-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C8z2NBvD8+3HhFQnXyEt4Fc49AAVVFJYrhSxrfOI5ueMumd52dcyGm38DuHA5yNX RMMLvrsmJ4/mDl2mcHOBrA== 0000912057-97-019442.txt : 19970605 0000912057-97-019442.hdr.sgml : 19970605 ACCESSION NUMBER: 0000912057-97-019442 CONFORMED SUBMISSION TYPE: 10-12G/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19970604 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRIFFIN LAND & NURSERIES INC CENTRAL INDEX KEY: 0001037390 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-BUILDING MATERIALS, HARDWARE, GARDEN SUPPLY [5200] IRS NUMBER: 060868486 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-12G/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12879 FILM NUMBER: 97618816 BUSINESS ADDRESS: STREET 1: 387 PARK AVENUE SOUTH 6TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016-8899 BUSINESS PHONE: 2124483800 MAIL ADDRESS: STREET 1: 387 PARK AVENUE SOUTH 6TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016-8899 10-12G/A 1 10-12G/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10/A AMENDMENT NO. 3 GENERAL FORM FOR REGISTRATION OF SECURITIES PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934 --------------------- GRIFFIN LAND & NURSERIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 06-0868496 (State or other (I.R.S. Employer Identification jurisdiction of No.) incorporation or organization) ONE ROCKEFELLER PLAZA NEW YORK, NY 10020 (Address of principal (Zip Code) executive office)
------------------------ Registrant's telephone number, including area code: (860) 286-7660 ------------------------ Securities to be registered pursuant to Section 12(b) of the Act. None. Securities to be registered pursuant to Section 12(g) of the Act. Common Stock, par value $0.01 per share - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GRIFFIN LAND & NURSERIES, INC. INFORMATION INCLUDED IN INFORMATION STATEMENT AND INCORPORATED IN FORM 10 BY REFERENCE. CROSS-REFERENCE SHEET BETWEEN INFORMATION SHEET AND ITEMS ON FORM 10.
ITEM NO. ITEM CAPTION LOCATION IN INFORMATION STATEMENT - --------- ----------------------------------------------------- ----------------------------------------------------- 1. Business............................................. BUSINESS 2. Financial Information................................ SELECTED COMBINED FINANCIAL DATA 3. Properties........................................... BUSINESS 4. Security Ownership of Certain Beneficial Owners and Management.......................................... PRINCIPAL STOCKHOLDERS 5. Directors and Executive Officers..................... MANAGEMENT; CERTAIN EMPLOYEE BENEFIT MATTERS 6. Executive Compensation............................... MANAGEMENT; CERTAIN EMPLOYEE BENEFIT MATTERS 7. Certain Relationships and Related Transactions....... RELATIONSHIP BETWEEN CULBRO AND GRIFFIN AFTER THE DISTRIBUTION; CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. 8. Legal Proceedings.................................... BUSINESS 9. Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters....... DIVIDEND POLICY; SHARES ELIGIBLE FOR FUTURE SALE 10. Recent Sales of Unregistered Securities.............. Part II 11. Description of Registrant's Securities to be Registered.......................................... DESCRIPTION OF CAPITAL STOCK 12. Indemnification of Directors and Officers............ Part II 13. Financial Statements and Supplementary Data.......... INDEX TO FINANCIAL STATEMENTS 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................. N/A 15. Financial Statements and Exhibits (a) Financial Statements............................. INDEX TO FINANCIAL STATEMENTS (b) Exhibits......................................... Part II
CULBRO CORPORATION 387 PARK AVENUE SOUTH NEW YORK, NY 10016 June , 1997 To the Shareholders of Culbro Corporation: Culbro Corporation ("Culbro") currently owns all of the outstanding shares of Common Stock (the "Common Stock") of Griffin Land & Nurseries, Inc. ("Griffin"). Culbro has recently reorganized its subsidiaries so that Griffin now holds and operates substantially all of Culbro's non-tobacco related businesses. The enclosed Information Statement contains information regarding the distribution of the Common Stock of Griffin to the shareholders of Culbro (the "Distribution"). If you are a holder of Culbro common stock on June 23, 1997, the record date for the Distribution, you will be entitled to receive one (1) share of Common Stock of Griffin for each share of Culbro common stock you own on that date. Holders of Culbro common stock on the record date will not be required to make any payment or take any other action in order to receive Griffin shares in the Distribution. From the date which is two days prior to the record date until the time of the Distribution, the Culbro common stock is expected to trade on the New York Stock Exchange in a manner which transfers to the buyer the right to receive Common Stock in the Distribution. We expect that Griffin stock certificates will be mailed beginning on or about July 3, 1997. The principal effect of the Distribution will be to separate Culbro's tobacco related business from its other businesses. After the Distribution, each business will be conducted by a separate, publicly held corporation, and Culbro will merge (the "Merger") with and into its other subsidiary, General Cigar Holdings, Inc. ("General Cigar"). The Board of Directors of Culbro, which approved the Distribution on December 12, 1996, believes that the Distribution will enhance shareholder values over the long term by allowing General Cigar and Griffin to concentrate on their respective businesses and providing each company with greater flexibility in pursuing its independent business objectives. The Culbro Board of Directors believes that the Distribution, followed by the Merger, will enable the investment community to analyze more effectively the investment characteristics, performance and future prospects of each business, enhancing the likelihood that each will achieve appropriate market recognition of its value. The Board of Directors of Culbro has unanimously approved the Distribution and the Merger. Shareholders of Culbro approved the Merger on June 2, 1997. Details of the Distribution and other important information, including a description of the business and management of Griffin after the Distribution, are set forth in the accompanying Information Statement, which should be reviewed carefully by shareholders. Shareholder approval of the Distribution is not required, and we are not soliciting your proxy, with respect to the Distribution. Shareholders of Culbro with inquiries related to the Distribution should contact A. Ross Wollen at (212) 448-3800. Sincerely yours, [SIGNATURE] Edgar M. Cullman CHAIRMAN PRELIMINARY INFORMATION STATEMENT DATED JUNE 4, 1997 A REGISTRATION STATEMENT ON FORM 10 RELATING TO STOCK OF GRIFFIN LAND & NURSERIES, INC. HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION AND AMENDMENT. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION AND AMENDMENT ------------------------ INFORMATION STATEMENT --------------------- GRIFFIN LAND & NURSERIES, INC. COMMON STOCK (PAR VALUE $0.01 PER SHARE) This Information Statement is being furnished in connection with a special distribution (the "Distribution") by Culbro Corporation ("Culbro") of one (1) share of Common Stock, par value $0.01 per share (the "Common Stock"), of Griffin Land & Nurseries, Inc. (formerly known as Culbro Land Resources, Inc.) ("Griffin") for each share of Culbro common stock, par value $1 per share (the "Culbro Common Stock"), held of record as of the close of business on June 23, 1997 (the "Record Date"). The Common Stock initially is expected to trade in the "over the counter" market as quoted on the automated quotation system Electronic Bulletin Board of the National Association of Securities Dealers, Inc. ("NASD"). Griffin plans to apply to list the Common Stock on the Nasdaq National Market ("NASDAQ") or another securities exchange or stock market, subject to compliance with the listing requirements of NASDAQ or such other exchange or market. See "THE DISTRIBUTION--Listing and Trading of the Common Stock; No Prior Market for the Common Stock." The Distribution will result in 100% of the outstanding shares of Common Stock being distributed to the holders of Culbro Common Stock. On July 3, 1997 (the "Distribution Date"), Culbro will deliver all of the issued and outstanding shares of Common Stock to Chase Mellon Shareholder Services, L.L.C., as distribution agent (the "Distribution Agent"), which in turn will distribute such shares to the holders of Culbro Common Stock as of the Record Date. It is expected that certificates representing shares of Common Stock will be mailed by the Distribution Agent on or about July 3, 1997. See "INTRODUCTION" and "THE DISTRIBUTION--Manner of Effecting the Distribution." Holders of Culbro Common Stock on the Record Date will not be required to make any payment or take any other action to receive Common Stock in the Distribution. Following the Distribution Culbro is expected to merge with and into its subsidiary General Cigar Holdings, Inc. ("General Cigar"). Griffin owns substantially all of Culbro's non-tobacco related assets and liabilities, including all of its assets and liabilities relating to its landscape nursery business and Connecticut- and Massachusetts-based real estate business, together with Culbro's approximate 25% interest in Centaur Communications Limited ("Centaur") and its approximate 50% interest in The Eli Witt Company ("Eli Witt"). ------------------------ NO VOTE OF SHAREHOLDERS IS REQUIRED IN CONNECTION WITH THE DISTRIBUTION. NO PROXIES ARE BEING SOLICITED, AND YOU ARE REQUESTED NOT TO SEND US A PROXY. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER FEDERAL OR STATE AUTHORITY, NOR HAS SUCH COMMISSION OR OTHER AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS INFORMATION STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES ------------------------ The date of this Information Statement is , 1997 SUMMARY OF CERTAIN INFORMATION THIS SUMMARY IS QUALIFIED BY THE MORE DETAILED INFORMATION SET FORTH ELSEWHERE IN THIS INFORMATION STATEMENT, WHICH SHOULD BE READ IN ITS ENTIRETY. UNLESS THE CONTEXT OTHERWISE REQUIRES, (I) REFERENCES IN THE INFORMATION STATEMENT TO CULBRO AND GRIFFIN SHALL INCLUDE THEIR RESPECTIVE SUBSIDIARIES AND (II) REFERENCES TO A FISCAL YEAR ARE TO THE TWELVE-MONTH PERIOD ENDED THE SATURDAY NEAREST NOVEMBER 30 OF THE YEAR REFERENCED. CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS INFORMATION STATEMENT. Distributing Company.............. Culbro Corporation, a New York corporation ("Culbro"). Following the Distribution, Culbro is expected to merge with and into General Cigar Holdings, Inc., ("General Cigar"), a Delaware Corporation. Distributed Company............... Griffin Land & Nurseries, Inc., a Delaware corporation ("Griffin"), which owns substantially all of the Connecticut- and Massachusetts-based real estate and the landscape nursery businesses previously operated by Culbro, the approximate 25% interest in Centaur Communications Limited ("Centaur") and the approximate 50% interest in The Eli Witt Company ("Eli Witt") previously owned by Culbro. Griffin was incorporated under the laws of Delaware on March 10, 1970. The Distribution.................. On the Distribution Date, all of the outstanding shares of Common Stock will be delivered to the Distribution Agent. On or about July 3, 1997, the Distribution Agent will mail stock certificates representing shares of Common Stock to holders of record of Culbro Common Stock as of the Record Date. See "THE DISTRIBUTION--Manner of Effecting the Distribution." Record Date....................... June 23, 1997. Distribution Date................. July 3, 1997. Distribution Ratio................ Each Culbro shareholder will receive one (1) share of Common Stock for each share of common stock, $1 par value, of Culbro (the "Culbro Common Stock") owned on the Record Date. Shares to be Distributed.......... The shares to be distributed to Culbro shareholders (the "Distribution Shares") will constitute all of the shares of Common Stock outstanding immediately after the Distribution. The number of Distribution Shares will equal the number of shares of Culbro Common Stock outstanding on the Record Date. Distribution Agent................ Chase Mellon Shareholder Services, L.L.C. No Payment Required............... Culbro shareholders will not be required to make any payment or to take any other action to receive their portion of the Distribution. See "THE DISTRIBUTION--Manner of Effecting the Distribution." Conditions to the Distribution.... The Distribution is conditioned upon, among other things, (1) declaration of the special dividend by the Board of Directors of Culbro (the "Culbro Board") and (2) the receipt of a private letter ruling from the Internal Revenue Service (the "IRS") or
2 an opinion of counsel, in either case, in form and substance satisfactory to the Culbro Board as to the tax consequences of the Distribution (see "--Tax Consequences"). The Culbro Board has reserved the right to waive any conditions to the Distribution or, even if the conditions to the Distribution are satisfied, to abandon, defer or modify the Distribution at any time prior to the Distribution Date. See "INTRODUCTION" and "THE DISTRIBUTION--Manner of Effecting the Distribution." The Merger........................ Following the Distribution, but not before August 26, 1997 without the prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation, Culbro will merge with and into its subsidiary, General Cigar (the "Merger"). Reasons for the Distribution...... The Distribution will formally separate Culbro's tobacco and non-tobacco related businesses. After the Distribution, each business will be conducted by a separate, publicly held corporation. The Culbro Board believes that the Distribution will enable the management of each company to concentrate its attention and financial resources on the core businesses of such company, and enhance stockholder value over the long-term by allowing the investment community to analyze more effectively the investment characteristics, performance and future prospects of the two distinct business groups. The Culbro Board also believes that the Distribution will provide each company with greater flexibility in pursuing its independent business objectives. See "THE DISTRIBUTION--Background and Reasons for the Distribution." Tax Consequences.................. The Culbro Board has conditioned the Distribution on receipt of a private letter ruling from the IRS or an opinion of counsel satisfactory to the Culbro Board, in either case, to the effect, among other things, that receipt of shares of Class B Common Stock by holders of Culbro Common Stock will be tax free. See "THE DISTRIBUTION--Federal Income Tax Aspects of the Distribution." Trading Market.................... There is currently no public market for the Common Stock. The Common Stock initially is expected to trade in the "over the counter" market as quoted on the NASD's automated quotation system Electronic Bulletin Board. Griffin plans to apply to list the Common Stock on NASDAQ or another securities exchange or stock market, subject to compliance with the listing requirements of NASDAQ or such other exchange or market. See "THE DISTRIBUTION--Listing and Trading of the Common Stock; No Prior Market for the Common Stock," and "RISK FACTORS--No Prior Market for Common Stock." General Cigar..................... General Cigar Holdings, Inc., incorporated under the laws of Delaware, is a publicly-held corporation which conducts the tobacco related businesses of Culbro. In February 1997, General Cigar consummated an initial public offering (the "Offering") of
3 6,900,000 shares of its Class A Common Stock, par value $0.01 per share (the "Class A Common Stock"). Principal Office of Griffin....... The principal executive offices of Griffin will be located at One Rockefeller Center, New York, New York, 10020. Board of Directors................ Culbro, as the sole stockholder of Griffin, has elected the following persons to constitute the Board of Directors of Griffin; Edgar M. Cullman, Frederick M. Danziger, John L. Ernst and Winston J. Churchill, Jr. Risk Factors...................... See "RISK FACTORS" for a discussion of factors that should be considered in connection with the Common Stock received in the Distribution. Financing......................... Prior to the Distribution, Griffin expects to establish facilities for letters of credit and lines of credit. See "DESCRIPTION OF CERTAIN INDEBTEDNESS."
