approval of a consent order reached with the Federal Trade
Commission, pursuant to which the Registrant agreed to divest its
Petersr U.S. consumer water-soluble fertilizer business, which
had 1994 sales of $7.2 million, before the end of December 1995.
The Petersr commercial business will remain with the Registrant,
as will the U.S. consumer potting soil business. The Registrant
must maintain the Miracle-Gro Companies as a separate business
unit until after completion of the divestiture of the Petersr
U.S. consumer water-soluble business, or the expiration of the 60-
day waiting period before the Federal Trade Commission order
becomes final, whichever is later.
On May 19, 1995, the Registrant issued the press release
attached as an exhibit hereto.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
Reference is made to the Registrant's Registration Statement
on Form S-4 (File No. 33-57595), which is incorporated herein
by reference, for certain of the required historical financial
statements of the Miracle-Gro Companies. Interim
historical financial statements of the Miracle-Gro Companies
are presently being prepared, and it is impracticable to file
such statements with this Current Report. Such financial
statements will be filed as soon as practicable and in any
event not later than 60 days after the date by which this
Current Report is required to be filed.
(b) Pro forma financial information.
The required pro forma financial information is presently
being prepared, and it is impracticable to file such
statements with this Current Report. Such pro forma financial
statements will be filed as soon as practicable and in any
event not later than 60 days after the date by which this
Current Report is required to be filed.
(c) Exhibits.
Please see "Index to Exhibits" beginning at page 5 for
a list of the exhibits filed with this Current Report.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
THE SCOTTS COMPANY
Date: May 31, 1995 By /s/ Craig D. Walley
Name: Craig D. Walley
Title: Vice President, General Counsel
and Secretary
INDEX TO EXHIBITS
Exhibit Description Location
No.
2(a) Agreement and Plan of Merger Incorporated herein by
dated as of January 26, 1995, reference to the
among the Miracle-Gro Registrant's
Companies, the original Registration Statement
shareholders of the Miracle- on Form S-4 (the
Gro Companies, Registrant and "Registrant's Form S-
Merger Subsidiary 4") (File No. 33-57595)
(Exhibit 2)
2(b) Amended and Restated Agreement Page 7
and Plan of Merger dated as of
May 19, 1995, among the
Miracle-Gro Companies, the
Hagedorn Partnership, the
general partners of the
Hagedorn Partnership, the
Charity, Horace Hagedorn, John
Kenlon, the Registrant and
Merger Subsidiary
4(a) Amended Articles of Incorporated herein by
Incorporation of the reference to the Annual
Registrant as filed with the Report on Form
Ohio Secretary of State on 10-K for the fiscal
September 20, 1994 (including year ended September
the terms of the Class A 30, 1994 of the
Convertible Preferred Stock of Registrant (File No. 0-
the Registrant) 19768) (Exhibit 3(a))
4(b) Certificate of Amendment by Incorporated herein by
Shareholders of the Articles reference to the
of Incorporation of the Quarterly Report on
Registrant as filed with the Form 10-Q for the
Ohio Secretary of State on May fiscal quarter ended
4, 1995 April 1, 1995 of the
Registrant (File No. 0-
10768) (Exhibit 4(b))
4(c) Regulations of the Registrant Incorporated herein by
(reflecting amendments adopted reference to the
by the shareholders of the Quarterly Report on
Registrant on April 6, 1995) Form 10-Q for the
fiscal quarter ended
April 1, 1995 of the
Registrant (File No. 0-
10768) (Exhibit 4(c))
4(c) Form of Series A Warrant Included in Exhibit
2(b) above
4(d) Form of Series B Warrant Included in Exhibit
2(b) above
4(e) Form of Series C Warrant Included in Exhibit
2(b) above
99(a) Press release issued by the Page 157
Registrant on May 19, 1995
EXHIBIT 99(a)
THE SCOTTS COMPANY MERGES WITH MIRACLE-GRO PRODUCTS, INC.
TO JOIN LEADING BRANDS IN LAWN CARE AND GARDENING
_____________________________
MARYSVILLE, OH, May 19, 1995 -- The Scotts Company (NASDAQ: SCTT)
said today that it had completed its previously announced merger
with privately-held Stern's Miracle-Gro Products, Inc., bringing
together two of the strongest brand names in the lawn and garden
industry.
"We are delighted to be able to proceed with the Scotts-
Miracle-Gro merger so that we can begin to leverage the combined
potential of these two powerful brands," said Theodore J. Host,
President and Chief Executive Officer of Scotts. "We expect the
combination to create a more profitable and faster growing
company and to open new international market opportunities.
Additionally, we see the merger as clearly and appropriately
reinforcing our position as a leading branded consumer products
company."
"The enthusiastic reaction of the market to this merger once
it was announced in January confirms the strategic nature of this
transaction," Mr. Host added.
The merger was overwhelmingly approved at the annual meeting
of Scotts shareholders on April 6. The closing follows
preliminary approval of a consent order reached with the Federal
Trade Commission, under which Scotts agreed to divest its Peters
U.S. consumer water-soluble fertilizer business, which had 1994
sales of $7.2 million, before the end of December 1995. The
Peters commercial business will remain with The Scotts Company,
as will the Peters U.S. Consumer potting soil business.
Scotts must maintain Miracle-Gro as a separate business unit
until after completion of the divestiture of the Peters U.S.
consumer water-soluble business, or the expiration of the 60-day
waiting period before the FTC order becomes final, whichever is
later. The company said it had signed a definitive agreement to
sell Peters U.S. consumer water-soluble fertilizer business for
approximately $10 million to Alljack & Company and Celex
Corporation, two privately held, related companies based in
Plymouth, Michigan. As part of the agreement with Alljack and
Celex, Scotts will enter into a supply agreement for certain
licensed products made by Peters.
The merger joins the number one marketer of garden plant
foods with the world's leading manufacturer of products for do-it-
yourself lawn care, commercial turf care and horticulture.
Miracle-Gro, based in Port Washington, NY, markets the
leading brands of garden plant foods, Miracle-Gro and Miracid,
and Scotts, headquartered in Marysville, Ohio, manufactures and
sells such well-known brands as Turf Builder, Osmocote, and
Hyponex. In addition to lawn care products, Scotts manufactures
and sells specialized products and application devices to
professional users such as golf courses and the horticulture
industry worldwide.
[CONFORMED COPY]
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
dated as of
May 19, 1995
among
STERN S MIRACLE-GRO PRODUCTS, INC.
STERN S NURSERIES, INC.
MIRACLE-GRO LAWN PRODUCTS INC.
MIRACLE-GRO PRODUCTS LIMITED
(the "Miracle-Gro Constituent Companies")
HAGEDORN PARTNERSHIP, L.P.
COMMUNITY FUNDS, INC.
HORACE HAGEDORN
JOHN KENLON
(the "Shareholders")
JAMES HAGEDORN
KATHERINE HAGEDORN LITTLEFIELD
PAUL HAGEDORN
PETER HAGEDORN
ROBERT HAGEDORN
SUSAN HAGEDORN
(the "General Partners")
THE SCOTTS COMPANY
("Scotts")
and
ZYX CORPORATION
("Merger Subsidiary")
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF MERGER . . . . . . . . . . . . . . . . 1
ARTICLE I
THE MERGER TRANSACTIONS
SECTION 1.01. The Merger Transactions; Effective
Time . . . . . . . . . . . . . . . . . . . . . 2
1.02. Closing . . . . . . . . . . . . . . . . . . . 3
1.03. Effect of the Merger Transactions . . . . . . 3
1.04. Conversion of Securities . . . . . . . . . . . 3
1.05. Surrender . . . . . . . . . . . . . . . . . . 4
1.06 Nurseries Liquidation . . . . . . . . . . . . 5
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.01. Reincorporation . . . . . . . . . . . . . . . 5
2.02. Articles of Incorporation; Code of
Regulations . . . . . . . . . . . . . . . . . 5
2.03. Directors and Officers . . . . . . . . . . . . 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE MIRACLE-GRO CONSTITUENT COMPANIES AND THE SHAREHOLDERS
SECTION 3.01. Corporate Existence and Power . . . . . . . . 6
3.02. Organizational Documents . . . . . . . . . . . 6
3.03. Corporate Authorization . . . . . . . . . . . 7
3.04. Governmental Authorization . . . . . . . . . . 7
3.05. Non-Contravention . . . . . . . . . . . . . . 7
3.06. Capitalization . . . . . . . . . . . . . . . . 8
3.07. Financial Statements . . . . . . . . . . . . . 9
3.08. Disclosure Documents . . . . . . . . . . . . . 9
3.09. Absence of Certain Changes . . . . . . . . . . 9
3.10. No Undisclosed Material Liabilities . . . . . 11
3.11. Litigation . . . . . . . . . . . . . . . . . . 11
3.12. Taxes . . . . . . . . . . . . . . . . . . . . 11
3.13. ERISA . . . . . . . . . . . . . . . . . . . . 12
3.14. Trademarks, Patents and Copyrights . . . . . . 14
3.15. Material Contracts . . . . . . . . . . . . . . 15
3.16. Compliance with Laws . . . . . . . . . . . . . 16
3.17. Finders Fees . . . . . . . . . . . . . . . . 16
3.18. Other Information . . . . . . . . . . . . . . 16
3.19. Environmental Compliance . . . . . . . . . . . 16
3.20. Stock Ownership . . . . . . . . . . . . . . . 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SCOTTS AND MERGER SUBSIDIARY
SECTION 4.01. Corporate Existence and Power . . . . . . . . 18
4.02. Organizational Documents . . . . . . . . . . . 19
4.03. Corporate Authorization . . . . . . . . . . . 19
4.04. Governmental Authorization . . . . . . . . . . 19
4.05. Non-Contravention . . . . . . . . . . . . . . 19
4.06. Capitalization . . . . . . . . . . . . . . . . 20
4.07. SEC Filings; Financial Statements . . . . . . 21
4.08. Absence of Certain Changes . . . . . . . . . . 22
4.09. No Undisclosed Material Liabilities . . . . . 23
4.10. Litigation . . . . . . . . . . . . . . . . . . 23
4.11. Taxes . . . . . . . . . . . . . . . . . . . . 23
4.12. ERISA . . . . . . . . . . . . . . . . . . . . 24
4.13. Trademarks, Patents and Copyrights . . . . . . 26
4.14. Material Contracts . . . . . . . . . . . . . . 26
4.15. Compliance with Laws . . . . . . . . . . . . . 28
4.16. Finders Fees . . . . . . . . . . . . . . . . 28
4.17. Environmental Compliance . . . . . . . . . . . 28
4.18. Opinion of Financial Advisor . . . . . . . . . 29
ARTICLE V
COVENANTS OF THE MIRACLE-GRO CONSTITUENT
COMPANIES AND THE SHAREHOLDERS
SECTION 5.01. Conduct of the Business of the Miracle-Gro
Constituent Companies . . . . . . . . . . . 29
5.02. Access to Information; Confidentiality . . . . 30
5.03. Other Offers . . . . . . . . . . . . . . . . . 31
5.04. Notices of Certain Events . . . . . . . . . . 31
5.05. Certain Loans . . . . . . . . . . . . . . . . 32
ARTICLE VI
STANDSTILL AND VOTING PROVISIONS;
RESTRICTIONS ON TRANSFER
SECTION 6.01. Certain Definitions . . . . . . . . . . . . . 33
6.02. Board of Directors . . . . . . . . . . . . . . 34
6.03. Rule 145 . . . . . . . . . . . . . . . . . . . 35
6.04. Registration Rights . . . . . . . . . . . . . 35
6.05. Reservation of Shares . . . . . . . . . . . . 35
6.06. Standstill Restrictions . . . . . . . . . . . 35
6.07. Additional Standstill Restrictions . . . . . . 36
6.08. Voting . . . . . . . . . . . . . . . . . . . . 37
6.09. Restrictions on Transfers of Voting Stock
and Warrants . . . . . . . . . . . . . . . . . 38
6.10. Right of First Offer . . . . . . . . . . . . . 39
ARTICLE VII
COVENANTS OF SCOTTS AND MERGER SUBSIDIARY
SECTION 7.01. Conduct of the Business of Scotts . . . . . . 40
7.02. Access to Information; Confidentiality . . . . 41
7.03. Obligations of Merger Subsidiary . . . . . . . 41
7.04. Other Offers . . . . . . . . . . . . . . . . . 41
7.05. Notices of Certain Events . . . . . . . . . . 42
7.06. Proxy Statement and Shareholder Vote . . . . . 42
7.07. Director and Officer Indemnification . . . . . 43
7.08. Employee Benefits . . . . . . . . . . . . . . 43
7.09. Employee Stock Options . . . . . . . . . . . . 44
ARTICLE VIII
COVENANTS OF SCOTTS, THE MIRACLE-GRO
CONSTITUENT COMPANIES AND THE SHAREHOLDERS
SECTION 8.01. Best Efforts . . . . . . . . . . . . . . . . . 44
8.02. Certain Filings . . . . . . . . . . . . . . . 44
8.03. Public Announcements . . . . . . . . . . . . . 44
8.04. Further Assurances . . . . . . . . . . . . . . 45
8.05. Tax Matters . . . . . . . . . . . . . . . . . 45
8.06. Tax Treatment . . . . . . . . . . . . . . . . 45
8.07. Tax Gross-Up . . . . . . . . . . . . . . . . . 46
8.08. Consent Order . . . . . . . . . . . . . . . . 47
8.09. Conduct of the Business . . . . . . . . . . . 47
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to the Obligations of Each Party . 47
9.02. Conditions to the Obligations of Scotts and
Merger Subsidiary . . . . . . . . . . . . . 48
9.03. Conditions to the Obligations of the
Miracle-Gro Constituent
Companies and the Shareholders . . . . . . . . 49
ARTICLE X
TERMINATION
SECTION 10.01. Termination . . . . . . . . . . . . . . . . 50
10.02. Effect of Termination . . . . . . . . . . . 51
ARTICLE XI
SURVIVAL; INDEMNIFICATION
SECTION 11.01. Survival . . . . . . . . . . . . . . . . . 51
11.02. Indemnification . . . . . . . . . . . . . . 52
11.03. Procedures . . . . . . . . . . . . . . . . 52
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Notices . . . . . . . . . . . . . . . . . . 53
12.02. Amendments; No Waivers . . . . . . . . . . 54
12.03. Expenses; Taxes . . . . . . . . . . . . . . 55
12.04. Headings . . . . . . . . . . . . . . . . . 55
12.05. Severability . . . . . . . . . . . . . . . 55
12.06. Entire Agreement . . . . . . . . . . . . . 55
12.07. Successors and Assigns . . . . . . . . . . 55
12.08. Governing Law . . . . . . . . . . . . . . . 56
12.09. Counterparts; Effectiveness . . . . . . . . 56
Schedule 1.04 - Merger Consideration Allocation
Schedule 2.03 - Officers of the Surviving Corporation and New
Miracle Gro
Annex A - Terms of Class A Convertible Preferred
Stock
Annex B - Terms of Series A Warrant
Annex C - Terms of Series B Warrant
Annex D - Terms of Series C Warrant
Annex E - Registration Rights
Annex F - Form of Employment Agreement of Horace Hagedorn,
John Kenlon and James Hagedorn [INTENTIONALLY OMITTED]
Annex G - Proposed Amendments to Scotts Articles of
Incorporation and Code of Regulations
Annex H - Form of Skadden, Arps, Slate, Meagher & Flom
Opinion [INTENTIONALLY OMITTED]
INDEX OF DEFINED TERMS
1
1994 Form 10-K . . . . . . . . . . . . . . . . . . . . . . . 21
A
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . 12, 33
Applicable Corporate Statutes . . . . . . . . . . . . . . . . . 1
Asset Transfer . . . . . . . . . . . . . . . . . . . . . . . . 1
Associate . . . . . . . . . . . . . . . . . . . . . . . . . . 33
B
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . 9
Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . . 9
C
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Charity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Acquisition Proposal . . . . . . . . . . . . . . . . 31
Company Disclosure Schedule . . . . . . . . . . . . . . . . . . 9
Company Material Adverse Effect . . . . . . . . . . . . . . . . 6
Company Representatives . . . . . . . . . . . . . . . . . . . 41
Company Securities . . . . . . . . . . . . . . . . . . . . . . 8
Consent Order . . . . . . . . . . . . . . . . . . . . . . . . . 2
Convertible Preferred Stock . . . . . . . . . . . . . . . . . . 3
Credit Agreement . . . . . . . . . . . . . . . . . . . . . . 47
CS First Boston . . . . . . . . . . . . . . . . . . . . . . . 16
E
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 2
Employee Plans . . . . . . . . . . . . . . . . . . . . . . . 12
Environmental Law . . . . . . . . . . . . . . . . . . . . . . 18
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Excess Amount . . . . . . . . . . . . . . . . . . . . . . . . 46
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . 7
G
General Partners . . . . . . . . . . . . . . . . . . . . . . . 1
group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
H
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
I
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . 52
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . 52
Intellectual Property Rights . . . . . . . . . . . . . . . . 14
L
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
M
Market Price . . . . . . . . . . . . . . . . . . . . . . . 33
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration . . . . . . . . . . . . . . . . . . . . . 3
Merger Subsidiary . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Transactions . . . . . . . . . . . . . . . . . . . . . . 1
Miracle-Gro Constituent Companies . . . . . . . . . . . . . . . 1
Miracle-Gro Director . . . . . . . . . . . . . . . . . . . . 34
Miracle-Gro New York . . . . . . . . . . . . . . . . . . . . . 1
Miracle-Gro UK . . . . . . . . . . . . . . . . . . . . . . . . 1
Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . 12
N
New Jersey Law . . . . . . . . . . . . . . . . . . . . . . . . 1
New Miracle-Gro . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes Indenture . . . . . . . . . . . . . . . . . . . . . . . 47
Nurseries . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
O
Ohio Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Original Merger Agreement . . . . . . . . . . . . . . . . . . . 1
P
Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . 13
Permitted Transferee . . . . . . . . . . . . . . . . . . . . 33
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Plan Transfer Date . . . . . . . . . . . . . . . . . . . . . 43
Polluting Substance . . . . . . . . . . . . . . . . . . . . . 17
R
Reincorporation . . . . . . . . . . . . . . . . . . . . . . . . 5
Registration Statement . . . . . . . . . . . . . . . . . . . 42
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Retirement Plans . . . . . . . . . . . . . . . . . . . . . . 12
S
Scotts . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Scotts Acquisition Proposal . . . . . . . . . . . . . . . . . 42
Scotts Balance Sheet . . . . . . . . . . . . . . . . . . . . 23
Scotts Benefit Arrangements . . . . . . . . . . . . . . . . . 25
Scotts Common Stock . . . . . . . . . . . . . . . . . . . . . . 4
Scotts Disclosure Documents . . . . . . . . . . . . . . . . . 21
Scotts Disclosure Schedule . . . . . . . . . . . . . . . . . 21
Scotts Employee Plans . . . . . . . . . . . . . . . . . . . . 25
Scotts Intellectual Property Rights . . . . . . . . . . . . . 26
Scotts Material Adverse Effect . . . . . . . . . . . . . . . 19
Scotts Multiemployer Plan . . . . . . . . . . . . . . . . . . 24
Scotts Pension Plans . . . . . . . . . . . . . . . . . . . . 24
Scotts Proxy Statement . . . . . . . . . . . . . . . . . . . . 9
Scotts Representatives . . . . . . . . . . . . . . . . . . . 30
Scotts Retirement Plans . . . . . . . . . . . . . . . . . . . 24
Scotts Securities . . . . . . . . . . . . . . . . . . . . . . 20
Scotts Shareholder Consent . . . . . . . . . . . . . . . . . 19
Scotts Shareholder Meeting . . . . . . . . . . . . . . . . . 43
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . 7
Selling Shareholder . . . . . . . . . . . . . . . . . . . . . 39
Series A Warrants . . . . . . . . . . . . . . . . . . . . . . . 3
Series B Warrants . . . . . . . . . . . . . . . . . . . . . . . 3
Series C Warrants . . . . . . . . . . . . . . . . . . . . . . . 3
Shareholder Representative . . . . . . . . . . . . . . . . . 34
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 1
Smith Barney . . . . . . . . . . . . . . . . . . . . . . . . 38
Standstill Percentage . . . . . . . . . . . . . . . . . . . . 34
Stock Sales . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Straddle Periods . . . . . . . . . . . . . . . . . . . . . . 45
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . 20
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . 2
T
Target Amount . . . . . . . . . . . . . . . . . . . . . . . . 49
Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . 11
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Total Voting Power . . . . . . . . . . . . . . . . . . . . . 34
Transfer Consideration . . . . . . . . . . . . . . . . . . . 39
Transfer Notice . . . . . . . . . . . . . . . . . . . . . . . 39
V
Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . 34
Voting Stock Equivalents . . . . . . . . . . . . . . . . . . 34
W
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as
of May 19, 1995, among STERN S MIRACLE-GRO PRODUCTS INC., a New
Jersey corporation (the Company ), STERN S NURSERIES, INC., a
New York corporation ( Nurseries ), MIRACLE-GRO LAWN PRODUCTS
INC., a New York corporation ( Miracle-Gro New York ), MIRACLE-
GRO PRODUCTS LIMITED, a New York corporation ( Miracle-Gro UK ,
and collectively with the Company, Nurseries, Miracle-Gro New
York and Miracle-Gro UK, the Miracle-Gro Constituent
Companies ), HAGEDORN PARTNERSHIP, L.P., a Delaware limited
partnership (the "Partnership"), COMMUNITY FUNDS, INC. a New York
not-for-profit corporation (the "Charity"), Horace Hagedorn, John
Kenlon (the Partnership, the Charity, Messrs. Hagedorn and
Kenlon, collectively the "Shareholders"), James Hagedorn,
Katherine Hagedorn Littlefield, Paul Hagedorn, Peter Hagedorn,
Robert Hagedorn, Susan Hagedorn (the "General Partners"), THE
SCOTTS COMPANY, an Ohio corporation ( Scotts ), and ZYX
CORPORATION, an Ohio corporation and a direct, wholly-owned
subsidiary of Scotts ( Merger Subsidiary ).
WHEREAS, on January 26, 1995, the Miracle-Gro Constituent
Companies, Horace Hagedorn, John Kenlon, the General Partners,
Scotts and Merger Subsidiary entered into an Agreement and Plan
of Merger (the "Original Merger Agreement"); and
WHEREAS, on May 1, 1995, the parties hereto executed
Amendment No. 1 to the Original Merger Agreement; and
WHEREAS, upon the terms and subject to the conditions of
this Agreement and in accordance with the General Corporation Law
of the State of Ohio (the Ohio Law ) and the Business
Corporation Act of the State of New Jersey (the New Jersey Law
and together, the Applicable Corporate Statutes ), the Miracle-
Gro Constituent Companies and Scotts have agreed to effectuate a
business combination transaction pursuant to which Merger
Subsidiary will merge with and into the Company (the Merger)
and, immediately subsequent to the Merger, Nurseries shall
transfer substantially all of its assets, including but not
limited to all intellectual property rights to the Company
(the Asset Transfer ) and the shareholders of Miracle-Gro New
York and Miracle-Gro UK will transfer all of the outstanding
shares of capital stock of such companies to the Company
(collectively, the Stock Sales and, together with the Merger
and the Asset Transfer, the Merger Transactions ); and
WHEREAS, the respective Boards of Directors of each of the
Miracle-Gro Constituent Companies, Scotts and Merger Subsidiary
have determined that the Merger Transactions are fair to and in
the best interests of their respective companies and shareholders
and have approved and adopted this Agreement and have approved
the Merger Transactions and the other transactions contemplated
hereby and recommended approval and adoption of the Original
Merger Agreement and approval of the Merger Transactions by their
respective shareholders and such shareholders have approved and
adopted the Original Merger Agreement and approved the Merger
Transactions; and
WHEREAS, simultaneously herewith, Scotts is entering into an
Agreement Containing Consent Order and an Agreement to Hold
Separate (collectively, the "Consent Order") with the Federal
Trade Commission; and
WHEREAS, for federal income tax purposes, it is intended
that each of the Merger Transactions qualify as a reorganization
under the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the Code );
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth in this Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER TRANSACTIONS
SECTION 1.01. The Merger Transactions; Effective Time.
(a) Upon the terms and subject to the conditions set forth
in this Agreement and in accordance with the Applicable Corporate
Statutes, as soon as practicable after the satisfaction or, to
the extent permitted hereunder, waiver of all conditions to the
Merger Transactions set forth in Article IX, (i) Merger
Subsidiary shall be merged with and into the Company, in
accordance with Ohio Law and New Jersey Law, whereupon the
separate existence of Merger Subsidiary shall cease and the
Company shall be the surviving corporation (the "Surviving
Corporation"), and (ii) immediately subsequent thereto, (x)
Nurseries shall transfer substantially all of its assets,
including but not limited to all intellectual property rights,
but excluding its liabilities, to the Company, (y) the
Partnership and John Kenlon shall transfer all of the outstanding
capital stock of Miracle-Gro UK to the Company and (z) the
Charity, the Partnership and John Kenlon shall transfer all of
the outstanding capital stock of Miracle-Gro New York to the
Company.
(b) As soon as practicable after satisfaction or, to the
extent permitted hereunder, waiver of all conditions to the
Merger Transactions set forth in Article IX, the Company and
Merger Subsidiary will file certificates of merger with the
Secretaries of State of the States of New Jersey and Ohio, in
such forms as required by and executed in accordance with the
provisions of, and shall make all other filings or recordings
required, by the Applicable Corporate Statutes in connection with
the Merger. The Merger shall become effective at such time as the
applicable certificate of merger is duly filed with the Secretary
of State of the applicable states or at such later time as is
specified in such certificates of merger (the last such effective
time being the Effective Time).
(c) From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions,
disabilities and duties of the Company and Merger Subsidiary, all
as provided under the Applicable Corporate Statutes.
SECTION 1.02. Closing. Unless this Agreement shall have
been terminated and abandoned pursuant to Section 10.01 and
subject to the satisfaction or, to the extent permitted
hereunder, waiver of the conditions set forth in Article IX, the
consummation of the Merger Transactions will take place as
promptly as practicable (and in any event within two business
days) after satisfaction or waiver of the conditions set forth in
Article IX, at the offices of Vorys, Sater, Seymour and Pease,
52 East Gay Street, Columbus, Ohio, unless another date or place
is agreed to in writing by the Company and Scotts.
SECTION 1.03. Effect of the Merger Transactions. At the
Effective Time, the effect of the Merger Transactions shall be as
provided in the Applicable Corporate Statutes. Without limiting
the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the
property, rights, privileges, powers and franchises of the
Company and Merger Subsidiary shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company
and Merger Subsidiary shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 1.04. Conversion of Securities.
(a) At the effective time of the Merger, by virtue of the
Merger and without any action on the part of the Company or any
of the Shareholders, all issued and outstanding shares of capital
stock of the Company immediately prior to the effective time of
the Merger shall be converted into that number of shares of Class
A Convertible Preferred Stock of Scotts set forth in Schedule
1.04(a) having the terms set forth in Annex A attached hereto
(the Convertible Preferred Stock ), that number of Series A
warrants of Scotts set forth in Schedule 1.04(a) having the
terms set forth in Annex B hereto (the Series A Warrants), that
number of Series B warrants of Scotts set forth in Schedule
1.04(a) having the terms set forth in Annex C hereto (the Series
B Warrants ), and that number of Series C warrants of Scotts set
forth in Schedule 1.04(a) having the terms set forth in Annex D
hereto (the Series C Warrants and, collectively with the Series
A Warrants and the Series B Warrants, the Warrants ), and such
Convertible Preferred Stock, Series A Warrants, Series B Warrants
and Series C Warrants (collectively, the Merger Consideration )
shall be legally and beneficially owned by the Shareholders as
set forth in Schedule 1.04(a). The holders of such certificates
previously evidencing shares of capital stock of the Company
outstanding prior to the effective time of the Merger shall cease
to have any rights with respect to such shares of capital stock
except as otherwise provided herein or by applicable law.
(b) Immediately following the Effective Time, the
Partnership, the Charity and John Kenlon shall deliver to the
Company certificates representing all of the shares of
outstanding capital stock of Miracle-Gro New York (accompanied by
stock powers properly executed in blank or other appropriate
instruments of transfer), and shall receive, in consideration
therefor, shares of Convertible Preferred Stock as set forth in
Schedule 1.04(b), and such Merger Consideration shall be legally
and beneficially owned by the Partnership, the Charity and John
Kenlon, respectively.
(c) Immediately following the Effective Time the
Partnership and John Kenlon shall deliver to the Company
certificates representing all of the shares of outstanding
capital stock of Miracle-Gro UK (accompanied by stock powers
properly executed in blank or other appropriate instruments of
transfer), and shall receive, in consideration therefor, shares
of Convertible Preferred Stock as set forth in Schedule 1.04(c),
and such Merger Consideration shall be legally and beneficially
owned by the Partnership and John Kenlon, respectively.
(d) At the effective time of the Asset Transfer and in
consideration therefor, Nurseries shall receive that number of
shares of Convertible Preferred Stock set forth in Schedule
1.04(d), and such Merger Consideration shall be legally and
beneficially owned by Nurseries as set forth Schedule 1.04(d).
(e) Each share of capital stock held by the Company as
treasury stock immediately prior to the Effective Time shall
automatically be cancelled and extinguished without any
conversion thereof, and no payment shall be made with respect
thereto.
(f) Each share capital stock of Merger Subsidiary issued
and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and non-assessable
common share, without par value, of the Surviving Corporation
with the same rights, powers and privileges as the shares so
converted and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
(g) Notwithstanding the foregoing, the aggregate amount of
Merger Consideration shall consist of (i) 195,000 shares
representing $195 million face amount of Convertible Preferred
Stock; (ii) Series A Warrants to purchase 1,000,000 common
shares, without par value, of Scotts (the Scotts Common Stock);
(iii) Series B Warrants to purchase 1,000,000 shares of Scotts
Common Stock and (iv) Series C Warrants to purchase 1,000,000
shares of Scotts Common Stock.
SECTION 1.05. Surrender. (a) At the Effective Time, the
holders of shares of capital stock of the Company outstanding
immediately prior to the Effective Time shall be entitled to
receive the Merger Consideration set forth opposite their names
in Schedule 1.04(a) upon surrender to Scotts of all certificates
which formerly represented all outstanding shares of capital
stock of the Company. At the Effective Time, the holders of
shares of capital stock of Miracle-Gro New York and Miracle-Gro
UK, respectively, shall be entitled to receive the Merger
Consideration set forth opposite their names in Schedule 1.04(b)
and Schedule 1.04(c), respectively, in exchange for certificates
representing all outstanding shares of capital stock of Miracle-
Gro New York and Miracle-Gro UK, respectively. At the Effective
Time, Nurseries shall be entitled to receive the Merger
Consideration set forth in Schedule 1.04(d).
(b) After the Effective Time, the stock transfer books of
the Company shall be closed, and there shall be no further
registration of transfers of shares of capital stock of the
Company on the records of any of the Company. If, after the
Effective Time, certificates representing shares of capital stock
of the Company are presented to the Surviving Corporation, they
shall be cancelled and exchanged for the Merger Consideration
provided for, and in accordance with the procedures set forth,
in this Article I.
(c) No dividends or other distributions declared or made
after the Effective Time which have a record date after the
Effective Time shall be paid to the holder of any unsurrendered
certificates representing shares of capital stock of any Miracle-
Gro Constituent Company with respect to the shares of Convertible
Preferred Stock they are entitled to receive until such
certificates shall have been surrendered in accordance with this
Article I.
SECTION 1.06. Nurseries Liquidation. Promptly following
the Effective Time, Nurseries shall liquidate in accordance with
New York law.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.01. Reincorporation. Immediately after the
Effective Time, the Surviving Corporation shall be merged with
and into a newly-formed, wholly-owned subsidiary of the Surviving
Corporation which shall be an Ohio corporation (New Miracle-
Gro )(the Reincorporation ). The effect of the Reincorporation
shall be as provided under Ohio Law and New Jersey Law. Without
limiting the generality of the foregoing, and subject thereto, at
the effective time of the Reincorporation, all the property,
rights, privileges, powers and franchises of the Surviving
Corporation shall vest in New Miracle-Gro, and all debts,
liabilities and duties of the Surviving Corporation shall become
the debts, liabilities and duties of New Miracle-Gro. It is
intended that the Reincorporation qualify as a reorganization
under the provisions of Section 368(a)(1)(F) of the Code.
SECTION 2.02. Articles of Incorporation; Code of
Regulations. (a) At the effective time of the Merger, the
Certificate of Incorporation and the By-laws of the Company, as
in effect immediately prior to such effective time, shall be the
Certificate of Incorporation and the By-laws of the Surviving
Corporation.