4 INTRODUCTION The Board of Directors of Culbro has declared a special distribution (the "Distribution") of one share of Common Stock of Griffin, for each share of Culbro Common Stock held as of the Record Date. Culbro will effect the Distribution on the Distribution Date by delivering all of the issued and outstanding shares of Common Stock to the Distribution Agent for transfer and distribution to the holders of record of Culbro Common Stock as of the Record Date. It is expected that certificates representing shares of Common Stock will be mailed to Culbro shareholders beginning on or about July 3, 1997. In the summer of 1996, Culbro began considering a major cigar business acquisition and its financial consequences, including the desirability of making a public offering of common stock. Culbro reviewed its capital structure with both its financial advisors and potential underwriters for an offering of common stock and concluded that the best structure for a public offering was a "pure play" cigar company with no prior trading history. Culbro believed that this structure would provide more net dollars than an offering of Culbro shares and, therefore, was considered to be a more desirable way of raising capital that would ultimately benefit Culbro shareholders. To achieve this, Culbro created General Cigar to make the public offering. The underwriters and financial advisors also agreed that added liquidity, through not having a holding company structure with both Culbro and General Cigar as public companies traded on the New York Stock Exchange ("NYSE"), was desirable. To achieve this end and to reduce ongoing costs, Culbro proposed the Merger following the Distribution so that the resulting structure would be two public companies, General Cigar and Griffin, each pursuing its separate business with its separate resources. Culbro believed that the cigar business thereby would be able to receive substantially higher proceeds from the Offering because it would be viewed as a "pure play" cigar company, and would eventually have greater share liquidity as the result of the issuance of added public shares at the time of the Merger which the underwriters viewed as desirable. In addition, the probable discount to (i) Culbro Common Stock associated with holding the cigar business through a holding company that did not own all of the cigar company stock and (ii) the Class A Common Stock of General Cigar associated with owning stock of an entity controlled by a single enterprise with potentially different expansion and dividend policies, would be eliminated by the Merger. Culbro declared the Distribution because it believes that it is in the best interests of Culbro and General Cigar to separate the cigar business from the unrelated businesses of Culbro. By effecting the Distribution, Culbro believes that Culbro, General Cigar and their shareholders will benefit by allowing the cigar business and non-tobacco related businesses to be evaluated on a stand-alone basis. After the Distribution, the tobacco business will be conducted by General Cigar and the non-tobacco businesses will be conducted by Griffin, each as a separate, publicly held corporation. Effective as of February 27, 1997, Culbro transferred to Griffin, as a contribution to capital, substantially all of its assets and liabilities relating to its landscape nursery and Connecticut- and Massachusetts-based real estate businesses, as well as Culbro's interest in Centaur and Eli Witt. Griffin will own and operate substantially all of the real estate and nursery businesses while General Cigar will own and operate the tobacco related businesses. See "BUSINESS." The Distribution is intended to enhance shareholder value over the long term by allowing Griffin and Culbro (and following the Merger, General Cigar) to concentrate on their respective businesses, and by enabling the investment community to analyze more effectively the investment characteristics, performance and future prospects of the two distinct business groups. The Distribution is also intended to provide each company with greater flexibility in pursuing its independent business objectives. For a description of risk factors in connection with the Distribution and the related transactions described in this Information Statement, see "RISK FACTORS." Griffin was formed as a subsidiary of Culbro on March 10, 1970. There has been no trading market in the Common Stock. The Common Stock initially is expected to trade in the "over the counter" market as quoted on the NASD's automated quotation system Electronic Bulletin Board. Griffin plans to apply to list 5 the Common Stock on NASDAQ or another securities exchange or stock market, subject to compliance with the listing requirements of NASDAQ or such other exchange or market. The Distribution does not require shareholder approval and the Culbro Board may abandon, defer or modify the Distribution prior to the Distribution Date. Culbro shareholders will not be entitled to appraisal rights in connection with the Distribution. The principal executive offices of Griffin are located at One Rockefeller Plaza, New York, New York 10020; telephone number (212) . RISK FACTORS Shareholders should note the following risk factors, as well as the other information contained in this Information Statement. COMPETITION The landscape nursery business is competitive and Griffin competes against a number of other companies, including local and regional nursery businesses. Some of Griffin's competitors may be in a stronger financial position than Griffin. Numerous real estate developers operate in the portion of Connecticut and Massachusetts in which Griffin's holdings are concentrated. Some of such businesses compete in each anticipated business of Griffin and may have greater financial resources than Griffin. See "BUSINESS--Competition." ASSUMED LIABILITIES; THE ELI WITT COMPANY Pursuant to the terms of the Distribution Agreement, Tax Sharing Agreement and Employee Benefits Allocation Agreement, certain liabilities of Culbro are being assumed by Griffin, including liabilities relating to the real estate business and the nursery business, certain specified tax liabilities, liabilities relating to employees of Griffin and all of Culbro's interests relating to Eli Witt. As a result of the Asset Transfers, Griffin acquired Culbro's 50.1% interest in Eli Witt. In November 1996, Eli Witt filed for protection under Chapter 11 of the Federal Bankruptcy Law. Prior to February 1993, Eli Witt was a wholly-owned subsidiary of Culbro and filed consolidated tax returns with Culbro. Culbro, Eli Witt and other parties engaged in two complex acquisitions and reorganizations in 1993 and 1994, pursuant to which Culbro in 1993 received material distributions both to repay intercompany indebtedness and as a return of capital from Eli Witt which was used to repay Culbro's debt, including substantial amounts Culbro had previously borrowed from unaffiliated third parties to fund Eli Witt's business. Culbro subsequently loaned $5 million to Eli Witt. It is anticipated that these transactions (including the transfer of funds to Culbro) will be reviewed by Eli Witt creditors and other parties in interest in connection with the Chapter 11 case. Griffin believes that Eli Witt was solvent at the time of the distributions to Culbro in 1993, and therefore that such distributions would not constitute a fraudulent conveyance under applicable federal and state insolvency laws. Griffin is not entitled to contribution from Culbro or General Cigar for liabilities assumed by Griffin relating to the Eli Witt matter. Griffin is obligated to indemnify Culbro and General Cigar for any liability relating to the Eli Witt matter. To date, one creditor has written to the unsecured creditors committee proposing an inquiry into this matter. Any claim based on the foregoing, if asserted and successfully prosecuted, could have a material adverse effect on Griffin's financial condition. See "BUSINESS--Legal Matters." NO OPERATING HISTORY AS AN INDEPENDENT COMPANY Griffin does not have an operating history as an independent public company. Griffin also will have a new management team in place at the commencement of its operation as a public company. The Griffin business has historically relied on Culbro for various financial and administrative services. After the Distribution, Griffin will require its own lines of credit, banking relationships and administrative functions 6 although Culbro (and following the Merger, General Cigar) will continue to provide Griffin with certain administrative services for a period of at least one year following the Distribution Date. There can be no assurance that, following the Distribution, and particularly following the termination of administrative relations with Culbro (and following the Merger, General Cigar), Griffin will be able to operate efficiently as an independent public corporation. DIVIDEND POLICY Griffin's dividend policy will be established by the Griffin Board from time to time based on the results of operations and financial condition of Griffin and such other business considerations as the Griffin Board considers relevant. It is not anticipated that dividends will be paid for a substantial period of time following the Distribution. See "DIVIDEND POLICY" and "--Lack of Cash Flow from Operations; Need for Additional Cash." NO PRIOR MARKET FOR COMMON STOCK There has been no prior trading market for the Common Stock and there can be no assurance as to the prices at which the Common Stock will trade before or after the Distribution Date. The Common Stock initially is expected to trade in the "over the counter" market as quoted on the NASD's automated quotation system Electronic Bulletin Board. Griffin plans to apply to list the Common Stock on NASDAQ or another securities exchange or stock market, subject to compliance with the listing requirements of NASDAQ or such other exchange or market.Until the Common Stock is fully distributed and an orderly market develops, the prices at which the Common Stock trades may fluctuate significantly. Prices for the Common Stock will be determined in the trading markets and may be influenced by many factors, including the depth and liquidity of the market for the Common Stock, investor perceptions of Griffin and its business and general economic and market conditions. See "THE DISTRIBUTION--Listing and Trading of the Common Stock; No Prior Market for the Common Stock." CERTAIN FEDERAL INCOME TAX CONSIDERATIONS Culbro has applied for a Tax Ruling from the IRS to the effect that, among other things, for United States federal income tax purposes the Distribution will be tax-free under Section 355 of the Internal Revenue Code of 1986, as amended (the "Code"). See "THE DISTRIBUTION--Federal Income Tax Aspects of the Distribution." The continuing validity of any such ruling, if granted, will be subject to certain factual representations and assumptions. Neither Culbro nor Griffin is aware of any facts or circumstances which should cause such representations and assumptions to be untrue. The Distribution Agreement (as defined below) provides that neither Culbro nor Griffin is to take any action inconsistent with, nor fail to take any action required by, the request for the Tax Ruling or the Tax Ruling unless required to do so by law or permitted to do so by the prior written consent of the other party or, in certain circumstances, a supplemental ruling or tax opinion. See "RELATIONSHIP BETWEEN CULBRO AND GRIFFIN AFTER THE DISTRIBUTION--Distribution Agreement." LACK OF CASH FLOW FROM OPERATIONS; NEED FOR ADDITIONAL CASH Although neither Griffin nor any of its subsidiaries currently has outstanding any material indebtedness, Griffin has operated during the last several years with little positive net cash flow and losses. See "--Historical Operating Losses and Net Deficit." In order to develop its real estate business, Griffin either must sell assets or obtain debt financing. Griffin intends to consider development opportunities, as well as a variety of financing options, including the incurrence of one or more forms of indebtedness. There can be no assurance, however, that any such financing can be obtained by Griffin on commercially reasonable terms or at all, or that dispositions of assets, if any, can be made in a sufficiently timely fashion to meet Griffin's cash needs, or at prices that reflect the fair market value of such assets at the time of any such 7 dispositions. The inability of Griffin to generate cash in the future could have an adverse effect on Griffin's ability to develop its property, financial condition or results of operations. POTENTIAL RESTRICTIONS IMPOSED BY THE TERMS OF GRIFFIN'S FUTURE INDEBTEDNESS The terms and conditions of future debt instruments of Griffin or its subsidiaries may impose restrictions on Griffin and its subsidiaries that affect, among other things, their ability to incur debt, pay dividends or make distributions, make acquisitions, create liens, sell assets, and make certain investments. The ability of Griffin and its subsidiaries to comply with the terms of their respective debt instruments can be affected by events beyond their control, including events such as changes in prevailing economic conditions, changes in consumer preferences and changes in the competitive environment, which could impair Griffin's operating performance. There can be no assurance that the assets or cash flows of Griffin or its subsidiaries would be sufficient to repay in full borrowings under their respective outstanding debt instruments, whether upon maturity or in the event of acceleration upon an event of default, or upon a required repurchase in the event of a change of control, or that Griffin would be able to refinance or restructure the payments on such indebtedness. See "DESCRIPTION OF CERTAIN INDEBTEDNESS." HISTORICAL OPERATING LOSSES AND NET DEFICIT; RECENT FORECLOSURE Griffin in recent years has experienced net losses before extraordinary items. In 1996, an office building which had been owned by Griffin and leased to the State of Connecticut was transferred to the lender to the building in a deed in lieu of foreclosure. Although Griffin believes, based on the current level of operations and anticipated growth, that cash flow from operations, cash on hand and, if needed, borrowings under an anticipated credit facility will be sufficient to fund its future operations in the near term, there can be no assurance that Griffin will operate profitability. At present, 5 individual buildings owned by Griffin are subject to mortgages aggregating $2.6 million. Each of these buildings experiences net positive cash flow after mortgage service expenses. There can be no assurance that such net positive cash flow will continue with respect to all of the properties currently subject to mortgages. See "--Lack of Cash Flow from Operations; Need for Additional Cash," "--Potential Restrictions Imposed by the Terms of Griffin's Future Indebtedness" and "--General Real Estate Investment Risks; Adverse Impact on Ability to Make Distributions." LIMITED GEOGRAPHIC DIVERSIFICATION; DEPENDENCE ON CERTAIN REGIONS Griffin's properties consist almost exclusively of real estate development properties in the Hartford-Springfield corridor of Massachusetts and Connecticut and landscape nursery properties in the New England, Mid-Atlantic and Mid-Western states. Griffin's performance will therefore be linked to economic conditions and the market for commercial real estate and landscape nursery products in these regions. ENVIRONMENTAL MATTERS Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or petroleum product releases at such property and may be held liable to a governmental entity or to third parties for property damage and for investigation and clean-up costs incurred by such parties in connection with contamination. The cost of investigation, remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner's ability to sell or rent such property or to borrow using such property as collateral. In connection with the ownership (direct or indirect), operation, management and development of real properties, Griffin may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property. In Simsbury, the value of Griffin's land is affected by the presence of chlordane on a portion of 8 the land which is intended for residential development. Griffin is experimenting with means of remediation on such lands. Although Griffin believes that it will be able to take steps to reduce chlordane contamination to levels below that which would impede residential development of such properties, there can be no assurance that Griffin will be able to do so in a timely or economic fashion or at all. In the event that Griffin is unable adequately to remediate this property, its ability to develop such property for its intended purposes would be materially affected. In addition, Griffin is seeking to develop a joint venture to process bulky waste and build a transfer station and recycling operation on a portion of its land in East Granby, Connecticut. Although Griffin intends to conduct such operations in compliance with all applicable environmental laws, there can be no assurance that Griffin will not incur incremental additional costs in connection with such operations resulting from environmental compliance efforts, or as a result of any future noncompliance with such laws. Griffin periodically reviews its properties for the purpose of evaluating such properties' compliance with applicable state and federal environmental laws. See "BUSINESS--Real Estate Nursery Business" and "BUSINESS--Regulation; Environmental Matters." GENERAL REAL ESTATE INVESTMENT RISKS; ADVERSE IMPACT ON ABILITY TO MAKE DISTRIBUTIONS; DEPRESSED MARKET FOR REAL ESTATE IN HARTFORD AREA GENERAL. Income from real property investments may be adversely affected by the general economic climate (particularly the economic climate of the New England region, where Griffin's properties are located), the attractiveness of Griffin's commercial development properties to tenants, competition from other available commercial properties, the ability of Griffin to provide adequate maintenance and insurance, and increased operating costs (including insurance premiums and real estate taxes). In addition, the northwest quadrant of the Hartford area is subject to material zoning and other regulatory restrictions, which can affect Griffin's ability to develop properties in accordance with their best use. DEPRESSED MARKET FOR REAL ESTATE. During the last several years, the real estate market in the Hartford area, particularly that in the northwest quadrant where the majority of Griffin's acreage is located, has been depressed by a number of factors, including the decline of employment in the defense and insurance industries. There can be no assurance that the condition of the real estate market in this region will improve in the near future. UNINSURED LOSS. Griffin carries insurance with respect to its properties which it deems reasonable. There may be, however, certain types of losses against which Griffin may not presently be insured. COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT AND SIMILAR LAWS. Under the Americans with Disabilities Act of 1990 (the "ADA"), all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. Although management believes that its commercial real estate properties are substantially in compliance with present requirements of the ADA, Griffin has not conducted an audit or investigation to determine its compliance. There can be no assurance that Griffin will not incur additional costs of complying with the ADA. A number of additional federal, state and local laws exist which also may require modifications to Griffin's commercial real estate properties, or restrict certain further renovations thereof, with respect to access thereto by disabled persons. The ultimate amount of the cost of compliance with the ADA or such legislation is not currently ascertainable, and, while such costs are not expected to have a material effect on Griffin, such costs could be substantial. SEASONALITY Sales in Griffin's landscape nursery business are seasonal, peaking in the spring, and are affected by commercial and residential building activity as well as weather conditions. Disruptions in such building activity, due to adverse weather during the spring season or adverse economic conditions in the regions in which Griffin conducts its landscape nursery operations, could have an adverse effect on the results of operations of Griffin, taken as a whole. 