(b) At the effective time of the Reincorporation, the
Articles of Incorporation and the Code of Regulations of New
Miracle-Gro, as in effect immediately prior to such effective
time, shall be the Articles of Incorporation and the Code of
Regulations of New Miracle-Gro, except that the name of New
Miracle-Gro shall be changed to Scotts Miracle-Gro Products, Inc.
SECTION 2.03. Directors and Officers. From and after the
respective effective times of the Merger and the Reincorporation,
until successors are duly elected or appointed and qualified in
accordance with applicable law, (i) the directors of the
Surviving Corporation shall be the directors set forth on
Schedule 2.03, and (ii) the officers of the Surviving Corporation
and New Miracle-Gro shall be the officers set forth on Schedule 2.03.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE MIRACLE-GRO CONSTITUENT COMPANIES, THE SHAREHOLDERS
AND THE GENERAL PARTNERS
As of January 26, 1995, each of the Miracle-Gro Constituent
Companies, the Shareholders and the General Partners, jointly and
severally, represent and warrant to Scotts and Merger Subsidiary
that (provided, however, that the Charity does not make any
representation or warranty as to the matters covered by Sections
3.12 or 3.20 hereof):
SECTION 3.01. Corporate Existence and Power. Each of the
Miracle-Gro Constituent Companies is a corporation duly
organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization, and has
all corporate powers and all governmental licenses,
authorizations, consents and approvals required to own, lease and
operate its properties and to carry on its business as now
conducted or as heretofore conducted by the Miracle-Gro
Constituent Companies, except to the extent the failure to have
such powers, licenses, authorizations, consents or approvals
would not, individually or in the aggregate, have a material
adverse effect on the business, assets, results of operations or
condition (financial or otherwise) of the Miracle-Gro Constituent
Companies, taken as a whole (a Company Material Adverse
Effect ). Each of the Miracle-Gro Constituent Companies is duly
qualified or licensed to do business as a foreign corporation,
and is in good standing, in each jurisdiction where the character
of the property owned or leased by it or the nature of its
activities makes such qualification or licensing necessary,
except for those jurisdictions where the failure to be so
qualified or licensed and in good standing would not,
individually or in the aggregate, have a Company Material Adverse
Effect.
SECTION 3.02. Organizational Documents. Each of the
Miracle-Gro Constituent Companies has heretofore delivered to
Scotts true and complete copies of the certificate of
incorporation and by-laws, or equivalent organizational
documents, of such Miracle-Gro Constituent Company, in each case
as currently in effect. None of the Miracle-Gro Constituent
Companies is in violation of any provision of its certificate of
incorporation, by-laws or equivalent organizational documents,
except for such violations that would not, individually or in the
aggregate, have a Company Material Adverse Effect.
SECTION 3.03. Corporate Authorization. The execution,
delivery and performance by the Miracle-Gro Constituent Companies
of this Agreement and the consummation by the Miracle-Gro
Constituent Companies of the transactions contemplated hereby are
within the corporate powers of each of the Miracle-Gro
Constituent Companies and have been duly authorized by all
necessary corporate action. This Agreement constitutes a valid
and binding agreement of each of the Miracle-Gro Constituent
Companies. The Merger, the Stock Sales and the Asset Transfer,
respectively, have been approved by the unanimous vote of all of
the outstanding capital shares of each of the respective Miracle-
Gro Constituent Companies.
SECTION 3.04. Governmental Authorization. The execution,
delivery and performance by the Miracle-Gro Constituent Companies
and the Shareholders of this Agreement and the consummation of
the transactions contemplated by the Agreement by the Miracle-Gro
Constituent Companies require no consent, approval, authorization
or permit of, or filing with or notification to any governmental
or regulatory authority, except (A) for (i) the filing of
certificates of merger and/or other appropriate merger documents
in accordance with New Jersey Law and Ohio Law; (ii) compliance
with any applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder (the HSR Act ); (iii) compliance with any
applicable provisions of the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the
Securities Act ), state securities or blue sky laws and state
takeover laws; (iv) compliance with any applicable requirements
of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (the Exchange Act ); and (v) any
applicable requirements of non-United States competition,
antitrust and investment laws and (B) where failure to obtain
such consents, approvals, authorizations or permits, or to make
such filings or notifications, would not prevent or delay the
consummation of the Merger or otherwise prevent any Miracle-Gro
Constituent Company from performing its obligations under this
Agreement, and would not, individually or in the aggregate, have
a Company Material Adverse Effect.
SECTION 3.05. Non-Contravention. The execution, delivery
and performance by the Miracle-Gro Constituent Companies and the
Shareholders of this Agreement and the consummation by the
Miracle-Gro Constituent Companies and the Shareholders of the
transactions contemplated hereby do not and will not (i)
contravene or conflict with the certificate of incorporation,
by-laws or equivalent organizational documents of any Miracle-Gro
Constituent Company; (ii) assuming compliance with the matters
referred to in Section 3.04, contravene or conflict with or
constitute a violation of any provision of any law, rule,
regulation, judgment, injunction, order or decree binding upon or
applicable to any Miracle-Gro Constituent Company or any
Shareholder; (iii) constitute a default under or give rise to a
right of termination, cancellation or acceleration of any right
or obligation of any Miracle-Gro Constituent Company or to a loss
of any benefit to which any Miracle-Gro Constituent Company is
entitled under any provision of any agreement, contract or other
instrument binding upon any Miracle-Gro Constituent Company or
any license, franchise, permit or other similar authorization
held by any Miracle-Gro Constituent Company; or (iv) result in
the creation or imposition of any Lien on any asset of any
Miracle-Gro Constituent Company, except, in the case of clauses
(ii), (iii) and (iv), for any such conflicts, violations,
defaults, breaches or other occurrences which would not prevent
or delay consummation of the Merger, or otherwise prevent any
Miracle-Gro Constituent Company from performing its obligations
under this Agreement, and would not, individually or in the
aggregate, have a Company Material Adverse Effect. For purposes
of this Agreement, Lien means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset.
SECTION 3.06. Capitalization. (a) The authorized capital
stock of the Company consists of 20,000 shares of Voting Common
Stock, without par value, and 20,000 shares of Non-Voting Common
Stock, without par value. As of the date hereof there are, and
as of the Effective Time there will be, outstanding 13,405 shares
of Voting Common Stock and 13,405.284 shares of Non-Voting Common
Stock. All outstanding shares of capital stock of the Company
have been, and at the Effective Time will be, duly authorized and
validly issued and are, and at the Effective Time will be, fully
paid and nonassessable.
(b) The authorized capital stock of Miracle-Gro New York
consists of 1,500 shares of Voting Common Stock, without par
value, and 1,500 shares of Non-Voting Common Stock, without par
value. As of the date hereof there are, and as of the Effective
Time there will be, outstanding 1,000 shares of Voting Common
Stock and 999.8 shares of Non-Voting Common Stock. All
outstanding shares of capital stock of Miracle-Gro New York have
been, and at the Effective Time will be, duly authorized and validly
issued and are, and at the Effective Time will be, fully
paid and nonassessable.
(c) The authorized capital stock of Miracle-Gro UK consists
of 20,000 shares of Voting Common Stock, without par value, and
20,000 shares of Non-Voting Common Stock, without par value. As
of the date hereof there are, and as of the Effective Time there
will be, outstanding 4,997.274 shares of Voting Common Stock and
4,997.106 shares of Non-Voting Common Stock. All outstanding
shares of capital stock of Miracle-Gro UK have been, and at the
Effective Time will be, duly authorized and validly issued and
are, and at the Effective Time will be, fully paid and
nonassessable.
(d) Except as set forth in this Section, there are, and at
the Effective Time will be, outstanding (i) no shares of capital
stock or other voting securities of any of the Miracle-Gro
Constituent Companies, (ii) no securities of any of the Miracle-
Gro Constituent Companies convertible into or exchangeable for
shares of capital stock or voting securities of any of the
Miracle-Gro Constituent Companies, and (iii) no options or other
rights to acquire from any of the Miracle-Gro Constituent
Companies, and no obligation of any of the Miracle-Gro
Constituent Companies to issue, any capital stock, voting
securities or securities convertible into or exchangeable for
capital stock or voting securities of any of the Miracle-Gro
Constituent Companies (the items in clauses (i), (ii) and (iii)
being referred to collectively as the Company Securities).
There are, and at the Effective Time will be, no outstanding
obligations of any of the Miracle-Gro Constituent Companies, to
repurchase, redeem or otherwise acquire any Company Securities or
make any material investment in any other Person. None of the
Miracle-Gro Constituent Companies has, or at the Effective Time
will have, any Subsidiaries. Subsidiary means with respect to
any of the Miracle-Gro Constituent Companies, any corporation or
other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are
directly or indirectly owned by any of the Miracle-Gro
Constituent Companies.
SECTION 3.07. Financial Statements. The audited combined
financial statements of the Miracle-Gro Constituent Companies as
of September 30, 1993 and 1994 and for the three fiscal years
ended September 30, 1994, which have previously been provided to
Scotts fairly present, in conformity with generally accepted
accounting principles applied on a consistent basis (except as
may be indicated in the notes thereto), the combined financial
position of the Miracle-Gro Constituent Companies as of the dates
thereof and their combined results of operations and changes in
financial position for the periods then ended (subject to normal
and recurring year-end adjustments in the case of any unaudited
interim financial statements which were not, and are not
expected, individually or in the aggregate, to be, material in
amount). For purposes of this Agreement, Balance Sheet means
the combined balance sheet of the Miracle-Gro Constituent
Companies as of September 30, 1994 and Balance Sheet Date
means September 30, 1994.
SECTION 3.08. Disclosure Documents. The information with
respect to the Miracle-Gro Constituent Companies that the Company
furnishes to Scotts in writing specifically for use in Scotts
proxy or information statement (together with any amendments
thereof, or supplements thereto, the Scotts Proxy Statement)
to be filed with the Securities and Exchange Commission (the SEC )
in connection with the Merger Transactions will not, at the time
of the filing of such Scotts Proxy Statement or at the time it is
first mailed to the shareholders of Scotts, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under
which they were made, not misleading.
SECTION 3.09. Absence of Certain Changes. Since the
Balance Sheet Date and except as disclosed to Scotts in Section
3.09 of the disclosure schedule previously delivered to Scotts by
the Company (the Company Disclosure Schedule ), the Miracle-Gro
Constituent Companies have conducted their business only in the
ordinary course consistent with past practice and there has not
been:
(a) any event, occurrence or development of a state of
circumstances or facts which has had or reasonably could be
expected to have a Company Material Adverse Effect;
(b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of
capital stock of any of the Miracle-Gro Constituent
Companies, or any repurchase, redemption or other
acquisition by any Miracle-Gro Constituent Company of any
outstanding shares of capital stock or other securities of,
or other ownership interests in, any Miracle-Gro Constituent
Company;
(c) any amendment of any material term of any
outstanding security of any Miracle-Gro Constituent Company;
(d) any incurrence, assumption or guarantee by any
Miracle-Gro Constituent Company of any indebtedness for
borrowed money;
(e) any creation or assumption by any Miracle-Gro
Constituent Company of any Lien on any material asset other
than in the ordinary course of business consistent with past
practices;
(f) any making of any loan, advance or capital
contribution to or investment in any individual,
corporation, partnership, limited liability company,
association, trust or other entity or organization,
including a government or political subdivision or any
agency or instrumentality thereof (each, a Person ), other
than loans, advances or capital contributions to or
investments in any Miracle-Gro Constituent Company made in
the ordinary course of business consistent with past
practices;
(g) any transaction or commitment made, or any
contract or agreement entered into, by any Miracle-Gro
Constituent Company relating to its assets or business
(including the acquisition or disposition of any assets) or
any relinquishment by any Miracle-Gro Constituent Company of
any contract or other right, in either case, material to the
Miracle-Gro Constituent Companies, taken as a whole, other
than transactions and commitments in the ordinary course of
business consistent with past practice and those
contemplated by this Agreement;
(h) any change in any method of accounting or
accounting practice by any Miracle-Gro Constituent Company,
except for any such change required by reason of a
concurrent change in generally accepted accounting
principles;
(i) any (i) grant of any severance or termination pay
to any director, officer, employee or agent of any Miracle-
Gro Constituent Company, (ii) entering into of any
employment, deferred compensation or other similar agreement
(or any amendment to any such existing agreement) with any
director, officer, employee or agent of any Miracle-Gro
Constituent Company, (iii) increase in benefits payable
under any existing severance or termination pay policies or
employment agreements or (iv) increase in compensation,
bonus or other benefits payable to directors, officers,
employees or agents of any Miracle-Gro Constituent Company,
other than in the ordinary course of business consistent
with past practice or, in the case of employment agreements,
as contemplated by Section 9.02(v); or
(j) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union
or representative thereof to organize any employees of any
Miracle-Gro Constituent Company, which employees were not
subject to a collective bargaining agreement at the Balance
Sheet Date, or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to such
employees.
SECTION 3.10. No Undisclosed Material Liabilities. Except
as and to the extent set forth in the Balance Sheet or as
otherwise set forth in Section 3.10 of the Company Disclosure
Schedule, none of the Miracle-Gro Constituent Companies had any
liability or obligation of any nature (whether accrued,
contingent, absolute, determined, determinable or otherwise) that
(i) would be required to be reflected on a combined balance sheet
of the Miracle-Gro Constituent Companies (including the notes
thereto) or (ii) would have, or could reasonably be likely to
have, individually or in the aggregate, a Company Material
Adverse Effect.
SECTION 3.11. Litigation. Except as set forth in Section
3.11 of the Company Disclosure Schedule, there is no claim,
action, suit, investigation or proceeding pending against or, to
the knowledge of the Company or the Shareholders, threatened
against any of the Miracle-Gro Constituent Companies or any of
their respective properties before any court or arbitrator or any
governmental body, agency or official which, individually or in
the aggregate, would reasonably be likely to have a Company
Material Adverse Effect or would reasonably be likely to impair
the ability of any Miracle-Gro Constituent Company to consummate
the Merger Transactions or the other transactions contemplated by
this Agreement.
SECTION 3.12. Taxes. Each of the Miracle-Gro Constituent
Companies has timely filed all federal, state, local and foreign
income, gross income, gross receipts, gains, premium, sales, use,
ad valorem, transfer, franchise, profits, withholding, payroll,
employment, excise, severance, stamp, occupation, license, lease,
environmental, customs, duties, property, windfall profits and
all other tax returns, statements, reports and forms (the Tax
Returns ) required to be filed with the appropriate tax authority
through the date hereof, the failure of which to file would
result in a Company Material Adverse Effect, and shall timely
file all such Tax Returns required to be filed on or before the
Effective Time. To the best knowledge of the Company and the
Shareholders, such Tax Returns are and will be true, correct and
complete in all material respects. Each of the Miracle-Gro
Constituent Companies has paid and discharged all federal, state,
local and foreign Taxes due from them, other than such Taxes that
are adequately reserved as shown on the Balance Sheet. Neither
the Internal Revenue Service nor any other taxing agency or
authority, domestic or foreign, is now asserting or, to the best
knowledge of the Company and the Shareholders, threatening to
assert against any of the Miracle-Gro Constituent Companies any
material deficiency or claim for additional Taxes. There are no
unexpired waivers by any of the Miracle-Gro Constituent Companies
of any statutes of limitations with respect to Taxes which,
individually or in the aggregate would have a Company Material
Adverse Effect. The accruals and reserves for Taxes reflected in
the Balance Sheet are adequate for the periods covered. Each of
the Miracle-Gro Constituent Companies has withheld or collected
and paid over to the appropriate governmental authorities or is
properly holding for such payment all Taxes required by law to be
withheld or collected, except to the extent that the failure to
so withhold or collect and pay would not, individually or in the
aggregate, have a Company Material Adverse Effect. There are no
Liens for Taxes upon the assets of any of the Miracle-Gro
Constituent Companies, which, individually or in the aggregate
would have a Company Material Adverse Effect or other than Liens
for current Taxes not yet due and payable. None of the Miracle-
Gro Constituent Companies has agreed to make, or is required to
make, any adjustment under Section 481(a) of the Code. None of
the Miracle-Gro Constituent Companies is a party to any
agreement, contract, arrangement or plan that has resulted, or
could result, individually or in the aggregate, in the payment of
excess parachute payments within the meaning of Section 280G of
the Code. Each of the Miracle-Gro Constituent Companies, other
than Nurseries, was, at all times from January 1, 1985 to May 1,
1995, an S corporation within the meaning of Section 1361(a)(1)
of the Code (or the corresponding provisions of preceding law)
and during such period was not subject to the tax imposed on
certain built-in gains under Section 1374 of the Code or the tax
imposed under Section 1375 of the Code. For purposes of this
Agreement, Taxes shall mean all taxes, charges and other
assessments, including any interest, penalties or additions to
tax with respect thereto. For purposes of this Section 3.12
only, a Company Material Adverse Effect shall mean a Loss (as
hereafter defined) in excess of $500,000.
SECTION 3.13. ERISA. (a) Section 3.13(a) of the Company
Disclosure Schedule includes a list identifying each employee
benefit plan, as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 ( ERISA ), which (i) is
subject to any provision of ERISA and (ii) is maintained,
administered or contributed to by any Miracle-Gro Constituent
Company or any affiliate (as defined below) and covers any
employee or former employee of any Miracle-Gro Constituent
Company or any affiliate or under which any Miracle-Gro
Constituent Company or any affiliate has any liability. Copies
of such plans (and, if applicable, related trust agreements) and
all amendments thereto and written interpretations thereof have
been furnished to Scotts together with (x) the three most recent
annual reports (Form 5500 including, if applicable, Schedule B
thereto) prepared in connection with any such plan and (y) the
most recent actuarial valuation report prepared in connection
with any such plan. Such plans are referred to collectively
herein as the Employee Plans. For purposes of this Section,
affiliate of any Person means any other Person which, together
with such Person, would be treated as a single employer under
Section 414 of the Code. The only Employee Plans which
individually or collectively would constitute an employee
pension benefit plan as defined in Section 3(2) of ERISA (the
Pension Plans ) are identified as such in the list referred to
above. The Company has provided Scotts with complete age,
salary, service and related data as of December 31, 1994 for
employees and former employees of each of the Miracle-Gro
Constituent Companies and any affiliate covered under the Pension
Plans.
(b) Except as otherwise identified in Section 3.13(b) of
the Company Disclosure Schedule, no Employee Plan constitutes a
multiemployer plan , as defined in Section 3(37) of ERISA (a
Multiemployer Plan ), and no Employee Plan is maintained in
connection with any trust described in Section 501(c)(9) of the
Code. The only Employee Plans that are subject to Title IV of
ERISA (the Retirement Plans ) are identified in the list of such
Employee Plans heretofore provided to Scotts by the Company. As
of the Balance Sheet Date, the fair market value of the assets of
each Retirement Plan (excluding for these purposes any accrued
but unpaid contributions) exceeded the present value of all
benefits accrued under such Retirement Plan determined on a
termination basis using the assumptions established by the
Pension Benefit Guaranty Corporation (the PBGC ) as in effect on
such date. No accumulated funding deficiency, as defined in
Section 412 of the Code, has been incurred with respect to any
Pension Plan, whether or not waived. The Company and the
Shareholders know of no reportable event, within the meaning of
Section 4043 of ERISA for which the 30-day notice requirement to
the PBGC has not been waived, and no event described in Section
4041, 4042, 4062 or 4063 of ERISA has occurred in connection with
any Employee Plan, other than a reportable event that,
individually or in the aggregate, will not have a Company
Material Adverse Effect. No condition exists and no event has
occurred that would constitute grounds for termination of any
Retirement Plan or, with respect to any Employee Plan which is a
Multiemployer Plan, presents a material risk of a complete or
partial withdrawal under Title IV of ERISA and neither any
Miracle-Gro Constituent Company nor any of their respective
affiliates has incurred any material liability under Title IV
of ERISA arising in connection with the termination of, or complete
or partial withdrawal from, any plan covered or previously
covered by Title IV of ERISA. If a complete withdrawal by any
Miracle-Gro Constituent Company and all of its respective
affiliates were to occur as of the Effective Time with respect to
all Employee Plans which are Multiemployer Plans, neither any
Miracle-Gro Constituent Company nor any such affiliate would
incur any material withdrawal liability under Title IV of ERISA.
To the Company s and the Shareholders knowledge, nothing done or
omitted to be done and no transaction or holding of any asset
under or in connection with any Employee Plan has or will make
any Miracle-Gro Constituent Company or any officer or director of
any Miracle-Gro Constituent Company subject to any liability
under Title I of ERISA or liable for any tax pursuant to Section
4975 of the Code that could, individually or in the aggregate,
have a Company Material Adverse Effect.
(c) Each Employee Plan which is intended to be qualified
under Section 401(a) of the Code is so qualified and has been so
qualified during the period from its adoption to date, and each
trust forming a part thereof is exempt from tax pursuant to
Section 501(a) of the Code. The Company has furnished to Scotts
copies of the most recent Internal Revenue Service determination
letters with respect to each such Plan. Each Employee Plan has
been maintained in material compliance with its terms and with
the requirements prescribed by any and all statutes, orders,
rules and regulations, including but not limited to ERISA and the
Code, which are applicable to such Plan.
(d) There is no contract, agreement, plan or arrangement
covering any employee or former employee of any Miracle-Gro
Constituent Company or any affiliate that, individually or
collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Sections
162(a)(1) or 280G of the Code.
(e) Section 3.13(e) of the Company Disclosure Schedule sets
forth a list of each employment, severance or other similar
contract, arrangement or policy and each plan or arrangement
(written or oral) providing for insurance coverage (including any
self-insured arrangements), workers compensation, disability
benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation
or benefits which (i) is not an Employee Plan, (ii) is entered
into, maintained or contributed to, as the case may be, by any of
the Miracle-Gro Constituent Companies or any of their respective
affiliates and (iii) covers any employee or former employee of
any of the Miracle-Gro Constituent Companies or any of their
respective affiliates. Such contracts, plans and arrangements as
are described above, copies or descriptions of all of which have
been furnished previously to Scotts are referred to collectively
herein as the Benefit Arrangements. Each Benefit Arrangement
has been maintained in substantial compliance with its terms and
with the requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such Benefit
Arrangement.
(f) The excess of the present value of the projected
liability in respect of post-retirement health and medical
benefits for retired employees of any Miracle-Gro Constituent
Companies and their respective affiliates, determined using
assumptions that are reasonable in the aggregate, over the fair
market value of any fund, reserve or other assets segregated for
the purpose of satisfying such liability (including for such
purposes any fund established pursuant to Section 401(h) of the
Code) does not in the aggregate exceed $1,000,000. No condition
exists that would prevent any Miracle-Gro Constituent Company
from amending or terminating any Employee Plan or Benefit
Arrangement providing health or medical benefits in respect of
any active employee of any of the Miracle-Gro Constituent
Companies other than limitations imposed under the terms of a
collective bargaining agreement.
(g) Except as set forth in Section 3.13(g) of the Company
Disclosure Schedule, no Miracle-Gro Constituent Company is a party
to or subject to any union contract or any employment contract or
arrangement providing for annual future compensation of $50,000
or more with any officer, consultant, director or employee.
(h) The consummation of the transactions contemplated
hereby will not result in any material acceleration of benefits,
or the modification of the terms of any benefits, payable to or
for the benefit of any officer, director or employee of any
Miracle-Gro Constituent Company, including any acceleration of
vesting of stock options or any changes in any amounts or timing
of any amounts payable under any incentive arrangement.
SECTION 3.14. Trademarks, Patents and Copyrights.
(a) Section 3.14(a) of the Company Disclosure Schedule sets forth
a true and complete list of (i) all patents, patent rights,
trademarks, trademark rights, trade names, copyrights, service
marks, trade secrets, applications for trademarks and for service
marks, know-how and other proprietary rights and information used
or held for use in connection with the business of the Miracle-
Gro Constituent Companies (collectively, "Intellectual Property
Rights") and (ii) all licenses, commitments and other agreements
to which any Miracle-Gro Constituent Company is a party providing
for the license of any Intellectual Property Rights to or from
any other Person.
(b) Except as set forth in Section 3.14(b) of the Company
Disclosure Schedule, the Miracle-Gro Constituent Companies own or
possess adequate licenses or other rights to use all of the
Intellectual Property Rights; there are no Intellectual Property
Rights necessary for use in connection with the business of the
Miracle-Gro Constituent Companies which are not owned or
possessed by the Miracle-Gro Constituent Companies or which, upon
completion of the Merger Transactions, will not be owned or
possessed by the Company; and neither the Company nor the
Shareholders is aware of any assertion or claim challenging the
validity of any of the Intellectual Property Rights; and the
conduct of the business of the Miracle-Gro Constituent Companies,
to the best knowledge of the Company and the Shareholders, does
not conflict in any way with any patent, patent right, license,
trademark, trademark right, trade name, trade name right, service
mark or copyright of any third party. To the best knowledge of
the Company and the Shareholders, there are no infringements of
any proprietary rights owned by or licensed by or to any Miracle-
Gro Constituent Company that individually or in the aggregate
would have a Company Material Adverse Effect.
SECTION 3.15. Material Contracts. (a) Except for
agreements, contracts, plans, leases, arrangements or commitments
(in each case, oral or written) set forth in Section 3.15(a) of
the Company Disclosure Schedule, no Miracle-Gro Constituent
Company is a party to or subject to:
(i) any lease providing for annual rental
payments of $50,000 or more;
(ii) any contract for the purchase of materials,
supplies, goods, services, equipment or other assets
providing for annual payments by any Miracle-Gro
Constituent Company of $50,000 or more;
(iii) any sales, distribution or other similar
agreement providing for the sale by any Miracle-Gro
Constituent Company of materials, supplies, goods,
services, equipment or other assets that provides for
annual payments to any Miracle-Gro Constituent Company
of $100,000 or more;
(iv) any partnership, joint venture or other
similar contract arrangement or agreement;
(v) any contract relating to indebtedness for
borrowed money or the deferred purchase price of
property (whether incurred, assumed, guaranteed or
secured by any asset), except contracts relating to
indebtedness incurred in the ordinary course of
business in an amount not exceeding $25,000;
(vi) any license agreement, franchise agreement
or agreement in respect of similar rights granted to or
held by any Miracle-Gro Constituent Company;
(vii) any agency, dealer, sales representative or
other similar agreement;
(viii) any contract or other document that
substantially limits the ability of any Miracle-Gro
Constituent Company to compete in any line of business
or with any Person or in any area or which would so
restrict any of the Miracle-Gro Constituent Companies
after the Effective Time; or
(ix) any other contract or commitment not made in
the ordinary course of business that is material to the
Company or any other Miracle-Gro Constituent Company.
(b) Each agreement, contract, lease, arrangement and
commitment disclosed in Section 3.15(a) of the Company Disclosure
Schedule or required to be disclosed pursuant to this Section is
a valid and binding agreement of such Miracle-Gro Constituent
Company and is in full force and effect, and neither any Miracle-
Gro Constituent Company nor, to the knowledge of the Company and
the Shareholders, any other party thereto is in default in any
material respect under the terms of any such agreement, contract,
plan, lease arrangement or commitment.
SECTION 3.16. Compliance with Laws. No Miracle-Gro
Constituent Company is in violation of, or has violated, any
applicable provisions of any laws, rules, statutes, ordinances or
regulations, except for violations that would not, individually
or in the aggregate, have a Company Material Adverse Effect.
SECTION 3.17. Finders Fees. No investment banker, broker,
finder or other intermediary (other than CS First Boston
Corporation ( CS First Boston )) has been retained by, or
authorized to act on behalf of, any Miracle-Gro Constituent
Company and entitled to any fee or commission in connection with
the Merger Transactions or the transactions contemplated by this
Agreement. The Company has previously furnished to Scotts a
complete and correct copy of all agreements between CS First
Boston and any Miracle-Gro Constituent Company (or any
Shareholder) pursuant to which such firm would be entitled to any
payment relating to the Merger Transactions or the transactions
contemplated by this Agreement.
SECTION 3.18. Other Information. The statements contained
in the documents and certificates furnished or to be furnished by
any of the Miracle-Gro Constituent Companies or the Shareholders
pursuant to this Agreement and in connection with the
transactions contemplated by this Agreement, when considered in
their entirety and taking into account all subsequent
corrections, modifications and amplifications of previously
delivered information, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order
to make the statements contained therein not misleading.
Notwithstanding anything herein to the contrary, none of the
Miracle-Gro Constituent Companies nor any Shareholder makes any
representation or warranty regarding any financial projection
relating to the Company and/or the other Miracle-Gro Constituent
Companies or any other indications of future financial
performance or results of any Miracle-Gro Constituent Company.
SECTION 3.19. Environmental Compliance. Except as set
forth in Section 3.19 of the Company Disclosure Schedule:
(a) No written notice, notification, demand, request for
information, citation, summons, complaint or order has been
issued or filed, no penalty has been assessed and no
investigation or review is pending, or to the knowledge of the
Company or the Shareholders, after due inquiry, threatened by any
governmental or other entity, and there are no existing orders,
decrees or agreements in effect or, to the knowledge of the
Company or the Shareholders, after due inquiry, threatened, (i)
with respect to any alleged material violation of any
Environmental Law (as hereafter defined) in connection with the
conduct of the business of any of the Miracle-Gro Constituent
Companies (for purposes of this Section 3.19, the Miracle-Gro
Constituent Companies shall include any predecessor of any of the
Miracle-Gro Constituent Companies) or (ii) with respect to any
alleged failure to have any permit, certificate, license,
approval, registration or authorization required by any
Environmental Law in connection with the conduct of the business
of the Miracle-Gro Constituent Companies or (iii) with respect to
any generation, treatment, storage, recycling, transportation,
disposal or release (including a release as defined in 42 USC
SECTION 9601) ( Release ) of any polluting material, including
petroleum, its derivatives, by-products and other hydrocarbons
( Polluting Substance ).
(b)(i) No Miracle-Gro Constituent Company has, other than
as a generator, handled any Polluting Substance, on any property
now or previously owned or leased by any Miracle-Gro Constituent
Company; (ii) no asbestos is present at any property now or
previously owned or leased by any Miracle-Gro Constituent
Company; (iii) there are no underground storage tanks currently
in use or, to the knowledge of the Company or the Shareholders,
abandoned at any property now or previously owned or leased by
any Miracle-Gro Constituent Company which have been used to store
or have contained a substance which is regulated by Environmental
Laws or which, if Released into the environment, would result in
pollution, (iv) there has been no Release of a Polluting
Substance with respect to which any of the Miracle-Gro
Constituent Companies may reasonably be required to perform
investigation or remediation, other than routine spills and leaks
which are addressed in the ordinary course of business, at, on or
under any property now or previously owned or leased by any
Miracle-Gro Constituent Company and (v) no Hazardous Substance
(as defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ( CERCLA )) is
present in a reportable or threshold planning quantity, where
such a quantity has been established by statute, ordinance, rule,
regulation or order, at, on or under any property now or
previously owned by any Miracle-Gro Constituent Company.
(c) To the knowledge of the Company and the Shareholders,
no Miracle-Gro Constituent Company has transported or arranged
for the transportation (directly or indirectly) of any Hazardous
Substance (as defined in CERCLA) to any location which is listed
or proposed for listing on the nationwide priorities list
established under CERCLA or on any similar state list.
(d) To the knowledge of the Company and the Shareholders,
no oral or written notification of a Release of a Hazardous
Substance (as defined in CERCLA) has been filed by or on behalf
of any Miracle-Gro Constituent Company, and no property now or
previously owned or leased by any Miracle-Gro Constituent Company
is listed, or to the knowledge of the Company or the
Shareholders, proposed for listing, on the National Priorities
List promulgated pursuant to CERCLA.
(e) There are no environmental Liens on any asset of any
Miracle-Gro Constituent Company and no government actions have
been taken or are in process which could subject any of such
assets to such Liens.
(f) Except as set forth in Section 3.19(f) of the Company
Disclosure Schedule, there have been no material environmental
investigations, studies, audits, tests, reviews or other analyses
conducted by or which are in the possession of any of the
Miracle-Gro Constituent Companies in relation to any property or
facility now or previously owned or leased by any Miracle- Gro
Constituent Company.
(g) For purposes of this Agreement, Environmental Law
means all applicable Federal, state and local laws, rules and
regulations, including common law, orders decrees, permits and
other binding requirements relating to pollution, the
preservation of the environment and Releases of pollutants into
the environment or the workplace.
SECTION 3.20 Stock Ownership. Immediately following the
Effective Time, the Shareholders shall deliver to the Company all
of the outstanding capital stock of, or other ownership interest
in, Miracle-Gro UK and Miracle-Gro New York free and clear of any
Lien and free of any other limitation or restriction on the right
to vote, sell or otherwise dispose of such capital stock or other
ownership interest, and at such time there will be no options or
other rights to acquire from the Company, or of Miracle-Gro UK or
Miracle-Gro New York to issue, any capital stock, voting
securities or other ownership interests in, or any securities
convertible into or exchangeable for any capital stock, voting
securities or ownership interest in, Miracle-Gro UK or Miracle-
Gro New York, respectively.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SCOTTS AND MERGER SUBSIDIARY
As of January 26, 1995, Scotts and Merger Subsidiary,
jointly and severally, represent and warrant to the Miracle-Gro
Constituent Companies and the Shareholders that:
SECTION 4.01. Corporate Existence and Power. Each of
Scotts and Merger Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, and has all
corporate powers and all governmental licenses, authorizations,
consents and approvals required to own, lease and operate its
properties and to carry on its business as now conducted except
to the extent the failure to have such powers, licenses,
authorizations, consents or approvals would not, individually or
in the aggregate, have a material adverse effect on the business,
assets, results of operations or condition (financial or
otherwise) of Scotts and its consolidated Subsidiaries, taken as
a whole (a Scotts Material Adverse Effect ). Each of Scotts and
Merger Subsidiary is duly qualified or licensed to do business as
a foreign corporation, and is in good standing, in each
jurisdiction where the character of the property owned or leased
by it or the nature of its activities makes such qualification or
licensing necessary, except for those jurisdictions where the
failure to be so qualified or licensed and in good standing would
not, individually or in the aggregate, have a Scotts Material
Adverse Effect. Since the date of its incorporation, Merger
Subsidiary has not engaged in any activities other than in
connection with or as contemplated by this Agreement or in
connection with arranging any financing required to consummate
the transactions contemplated hereby.
SECTION 4.02. Organizational Documents. Scotts has
heretofore delivered to the Company true and complete copies of
the Articles of Incorporation and Code of Regulations of Scotts,
Merger Subsidiary and New Miracle-Gro, in each case as currently
in effect. Neither Scotts nor Merger Subsidiary is in violation
of any provision of its Articles of Incorporation or Code of
Regulations, except for such violations that would not,
individually or in the aggregate, have a Scotts Material Adverse
Effect.
SECTION 4.03. Corporate Authorization. The execution,
delivery and performance by Scotts and Merger Subsidiary of this
Agreement and the consummation by Scotts and Merger Subsidiary of
the transactions contemplated hereby are within the corporate
powers of each of Scotts and Merger Subsidiary and have been duly
authorized by all necessary corporate action (other than the
required approval by Scotts shareholders of the matters set
forth in Sections 9.01(iii) and (iv) (the Scotts Shareholder
Consent ). This Agreement constitutes a valid and binding
agreement of Scotts and Merger Subsidiary.
SECTION 4.04. Governmental Authorization. The execution,
delivery and performance by Scotts and Merger Subsidiary of this
Agreement and the consummation by Scotts and Merger Subsidiary of
the transactions contemplated by the Agreement require no
consent, approval, authorization or permit of, or filing with or
notification to any governmental or regulatory authority, except
(A) for (i) the filing of a certificate of merger and/or other
appropriate merger documents in accordance with New Jersey Law
and Ohio Law, (ii) compliance with any applicable requirements of
the HSR Act; (iii) compliance with any applicable requirements of
the Securities Act, state securities or blue sky laws and state
takeover laws; (iv) compliance with any applicable requirements
of Exchange Act; and (v) any applicable requirements of non-
United States competition, antitrust and investment laws and (B)
where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not
prevent or delay the consummation of the Merger or otherwise
prevent Scotts or Merger Subsidiary from performing its
obligations under this Agreement, and would not, individually or
in the aggregate, have a Scotts Material Adverse Effect.
SECTION 4.05. Non-Contravention. The execution, delivery
and performance by Scotts and Merger Subsidiary of this Agreement
and the consummation by Scotts and Merger Subsidiary of the
transactions contemplated hereby, assuming receipt of the Scotts
Shareholder Consent, do not and will not (i) contravene or
conflict with the Articles of Incorporation or Code of
Regulations of Scotts or Merger Subsidiary; (ii) assuming
compliance with the matters referred to in Section 4.04,
contravene or conflict with or constitute a violation of any
provision of law, rule regulation, judgment, injunction, order or
decree binding upon Scotts or Merger Subsidiary; (iii) assuming
satisfaction or waiver of the conditions set forth in Section
9.01(i) and Section 9.01(ii), constitute a default under or give
rise to any right of termination, cancellation or acceleration of
any right or obligation of Scotts or Merger Subsidiary or to a
loss of any material benefit to which Scotts or Merger Subsidiary
is entitled under any material agreement, contract or other
instrument binding upon Scotts or Merger Subsidiary; or (iv)
result in the creation or imposition of any Lien on any asset of
Scotts or Merger Subsidiary, except, in the case of clauses (ii),
(iii) and (iv), for any such conflicts, violations, defaults,
breaches or other occurrences which would not prevent or delay
consummation of the Merger, or otherwise prevent Scotts or Merger
Subsidiary from performing its obligations under this Agreement,
and would not, individually or in the aggregate, have a Scotts
Material Adverse Effect.
SECTION 4.06. Capitalization. (a) As of the date hereof,
the authorized capital stock of Scotts consists of 35,000,000
shares of Scotts Common Stock. As of January 15, 1995, there
were outstanding 18,667,064 shares of Scotts Common Stock and
employee stock options to purchase an aggregate of 1,428,705
shares of Scotts Common Stock (of which options to purchase an
aggregate of 575,816 shares were exercisable). All of the
outstanding common shares of Scotts have been duly authorized and
validly issued and are fully paid and nonassessable. Except as
set forth in this Section and except for changes since January
15, 1995, resulting from the exercise of employee stock options
outstanding on such date, there are outstanding (i) no shares of
capital stock or other voting securities of Scotts, (ii) no
securities of Scotts convertible into or exchangeable for shares
of capital stock or voting securities of Scotts, and (iii) no
options or other rights to acquire from Scotts, and no obligation
of Scotts to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or
voting securities of Scotts (the items in clauses (i), (ii) and
(iii) being referred to collectively as the Scotts Securities ).
There are no outstanding obligations of Scotts or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any
Scotts Securities. Subsidiary, with respect to Scotts, means
any corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing
similar functions are directly or indirectly owned by Scotts.
(b) The authorized capital stock of Merger Subsidiary
consists of 1,000 common shares, without par value. As of the
date hereof, there are outstanding 1,000 common shares. All of
the outstanding common shares of Merger Subsidiary have been duly
authorized and validly issued and are fully paid and
nonassessable. Except as set forth in this Section, there are
outstanding (i) no shares of capital stock or other voting
securities of Merger Subsidiary, (ii) no securities of Merger
Subsidiary convertible into or exchangeable for shares of capital
stock or voting securities of Merger Subsidiary, and (iii) no
options or other rights to acquire from Merger Subsidiary, and no
obligation of Merger Subsidiary to issue, any capital stock,
voting securities or securities convertible into or exchangeable
for capital stock or voting securities of Merger Subsidiary.
(c) The Merger Consideration, when issued in accordance
with this Agreement, will be duly authorized, validly issued, in
the case of the Convertible Preferred Stock, fully paid and non-
assessable, and, in the case of the Warrants, valid and binding
obligations of Scotts.
SECTION 4.07. SEC Filings; Financial Statements. (a)
Scotts has filed all forms, reports and documents required to be
filed by it with the SEC since September 30, 1992, and has
heretofore made available to the Company and the Shareholders, in
the form filed with the SEC (excluding any exhibits thereto,
unless otherwise specifically requested by the Company or the
Shareholders), (i) its Annual Reports on Form 10-K for the fiscal
years ended September 30, 1992, 1993 and 1994, respectively; (ii)
all proxy statements relating to meetings of Scotts shareholders
(whether annual or special) held since October 1, 1992; and (iii)
all other reports and registration statements (other than
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
filed prior to September 30, 1994) filed with the SEC since
October 1, 1992 (the forms, reports and other documents referred
to in clauses (i) through (iii) being referred to herein,
collectively, as the Scotts Disclosure Documents ). The Scotts
Disclosure Documents and any other forms, reports or other
documents filed by Scotts with the SEC after the date of this
Agreement but prior to the Effective Time (x) were prepared, or
will be prepared, in accordance with the Securities Act or the
Exchange Act, as the case may be, and (y) did not at the time
they were filed, or will not at the time they are filed, with the
SEC contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon
and in conformity with information furnished to Scotts by any
Miracle-Gro Constituent Company or any Shareholder.
Notwithstanding anything herein to the contrary, neither Scotts
nor Merger Subsidiary makes any representation or warranty
regarding any financial projection relating to Scotts or any of
its Subsidiaries or any other indications of future financial
performance or results of Scotts or any of its Subsidiaries.
(b) Each of the consolidated financial statements
(including any notes thereto) contained in the Annual Report on
Form 10-K for the fiscal year ended September 30, 1994 (the 1994
Form 10-K ), was prepared in accordance with generally accepted
accounting principles and fairly presents the consolidated
financial position, results of operations and cash flows of Scotts
and its consolidated subsidiaries as at the respective
dates thereof and for the respective periods indicated therein.
(c) Except as and to the extent set forth in the
consolidated balance sheet included in the 1994 Form 10-K, or as
otherwise set forth in Section 4.07 of the disclosure schedule
previously delivered to the Company by Scotts (the Scotts
Disclosure Schedule ), Scotts had no liability or obligation of
any nature (whether accrued, contingent, absolute, determined,
determinable or otherwise) that (i) would be required to be
reflected in such consolidated balance (including the notes
thereto) or (ii) would have, or could reasonably be likely to
have, individually or in the aggregate, a Scotts Material Adverse
Effect.
SECTION 4.08. Absence of Certain Changes. Since September
30, 1994, and except as disclosed to the Company in Section 4.08
of the Scotts Disclosure Statement or as otherwise contemplated
by this Agreement, Scotts has conducted its business only in the
ordinary course consistent with past practice and there has not
been:
(a) any event, occurrence or development of a
state of circumstances or facts which has had or
reasonably could be expected to have a Scotts Material
Adverse Effect;
(b) any declaration, setting aside or payment of
any dividend or other distribution with respect to any
shares of capital stock of Scotts, or any repurchase,
redemption or other acquisition by Scotts or any of its
Subsidiaries of any outstanding shares of capital stock
or other securities of, or other ownership interests
in, Scotts;
(c) any amendment of any material term of any
outstanding security of Scotts;
(d) any incurrence, assumption or guarantee by
Scotts of indebtedness for borrowed money, which
incurrence, assumption or guarantee is material to
Scotts and its Subsidiaries, taken as a whole;
(e) any creation or assumption by Scotts of a
Lien on any material asset, which creation or
assumption is material to Scotts and its Subsidiaries,
taken as a whole, other than those in the ordinary
course of business consistent with past practices;
(f) any making of any loan, advance or capital
contribution to or investment in any Person, which is
material to Scotts and its Subsidiaries, taken as
whole, other than loans, advances or capital
contributions to or investments in any Subsidiary of
Scotts made in the ordinary course of business
consistent with past practices;
(g) any transaction or commitment made, or any
contract or agreement entered into, by Scotts or its
Subsidiaries relating to their respective assets or
business (including the acquisition or disposition of
any assets) or any relinquishment by Scotts or its
Subsidiaries of any contract or other right, in either
case, material to Scotts and its Subsidiaries, taken as
a whole, other than transactions and commitments in the
ordinary course of business consistent with past
practice and those contemplated by this Agreement;
(h) any change in any method of accounting or
accounting practice by Scotts, except for any such
change required by reason of a concurrent change in
generally accepted accounting principles; or
(i) any labor dispute, other than routine
individual grievances, or any activity or proceeding by
a labor union or representative thereof to organize any
employees of Scotts, which employees were not subject
to a collective bargaining agreement at September 30,
1994, or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to such
employees.
SECTION 4.09. No Undisclosed Material Liabilities. Except
as and to the extent set forth in the 1994 Form 10-K, or as
otherwise set forth in Section 4.09 of the Scotts Disclosure
Schedule, neither Scotts nor any of its Subsidiaries had any
liability or obligation of any nature (whether accrued,
contingent, absolute, determined, determinable or otherwise) that
(i) would be required to be reflected on a consolidated balance
sheet of Scotts and its Subsidiaries (including the notes
thereto) or (ii) would have, or could reasonably be likely to
have, individually or in the aggregate, a Scotts Material Adverse
Effect.
SECTION 4.10. Litigation. Except as set forth in the 1994
Form 10-K or in Section 4.10 of the Scotts Disclosure Schedule,
there is no claim, action, suit, investigation or proceeding
pending against or, to the knowledge of Scotts, threatened
against Scotts or any of its Subsidiaries or any of their
respective properties before any court or arbitrator or any
governmental body, agency or official which, individually or in
the aggregate, would reasonably be likely to have a Scotts
Material Adverse Effect or would reasonably be likely to have
impair the ability of Scotts or Merger Subsidiary to consummate
the Merger or the other transactions contemplated by this
Agreement.
SECTION 4.11. Taxes. Scotts and each of its Subsidiaries
has timely filed all Tax Returns required to be filed with the
appropriate tax authority through the date hereof, the failure of
which to file would result in a Scotts Material Adverse Effect,
and shall timely file all such Tax Returns required to be filed
on or before the Effective Time. To the best knowledge of
Scotts, such Tax Returns are and will be true, correct and
complete in all material respects. Scotts and each of its
Subsidiaries has paid and discharged all federal, state, local
and foreign Taxes due from them, other than such Taxes that are
adequately reserved as shown on the balance sheet of Scotts
included in the 1994 Form 10-K (the Scotts Balance Sheet ).
Neither the Internal Revenue Service nor any other taxing agency
or authority, domestic or foreign, is now asserting or, to the
best knowledge of Scotts, threatening to assert against Scotts or
any of its Subsidiaries any material deficiency or claim for
additional Taxes. There are no unexpired waivers by Scotts or
any of its Subsidiaries of any statutes of limitations with
respect to Taxes which, individually or in the aggregate would
have a Scotts Material Adverse Effect. The accruals and reserves
for Taxes reflected in the Scotts Balance Sheet are adequate for
the periods covered. Scotts and each of its Subsidiaries has
withheld or collected and paid over to the appropriate
governmental authorities or is properly holding for such payment
all Taxes required by law to be withheld or collected, except to
the extent that the failure to so withhold or collect and pay
would not, individually or in the aggregate, have a Scotts
Material Adverse Effect. There are no Liens for Taxes upon the
assets of Scotts or any of its Subsidiaries, which, individually
or in the aggregate would have a Scotts Material Adverse Effect
or other than Liens for current Taxes not yet due and payable.
Scotts has not agreed to make, and is not required to make, any
adjustment under Section 481(a) of the Code. Neither Scotts nor
any of its Subsidiaries is a party to any agreement, contract,
arrangement or plan that has resulted, or could result,
individually or in the aggregate, in the payment of excess
parachute payments within the meaning of Section 280G of the
Code. For purposes of this Section 4.11 only, a Scotts Material
Adverse Effect shall mean a Loss (as hereafter defined) in excess
of $500,000.
SECTION 4.12. ERISA. (a) Section 4.12(a) of the Scotts
Disclosure Schedule includes a list identifying each material
employee benefit plan, as defined in Section 3(3) of ERISA,
which (i) is subject to any provision of ERISA and (ii) is
maintained, administered or contributed to by Scotts, any of its
Subsidiaries or any affiliate (as defined below) and covers any
employee or former employee of Scotts, any of its Subsidiaries or
any affiliate or under which Scotts, any of its Subsidiaries or
any affiliate has any liability. Copies of such plans (and, if
applicable and available, related trust agreements) and all
amendments thereto have been furnished to the Company. Such
plans are referred to collectively herein as the Scotts Employee
Plans. For purposes of this Section, affiliate of any Person
means any other Person which, together with such Person, would be
treated as a single employer under Section 414 of the Code. The
only Employee Plans which individually or collectively would
constitute an employee pension benefit plan as defined in
Section 3(2) of ERISA (the Scotts Pension Plans ) are identified
as such in the list referred to above. Scotts has provided the
Company with (x) complete age, salary, service and related data
as of December 31, 1994 for employees and former employees of
Scotts, any of its Subsidiaries and any affiliate covered under
the Scotts Pension Plans who had a salary in excess of $100,000
for the fiscal year ended September 30, 1994 and (y) the two most
recent annual reports (Form 5500 including, if applicable,
Schedule B thereto) prepared in connection with any such plan.
(b) Except as otherwise identified in Section 4.12(b) of
the Scotts Disclosure Schedule, no Scotts Employee Plan
constitutes a multiemployer plan , as defined in Section 3(37)
of ERISA (a Scotts Multiemployer Plan ), and no Scotts Employee
Plan is maintained in connection with any trust described in
Section 501(c)(9) of the Code. The only Scotts Employee Plans
that are subject to Title IV of ERISA (the Scotts Retirement
Plans ) are identified in the list of such Plans heretofore
provided to the Company by Scotts. As of the Scotts Balance
Sheet Date, the fair market value of the assets of each Scotts
Retirement Plan (excluding for these purposes any accrued but
unpaid contributions) exceeded the present value of all benefits
accrued under such Scotts Retirement Plan determined on a
termination basis using the assumptions established by the PBGC
as in effect on such date. No accumulated funding deficiency,
as defined in Section 412 of the Code, has been incurred with
respect to any Scotts Pension Plan, whether or not waived.
Scotts knows of no reportable event, within the meaning of
Section 4043 of ERISA for which the 30-day notice requirement to
the PBGC has not been waived, and no event described in Section
4041, 4042, 4062 or 4063 of ERISA has occurred in connection with
any Scotts Employee Plan, other than a reportable event that,
individually or in the aggregate, will not have a Scotts Material
Adverse Effect. No condition exists and no event has occurred
that would constitute grounds for termination of any Scotts
Retirement Plan or, with respect to any Scotts Employee Plan
which is a Scotts Multiemployer Plan, presents a material risk of
a complete or partial withdrawal under Title IV of ERISA and
neither Scotts, any of its Subsidiaries nor any of their
respective affiliates has incurred any material liability under
Title IV of ERISA arising in connection with the termination of,
or complete or partial withdrawal from, any plan covered or
previously covered by Title IV of ERISA. If a complete
withdrawal by Scotts, its Subsidiaries and all of their
respective affiliates were to occur as of the Effective Time with
respect to all Scotts Employee Plans which are Scotts
Multiemployer Plans, neither Scotts, its Subsidiaries nor any
such affiliate would incur any material withdrawal liability
under Title IV of ERISA. To Scotts knowledge, nothing done or
omitted to be done and no transaction or holding of any asset
under or in connection with any Scotts Employee Plan has or will
make Scotts or any of its Subsidiaries or any officer or director
of Scotts or any of its Subsidiaries subject to any liability
under Title I of ERISA or liable for any tax pursuant to Section
4975 of the Code that could, individually or in the aggregate,
have a Scotts Material Adverse Effect.
(c) Each Scotts Employee Plan which is intended to be
qualified under Section 401(a) of the Code is so qualified and
has been so qualified during the period from its adoption to
date, and each trust forming a part thereof is exempt from tax
pursuant to Section 501(a) of the Code. Scotts has furnished to
the Company copies of the most recent Internal Revenue Service
determination letters with respect to each such Plan. Each
Scotts Employee Plan has been maintained in material compliance
with its terms and with the requirements prescribed by any and
all statutes, orders, rules and regulations, including but not
limited to ERISA and the Code, which are applicable to such Plan.
(d) There is no contract, agreement, plan or arrangement
covering any employee or former employee of Scotts, any of its
Subsidiaries or any affiliate that, individually or collectively,
could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Sections 162(a)(1) or 280G of
the Code.
(e) Section 4.12(e) of the Scotts Disclosure Schedule sets
forth a list of each material employment, severance or other
similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage
(including any self-insured arrangements), disability benefits,
supplemental unemployment benefits, retirement benefits or for
deferred compensation, stock options, stock appreciation or post-
retirement insurance, compensation or benefits which (i) is not a
Scotts Employee Plan, (ii) is entered into, maintained or
contributed to, as the case may be, by Scotts, its Subsidiaries
or any of their respective affiliates and (iii) covers any
domestic employee or former employee of Scotts, any of its
Subsidiaries or any of their respective affiliates. Such
contracts, plans and arrangements as are described above are
referred to collectively herein as the Scotts Benefit
Arrangements. Scotts has furnished or made available to the
Company copies or descriptions of such Scotts Benefit
Arrangements. Each Scotts Benefit Arrangement has been
maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules
and regulations that are applicable to such Scotts Benefit
Arrangement.
(f) The excess of the present value of the projected
liability in respect of post-retirement health and medical
benefits for retired employees of Scotts, its Subsidiaries and
their respective affiliates, determined using assumptions that
are reasonable in the aggregate, over the fair market value of
any fund, reserve or other assets segregated for the purpose of
satisfying such liability (including for such purposes any fund
established pursuant to Section 401(h) of the Code) does not in
the aggregate exceed $20,000,000. No condition exists that would
prevent Scotts of any of its Subsidiaries from amending or
terminating any Scotts Employee Plan or Scotts Benefit
Arrangement providing health or medical benefits in respect of
any active employee of Scotts or any of its Subsidiaries other
than limitations imposed under the terms of a collective
bargaining agreement.
(g) Except as set forth in Section 4.12(g) of the Scotts
Disclosure Schedule, neither Scotts nor any of its Subsidiaries
is a party to or subject to any union contract or any employment
contract or arrangement providing for annual future compensation
of $100,000 or more with any domestic officer, consultant,
director or employee.
(h) The consummation of the transactions contemplated by
this Agreement will not result in any material acceleration of
benefits, or the modification of the terms of any benefits,
payable to or for the benefit of any officer, director or
employee of Scotts or any of its Subsidiaries, including any
acceleration of vesting of stock options or any changes in the
amounts or timing of any amounts payable under any incentive
arrangement.
SECTION 4.13. Trademarks, Patents and Copyrights. (a)
Section 4.13(a) of the Scotts Disclosure Schedule sets forth a
true and complete list of (i) all patents, patent rights,
trademarks, trademark rights, trade names, copyrights, service
marks, trade secrets, applications for trademarks and for service
marks, know-how and other proprietary rights and information
used or held for use in connection with the business of Scotts as
currently conducted (collectively, Scotts Intellectual Property
Rights ) and (ii) all licenses, commitments and other agreements
to which Scotts or any of its Subsidiaries is a party providing
for the license of any Intellectual Property Rights to or from
any other Person.
(b) Except as set forth in Section 4.13(b) of the Scotts
Disclosure Schedule, Scotts and its Subsidiaries own or possess
adequate licenses or other rights to use all of the Scotts
Intellectual Property Rights; there are no Scotts Intellectual
Property Rights necessary for use in connection with the business
of Scotts as currently conducted which are not owned or possessed
by Scotts or its Subsidiaries; and Scotts is not aware of any
assertion or claim challenging the validity of any of the Scotts
Intellectual Property Rights; and the conduct of the business of
Scotts as currently conducted, to the best knowledge of Scotts,
does not conflict in any way with any patent, patent right,
license, trademark, trademark right, trade name, trade name
right, service mark or copyright of any third party. To the best
knowledge of Scotts, there are no infringements of any
proprietary rights owned by or licensed by or to Scotts or any of
its Subsidiaries that individually or in the aggregate would have
a Scotts Material Adverse Effect.
SECTION 4.14. Material Contracts. (a) Except for
agreements, contracts, plans, leases, arrangements or commitments
(in each case, oral or written) set forth in Section 4.14(a) of
the Scotts Disclosure Schedule or set forth in the exhibit list
to the 1994 Form 10-K, neither Scotts nor any of its Subsidiaries
is a party to or subject to:
(i) any lease which is material to Scotts and its
Subsidiaries, taken as a whole;
(ii) any contract for the purchase of materials,
supplies, goods, services, equipment or other assets
which is material to Scotts and its Subsidiaries, taken
as a whole;
(iii) any sales, distribution or other similar
agreement which is material to Scotts and its
Subsidiaries, taken as a whole;
(iv) any partnership, joint venture or other
similar contract arrangement or agreement which is
material to Scotts and its Subsidiaries, taken as a
whole;
(v) any contract relating to indebtedness for
borrowed money or the deferred purchase price of
property (whether incurred, assumed, guaranteed or
secured by any asset), which is material to Scotts and
its Subsidiaries, taken as a whole;
(vi) any license agreement, franchise agreement
or agreement in respect of similar rights, which is
material to Scotts and its Subsidiaries, taken as a
whole
(vii) any agency, dealer, sales representative or
other similar agreement which is material to Scotts and
its Subsidiaries, taken as a whole;
(viii) any contract or other document that
substantially limits the ability of Scotts or any of
its Subsidiaries to compete in any material line of
business or in a material way with any Person or in any
area or which would so restrict Scotts or any of its
Subsidiaries after the Effective Time; or
(ix) any other contract or commitment of Scotts
or any of its Subsidiaries not made in the ordinary
course of business that is material to Scotts and its
Subsidiaries, taken as a whole.(b) Each agreement,
contract, lease, arrangement and commitment disclosed
in Section 4.14(a) of the Scotts Disclosure Schedule or
required to be disclosed pursuant to this Section is a
valid and binding agreement of Scotts or such Subsidiary
and is in full force and effect, and neither Scotts,
such Subsidiary nor, to the knowledge of Scotts, any other
party thereto is in default in any material respect under
the terms of any such agreement, contract, plan, lease
arrangement or commitment.
SECTION 4.15. Compliance with Laws. Neither Scotts nor any
of its Subsidiaries is in violation of, or has violated, any
applicable provisions of any laws, rules, statutes, ordinances or
regulations, except for violations that would not, individually
or in the aggregate, have a Scotts Material Adverse Effect.
SECTION 4.16. Finders Fees. No investment banker, broker,
finder or other intermediary (other than Smith Barney, Inc.
( Smith Barney )) has been retained by, or authorized to act on
behalf of, Scotts and entitled to any fee or commission in
connection with the Merger or the transactions contemplated by
this Agreement. Scotts has previously furnished to the Company a
complete and correct copy of all agreements between Smith Barney
and Scotts pursuant to which such firm would be entitled to any
payment relating to the Merger or the transactions contemplated
by this Agreement.
SECTION 4.17. Environmental Compliance. Except as set
forth in Section 4.17 of the Scotts Disclosure Schedule:
(a) No written notice, notification, demand, request for
information, citation, summons, complaint or order has been
issued or filed, no penalty has been assessed and no
investigation or review is pending, or to the knowledge of
Scotts, after due inquiry, threatened by any governmental or
other entity, and there are no existing orders, decrees or
agreements in effect or, to the knowledge of Scotts, after due
inquiry, threatened, (i) with respect to any alleged material
violation of any Environmental Law in connection with the conduct
of the business of Scotts (for purposes of this Section 4.17,
Scotts shall include any predecessor of Scotts) or (ii) with
respect to any alleged failure to have any permit, certificate,
license, approval, registration or authorization required by
Environmental Law in connection with the conduct of the business
of Scotts or (iii) with respect to any Release of a Polluting
Substance with respect to which Scotts is or may be liable,
except in each case such alleged material violation, alleged
failure or Release which could not reasonably be expected,
individually or in the aggregate, to result in a Loss (as
hereafter defined) by Scotts in excess of $100,000.
(b) Except as set forth in Section 4.17(b) of the Scotts
Disclosure Schedule, (i) Scotts has not, other than as a
generator, handled any Polluting Substance on any property now or
previously owned or leased by Scotts or its Subsidiaries; (ii) no
asbestos is present at any property now or previously owned or
leased by Scotts or its Subsidiaries; (iii) there are no
underground storage tanks currently in use or, to the knowledge
of Scotts, abandoned at any property now or previously owned or
leased by Scotts or any of its Subsidiaries which have been used
to store or have contained a substance which is regulated by
Environmental Laws or which, if released into the environment,
would result in pollution, (iv) there has been no Release of any
Polluting Substance with respect to which Scotts or any of its
Subsidiaries may reasonably be required to perform investigation
or remediation, other than routine spills and leaks which are
addressed in the ordinary course of business, at, on or under any
property now or previously owned or leased by Scotts or any of
its Subsidiaries and (v) no Hazardous Substance (as defined in
CERCLA) is present in a reportable or threshold planning
quantity, where such a quantity has been established by statute,
ordinance, rule, regulation or order, at, on or under any
property now or previously owned by Scotts or any of its
Subsidiaries.
(c) To the knowledge of Scotts, neither Scotts nor any or
its Subsidiaries has transported or arranged for the
transportation (directly or indirectly) of any Hazardous
Substance (as defined in CERCLA) to any location which is listed
or proposed for listing on the Nationwide Priorities List
established under CERCLA or on any similar state list.
(d) To the knowledge of Scotts, no oral or written
notification of a Release of a Hazardous Substance (as defined in
CERCLA) has been filed by or on behalf of Scotts or any of its
Subsidiaries, and no property now or previously owned or leased
by Scotts or any of its Subsidiaries is listed, or to the
knowledge of Scotts, proposed for listing, on the National
Priorities List promulgated pursuant to CERCLA.
(e) There are no environmental Liens on any asset of Scotts
or any of its Subsidiaries and no government actions have been
taken or are in process which could subject any of such assets to
such Liens.
(f) Except as set forth in Section 4.17(f) of the Scotts
Disclosure Schedule, there have been no material environmental
investigations, studies, audits, tests, reviews or other analyses
conducted by or which are in the possession of Scotts in relation
to any property or facility now or previously owned or leased by
Scotts or any of its Subsidiaries.
SECTION 4.18. Opinion of Financial Advisor. Scotts
received the opinion of Smith Barney orally on January 24, 1995
to the effect that, as of such date, the Merger Transactions are
fair to the shareholders of Scotts from a financial point of view
and a copy of the written confirmatory opinion to such effect
will be delivered to the Company promptly upon receipt.
ARTICLE V
COVENANTS OF THE MIRACLE-GRO CONSTITUENT
COMPANIES AND THE SHAREHOLDERS
Each of the Miracle-Gro Constituent Companies and the
Shareholders, jointly and severally, agree that:
SECTION 5.01. Conduct of the Business of the Miracle-Gro
Constituent Companies. From January 26, 1995 until the Effective
Time unless Scotts shall otherwise have consented in writing, the
Miracle-Gro Constituent Companies shall conduct their respective
businesses in the ordinary course consistent with past practice
and shall use their best efforts to preserve intact their
business organizations and relationships with third parties and
to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing,
from January 26, 1995 until the Effective Time, except as
contemplated or required by this Agreement or set forth in
Section 5.01 of the Company Disclosure Schedule, none of the
Miracle-Gro Constituent Companies shall, directly or indirectly,
do, or propose or agree to do, any of the following without the
prior written consent of Scotts:
(a) adopt or propose any change in their
respective certificates of incorporation or bylaws or
equivalent organizational documents;
(b) merge or consolidate with any other Person or
acquire a material amount of assets of any other
Person;
(c) lease, license or otherwise dispose of any
material assets or property except (i) pursuant to
existing contracts or commitments or (ii) in the
ordinary course consistent with past practice;
(d) declare, set aside, make or pay any dividend
or other distribution, payable in cash, stock, property
or otherwise, with respect to any of their respective
capital stock;
(e) reclassify, combine, split, subdivide or
redeem, purchase or otherwise acquire, directly or
indirectly, any of their respective capital stock;
(f) increase the compensation payable or to
become payable to any of the Miracle-Gro Constituent
Companies executive officers, directors or employees,
except for increases in the ordinary course of business
consistent with past practice, or grant any severance
or termination pay to, or enter into any employment or
severance agreement with any director or executive
officer, or establish, adopt, enter into or amend in
any material respect or take action to accelerate any
rights or benefits under any collective bargaining,
bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, executive
officer or employee;
(g) agree or commit to do any of the foregoing;
or
(h) take or agree or commit to take any action
that would make any representation and warranty of the
Miracle-Gro Constituent Companies or the Shareholders
hereunder inaccurate in any respect at, or as of any
time prior to, the Effective Time.
SECTION 5.02. Access to Information; Confidentiality. (a)
From January 26, 1995 until the Effective Time, the Company shall
afford Scotts, its officers, directors, employees, counsel,
financial advisors, auditors and other authorized representatives
(the Scotts Representatives ) reasonable access to the offices,
properties, books and records of each of the Miracle-Gro
Constituent Companies, will furnish to Scotts and the Scotts
Representatives such financial and operating data and other
information as such Persons may reasonably request and will
instruct the Miracle-Gro Constituent Companies employees,
counsel and financial advisors to cooperate with Scotts in its
investigation of the business of the Miracle-Gro Constituent
Companies; provided that no investigation pursuant to this
Section shall affect any representation or warranty given by the
Miracle-Gro Constituent Companies and the Shareholders to Scotts
and Merger Subsidiary hereunder.
(b) All information obtained by Scotts pursuant to this
Section shall be kept confidential in accordance with the
confidentiality agreements dated as of October 3, 1994, between
Scotts and the Company.