9 INABILITY TO PREDICT DEMAND Many of the products developed and/or produced by the landscape nursery business require significant time in order to mature. As a result, the landscape nursery business is dependent upon the ability to accurately estimate demand from one to five years in advance of actual demand, making it more difficult for Griffin to react quickly to sudden changes in demand. A sharp increase in demand which exceeded Griffin's projections would prevent Griffin from taking full advantage of such increase and could have an adverse effect on Griffin's reputation; conversely, a sharp decrease in demand might cause a loss of inventory value, result in excess inventory and could otherwise have an adverse effect on Griffin's results of operations. THE DISTRIBUTION GENERAL On the Distribution Date, Culbro intends to distribute all of the outstanding shares of Common Stock to holders of record on the Record Date of Culbro Common Stock. Each holder of Culbro Common Stock will receive one (1) share of Common Stock for each share of Culbro Common Stock held on the Record Date. Holders of Culbro Common Stock on the Record Date will not be required to make any payment or to take any other action to receive their portion of the Distribution. BACKGROUND AND REASONS FOR THE DISTRIBUTION In the summer of 1996, Culbro began considering a major cigar business acquisition and its financial consequences, including the desirability of making a public offering of common stock. Culbro reviewed its capital structure with both its financial advisors and potential underwriters for an offering of common stock and concluded that the best structure for a public offering was a "pure play" cigar company with no prior trading history. Culbro believed that this structure would provide more net dollars than an offering of Culbro shares and, therefore, was considered to be a more desirable way of raising capital that would ultimately benefit Culbro shareholders. To achieve this, Culbro created General Cigar to make the public offering. The underwriters and financial advisors also agreed that added liquidity, through not having a holding company structure with both Culbro and General Cigar as public companies traded on the NYSE, was desirable. To achieve this end and to reduce ongoing costs, Culbro proposed the Merger following the Distribution so that the resulting structure would be two public companies, General Cigar and Griffin, each pursuing its separate business with its separate resources. Culbro believed that the cigar business thereby would be able to receive substantially higher proceeds from the Offering because it would be viewed as a "pure play" cigar company, and would eventually have greater share liquidity as the result of the issuance of added public shares at the time of the Merger which the underwriters viewed as desirable. In addition, the probable discount to (i) Culbro Common Stock of General Cigar associated with holding the cigar business through a holding company that did not own all of the cigar company stock and (ii) the Class A Common Stock associated with owning stock of an entity controlled by a single enterprise with potentially different expansion and dividend policies, would be eliminated by the Merger. Culbro declared the Distribution because it believes that it is in the best interests of Culbro and General Cigar to separate the cigar business from the unrelated businesses of Culbro. By effecting the Distribution, Culbro believes that Culbro, General Cigar and their shareholders will benefit by allowing the cigar business and non-tobacco related businesses to be evaluated on a stand-alone basis. After the Distribution, the tobacco business will be conducted by General Cigar and the non-tobacco businesses will be conducted by Griffin, each as a separate, publicly held corporation. The Culbro Board believes that the Distribution will enable the management of each company to concentrate its attention and financial resources on the core businesses of such company, and enhance stockholder value over the long term by allowing the investment community to analyze more effectively the investment characteristics, performance and future prospects of the two distinct business groups. The Culbro Board also believes that the Distribution will provide each company with greater flexibility in pursuing its independent business objectives. 10 MANNER OF EFFECTING THE DISTRIBUTION On the Distribution Date, all of the outstanding shares of Common Stock will be delivered to the Distribution Agent for transfer and distribution to the holders of record of Culbro Common Stock as of the Record Date. It is expected that certificates representing shares of Common Stock will be mailed by the Distribution Agent to Culbro shareholders beginning on or about July 3, 1997. The Board of Directors of Culbro has reserved the right to abandon, defer or modify the Distribution and the related transactions described in this Information Statement at any time prior to 11:59 p.m., New York time, on the day immediately preceding the Distribution Date. No holder of Culbro Common Stock will be required to pay any cash or other consideration for the shares of Common Stock received in the Distribution or surrender or exchange shares of Culbro Common Stock in order to receive Common Stock. The Distribution will not affect the number of, or the rights attaching to, outstanding shares of Culbro Common Stock. All shares of Common Stock will be fully paid and non-assessable and the holders of those shares will not be entitled to preemptive rights. See "DESCRIPTION OF CAPITAL STOCK--Common Stock." LISTING AND TRADING OF THE COMMON STOCK; NO PRIOR MARKET FOR THE COMMON STOCK The Common Stock initially is expected to trade in the "over the counter" market as quoted on the NASD's automated quotation system Electronic Bulletin Board. Griffin plans to apply to list the Common Stock on NASDAQ or another securities exchange or stock market, subject to compliance with the listing requirements of NASDAQ or such other exchange or market. NASDAQ has informed Griffin that it expects to amend its listing requirements to provide that a listed class of equity securities must have a minimum public float of 1.1 million shares, a minimum aggregate market value of $18 million, a minimum price per share of $5, and a minimum of 400 holders. Griffin initially will have approximately 830 shareholders of record, which does not include beneficial owners whose shares are held of record in the names of brokers or nominees, based upon the number of record shareholders of Culbro Common Stock as of April 23, 1997, and will have more than 1.1 million shares held by the public, calculated in accordance with the listing requirements of NASDAQ. For certain information regarding options to purchase Common Stock that will be outstanding after the Distribution, see "RELATIONSHIP BETWEEN CULBRO AND GRIFFIN AFTER THE DISTRIBUTION--Related Agreements--Benefits and Employment Matters Allocation Agreement" and "CERTAIN EMPLOYEE BENEFIT MATTERS." There is not currently a public market for the Common Stock. Prices at which the Common Stock may trade cannot be predicted. Until the Common Stock is fully distributed and an orderly market develops, the prices at which trading in such Common Stock occurs may fluctuate significantly. The prices at which the Common Stock trades will be determined by the marketplace and may be influenced by many factors, including, among others, the depth and liquidity of the market for the Common Stock, investor perception of Griffin and the industries in which Griffin participates, Griffin's dividend policy and general economic and market conditions. See "RISK FACTORS--No Prior Market for Common Stock." Culbro and Griffin have received an opinion from Latham & Watkins, counsel to Culbro, to the effect that, among other things, the Distribution does not constitute a "sale" of the Common Stock to Culbro's shareholders under the Securities Act. It is Griffin's belief that the Common Stock distributed to Culbro's shareholders in the Distribution, and any Common Stock issued upon exercise of Griffin Options, will be freely transferable, except for securities received by persons who may be deemed to be "affiliates" of Culbro within the meaning of Rule 144 of the Securities Act, which persons may not publicly offer or sell Common Stock received in connection with the Distribution except pursuant to a registration statement under the Securities Act or pursuant to Rule 144 (without regard to holding period requirements thereunder). See "SHARES ELIGIBLE FOR FUTURE SALE." FEDERAL INCOME TAX ASPECTS OF THE DISTRIBUTION On December 16, 1996, Culbro filed a request for a ruling from the IRS to the effect, among other things, that the Distribution will qualify as a tax free spin-off under Section 355 of the Internal Revenue Code of 1986, as amended (the "Code"), and that, for Federal income tax purposes: 11 (1) No gain or loss will be recognized by (and no amount will be included in the income of) a holder of Culbro Common Stock upon the receipt of Common Stock in the Distribution. (2) The aggregate basis of the Culbro Common Stock and the Common Stock in the hands of the shareholders of Culbro immediately after the Distribution will be the same as the aggregate basis of the Culbro Common Stock held immediately before the Distribution, allocated in proportion to the fair market value of each. (3) The holding period of the Common Stock received by the shareholders of Culbro will include the holding period of Culbro Common Stock with respect to which the Distribution will be made, provided that such shareholder held the Culbro Common Stock as a capital asset on the Distribution Date. (4) No gain or loss will be recognized by Culbro upon the Distribution. The summary of federal income tax consequences set forth above does not purport to cover all federal income tax consequences that may apply to all categories of shareholders. All shareholders should consult their own tax advisors regarding the particular federal, foreign, state and local tax consequences of the Distribution to such shareholders. For a description of the Tax Sharing Agreement pursuant to which Culbro and Griffin have provided for various tax matters, see "RELATIONSHIP BETWEEN CULBRO AND GRIFFIN AFTER THE DISTRIBUTION--Related Agreements--Tax Sharing Agreement." REASONS FOR FURNISHING THE INFORMATION STATEMENT This Information Statement is being furnished by Culbro solely to provide information to Culbro shareholders who will receive Common Stock in the Distribution. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any securities of Culbro or Griffin. The information contained in this Information Statement is believed by Culbro and Griffin to be accurate as of the date set forth on its cover. Changes may occur after that date, and neither Culbro nor Griffin will update the information except in the normal course of their respective public disclosure practices. 12 RELATIONSHIP BETWEEN CULBRO AND GRIFFIN AFTER THE DISTRIBUTION For purposes of governing certain relationships between Culbro and Griffin after the Distribution and providing for an orderly transition, Culbro and Griffin have entered into various agreements, including those described below. Copies of certain of the agreements are included as exhibits to Griffin's Registration Statement on Form 10 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), relating to the Class A Common Stock, and the following discussions with respect to such agreements are qualified in their entirety by reference to the agreements as filed. DISTRIBUTION AGREEMENT In 1997, Culbro, Griffin and General Cigar entered into a distribution agreement (the "Distribution Agreement") which provides for the pro rata distribution by Culbro to the shareholders of Culbro of all issued and outstanding shares of Common Stock. Pursuant to the Distribution Agreement, Culbro transferred to General Cigar all of the common stock of General Cigar Co., Inc., Club Macanudo, Inc., Club Macanudo (Chicago), Inc. and all of Culbro's interest in the building located at 387 Park Avenue South, New York, New York. In addition, Culbro transferred to General Cigar Co., Inc. approximately 1,100 acres of its real estate holdings in the Connecticut River Valley used to cultivate cigar wrapper tobacco. In connection with these transfers, General Cigar received all licenses, permits, accounts receivable, prepaid expenses, reserves and other assets related to the cigar business. Pursuant to the Distribution Agreement, Culbro also transferred to Griffin substantially all the non-tobacco related assets of Culbro, including: (i) all of the common stock of Imperial Nurseries, Inc., a wholly-owned subsidiary of Culbro; (ii) approximately 5,500 acres of land in Connecticut and Florida, as well as several nursery wholesale and retail centers; (iii) Culbro's interests in Eli Witt and assets previously owned by Eli Witt; (iv) Culbro's 25% interest in Centaur; and (v) all licenses, permits, accounts receivable, prepaid expenses, reserves and other assets (other than cash) related to the real estate and nursery business. Culbro also transferred to Griffin $7.0 million in cash. Griffin continues to operate the real estate business owned by it prior to these Asset Transfers. Pursuant to the Distribution Agreement, General Cigar assumed all of Culbro's liabilities relating to the tobacco business and the assets transferred to General Cigar and General Cigar Co., Inc., and all of Culbro's retained indebtedness (other than those liabilities related to the assets transferred to Griffin), including bank and corporate debt, all expenses related to the Asset Transfers (as defined), the Offering, the Distribution and the Merger and certain other contingent liabilities. Similarly, Griffin assumed all liabilities relating to the real estate business and the nursery business and relating to the assets transferred to Griffin. These liabilities include all of Griffin's assumed and retained indebtedness, including bank and corporate debt, other liabilities relating to the assets transferred to Griffin and certain additional tax liabilities. Griffin also assumed all liabilities of Culbro related to Eli Witt, which filed for relief from creditors under Chapter 11 of the Federal Bankruptcy Code in 1996. See "RISK FACTORS--Assumed Liabilities; The Eli Witt Company." The transfer of certain assets and liabilities of Culbro referred to in the previous two paragraphs are referred to herein as the "Asset Transfers." As a result of the Asset Transfers, Culbro has become a holding company, substantially all of the assets of which are the stock of General Cigar and Griffin. Pursuant to the terms of the Distribution Agreement, General Cigar and Griffin will operate independently of each other. The Distribution Agreement also contains general indemnities between Culbro (or General Cigar, following the Merger) and Griffin and the procedures by which indemnification may be claimed. The Distribution Agreement provides for, on the one hand, Culbro and General Cigar to indemnify Griffin for any losses, liabilities or damages (including attorneys fees) in connection with any claim or action in respect of any of the liabilities to be assumed or retained by Culbro and General Cigar and, on the other 13 hand, Griffin to similarly indemnify Culbro and General Cigar in connection with any claim or action in respect of any liabilities retained or assumed by Griffin. In each instance, indemnities are limited by insurance proceeds recovered by the indemnified party that reduce the amount of the loss, liability or damage. In addition, the Distribution Agreement contains provisions for the administration of insurance policies shared by the parties and provisions for the sharing of information and related services among the parties. Upon consummation of the Merger, Culbro's obligations with respect to such indemnities will become the obligations of General Cigar. With respect to corporate governance, the Distribution Agreement requires the resignation of all Griffin directors and officers from any positions they previously held with Culbro, General Cigar or General Cigar Co., Inc., and each of their respective subsidiaries, and the resignation of all directors of Culbro, General Cigar or General Cigar Co., Inc., from any positions they previously held with Griffin, except that Edgar M. Cullman and John L. Ernst will retain their seats on the Griffin board of directors notwithstanding their positions at Culbro and General Cigar, and Edgar M. Cullman will be the Chairman of the Board of Griffin. RELATED AGREEMENTS TAX SHARING AGREEMENT Culbro and Griffin have entered into a tax sharing agreement (the "Tax Sharing Agreement") that defines the parties' rights and obligations with respect to filing of returns, payments, deficiencies and refunds of federal, state and other income or franchise taxes relating to Culbro's business for tax years prior to and including the Distribution. In general, with respect to periods ending on or before the last day of the taxable year in which the Distribution occurs, Culbro is responsible for (i) filing both consolidated federal tax returns for the Culbro affiliated group and combined or consolidated state tax returns for any group that includes a member of the Culbro affiliated group, including in each case Griffin and its subsidiaries for the relevant periods of time that such companies were members of the applicable group and (ii) paying the taxes relating to such returns. Generally, any subsequent adjustments resulting from the redetermination of such tax liabilities by the applicable taxing authorities will be paid by the member or affiliated group to which the adjustment relates, with Griffin assuming responsibility for all adjustments relating to Culbro and its affiliates other than General Cigar and its subsidiaries. Griffin is responsible for filing returns and paying taxes relating to any member of the Griffin affiliated group for periods that begin before and end after the Distribution and for periods that begin after the Distribution. Culbro and Griffin have agreed to cooperate with each other and to share information in preparing such tax returns and in dealing with other tax matters. SERVICES AGREEMENT Culbro and Griffin have entered into a services agreement (the "Services Agreement") pursuant to which Culbro has agreed to provide a number of administrative and other services to Griffin for a period of at least one year. These services include administration of Griffin's insurance policies, internal audit, preparation of tax returns, transportation and general in-house legal services. Griffin will make an annual payment of approximately $550,000 to, and will reimburse out-of-pocket expenses incurred by, Culbro and its subsidiaries, in connection with such services. Culbro will make the above services available to Griffin on an as-needed basis for a period of at least one year following the Distribution. Pursuant to the Merger, Culbro's obligations under the Services Agreement will be assumed by General Cigar. BENEFITS AND EMPLOYMENT MATTERS ALLOCATION AGREEMENT Culbro and Griffin have entered into the Benefits and Employment Matters Allocation Agreement (the "Benefits Agreement") which provides generally for the assumption by General Cigar of certain Culbro employee benefit plans and the allocation of employee benefits liabilities among Culbro, Griffin and General Cigar. In addition, the Benefits Agreement provides that upon the Distribution each option exercisable for shares of Culbro Common Stock will be converted into an option exercisable for shares of 14 Culbro Common Stock and an option exercisable for shares of Common Stock of Griffin. The Benefits Agreement further provides that, following the Distribution upon consummation of the Merger, options then exercisable for Culbro Common Stock will be converted into options exercisable for Common Stock of General Cigar. See "CERTAIN EMPLOYEE BENEFITS MATTERS." LEASES Griffin as lessor and General Cigar Co., Inc. as lessee have entered into a lease for certain agricultural real property in Connecticut and Massachusetts (the "Agricultural Lease"). The Agricultural Lease is for approximately 500 acres of arable land allocated to Griffin for possible commercial development in the long-term, but which provides General Cigar with a source of Connecticut Shade wrapper tobacco. General Cigar Co., Inc.'s use of the land is limited to the cultivation of cigar wrapper tobacco. The Agricultural Lease has an initial term of ten years and will provide for the extension of the lease for additional periods thereafter. In addition, at Griffin's option the Agricultural Lease may be terminated with respect to 100 acres of such land annually upon one year's prior notice. The rent payable by General Cigar Co., Inc. under the Agricultural Lease will be principally equal to the aggregate amount of all taxes and other assessments payable by Griffin attributable to the land leased. In addition, Griffin and General Cigar are considering entering into a lease for the use by General Cigar of certain commercial space in Connecticut (the "Commercial Lease"). The Commercial Lease, if entered into, would be for approximately 25,000 square feet of office space in the Griffin Center South office complex in Bloomfield, Connecticut. The Commercial Lease would have an initial term of ten years and provide for the extension of the lease for additional annual periods thereafter. The rent payable by General Cigar Co., Inc. under the Commercial Lease would be at market rates. 15 SELECTED FINANCIAL DATA The Selected Combined Financial Data of Griffin for fiscal 1992 and fiscal 1993 have been derived from the unaudited combined financial statements of Griffin. The Selected Combined Financial Data of Griffin for fiscal 1994, fiscal 1995 and fiscal 1996 have been derived from the audited Combined Financial Statements of Griffin included elsewhere in this Information Statement. The Selected Consolidated Financial Data of Griffin for the thirteen weeks ended March 2, 1996 and March 1, 1997 have been derived from the unaudited Consolidated Financial Statements of Griffin included elsewhere in this Information Statement. The following Selected Financial Data should be read in conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and the Financial Statements of Griffin and Notes thereto included elsewhere in this Information Statement. The information presented below reflects CMS Gilbreth Packaging Systems, Inc. ("CMS Gilbreth") as a discontinued operation. The 1994, 1995, and 1996 information reflects the deconsolidation of Eli Witt in April 1994 and subsequent accounting for the investment in Eli Witt under the equity method. See Note 12 to the Combined Financial Statements for fiscal 1994, fiscal 1995 and fiscal 1996 included elsewhere in this Information Statement.