SECTION 5.03. Other Offers. From January 26, 1995 until
the later of the termination of this Agreement and the Effective
Time, none of the Miracle-Gro Constituent Companies, the
Shareholders or any officer, director, employee or other agent of
any of the Miracle-Gro Constituent Companies will, directly or
indirectly, (i) take any action to solicit, initiate or encourage
any inquiries or the making or implementation of any proposal or
offer with respect to a merger, acquisition, consolidation or
similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of,
any Miracle-Gro Constituent Company (a Company Acquisition
Proposal ), other than the transactions contemplated by this
Agreement, or (ii) engage in negotiations with, or disclose any
nonpublic information relating to any of the Miracle-Gro
Constituent Companies or afford access to the properties, books
or records of any of the Miracle-Gro Constituent Companies to,
any Person that the Company believes may be considering making,
or has made, a Company Acquisition Proposal. The Company will
promptly notify Scotts upon receipt of any Company Acquisition
Proposal or any indication that any Person is considering making
a Company Acquisition Proposal or any request for nonpublic
information relating to any of the Miracle-Gro Constituent
Companies or for access to the properties, books or records of
any of the Miracle-Gro Constituent Companies by any Person that
may be considering making, or has made, a Company Acquisition
Proposal and will keep Scotts fully informed of the status and
details of any such Company Acquisition Proposal, indication or
request.
SECTION 5.04. Notices of Certain Events. The Company shall
promptly notify Scotts of:
(i) any notice or other communication from any
Person alleging that the consent of such Person is or
may be required in connection with the transactions
contemplated by this Agreement;
(ii) any notice or other communication from any
governmental or regulatory agency or authority in
connection with the transactions contemplated by this
Agreement;
(iii) the occurrence, or non-occurrence, of any
event the occurrence, or non-occurrence, of which would
be likely to cause (x) any representation or warranty
contained in this Agreement to be untrue or inaccurate
or (y) any covenant, condition or agreement contained
in this Agreement not to be complied with or satisfied;
and
(iv) any failure of any Miracle-Gro Constituent
Company or any Shareholder to comply with or satisfy
any covenant, condition or agreement to be complied
with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies
available hereunder to Scotts.
SECTION 5.05. Certain Loans. (a) The parties acknowledge
that Miracle-Gro New York owes $5.0 million to the Hagedorn
Family Fund. The parties agree that such amount shall be paid,
without interest, as follows: All available cash at such company
(or the successor division of New Miracle-Gro treated for this
purpose as a separate business unit), including all amounts
received from the sale of inventory or the collection of accounts
receivable, shall be paid to the Hagedorn Family Fund until the
amount set forth in the first sentence of this paragraph has been
repaid in full. If such amount has not been paid in full by the
close of business on September 30, 1995, Scotts will cause
Miracle-Gro New York or New Miracle-Gro, as its successor, to pay
the remaining balance immediately following such date.
(b) The parties acknowledge that Miracle-Gro UK owes $3.5
million to the Hagedorn Family Fund. The parties agree that
payment shall be made as follows, without interest: All
available cash at such company (or the successor division of New
Miracle-Gro treated for this purpose as a separate business
unit), including all amounts received from the sale of inventory
or the collection of accounts receivable, shall be paid to the
Hagedorn Family Fund, such payments to continue until the close
of business on September 30, 1995, or until there is no remaining
cash or inventory, at which point such payments shall cease. If
the amount set forth in the first sentence of this paragraph (b)
has not been repaid in full on such date the outstanding balance
shall be forgiven.
(c) Following the Effective Time, Scotts shall operate the
businesses of Miracle-Gro New York and Miracle-Gro UK in the
ordinary course of business and will not take any action
restricting the sale of inventory, the collection of accounts
receivable, or any other action which would interfere with the
payments contemplated by this Section 5.05.
ARTICLE VI
STANDSTILL AND VOTING PROVISIONS;
RESTRICTIONS ON TRANSFER
SECTION 6.01. Certain Definitions. For purposes of this
Article VI only, the following terms have the following meanings:
(a) Affiliate and Associate shall have the meaning set
forth in Rule 405 of Regulation C under the Securities Act.
(b) beneficial ownership and beneficially own shall
have the meanings set forth in Rule 13d-3 under the Exchange Act.
(c) group shall have the meaning comprehended by
Section 13(d)(3) of the Exchange Act; provided that, for purposes
of this Agreement, the Shareholders shall not by themselves, or
together with any Permitted Transferee, constitute a group.
(d) The Market Price of a share of Scotts Common Stock on
any date means (i) the last reported sales price of the Scotts
Common Stock on the principal national securities exchange on
which the Scotts Common Stock is listed or admitted to trading
or, if no such reported sale takes place on any such day, the
average of the closing bid and asked prices thereon, as reported
in The Wall Street Journal, or (ii) if the Scotts Common Stock
shall not be listed or admitted to trading on a national
securities exchange, the last reported sales price on the NASDAQ
National Market System or, if no such reported sale takes place
on any such day, the average of the closing bid and asked prices
thereon, as reported in The Wall Street Journal, or (iii) if the
Scotts Common Stock shall not be quoted on such National Market
System nor listed or admitted to trading on a national securities
exchange, then the average of the closing bid and asked prices,
as reported by The Wall Street Journal for the over-the- counter
market, or (iv) if there is no public market for the Scotts
Common Stock, the fair market value of a share of Scotts Common
Stock as determined in good faith by the Board of Directors of
Scotts after consultation with an independent investment bank of
national repute (whose report will be made available to the
Shareholders prior to such determination of fair market value).
(e) Permitted Transferee means the Shareholders and the
General Partners, on the one hand, and any other Shareholder or
General Partner, any lineal descendant of any Shareholder or
General Partner, any member of the immediate family of any
Shareholder or General Partner or such descendant, any heir of
the foregoing, any trust for the benefit of any of the foregoing
(including a voting trust), any private charitable foundation or
any partnership, limited liability company or corporation owned
or controlled by some or all of the foregoing or any charity
(public or private) which is transferred a non-controlling
interest (except as otherwise required by applicable law) in a
Permitted Transferee, on the other; provided, that such Permitted
Transferee has agreed in writing to be bound by the terms of this
Agreement as if it were a Shareholder hereunder.
(f) Shareholder Representative means a Shareholder who is
a natural person and has been chosen in writing, with notice
thereof to Scotts, by a majority of the Shareholders based on
their then percentage of beneficial ownership of Total Voting
Power.
(g) Standstill Percentage means 43% of Total Voting Power.
(h) Total Voting Power means, at any time, the aggregate
number of votes which may be cast by holders of outstanding
Voting Stock.
(i) Voting Stock means the Scotts Common Stock, the
Convertible Preferred Stock and any other securities (including
voting preferred shares) issued by Scotts which are entitled to
vote generally for the election of directors of Scotts, whether
currently outstanding or hereafter issued (other than securities
having such powers only upon the occurrence of a contingency).
(j) Voting Stock Equivalents means the Warrants and any
other security that is not Voting Stock but is convertible into
or exchangeable for Voting Stock or is an option to purchase such
securities or Voting Stock.
SECTION 6.02. Board of Directors. (a) At the earliest
time permissible under the Consent Order, Scotts will take such
action as may be necessary to increase the size of the Board of
Directors to 12 and to fill a vacancy existing in each of the
three classes of directors (assuming the amendment of the Code of
Regulations of Scotts as contemplated by Section 9.01(v) hereof)
with a director designated by the Shareholder Representative (or
in the event that the condition set forth in Section 9.01(v) is
waived by the parties, with three directors designated by the
Shareholder Representative) (each, a Miracle-Gro Director and,
collectively, the Miracle-Gro Directors ). Scotts acknowledges
and accepts that the initial three Miracle-Gro Directors are the
persons named in Section 9.02(iv), it being understood that any
future successor designees will be reasonably acceptable to the
Scotts Board of Directors.
(b) Until the earlier of the fifth anniversary of the
Effective Time and such time as the Shareholders no longer
beneficially own at least 19% of the Voting Stock, Scotts
covenants and agrees as follows:
(i) except as contemplated by this Agreement or as
required in the terms of the Convertible Preferred Stock,
Scotts will not take or recommend to its shareholders any
action which would cause the Board of Directors of Scotts to
consist of any number of directors other than twelve
directors divided into three classes of four directors each;
(ii) to the extent that, and for so long as, Scotts
maintains a Nominating Committee and/or an Executive
Committee of the Board of Directors, such committee(s) shall
consist of four directors, one of whom shall be a Miracle-
Gro Director;
(iii) to the extent that, and for so long as, any of
the Miracle-Gro Directors is qualified under the then-
current rules and regulations of the Nasdaq National Market,
or any exchange on which the Scotts Common Stock is listed,
the rules and regulations under the Code relating to the
qualification of employee stock benefit plans and Scotts
Code of Regulations, the Audit Committee, Compensation
Committee and any newly created committees of the Board of
Directors shall consist of four directors, and one of the
Miracle-Gro Directors shall be entitled to sit on such
committee(s) to the same extent, and on the same basis, as
the other members of the Board of Directors; and
(iv) subject to the fiduciary duties of the members of
the Nominating Committee to Scotts shareholders, Scotts
will use its best efforts to cause the Nominating Committee
to recommend for election to the class of directors whose
terms expire in any year, one Miracle-Gro Director;
provided, that if the Shareholders vote all of their
outstanding shares of Voting Stock in favor of the election
of such Miracle-Gro Director and such Miracle-Gro Director
nevertheless is not elected by the shareholders of Scotts,
or if such Miracle-Gro Director is not nominated for
election or is not recommended for election by the Scotts
Board, the provisions of this Article VI shall no longer be
in effect.
SECTION 6.03. Rule 145. With a view to making available to
the Shareholders the benefits of Rule 145 promulgated under the
Securities Act, and any other similar rules or regulations of the
SEC which may at any time permit the Shareholders to sell or
distribute without registration the Scotts Common Stock issued
upon conversion of the Convertible Preferred Stock or upon
exercise of the Warrants, Scotts agrees to use its best efforts
to file with the SEC in a timely manner all reports and other
documents required to be filed by it under the Exchange Act.
SECTION 6.04. Registration Rights. Scotts will comply with
the provisions regarding registration rights contained in Annex E
hereto.
SECTION 6.05. Reservation of Shares. Scotts will reserve
and keep available out of its authorized but unissued shares of
Scotts Common Stock the full number of shares at any time
deliverable on conversion of the Convertible Preferred Stock or
exercise of the Warrants.
SECTION 6.06. Standstill Restrictions. Until the fifth
anniversary of the Effective Time, the Shareholders covenant and
agree as follows:
(a) Without the prior written consent of Scotts, the
Shareholders shall not, and shall not permit any of their
respective Affiliates or Associates to, directly or indirectly,
authorize or make a tender or exchange offer for, or purchase or
otherwise acquire, or agree to acquire or obtain, directly or
indirectly, beneficial ownership of any Voting Stock, if the
effect of such acquisition would be to increase the outstanding
number of shares of Voting Stock then beneficially owned by the
Shareholders, their Affiliates and their Associates, in the
aggregate, to an amount representing more than the Standstill
Percentage. It is expressly understood and agreed that, for
purposes of this Section 6.06 only, the Warrants, until exercised
and subject to the terms of such exercise, do not constitute
beneficial ownership of outstanding shares of Voting Stock.
(b) Notwithstanding the foregoing, the Shareholders shall
not be obligated to dispose of any shares of Voting Stock if
their aggregate percentage of Total Voting Power is increased as
a result of a recapitalization of Scotts or a repurchase of
securities by Scotts or any other action taken by Scotts or its
Subsidiaries; provided, that, to the extent that any such
recapitalization or repurchase would increase the Standstill
Percentage by more than 1%, such Shareholders shall be obligated
to dispose of shares of Voting Stock sufficient to reduce their
aggregate percentage of Total Voting Power to less than the
Standstill Percentage plus 1%. If Scotts repurchases any of its
Voting Stock and such repurchases result in the Shareholders
owning more than the Standstill Percentage, but less than the
Standstill Percentage plus 1%, at the effective time of such
repurchases, the Shareholders shall not be obligated to divest
themselves of the Voting Stock to fall within the foregoing
percentage limitation, but shall not acquire any additional
Voting Stock unless such acquisition would otherwise be permitted
under this Section 6.06.
(c) Subject to the limitations of subparagraph (a) of this
Section 6.06, the Shareholders, their Affiliates and Associates,
as a group, shall have the right to purchase Voting Stock in the
open market in an amount up to the Standstill Percentage.
(d) Except as otherwise provided herein, no Shareholder
shall join any group or otherwise act in concert with any third
person other than Permitted Transferees for the purpose of
acquiring, holding or disposing of Voting Stock.
SECTION 6.07. Additional Standstill Restrictions. After the
fifth anniversary of the Effective Time, the Shareholders
covenant and agree as follows:
(a) The Shareholders shall not, and shall not permit any of
their respective Affiliates or Associates to, directly or
indirectly, authorize or make a tender or exchange offer for, or
purchase or otherwise acquire, or agree to acquire or obtain,
directly or indirectly, beneficial ownership of any Voting
Stock, if the effect of such acquisition would be to increase the
number of shares of Voting Stock then beneficially owned by the
Shareholders, their Affiliates and their Associates, in the
aggregate, to an amount representing more than 49% of Total
Voting Power, unless such acquisition is made pursuant to a
tender offer for 100% of Total Voting Power which tender offer is
(i) made at a price per share which is not less than the Market
Price per share on the last trading day before the announcement
of such tender offer and (ii) conditioned upon the acquisition by
the Shareholders, their Affiliates and their Associates of
beneficial ownership of shares of Voting Stock representing at
least 50% of the then outstanding Total Voting Power not
beneficially owned by the Shareholders or their Affiliates or
Associates. It is expressly understood and agreed that, for
purposes of this Section 6.07, the Warrants, until exercised and
subject to the terms of such exercise, do not constitute
beneficial ownership of outstanding shares of Voting Stock.
(b) Subject to the limitations of subparagraph (a) of this
Section 6.07, the Shareholders, their Affiliates and Associates,
in the aggregate, shall have the right to purchase Voting Stock
in the open market in an amount up to their aggregate percentage
ownership permitted under such subparagraph (a).
(c) Except as otherwise provided herein, no Shareholder
shall join any group or otherwise act in concert with any third
person other than Permitted Transferees for the purpose of
acquiring, holding or disposing of Voting Stock.
SECTION 6.08. Voting. Until the earlier of the fifth
anniversary of the Effective Time and such time as the
Shareholders no longer beneficially own at least 19% of the
Voting Stock:
(a) The Shareholders will take all such action as may be
required so that all shares of Voting Stock owned by the
Shareholders, their Affiliates and Associates, as a group, are
voted (in person or by proxy) (i) for Scotts nominees to the
Board of Directors of Scotts, in accordance with the
recommendation of the Nominating Committee of the Board of
Directors, and (ii) on all matters to be voted on by holders of
Voting Stock, in accordance with the recommendation of the Board
of Directors, except with respect to a proposal as to which
shareholder approval is required under Ohio Law relating to
(v) an acquisition of Voting Stock of Scotts, (w) a merger or
consolidation, (x) a sale of all or substantially all of the
assets of Scotts, (y) a recapitalization of Scotts or (z) an
amendment to the Articles of Incorporation or Code of Regulations
of Scotts which would materially adversely affect the rights of
the Shareholders. Each Shareholder shall be present, in person
or by proxy, at all duly held meetings of shareholders of Scotts
so that all shares of Voting Stock held by the Shareholders may
be counted for the purposes of determining the presence of a
quorum at such meetings.
(b) Except as consented to by Scotts in writing, no
Shareholder shall deposit any shares of Voting Stock owned by him
or her in a voting trust that is not a Permitted Transferee or,
subject any such shares to any similar arrangement or agreement
with or for the benefit of any Person that is not a Permitted
Transferee with respect to the voting of such shares.
(c) Without Scotts prior written consent, no Shareholder
shall solicit proxies with respect to any Voting Stock or become
a participant in any election contest (as such terms are used in
Rule 14a-11 of Regulation 14A under the Exchange Act) relating to
the election of directors of Scotts.
(d) Without the prior consent of the Shareholder
Representative, Scotts shall not (i) issue Voting Stock or Voting
Stock Equivalents constituting in the aggregate more than 12.5%
of Total Voting Power, other than pursuant to stock option or
other employee benefit plans in the ordinary course of business,
consistent with past practice; or (ii) in any single transaction
or series of related transactions outside of the ordinary course
of business, make an acquisition or disposition of assets which
would require disclosure pursuant to Item 2 of Form 8-K under the
Exchange Act; provided, however, that if five-sixths of the Board
of Directors of Scotts determines that it is in the best
interests of Scotts and its shareholders to make an acquisition
pursuant to clause (ii) above without the consent of the
Shareholder Representative, such acquisition may be made without
the consent of the Shareholder Representative.
SECTION 6.09. Restrictions on Transfers of Voting Stock and
Warrants. (a) Prior to the fifth anniversary of the Effective
Time, no Shareholder shall, directly or indirectly, sell or
transfer any Scotts Common Stock except:
(i) to Scotts or any Person or group approved by Scotts;
(ii) to any Permitted Transferee;
(iii) pursuant to a merger or consolidation of Scotts
or pursuant to a plan of liquidation of Scotts, which has
been approved by the Board of Directors of Scotts;
(iv) provided that the rights of the Shareholders
under this Agreement shall not transfer to the transferee of
such securities, pursuant to a bona fide public offering
registered under the Securities Act (which shall be
structured to distribute such shares or other securities, if
any, through an underwriter or otherwise in such a manner
as, to the extent practicable, will not result in any Person
or group beneficially owning 3% or more of Total Voting
Power being transferred to a single person or group);
(v) subject to Section 6.10, provided that the rights
of the Shareholders under this Agreement shall not transfer
to the transferee of such securities, pursuant to Rule 144,
Rule 145 or Rule 144A under the Securities Act or otherwise,
(x) if any such sale will not, to the knowledge of the
Shareholder, result in any Person or group beneficially
owning 3% or more of Total Voting Power to a single person
or group and (y) if all such sales by the Shareholders
within the preceding three months do not exceed, in the
aggregate, the greatest of the limits set forth in Rule
144(e)(1) under the Securities Act;
(vi) in response to an offer to purchase or exchange
for cash or other consideration any Voting Stock (x) which
is made by or on behalf of Scotts, or (y) which is made by
another person or group and is approved by the Board of
Directors of Scotts within the time such Board is required,
pursuant to regulations under the Exchange Act, to advise
the shareholders of Scotts of such Board's position on such
offer; or
(vii) subject to Section 6.10, in any transfer not
otherwise described herein so long as such transfer does
not, directly or indirectly, result, to the best knowledge
of the Shareholder, after reasonable inquiry, in any Person
or group beneficially owning 3% or more of Total Voting
Power.
(b) No Shareholder shall, directly or indirectly, sell or
transfer (x) any Convertible Preferred Stock or other Voting
Stock or Voting Stock Equivalents (other than Scotts Common
Stock) or (y) prior to the fifth anniversary of the Effective
Time, any Warrants, except:
(i) to Scotts or any Person or group approved by Scotts;
(ii) to any Permitted Transferee; or
(iii) pursuant to a merger or consolidation of Scotts
or pursuant to a plan of liquidation of Scotts.
(iv) Convertible Preferred Stock convertible into
Scotts Common Stock representing in the aggregate no more
than 15% of the outstanding shares of Scotts Common Stock on
a fully diluted basis or any number of Warrants:
(1) subject to Section 6.10, provided that the
rights of the Shareholders under this Agreement shall
not transfer to the transferee of such securities and
provided that the Shareholders do not sell or transfer
Warrants pursuant to this clause (1) more than once per
fiscal quarter in the aggregate, pursuant to Rule 145
or Rule 144A under the Securities Act or otherwise, (x)
if any such sale will not to the knowledge of the
Shareholder, result in any Person or group beneficially
owning 3% or more of Total Voting Power and (y) if all
such sales by the Shareholders within the preceding
three months do not exceed, in the aggregate, the
greatest of the limits set forth in Rule 144(e)(1)
under the Securities Act; or
(2) subject to Section 6.10, in any transfer not
otherwise described herein so long as such transfer
does not, directly or indirectly, result, to the best
knowledge of the Shareholder, after reasonable inquiry,
in any Person or group beneficially owning 3% or more
of Total Voting Power.
SECTION 6.10. Right of First Offer. Prior to making any
sale or transfer of shares of Scotts Common Stock pursuant to
Section 6.09(a) (v) or (vii) or of the Convertible Preferred
Stock or Warrants pursuant to Section 6.09(b)(iv), the selling
Shareholder (the Selling Shareholder ) will give Scotts the
opportunity to purchase such shares in the following manner:
(a) The Selling Shareholder shall give notice (the
Transfer Notice ) to Scotts in writing of such intention
specifying the number of shares of Scotts Common Stock or
Convertible Preferred Stock proposed to be sold or transferred,
the proposed price therefor (the Transfer Consideration ) and
the other material terms upon which such disposition is proposed
to be made; provided, that in the case of a sale or transfer of
Convertible Preferred Stock made pursuant to Section 6.09(b)(iv),
the Transfer Consideration shall be equal to (x) the aggregate
Market Price of the shares of Scotts Common Stock into which such
shares of Convertible Preferred Stock could be converted at the
time of such Transfer Notice multiplied by (B) 105%.
(b) Scotts shall have the right, exercisable by written
notice given by Scotts to the Selling Shareholder within two
business days after receipt of the Transfer Notice (except in the
case of a sale or transfer of Convertible Preferred Stock made
pursuant to Section 6.09(b)(iv), in which case, ten business days
after receipt of the Transfer Notice), to purchase all or any
part of the shares of Scotts Common Stock or Convertible
Preferred Stock or the number of Warrants specified in such
Transfer Notice for cash in an amount equivalent to the Transfer
Consideration.
(c) If Scotts exercises its right of first offer hereunder,
the closing of the purchase of the shares of Scotts Common Stock
or Convertible Preferred Stock with respect to which such right
has been exercised shall take place within ten business days
after Scotts gives notice of such exercise, which period of time
shall be extended, as necessary, in order to comply with
applicable securities and other applicable laws and regulations.
Upon exercise of its right of first offer, Scotts and the
Selling Shareholder shall be legally obligated to consummate
the purchase contemplated thereby and shall use their best
efforts to secure any approvals required in connection therewith.
(d) If Scotts does not exercise its right of first offer
hereunder within the time specified for such exercise, the
Selling Shareholder shall be free, during the period of 90
calendar days following the expiration of such time for exercise,
to sell the shares of Scotts Common Stock or Convertible
Preferred Stock or the number of Warrants specified in the
Transfer Notice pursuant to Section 6.09(a)(v) or (vii) or
Section 6.09(b)(iv), respectively, at a price not less than the
Transfer Consideration.
(e) In the event that Scotts elects to exercise any of its
rights under this Section 6.10, Scotts may specify, prior to
closing such purchase, another person as its designee to
purchase the shares of Scotts Common Stock or Convertible
Preferred Stock to which such notice of intention to exercise
such rights relates. If Scotts designates another person as the
purchaser pursuant to this Section 6.10, Scotts shall be legally
obligated to complete such purchase if its designee fails to do so.
ARTICLE VII
COVENANTS OF SCOTTS AND MERGER SUBSIDIARY
Scotts agrees that:
SECTION 7.01. Conduct of the Business of Scotts. From
January 26, 1995 until the Effective Time, unless the Company
shall otherwise have consented in writing, Scotts shall, and
shall cause its Subsidiaries to, conduct its business in the
ordinary course consistent with past practice and shall use its
best efforts to preserve intact its business organization and
relationships with third parties. Except as contemplated or
required by this Agreement or set forth in Section 7.01 of the
Scotts Disclosure Schedule, Scotts shall not, and shall cause its
Subsidiaries not to, do, or propose or agree to do, any of the
following without the prior written consent of the Company:
(a) adopt or propose any change in its Articles of
Incorporation or Code of Regulations;
(b) merge or consolidate with any other Person or acquire a
material amount of assets of any other Person;
(c) lease, license or dispose of any assets or property,
which assets or property is material to Scotts and its
Subsidiaries, taken as a whole, except (i) pursuant to existing
contracts or commitments or (ii) in the ordinary course
consistent with past practice ;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of Scotts capital stock;
(e) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, a material
amount of its capital stock;
(f) agree or commit to do any of the foregoing; or
(g) take or agree or commit to take any action that would
make any representation and warranty of Scotts or Merger
Subsidiary hereunder inaccurate in any respect at, or as of any
time prior to the Effective Time.
SECTION 7.02. Access to Information; Confidentiality. (a)
From January 26, 1995 until the Effective Time, Scotts shall
afford the Company, its officers, directors, employees, counsel,
financial advisors, auditors and other authorized representatives
(the Company Representatives ) reasonable access to the offices,
properties, books and records of Scotts and Merger Subsidiary,
will furnish to the Company and the Company Representatives such
financial and operating data and other information as such
Persons may reasonably request and will instruct Scotts
employees, counsel and financial advisors to cooperate with the
Company in its investigation of the business of Scotts and its
Subsidiaries; provided that no investigation pursuant to this
Section shall affect any representation or warranty given by
Scotts and Merger Subsidiary to the Company and the Shareholders
hereunder.
(b) All information obtained by the Company pursuant to
this Section shall be kept confidential in accordance with the
confidentiality agreements dated as of October 3, 1994, between
Scotts and the Company.
SECTION 7.03. Obligations of Merger Subsidiary. Scotts
will take all action necessary to cause Merger Subsidiary to
perform its obligations under this Agreement and to consummate
the Merger on the terms and conditions set forth in this
Agreement.
SECTION 7.04. Other Offers. From January 26, 1995 until
the later of the termination of this Agreement and the Effective
Time, neither Scotts nor any officer, director, employee or other
agent of Scotts will, directly or indirectly, (i) take any action
to solicit, initiate or encourage any inquiries or the making or
implementation of any proposal or offer with respect to a merger,
acquisition, consolidation or similar transaction involving, or
any purchase of all or any significant portion of the assets or
any equity securities of, Scotts (a Scotts Acquisition
Proposal ), other than the transactions contemplated by this
Agreement, or (ii) engage in negotiations with, or disclose any
nonpublic information relating to Scotts or afford access to the
properties, books or records of Scotts to, any Person that Scotts
believes may be considering making, or has made, a Scotts
Acquisition Proposal. Scotts will promptly notify the Company
upon receipt of any Scotts Acquisition Proposal or any indication
that any Person is considering making a Scotts Acquisition
Proposal or any request for nonpublic information relating to
Scotts or for access to the properties, books or records of
Scotts by any Person that may be considering making, or has made,
a Scotts Acquisition Proposal and will keep the Company fully
informed of the status and details of any such Scotts Acquisition
Proposal, indication or request.
SECTION 7.05. Notices of Certain Events. Scotts shall
promptly notify the Company of:
(i) any notice or other communication from any Person
alleging that the consent of such Person is or may be
required in connection with the transactions contemplated by
this Agreement;
(ii) any notice or other communication from any
governmental or regulatory agency or authority in connection
with the transactions contemplated by this Agreement;
(iii) the occurrence, or non-occurrence, of any event
the occurrence, or non-occurrence, of which would be likely
to cause (x) any representation or warranty contained in
this Agreement to be untrue or inaccurate or (y) any
covenant, condition or agreement contained in this Agreement
not to be complied with or satisfied; and
(iv) any failure of Scotts or Merger Subsidiary to
comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies
available hereunder to the Company.
SECTION 7.06. Proxy Statement and Shareholder Vote. (a)
As promptly as practicable after January 26, 1995, Scotts shall
prepare and file with the SEC (i) the Scotts Proxy Statement
relating to Scotts 1995 Annual Meeting of Shareholders or a
Special Meeting of Shareholders at which the Scotts Shareholder
Consent will be solicited (the Scotts Shareholder Meeting ),
(ii) a registration statement on Form S-4 in which the Proxy
Statement shall be included as a prospectus, in connection with
the registration under the Securities Act of the Merger
Consideration (the "Registration Statement"). Scotts shall use
its best efforts to cause the Registration Statement to become
effective as promptly as practicable, and shall take all actions
required under any applicable federal or state securities laws in
connection with the issuance of the Merger Consideration. Scotts
shall take such action as is necessary to ensure that the Proxy
Statement and the Registration Statement comply with the Exchange
Act and the Securities Act, respectively. As promptly as
practicable after review by the SEC, Scotts shall mail the Scotts
Proxy Statement to its shareholders. The Scotts Proxy Statement
shall include the recommendation of the Board of Directors of
Scotts in favor of (i) the amendment of Scotts Articles of
Incorporation to authorize the Convertible Preferred Stock; (ii)
the acquisition by the Shareholders of more than 33-1/3% (but
less than 50%) of Scotts voting power, as contemplated by
Section 1701.831 of the Ohio Law; and (iii) the amendment of
Scotts Code of Regulations to implement a classified Board of
Directors consisting of three classes of up to four directors
each, to require a two-thirds vote of Shareholders on certain
matters and to implement certain limitations on the ability of
shareholders to call special meetings. Attached hereto as Annex
G is each of the amendments to Scotts Articles of Incorporation
and Code of Regulations which is proposed to be adopted by the
shareholders of Scotts at the Scotts Shareholder Meeting.
(b) Scotts will ensure that the Scotts Proxy Statement and
the Registration Statement will not, at the time (i) each such
document is filed with the SEC, (ii) each such document is first
published, sent or given to shareholders of Scotts, (iii) the
Registration Statement is declared effective by the SEC, (iv) the
Scotts Shareholder Meeting is convened and (v) the Effective Time
occurs, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading (except
to the extent that any untrue statement or omission or alleged
untrue statement or omission was made or omitted in reliance upon
information furnished to Scotts by the Company or the
Shareholders).
SECTION 7.07. Director and Officer Indemnification. From
and after the Effective Time, Scotts will cause the Surviving
Corporation to indemnify and hold harmless the present and former
officers and directors of the Miracle-Gro Constituent Companies
in respect of acts or omissions occurring prior to the Effective
Time to the extent provided under such Miracle-Gro Constituent
Company s certificate of incorporation and by-laws, or equivalent
organizational documents, in effect on January 26, 1995;
provided, that such indemnification shall be subject to any
limitation imposed from time to time under applicable law, and,
provided, further, that such indemnification shall not apply to
claims made by or on behalf of any stockholder or former
stockholder of any Miracle-Gro Constituent Company.
SECTION 7.08. Employee Benefits. From and after the
Effective Time through the later of December 31, 1995 and such
date as the employees of the Miracle-Gro Constituent Companies
commence participation in Scotts employee benefits plans, as
described in the following sentence (the Plan Transfer Date ),
Scotts will cause the Surviving Corporation and/or New Miracle-
Gro to provide benefits to the Miracle-Gro Constituent Companies
employees that are comparable to those provided by the Miracle-
Gro Constituent Companies immediately prior to the Effective
Time. From and after the Plan Transfer Date, all employees of
the Surviving Corporation shall become participants in the
employee benefit plans and programs maintained by Scotts for
similarly situated employees of Scotts. Such employee benefit
plans that are health benefit plans shall (i) recognize expenses
and claims that were incurred by such employees in the year in
which the Effective Time occurs and recognized for similar
purposes under the Miracle-Gro Constituent Companies plans as of
the Effective Time, and (ii) provide coverage (without any
required waiting period) for pre-existing health conditions to
the extent covered under the applicable plans or programs of the
Miracle-Gro Constituent Companies plans as of the Effective
Time. In addition, such employee benefit plans and programs
shall credit such employees with years of service with the
Miracle-Gro Constituent Companies for all plan purposes;
provided, however, that no such crediting shall be required to
the extent that it would result in a duplication of benefits.
Scotts will cause New Miracle-Gro, as successor corporation, to
perform the obligations of the Company under the agreements set
forth in Section 7.08 of the Miracle-Gro Disclosure Schedule.
SECTION 7.09. Employee Stock Options. Subject to the
fiduciary duties of Scotts Board of Directors and appropriate
authorization therefrom, Scotts agrees to use reasonable efforts
to fund the issuance of Scotts Common Stock pursuant to the
exercise of employee stock options granted after January 26, 1995
through shares of Scotts Common Stock held as treasury stock,
which are acquired after January 26, 1995, or through open market
or privately negotiated repurchases of Scotts Common Stock.
ARTICLE VIII
COVENANTS OF SCOTTS, THE MIRACLE-GRO
CONSTITUENT COMPANIES AND THE SHAREHOLDERS
The parties hereto agree that:
SECTION 8.01. Best Efforts. Subject to the terms and
conditions of this Agreement, each party will use its best
efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions
contemplated by this Agreement as promptly as possible.
SECTION 8.02. Certain Filings. The Miracle-Gro Constituent
Companies and Scotts shall cooperate with one another (a) in
connection with the preparation of the Scotts Proxy Statement and
the Registration Statement (including, but not limited to, the
preparation of any financial statements or pro forma financial
statements required to be included therein), and (b) in
determining whether any action by or in respect of, or filing
with, any governmental body, agency or official, or authority is
required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts,
in connection with the consummation of the transactions
contemplated by this Agreement and (c) in seeking any such
actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection therewith
or with the Scotts Proxy Statement or the Registration Statement
and seeking timely to obtain any such actions, consents,
approvals or waivers.
SECTION 8.03. Public Announcements. Scotts and the Company
will consult with each other before issuing any press release or
otherwise making any public statement with respect to this
Agreement or any transaction contemplated herein and, except as
may be required by applicable law or any listing agreement with
any national securities exchange, Scotts will not issue any such
press release or make any such public statement prior to such
consultation and no Miracle-Gro Constituent Company will issue
any such press release or make any such public statement without
the prior written consent of Scotts, which shall not be
unreasonably withheld.
SECTION 8.04. Further Assurances. At and after the
Effective Time, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the
name and on behalf of the Company or Merger Subsidiary, any
deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger
Subsidiary, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any
and all right, title and interest in, to and under any of the
rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
SECTION 8.05. Tax Matters. (a) The Shareholders shall be
solely responsible for preparing and filing on a timely basis all
Tax Returns with respect to the income, business, assets,
operations, activities, status or other matters of the Miracle-
Gro Constituent Companies for all taxable periods ending at or
before the Effective Time. The Shareholders shall be solely
responsible for and shall pay on a timely basis all taxes due
thereon.
(b) Scotts shall be solely responsible for preparing and
filing on a timely basis all Tax Returns with respect to the
income, business, assets, operations, activities, status or other
matters of the Company for all taxable periods beginning after
the Effective Time. Scotts shall be solely responsible for and
shall pay on a timely basis all taxes due thereon.
(c) The Shareholders and Scotts shall jointly prepare all
Tax Returns with respect to the income, business, assets,
operations, activities, status or other matters of the Miracle-
Gro Constituent Companies for all taxable periods beginning
before and ending after the Effective Time ( Straddle Periods ).
The Shareholders and Scotts shall allocate any liability for
taxes relating to Straddle Periods on the basis of an interim
closing of the books as of the Effective Time.
(d) The Shareholders and Scotts agree to furnish to each
other, upon written request, as promptly as practicable, such
information and reasonable assistance relating to the Miracle-Gro
Constituent Companies as is necessary for the filing of any Tax
Return required to be filed after the Effective Time. The
Shareholders and Scotts also agree to cooperate with each other
in the conduct of any audit or other proceeding involving one or
more of the Miracle-Gro Constituent Companies or any successor
corporation. In any such case, each party shall use its best
efforts to cause its financial advisors, auditors and other
authorized representatives to cooperate therewith.
SECTION 8.06. Tax Treatment. (a) The Company and the
Shareholders agree to accept the opinion of Skadden, Arps, Slate,
Meagher & Flom, substantially in the form of Annex H hereto, in
satisfaction of the condition set forth in Section 9.03(iv). The
Company agrees that the representations and warranties set forth
in the officer's certificate with respect to each of the Miracle-
Gro Companies, which certificates are attached to such Annex H,
are true and correct in all material respects as of the date
hereof, and, assuming such representations and warranties
continue to be true and correct in all material respects
immediately prior to the Effective Time and that an authorized
officer of Scotts and Merger Subsidiary executes the officer's
certificate of Scotts and Merger Subsidiary attached to such
Annex H, agree to cause an authorized officer of each of the
Miracle-Gro Constituent Companies to execute such officer's
certificates.
(b) None of the Shareholders, the Miracle-Gro Constituent
Companies, Scotts or Merger Subsidiary has taken, or will take,
any action or omitted to take any action which would (i) cause
the representations and warranties in the officer's certificates
(attached to Annex H) not to be true and correct in all material
respects and (ii) cause any of the Merger Transactions to fail to
qualify as a reorganization under Section 368(a) of the Code or
otherwise jeopardize the status of any of the Merger Transactions
as a tax-free reorganization within the meaning of Section 368(a)
of the Code. The Shareholders and the Miracle-Gro Constituent
Companies agree to use their best efforts to cause each of the
Merger Transactions to qualify as tax-free reorganizations within
the meaning of Section 368(a) of the Code.
(c) Scotts agrees to cause the Surviving Corporation and
New Miracle-Gro not to take any action or omit to take any action
at or after the Effective Time if Scotts reasonably believes
after consultation with counsel that such action or inaction,
respectively, would jeopardize the status of any of the Merger
and the Stock Sales as a tax-free reorganization within the
meaning of Section 368(a) of the Code.
SECTION 8.07. Tax Gross-Up. (a) Notwithstanding anything
herein to the contrary, the parties hereby agree that prior to
the Effective Time the Miracle-Gro Constituent Companies shall
distribute to the Shareholders an amount equal to $22 million.
The Company may borrow funds to finance the payment of such
distribution. Unless specifically requested by the Shareholder
Representative, (i) no funds or assets will be supplied by Scotts
directly or indirectly to repay such loan, and (ii) in the event
that the Surviving Corporation determines that it does not have
sufficient funds to repay such loan, it shall use its best
efforts to borrow funds for such repayment without a guarantee or
other credit support from Scotts.
(b) In the event that pursuant to Section 1366 of the Code,
the aggregate taxable income of the Shareholders with respect to
the aggregate income of the Miracle-Gro Constituent Companies for
the fiscal year commencing October 1, 1994, and ending at the
Effective Time exceeds $22 million by up to $1 million (such
excess being the "Excess Amount"), Scotts shall cause New
Miracle-Gro to distribute to the Shareholders an additional
amount of cash equal to 46% of such Excess Amount. The foregoing
distribution shall be made so as to qualify under Section
1371(e)(1) of the Code and, in any event, shall be made not later
than 30 days following the date on which the said aggregate
income of the Miracle-Gro Constituent Companies, or any portion
thereof, is determined to exceed $22 million.
(c) In the event that the distribution contemplated by
Section 8.07(b) does not qualify as a distribution under Section
1371(e)(1) of the Code, Scotts shall pay the Shareholders an
amount which, after the payment of all Taxes due from the
Shareholders with respect to such amount, shall equal 46% of the
Excess Amount. The amount to be paid to the Shareholders
pursuant to this subsection shall not exceed $852,000.
SECTION 8.08. Consent Order. Notwithstanding anything
herein to the contrary, the parties hereto agree to act in a
manner consistent with the Consent Order.
SECTION 8.09. Conduct of the Business. (a) Until such time
as Scotts may, consistent with the Consent Order, appoint
directors to the Board of Directors of New Miracle-Gro, New
Miracle-Gro will, and will cause its subsidiaries to, conduct its
business in the ordinary course,as set forth in Section 5.01
hereof, to the extent such actions are consistent with the
Consent Order.
(b) Until such time as the Miracle-Gro Directors are
appointed to the Board of Directors of Scotts, as provided in
Section 7.01 hereof, Scotts will, and will cause its Subsidiaries
to, conduct its business in the ordinary course, as set forth in
Section 7.01 hereof, to the extent such actions are consistent
with the Consent Order.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to the Obligations of Each Party.
The respective obligations of the Company, the Shareholders,
Scotts and Merger Subsidiary to consummate the Merger are subject
to the satisfaction of the following conditions, any or all of
which may be waived, in whole or in part, to the extent permitted
by this Agreement and by applicable law:
(i) Scotts shall have received the consent of the
Requisite Banks (as defined in the Third Amended and
Restated Credit Agreement dated as of April 7, 1992, as
amended (the Credit Agreement ), among Scotts, the Banks
listed therein and Chemical Bank, as Agent) to the Merger
Transactions and the other transactions contemplated herein,
and the Credit Agreement provisions relating to restricted
payments, operating and financial condition ratios and
events of default shall have been appropriately amended in
contemplation of the transactions contemplated by this
Agreement, all of which shall be reasonably satisfactory to
the Miracle-Gro Constituent Companies;
(ii) Scotts shall have received the consent to the
Merger Transactions and the other transactions contemplated
herein by the holders of a majority of aggregate principal
amount of Scotts outstanding 9-7/8% Senior Subordinated
Notes due August 1, 2004, pursuant to the terms of the
Indenture dated as of June 1, 1994, as supplemented (the
Notes Indenture ), between Scotts and Chemical Bank, as
trustee;
(iii) Scotts shareholders shall have approved the
acquisition by the Shareholders of more than 33-1/3% (but
less than 50%) of Scotts voting power, in accordance with
the provisions of Section 1701.831 of Ohio Law;
(iv) shareholders representing more than 66-2/3% of
the outstanding Scotts Common Stock shall have approved the
amendment of Scotts Articles of Incorporation to authorize
the issuance of the Convertible Preferred Stock;
(v) shareholders representing more than a majority of
the outstanding Scotts Common Stock shall have approved the
amendment of Scotts Code of Regulations to authorize a
classified Board of Directors;
(vi) the applicable waiting period under the HSR Act
relating to the Merger shall have expired or been
terminated;
(vii) no provision of any applicable law or regulation
and no judgment, injunction, order or decree shall prohibit
the consummation of the Merger;
(viii) other than the filing of certificates of merger
and/or other merger documents in accordance with New Jersey
Law and Ohio Law, all authorizations, consents, waivers,
orders or approvals required to be obtained, and all
filings, notices or declarations required to be made, by the
Company, Scotts and Merger Subsidiary prior to the
consummation of the Merger shall have been obtained from,
and made with, all required governmental or regulatory
authorities except for such authorizations, consents,
waivers, orders, approvals, filings, notices or declarations
the failure of which to obtain or make would not, at or
after the Effective Time, individually or in the aggregate,
have a Company Material Adverse Effect or a Scotts Material
Adverse Effect; and
(ix) the Registration Statement shall have been
declared effective under the Securities Act and there shall
be no stop order or threatened stop order with respect
thereto.
SECTION 9.02. Conditions to the Obligations of Scotts and
Merger Subsidiary. The obligations of Scotts and Merger
Subsidiary to consummate the Merger are subject to the
satisfaction of the following further conditions, any or all of
which may be waived, in whole or in part, to the extent permitted
by this Agreement and by applicable law:
(i) the Miracle-Gro Constituent Companies and the
Shareholders and the General Partners shall have performed
in all material respects their respective agreements and
covenants required by this Agreement to be performed by them
at or prior to the Effective Time; the representations and
warranties of the Miracle-Gro Constituent Companies and the
Shareholders and the General Partners contained in this
Agreement and in any certificate delivered by any Miracle-
Gro Constituent Company or Shareholder or General Partner
pursuant hereto (in each case, limited, with respect to the
Charity, as otherwise set forth herein) shall be true and
correct in all material respects at and as of the Effective
Time as if made at and as of such time, and Scotts shall
have received a certificate signed by the Chief Executive
Officer and Chief Financial Officer of the Company to the
foregoing effect;
(ii) since January 26, 1995, there shall have been no
change, occurrence or circumstance in the business, results
of operations or condition (financial or otherwise) of the
Miracle-Gro Constituent Companies having or reasonably
likely to have, individually or in the aggregate, a Company
Material Adverse Effect, and Scotts shall have received a
certificate of the Chief Executive Officer of the Company to
such effect;
(iii) no court, arbitrator or governmental body,
agency or official shall have issued any order, and there
shall not be any statute, rule or regulation, restraining or
prohibiting the consummation of the Merger or the effective
operation of the business of the Company after the Effective
Time;
(iv) Scotts shall have received Employment Agreements
substantially in the forms attached hereto as Annex F- 1, F-2
and F-3 executed by Horace Hagedorn, John Kenlon and James
Hagedorn, respectively; and
(v) Scotts shall have received all documents it may
reasonably request relating to the existence of the Company
and the authority of the Company to enter to, deliver and
perform this Agreement, all in form and substance
satisfactory to Scotts.
SECTION 9.03. Conditions to the Obligations of the Miracle-
Gro Constituent Companies and the Shareholders. The obligations
of the Miracle-Gro Constituent Companies and the Shareholders to
consummate the Merger Transactions are subject to the
satisfaction of the following further conditions, any or all of
which may be waived, in whole or in part, to the extent permitted
by this Agreement and by applicable law:
(i) Scotts and Merger Subsidiary shall have performed
in all material respects their respective agreements and
covenants required by this Agreement to be performed by them
at or prior to the Effective Time; the representations and
warranties of Scotts and Merger Subsidiary contained in this
Agreement and in any certificate delivered by Scotts or
Merger Subsidiary pursuant hereto shall be true and correct
in all material respects at and as of the Effective Time as
if made at and as of such time, and the Company shall have
received a certificate signed by the Chief Executive Officer
and Chief Financial Officer of Scotts to the foregoing
effect;
(ii) since January 26, 1995, there shall have been no
change, occurrence or circumstance in the business, results
of operations or condition (financial or otherwise) of
Scotts having or reasonably likely to have, individually or
in the aggregate, a Scotts Material Adverse Effect, and the
Company shall have received a certificate of the Chief
Executive Officer of Scotts to such effect;
(iii) no court, arbitrator or governmental body,
agency or official shall have issued any order, and there
shall not be any statute, rule or regulation, restraining or
prohibiting the consummation of the Merger or the effective
operation of the business of Scotts after the Effective
Time;
(iv) the Company and the Shareholders shall have
received the opinion of Skadden, Arps, Slate, Meagher & Flom
substantially in the form attached hereto as Annex H to the
effect that each of the Merger and each of the Stock Sales
constitutes a tax-free reorganization pursuant to Section
368(a) of the Code; and
(v) the Company shall have received all documents it
may reasonably request relating to the existence of Scotts
and Merger Subsidiary and the authority of Scotts and Merger
Subsidiary to enter to, deliver and perform this Agreement,
all in form and substance satisfactory to the Company.
ARTICLE X
TERMINATION
SECTION 10.01. Termination. This Agreement may be
terminated and the Merger may be abandoned at any time prior to
the Effective Time (notwithstanding any approval of this
Agreement by the Shareholders or of the shareholders of Scotts):
(a) by mutual written consent of the parties hereto;
(b) by any party if the Merger has not been
consummated by September 30, 1995;
(c) by any party if, prior to the Effective Time, the
Market Price (as defined in Section 6.01) of Scotts Common
Stock shall be less than the Target Amount for ten
consecutive trading days, the Target Amount being the
lesser of $12 per share and the amount determined by
multiplying $12 by a percentage equal to 100% minus the
percentage decline, if any, in the Standard & Poors 500
Index (as reported by The Wall Street Journal) from January
26, 1995 to the date of the first day of such ten
consecutive day trading period;
(d) by any party if there shall be any law or
regulation that makes consummation of the Merger illegal or
otherwise prohibited or if any judgment, injunction, order
or decree enjoining Scotts or any Miracle-Gro Constituent
Company from consummating any of the Merger Transactions is
entered and such judgment, injunction, order or decree shall
become final and nonappealable; and
(e) by Scotts, upon a breach of any representation,
warranty, covenant or agreement on the part of any Miracle-
Gro Constituent Company or any Shareholder set forth in this
Agreement, or if any representation or warranty of the
Miracle-Gro Constituent Companies and the Shareholders shall
have become untrue, in either case such that the conditions
set forth in Section 9.02 would be incapable of being
satisfied by September 30, 1995 (or as otherwise extended);
provided that, in any case, a willful breach shall be deemed
to cause such conditions to be incapable of being satisfied
for purposes of this Section 10.01(e);
(f) by the Miracle-Gro Constituent Companies and the
Shareholders, upon a breach of any representation, warranty,
covenant or agreement on the part of Scotts or Merger
Subsidiary set forth in this Agreement, or if any
representation or warranty of Scotts or Merger Subsidiary
shall have become untrue, in either case such that the
conditions set forth in Section 9.03 would be incapable of
being satisfied by September 30, 1995 (or as otherwise
extended); provided that, in any case, a willful breach
shall be deemed to cause such conditions to be incapable of
being satisfied for purposes of this Section 10.01(f); and
(g) by any party hereto if the Scotts' Shareholders
shall fail to approve the acquisition contemplated by
Section 9.01(iii) at the Scotts Shareholder Meeting.
SECTION 10.02. Effect of Termination. If this Agreement is
terminated pursuant to Section 10.01, this Agreement shall become
void and of no effect with no liability on the part of any party
hereto, except that the agreements contained in Sections 5.02,
7.02 and 12.03 shall survive the termination hereof; provided,
however, that nothing herein shall relieve any party from
liability for the willful breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
SECTION 11.01. Survival. The representations and
warranties of the parties hereto contained in this Agreement or
in any certificate or other writing delivered pursuant hereto or
in connection herewith shall survive until the Effective Time and
shall thereupon terminate and be of no further force and effect;
provided, that the representations and warranties contained in
Sections 3.12 and 4.11 shall survive until expiration of the
applicable statutory period of limitations (giving effect to any
waiver, mitigation or extension thereof), if later.
Notwithstanding the preceding sentence, any representation or
warranty in respect of which indemnity may be sought under
Section 11.02 or 11.03 shall survive the time at which it would
otherwise terminate pursuant to the preceding sentence, if notice
of the specific inaccuracy or breach thereof giving rise to such
right to indemnity shall have been given to the party against
whom such indemnity may be sought prior to such time.
Notwithstanding any other provision of this Agreement to the
contrary, the provisions of this Article XI shall apply to the
Charity only to the extent that such provisions relate to
covenants to be performed by the Charity.
SECTION 11.02. Indemnification. (a) The Company and each
Shareholder hereby jointly and severally indemnify Scotts against
and agree to hold it harmless from any and all damage, loss,
liability and expense (including, without limitation, reasonable
expenses of investigation and reasonable attorneys' fees and
expenses in connection with any action, suit or proceeding)
(collectively, Loss ) incurred or suffered by Scotts arising out
of any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by the Company or the Share-
holders pursuant to this Agreement.
(b) Scotts hereby indemnifies the Company and the Share-
holders against and agrees to hold them harmless from any and all
Loss incurred or suffered by the Company and/or the Shareholders
arising out of any misrepresentation or breach of warranty,
covenant or agreement made or to be performed by Scotts pursuant
to this Agreement.
SECTION 11.03. Procedures. (a) The party seeking
indemnification under Section 11.02 (the Indemnified Party )
agrees to give prompt notice to the party against whom indemnity
is sought (the Indemnifying Party ) of the assertion of any
claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought under such Section. The
Indemnifying Party may, and at the request of the Indemnified
Party shall, participate in and control the defense of any such
suit, action or proceeding at its own expense. The Indemnifying
Party shall not be liable under Section 11.02 for any settlement
effected without its consent of any claim, litigation or
proceeding in respect of which indemnity may be sought hereunder;
provided that such consent is not unreasonably withheld.
(b) The Indemnified Party shall cooperate fully in all
aspects of any matter for which indemnity is sought pursuant to
this Article XI with respect to an action brought by a third
party, including, in such case, by providing reasonable access to
employees and officers (as witnesses or otherwise) and other
information.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing
(including telecopy, telex or similar writing) and shall be
given,
if to Scotts or Merger Subsidiary, to:
The Scotts Company
14111 Scottslawn Road
Marysville, OH 43041
Attn.: Craig D. Walley, General Counsel
Telecopy: (513) 644-7072
with a copy to:
G. Robert Lucas, II Vorys, Sater, Seymour and Pease
52 East Gay Street
Columbus, OH 43215
Telecopy: (614) 464-6350
if to the Company, the General Partners, the Shareholders or
the Shareholder Representative, to:
Stern's Miracle-Gro Products, Inc.
800 Port Washington Boulevard
Port Washington, NY 11050
Attn.: John Kenlon, President
Telecopy: (516) 883-6563
with a copy to:
Horace Hagedorn
800 Port Washington Boulevard
Port Washington, NY 11050
Telecopy: (516) 883-6563
with a further copy to:
J. Michael Schell
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Telecopy: (212) 735-2000
and a further copy to:
Jonathan R. Karis
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Telecopy: (617) 951-1295
and a further copy to:
Hagedorn Partnership, L.P.
800 Port Washington Boulevard
Port Washington, NY 11050
Attn.: James Hagedorn
Telecopy: (516) 883-6563
and a further copy to:
The New York Community Trust
Two Park Avenue
New York, NY 10016
Attn.: Jane Wilton
Telecopy: (212) 532-8528
or such other address or telecopy number as such party may
hereafter specify for the purpose by notice to the other parties
hereto. Each such notice, request or other communication shall
be effective (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section and
the appropriate confirmation is received or (ii) if given by any
other means, when delivered at the address specified in this
Section.
SECTION 12.02. Amendments; No Waivers. Any provision of
this Agreement may be amended or waived prior to the Effective
Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the parties hereto or in
the case of a waiver, by the party against whom the waiver is to
be effective; provided that after the adoption of this Agreement
by the shareholders of Scotts, no such amendment or waiver shall,
without the further approval of such shareholders, alter or
change (i) the amount or kind of consideration to be received in
exchange for any shares of capital stock of the Company, (ii) any
term of the Articles of Incorporation of the Surviving
Corporation or (iii) any of the terms or conditions of this
Agreement if such alteration or change would adversely affect the
holders of any shares of capital stock of Scotts.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 12.03. Expenses; Taxes. All costs and expenses
incurred in connection with this Agreement shall be paid by
Scotts in the case of the costs and expenses of Scotts and Merger
Subsidiary, and by the Shareholders in the case of the costs and
expenses of the Miracle-Gro Constituent Companies and the
Shareholders which have not been paid at the Effective Time.
Notwithstanding the foregoing, all applicable sales, use or
transfer taxes, if any, and all capital gains or income taxes of
any of the Shareholders or any of the Miracle-Gro Constituent
Companies, in each case, that may be due and payable as a result
of the Merger or the transactions contemplated by this Agreement,
whether levied on any Miracle-Gro Constituent Company, any of the
Shareholders, Scotts or Merger Subsidiary, shall be borne by the
Shareholders.
SECTION 12.04. Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 12.05. Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected
in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
SECTION 12.06. Entire Agreement. This Agreement (together
with the exhibits and annexes, the Company Disclosure Schedule,
the Scotts Disclosure Schedule and the other documents delivered
pursuant hereto) and the confidentiality agreements between the
Company and Scotts constitute the entire agreement of the parties
and supersede all prior agreements and undertakings, both written
and oral, among the parties, or any of them, with respect to the
subject matter hereof.
SECTION 12.07. Successors and Assigns. The provisions of
this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns,
provided that no party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the
written consent of the other parties.
SECTION 12.08. Governing Law. This Agreement shall be
construed in accordance with and governed by the law of the State
of Ohio.
SECTION 12.09. Counterparts; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall
become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
MIRACLE-GRO CONSTITUENT
COMPANIES:
STERN'S MIRACLE-GRO PRODUCTS, INC.
By /s/ Horace Hagedorn
Title: Chairman and Chief
Executive Officer
STERN'S NURSERIES, INC.
By /s/ Horace Hagedorn
Title: Chief Executive Officer
MIRACLE-GRO LAWN PRODUCTS INC.
By /s/ James Hagedorn
Title: President
MIRACLE-GRO PRODUCTS LIMITED
By /s/ John Kenlon
Title: President
SHAREHOLDERS:
/s/ Horace Hagedorn
HORACE HAGEDORN
COMMUNITY FUNDS, INC.
By /s/ Jane Wilton
Secretary and General Counsel
HAGEDORN PARTNERSHIP, L.P.
By /s/ James Hagedorn
A General Partner
/s/ John Kenlon
JOHN KENLON
GENERAL PARTNERS:
/s/ James Hagedorn
JAMES HAGEDORN
/s/ Katherine Hagedorn Littlefield
KATHERINE HAGEDORN LITTLEFIELD
/s/ Paul Hagedorn
PAUL HAGEDORN
/s/ Peter Hagedorn
PETER HAGEDORN
/s/ Robert Hagedorn
ROBERT HAGEDORN
/s/ Susan Hagedorn
SUSAN HAGEDORN
SCOTTS:
THE SCOTTS COMPANY
By /s/ Craig Walley
MERGER SUBSIDIARY:
ZYX CORPORATION, an Ohio corporation
By /s/ Craig Walley
SCHEDULE 1.04
MERGER CONSIDERATION ALLOCATION
STERN'S MIRACLE-GRO PRODUCTS, INC.
Schedule 1.04(a)
(Number of securities)
SHARES OF
$1,000 CLASS A CLASS B CLASS B
PREFERRED WARRANTS WARRANTS WARRANTS
Community Funds, Inc. 15,686 977,786 977,786 977,786
Hagedorn Partnership, L.P. 145,608 0 0 0
John Kenlon 3,696 22,214 22,214 22,214
_______________________________________________________________________
TOTAL 164,990 1,000,000 1,000,000 1,000,000
_______________________________________________________________________
MERGER CONSIDERATION ALLOCATION
MIRACLE-GRO PRODUCTS LTD.
Schedule 1.04(b)
(Number of securities)
SHARES OF
$1,000 CLASS A CLASS B CLASS B
PREFERRED WARRANTS WARRANTS WARRANTS
Hagedorn Partnership, L.P. 14,664 0 0 0
John Kenlon 336 0 0 0
_____________________________________________________________________
TOTAL 15,000 0 0 0
_____________________________________________________________________
MERGER CONSIDERATION ALLOCATION
MIRACLE-GRO LAWN PRODUCTS, INC.
Schedule 1.04(c)
(Number of securities)
SHARES OF
$1,000 CLASS A CLASS B CLASS B
PREFERRED WARRANTS WARRANTS WARRANTS
Community Funds, Inc. 1,500 0 0 0
Hagedorn Partnership, L.P. 13,200 0 0 0
John Kenlon 300 0 0 0
_____________________________________________________________________
TOTAL 15,000 0 0 0
_____________________________________________________________________
MERGER CONSIDERATION ALLOCATION
STERN'S NURSERIES, INC.
Schedule 1.04(d)
(Following Liquidation)
(Number of securities)
SHARES OF
$1,000 CLASS A CLASS B CLASS B
PREFERRED WARRANTS WARRANTS WARRANTS
Horace Hagedorn 10 0 0 0
___________________________________________________________________
TOTAL 10 0 0 0
___________________________________________________________________
GRAND TOTAL 195,000 1,000,000 1,000,000 1,000,000
SCHEDULE 2.03
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
AND NEW MIRACLE-GRO
Horace Hagedorn - Chairman of the Board of Directors
and
Chief Executive Officer
John Kenlon - Director, President and Chief Operating Officer
James Hagedorn - Director and Executive Vice President
ANNEX A
TERMS OF
CLASS A CONVERTIBLE PREFERRED STOCK
1. Designation. This series of Preferred Stock shall be
designated Class A Convertible Preferred Stock, without par value
(the Class A Preferred ).
2. Authorized Number. The number of shares constituting the
Class A Preferred shall be One Hundred Ninety-Five Thousand
(195,000) shares.
3. Dividends. (a) The holders of the Class A Preferred
shall be entitled to receive, ratably with the holders of any other
series of Preferred Stock with Parity Rights (as defined below) as
to dividends based on their respective dividend rates, annual
cumulative dividends in cash on each outstanding share of Class A
Preferred at the rate of $50.00 per share per annum. Such
cumulative dividends shall be paid in equal amounts (other than
with respect to the initial dividend period) quarterly on June 30,
September 30, December 31 and March 31 of each year (unless such
day is not a business day, in which event on the next business day)
as declared by the Board of Directors to the extent legally
permitted, to holders of record as they appear on the register for
the Class A Preferred on the June 15, September 15, December 15 and
March 15 immediately preceding the relevant Dividend Payment Date
(as hereinafter defined), out of any funds at the time legally
available therefor, shall accrue until so paid from the date of
issuance of the applicable shares of Class A Preferred, and shall
be deemed to accrue from day to day, whether or not declared. A
quarterly dividend period shall begin on the day following each
June 30, September 30, December 31 and March 31 (each a Dividend
Payment Date, whether or not a dividend is paid on such date) and
end on the next succeeding Dividend Payment Date. Notwithstanding
the foregoing, the first quarterly dividend period shall commence
on the date of issue, and such dividend shall be paid on June 30,
1995 for the actual number of days in such period. If dividends
shall not have been paid, or declared and set apart for payment,
upon all outstanding shares of Class A Preferred at the aforesaid
times and rates, such deficiency shall be cumulative in full. Any
accumulation of dividends shall not bear interest.
(b) No dividends or other distribution (other than dividends
payable in Common Stock), and no redemption, purchase or other
acquisition for value (other than redemptions, purchases or
acquisitions payable in Common Stock or repurchases of Common Stock
from employees of the Company pursuant to obligations existing as
of the date hereof or upon foreclosure pursuant to loans existing
as of the date hereof to employees of the Company secured by Common
Stock), shall be made with respect to the Common Stock or any other
class or series of the Company s capital stock ranking junior to
the Class A Preferred with respect to dividends or liquidation
preferences until cumulative dividends on the Class A Preferred in
the full amounts as set forth above for all dividend periods
ending, and all amounts payable upon redemption of Class A
Preferred, on or prior to the date on which the proposed dividend
or distribution is paid, or the proposed redemption, purchase or
other acquisition is effected, have been declared and paid or set
apart for payment.
(c) (i) If on any Dividend Payment Date all or any portion
of the dividend payable on such date is not so paid and at such
time all or any portion of the dividend payable on the next
preceding Dividend Payment Date remains in arrears, then from such
second Dividend Payment Date (herein the commencement of a default
period) until all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current quarterly dividend
period on all shares of Class A Preferred then outstanding shall
have been declared and paid, all holders of Class A Preferred,
voting separately as a class, shall have the right to elect three
directors to the Company's Board of Directors ("Directors").
(ii) Such Directors shall be designated by the Shareholder
Representative (as defined in the Merger Agreement) and shall be
appointed to the Board, to fill vacancies newly created for such
purpose, immediately upon such designation. After the holders of
the Class A Preferred shall have exercised their right to elect
Directors in any default period and during the continuance of such
period, the number of Directors shall not be increased or decreased
except by vote of the holders of Class A Preferred as herein
provided.
(iii) Immediately upon the expiration of a default period,
(x) the right of the holders of Class A Preferred as a class to
elect Directors pursuant to this Section 3(c) shall cease, (y) the
term of any Directors elected by the holders of Class A Preferred
as a class pursuant to this Section 3(c) shall terminate, and (z)
the number of Directors shall be such number as was in effect
immediately prior to the increase contemplated by this Section
3(c).
4. Liquidation Preference. In the event of any liquidation,
dissolution, or winding up of the Company, either voluntary or
involuntary, distributions to the shareholders of the Company shall
be made in the following manner:
(a) The holders of the Class A Preferred shall be entitled to
receive, ratably with the holders of any other series of Preferred
Stock with Parity Rights (as defined below) as to liquidation
preferences based on their respective preference amounts (which, in
the case of the Class A Preferred, shall include any amounts owing
in respect of accrued and unpaid dividends), prior and in
preference to any distribution of any of the assets or funds of the
Company to the holders of the Common Stock (or any other securities
of the Company ranking junior to the Class A Preferred as to
liquidation preferences), the preference amount (in cash) of $1,000
per share for each share of Class A Preferred then held by them
plus an amount equal to all accrued but unpaid dividends (whether
or not declared) on the Class A Preferred to the date of
liquidation, dissolution or winding up. If the assets and funds
thus distributed among the holders of the Class A Preferred and of
any other series of Preferred Stock with Parity Rights as to
liquidation preferences are insufficient to permit the payment to
such holders of the full preferential amount described above, then
the entire assets and funds of the Company legally available for
distribution shall be distributed among the holders of the Class A
Preferred and of any other series of Preferred Stock with Parity
Rights as to liquidation preferences in the proportion that the
aggregate preferential amount of shares of Class A Preferred and of
any other series of Preferred Stock with Parity Rights as to
liquidation preferences held by each such holder bears to the
aggregate preferential amount of all shares of Class A Preferred
and of any other series of Preferred Stock with Parity Rights as to
liquidation preferences. After payment has been made to the
holders of the Class A Preferred and of any other series of
Preferred Stock with Parity Rights as to liquidation preferences of
the full amounts to which they are entitled, no further amounts
shall be paid with respect to the Class A Preferred, and the
remaining assets of the Company shall be distributed among the
holders of the Common Stock (and other junior securities with
regard to liquidation preferences) in accordance with the Restated
Articles of Incorporation and applicable law.
(b) For purposes of this Section 4, a merger or consolidation
of the Company with or into any other corporation or corporations
in which the Company is not the surviving corporation, or a
voluntary sale of all or substantially all of the assets of the
Company, shall not be treated as a liquidation, dissolution or
winding up of the Company (unless in connection therewith, the
liquidation, dissolution or winding up of the Company is
specifically approved), but shall be treated as provided in Section
7(e) hereof.