THIRTEEN WEEKS ENDED --------------------- MARCH 2, MARCH 1, 1992 1993 1994 1995 1996 1996 1997 ------------ ------------ ---------- ---------- ---------- ---------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA ) STATEMENT OF OPERATIONS DATA: Net sales and other revenue......... $ 1,028,129 $ 1,239,855 $ 43,024 $ 41,756 $ 46,531 $ 3,352 $ 2,725 Operating profit (loss)............. 10,496 11,336 (4,867) 810 (1,245) (1,624) (2,426) Loss from continuing operations..... (1,555) (2,632) (7,157) (4,265) (4,063) (1,967) (2,013) Net income (loss)................... 344 (4,510) (3,833) (580) (4,606) (1,471) (2,013) BALANCE SHEET DATA: Total assets........................ 302,728 316,056 167,421 165,655 101,775 162,446 99,873 Working capital..................... 64,602 74,262 28,112 23,069 36,698 20,085 38,231 Long-term debt...................... 141,871 172,068 91,614 72,737 38,846 77,916 2,896 Culbro Investment................... 44,555 32,406 44,426 61,299 47,449 52,270 90,292
16 UNAUDITED PRO FORMA FINANCIAL DATA In 1997, Culbro transferred to Griffin substantially all the non-tobacco related assets of Culbro, including: (i) all of the common stock of Imperial Nurseries, Inc., a wholly-owned subsidiary of Culbro; (ii) approximately 5,500 acres of land in Connecticut and Florida, as well as several landscape nursery wholesale and retail centers; (iii) Culbro's interests in Eli Witt and assets previously owned by Eli Witt; (iv) Culbro's 25% interest in Centaur; and (v) all licenses, permits, accounts receivable, prepaid expenses, reserves and other assets (other than cash) related to the real estate and nursery business. Culbro also transferred to Griffin $7.0 million in cash. These transactions are reflected in the Consolidated Financial Statements of Griffin. Griffin continues to operate the real estate business owned by it prior to the Asset Transfers. The Unaudited Pro Forma Combined Statement of Operations for fiscal 1996 was prepared to reflect (i) the use of proceeds from the sale of CMS Gilbreth, (ii) the exchange of the shares of preferred stock of Eli Witt in satisfaction of the subordinated note issued by Culbro to a third party, (iii) the assumption of certain liabilities by General Cigar as part of the Asset Transfers (the "Liability Assumption") and the elimination of certain nonrecurring expenses directly related to the Distribution and (iv) the effect of the Distribution on Griffin's capital structure, as if these transactions had occured at the beginning of fiscal 1996. The Unaudited Pro Forma Consolidated Statement of Operations for the thirteen weeks ended March 1, 1997 was prepared to give effect to the Liability Assumption by General Cigar as if it had been completed at the beginning of the period and the elimination of pension expense which will not be incurred in the future. The Unaudited Pro Forma Consolidated Balance Sheet at March 1, 1997 was prepared to reflect the effect of the Distribution on Griffin's capital structure as if the Distribution had occurred on March 1, 1997. The column designated Griffin Historical reflects the results of operations and the assets and liabilities, as appropriate, of Griffin and Imperial Nurseries on an historical combined basis. In the opinion of management, all adjustments necessary to fairly present this pro forma information have been made. The Unaudited Pro Forma Combined Financial Statements are based upon, and should be read in conjunction with, the Combined Financial Statements of Griffin and Notes thereto included elsewhere in this document. The pro forma information does not purport to be indicative of the results that would have been reported had such events actually occurred on the dates specified, nor is it indicative of Griffin's future results. 17 UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR FISCAL 1996
PRO FORMA ADJUSTMENTS FOR -------------------------------------------------------- LIABILITY ASSUMPTION EXCHANGE OF ELI AND NON- GRIFFIN SALE OF CMS WITT PREFERRED RECURRING GRIFFIN HISTORICAL GILBRETH STOCK EXPENSES DISTRIBUTION PRO FORMA ----------- ------------- --------------- ----------- ----------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales and other revenue.................... $ 46,531 $ 46,531 Costs and expenses: Cost of goods sold.......... 34,210 34,210 Selling, general and administrative expenses.... 12,666 12,666 Other nonrecurring expense.................... 900 (900)(5) ----------- ------------- ------- ----------- ----------- ---------- Operating loss.............. (1,245 ) 900 (345) Income from equity investment................. 303 303 Other nonoperating income, net........................ 1,917 (1,917 (3) Interest expense............ 7,805 (2,859 (1) (2,167 (4) (2,271 (6) 508 ----------- ------------- ------- ----------- ----------- ---------- Loss before income tax benefit.................... (6,830 ) 2,859 250 3,171 (550) Income tax benefit.......... (2,767 ) 1,115 (2) 98 (2) 1,237 (2) (317) ----------- ------------- ------- ----------- ----------- ---------- Loss from continuing operations................. $ (4,063 ) $ 1,744 $ 152 $ 1,934 $ (233) ----------- ------------- ------- ----------- ----------- ---------- ----------- ------------- ------- ----------- ----------- ---------- Loss per common share from continuing operations...... $ (0.05) ---------- ---------- Weighted average common shares and equivalents outstanding................ 4,664 (7) 4,664 ----------- ---------- ----------- ----------
See Notes to Unaudited Pro Forma Financial Statements. 18 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED MARCH 1, 1997
PRO FORMA ADJUSTMENTS FOR ------------------------ LIABILITY ASSUMPTION AND NON- GRIFFIN RECURRING GRIFFIN HISTORICAL EXPENSES DISTRIBUTION PRO FORMA ----------- ----------- ----------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales and other revenue................................ $ 2,725 $ 2,725 Costs and expenses: Cost of goods sold......................................... 1,943 1,943 Selling, general and administrative expenses............... 3,208 3,208 ----------- ----------- ----------- ---------- Operating loss............................................. (2,426) (2,426) Loss from equity investment................................ (22) (22) Interest expense........................................... 799 (730)(6) 69 ----------- ----------- ----------- ---------- Loss before income tax benefit............................. (3,247 ) 730 (2,517) Income tax benefit......................................... (1,234 ) 285 (2) (949) ----------- ----------- ----------- ---------- Loss from continuing operations............................ $ (2,013 ) $ 445 $ (1,568) ----------- ----------- ----------- ---------- ----------- ----------- ----------- ---------- Loss per common share from continuing operations........... $ (0.33) ---------- ---------- Weighted average common shares and equivalents outstanding............................................... 4,803 (7) 4,803 ----------- ---------- ----------- ----------
See Notes to Unaudited Pro Forma Financial Statements. 19 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF MARCH 1, 1997
PRO FORMA ADJUSTMENTS GRIFFIIN FOR GRIFFIN PRO HISTORICAL DISTRIBUTION FORMA ---------- ----------- ----------- (IN THOUSANDS) ASSETS Cash and cash equivalents............................................... $ 6,498 $ 6,498 Accounts receivable, net................................................ 1,730 1,730 Inventories............................................................. 30,109 30,109 Deferred income taxes................................................... 2,783 2,783 Other current assets.................................................... 801 801 ---------- ----------- ----------- Total current assets.................................................... 41,921 41,921 Property and equipment, net............................................. 12,671 12,671 Real estate held for sale or lease, net................................. 27,154 27,154 Investment in Centaur Communications, Ltd............................... 14,673 14,673 Other assets, including investment in real estate joint venture......... 3,454 3,454 ---------- ----------- ----------- Total assets............................................................ $ 99,873 $ 99,873 ---------- ----------- ----------- ---------- ----------- ----------- LIABILITIES AND CULBRO INVESTMENT/STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities................................ $ 3,448 $ 3,448 Long-term debt due within one year...................................... 242 242 ---------- ----------- ----------- Total current liabilities............................................... 3,690 3,690 Long-term debt.......................................................... 2,896 2,896 Other noncurrent liabilities............................................ 2,995 2,995 ---------- ----------- ----------- Total liabiities........................................................ 9,581 9,581 ---------- ----------- ----------- Culbro Investment....................................................... 90,292 (90,292)(7) Common stock............................................................ 45 (7) 45 Additional paid in capital.............................................. 90,247 (7) 90,247 ---------- ----------- ----------- Total Culbro Investment/stockholders' equity............................ 90,292 90,292 ---------- ----------- ----------- Total liabilities and Culbro Investment/stockholders' equity............ $ 99,873 $ 99,873 ---------- ----------- ----------- ---------- ----------- -----------
See Notes to Unaudited Pro Forma Financial Statements. 20 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (1) Reflects reduction of interest expense as a result of using the proceeds from the sale of CMS Gilbreth Packaging Systems, Inc. to reduce debt. The net proceeds of approximately $35 million from the sale, which was completed on November 8, 1996, reduced debt under Culbro's Senior Notes and Credit Agreement, which had interest rates of 9.9% and 7.0%, respectively. (2) Reflects Federal income tax (35%) and state income tax (4%), which is net of Federal tax benefits. (3) Reflects the elimination of $2.167 million of income from accrued dividends and accretion on shares of preferred stock of Eli Witt as a result of the exchange of such preferred stock in satisfaction of a subordinated note issued by Culbro to a third party, and elimination of other nonoperating expense of $0.25 million which Griffin incurred in connection with its investment in Eli Witt. (4) Reflects the elimination of interest expense on a subordinated note issued by Culbro to a third party that was satisfied by the exchange of such note for shares of preferred stock issued by Eli Witt. (5) Reflects elimination of the other nonrecurring expense directly related to the Distribution of $0.9 million in 1996. This item represents Griffin's allocated portion of Culbro's nonrecurring expense for the cost of terminating a long-term compensation plan and severance for certain employees in contemplation of the Distribution. (6) Reflects the reduction of interest expense from the assumption by General Cigar of the Culbro general corporate debt that was included on Griffin's historical financial statements. (7) Reflects the Distribution of Griffin's Common Stock to shareholders of Culbro in a one-for-one ratio. The Common Stock has a par value of $0.01 per share. 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION OF THE HISTORICAL FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF GRIFFIN SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS INFORMATION STATEMENT (F-1 TO F-33). THE FOLLOWING DISCUSSION OF THE PRO FORMA FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF GRIFFIN SHOULD BE READ IN CONJUNCTION WITH THE UNAUDITED PRO FORMA FINANCIAL DATA AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS INFORMATION STATEMENT. OVERVIEW Griffin is a wholly owned subsidiary of Culbro. Prior to March 18, 1997, Griffin was known as Culbro Land Resources, Inc. Griffin principally owns and operates landscape nursery and Connecticut-and Massachusetts-based real estate operations, and other non-tobacco related assets and investments, all of which were held by Griffin or transfered to Griffin in the Asset Transfers effected under the terms of the Distribution Agreement. The historical financial statements of Griffin reflect the combined results of the operations of all of these businesses and assets. Griffin's results in each of the periods presented also include allocations to Griffin of Culbro corporate overhead of $0.4 million in the thirteen weeks ended March 1, 1997 (the "1997 first quarter") and $0.4 million in the thirteen weeks ended March 2, 1996 (the "1996 first quarter") and $2.4 million, $2.1 million and $1.8 million in fiscal 1994, fiscal 1995 and fiscal 1996, respectively. Additionally, $0.9 million of Culbro nonrecurring expense was allocated to Griffin in fiscal 1996. These allocations, which may not necessarily reflect the additional expenses Griffin would have incurred as a separate stand-alone entity, are deemed reasonable by Griffin management. The combined financial statements include interest expense on debt specifically incurred by Griffin, and interest expense on Culbro general corporate debt. The Culbro debt is included in Griffin's historical combined financial statements for the fiscal years ended 1994, 1995 and 1996. Pursuant to the Distribution Agreement entered into on February 27, 1997, between Culbro, Griffin and General Cigar, the Culbro general corporate debt included in Griffin's historical financial statements was assumed by General Cigar. This debt is excluded from Griffin's debt structure as of March 1, 1997, however, due to the fact that General Cigar did not assume the debt until the end of the 1997 first quarter, the interest expense incurred on the Culbro general corporate debt is included in Griffin's historical consolidated statement of operations for the thirteen weeks ended March 1, 1997. This interest expense will not be part of Griffin's results of operations on a prospective basis. Therefore, Griffin's results of operations should be read in conjunction with the unaudited combined pro forma results of operations in Note 4 of the Combined Financial Statements and the Unaudited Pro Forma Combined Financial Statements included elsewhere in this Information Statement. PRO FORMA 1996 COMPARED TO ACTUAL FISCAL 1996 The following summary financial information and discussion relate to Griffin's 1996 results of operations on a pro forma basis. The pro forma operating data is presented as if the Liability Assumption, the exchange of the preferred stock of Eli Witt for the related subordinated note previously issued by Culbro and the use of proceeds from the disposition of CMS Gilbreth had all occurred at the beginning of fiscal 1996. The pro forma balance sheet reflects the Liability Assumption as if it had occurred at the balance sheet date. The effect of the sale of CMS Gilbreth and the exchange of the preferred stock are reflected (eliminated) in Griffin's 1996 Combined Balance Sheet. 22 1996 SUMMARIZED FINANCIAL INFORMATION
1996 1996 HISTORICAL PRO FORMA ---------- ----------- Net sales................................................................................. $ 46,531 $ 46,531 ---------- ----------- Operating loss............................................................................ (1,245) (345) Other nonoperating income items........................................................... 2,220 303 Interest expense.......................................................................... 7,805 508 ---------- ----------- Loss before income tax benefit............................................................ (6,830) (550) Income tax benefit........................................................................ (2,767) (317) ---------- ----------- Loss from continuing operations........................................................... $ (4,063) $ (233) ---------- ----------- ---------- ----------- Current assets............................................................................ $ 44,068 $ 42,491 ---------- ----------- Total assets.............................................................................. $ 101,775 $ 100,198 ---------- ----------- ---------- ----------- Current liabilities....................................................................... $ 7,370 $ 5,836 ---------- ----------- Long-term debt............................................................................ 38,846 2,846 ---------- ----------- Culbro Investment/stockholders' equity.................................................... 47,449 87,854 ---------- ----------- Total liabilities and Culbro Investment/stockholders' equity.............................. $ 101,775 $ 100,198 ---------- ----------- ---------- -----------