5. Provisions Generally Applicable to Dividends and
Liquidation.
(a) The term Parity Rights, as used in this Article FOURTH
of the Restated Articles of Incorporation, shall mean dividend
rights and liquidation preferences of any series of Preferred Stock
of the Company which have preferences upon any liquidation,
dissolution, or winding up of the Company or rights with respect to
the declaration, payment and setting aside of dividends on a parity
with those of the Class A Preferred.
(b) Except as otherwise permitted by the Amended and Restated
Agreement and Plan of Merger dated as of May 19, 1995 (the "Merger
Agreement"), among Stern's Miracle-Gro Products, Inc., Stern's
Nurseries, Inc., Miracle-Gro Lawn Products, Inc., Miracle- Gro
Products Limited, Hagedorn Partnership, L.P. (the "Partnership"),
Community Funds, Inc., Horace Hagedorn, John Kenlon, the general
partners of the Partnership, the Company and ZYX Corporation, the
Company will not, by amendment of its Restated Articles of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of Sections 3 and
4 and in the taking of all such action as may be necessary or
appropriate in order to protect the dividend and liquidation rights
of the holders of the Class A Preferred against impairment;
provided, however, that nothing herein will prevent the Company
from creating any new series of Preferred Stock with higher
dividend rates or liquidation payments so long as the priority of
such rights is not senior to the rights of the Class A Preferred.
6. Voting Rights. Except as otherwise required by law, the
holder of each share of Class A Preferred shall be entitled to the
number of votes equal to the number of shares of Common Stock into
which such share of Class A Preferred could be converted at the
record date for determination of the shareholders entitled to vote
on such matters, such votes to be counted together with all other
shares of stock of the Company having general voting power and not
separately as a class or series. Holders of Class A Preferred
shall be entitled to receive the same notice of any shareholders
meeting as is provided to holders of Common Stock. Fractional
votes by the holders of Class A Preferred shall not, however, be
permitted, and any fractional voting rights shall (after
aggregating all shares into which shares of Class A Preferred held
by each holder could be converted) be rounded to the nearest whole
number. The Company will, or will cause the registrar to, transmit
to the registered holders of the Class A Preferred all reports and
communications from the Company that are generally mailed to
holders of its Common Stock.
7. Conversion. The holders of the Class A Preferred have
conversion rights as follows (the Conversion Rights ):
(a) Right to Convert. Each share of Class A Preferred shall
be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share and prior to the close of
business of the Company on the business day next preceding any date
set for the redemption thereof (provided that funds sufficient to
redeem all shares to be redeemed on such date have been paid or
made available for payment as described in Section 8(b)(iii)), at
the office of the Company or any transfer agent for the Class A
Preferred, into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing $1,000 by the
Conversion Price, determined as hereinafter provided, in effect at
the time of conversion. The price at which shares of Common Stock
shall be deliverable upon conversion (the Conversion Price ) shall
initially be $19 per share of Common Stock. Such initial Conversion
Price shall be subject to adjustment as hereinafter provided.
(b) Accrued Dividends and Fractional Shares. Dividends shall
cease to accrue on shares of Class A Preferred surrendered for
conversion into Common Stock; provided, however, that any dividends
(whether or not declared) upon such shares which were accrued as of
but not paid on or before the Dividend Payment Date immediately
preceding the conversion date shall be paid in cash upon such
conversion or as soon thereafter as permitted by law.
No fractional shares of Common Stock shall be issued upon
conversion of Class A Preferred. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Company shall,
after aggregation of all fractional share interests held by each
holder, pay cash equal to such remaining fractional interest
multiplied by the Market Price at the time of conversion.
(c) Mechanics of Conversion. Before any holder of Class A
Preferred shall be entitled to convert the same into full shares of
Common Stock and to receive certificates therefor, such holder
shall surrender the certificate or certificates for the Class A
Preferred to be converted, duly endorsed, at the office of the
Company or of any transfer agent for the Class A Preferred, and
shall give written notice to the Company at such office that such
holder elects to convert the same. The Company shall, as soon as
practicable after such delivery, issue and deliver at such office
to such holder of Class A Preferred (or to any other person
specified in the notice delivered by such holder), a certificate or
certificates for the number of shares of Common Stock to which such
holder shall be entitled as aforesaid and a check payable to the
holder for any cash amounts payable as the result of a conversion
into fractional shares of Common Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business
on the date of such surrender of the shares of Class A Preferred to
be converted, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock on such date. In case any certificate for
shares of Class A Preferred shall be surrendered for conversion of
only a part of the shares represented thereby, the Company shall
deliver at such office to or upon the written order of the holder
thereof, a certificate or certificates for the number of shares of
Class A Preferred represented by such surrendered certificate which
are not being converted. Notwithstanding the foregoing, the
Company shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the
certificates evidencing Class A Preferred are either delivered to
the Company or its transfer agent, or the holder notifies the
Company or its transfer agent that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to
the Company to indemnify the Company from any loss incurred by it
in connection with such certificates. The issuance of certificates
for shares of Common Stock issuable upon conversion of shares of
Class A Preferred shall be made without charge to the converting
holder for any tax imposed in respect of the issuance thereof;
provided that the Company shall not be required to pay any tax
which may be payable with respect to any transfer involved in the
issue and delivery of any certificate in a name other than that of
the holder of the shares of Class A Preferred being converted.
(d) Effects of Certain Events.
(i) Common Stock Dividends, Subdivisions or Combinations. In
case the Company shall (A) pay or make a dividend or other
distribution to all holders of its Common Stock in shares of its
Common Stock, (B) subdivide, split or reclassify the outstanding
shares of its Common Stock into a larger number of shares or (C)
combine or reclassify the outstanding shares of its Common Stock
into a smaller number of shares, the Conversion Price in effect
immediately prior thereto shall be adjusted so that the holder of
each outstanding share of Class A Preferred shall thereafter be
entitled to receive upon the conversion of such share the number of
shares of Common Stock which such holder would have owned and been
entitled to receive had such shares of Class A Preferred been
converted immediately prior to the happening of any of the events
described above or, in the case of a stock dividend or other
distribution, prior to the record date for determination of
shareholders entitled thereto. An adjustment made pursuant to this
clause (i) shall become effective immediately after such record
date in the case of a dividend or distribution and immediately
after the effective date in the case of a subdivision, split,
combination or reclassification.
(ii) Distributions of Assets or Securities Other Than Common
Stock. In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any of its
capital stock (other than Common Stock), rights or warrants to
purchase any of its securities (other than those referred to in
(iii) below), cash (other than any regular quarterly or semi- annual
dividend which the Board of Directors of the Company determines),
other assets or evidences of its indebtedness, then in each such
case the Conversion Price shall be adjusted by multiplying the
Conversion Price in effect immediately prior to the date of such
dividend or distribution by a fraction, of which the numerator
shall be the Average Market Price per share of Common Stock at the
record date for determining shareholders entitled to such dividend
or distribution less the fair market value (as determined in good
faith by the Board of Directors) of the portion of the securities,
cash, assets or evidences of indebtedness so distributed applicable
to one share of Common Stock, and of which the denominator shall be
such Average Market Price per share. An adjustment made pursuant
to this clause (ii) shall become effective immediately after such
record date.
(iii) Below Market Distributions or Issuances. In case the
Company shall issue Common Stock (or rights, warrants or other
securities convertible into or exchangeable or exercisable for
shares of Common Stock) to all holders of Common Stock at a price
per share (or having an effective exercise, exchange or conversion
price per share) less than the Average Market Price per share of
Common Stock at the record date for the determination of
shareholders entitled to receive such Common Stock (or rights,
warrants or other securities convertible into or exchangeable or
exercisable for shares of Common Stock), then in each such case the
Conversion Price shall be adjusted by multiplying the Conversion
Price in effect immediately prior to the date of issuance of such
Common Stock (or rights, warrants or other securities) by a
fraction, the numerator of which shall be the sum of (A) the number
of shares of Common Stock outstanding on the date of such issuance
(without giving effect to any such issuance) and (B) the number of
shares which the aggregate consideration receivable by the Company
for the total number of shares of Common Stock so issued (or into
or for which such rights, warrants or other securities are
convertible, exchangeable or exercisable) would purchase at such
Average Market Price, and the denominator of which shall be the sum
of (A) the number of shares of Common Stock outstanding on the date
of such issuance (without giving effect to any such issuance) and
(B) the number of additional shares of Common Stock so issued (or
into or for which such rights, warrants or other securities are
convertible, exchangeable or exercisable). An adjustment made
pursuant to this clause (iii) shall become effective immediately
after the record date for determination of shareholders entitled to
receive or purchase such Common Stock (or rights, warrants or other
securities convertible into or exchangeable or exercisable for
shares of Common Stock). For purposes of this clause (iii), the
issuance of any options, rights or warrants or any shares of Common
Stock (whether treasury shares or newly issued shares) pursuant to
any employee (including consultants and directors) benefit or stock
option or purchase plan or program of the Company shall not be
deemed to constitute an issuance of Common Stock or options, rights
or warrants to which this clause (iii) applies. Notwithstanding
anything herein to the contrary, no further adjustment to the
Conversion Price shall be made (i) upon the issuance or sale of
Common Stock upon the exercise of any rights or warrants or (ii)
upon the issuance or sale of Common Stock upon conversion or
exchange of any convertible securities, if any adjustment in the
Conversion Price was made or required to be made upon the issuance
or sale of such rights, warrants or securities.
(iv) Repurchases. In case at any time or from time to time
the Company or any subsidiary thereof shall repurchase, by self
tender offer or otherwise, any shares of Common Stock of the
Company at a weighted average purchase price in excess of the
Average Market Price on the business day immediately prior to the
earliest of the date of such repurchase, the commencement of an
offer to repurchase or the public announcement of either (such date
being referred to as the Determination Date ), the Conversion
Price in effect as of such Determination Date shall be adjusted by
multiplying such Conversion Price by a fraction, the numerator of
which shall be (A) the product of (x) the number of shares of
Common Stock outstanding on such Determination Date and (y) the
Average Market Price of the Common Stock on such Determination Date
minus (B) the aggregate purchase price of such repurchase and the
denominator of which shall be the product of (x) the number of
shares of Common Stock outstanding on such Determination Date minus
the number of shares of Common Stock repurchased by the Company or
any subsidiary thereof in such repurchase and (y) the Average
Market Price of the Common Stock on such Determination Date. For
purposes of this clause (iv), the repurchase or repurchases by the
Company or any subsidiary thereof within any 12 month period of not
more than 15% of the shares of Common Stock outstanding as of the
first date of such period, at a price not in excess of 120% of the
Average Market Price as of the Determination Date of any such
repurchase, shall not be deemed to constitute a repurchase to which
this clause (iv) applies. An adjustment made pursuant to this
clause (iv) shall become effective immediately after the effective
date of such repurchase.
(e) Certain Reorganizations. In the event of any change,
reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company (other than any
reclassification referred to in Section 7(d)(i)), whether pursuant
to a merger, consolidation, reorganization or otherwise, or the
sale or other disposition of all or substantially all of the assets
and properties of the Company, the shares of Class A Preferred
shall, after such merger, consolidation, reorganization or other
transaction, sale or other disposition, be convertible into the
kind and number of shares of stock or other securities or property,
of the Company or otherwise, to which such holder would have been
entitled if immediately prior to such event such holder had
converted its shares of Class A Preferred into Common Stock at the
Conversion Price in effect as of the consummation of such event.
The provisions of this Section 7(e) shall similarly apply to
successive changes, reclassifications, conversions, exchange or
cancellations.
(f) No Impairment. Except as permitted by the Merger
Agreement, the Company will not, by amendment of its Restated
Articles of Incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this
Section 7 and in the taking of all such action as may be necessary
or appropriate in order to protect the conversion rights of the
holders of the Class A Preferred against impairment.
(g) Calculation of Adjustments. No adjustment in the
Conversion Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this
subsection (g) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All
calculations under this Section 7 shall be made by the Company and
shall be made to the nearest cent or to the nearest one hundredth
of a share, as the case may be. Anything in this Section 7 to the
contrary notwithstanding, the Company shall be entitled to make
such reductions in the Conversion Price, in addition to those
required by this Section 7, as it in its sole discretion shall
determine to be advisable in order that any stock dividends,
subdivision of shares, distribution of rights to purchase stock or
securities, or a distribution of securities convertible into or
exchangeable for stock hereafter made by the Company to its
shareholders shall not be taxable.
(h) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price pursuant to
this Section 7, the Company at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms hereof
and furnish to each holder of Class A Preferred a certificate
setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The
Company shall, upon the written request at any time of any holder
of Class A Preferred, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any,
of other property which at the time would be received upon the
conversion of Class A Preferred.
(i) Notices.
(A) In the event that the Company shall propose at any
time:
(1) to declare any dividend or distribution upon
its Common Stock;
(2) to offer for subscription pro rata to the
holders of any class or series of its stock any additional
shares of stock of any class or series or other rights;
or
(3) to effect any transaction of the type described
in Section 7(e) hereof involving a change in the Common Stock;
then, in connection with each such event, the Company shall
send to the holders of the Class A Preferred:
(i) at least 20 days prior written notice of
the date on which a record shall be taken for such
dividend or distribution (and specifying the date on
which the holders of Common Stock shall be entitled
thereto) or for determining rights to vote in respect of
the matters referred to in (1) and (2) above; and
(ii) in the case of the matters referred to in
(3) above, at least 20 days prior written notice of the
date when the same shall take place (and specifying the
time on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or
other property deliverable upon the occurrence of such
event).
(B) In the event of any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the
Company shall send to the holders of the Class A Preferred at
least 20 days prior written notice.
(C) The Company shall send written notice immediately
upon any public announcement with respect to an open market
repurchase program, any self tender offer for shares of Common
Stock and any other repurchase other than a repurchase of
stock of an employee or consultant pursuant to any benefit
plan or agreement.
8. Redemption.
(a) Redemption. The Class A Preferred shall not be subject
to redemption prior to the last day of the month in which the fifth
anniversary of the date of issuance occurs. On or after such date,
the Company may, at its option, redeem all or from time to time any
part of the shares of Class A Preferred, out of funds legally
available therefor, upon giving the Redemption Notice as set forth
in Section 8(b) hereof. The redemption payment for each share of
Class A Preferred shall be an amount (the Redemption Payment ) in
cash equal to the sum of (i) the amount of all accrued and unpaid
dividends (whether or not declared) thereon to and including the
date fixed for redemption plus (ii) $1000. In the event of a
redemption of only a part of the then outstanding Class A
Preferred, the Company shall effect such redemption ratably
according to the number of shares held by each holder of Class A
Preferred.
(b) Mechanics of Redemption.
(i) At least 30 days, but no more than 60 days, prior to the
date fixed for any redemption pursuant to Section 8(a) (the
Redemption Date ), the Company shall send a written notice (the
Redemption Notice ) to the holders of shares to be redeemed on
such date (the Redemption Shares ) stating: (A) the total number
of shares being redeemed; (B) the number of Redemption Shares held
by such holder; (C) the Redemption Date and the Redemption Payment;
(D) the date on which such holder s conversion rights as to such
shares shall terminate; and (E) the manner in which and the place
at which such holder is to surrender to the Company the certificate
or certificates representing the Redemption Shares.
(ii) Upon the surrender to the Company, in the manner and at
the place designated, of a certificate or certificates representing
Redemption Shares, the Redemption Payment for such shares shall be
payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof. All such
surrendered certificates shall be cancelled. Upon redemption of
only a portion of the shares of Class A Preferred represented by a
certificate surrendered for redemption, the Company shall issue and
deliver to or upon the written order of the holder of the
certificate so surrendered, at the expense of the Company (except
for expenses relating to the issuance of such shares to a person
other than the record holder of the Redemption Shares), a new
certificate representing the unredeemed shares of Class A Preferred
represented by the certificate so surrendered.
(iii) On or prior to the Redemption Date, the Company shall
have the option to deposit the aggregate of all Redemption Payments
for all Redemption Shares (other than Redemption Shares surrendered
for conversion prior to such date) in a bank or trust company
(designated in the notice of such redemption) doing business in the
State of Ohio or the City of New York, having aggregate capital and
surplus in excess of $500,000,000, as a trust fund for the benefit
of the respective holders of Redemption Shares, with irrevocable
instructions and authority to the bank or trust company to pay the
appropriate Redemption Payment to the holders of Redemption Shares
upon receipt of notification from the Company that such holder has
surrendered the certificate representing such shares to the
Company. Such instructions shall also provide that any such moneys
remaining unclaimed at the expiration of one year following the
Redemption Date shall thereafter be returned to the Company upon
its request as expressed in a resolution of its Board of Directors.
The holder of any Redemption Shares in respect of which such
deposit has been returned to the Company pursuant to the preceding
sentence shall have a claim as an unsecured creditor against the
Company for the Redemption Payment in respect thereof, without
interest.
(iv) Provided that the Company has given the Redemption
Notice described in Section 8(b)(i) and has on or prior to the
Redemption Date either paid or made available (as described in
Section 8(b)(iii)) Redemption Payments to the holders of Redemption
Shares, all Redemption Shares shall be deemed to have been redeemed
as of the close of business of the Company on the applicable
Redemption Date. Thereafter, the holder of such shares shall no
longer be treated for any purposes as the record holder of such
shares of Class A Preferred, regardless of whether the certificates
representing such shares are surrendered to the Company or its
transfer agent, excepting only the right of the holder to receive
the appropriate Redemption Payment, without interest, upon such
surrender. Such shares so redeemed shall not be transferred on the
books of the Company or be deemed to be outstanding for any purpose
whatsoever.
(v) The Company shall not be obligated to pay the Redemption
Payment to any holder of Redemption Shares unless the certificates
evidencing such shares are either delivered to the Company or its
transfer agent, or the holder notifies the Company or its transfer
agent that such certificates have been lost, stolen or destroyed
and executes an agreement satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection with such
certificates.
(c) Limitation on Redemption. The Company shall not be
obligated to redeem any shares of Class A Preferred which have
previously been converted into Common Stock. The Company shall not
be obligated to redeem shares pursuant to this Section 8 if such
redemption would violate any provisions of applicable law. If,
after giving the Redemption Notice, the Company is unable, pursuant
to applicable law, to redeem some or all unconverted Redemption
Shares on any particular Redemption Date, the Company shall
promptly notify the holders thereof of the facts that prevent the
Company from so redeeming such shares. Thereafter, the Company
shall redeem such unredeemed Redemption Shares at such time as it
is lawfully able to do so.
9. Status of Converted Shares. If shares of Class A
Preferred are converted pursuant to Section 7 hereof or redeemed
pursuant to Section 8 hereof, the shares so converted or redeemed
shall resume the status of authorized but unissued shares of
Preferred Stock of the Company unless otherwise prohibited by
applicable law.
10. Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to
have been duly given if delivered by hand or when sent by telegram
or telecopier (with receipt confirmed), provided a copy is also
sent by express (overnight, if possible) courier, addressed (i) in
the case of a holder of Class A Preferred, to such holder's address
of record, and (ii) in the case of the Company, to the Company s
principal executive offices to the attention of the Company's
secretary.
11. Amendments and Waivers. Any right, preference, privilege
or power of, or restriction provided for the benefit of, the Class
A Preferred set forth herein may be amended and the observance
thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively) with the written consent
of the Company and the affirmative vote or written consent of the
holders of not less than a majority of the shares of Class A
Preferred then outstanding, and any amendment or waiver so effected
shall be binding upon the Company and all holders of Class A
Preferred.
12. Additional Definitions. As used herein the term Trading
Day means each Monday, Tuesday, Wednesday, Thursday and Friday
which is a day on which the New York Stock Exchange, Inc. is open
for trading.
As used herein, the term Market Price of a share of Common
Stock or of any other security of the Company on any date shall
mean: (i) the last reported sales price of the Common Stock or
such other security on the principal national securities exchange
on which such Common Stock or other security is listed or admitted
to trading or, if no such reported sale takes place on such date,
the average of the closing bid and asked prices thereon, as
reported in The Wall Street Journal, or (ii) if such Common Stock
or other security shall not be listed or admitted to trading on a
national securities exchange, the last reported sales price on the
NASDAQ National Market or, if no such reported sales takes place on
any such date, the average of the closing bid and asked prices
thereon, as reported in The Wall Street Journal, or (iii) if such
Common Stock or other security shall not be quoted on such National
Market nor listed or admitted to trading on a national securities
exchange, then the average of the closing bid and asked prices, as
reported by The Wall Street Journal for the over-the-counter
market, or (iv) if there is no public market for such Common Stock
or other security, the fair market value of a share of such Common
Stock or a unit of such other security as determined in good faith
by the Board of Directors of the Company.
The term Average Market Price shall mean the average of the
Market Prices for the 30 consecutive trading days immediately
preceding the date in question.
ANNEX B
SERIES A WARRANT TO PURCHASE COMMON SHARES
OF
THE SCOTTS COMPANY
THIS WARRANT WAS ISSUED PURSUANT TO THE AMENDED AND
RESTATED AGREEMENT AND PLAN OF MERGER DATED AS OF MAY 19,
1995, AMENDING AND RESTATING THE ORIGINAL AGREEMENT AND PLAN
OF MERGER DATED AS OF JANUARY 26, 1995 (AS SO AMENDED AND
RESTATED, THE "MERGER AGREEMENT"), AMONG STERN'S MIRACLE-GRO
PRODUCTS, INC., STERN'S NURSERIES, INC., MIRACLE-GRO LAWN
PRODUCTS, INC., MIRACLE-GRO PRODUCTS LIMITED, THE HAGEDORN
PARTNERSHIP, L.P., THE GENERAL PARTNERS OF THE HAGEDORN
PARTNERSHIP, L.P., COMMUNITY FUNDS, INC., HORACE HAGEDORN,
JOHN KENLON, THE SCOTTS COMPANY AND ZYX CORPORATION. NO
TRANSFER MAY OCCUR EXCEPT IN CONFORMITY WITH THE TERMS OF THE
MERGER AGREEMENT.
No. WA-1 Warrant to Purchase
______ Common Shares,
without par value
(subject to adjustment)
Void after November 19, 2003
For value received, THE SCOTTS COMPANY, an Ohio
corporation (the Company ), hereby certifies that
___________, or registered assigns (the Holder ), is
entitled, subject to the terms set forth below and to the
Merger Agreement, to purchase from the Company, ______ Common
Shares, without par value, of the Company ( Common Stock ), as
constituted on May 19, 1995 (the Warrant Issue Date ), upon
surrender hereof at the principal office of the Company
referred to below, with the Notice of Exercise attached hereto
duly executed, and simultaneous payment therefor in lawful
money of the United States as hereinafter provided at the per
share price of $21 (the Exercise Price ). The number,
character and Exercise Price of such shares of Common Stock
are subject to adjustment as provided below. The term
Warrant as used herein shall include this Warrant and any
warrants delivered in substitution or exchange therefor as
provided herein. This Warrant is registered and its transfer
may be registered upon the books maintained for that purpose
by the Company by delivery of this Warrant duly endorsed.
Terms used herein and not otherwise defined shall have
the meanings ascribed thereto in the Merger Agreement.
1. Term of Warrant. Subject to the terms and
conditions set forth herein, this Warrant shall be
exercisable, in whole or in part, during the term commencing
on May 19, 1995 and ending at 5:00 p.m., Eastern time, on the
date eight years and six months after the Warrant Issue Date,
and shall be void thereafter.
2. Exercise of Warrant.
2.1 Method. The purchase rights represented by
this Warrant are exercisable by the Holder in whole or in
part, at any time, or from time to time, during the term
hereof as described in Section 1 above and subject to Section
2.5, by the surrender of this Warrant and the Notice of
Exercise annexed hereto duly completed and executed by the
Holder at the principal executive office of the Company at
14111 Scottslawn Road, Marysville, Ohio 43041 (or such other
office or agency of the Company as it may designate by notice
in writing to the Holder), upon payment in cash or by wire
transfer to a bank account designated by the Company or by a
certified or cashier's check of the aggregate Exercise Price
of the shares to be purchased; provided, however, that, in
lieu of cash, such Holder may pay such Exercise Price by
exchanging shares of Common Stock having an aggregate Market
Price equal to the aggregate Exercise Price or by reducing the
number of shares of Common Stock such Holder would otherwise
be entitled to upon such exercise by a number of shares of
Common Stock having an aggregate Market Price equal to the
aggregate Exercise Price.
2.2 Effect. This Warrant shall be deemed to have
been exercised at the time of its surrender for exercise
together with full payment as provided above, and the person
entitled to receive the shares of Common Stock issuable upon
such exercise shall be treated for all purposes as the holder
of record of such shares at and after such time. As promptly
as practicable on or after such date the Company at its
expense shall issue to the person entitled to receive the same
a certificate for the number of shares of Common Stock
issuable upon such exercise. If this Warrant is exercised in
part, the Company at its expense will execute and deliver a
new Warrant exercisable for the number of shares for which
this Warrant may then be exercised.
2.3 Holder Not a Shareholder. The Holder shall
neither be entitled to vote nor receive dividends nor be
deemed the holder of Common Stock or any other securities of
the Company that may at any time be issuable on the exercise
hereof for any purpose until the Warrant has been exercised
for shares of Common Stock as provided in this Section 2.
2.4 No Fractional Shares or Scrip. No fractional
shares or scrip representing fractional shares of Common Stock
shall be issued upon the exercise of this Warrant. In lieu of
any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the
Exercise Price multiplied by such fraction.
2.5 Exercise for Cash in Certain Circumstances.
Notwithstanding the foregoing, (a) until the fifth anniversary
of the Warrant Issue Date, in the event, and to the extent
that, the exercise of this Warrant would cause the Total
Voting Power of the Shareholders to exceed the Standstill
Percentage, this Warrant shall not be exercisable for shares
of Common Stock but rather shall be exercisable solely for the
difference at the time of exercise between the Market Price
and the Exercise Price at such time and (b) thereafter, in the
event, and to the extent that, the exercise of this Warrant
would cause the Total Voting Power of the Shareholders to
exceed 49%, this Warrant shall not be exercisable for shares
of Common Stock but rather shall be exercisable solely for the
difference at the time of exercise between the Market Price
and the Exercise Price at such time.
3. Registered Warrants.
3.1 Series. This Warrant is one of a series of
Warrants, designated as Series A, which are identical except
as to the number of shares of Common Stock purchasable and as
to any restriction on the transfer thereof in order to comply
with the Securities Act of 1933 (the Act ) and the
regulations of the Securities and Exchange Commission
promulgated thereunder or state securities or blue sky laws.
Such Warrants are referred to herein collectively as the
Warrants.
3.2 Record Ownership. The Company shall maintain a
register of the Holders of the Warrants (the Register )
showing their names and addresses and the serial numbers and
number of Common Shares purchasable, issued to or transferred
of record by them from time to time. The Register may be
maintained in electronic, magnetic or other computerized form.
The Company may treat the person named as the Holder of this
Warrant in the Register as the sole owner of this Warrant.
The Holder of this Warrant is the person exclusively entitled
to receive notifications with respect to this Warrant,
exercise it to purchase shares of Common Stock and otherwise
exercise all of the rights and powers as the absolute owner
hereof.
3.3 Registration of Transfer. To the extent
permitted under the Merger Agreement, transfers of this
Warrant may be registered on the Register. Transfers shall be
registered when this Warrant is presented to the Company duly
endorsed with a request to register the transfer hereof in
accordance with the terms of the Merger Agreement. When this
Warrant is presented for transfer and duly transferred
hereunder, it shall be cancelled and a new Warrant showing the
name of the transferee as the Holder thereof shall be issued
in lieu hereof. No transfer of this Warrant may take place
except in accordance with the terms of the Merger Agreement.
3.4 Worn and Lost Warrants. If this Warrant
becomes worn, defaced or mutilated but is still substantially
intact and recognizable, the Company or its agent may issue a
new Warrant in lieu hereof upon its surrender. If this
Warrant is lost, destroyed or wrongfully taken, the Company
shall issue a new Warrant in place of the original Warrant if
the Holder so requests by written notice to the Company and
the Holder has delivered to the Company an indemnity agreement
reasonably satisfactory to the Company with an affidavit of
the Holder that this Warrant has been lost, destroyed or
wrongfully taken.
3.5 Restrictions on Transfer. (a) This Warrant
and the Common Stock issuable upon the exercise hereof have
been registered under the Act on Form S-4, and therefore this
Warrant and the Common Stock issuable upon the exercise of
this Warrant may not be offered for sale, sold or otherwise
transferred unless such offer, sale or other transfer complies
with Rule 145 under the Act and is otherwise registered under
the appropriate state securities or Blue Sky laws or such
transfer is exempt from such registration.
(b) No transfer of this Warrant or the Common Stock
issuable upon the exercise hereof may be made except in
accordance with the terms of the Merger Agreement.
3.6 Warrant Agent. The Company may, by written
notice to the Holder, appoint an agent for the purpose of
maintaining the Register, issuing Common Stock or other
securities then issuable upon the exercise of this Warrant,
exchanging or transferring this Warrant, or any or all of the
foregoing. Thereafter, any such registration, issuance,
exchange, or transfer, as the case may be, shall be made at
the office of such agent.
4. Reservation of Stock. The Company covenants that,
during the term this Warrant is exercisable, the Company will
reserve from its authorized and unissued Common Stock or
Common Stock held in Treasury a sufficient number of shares to
provide for the issuance of Common Stock upon the exercise of
this Warrant. The Company further covenants that all shares
that may be issued upon the exercise of rights represented by
this Warrant, upon exercise of the rights represented by this
Warrant and payment of the Exercise Price, all as set forth
herein, will be duly authorized, validly issued, fully paid
and non-assessable. The Company agrees that its issuance of
this Warrant shall constitute full authority to its officers
who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of
Common Stock upon the exercise of this Warrant.
5. Effects of Certain Events.
5.1 Common Stock Dividends, Subdivisions or
Combinations. In case the Company shall (A) pay or make a
dividend or other distribution to all holders of its Common
Stock in shares of its Common Stock, (B) subdivide, split or
reclassify the outstanding shares of its Common Stock into a
larger number of shares or (C) combine or reclassify the
outstanding shares of its Common Stock into a smaller number
of shares, the Exercise Price in effect immediately prior
thereto shall be adjusted so that the Holder of this Warrant
shall thereafter be entitled to receive upon the exercise of
this Warrant, subject to Section 2.5, the number of shares of
Common Stock which such Holder would have owned and been
entitled to receive had such Warrant been exercised
immediately prior to the happening of any of the events
described above or, in the case of a stock dividend or other
distribution, prior to the record date for determination of
shareholders entitled thereto. An adjustment made pursuant to
this Section 5.1 shall become effective immediately after such
record date in the case of a dividend or distribution and
immediately after the effective date in the case of a
subdivision, split, combination or reclassification.
5.2 Distributions of Assets or Securities Other
Than Common Stock. In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock
shares of any of its capital stock (other than Common Stock),
rights or warrants to purchase any of its securities (other
than those referred to in Section 5.3 below), cash (other than
any regular quarterly or semi-annual dividend which the Board
of Directors of the Company determines), other assets or
evidences of its indebtedness, then in each such case the
Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to the date of such dividend
or distribution by a fraction, of which the numerator shall be
the Average Market Price per share of Common Stock at the
record date for determining shareholders entitled to such
dividend or distribution less the fair market value (as
determined in good faith by the Board of Directors) of the
portion of the securities, cash, assets or evidences of
indebtedness so distributed applicable to one share of Common
Stock, and of which the denominator shall be such Average
Market Price per share. An adjustment made pursuant to this
Section 5.2 shall become effective immediately after such
record date.
5.3 Below Market Distributions or Issuances. In
case the Company shall issue Common Stock (or rights, warrants
or other securities convertible into or exchangeable or
exercisable for shares of Common Stock) to all holders of
Common Stock at a price per share (or having an effective
exercise, exchange or conversion price per share) less than
the Average Market Price per share of Common Stock at the
record date for the determination of shareholders entitled to
receive such Common Stock (or rights, warrants or other
securities convertible into or exchangeable or exercisable for
shares of Common Stock), then in each such case the Exercise
Price shall be adjusted by multiplying the Exercise Price in
effect immediately prior to the date of issuance of such
Common Stock (or rights, warrants or other securities) by a
fraction, the numerator of which shall be the sum of (A) the
number of shares of Common Stock outstanding on the date of
such issuance (without giving effect to any such issuance) and
(B) the number of shares which the aggregate consideration
receivable by the Company for the total number of shares of
Common Stock so issued (or into or for which such rights,
warrants or other securities are convertible, exchangeable or
exercisable) would purchase at such Average Market Price, and
the denominator of which shall be the sum of (A) the number of
shares of Common Stock outstanding on the date of such
issuance (without giving effect to any such issuance) and (B)
the number of additional shares of Common Stock so issued (or
into or for which such rights, warrants or other securities
are convertible, exchangeable or exercisable). An adjustment
made pursuant to this Section 5.3 shall become effective
immediately after the record date for determination of
shareholders entitled to receive or purchase such Common Stock
(or rights, warrants or other securities convertible into or
exchangeable or exercisable for shares of Common Stock). For
purposes of this Section 5.3, the issuance of any options,
rights or warrants or any shares of Common Stock (whether
treasury shares or newly issued shares) pursuant to any
employee (including consultants and directors) benefit or
stock option or purchase plan or program of the Company shall
not be deemed to constitute an issuance of Common Stock or
options, rights or warrants to which this Section 5.3 applies.