Net sales remain unchanged because CMS Gilbreth was reported as a discontinued operation in the historical financial statements. The lower operating loss reflects the elimination of Griffin's allocated share of a nonrecurring corporate expense incurred by Culbro that was directly related to the Distribution. The lower nonoperating income reflects the elimination of the accrued dividend income on the Eli Witt preferred stock that was exchanged for Culbro's subordinated note payable (which was assumed by Griffin as part of the Asset Transfers). The retirement of the subordinated note resulted in a reduction of interest expense equal to the amount of the dividend income. The disposition of the investment in Eli Witt also resulted in the elimination of approximately $0.3 million of Eli Witt related expenses. The reduction in debt from the proceeds from the sale of CMS Gilbreth and the exchange of the preferred stock of Eli Witt is reflected in the historical balance sheet. The lower debt balance and the increase in capital (Culbro Investment) in the pro forma balance sheet reflect the assumption by General Cigar of the allocated Culbro debt, certain of Griffin's employee retirement obligations and other liabilities. ACTUAL RESULTS OF OPERATIONS The discussion set forth below relates to the financial condition and results of operations of Griffin as of and for the thirteen weeks ended March 1, 1997 and March 2, 1996, fiscal 1996, fiscal 1995 and fiscal 1994. THIRTEEN WEEKS ENDED MARCH 1, 1997 COMPARED TO THIRTEEN WEEKS ENDED MARCH 2, 1996 Net sales and other revenue decreased $0.6 million, to $2.7 million in the 1997 first quarter from $3.3 million in the 1996 first quarter. The decrease reflected lower sales in the landscape nursery and real estate segments. In the landscape nursery segment, net sales and other revenue decreased $0.2 million, to $2.0 million in the 1997 first quarter from $2.2 million in the 1996 first quarter. The decrease in the 1997 first quarter reflected lower sales of hardgoods, including snow and ice removal products, due principally to the milder weather and lower snowfall in the 1997 first quarter, which contrasted sharply with the more severe weather in the 1996 first quarter. Due to the seasonal nature of the business, first quarter sales of landscape nursery products are typically less than 5% of annual sales. Net sales and other revenue in the 23 real estate segment decreased $0.4 million to $0.7 million in the 1997 first quarter as compared to $1.1 million in the 1996 first quarter. The higher net sales and other revenue in the 1996 first quarter included rental revenue from a commercial property and income related to a real estate joint venture, both of which were disposed of in the 1996 fourth quarter (see below). Additionally, revenue from property management decreased, due principally to lower revenue from services provided to tenants. The operating loss in the landscape nursery segment increased $0.3 million to $1.8 million in the 1997 first quarter from $1.5 million in the 1996 first quarter. The increased loss reflects higher expenses, due principally to timing, and the effect of the lower sales. The landscape nursery segment incurs an operating loss in the first quarter because of the seasonality of its sales. The real estate segment incurred an operating loss of $0.2 million in the 1997 quarter compared to an operating loss of $0.1 million in the 1996 quarter, due principally to the lower net sales and other revenue. Interest expense decreased $1.1 million to $0.8 million in the 1997 first quarter from $1.9 million in the 1996 first quarter. The lower interest expense reflects the lower debt level in the 1997 first quarter as a result of several transactions that took place in the fourth quarter last year. These included the reduction of debt through proceeds received from the sale of CMS Gilbreth and the sale of Griffin's interest in a real estate joint venture, the exchange of preferred stock in Eli Witt and the satisfaction of a nonrecourse mortgage on a commercial property through the transfer of the property to the mortgage holder. Other nonoperating income, net, in the 1996 first quarter reflected accrued dividends and accretion income on the Eli Witt preferred stock, partially offset by other expenses related to the investment in Eli Witt. As a result of the exchange of Eli Witt preferred stock, there were no such items in the 1997 first quarter. Net loss in the 1996 first quarter included the results of CMS Gilbreth. Since this company was sold, in the 1996 fourth quarter, its results are not included in the 1997 first quarter. FISCAL 1996 COMPARED TO FISCAL 1995 Net sales and other revenue increased 11.4% or $4.7 million, to $46.5 million in fiscal 1996 compared to $41.8 million in fiscal 1995. The increase in net sales and other revenue was due to higher net sales and other revenue in both the landscape nursery and real estate segments. In the landscape nursery segment, net sales increased 6.2% or $2.1 million to $37.0 million in fiscal 1996 from $34.9 million in fiscal 1995. This increase reflected increased sales at the wholesale landscape nursery sales and service centers. Net sales and other revenue in the real estate business increased $2.6 million to $9.5 million in fiscal 1996 from $6.9 million in fiscal 1995. The increase reflected the sale of Griffin's 30% interest in a joint venture that owns commercial properties in Griffin Center and Griffin Center South. The joint venture sale generated net proceeds of $4.0 million and a pretax loss of $0.4 million. Excluding this transaction, net sales and other revenue decreased by $1.8 million, due to lower residential lot sales and lower sales of undeveloped commercial land. Griffin incurred an operating loss of $1.2 million in fiscal 1996 compared to an operating profit of $0.8 million in fiscal 1995. In the landscape nursery segment, operating profit was $1.6 million in fiscal 1996 compared to $1.7 million in fiscal 1995, reflecting higher operating expenses, which offset the effect of the higher sales. An increase in gross margins to 29.7% in fiscal 1996 from 29.1% in fiscal 1995 was due to the effect of a $1.0 million charge in 1995 to reserve for excess field-grown plant inventories offset by product mix and competitive pricing pressures in fiscal 1996. Operating expenses in the landscape nursery business increased to 25.7% of net sales in fiscal 1996 from 25.1% of net sales in fiscal 1995. The increase reflected higher selling expenses, and the operating expenses of a new sales and service center. In the real estate segment, Griffin incurred an operating loss of $0.3 million in fiscal 1996 compared to an operating profit of $1.2 million in fiscal 1995. The lower results reflected the loss of $0.4 million on the joint venture sale and the effect of the lower residential and commercial land sales. 24 General corporate expense, net, increased to $2.6 million in fiscal 1996 from $2.2 million in fiscal 1995. The increase in fiscal 1996 reflects Griffin's allocated share of a Culbro nonrecurring corporate compensation expense item. Results from Griffin's equity investment in Centaur increased to $0.3 million of equity income in fiscal 1996 from an equity loss of $0.2 million in fiscal 1995. The increase reflected improved business conditions for Centaur's publishing business in the United Kingdom. Other nonoperating income of $1.9 million in fiscal 1996 and $0.9 million in fiscal 1995 included principally accretion and accrued dividend income on the preferred stock of Eli Witt of $2.2 million and $2.3 million in fiscal 1996 and fiscal 1995, respectively. In fiscal 1995 the income was partially offset by expenses incurred in connection with Griffin's support for the refinancing of Eli Witt. The accretion and accrued dividend income on the preferred stock equaled the interest expense recorded in those years on a related exchangeable subordinated note payable. In the 1996 fourth quarter shares of preferred stock were exchanged in satisfaction of a subordinated note issued by Culbro and all accrued interest thereon. Interest expense decreased to $7.8 million in fiscal 1996 from $8.2 million in fiscal 1995 due to lower debt levels, reflecting the proceeds from the sale of CMS Gilbreth which was used to repay debt. The results of the discontinued CMS Gilbreth operation in fiscal 1996 reflected a loss of $0.5 million, net of tax, compared to income of $3.7 million, net of tax, in fiscal 1995. The 1996 results included a net loss on the sale of CMS Gilbreth of $1.3 million partially offset by income from this business of $0.8 million prior to the sale. FISCAL 1995 COMPARED TO FISCAL 1994 Net sales and other revenue decreased 2.9% or $1.2 million, to $41.8 million in fiscal 1995 from $43.0 million in fiscal 1994. The decrease was due to lower net sales and other revenue in both the nursery products and real estate business segments. In the landscape nursery segment, net sales decreased 1.2% or $0.4 million to $34.9 million in fiscal 1995 from $35.3 million in fiscal 1994. The decrease reflected slightly lower sales at the wholesale sales and service centers. Net sales and other revenue in the real estate segment decreased $0.8 million to $6.9 million in fiscal 1995 from $7.7 million in fiscal 1994. The decrease was due to lower residential lot sales in fiscal 1995 partially offset by increased commercial land sales. Operating profit in fiscal 1995 was $0.8 million compared to an operating loss of $4.9 million in fiscal 1994. In the landscape nursery segment, operating profit was $1.7 million in fiscal 1995 compared to an operating loss of $0.6 million in fiscal 1994. The increased operating profit reflected the effect of higher margins, which increased to 29.1% in fiscal 1995 from 25.0% in fiscal 1994, and lower operating expenses, which decreased to 25.1% of net sales from 27.7% in fiscal 1994. The higher gross margins reflected improved pricing and lower costs, partially offset by a $1.0 million charge to reserve for excess field-grown plant inventories. The decrease in operating expenses reflected lower selling expenses and improved cost containment measures at the wholesale sales and service centers. In the real estate segment, operating profit was $1.2 million in fiscal 1995 as compared to an operating loss of $2.2 million in fiscal 1994. The increase principally reflected the effect of a $3.6 million charge recorded in 1994 to write off the costs of certain projects that were not developed as originally planned. Excluding that item, operating results were substantially unchanged in fiscal 1995 as compared to fiscal 1994. The effect of lower sales of residential lots in fiscal 1995 was substantially offset by lower general and administrative expenses, principally reflecting headcount reduction. General corporate expense, net, which principally reflects general and administrative expenses allocated to Griffin from Culbro, increased to $2.2 million in fiscal 1995 from $2.0 million in fiscal 1994. The loss on equity investments was $0.2 million in fiscal 1995 as compared to a $1.7 million equity loss in fiscal 1994. The change reflected the inclusion in fiscal 1994 of results of Eli Witt prior to the deconsolidation of that subsidiary (see Note 12 to the Combined Financial Statements). The investment in 25 Centaur had an equity loss of $0.2 million in fiscal 1995 compared to equity income of $0.4 million in fiscal 1994. The lower results from Centaur were attributed to a downturn in the British economy. Other nonoperating income, net, decreased to $0.9 million in fiscal 1995 from $1.4 million in fiscal 1994. The decrease reflected expenses in fiscal 1995 related to Griffin's support for the refinancing of Eli Witt, partially offset by a full year of accretion and accrued dividend income on the Eli Witt preferred stock in fiscal 1995 versus a partial year of such income in fiscal 1994. The accretion income and accrued dividends equaled the interest expense on the exchangeable subordinated note payable. Interest expense increased to $8.2 million in fiscal 1995 from $8.0 million in fiscal 1994. The increase was due principally to a full year of interest expense on the exchangeable subordinated note payable in fiscal 1995 versus a partial year of interest expense on the subordinated note in fiscal 1994. Income from the discontinued operation was $3.7 million, net of tax, in fiscal 1995 compared to $3.3 million, net of tax, in fiscal 1994. The increase reflected improved margins, due to sales mix, partially offset by higher operating expenses. LIQUIDITY AND CAPITAL RESOURCES Net cash flows used in operating activities of continuing operations were $5.0 million in the 1997 first quarter compared to $0.5 million in the 1996 first quarter. The increased use of cash reflected principally a greater increase in inventories, a greater reduction of accounts payable and accrued liabilities, and a decrease in deferred income taxes as compared to an increase in the 1996 first quarter. The lower net cash used in investing activities in the 1997 first quarter reflected the effect of the cash used in the discontinued operation in the 1996 first quarter partially offset by higher capital expenditures in the landscape nursery business segment in the 1997 first quarter. Net cash provided by financing activities in the 1997 first quarter reflected an increase in Culbro's general corporate debt that was included in Griffin's financial statements through the date that debt was assumed by General Cigar (see below). Net cash flows used in operating activities of continuing operations were $2.2 million in fiscal 1996 compared to $3.9 million used in operating activities in 1995. The lower use of cash reflected principally the benefit from proceeds from sale of a real estate joint venture, partially offset by reductions in liabilities, including $3.5 million of deferred taxes relating to continuing operations, and reductions in accounts payable and accrued liabilities. The net cash flows used in operating activities of continuing operations in 1995 of $3.9 million compared to $11.6 million used in operating activities in fiscal 1994 reflected the lower loss from continuing operations in fiscal 1995 compared to fiscal 1994 which also included a noncash gain on sale of Eli Witt stock. Cash used in operating activities in each of the fiscal years 1994 through 1996 includes pretax interest expense of $8.0 million, $8.2 million and $7.8 million, respectively, principally on allocated Culbro debt which was used to fund Griffin's operations including both continuing and discontinued operations. Effective February 27, 1997, pursuant to the Distribution Agreement, the Culbro debt allocated to Griffin in the historical Combined Financial Statements was assumed by General Cigar and is not an obligation of Griffin. Net cash flow provided by investing activities in 1996 included principally the proceeds from the sale of CMS Gilbreth. The investing activities of 1995 and 1994 include transactions primarily relating to the investment in Eli Witt. In February 1997, Eli Witt sold all of its assets in a court supervised bankruptcy sale. Griffin has no investment related to Eli Witt in its 1996 Combined Balance Sheet and does not expect to receive any proceeds from the sale. See Notes 12 and 14 to the Combined Financial Statements for fiscal 1994, fiscal 1995 and fiscal 1996 contained elsewhere in this Information Statement. Net cash relating to financing activities in each of the fiscal years 1994 through 1996 includes net payments of debt, principally the debt that was allocated by Culbro to Griffin. As a result of the 26 assumption by General Cigar on February 27, 1997, such debt will not be part of Griffin's debt structure prospectively. Financing activities also included net transactions with Culbro, including operating cash flow transferred to Culbro in fiscal 1996 and cash flow transferred to Griffin by Culbro in fiscal 1995 and fiscal 1994 to paydown the allocated debt and fund Griffin's operations. Through the date of the Distribution Agreement, February 27, 1997, the cash management and treasury activities of Griffin were integrated with those of Culbro. Griffin's cash receipts were transferred daily into Culbro's cash account and Griffin's cash disbursement accounts were reimbursed by Culbro on a daily basis. Griffin did not maintain its own separate credit facilities. Culbro maintained credit facilities which it utilized to finance transactions relating to Griffin. Borrowings under the Culbro credit facilities are reflected in Griffin's Financial Statements through the date that this debt was assumed by General Cigar, which was February 27, 1997. Subsequent to that date, Griffin's cash flows are segregated from Culbro's other subsidiaries. Griffin maintained an intercompany account with Culbro in which its net cash flow and other intercompany transactions with Culbro were recorded. See Note 6 in the Financial Statements for fiscal 1994, fiscal 1995 and fiscal 1996 and Note 4 in the Financial Statements for the 1997 first quarter and the 1996 first quarter. The intercompany account with Culbro and Griffin's retained earnings and capital accounts are included in the Financial Statements as Culbro Investment. Historically, Griffin depended on Culbro's credit facilities to fund its operations. In accordance with the Distribution Agreement, Griffin received cash of $7.0 million from General Cigar. Griffin intends to negotiate a line of credit to fund future real estate projects and for general working capital purposes. Management believes, based on the current level of operations and anticipated growth, that the cash flow from operations, cash on hand and, if needed, borrowings under an anticipated credit facility will be sufficient to fund its future operations in the next twelve months. Over the long-term, selective asset sales and additional credit facilities may be required to fund capital projects. Griffin anticipates based on discussions to date with potential lenders that it will be able to obtain adequate credit facilities. Griffin also believes that it will be able adequately to administer its operations following the Distribution and following the expiration of the Services Agreement. 27 BUSINESS Griffin and its subsidiaries comprise principally a landscape nursery and real estate business. At the end of its 1996 fiscal year Griffin engaged in two principal lines of business: (1) landscape nursery products, comprised of growing container and field-grown landscape nursery products for sale principally to landscape nursery mass merchandisers, and owning and operating wholesale sales and service centers; and (2) real estate, comprised of owning, building and managing commercial and industrial properties and developing residential subdivisions on real estate owned by Griffin in Connecticut and Massachusetts. LANDSCAPE NURSERY BUSINESS The landscape nursery operations of Griffin are operated by its wholly-owned subsidiary, Imperial Nurseries, Inc. ("Imperial"). Imperial is a grower, distributor and broker of wholesale landscape nursery stock. The landscape nursery industry is extremely fragmented, with the industry leader having less than 1% of total market share. Imperial believes that its volume places it among the ten largest landscape nursery companies in the country. Imperial's growing operations are located on property owned partly by Griffin and partly by Imperial, in Connecticut (1,000 in-ground acres and 400 acres for containers) and in northern Florida (350 acres for containers). The largest portion of Imperial's container-grown product consists of broad leaf evergreens, including azaleas and rhododendron. Container-grown product is held principally from one to five years prior to its sale by Griffin. Its field-grown, as opposed to container-grown, product includes principally evergreen pines, hemlocks, spruce and arborvitae. Imperial also contracts with a grower in the Mid-Atlantic states to grow field-grown product for Imperial. The agreement provides for Imperial to purchase such product over a five year period. This program is part of a program intended to reduce Imperial's investment in field-grown plants and to shorten its product growing cycles to increase the profitability of the field-grown business. Imperial is also reviewing other approaches to increasing its return on assets. Among the possible approaches are holding some of its containerized production for a longer period and selling such plants in terra cotta or similar containers for immediate use by customers and adding a broader selection of perennial flowers directed at increasing both margin and selling price. The combined field-grown and container operations serve a market comprised principally of landscapers, retail chain store garden departments, retail nurseries and garden centers, and wholesale nurseries and distributors. Imperial-grown products are also distributed through its own wholesale horticultural sales and service centers. Imperial's major markets service the Northeast, Mid-Atlantic, Southeast and Mid-West. Nursery sales are seasonal, peaking in spring, and are affected by commercial and residential building activity as well as weather conditions. The largest portion of Imperial's assets are represented by plant inventories. Imperial operates eight wholesale horticultural sales and service centers which sell a wide range of plant material, including a large portion purchased from growers other than Imperial, and horticultural tools and products to the trade. The centers owned by Imperial are located in Windsor, Connecticut; Aston, Pennsylvania; Columbus and Cincinnati, Ohio; White Marsh, Maryland; and Manassas, Virginia. In addition, Imperial leases centers in Pittsburgh, Pennsylvania and Monroeville, Pennsylvania. In 1996, Imperial continued to diversify its customer base in order to reduce its dependence on a few large customers. Currently Imperial's sales are made to a large variety of customers, none of whom represents more than 3% of sales. Containerized growing and shipping capacity has been increased to meet the potential volume and quality needs of Imperial's customers and to capitalize on any growth in the Mid-Atlantic and Mid-West markets. 