Notwithstanding anything herein to the contrary, no further
adjustment to the Exercise Price shall be made (i) upon the
issuance or sale of Common Stock upon the exercise of any
rights or warrants or (ii) upon the issuance or sale of Common
Stock upon conversion or exchange of any convertible
securities, if any adjustment in the Exercise Price was made
or required to be made upon the issuance or sale of such
rights, warrants or securities.
5.4 Repurchases.
In case at any time or from time to time the Company or any subsidiary
thereof shall repurchase, by self tender offer or otherwise, any shares
of Common Stock of the Company at a weighted average purchase price in
excess of the Average Market Price on the business day immediately prior
to the earliest of the date of such repurchase, the commencement of an
offer to repurchase or the public announcement of either (such date being
referred to as the Determination Date ), the Exercise Price in effect
as of such Determination Date shall be adjusted by multiplying such
Exercise Price by a fraction, the numerator of which shall be
(A) the product of (x) the number of shares of Common Stock
outstanding on such Determination Date and (y) the Average
Market Price of the Common Stock on such Determination Date
minus (B) the aggregate purchase price of such repurchase and
the denominator of which shall be the product of (x) the
number of shares of Common Stock outstanding on such
Determination Date minus the number of shares of Common Stock
repurchased by the Company or any subsidiary thereof in such
repurchase and (y) the Average Market Price of the Common
Stock on such Determination Date. For purposes of this clause
(iv), the repurchase or repurchases by the Company or any
subsidiary thereof within any 12 month period of not more than
15% of the shares of Common Stock outstanding as of the first
date of such period, at a price not in excess of 120% of the
Average Market Price as of the Determination Date of any such
repurchase, shall not be deemed to constitute a repurchase to
which this Section 5.4 applies. An adjustment made pursuant
to this Section 5.4 shall become effective immediately after
the effective date of such repurchase.
6. Certain Reorganizations. In the event of any
change, reclassification, conversion, exchange or cancellation
of outstanding shares of Common Stock of the Company (other
than any reclassification referred to in Section 5.1), whether
pursuant to a merger, consolidation, reorganization or
otherwise, or the sale or other disposition of all or
substantially all of the assets and properties of the Company,
this Warrant shall, after such merger, consolidation,
reorganization or other transaction, sale or other
disposition, be exercisable for the kind and number of shares
of stock or other securities or property, of the Company or
otherwise, to which the Holder would have been entitled if
immediately prior to such event such Holder had exercised this
Warrant for Common Stock at the Exercise Price in effect as of
the consummation of such event. The provisions of this
Section 6 shall similarly apply to successive changes,
reclassifications, conversions, exchange or cancellations.
7. No Impairment. Except as permitted by the Merger
Agreement, the Company will not, by amendment of its Restated
Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company,
but will at all times in good faith assist in the carrying out
of all the provisions of this Warrant and in the taking of all
such action as may be necessary or appropriate in order to
protect the exercise rights of the Holder hereof against
impairment.
8. Calculation of Adjustments. No adjustment in the
Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of
this Section 8 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
All calculations under this Warrant shall be made by the
Company and shall be made to the nearest cent or to the
nearest one hundredth of a share, as the case may be.
Anything in this Warrant to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the
Exercise Price, in addition to those required by this Warrant,
as it in its sole discretion shall determine to be advisable
in order that any stock dividends, subdivision of shares,
distribution of rights to purchase stock or securities, or a
distribution of securities convertible into or exchangeable
for stock hereafter made by the Company to its shareholders
shall not be taxable.
9. Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Exercise Price
pursuant to this Warrant, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to the Holder of this
Warrant a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon
the written request at any time of the Holder of this Warrant,
furnish or cause to be furnished to such Holder a like
certificate setting forth (i) such adjustments and
readjustments, (ii) the Exercise Price at the time in effect,
and (iii) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received
upon the exercise of this Warrant; provided, however, that the
Company shall not be required to calculate the effect of
Section 2.5 upon such exercise.
10. Notices.
10.1 Dilutive Events. In the event that the Company
shall propose at any time:
(1) to declare any dividend or distribution upon its
Common Stock;
(2) to offer for subscription pro rata to the
holders of any class or series of its stock any additional
shares of stock of any class or series or other rights; or
(3) to effect any transaction of the type described
in Section 6 hereof involving a change in the Common Stock;
then, in connection with each such event, the Company shall
send to the Holders of this Warrant:
(A) at least 20 days prior written notice of the
date on which a record shall be taken for such dividend or
distribution (and specifying the date on which the holders of
Common Stock shall be entitled thereto) or for determining
rights to vote in respect of the matters referred to in (1)
and (2) above; and (B) in the case of the matters referred to in (3)
above, at least 20 days prior written notice of the date when
the same shall take place (and specifying the time on which
the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property
deliverable upon the occurrence of such event).
10.2 Dissolution; Liquidation. In the event of any
voluntary or involuntary dissolution, liquidation or winding
up of the Company, the Company shall send to the Holder of
this Warrant at least 20 days prior written notice.
10.3 Repurchase Programs. The Company shall send
written notice immediately upon any public announcement with
respect to an open market repurchase program, any self tender
offer for shares of Common Stock and any other repurchase
other than a repurchase of stock of an employee or consultant
pursuant to any benefit plan or agreement.
11. Amendments. This Warrant may not be amended without
the prior written consent of the Holder.
12. Additional Definition. As used herein, the term
Average Market Price shall mean the average of the Market
Prices for the 30 consecutive trading immediately preceding
the date in question.
13. Notices. Any notice, certificate or other
communication which is required or convenient under the terms
of this Warrant shall be duly given if it is in writing and
delivered in person or mailed by first class mail, postage
prepaid, and directed to the Holder of the Warrant at its
address as it appears on the Register or if to the Company to
its principal executive offices. The time when such notice is
sent shall be the time of the giving of the notice.
14. Time. Where this Warrant provides for a payment or
performance on a Saturday or Sunday or a public holiday in the
State of Ohio, such payment or performance may be made on the
next succeeding business day, without liability of the Company
for interest on any such payment.
15. Rules of Construction. In this Warrant, unless the
context otherwise requires, words in the singular number
include the plural, and in the plural include the singular,
and words of the masculine gender include the feminine and the
neuter, and when the sense so indicates, words of the neuter
gender may refer to any gender. The numbers and titles of
sections contained in this Warrant are inserted for
convenience of reference only, and they neither form a part of
this Warrant nor are they to be used in the construction or
interpretation hereof.
16. Governing Law. This Warrant shall be construed in
accordance with and governed by the law of the State of Ohio.
IN WITNESS WHEREOF, the Company has caused this Warrant
to be executed by its officer thereto duly authorized.
THE SCOTTS COMPANY
By:______________________________________
Name:
Title:
Assignment of Warrant
The undersigned hereby sell(s) and assign(s) and
transfer(s) unto
______________________________________________________________
______________________________________________________________
__________________________
(name, address and SSN or EIN of assignee)
__________________________________ of this Warrant.
(portion of Warrant)
Date:_____________________
Sign:________________________________________
(Signature must conform in all respects to
name of Holder shown on face of Warrant)
Signature Guaranteed:
Notice of Exercise
[To be completed and signed only upon exercise of Warrant]
The undersigned, the Holder of this Warrant, hereby
irrevocably elects to exercise the right to purchase Common
Stock, without par value, of The Scotts Company as follows:
__________________________________________
(whole number of Warrants exercised)
Dollars ($)
(number of Warrants exercised times Exercise Price)
Shares ()
Dollars ($)
(number of shares and Market Price of Common
Stock in cashless exercise)
[Signature must be
____________________________________________
guaranteed if name of (name of holder of shares
if different than Holder
holder of shares differs of Warrant)
from registered Holder
of Warrant]
____________________________________________
(address of holder of shares if
different than address of Holder of Warrant)
____________________________________________
(Social Security or EIN of holder
of shares if different than Holder of Warrant)
Date:_______________
Sign:______________________________________________
(Signature must conform in all
respects to name of Holder shown on face of this Warrant)
Signature Guaranteed:
RECEIPT FOR WARRANTS
The undersigned hereby acknowledges receipt from The
Scotts Company (the Company ) on this 19th day of May, 1995,
of a separate Series A Warrant for the purchase of ______
common shares of the Company, subject to the terms and
conditions contained in the warrant.
SIGNATURE
COMMUNITY FUNDS, INC., a New York
not-for-profit corporation
_______________________
By:
Its:
_______________________
John Kenlon
ANNEX C
SERIES B WARRANT TO PURCHASE COMMON SHARES
OF
THE SCOTTS COMPANY
THIS WARRANT WAS ISSUED PURSUANT TO THE AMENDED AND
RESTATED AGREEMENT AND PLAN OF MERGER DATED AS OF MAY 19,
1995, AMENDING AND RESTATING THE ORIGINAL AGREEMENT AND PLAN
OF MERGER DATED AS OF JANUARY 26, 1995 (AS SO AMENDED AND
RESTATED, THE "MERGER AGREEMENT"), AMONG STERN'S MIRACLE-GRO
PRODUCTS, INC., STERN'S NURSERIES, INC., MIRACLE-GRO LAWN
PRODUCTS, INC., MIRACLE-GRO PRODUCTS LIMITED, THE HAGEDORN
PARTNERSHIP, L.P., THE GENERAL PARTNERS OF THE HAGEDORN
PARTNERSHIP, L.P., COMMUNITY FUNDS, INC., HORACE HAGEDORN,
JOHN KENLON, THE SCOTTS COMPANY AND ZYX CORPORATION. NO
TRANSFER MAY OCCUR EXCEPT IN CONFORMITY WITH THE TERMS OF THE
MERGER AGREEMENT.
No. WB-1 Warrant to Purchase
______ Common Shares,
without par value
(subject to adjustment)
Void after November 19, 2003
For value received, THE SCOTTS COMPANY, an Ohio
corporation (the Company ), hereby certifies that
___________, or registered assigns (the Holder ), is
entitled, subject to the terms set forth below and to the
Merger Agreement, to purchase from the Company, ______ Common
Shares, without par value, of the Company ( Common Stock ), as
constituted on May 19, 1995 (the Warrant Issue Date ), upon
surrender hereof at the principal office of the Company
referred to below, with the Notice of Exercise attached hereto
duly executed, and simultaneous payment therefor in lawful
money of the United States as hereinafter provided at the per
share price of $25 (the Exercise Price ). The number,
character and Exercise Price of such shares of Common Stock
are subject to adjustment as provided below. The term
Warrant as used herein shall include this Warrant and any
warrants delivered in substitution or exchange therefor as
provided herein. This Warrant is registered and its transfer
may be registered upon the books maintained for that purpose
by the Company by delivery of this Warrant duly endorsed.
Terms used herein and not otherwise defined shall have
the meanings ascribed thereto in the Merger Agreement.
1. Term of Warrant. Subject to the terms and
conditions set forth herein, this Warrant shall be
exercisable, in whole or in part, during the term commencing
on May 19, 1995 and ending at 5:00 p.m., Eastern time, on the
date eight years and six months after the Warrant Issue Date,
and shall be void thereafter.
2. Exercise of Warrant.
2.1 Method. The purchase rights represented by
this Warrant are exercisable by the Holder in whole or in
part, at any time, or from time to time, during the term
hereof as described in Section 1 above and subject to Section
2.5, by the surrender of this Warrant and the Notice of
Exercise annexed hereto duly completed and executed by the
Holder at the principal executive office of the Company at
14111 Scottslawn Road, Marysville, Ohio 43041 (or such other
office or agency of the Company as it may designate by notice
in writing to the Holder), upon payment in cash or by wire
transfer to a bank account designated by the Company or by a
certified or cashier's check of the aggregate Exercise Price
of the shares to be purchased; provided, however, that, in
lieu of cash, such Holder may pay such Exercise Price by
exchanging shares of Common Stock having an aggregate Market
Price equal to the aggregate Exercise Price or by reducing the
number of shares of Common Stock such Holder would otherwise
be entitled to upon such exercise by a number of shares of
Common Stock having an aggregate Market Price equal to the
aggregate Exercise Price.
2.2 Effect. This Warrant shall be deemed to have
been exercised at the time of its surrender for exercise
together with full payment as provided above, and the person
entitled to receive the shares of Common Stock issuable upon
such exercise shall be treated for all purposes as the holder
of record of such shares at and after such time. As promptly
as practicable on or after such date the Company at its
expense shall issue to the person entitled to receive the same
a certificate for the number of shares of Common Stock
issuable upon such exercise. If this Warrant is exercised in
part, the Company at its expense will execute and deliver a
new Warrant exercisable for the number of shares for which
this Warrant may then be exercised.
2.3 Holder Not a Shareholder. The Holder shall
neither be entitled to vote nor receive dividends nor be
deemed the holder of Common Stock or any other securities of
the Company that may at any time be issuable on the exercise
hereof for any purpose until the Warrant has been exercised
for shares of Common Stock as provided in this Section 2.
2.4 No Fractional Shares or Scrip. No fractional
shares or scrip representing fractional shares of Common Stock
shall be issued upon the exercise of this Warrant. In lieu of
any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the
Exercise Price multiplied by such fraction.
2.5 Exercise for Cash in Certain Circumstances.
Notwithstanding the foregoing, (a) until the fifth anniversary
of the Warrant Issue Date, in the event, and to the extent
that, the exercise of this Warrant would cause the Total
Voting Power of the Shareholders to exceed the Standstill
Percentage, this Warrant shall not be exercisable for shares
of Common Stock but rather shall be exercisable solely for the
difference at the time of exercise between the Market Price
and the Exercise Price at such time and (b) thereafter, in the
event, and to the extent that, the exercise of this Warrant
would cause the Total Voting Power of the Shareholders to
exceed 49%, this Warrant shall not be exercisable for shares
of Common Stock but rather shall be exercisable solely for the
difference at the time of exercise between the Market Price
and the Exercise Price at such time.
3. Registered Warrants.
3.1 Series. This Warrant is one of a series of
Warrants, designated as Series B, which are identical except
as to the number of shares of Common Stock purchasable and as
to any restriction on the transfer thereof in order to comply
with the Securities Act of 1933 (the Act ) and the
regulations of the Securities and Exchange Commission
promulgated thereunder or state securities or blue sky laws.
Such Warrants are referred to herein collectively as the
Warrants.
3.2 Record Ownership. The Company shall maintain a
register of the Holders of the Warrants (the Register )
showing their names and addresses and the serial numbers and
number of Common Shares purchasable, issued to or transferred
of record by them from time to time. The Register may be
maintained in electronic, magnetic or other computerized form.
The Company may treat the person named as the Holder of this
Warrant in the Register as the sole owner of this Warrant.
The Holder of this Warrant is the person exclusively entitled
to receive notifications with respect to this Warrant,
exercise it to purchase shares of Common Stock and otherwise
exercise all of the rights and powers as the absolute owner
hereof.
3.3 Registration of Transfer. To the extent
permitted under the Merger Agreement, transfers of this
Warrant may be registered on the Register. Transfers shall be
registered when this Warrant is presented to the Company duly
endorsed with a request to register the transfer hereof in
accordance with the terms of the Merger Agreement. When this
Warrant is presented for transfer and duly transferred
hereunder, it shall be cancelled and a new Warrant showing the
name of the transferee as the Holder thereof shall be issued
in lieu hereof. No transfer of this Warrant may take place
except in accordance with the terms of the Merger Agreement.
3.4 Worn and Lost Warrants. If this Warrant
becomes worn, defaced or mutilated but is still substantially
intact and recognizable, the Company or its agent may issue a
new Warrant in lieu hereof upon its surrender. If this
Warrant is lost, destroyed or wrongfully taken, the Company
shall issue a new Warrant in place of the original Warrant if
the Holder so requests by written notice to the Company and
the Holder has delivered to the Company an indemnity agreement
reasonably satisfactory to the Company with an affidavit of
the Holder that this Warrant has been lost, destroyed or
wrongfully taken.
3.5 Restrictions on Transfer. (a) This Warrant and
the Common Stock issuable upon the exercise hereof have been
registered under the Act on Form S-4, and therefore this
Warrant and the Common Stock issuable upon the exercise of
this Warrant may not be offered for sale, sold or otherwise
transferred unless such offer, sale or other transfer complies
with Rule 145 under the Act and is otherwise registered under
the appropriate state securities or Blue Sky laws or such
transfer is exempt from such registration.
(b) No transfer of this Warrant or the Common Stock
issuable upon the exercise hereof may be made except in
accordance with the terms of the Merger Agreement.
3.6 Warrant Agent. The Company may, by written
notice to the Holder, appoint an agent for the purpose of
maintaining the Register, issuing Common Stock or other
securities then issuable upon the exercise of this Warrant,
exchanging or transferring this Warrant, or any or all of the
foregoing. Thereafter, any such registration, issuance,
exchange, or transfer, as the case may be, shall be made at
the office of such agent.
4. Reservation of Stock. The Company covenants that,
during the term this Warrant is exercisable, the Company will
reserve from its authorized and unissued Common Stock or
Common Stock held in Treasury a sufficient number of shares to
provide for the issuance of Common Stock upon the exercise of
this Warrant. The Company further covenants that all shares
that may be issued upon the exercise of rights represented by
this Warrant, upon exercise of the rights represented by this
Warrant and payment of the Exercise Price, all as set forth
herein, will be duly authorized, validly issued, fully paid
and non-assessable. The Company agrees that its issuance of
this Warrant shall constitute full authority to its officers
who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of
Common Stock upon the exercise of this Warrant.
5. Effects of Certain Events.
5.1 Common Stock Dividends, Subdivisions or
Combinations. In case the Company shall (A) pay or make a
dividend or other distribution to all holders of its Common
Stock in shares of its Common Stock, (B) subdivide, split or
reclassify the outstanding shares of its Common Stock into a
larger number of shares or (C) combine or reclassify the
outstanding shares of its Common Stock into a smaller number
of shares, the Exercise Price in effect immediately prior
thereto shall be adjusted so that the Holder of this Warrant
shall thereafter be entitled to receive upon the exercise of
this Warrant, subject to Section 2.5, the number of shares of
Common Stock which such Holder would have owned and been
entitled to receive had such Warrant been exercised
immediately prior to the happening of any of the events
described above or, in the case of a stock dividend or other
distribution, prior to the record date for determination of
shareholders entitled thereto. An adjustment made pursuant to
this Section 5.1 shall become effective immediately after such
record date in the case of a dividend or distribution and
immediately after the effective date in the case of a
subdivision, split, combination or reclassification.
5.2 Distributions of Assets or Securities Other
Than Common Stock. In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock
shares of any of its capital stock (other than Common Stock),
rights or warrants to purchase any of its securities (other
than those referred to in Section 5.3 below), cash (other than
any regular quarterly or semi-annual dividend which the Board
of Directors of the Company determines), other assets or
evidences of its indebtedness, then in each such case the
Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to the date of such dividend
or distribution by a fraction, of which the numerator shall be
the Average Market Price per share of Common Stock at the
record date for determining shareholders entitled to such
dividend or distribution less the fair market value (as
determined in good faith by the Board of Directors) of the
portion of the securities, cash, assets or evidences of
indebtedness so distributed applicable to one share of Common
Stock, and of which the denominator shall be such Average
Market Price per share. An adjustment made pursuant to this
Section 5.2 shall become effective immediately after such
record date.
5.3 Below Market Distributions or Issuances. In
case the Company shall issue Common Stock (or rights, warrants
or other securities convertible into or exchangeable or
exercisable for shares of Common Stock) to all holders of
Common Stock at a price per share (or having an effective
exercise, exchange or conversion price per share) less than
the Average Market Price per share of Common Stock at the
record date for the determination of shareholders entitled to
receive such Common Stock (or rights, warrants or other
securities convertible into or exchangeable or exercisable for
shares of Common Stock), then in each such case the Exercise
Price shall be adjusted by multiplying the Exercise Price in
effect immediately prior to the date of issuance of such
Common Stock (or rights, warrants or other securities) by a
fraction, the numerator of which shall be the sum of (A) the
number of shares of Common Stock outstanding on the date of
such issuance (without giving effect to any such issuance) and
(B) the number of shares which the aggregate consideration
receivable by the Company for the total number of shares of
Common Stock so issued (or into or for which such rights,
warrants or other securities are convertible, exchangeable or
exercisable) would purchase at such Average Market Price, and
the denominator of which shall be the sum of (A) the number of
shares of Common Stock outstanding on the date of such
issuance (without giving effect to any such issuance) and (B)
the number of additional shares of Common Stock so issued (or
into or for which such rights, warrants or other securities
are convertible, exchangeable or exercisable). An adjustment
made pursuant to this Section 5.3 shall become effective
immediately after the record date for determination of
shareholders entitled to receive or purchase such Common Stock
(or rights, warrants or other securities convertible into or
exchangeable or exercisable for shares of Common Stock). For
purposes of this Section 5.3, the issuance of any options,
rights or warrants or any shares of Common Stock (whether
treasury shares or newly issued shares) pursuant to any
employee (including consultants and directors) benefit or
stock option or purchase plan or program of the Company shall
not be deemed to constitute an issuance of Common Stock or
options, rights or warrants to which this Section 5.3 applies.
Notwithstanding anything herein to the contrary, no further
adjustment to the Exercise Price shall be made (i) upon the
issuance or sale of Common Stock upon the exercise of any
rights or warrants or (ii) upon the issuance or sale of Common
Stock upon conversion or exchange of any convertible
securities, if any adjustment in the Exercise Price was made
or required to be made upon the issuance or sale of such
rights, warrants or securities.
5.4 Repurchases. In case at any time or from time
to time the Company or any subsidiary thereof shall
repurchase, by self tender offer or otherwise, any shares of
Common Stock of the Company at a weighted average purchase
price in excess of the Average Market Price on the business
day immediately prior to the earliest of the date of such
repurchase, the commencement of an offer to repurchase or the
public announcement of either (such date being referred to as
the Determination Date ), the Exercise Price in effect as of
such Determination Date shall be adjusted by multiplying such
Exercise Price by a fraction, the numerator of which shall be
(A) the product of (x) the number of shares of Common Stock
outstanding on such Determination Date and (y) the Average
Market Price of the Common Stock on such Determination Date
minus (B) the aggregate purchase price of such repurchase and
the denominator of which shall be the product of (x) the
number of shares of Common Stock outstanding on such
Determination Date minus the number of shares of Common Stock
repurchased by the Company or any subsidiary thereof in such
repurchase and (y) the Average Market Price of the Common
Stock on such Determination Date. For purposes of this clause
(iv), the repurchase or repurchases by the Company or any
subsidiary thereof within any 12 month period of not more than
15% of the shares of Common Stock outstanding as of the first
date of such period, at a price not in excess of 120% of the
Average Market Price as of the Determination Date of any such
repurchase, shall not be deemed to constitute a repurchase to
which this Section 5.4 applies. An adjustment made pursuant
to this Section 5.4 shall become effective immediately after
the effective date of such repurchase.
6. Certain Reorganizations. In the event of any
change, reclassification, conversion, exchange or cancellation
of outstanding shares of Common Stock of the Company (other
than any reclassification referred to in Section 5.1), whether
pursuant to a merger, consolidation, reorganization or
otherwise, or the sale or other disposition of all or
substantially all of the assets and properties of the Company,
this Warrant shall, after such merger, consolidation,
reorganization or other transaction, sale or other
disposition, be exercisable for the kind and number of shares
of stock or other securities or property, of the Company or
otherwise, to which the Holder would have been entitled if
immediately prior to such event such Holder had exercised this
Warrant for Common Stock at the Exercise Price in effect as of
the consummation of such event. The provisions of this
Section 6 shall similarly apply to successive changes,
reclassifications, conversions, exchange or cancellations.
7. No Impairment. Except as permitted by the Merger
Agreement, the Company will not, by amendment of its Restated
Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company,
but will at all times in good faith assist in the carrying out
of all the provisions of this Warrant and in the taking of all
such action as may be necessary or appropriate in order to
protect the exercise rights of the Holder hereof against
impairment.
8. Calculation of Adjustments. No adjustment in the
Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of
this Section 8 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
All calculations under this Warrant shall be made by the
Company and shall be made to the nearest cent or to the
nearest one hundredth of a share, as the case may be.
Anything in this Warrant to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the
Exercise Price, in addition to those required by this Warrant,
as it in its sole discretion shall determine to be advisable
in order that any stock dividends, subdivision of shares,
distribution of rights to purchase stock or securities, or a
distribution of securities convertible into or exchangeable
for stock hereafter made by the Company to its shareholders
shall not be taxable.
9. Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Exercise Price
pursuant to this Warrant, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to the Holder of this
Warrant a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon
the written request at any time of the Holder of this Warrant,
furnish or cause to be furnished to such Holder a like
certificate setting forth (i) such adjustments and
readjustments, (ii) the Exercise Price at the time in effect,
and (iii) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received
upon the exercise of this Warrant; provided, however, that the
Company shall not be required to calculate the effect of
Section 2.5 upon such exercise.
10. Notices.
10.1 Dilutive Events. In the event that the Company
shall propose at any time:
(1) to declare any dividend or distribution upon its
Common Stock;
(2) to offer for subscription pro rata to the
holders of any class or series of its stock any additional
shares of stock of any class or series or other rights; or
(3) to effect any transaction of the type described
in Section 6 hereof involving a change in the Common Stock;
then, in connection with each such event, the Company shall
send to the Holders of this Warrant:
(A) at least 20 days prior written notice of the
date on which a record shall be taken for such dividend or
distribution (and specifying the date on which the holders of
Common Stock shall be entitled thereto) or for determining
rights to vote in respect of the matters referred to in (1)
and (2) above; and
(B) in the case of the matters referred to in (3)
above, at least 20 days prior written notice of the date when
the same shall take place (and specifying the time on which
the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property
deliverable upon the occurrence of such event).
10.2 Dissolution; Liquidation. In the event of any
voluntary or involuntary dissolution, liquidation or winding
up of the Company, the Company shall send to the Holder of
this Warrant at least 20 days prior written notice.
10.3 Repurchase Programs. The Company shall send
written notice immediately upon any public announcement with
respect to an open market repurchase program, any self tender
offer for shares of Common Stock and any other repurchase
other than a repurchase of stock of an employee or consultant
pursuant to any benefit plan or agreement.
11. Amendments. This Warrant may not be amended without
the prior written consent of the Holder.
12. Additional Definition. As used herein, the term
Average Market Price shall mean the average of the Market
Prices for the 30 consecutive trading immediately preceding
the date in question.
13. Notices. Any notice, certificate or other
communication which is required or convenient under the terms
of this Warrant shall be duly given if it is in writing and
delivered in person or mailed by first class mail, postage
prepaid, and directed to the Holder of the Warrant at its
address as it appears on the Register or if to the Company to
its principal executive offices. The time when such notice is
sent shall be the time of the giving of the notice.
14. Time. Where this Warrant provides for a payment or
performance on a Saturday or Sunday or a public holiday in the
State of Ohio, such payment or performance may be made on the
next succeeding business day, without liability of the Company
for interest on any such payment.
15. Rules of Construction. In this Warrant, unless the
context otherwise requires, words in the singular number
include the plural, and in the plural include the singular,
and words of the masculine gender include the feminine and the
neuter, and when the sense so indicates, words of the neuter
gender may refer to any gender. The numbers and titles of
sections contained in this Warrant are inserted for
convenience of reference only, and they neither form a part of
this Warrant nor are they to be used in the construction or
interpretation hereof.
16. Governing Law. This Warrant shall be construed in
accordance with and governed by the law of the State of Ohio.
IN WITNESS WHEREOF, the Company has caused this Warrant
to be executed by its officer thereto duly authorized.
THE SCOTTS COMPANY
By:______________________________
Name:
Title:
Assignment of Warrant
The undersigned hereby sell(s) and assign(s) and
transfer(s) unto______________
______________________________________________________________
______________________________________________________________
(name, address and SSN or EIN of assignee)
__________________________________ of this Warrant.
(portion of Warrant)
Date:_________________
Sign:________________________________________
(Signature must conform in all respects to name of Holder
shown on face of Warrant)
Signature Guaranteed:
Notice of Exercise
[To be completed and signed only upon exercise of Warrant]
The undersigned, the Holder of this Warrant, hereby
irrevocably elects to exercise the right to purchase Common
Stock, without par value, of The Scotts Company as follows:
_________________________________________________
(whole number of Warrants exercised)
Dollars ($)
(number of Warrants exercised times
Exercise Price)
Shares ( )
Dollars ($)
(number of shares and Market Price of Common Stock in
cashless exercise)
[Signature must be
______________________________________________
guaranteed if name of (name of holder of shares if
different than Holder of
holder of shares differs Warrant)
from registered Holder
of Warrant]
_______________________________________________
(address of holder of shares if different than address of
Holder of Warrant)
_______________________________________________
(Social Security or EIN of holder of shares if different
than Holder of Warrant)
Date:______________
Sign:______________________________________________
(Signature must conform in all respects to name of
Holder shown on face of this Warrant)
Signature Guaranteed:
RECEIPT FOR WARRANTS
The undersigned hereby acknowledges receipt from The
Scotts Company (the Company ) on this 19th day of May, 1995,
of a separate Series B Warrant for the purchase of ______
common shares of the Company, subject to the terms and
conditions contained in the warrant.
SIGNATURE
COMMUNITY FUNDS, INC., a New York
not-for-profit corporation
_______________________
By:
Its:
_______________________
John Kenlon
ANNEX D
SERIES C WARRANT TO PURCHASE COMMON SHARES
OF
THE SCOTTS COMPANY
THIS WARRANT WAS ISSUED PURSUANT TO THE AMENDED AND
RESTATED AGREEMENT AND PLAN OF MERGER DATED AS OF MAY 19,
1995, AMENDING AND RESTATING THE ORIGINAL AGREEMENT AND PLAN
OF MERGER DATED AS OF JANUARY 26, 1995 (AS SO AMENDED AND
RESTATED, THE "MERGER AGREEMENT"), AMONG STERN'S MIRACLE-GRO
PRODUCTS, INC., STERN'S NURSERIES, INC., MIRACLE-GRO LAWN
PRODUCTS, INC., MIRACLE-GRO PRODUCTS LIMITED, THE HAGEDORN
PARTNERSHIP, L.P., THE GENERAL PARTNERS OF THE HAGEDORN
PARTNERSHIP, L.P., COMMUNITY FUNDS, INC., HORACE HAGEDORN,
JOHN KENLON, THE SCOTTS COMPANY AND ZYX CORPORATION. NO
TRANSFER MAY OCCUR EXCEPT IN CONFORMITY WITH THE TERMS OF THE
MERGER AGREEMENT.
No. WC-1 Warrant to Purchase
______ Common Shares,
without par value
(subject to adjustment)
Void after November 19, 2003
For value received, THE SCOTTS COMPANY, an Ohio
corporation (the Company ), hereby certifies that
___________, or registered assigns (the Holder ), is
entitled, subject to the terms set forth below and to the
Merger Agreement, to purchase from the Company, ______ Common
Shares, without par value, of the Company ( Common Stock ), as
constituted on May 19, 1995 (the Warrant Issue Date ), upon
surrender hereof at the principal office of the Company
referred to below, with the Notice of Exercise attached hereto
duly executed, and simultaneous payment therefor in lawful
money of the United States as hereinafter provided at the per
share price of $29 (the Exercise Price ). The number,
character and Exercise Price of such shares of Common Stock
are subject to adjustment as provided below. The term
Warrant as used herein shall include this Warrant and any
warrants delivered in substitution or exchange therefor as
provided herein. This Warrant is registered and its transfer
may be registered upon the books maintained for that purpose
by the Company by delivery of this Warrant duly endorsed.
Terms used herein and not otherwise defined shall have
the meanings ascribed thereto in the Merger Agreement.
1. Term of Warrant. Subject to the terms and
conditions set forth herein, this Warrant shall be
exercisable, in whole or in part, during the term commencing
on May 19, 1995 and ending at 5:00 p.m., Eastern time, on the
date eight years and six months after the Warrant Issue Date,
and shall be void thereafter.
2. Exercise of Warrant.
2.1 Method. The purchase rights represented by
this Warrant are exercisable by the Holder in whole or in
part, at any time, or from time to time, during the term
hereof as described in Section 1 above and subject to Section
2.5, by the surrender of this Warrant and the Notice of
Exercise annexed hereto duly completed and executed by the
Holder at the principal executive office of the Company at
14111 Scottslawn Road, Marysville, Ohio 43041 (or such other
office or agency of the Company as it may designate by notice
in writing to the Holder), upon payment in cash or by wire
transfer to a bank account designated by the Company or by a
certified or cashier's check of the aggregate Exercise Price
of the shares to be purchased; provided, however, that, in
lieu of cash, such Holder may pay such Exercise Price by
exchanging shares of Common Stock having an aggregate Market
Price equal to the aggregate Exercise Price or by reducing the
number of shares of Common Stock such Holder would otherwise
be entitled to upon such exercise by a number of shares of
Common Stock having an aggregate Market Price equal to the
aggregate Exercise Price.
2.2 Effect. This Warrant shall be deemed to have
been exercised at the time of its surrender for exercise
together with full payment as provided above, and the person
entitled to receive the shares of Common Stock issuable upon
such exercise shall be treated for all purposes as the holder
of record of such shares at and after such time. As promptly
as practicable on or after such date the Company at its
expense shall issue to the person entitled to receive the same
a certificate for the number of shares of Common Stock
issuable upon such exercise. If this Warrant is exercised in
part, the Company at its expense will execute and deliver a
new Warrant exercisable for the number of shares for which
this Warrant may then be exercised.
2.3 Holder Not a Shareholder. The Holder shall
neither be entitled to vote nor receive dividends nor be
deemed the holder of Common Stock or any other securities of
the Company that may at any time be issuable on the exercise
hereof for any purpose until the Warrant has been exercised
for shares of Common Stock as provided in this Section 2.
2.4 No Fractional Shares or Scrip. No fractional
shares or scrip representing fractional shares of Common Stock
shall be issued upon the exercise of this Warrant. In lieu of
any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the
Exercise Price multiplied by such fraction.
2.5 Exercise for Cash in Certain Circumstances.
Notwithstanding the foregoing, (a) until the fifth anniversary
of the Warrant Issue Date, in the event, and to the extent
that, the exercise of this Warrant would cause the Total
Voting Power of the Shareholders to exceed the Standstill
Percentage, this Warrant shall not be exercisable for shares
of Common Stock but rather shall be exercisable solely for the
difference at the time of exercise between the Market Price
and the Exercise Price at such time and (b) thereafter, in the
event, and to the extent that, the exercise of this Warrant
would cause the Total Voting Power of the Shareholders to
exceed 49%, this Warrant shall not be exercisable for shares
of Common Stock but rather shall be exercisable solely for the
difference at the time of exercise between the Market Price
and the Exercise Price at such time.
3. Registered Warrants.
3.1 Series. This Warrant is one of a series of
Warrants, designated as Series C, which are identical except
as to the number of shares of Common Stock purchasable and as
to any restriction on the transfer thereof in order to comply
with the Securities Act of 1933 (the Act ) and the
regulations of the Securities and Exchange Commission
promulgated thereunder or state securities or blue sky laws.
Such Warrants are referred to herein collectively as the
Warrants.
3.2 Record Ownership. The Company shall maintain a
register of the Holders of the Warrants (the Register )
showing their names and addresses and the serial numbers and
number of Common Shares purchasable, issued to or transferred
of record by them from time to time. The Register may be
maintained in electronic, magnetic or other computerized form.
The Company may treat the person named as the Holder of this
Warrant in the Register as the sole owner of this Warrant.
The Holder of this Warrant is the person exclusively entitled
to receive notifications with respect to this Warrant,
exercise it to purchase shares of Common Stock and otherwise
exercise all of the rights and powers as the absolute owner
hereof.
3.3 Registration of Transfer. To the extent
permitted under the Merger Agreement, transfers of this
Warrant may be registered on the Register. Transfers shall be
registered when this Warrant is presented to the Company duly
endorsed with a request to register the transfer hereof in
accordance with the terms of the Merger Agreement. When this
Warrant is presented for transfer and duly transferred
hereunder, it shall be cancelled and a new Warrant showing the
name of the transferee as the Holder thereof shall be issued
in lieu hereof. No transfer of this Warrant may take place
except in accordance with the terms of the Merger Agreement.
3.4 Worn and Lost Warrants. If this Warrant
becomes worn, defaced or mutilated but is still substantially
intact and recognizable, the Company or its agent may issue a
new Warrant in lieu hereof upon its surrender. If this
Warrant is lost, destroyed or wrongfully taken, the Company
shall issue a new Warrant in place of the original Warrant if
the Holder so requests by written notice to the Company and
the Holder has delivered to the Company an indemnity agreement
reasonably satisfactory to the Company with an affidavit of
the Holder that this Warrant has been lost, destroyed or
wrongfully taken.
3.5 Restrictions on Transfer. (a) This Warrant and
the Common Stock issuable upon the exercise hereof have been
registered under the Act on Form S-4, and therefore this
Warrant and the Common Stock issuable upon the exercise of
this Warrant may not be offered for sale, sold or otherwise
transferred unless such offer, sale or other transfer complies
with Rule 145 under the Act and is otherwise registered under
the appropriate state securities or Blue Sky laws or such
transfer is exempt from such registration.
(b) No transfer of this Warrant or the Common Stock
issuable upon the exercise hereof may be made except in
accordance with the terms of the Merger Agreement.
3.6 Warrant Agent. The Company may, by written
notice to the Holder, appoint an agent for the purpose of
maintaining the Register, issuing Common Stock or other
securities then issuable upon the exercise of this Warrant,
exchanging or transferring this Warrant, or any or all of the
foregoing. Thereafter, any such registration, issuance,
exchange, or transfer, as the case may be, shall be made at
the office of such agent.
4. Reservation of Stock. The Company covenants that,
during the term this Warrant is exercisable, the Company will
reserve from its authorized and unissued Common Stock or
Common Stock held in Treasury a sufficient number of shares to
provide for the issuance of Common Stock upon the exercise of
this Warrant. The Company further covenants that all shares
that may be issued upon the exercise of rights represented by
this Warrant, upon exercise of the rights represented by this
Warrant and payment of the Exercise Price, all as set forth
herein, will be duly authorized, validly issued, fully paid
and non-assessable. The Company agrees that its issuance of
this Warrant shall constitute full authority to its officers
who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of
Common Stock upon the exercise of this Warrant.
5. Effects of Certain Events.
5.1 Common Stock Dividends, Subdivisions or
Combinations. In case the Company shall (A) pay or make a
dividend or other distribution to all holders of its Common
Stock in shares of its Common Stock, (B) subdivide, split or
reclassify the outstanding shares of its Common Stock into a
larger number of shares or (C) combine or reclassify the
outstanding shares of its Common Stock into a smaller number
of shares, the Exercise Price in effect immediately prior
thereto shall be adjusted so that the Holder of this Warrant
shall thereafter be entitled to receive upon the exercise of
this Warrant, subject to Section 2.5, the number of shares of
Common Stock which such Holder would have owned and been
entitled to receive had such Warrant been exercised
immediately prior to the happening of any of the events
described above or, in the case of a stock dividend or other
distribution, prior to the record date for determination of
shareholders entitled thereto. An adjustment made pursuant to
this Section 5.1 shall become effective immediately after such
record date in the case of a dividend or distribution and
immediately after the effective date in the case of a
subdivision, split, combination or reclassification.
5.2 Distributions of Assets or Securities Other
Than Common Stock. In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock
shares of any of its capital stock (other than Common Stock),
rights or warrants to purchase any of its securities (other
than those referred to in Section 5.3 below), cash (other than
any regular quarterly or semi-annual dividend which the Board
of Directors of the Company determines), other assets or
evidences of its indebtedness, then in each such case the
Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to the date of such dividend
or distribution by a fraction, of which the numerator shall be
the Average Market Price per share of Common Stock at the
record date for determining shareholders entitled to such
dividend or distribution less the fair market value (as
determined in good faith by the Board of Directors) of the
portion of the securities, cash, assets or evidences of
indebtedness so distributed applicable to one share of Common
Stock, and of which the denominator shall be such Average
Market Price per share. An adjustment made pursuant to this
Section 5.2 shall become effective immediately after such
record date.
5.3 Below Market Distributions or Issuances. In
case the Company shall issue Common Stock (or rights, warrants
or other securities convertible into or exchangeable or
exercisable for shares of Common Stock) to all holders of
Common Stock at a price per share (or having an effective
exercise, exchange or conversion price per share) less than
the Average Market Price per share of Common Stock at the
record date for the determination of shareholders entitled to
receive such Common Stock (or rights, warrants or other
securities convertible into or exchangeable or exercisable for
shares of Common Stock), then in each such case the Exercise
Price shall be adjusted by multiplying the Exercise Price in
effect immediately prior to the date of issuance of such
Common Stock (or rights, warrants or other securities) by a
fraction, the numerator of which shall be the sum of (A) the
number of shares of Common Stock outstanding on the date of
such issuance (without giving effect to any such issuance) and
(B) the number of shares which the aggregate consideration
receivable by the Company for the total number of shares of
Common Stock so issued (or into or for which such rights,
warrants or other securities are convertible, exchangeable or
exercisable) would purchase at such Average Market Price, and
the denominator of which shall be the sum of (A) the number of
shares of Common Stock outstanding on the date of such
issuance (without giving effect to any such issuance) and (B)
the number of additional shares of Common Stock so issued (or
into or for which such rights, warrants or other securities
are convertible, exchangeable or exercisable). An adjustment
made pursuant to this Section 5.3 shall become effective
immediately after the record date for determination of
shareholders entitled to receive or purchase such Common Stock
(or rights, warrants or other securities convertible into or
exchangeable or exercisable for shares of Common Stock). For
purposes of this Section 5.3, the issuance of any options,
rights or warrants or any shares of Common Stock (whether
treasury shares or newly issued shares) pursuant to any
employee (including consultants and directors) benefit or
stock option or purchase plan or program of the Company shall
not be deemed to constitute an issuance of Common Stock or
options, rights or warrants to which this Section 5.3 applies.
Notwithstanding anything herein to the contrary, no further
adjustment to the Exercise Price shall be made (i) upon the
issuance or sale of Common Stock upon the exercise of any
rights or warrants or (ii) upon the issuance or sale of Common
Stock upon conversion or exchange of any convertible
securities, if any adjustment in the Exercise Price was made
or required to be made upon the issuance or sale of such
rights, warrants or securities.
5.4 Repurchases.
In case at any time or from time
to time the Company or any subsidiary thereof shall
repurchase, by self tender offer or otherwise, any shares of
Common Stock of the Company at a weighted average purchase
price in excess of the Average Market Price on the business
day immediately prior to the earliest of the date of such
repurchase, the commencement of an offer to repurchase or the
public announcement of either (such date being referred to as
the Determination Date ), the Exercise Price in effect as of
such Determination Date shall be adjusted by multiplying such
Exercise Price by a fraction, the numerator of which shall be
(A) the product of (x) the number of shares of Common Stock
outstanding on such Determination Date and (y) the Average
Market Price of the Common Stock on such Determination Date
minus (B) the aggregate purchase price of such repurchase and
the denominator of which shall be the product of (x) the
number of shares of Common Stock outstanding on such
Determination Date minus the number of shares of Common Stock
repurchased by the Company or any subsidiary thereof in such
repurchase and (y) the Average Market Price of the Common
Stock on such Determination Date. For purposes of this clause
(iv), the repurchase or repurchases by the Company or any
subsidiary thereof within any 12 month period of not more than
15% of the shares of Common Stock outstanding as of the first
date of such period, at a price not in excess of 120% of the
Average Market Price as of the Determination Date of any such
repurchase, shall not be deemed to constitute a repurchase to
which this Section 5.4 applies. An adjustment made pursuant
to this Section 5.4 shall become effective immediately after
the effective date of such repurchase.
6. Certain Reorganizations. In the event of any
change, reclassification, conversion, exchange or cancellation
of outstanding shares of Common Stock of the Company (other
than any reclassification referred to in Section 5.1), whether
pursuant to a merger, consolidation, reorganization or
otherwise, or the sale or other disposition of all or
substantially all of the assets and properties of the Company,
this Warrant shall, after such merger, consolidation,
reorganization or other transaction, sale or other
disposition, be exercisable for the kind and number of shares
of stock or other securities or property, of the Company or
otherwise, to which the Holder would have been entitled if
immediately prior to such event such Holder had exercised this
Warrant for Common Stock at the Exercise Price in effect as of
the consummation of such event. The provisions of this
Section 6 shall similarly apply to successive changes,
reclassifications, conversions, exchange or cancellations.
7. No Impairment. Except as permitted by the Merger
Agreement, the Company will not, by amendment of its Restated
Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company,
but will at all times in good faith assist in the carrying out
of all the provisions of this Warrant and in the taking of all
such action as may be necessary or appropriate in order to
protect the exercise rights of the Holder hereof against
impairment.
8. Calculation of Adjustments. No adjustment in the
Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of
this Section 8 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
All calculations under this Warrant shall be made by the
Company and shall be made to the nearest cent or to the
nearest one hundredth of a share, as the case may be.
Anything in this Warrant to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the
Exercise Price, in addition to those required by this Warrant,
as it in its sole discretion shall determine to be advisable
in order that any stock dividends, subdivision of shares,
distribution of rights to purchase stock or securities, or a
distribution of securities convertible into or exchangeable
for stock hereafter made by the Company to its shareholders
shall not be taxable.
9. Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Exercise Price
pursuant to this Warrant, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to the Holder of this
Warrant a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon
the written request at any time of the Holder of this Warrant,
furnish or cause to be furnished to such Holder a like
certificate setting forth (i) such adjustments and
readjustments, (ii) the Exercise Price at the time in effect,
and (iii) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received
upon the exercise of this Warrant; provided, however, that the
Company shall not be required to calculate the effect of
Section 2.5 upon such exercise.
10. Notices.
10.1 Dilutive Events. In the event that the Company
shall propose at any time:
(1) to declare any dividend or distribution upon its
Common Stock;
(2) to offer for subscription pro rata to the
holders of any class or series of its stock any additional
shares of stock of any class or series or other rights; or
(3) to effect any transaction of the type described
in Section 6 hereof involving a change in the Common Stock;
then, in connection with each such event, the Company shall
send to the Holders of this Warrant:
(A) at least 20 days prior written notice of the
date on which a record shall be taken for such dividend or
distribution (and specifying the date on which the holders of
Common Stock shall be entitled thereto) or for determining
rights to vote in respect of the matters referred to in (1)
and (2) above; and
(B) in the case of the matters referred to in (3)
above, at least 20 days prior written notice of the date when
the same shall take place (and specifying the time on which
the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property
deliverable upon the occurrence of such event).
10.2 Dissolution; Liquidation. In the event of any
voluntary or involuntary dissolution, liquidation or winding
up of the Company, the Company shall send to the Holder of
this Warrant at least 20 days prior written notice.
10.3 Repurchase Programs. The Company shall send
written notice immediately upon any public announcement with
respect to an open market repurchase program, any self tender
offer for shares of Common Stock and any other repurchase
other than a repurchase of stock of an employee or consultant
pursuant to any benefit plan or agreement.
11. Amendments. This Warrant may not be amended without
the prior written consent of the Holder.
12. Additional Definition. As used herein, the term
Average Market Price shall mean the average of the Market
Prices for the 30 consecutive trading immediately preceding
the date in question.
13. Notices. Any notice, certificate or other
communication which is required or convenient under the terms
of this Warrant shall be duly given if it is in writing and
delivered in person or mailed by first class mail,
postage
prepaid, and directed to the Holder of the Warrant at its
address as it appears on the Register or if to the
Company to
its principal executive offices. The time when such
notice is
sent shall be the time of the giving of the notice.
14. Time. Where this Warrant provides for a
payment or
performance on a Saturday or Sunday or a public holiday
in the
State of Ohio, such payment or performance may be made on
the
next succeeding business day, without liability of the
Company
for interest on any such payment.
15. Rules of Construction. In this Warrant, unless
the
context otherwise requires, words in the singular number
include the plural, and in the plural include the
singular,
and words of the masculine gender include the feminine
and the
neuter, and when the sense so indicates, words of the
neuter
gender may refer to any gender. The numbers and titles
of
sections contained in this Warrant are inserted for
convenience of reference only, and they neither form a
part of
this Warrant nor are they to be used in the construction
or
interpretation hereof.
16. Governing Law. This Warrant shall be construed
in
accordance with and governed by the law of the State of
Ohio.
IN WITNESS WHEREOF, the Company has caused this
Warrant
to be executed by its officer thereto duly authorized.
THE SCOTTS COMPANY
By:___________________________
Name:
Title:
Assignment of Warrant
The undersigned hereby sell(s) and assign(s) and
transfer(s) unto
____________________________________________________________
____________________________________________________________
(name, address and SSN or EIN of assignee)
__________________________________ of this Warrant.
(portion of Warrant)
Date:_________________
Sign:___________________________________
(Signature must conform in all respects
to name of Holder shown on face of Warrant)
Signature Guaranteed:
Notice of Exercise
[To be completed and signed only upon exercise of Warrant]
The undersigned, the Holder of this Warrant, hereby
irrevocably elects to exercise the right to purchase Common
Stock, without par value, of The Scotts Company as follows:
________________________________________________
(whole number of Warrants exercised)
Dollars ($)
__________________________________________________
(number of Warrants exercised times Exercise Price)
Shares ( )
__________________________________________________
__________________________________________________
Dollars ($)
(number of shares and Market Price of Common Stock in cashless exercise)
[Signature must be
_______________________________________________
guaranteed if name of (name of holder of shares if different
holder of shares differs than Holder of Warrant)
from registered Holder
of Warrant]
_______________________________________________
(address of holder of shares if
different than address of Holder of Warrant)
_______________________________________________
(Social Security or EIN of holder of shares if
different than Holder of Warrant)
Date:______________
Sign:__________________________________________
(Signature must conform in all respects to name of Holder shown on
face of this Warrant)
Signature Guaranteed:
RECEIPT FOR WARRANTS
The undersigned hereby acknowledges receipt from The
Scotts Company (the Company ) on this 19th day of May,
1995, of a separate Series C Warrant for the purchase of
______ common shares of the Company, subject to the terms
and conditions contained in the warrant.
SIGNATURE
COMMUNITY FUNDS, INC., a New York
not-for-profit corporation
_______________________
By:
Its:
_______________________
John Kenlon
ANNEX E
REGISTRATION RIGHTS
SECTION 1. Representative. The Shareholder
Representative shall act on behalf of the Shareholders in
connection with the matters set forth in this Annex E.
Scotts shall be entitled to rely on any notices from the
Shareholder Representative as if it came from the
Shareholders.
SECTION 2. Demand Registration. (a) The
Shareholder Representative may at any time request
Scotts,
in writing, to register under the Securities Act any or
all
of the shares of Scotts Common Stock owned by the
Shareholders (or any securities issued in respect of
the
Scotts Common Stock, by dividend, reclassification,
merger
or otherwise) (the Registrable Securities ). Scotts
shall
use its best efforts to cause the number of Registrable
Securities specified in such request to be registered
as
soon as reasonably practicable so as to permit the sale
thereof as specified in such request, and in connection
therewith prepare and file as promptly as practicable
with
the SEC a registration statement under the Securities
Act to
effect such registration on such appropriate form as
Scotts
shall reasonably determine, provided that each such
request
shall (i) specify the number of Registrable Securities
intended to be offered and sold; (ii) express the
present
intention of the applicable Shareholders to offer or
cause
the offering of such number of Registrable Securities
for
distribution; (iii) describe the nature or method of
the
proposed offer and sale thereof, including the plan of
distribution therefor (including, but not limited to,
unless
Scotts shall otherwise agree, no more than one offering
on a
delayed or continuous basis pursuant to Rule 415 (or
any
successor rule to similar effect) promulgated under the
Securities Act (a Rule 415 Offering )); (iv) cover an
aggregate number of Registrable Securities equal to at
least
30% of the Registrable Securities held in the aggregate
by
the Shareholders at such time; (v) not be made less
than one
year after the effective date of any other registration
statement filed under this Section 2; and (vi) contain
the
undertaking of the Shareholders to provide all such
information and materials and take all such action as
may be
required in order to permit Scotts to comply with all
applicable requirements of the SEC and to obtain any
desired
acceleration of the effective date of such registration
statement. The obligation of Scotts to register any
Registrable Securities on demand in accordance with
this
Section 2 shall expire after Scotts has filed
registration
statements by reason of such demands on three separate
occasions; provided, that a registration statement
shall not
be deemed to have been filed if it shall be subject to
a
stop order, injunction or other governmental action
restricting distribution thereunder.
(b) The obligation of Scotts to use its best
efforts
to cause the Registrable Securities to be registered
under
the Securities Act is subject to the limitation that
Scotts
shall be entitled to postpone for a reasonable period
of
time, but not more than ninety calendar days from the
receipt of the Shareholder Representative s notice, the
filing of any registration statement otherwise required
to
be prepared and filed by it pursuant hereto if, at the
time
it receives a request for such registration, Scotts,
based
on advice of counsel, determines, in its reasonable
judgment, that such registration and sale (i) would
interfere with any financing, acquisition, corporate
reorganization or other material transaction involving
Scotts or (ii) would require the disclosure of material
information and such disclosure would adversely affect
Scotts, and, in either case, promptly gives written
notice
of such determination. If Scotts shall so postpone the
filing of a registration statement, the Shareholders
shall
have the right to withdraw the request for registration
by
giving written notice to Scotts within thirty calendar
days
after receipt of the notice of postponement (and, in
the
event of such withdrawal, such request shall not be
counted
as a request for registration pursuant hereto). Scotts
shall not be entitled to postpone a registration
statement
pursuant to this Section 2(b) more than once per any
365 day
period.
SECTION 3. Piggyback Registration. (a) If
Scotts
shall, at any time and from time to time, propose the
registration under the Securities Act of an
underwritten
offering for cash of any of its equity securities,
whether
for the account of Scotts or another shareholder,
Scotts
shall give written notice as promptly as possible of
such
proposed registration to the Shareholders and will use
its
best efforts to include in such registration the sale
of
such number of Registrable Securities as the
Shareholder
Representative shall request, within 14 days after the
giving of such notice, upon the same terms (including
the
method of distribution) as such offering; provided
that:
(i) Scotts shall not be required to give notice or
include
any such Registrable Securities in any such
registration if
the proposed registration is primarily (A) a
registration of
a stock option or compensation plan or of securities
issued
or issuable pursuant to any such plan or (B) a
registration
of securities proposed to be issued in exchange for
securities or assets of, or in connection with a merger
or
consolidation with, another corporation; (ii) the
offering
of any such Registrable Securities shall be in
conformity
with this Annex E; and (iii) Scotts may at any time
prior to
the effectiveness of any such registration statement,
at its
sole discretion and without the consent of the
Shareholders,
withdraw such registration statement and abandon the
proposed offering in which the Shareholders had
requested to
participate.
(b) In connection with any offering pursuant to
Section
3, if the managing underwriters for such offering
advise
that the inclusion of all securities sought to be
registered
may interfere with an orderly sale and distribution or
may
materially adversely affect the price of such offering,
the
securities to be registered shall be included in such
registration in accordance with the following
priorities:
first, all securities to be sold for the account of
Scotts,
second, all securities to be sold for the account of
the
Shareholders, up to the limit specified by the managing
underwriters and third all securities to be sold for
the
account of other shareholders, up to the limit
specified by
the managing underwriters.
SECTION 4. Incidental Obligations. In
connection
with any offering of Registrable Securities registered
pursuant to this Annex E, Scotts shall (i) furnish to
the
Shareholders such number of copies of any prospectus
(including any preliminary prospectus) as they may
reasonably request in order to effect the offering and
sale
of the Registrable Securities to be offered and sold,
but
only while Scotts shall be required under the
provisions
hereof to cause the registration statement to remain
current, and (ii) take such action as shall be
necessary to
qualify the Registrable Securities covered by such
registration under state securities laws for offer and
sale
as the Shareholders shall request; provided that Scotts
shall not be obligated to qualify as a foreign
corporation
to do business under the laws of any jurisdiction in
which
it shall not be then qualified or to file any general
consent to service of process. In connection with any
offering of Registrable Securities registered pursuant
to
this Annex E, Scotts shall (A) furnish, at Scotts
expense,
unlegended certificates representing ownership of the
Registrable Securities being sold in such denominations
as
shall be requested and (B) instruct the transfer agent
and
registrar of the Scotts Common Stock to release any
stop
transfer orders with respect to the Registrable
Securities
being sold. Upon any registration becoming effective
pursuant to this Annex E, Scotts shall use its best
efforts
to keep such registration statement current for a
period of
ninety calendar days following its effective date
except
that with respect to a Rule 415 Offering, Scotts shall
use
its best efforts to keep such registration statement
current
and effective for a period of one hundred eighty
calendar
days following its effective date. Scotts will
otherwise
use its best efforts to ensure that any offering
pursuant to
this Annex E complies with all applicable law and
regulation, including any applicable listing agreement
for
Scotts securities and shall furnish such other
information
and documents as the Shareholder Representative may
reasonably request in connection therewith, and the
Shareholders will cooperate with Scotts and furnish
such
information as Scotts may reasonably request in
connection
therewith.
SECTION 5. Registration Expenses. In
connection
with any registration pursuant to this Annex E, Scotts
will
pay all SEC and Blue Sky registration and filing fees,
underwriting discounts in respect of securities to be
sold
by Scotts, commissions and expenses, printing expenses,
fees
and disbursements of legal counsel for Scotts and Blue
Sky
counsel, transfer agents and registrar s fees, fees
and
disbursements of any public accountants used by Scotts
in
connection with such registration (excluding the
underwriting discounts in respect of securities to be
sold
by Scotts, the Registration Expenses ); provided,
however,
that the Shareholders, and not Scotts, shall be
obligated to
pay all such Registration Expenses in connection with a
demand registration made pursuant to Section 2 of this
Annex
E in which the Shareholders seek to register less than
5% of
the outstanding number of shares of Scotts Common Stock
on a
fully diluted basis. In addition to, and not in
limitation
of, the foregoing, the Shareholders shall pay all of
their
own expenses, including underwriting discounts in
respect of
securities to be sold by them and fees and
disbursements of
the Shareholders counsel.
SECTION 6. Indemnification, Contribution,
Underwriting Agreement. In connection with any
offering
pursuant to this Annex E, Scotts and/or the
Shareholders, as
the case may be, will enter into an underwriting
agreement
(and any related agreements) with the underwriters for
the
offering on customary terms. In connection with any
offering pursuant to this Annex E, Scotts and the
Shareholders will enter into indemnification and
contribution agreements on customary terms, providing,
among
other things, that each applicable Shareholder will
indemnify and hold harmless Scotts in respect of any
information furnished by such Shareholder to Scotts in
connection with the applicable registration statement
and
Scotts shall indemnify and hold harmless each
applicable
Shareholder in respect of any other information
contained in
the registration statement or any failure of the
registration statement to comply with applicable law.
In no
case shall a Shareholder's liability exceed the
proceeds
received by such Shareholder pursuant to the applicable
offering. In each case, any dispute as to what
provisions
are customary will be determined by counsel for the
managing
underwriter for the offering, which managing
underwriter
shall be mutually acceptable to Scotts and such
Shareholders.
SECTION 7. Transferability. The Shareholders
may
transfer their rights under this Annex E, in whole or
in
part, to any Permitted Transferee of any Registrable
Securities, provided that such transfer is not in
violation
of the terms of the Agreement. For purposes of this
Annex,
the term Shareholder shall include any Permitted
Transferee of a Shareholder.
ANNEX G
PROPOSED AMENDMENTS TO SCOTTS ARTICLES OF
INCORPORATION AND CODE OF REGULATIONS
PROPOSED AMENDMENT TO ARTICLE FOURTH OF THE ARTICLES OF
INCORPORATION:
FOURTH: The authorized number of shares of the
corporation
shall be Fifty Million, One Hundred and Ninety-Five Thousand
(50,195,000), consisting of Fifty Million (50,000,000)
common
shares, each without par value, and One Hundred and Ninety-
Five
Thousand (195,000) preferred shares, each without par value
(the
Preferred Stock ). The Preferred Stock shall have the
following
terms:
SEE ANNEX A FOR THE TERMS OF THE PREFERRED STOCK.
PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION TO ADD
THE
FOLLOWING ARTICLE NINTH:
NINTH: Notwithstanding any provision of the Ohio
Revised Code requiring for any purpose the vote, consent,
waiver
or release of the holders of shares of the corporation
entitling
them to exercise two-thirds or any other proportion of the
voting
power of the corporation or of any class or classes thereof,
such
action, unless expressly otherwise provided by statute, may
be
taken by the vote, consent, waiver or release of the holders
of
the shares entitling them to exercise not less than a
majority of
the voting power of the corporation or of such class or
classes;
provided, however, that the affirmative vote of the holders
of
shares entitling them to exercise not less than two-thirds
(2/3)
of the voting power of the corporation, or two-thirds (2/3)
of
the voting power of any class or classes of shares of the
corporation which entitle the holders thereof to vote in
respect
of any such matter as a class, shall be required to adopt:
(1) A proposed amendment to this Article NINTH to the
Amended Articles of Incorporation of the
corporation;
(2) An agreement of merger or consolidation providing
for
the proposed merger or consolidation of the
corporation
with or into one or more other corporations and
requiring shareholder approval;
(3) A proposed combination or majority share
acquisition
involving the issuance of shares of the
Corporation and
requiring shareholder approval;
(4) A proposal to sell, exchange, transfer or
otherwise
dispose of all, or substantially all, the assets,
with
or without the goodwill, of the corporation; and
(5) A proposed dissolution of the corporation.
PROPOSED AMENDMENT TO SUBPARAGRAPHS (A), (B) AND (C) OF
SECTION
2.02 OF THE CODE OF REGULATIONS:
SECTION 2.02. NUMBER AND CLASSIFICATION OF DIRECTORS AND
TERM OF
OFFICE
(A) Until changed by amendment of the Regulations, by
the
adoption of new regulations or by action of the directors,
the
number of directors of the corporation shall be nine,
divided
into three classes consisting of three directors each. The
election of each class of directors shall be a separate
election.
At the 1995 annual meeting of shareholders an election shall
be
held to elect three persons to serve as directors for three
years
and until their successors are elected, an election shall be
held
to elect three persons to serve as directors for two years
and
until their successors are elected and an election shall be
held
to elect three persons to serve as directors for one year
and
until their successors are elected.
(B) The directors may change the number of directors
and
may fill any director's office that is created by an
increase in
the number of directors; provided, however, that the
directors
may not increase the number of directors to more than twelve
or
the number of directors in each class to more than four
except as
may be required by the provisions of Section 3(c) of Article
FOURTH of the Articles of Incorporation of the Corporation.
No
reduction in the number of directors shall of itself have
the
effect of shortening the term of any incumbent director.
(C) At each annual meeting of shareholders after the
1995
annual meeting, directors shall be elected to serve for
terms of
three years, so that the term of office of one class of
directors
shall expire in each year.
PROPOSED AMENDMENT TO SECTION 6.01 OF THE CODE OF
REGULATIONS:
IF THE PROPOSED AMENDMENT TO SUBPARAGRAPHS (A), (B) AND (C)
OF
SECTION 2.02 IS ADOPTED:
Section 6.01. Amendments. The Regulations may be
amended,
or new regulations may be adopted, at a meeting of
shareholders
held for such purpose, only by the affirmative vote of the
holders of shares entitling them to exercise not less than a
majority of the voting power of the corporation on such
proposal;
provided, however, that Sections 1.02 and 2.02 and this
Section
6.01 of these Regulations may be amended, or new regulations
which do not contain provisions identical to Sections 1.02
and
2.02 and this Section 6.01 may be adopted, only by the
affirmative vote of the holders of shares entitling them to
exercise not less than two-thirds (2/3) of the voting power
of
the corporation on such proposal. In addition, the
Regulations
may be amended, or new regulations may be adopted without a
meeting by the written consent of the holders of shares
entitling
them to exercise not less than all of the voting power of
the
corporation on such proposal.
IF THE PROPOSED AMENDMENT TO SUBPARAGRAPHS (A), (B) AND (C)
OF
SECTION 2.02 IS NOT ADOPTED:
Section 6.01. Amendments. The Regulations may be
amended,
or new regulations may be adopted, at a meeting of
shareholders
held for such purpose, only by the affirmative vote of the
holders of shares entitling them to exercise not less than a
majority of the voting power of the corporation on such
proposal; provided, however, that Section 1.02 and this
Section 6.01 of
these Regulations may be amended, or new regulations which
do not
contain provisions identical to Sections 1.02 and this
Section
6.01 may be adopted, only by the affirmative vote of the
holders
of shares entitling them to exercise not less than two-
thirds
(2/3) of the voting power of the corporation on such
proposal.
In addition, the Regulations may be amended, or new
regulations
may be adopted without a meeting by the written consent of
the holders of shares entitling them to exercise not less than
all of the voting power of the corporation on such proposal.