28 REAL ESTATE BUSINESS Griffin is directly engaged in the real estate development business on portions of its land in Connecticut, with headquarters in Bloomfield, Connecticut. Griffin develops portions of its properties for commercial, residential and industrial use. During the last several years, the real estate market in the Hartford area, particularly that in the northwest quadrant, where the majority of Griffin's acreage is located, has been depressed by a number of factors, including the decline of employment in the defense and insurance industries. There can be no assurance that the condition of the real estate market in this region will improve in the near future. The development of Griffin's land was also affected by land planning issues, particularly in the town of Simsbury. In Simsbury, the value of Griffin's land is affected by the presence of chlordane on a portion of the land which is intended for residential development. Griffin is examining means of remediation on its lands and will seek to subdivide certain of its Simsbury properties over a reasonable period. Griffin's most substantial development is Griffin Center in Windsor, Connecticut and Griffin Center South in Bloomfield, Connecticut. Together these master planned developments comprise approximately 600 acres, half of which have been developed with nearly 1,750,000 square feet of office and industrial space. Griffin Center currently includes nine corporate office buildings built by Griffin. During the 1980's, Griffin sold 70% interests in five of the buildings to a bank-managed real estate investment fund. In 1996, these buildings were sold in a transaction initiated by the successor of that partner. Griffin recorded a pre-tax loss as a result of this transaction. In the 1980's, Griffin also sold 70% interests in two other office buildings to an insurance company. Griffin currently maintains a 30% interest in those two office buildings in the Griffin Center Office Complex which aggregate 160,000 square feet. One other office building which had been leased to the State of Connecticut was transferred to the lender to the building in a deed in lieu of foreclosure in 1996. Griffin Center South, a 130-acre tract, comprises fifteen buildings of industrial and research/development space. Nine of these buildings have been retained by Griffin for rental and are 78% rented. The other buildings have been built on land sold by Griffin to commercial users who own and occupy the space. Griffin has a master plan state traffic certificate which allows for the development of an additional 300,000 square feet of space. Griffin owns a 600-acre tract of land near Bradley International Airport and Interstate 91 known as the New England Tradeport. To date, 140,000 square feet of warehouse and light manufacturing space have been developed and are 95% occupied and a bottling and distribution plant for Pepsi-Cola has been built. A state traffic control certificate for the future development of 1.3 million square feet has been obtained for the New England Tradeport. Griffin intends to direct its primary efforts at the construction and leasing of light industrial and warehouse facilities at the New England Tradeport. Development at the New England Tradeport will require investment in offsite infrastructure on behalf of Windsor, Connecticut and improvement of some state or town roads. Two additional Griffin parcels available for development include 28 acres in the Day Hill Technology Center in Windsor, and 100 acres in the South Windsor Technology Center. State traffic certificates have been obtained for these parcels for 500,000 square feet and 200,000 square feet of development, respectively. In 1988, a subsidiary of Griffin began infrastructure work at Walden Woods, a 153-acre site in Windsor, Connecticut which was planned to contain more than 365 residential units. Prior to 1992 Griffin had built and sold 45 homes before discontinuing its home building operations at Walden Woods. Since then two third-party home builders have completed an additional 64 homes. Griffin is seeking to develop a joint venture to process bulky waste and build a transfer station and recycling operation on a portion of its land in East Granby, Connecticut. In addition, approximately 500 acres are leased for tobacco growing to General Cigar at rentals approximating carrying cost. The lease for 29 these properties, which extends for 10 years, may be terminated, as to 100 acres, annually on one year's prior notice. Griffin also leases office space to General Cigar. EQUITY INVESTMENTS ELI WITT Griffin owns 50.1% of Eli Witt, a wholesale distributor of tobacco, sundries and general merchandise. Griffin deconsolidated Eli Witt as of April 25, 1994 and subsequently has accounted for its investment in Eli Witt under the equity method. In November 1996 Eli Witt filed for protection under Chapter 11 of the Federal Bankruptcy Law. In connection with such filing Eli Witt sold all of its operating assets to another wholesale distributor in March 1997. Shareholders of Eli Witt are not expected to receive any proceeds from the sale. See "--Legal Matters." CENTAUR Griffin owns approximately 25% of the stock of Centaur, a privately-held publisher of business magazines in the United Kingdom. After a period of time when results were adversely affected by a number of factors including adverse business conditions in the United Kingdom, this business is now profitable. Two members of Griffin's Board of Directors are on the Board of Directors of Centaur. Griffin's investment in Centaur is carried at approximately $14.0 million. FINANCIAL INFORMATION REGARDING INDUSTRY SEGMENTS See Note 5 to the Combined Financial Statements of Griffin included elsewhere herein for certain financial information regarding the landscape nursery business and the real estate business. PROPERTIES COMMERCIAL REAL ESTATE
LAND AREA LOCATION OF PROPERTY (ACRES) - ---------------------------------------------------------------------------------- ----------- CONNECTICUT Bloomfield, CT.................................................................... 220 East Granby, CT................................................................... 920 Simsbury, CT...................................................................... 860 South Windsor, CT................................................................. 103 Suffield, CT...................................................................... 350 Windsor, CT....................................................................... 1,220 MASSACHUSETTS Southwick, MA..................................................................... 425 FLORIDA Hillsborough County, Florida...................................................... 9 Leon County, Florida.............................................................. 6
30 NURSERY REAL ESTATE
LAND AREA LOCATION OF PROPERTY (ACRES) - ---------------------------------------------------------------------------------- ----------- FLORIDA Quincy, FL........................................................................ 1,365 PENNSYLVANIA* Aston, PA......................................................................... 17 Pittsburgh, PA.................................................................... 10 VIRGINIA Manassas, VA...................................................................... 22 OHIO Columbus, OH...................................................................... 12 Cincinnati, OH.................................................................... 11 MARYLAND White Marsh, MD................................................................... 20
*In addition Griffin leases property in Monroeville, PA. LEGAL MATTERS As a result of the Asset Transfers, Griffin has acquired Culbro's 50.1% interest in Eli Witt. In November 1996, Eli Witt filed for protection under Chapter 11 of the Federal Bankruptcy Law. Prior to February 1993, Eli Witt was a wholly-owned subsidiary of Culbro and filed consolidated tax returns with Culbro. Culbro, Eli Witt and other parties engaged in two complex acquisitions and reorganizations in 1993 and 1994, pursuant to which Culbro received significant distributions from Eli Witt to repay Culbro's debt, including substantial amounts Culbro had previously borrowed from unaffiliated third parties to fund Eli Witt's business. Culbro subsequently loaned $5 million to Eli Witt. It is anticipated that these transactions (including the transfer of funds to Culbro) will be reviewed by Eli Witt creditors and other parties in interest in connection with the Chapter 11 case. Griffin believes that Eli Witt was solvent at the time of the distributions to Culbro in 1993, and therefore that such distributions would not constitute a fraudulent conveyance under applicable federal and state insolvency laws. Griffin is not entitled to contribution from Culbro or General Cigar for liabilities assumed by Griffin relating to the Eli Witt matter. Griffin is obligated to indemnify Culbro and General Cigar for any liability relating to the Eli Witt matter. To date, one creditor has written to the unsecured creditors committee proposing an inquiry into this matter. Although Griffin believes that any claim challenging the distributions described above would be without merit, any such claim, if asserted and successfully prosecuted, could have a material adverse effect on Griffin's financial condition. See "RISK FACTORS--Assumed Liabilities; The Eli Witt Company." Certain parts of Griffin's property in Simsbury, Connecticut, are affected by the presence of chlordane. Although the various federal, state and local agencies may have an interest in the matter, there are no proceedings known by Griffin to be contemplated by any of these agencies in connection with possible chlordane exceedences on such properties. EMPLOYEES Griffin employs approximately 260 persons, including 11 in its real estate business and 249 in its landscape nursery business. At present, none of these employees is represented by a union. Griffin believes that its relations with its employees are satisfactory. 31 COMPETITION The nursery business is competitive and Griffin competes against a number of other companies, including local and regional nursery businesses. Some of Griffin's competitors may be in a stronger financial position than Griffin. Numerous real estate developers operate in the portion of Connecticut and Massachusetts in which Griffin's holdings are concentrated. Some of such businesses compete in each anticipated business of Griffin and may have greater financial resources than Griffin. See "RISK FACTORS--Competition." REGULATION; ENVIRONMENTAL MATTERS Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or petroleum product releases at such property and may be held liable to a govermental entity or to third parties for property damage and for investigation and clean-up costs incurred by such parties in connection with contamination. The cost of investigation, remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner's ability to sell or rent such property or to borrow using such property as collateral. In connection with the ownership (direct or indirect), operation, management and development of real properties, Griffin may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property. In Simsbury, the value of Griffin's land is affected by the presence of chlordane on a portion of the land which is intended for residential use. Griffin is experimenting with means of remediation on such lands. Although Griffin believes that it will be able to take steps to reduce chlordane contamination to levels below that which would impede residential development of such properties, there can be no assurance that Griffin will be able to do so in a timely or economic fashion or at all. In the event that Griffin is unable adequately to remediate this property, its ability to develop such property for its intended purposes would be materially affected. In addition, Griffin is seeking to develop a joint venture to process bulky waste and build a transfer station and recycling operation on a portion of its land in East Granby, Connecticut. Although Griffin intends to conduct such operations in compliance with all applicable environmental laws, there can be no assurance that Griffin will not incur incremental additional costs in connection with such operations resulting from environmental compliance efforts, or as a result of any future noncompliance with such laws. Griffin periodically reviews its properties for the purpose of evaluating such properties' compliance with applicable state and federal environmenal laws. Griffin does not anticipate experiencing in the immediate future material expense in complying with such laws. See "RISK FACTORS--Environmental Matters." 32 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth certain information with respect to Griffin's executive officers, directors and certain other key employees.
NAME AGE POSITION - ------------------------------------------------ --- ------------------------------------------------ Edgar M. Cullman................................ 79 Chairman of the Board and Director Frederick M. Danziger........................... 57 President, Chief Executive Officer and Director Anthony J. Galici............................... 39 Chief Financial Officer Richard L. Wyckoff.............................. 36 President of Imperial Nurseries, Inc. John L. Ernst................................... 56 Director Winston J. Churchill, Jr........................ 57 Director
EDGAR M. CULLMAN has been the Chairman of the Board of Griffin since April, 1997. He has been Chairman of the Board of General Cigar since December, 1996. From 1962 to 1996 he served as Chief Executive Officer of Culbro. Mr. Cullman has served as a Director of Culbro since 1961 and has been Chairman of Culbro since 1975. He also is a Director of Centaur Communications Limited, Bloomingdale Properties, Inc. and Eli Witt. Eli Witt filed for relief from its creditors under Chapter 11 of the Federal Bankruptcy Code in November 1996. Edgar M. Cullman is the uncle of John L. Ernst and the father-in-law of Frederick M. Danziger. FREDERICK M. DANZIGER has been a Director and the President and Chief Executive Officer of Griffin since April, 1997, and a director of Culbro since 1975. He was previously involved in the real estate operations of Griffin in the early 1980s. Mr. Danziger has been Of Counsel to the law firm of Latham & Watkins since 1995. From 1974 until 1995, Mr. Danziger was a Member of the law firm of Mudge Rose Guthrie Alexander & Ferdon. Mr. Danziger also is a director of Monro Muffler/Brake, Inc., Bloomingdale Properties, Inc., First Financial Caribbean Corporation and Centaur Communications Limited, and is a general partner of Ryan Instruments, L.P. ANTHONY J. GALICI has been the Chief Financial Officer of Griffin since April 1997. Mr. Galici has served as Vice President-Assistant Controller of Culbro since 1995. Prior to 1995, he was Assistant Controller of Culbro. RICHARD L. WYCKOFF has been the President of Imperial Nurseries, Inc. since August 1991. From 1990 until August 1991 he served as Vice President-Corporate and Business Development of Culbro. Mr. Wyckoff currently holds numerous positions on industry associations including The American Association of Nurserymen and Horticulture Research Institute. JOHN L. ERNST is a Director of Griffin, General Cigar and Culbro. He has been a Director of Griffin since April 1997, a director of General Cigar since December 1996 and a Director of Culbro since 1983. He is the Chairman of the Board and President of Bloomingdale Properties, Inc., an investment and real estate company. Mr. Ernst also is a director of the First Financial Caribbean Corporation. WINSTON J. CHURCHILL, JR. has been a Director of Griffin since April 1997. Mr. Churchill is also chairman of the board of Central Sprinkler Corporation and IBAH, Inc. and a member of the board of Geotek Communications, Inc. and Tescorp, Inc. He is a managing general partner of SCP Private Equity Partners, L.P., a private equity fund sponsored by Safeguard Scientifics Inc., and is chairman of Churchill Investment Partners, Inc. and CIP Capital, Inc. EXECUTIVE COMPENSATION From the time of its incorporation until the date hereof Griffin has been, and following the date hereof until the consummation of the Distribution, Griffin will be a wholly-owned subsidiary of Culbro 33 whose policy decisions are made by Culbro. Neither the Chief Executive Officer nor the Chief Financial Officer named above were employees of Griffin prior to April 1997. Griffin had no Chief Executive Officer prior to April 1997, and no current executive officer of Griffin received material compensation from Griffin during the last three years. COMPENSATION OF DIRECTORS Directors who do not receive compensation as officers or employees of the Company or any of its affiliates will be paid an annual retainer fee of $10,000 and a fee of $500 for each meeting of the Board of Directors or any committee thereof they attend, plus reasonable out-of-pocket expenses. In addition, such Directors will receive annually options exercisable for 2,000 shares of Common Stock exercisable at market prices in existence at the time of grant pursuant to the Griffin Stock Option Plan. See "CERTAIN EMPLOYEE BENEFIT MATTERS--Griffin Stock Option Plan." CERTAIN EMPLOYEE BENEFIT MATTERS Griffin and Culbro have entered into the Benefits Agreement which provides generally that following the date of the Asset Transfers or the Distribution, as the case may be, persons employed by Griffin shall cease to be eligible to participate in Culbro employee benefit plans and arrangements, and shall instead become eligible to participate in certain employee benefit plans and arrangements maintained or established by Griffin. GRIFFIN 401(K) PLAN In connection with the Distribution, Griffin will establish the Griffin Land & Nurseries, Inc. 401(k) Savings Plan (the "Griffin 401(k) Plan"). Employees of Griffin who participated in the Culbro Companies 401(k) Savings Plan immediately prior to the Distribution will become participants in the Griffin 401(k) Plan upon the Distribution Date, and as soon as practicable thereafter the account balances of persons employed by Griffin after the Distribution will be transferred from the Culbro Companies 401(k) Savings Plan to the Griffin 401(k) Plan. Following the Distribution, employees of Griffin who are employed in the United States, are at least age 21 and who have at least one year of service will be eligible to participate in the Griffin 401(k) Plan. Subject to applicable Internal Revenue Code limits, each participating employee will be able to defer any portion of such participating employee's compensation through salary deferrals. Griffin may in its discretion "match" employee deferrals each year. Any such matching contributions made by Griffin become fully vested after five years of service, which includes years of service with Culbro prior to the Distribution. GRIFFIN STOCK OPTION PLAN Effective as of the Distribution Date, Griffin will establish the Griffin Land & Nurseries, Inc. 1997 Stock Option Plan (the "Griffin Stock Option Plan"). A total of approximately 700,000 shares of Common Stock will be available for issuance under the Griffin Stock Option Plan. Of such 700,000 shares, 250,000 will be available for issuance with respect to new options that may be granted to certain officers, employees, consultants and directors of Griffin following the Distribution. The Griffin Stock Option Plan will be administered by the Compensation Committee of the Board of Directors of Griffin, and each option granted under the Griffin Stock Option Plan will be evidenced by a written stock option agreement that will set forth the material terms of the option, including the exercise price and vesting schedule. Options granted under the Griffin Stock Option Plan may be either incentive stock options or non-qualified stock options. Incentive stock options issued under the Griffin Stock Option Plan will satisfy certain Internal Revenue Code requirements applicable thereto. 34 Immediately prior to the Distribution, Griffin intends to grant options to the following persons in the amounts set forth below with exercise prices determined by the mean between the opening representative bid and asked prices for the Common Stock as quoted on the NASD's automated quotation system Electronic Bulletin Board on the first trading day immediately following the Distribution Date.
NAME NUMBER OF SHARES - --------------------------------------------------------------------------- ----------------- Frederick M. Danziger...................................................... Anthony J. Galici.......................................................... John Fletcher III.......................................................... Richard L. Wyckoff......................................................... Martha Collier............................................................. Jay Fisher.................................................................
In addition to the 250,000 shares available for issuance with respect to post-Distribution stock option grants, approximately 450,000 additional shares will be available for issuance upon the exercise of Culbro stock options that are reformed as Griffin Options (as defined below) pursuant to the Benefits Agreement, and such reformed Griffin Options shall be administered under the Griffin Stock Option Plan pursuant to the terms governing the original Culbro options as in effect immediately prior to the Distribution. The Benefits Agreement provides that as of the Distribution Date, each current holder of an option to acquire shares of Culbro Common Stock under any Culbro stock option plan or agreement will receive in exchange therefor two separately exercisable options, one option to purchase shares of Culbro Common Stock (a "Culbro Option") and one option to purchase shares of Common Stock (a "Griffin Option"), each containing terms substantially equivalent in the aggregate to those of such holder's pre-Distribution option. With respect to each holder of a nonqualified option, the combined aggregate exercise price of the Culbro Option and the Griffin Option shall be equal to the aggregate exercise price of the pre-Distribution option. With respect to each holder of an incentive stock option, the number of shares with respect to which each Culbro Option and each Griffin Option are exercisable, and the exercise price for each Culbro Option and each Griffin Option, will be set so as to preserve the Exercise Ratio and the Aggregate Spread (both as defined below) attributed to options currently outstanding, such determination to be based on the respective trading prices of Culbro common stock and Griffin common stock following the Distribution. The "Exercise Ratio" of the Culbro Option and the Griffin Option, respectively, shall be set such that on a share by share basis, the ratio of the exercise price of the Culbro Option and the Griffin Option to the value of Culbro common stock or Griffin common stock, respectively, shall be equal to the ratio of the pre-Distribution exercise price to the pre-Distribution value of stock subject to the option. The "Aggregate Spread" of an option is an amount equal to the difference between the exercise price of the option and the price of a share of Culbro common stock immediately prior to the Distribution multiplied by the number of shares underlying such option. MISCELLANEOUS BENEFIT PLANS Following the Asset Transfer Date, persons employed by Griffin who were eligible to participate in any of the employee welfare benefit plans or arrangements providing life, hospitalization, medical and long-term disability insurance maintained by Culbro for its salaried and certain hourly paid employees will continue to be eligible to participate in such plans and arrangements for the remainder of the 1997 fiscal year, and Griffin will participate in certain fee sharing arrangements with Culbro (or General Cigar, following the Merger) with respect to such plans. Following the 1997 fiscal year, Griffin intends to maintain substantially similar welfare benefit plans and arrangements for the benefit of its eligible employees. Following the Distribution Date, persons employed by Griffin shall cease to accrue any further benefits under the Culbro Retirement Plan and Griffin will not assume any liabilities or obligations with respect to the Culbro Retirement Plan. Griffin will assume sole responsibility for any payment due to Anthony Galici under any Culbro Annual Incentive Compensation Plan payable with respect to the 1997 fiscal year. 35 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Since December 1, 1995, Frederick M. Danziger, President and Chief Executive Officer of Griffin and a member of the Cullman & Ernst Group, the son-in-law of Edgar M. Cullman and the husband of Lucy C. Danziger, has been Of Counsel to the law firm of Latham & Watkins. During Culbro's 1996 fiscal year, such firm received fees and disbursements of approximately $1.5 million from Culbro for services rendered. See "PRINCIPAL STOCKHOLDERS." Messrs. Cullman, Danziger and Ernst are members of the Board of Directors of Bloomingdale Properties, Inc. of which Mr. Ernst is Chairman and President and other members of the Cullman & Ernst Group are associated. Real estate management and advisory services have been provided to Culbro by an affiliate of Bloomingdale Properties, Inc. A fee of approximately $200,000 was paid by Culbro in 1996 for management of Culbro's New York office building and for other real estate advisory services. John Fletcher, an employee of Bloomingdale Properties, Inc., was a director of Griffin until April 1997 and is expected to be retained by Griffin as a consultant. The terms of his consulting arrangement have not yet been determined. 36 PRINCIPAL STOCKHOLDERS Culbro beneficially owns all of the outstanding shares of Common Stock. Following the Distribution the holders of Culbro Common Stock immediately preceding the Distribution will own a number of shares of Common Stock equal to the number of issued and outstanding shares of Culbro Common Stock, constituting 100% of the outstanding Common Stock. For a description of the Common Stock, see "DESCRIPTION OF CAPITAL STOCK." The following table sets forth certain information regarding beneficial ownership of the Culbro Common Stock as of June 3, 1997 and by each person who is known by Griffin to beneficially own more than 5% of the outstanding shares of Culbro Common Stock, each director of Griffin and all directors of Griffin as a group. There are no executive officers of Griffin who received material compensation for services rendered to Griffin and whose ownership of any shares of Common Stock would be required to be included in the following table. As of May 5, 1997, on a pro forma basis after giving effect to the Distribution, the persons listed below would have held Common Stock in the amounts and percentages set forth below. Unless otherwise indicated, the address of each person named in the table below is c/o Culbro Corporation, 387 Park Avenue South, New York, New York, 10016-8899.
CULBRO COMMON STOCK PRIOR TO THE DISTRIBUTION ------------------------ SHARES BENEFICIALLY PERCENT OF NAME OF BENEFICIAL OWNER OWNED(1) TOTAL - ------------------------------------------------------------------------ ----------- ----------- Edgar M. Cullman (2).................................................... 974,874 21.4% Edgar M. Cullman, Jr. (2)............................................... 891,658 19.6 Louise B. Cullman (2)(3)................................................ 834,347 18.3 Susan R. Cullman (2)(3)................................................. 784,529 17.2 Lucy C. Danziger (2)(3)................................................. 1,051,264 23.1 John L. Ernst (2)....................................................... 420,271 9.2 Frederick M. Danziger (2)(3)............................................ 164,120 3.6 Anthony J. Galici (4)................................................... 5,673 * B. Bros. Realty Limited Partnership (5)................................. 233,792 5.1 Gabelli Funds, Inc. (6)................................................. 882,200 19.4 All officers and directors as a group (2 persons)(7).................... 1,564,938 34.3
- ------------------------ * less than 1% (1) This information reflects the definition of beneficial ownership adopted by the Securities and Exchange Commission (the "Commission"). Beneficial ownership shown reflects sole investment and voting power, except as reflected in footnote 2. Where more than one person shares investment and voting power in the same shares such shares may be shown more than once. Such shares are reflected only once, however, in the total for all directors and officers. Excluded are shares held by charitable foundations and trusts of which members of the Cullman and Ernst Group are officers and directors. As of June 3, 1997, a group consisting of Messrs. Cullman, direct members of their families and trusts for their benefit, Mr. Ernst, his sister and direct members of their families and trusts for their benefit, a partnership in which members of the Cullman and Ernst families hold substantial direct and indirect interests and charitable foundations and trusts of which members of the Cullman and Ernst families are directors or trustees, owned an aggregate of approximately 2,235,020 shares of Culbro Common Stock (approximately 50% of the outstanding shares of Culbro common stock). Among others, Messrs. Cullman, Mr. Ernst and to a lesser extent Mr. Danziger (who is a member of the Cullman & Ernst Group) hold investment and voting power or shared investment and voting power over such shares. Certain of such shares are pledged as security for loans payable under standard pledge 37 arrangements. A form filed with the SEC on behalf of the Cullman & Ernst Group states that there is no formal agreement governing the group's holding and voting of such shares but that there is an informal understanding that the persons and entities included in the group will hold and vote together the shares owned by each of them in each case subject to any applicable fiduciary responsibilities. Louise B. Cullman is the wife of Edgar M. Cullman. Susan R. Cullman and Lucy C. Danziger are the daughters of Edgar M. Cullman and Louise B. Cullman, and Lucy C. Danziger is the wife of Frederick M. Danziger. Edgar M. Cullman Jr. is the son of Edgar M. Cullman and Louise B. Cullman. (2) Included within the Culbro shares shown as beneficially owned by Edgar M. Cullman are 863,576 shares in which he holds shared investment and/or voting power; included within the shares shown as beneficially owned by Mr. Ernst are 411,321 shares in which he holds shared investment and/or voting power; included within the shares shown as beneficiary owned by Mr. Danziger are 147,578 shares in which he holds shares investment and/or voting power; and included within the shares shown as beneficially owned by Edgar M. Cullman, Jr. are 751,490 shares in which he holds shared investment and/or voting power. Included within the shares shown as beneficially owned by Louise B. Cullman are 730,937 shares in which she holds shared investment and/or voting power; included within the shares shown as beneficially owned by Susan R. Cullman are 690,042 shares in which she holds shared investment and/or voting power; included within the shares shown as beneficially owned by Lucy C. Danziger are 969,422 shares in which she holds shared investment and/or voting power. Excluded in each case are shares held by charitable foundations and trusts in which such persons or their families or trusts for their benefit are officers and directors. Messrs. Cullman, Ernst, Danziger and Cullman, Jr. disclaim beneficial interest in all shares over which there is shared investment and/or voting power and in all excluded shares. (3) The address of each of Louise B. Cullman, Susan R. Cullman, Lucy C. Danziger and Frederick M. Danziger is c/o 641 Lexington Avenue, New York, New York. (4) Includes 4,400 shares subject to Culbro Options exercisable within 60 days. Upon consummation of the Distribution such Culbro Options will be exercisable for approximately the same number of shares of Class A Common Stock. See "CERTAIN EMPLOYEE BENEFIT MATTERS--Griffin Stock Option Plan." (5) The address of B. Bros. Realty Limited Partnership ("B. Bros.") is 641 Lexington Avenue, New York, New York. Lucy C. Danziger and John L. Ernst are the general partners of B. Bros. (6) The address of such person is Gabelli Funds, Inc., One Corporate Center, Rye, New York, NY 10580. A form filed with the SEC in September 1991 by Gabelli Funds, Inc. as subsequently amended indicates that the securities have been acquired by Gabelli Funds, Inc. and its wholly-owned subsidiaries on behalf of their investment advisory clients. Culbro has been informed that no individual client of Gabelli Funds, Inc. has ownership of more than 5% of Culbro's common stock. (7) Excluding shares held by certain charitable foundations the officers and/or directors of which include certain officers and directors of the Company. DESCRIPTION OF CAPITAL STOCK Griffin's authorized capital stock consists of 10,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred Stock"). The following summary description of the capital stock of Griffin is qualified in its entirety by reference to the form of Amended and Restated Certificate of Incorporation of Griffin (the "Amended Certificate") and By-Laws of Griffin (the "By-Laws"), a copy of each of which is filed as an exhibit to the Registration Statement on Form 10 of which this Information Statement forms a part. 38 COMMON STOCK The holders of Common Stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Subject to preferences that may be applicable to any outstanding Preferred Stock, the holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available for that purpose. See "Dividend Policy." In the event of a liquidation, dissolution or winding up of the Company, the holders of the Common Stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of Preferred Stock, if any, then outstanding. The Common Stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of Common Stock are fully paid and nonassessable, and the shares of Common Stock to be issued in the Distribution will be fully paid and nonassessable. PREFERRED STOCK The Board of Directors, without further stockholder authorization, is authorized to issue, from time to time, Preferred Stock in one or more series, to establish the number of shares to be included in any such series and to fix the designations, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof, including dividend rights and preferences over dividends on the Common Stock, conversion rights, voting rights, redemption rights, the terms of any sinking fund therefor and rights upon liquidation. The ability of the Griffin Board to issue Preferred Stock, while providing flexibility in connection with financing, acquisitions and other corporate purposes, could have the effect of discouraging, deferring or preventing a change in control of Griffin or an unsolicited acquisition proposal, since the issuance of Preferred Stock could be used to dilute the share ownership of a person or entity seeking to obtain control of Griffin. In addition, because the Griffin Board has the power to establish the preferences, powers and rights of the shares of any such series of Preferred Stock, it may afford the holders of any Preferred Stock preferences, powers and rights (including voting rights) senior to the rights of the holders of Common Stock, which could adversely affect the rights of holders of Common Stock. SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW Section 203 ("Section 203") of the General Corporation Law of the State of Delaware (the "DGCL") provides, in general, that a stockholder acquiring more than 15% of the outstanding voting stock of a corporation subject to Section 203 (an "Interested Stockholder") but less than 85% of such stock may not engage in certain Business Combinations (as defined in Section 203) with the corporation for a period of three years subsequent to the date on which the stockholder became an Interested Stockholder unless (i) prior to such date the corporation's board of directors approved either the Business Combination or the transaction in which the stockholder became an Interested Stockholder or (ii) the Business Combination is approved by the corporation's board of directors and authorized by a vote of at least 66 2/3% of the outstanding voting stock of the corporation not owned by the Interested Stockholder. The Amended Certificate contains a provision electing not to be governed by Section 203. LIMITATIONS ON DIRECTORS' LIABILITY The Amended Certificate contains a provision which eliminates the personal liability of a director to Griffin and its stockholders for certain breaches of his or her fiduciary duty of care as a director. This provision does not, however, eliminate or limit the personal liability of a director (i) for any breach of such director's duty of loyalty to Griffin or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Delaware statutory provisions making directors personally liable, under a negligence standard, for unlawful dividends or unlawful stock repurchases or redemptions or (iv) for any transaction from which the director derived an 39 improper personal benefit. This provision offers persons who serve on the Board of Directors of Griffin protection against awards of monetary damages resulting from breaches of their duty of care (except as indicated above), including grossly negligent business decisions made in connection with takeover proposals for Griffin. As a result of this provision, the ability of Griffin or a stockholder thereof to successfully prosecute an action against a director for a breach of his duty of care has been limited. However, the provision does not affect the availability of equitable remedies such as an injunction or recision based upon a director's breach of his duty of care. The SEC has taken the position that the provision will have no effect on claims arising under the federal securities laws. In addition, the Amended Certificate and By-Laws provide mandatory indemnification rights, subject to limited exceptions, to any person who was or is party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that such person is or was a director or officer of Griffin, or is or was serving at the request of Griffin as a director or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. Such indemnification rights include reimbursement for expenses incurred by such person in advance of the final disposition of such proceeding in accordance with the applicable provisions of the DGCL. TRANSFER AGENT AND REGISTRAR Chase Mellon Shareholder Services, LLC is the transfer agent and registrar for the Common Stock. POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK Griffin believes that the power of the Griffin Board to issue additional authorized but unissued shares of Common Stock and Preferred Stock and to classify or reclassify unissued shares of Griffin capital stock and thereafter to cause Griffin to issue such classified or reclassified shares of stock will provide Griffin with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs which may arise. The additional classes or series, as well as the Common Stock and Preferred Stock, will be available for issuance without further action by Griffin's stockholders, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which Griffin's securities may be listed or traded. Although the Griffin Board has no intention at the present time of doing so, it could authorize Griffin to issue a class or series that could, depending upon the terms of such class or series, delay, defer or prevent a transaction or a change in control of Griffin that might involve a premium price for holders of Common Stock or otherwise be in their best interests. DIVIDEND POLICY The payment and amount of cash dividends on the Common Stock after the Distribution will be subject to the discretion of the Griffin Board. Griffin's dividend policy will be reviewed by Griffin's Board of Directors from time to time as may be appropriate and payment of dividends on the Common Stock will depend upon Griffin's financial position, capital requirements and other factors as the Griffin Board deems relevant. Subject to the foregoing, Griffin presently does not intend to pay cash dividends in the foreseeable future. DESCRIPTION OF CERTAIN INDEBTEDNESS Griffin presently does not have any material indebtedness. It is expected, however, that Griffin will explore a variety of financing options, including the possible establishment of a revolving credit facility, in order to fund future real estate development opportunities. The terms and conditions of future debt instruments of Griffin or its subsidiaries may impose restrictions on Griffin and its subsidiaries that affect, among other things, their ability to incur debt, pay dividends or make distributions, make acquisitions, create liens, sell assets, and make certain investments. In addition, the terms and conditions of such indebtedness may restrict the ability of Griffin to pay dividends except under certain circumstances. 40 SHARES ELIGIBLE FOR FUTURE SALE Immediately after consummation of the Distribution, Griffin will have outstanding a number shares of Common Stock equal to the number of shares of Culbro Common Stock outstanding immediately prior to the Distribution. As of June 2, 1997, there were 4,559,132 shares of Culbro Common Stock outstanding. Griffin intends to file a registration statement on Form S-8 under the Securities Act to register the sale of 700,000 shares of Common Stock reserved for issuance under the Griffin Stock Option Plan, including 450,000 shares of Common Stock issuable upon exercise of outstanding Culbro Options following the Distribution and 250,000 shares of Common Stock issuable upon exercise of newly issued options under the Griffin Stock Option Plan. See "CERTAIN EMPLOYEE BENEFIT MATTERS--Griffin Stock Option Plan." As a result, any shares of Common Stock issued upon exercise of such stock options will be available, subject to special rules for affiliates, for resale in the public market. In general, under Rule 144, as currently in effect, (i) a person (or persons whose shares are required to be aggregated) who has beneficially owned shares of Common Stock as to which at least two years have elapsed since such shares were sold by Griffin or by an affiliate of Griffin in a transaction or chain of transactions not involving a public offering ("restricted securities") or (ii) an affiliate of Griffin who holds shares of Common Stock that are not restricted securities may sell, within any three-month period, a number of such shares that does not exceed the greater of 1% of the Common Stock then outstanding or the average weekly trading volume in the Common Stock during the four calendar weeks preceding the date on which notice of such sale required under Rule 144 was filed. Sales under Rule 144 also are subject to certain provisions relating to the manner and notice of sale and availability of current public information about Griffin. Affiliates of Griffin must comply with the requirements of Rule 144, including the one-year holding period requirement, to sell shares of Common Stock that are restricted securities. Furthermore, if a period of at least two years has elapsed from the date restricted securities were acquired from Griffin or an affiliate of Griffin, a holder of such restricted securities who is not an affiliate of Griffin at the time of the sale and has not been an affiliate of Griffin at any time during the three months prior to such sale would be entitled to sell such shares without regard to the volume limitation and other conditions described above. All shares of Common Stock will be eligible for sale in the public market immediately after consummation of the Distribution; PROVIDED, that all of such shares held by the members of the Cullman & Ernst Group may be resold only pursuant to, and in accordance with, the volume, manner of sale and other conditions of Rule 144 described above. Prior to the Distribution, there has been no public market for the Common Stock. Although Griffin can make no prediction as to the effect, if any, that sales of shares of Common Stock by the Cullman & Ernst Group or any other person would have on the market price prevailing from time to time, sales of substantial amounts of Common Stock (including shares issued upon the exercise of stock options) or the perception that such sales could occur, could adversely affect prevailing market prices. 41 ADDITIONAL INFORMATION Griffin has filed with the Commission a Registration Statement on Form 10 under the Exchange Act with respect to the Common Stock described herein. This Information Statement does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. Further information may be obtained from the Registration Statement and such exhibits and schedules. Copies of these documents may be inspected at and obtained at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional Offices of the Commission at 7 World Trade Center, Suite 1300, New York, New York 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Such reports and other documents may be obtained from the web site that the Commission maintains at http://www.sec.gov. Copies of such information can also be obtained by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Following the Distribution, Griffin will be required to comply with the reporting requirements of the Exchange Act and will file annual, quarterly and other reports with the Commission. Additionally, Griffin will be subject to the proxy solicitation requirements of the Exchange Act and will furnish annual reports containing audited financial statements to its stockholders in connection with its annual meetings of stockholders. No person is authorized to give any information or to make any representations other than those contained in this Information Statement. Any other information or representations given or made must not be relied upon as having been authorized. This Information Statement does not constitute an offer to sell or a solicitation of an offer to buy any securities. The delivery of this Information Statement must not under any circumstances be construed as an implication that there has been no change in the affairs of Griffin subsequent to the date of this Information Statement. 42 INDEX TO FINANCIAL STATEMENTS INTERIM FINANCIAL STATEMENTS Consolidated Statement of Operations for the Thirteen Weeks Ended March 2, 1996 and March 1, 1997....................................................................... F-2 Consolidated Balance Sheet as of November 30, 1996 and March 1, 1997................. F-3 Consolidated Statement of Cash Flows for the Thirteen Weeks Ended March 2, 1996 and March 1, 1997....................................................................... F-4 Notes to Consolidated Financial Statements........................................... F-5 ANNUAL FINANCIAL STATEMENTS Report of Independent Accountants.................................................... F-9 Combined Statement of Operations for the Fiscal Years Ended December 3, 1994, December 2, 1995 and November 30, 1996.............................................. F-10 Combined Balance Sheet as of December 2, 1995 and November 30, 1996 and Pro Forma Combined Balance Sheet as of November 30, 1996...................................... F-11 Combined Statement of Cash Flows for the Fiscal Years Ended December 3, 1994, December 2, 1995 and November 30, 1996.............................................. F-12 Notes to Combined Financial Statements............................................... F-13
F-1 GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS) (UNAUDITED)
FOR THE 13 WEEKS ENDED, ---------------------------- MARCH 2, 1996 MARCH 1, 1997 ------------- ------------- Net sales and other revenue........................................................ $ 3,352 $ 2,725 Costs and expenses: Cost of goods sold............................................................... 2,408 1,943 Selling, general and administrative expenses..................................... 2,568 3,208 ------------- ------------- Operating loss..................................................................... (1,624) (2,426) Loss from equity investments in Centaur............................................ (18) (22) Other nonoperating income, net..................................................... 337 -- Interest expense................................................................... 1,902 799 ------------- ------------- Loss before income tax benefit..................................................... (3,207) (3,247) Income tax benefit................................................................. (1,240) (1,234) ------------- ------------- Loss from continuing operations.................................................... (1,967) (2,013) Income from discontinued operation, net of taxes of $321........................... 496 -- ------------- ------------- Net loss........................................................................... $ (1,471) $ (2,013) ------------- ------------- ------------- -------------
See Notes to Consolidated Financial Statements. F-2 GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
NOVEMBER 30, 1996 ----------------- MARCH 1, 1997 ------------- (UNAUDITED) ASSETS CURRENT ASSETS Cash and cash equivalents...................................................... $ 7,371 $ 6,498 Accounts receivable, less allowance of $302 and $304........................... 3,962 1,730 Inventories.................................................................... 27,530 30,109 Deferred income taxes.......................................................... 4,047 2,783 Other current assets........................................................... 1,158 801 -------- ------------- TOTAL CURRENT ASSETS........................................................... 44,068 41,921 Property and equipment, net.................................................... 12,676 12,671 Real estate held for sale or lease, net........................................ 26,862 27,154 Investment in Centaur Communications, Ltd...................................... 14,695 14,673 Other assets, including investment in real estate joint venture of $3,403 and $3,348....................................................................... 3,474 3,454 -------- ------------- TOTAL ASSETS................................................................... $ 101,775 $ 99,873 -------- ------------- -------- ------------- LIABILITIES AND CULBRO INVESTMENT CURRENT LIABILITIES Accounts payable and accrued liabilities....................................... $ 7,093 $ 3,448 Long-term debt due within one year............................................. 277 242 -------- ------------- TOTAL CURRENT LIABILITIES...................................................... 7,370 3,690 Long-term debt................................................................. 38,846 2,896 Other noncurrent liabilities................................................... 8,110 2,995 -------- ------------- TOTAL LIABILITIES.............................................................. 54,326 9,581 CULBRO INVESTMENT.............................................................. 47,449 90,292 -------- ------------- TOTAL LIABILITIES AND CULBRO INVESTMENT........................................ $ 101,775 $ 99,873 -------- ------------- -------- -------------
See Notes to Consolidated Financial Statements. F-3 GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS) (UNAUDITED)
FOR THE 13 WEEKS ENDED, ---------------------------- MARCH 2, 1996 MARCH 2, 1997 ------------- ------------- OPERATING ACTIVITIES: Net loss........................................................................... $ (1,471) $ (2,013) Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization...................................................... 575 504 Income from discontinued operation, before tax..................................... (817) -- Loss from equity investment in Centaur............................................. 18 22 Discount and interest on subordinated note......................................... 587 -- Accretion and dividend income on Series B preferred stock.......................... (587) -- Deferred income taxes.............................................................. 1,276 (313) Changes in assets and liabilities, net of effect of Liability Assumption: Accounts receivable.............................................................. 1,875 2,221 Inventories...................................................................... (1,778) (2,579) Real estate held for sale or lease............................................... 112 (475) Accounts payable and accrued liabilities......................................... (1,395) (2,111) Other.............................................................................. 1,103 (252) ------------- ------------- Net cash used in operating activities of continuing operations..................... (502) (4,996) Cash used in operating activities of discontinued operation........................ (317) -- ------------- ------------- Net cash used in operating activities.............................................. (819) (4,996) ------------- ------------- INVESTING ACTIVITIES: Additions to property and equipment................................................ (143) (327) Investing activities of discontinued operation..................................... (321) -- ------------- ------------- Net cash used in investing activities.............................................. (464) (327) ------------- ------------- FINANCING ACTIVITIES: Net transactions with Culbro, excluding Liability Assumption....................... (7,558) (2,765) Payments of debt................................................................... (81) (37) Increase in debt................................................................... 5,000 7,252 ------------- ------------- Net cash (used in) provided by financing activities................................ (2,639) 4,450 ------------- ------------- Net decrease in cash and cash equivalents.......................................... (3,922) (873) Cash and cash equivalents at beginning of period................................... 7,687 7,371 ------------- ------------- Cash and cash equivalents at end of period......................................... $ 3,765 $ 6,498 ------------- ------------- ------------- -------------
See Notes to Consolidated Financial Statements. F-4 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) 1. BASIS OF PRESENTATION The unaudited consolidated financial statements of Griffin Land & Nurseries ("Griffin"), a wholly owned subsidiary of Culbro Corporation ("Culbro") have been prepared in conformity with the standards of accounting measurement set forth in Accounting Principles Board Opinion No. 28 and any amendments thereto adopted by the Financial Accounting Standards Board. Also, the financial statements have been prepared in accordance with the accounting policies stated in Griffin's audited 1996 Combined Financial Statements and should be read in conjunction with the Notes to Combined Financial Statements appearing in that report. All adjustments, comprising only normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of results for the interim periods have been reflected. The results in the 1996 quarter include CMS Gilbreth Packaging Systems, Inc. ("CMS Gilbreth") as a discontinued operation. This business was sold in the 1996 fourth quarter. The results of operations for the thirteen week period ended March 1, 1997 are not necessarily indicative of the results to be expected for the full year. 2. CERTAIN TRANSACTIONS Griffin, Culbro and General Cigar Holdings, Inc. ("GC Holdings"), a Culbro subsidiary, entered into a Distribution Agreement (the "Distribution Agreement") on February 27, 1997. The Distribution Agreement provided for (i) the consummation of the Asset Transfers (see below), (ii) the Distribution of Griffin's common stock to the existing shareholders of Culbro (the "Distribution") following the initial public offering (the "Offering") of GC Holdings Class A common stock, and (iii) following the Distribution, the merger of Culbro, subject to certain conditions, with and into GC Holdings (the "Merger"). The Offering was completed on February 28, 1997. The Distribution is principally contingent upon (i) either a favorable tax ruling (which Culbro has applied for) or an opinion of counsel satisfactory to Culbro that the Distribution constitutes a tax free organization under Section 355 of the Internal Revenue Code and (ii) approval of the Merger by the holders of 66 2/3% of the outstanding Culbro common stock. Pursuant to the Distribution Agreement, Culbro transferred to Griffin substantially all the non-tobacco related assets of Culbro, including: (i) all of the outstanding common stock of Imperial Nurseries, Inc., a wholly owned subsidiary of Culbro; (ii) approximately 5,500 acres of land in Connecticut and Florida, as well as nursery wholesale service centers; (iii) Culbro's interests in Eli Witt and assets previously owned by Eli Witt; (iv) its 25% interest in Centaur Communications, Ltd. ("Centaur"); and (v) all licenses, permits, accounts receivable, prepaid expenses, reserves and other assets (other than cash) related to the real estate and nursery businesses. The Distribution Agreement also provided for the assumption by Griffin of all of the liabilities related to the businesses and assets transferred to Griffin from Culbro. Pursuant to the Distribution Agreement, Griffin was given $7 million in cash. All of the transferred assets and related liabilities are included in the accompanying consolidated financial statements at Culbro's historical cost. The Distribution Agreement also provided that, on February 27, 1997, GC Holdings assumed all of Culbro general corporate debt and certain other liabilities, principally retirement obligations, which are included in Griffin's historical financial statements (the "Liability Assumption"). See Note 3 for the pro forma effect of the Liability Assumption on Griffin's results of operations. F-5 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) (UNAUDITED) 2. CERTAIN TRANSACTIONS (CONTINUED) As a result of the transactions described above, Culbro is a holding company, substantially all of the assets of which are the stock of Griffin and GC Holdings. Pursuant to the terms of the Distribution Agreement, Griffin and GC Holdings will operate independently of each other. The Distribution Agreement also provides that Culbro undertake a pro rata distribution of Griffin common stock to the shareholders of Culbro. 3. CONSOLIDATED CONDENSED PRO FORMA FINANCIAL INFORMATION The following consolidated condensed unaudited pro forma statement of operations of Griffin gives effect to the Liability Assumption by GC Holdings as if it had been completed at the beginning of the respective periods. The unaudited pro forma statement of operations for the 1996 first quarter also gives effect to the use of the proceeds from the sale of CMS Gilbreth and the exchange of Series B preferred stock of Eli Witt in satisfaction of Griffin's obligations to a third party on the related subordinated note payable (transactions which were completed in the 1996 fourth quarter) as if they had been completed at the beginning of the 1996 first quarter. The Liability Assumption is already reflected in Griffin's March 1, 1997 balance sheet. The consolidated condensed unaudited pro forma statement of operations presented herein may not necessarily reflect the results of operations had these transactions actually taken place on the assumed dates. CONSOLIDATED CONDENSED PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE 13 WEEKS ENDED, ---------------------------- MARCH 2, 1996 MARCH 1, 1997 ------------- ------------- Net sales.......................................................................... $ 3,352 $ 2,725 ------------- ------------- Operating loss..................................................................... (1,624) (2,426) Loss from equity investment........................................................ (18) (22) Interest expense................................................................... 153 69 ------------- ------------- Loss before income tax benefit..................................................... (1,795) (2,517) Income tax benefit................................................................. (689) (949) ------------- ------------- Loss from continuing operations.................................................... $ (1,106) $ (1,568) ------------- ------------- ------------- -------------
4. RELATED PARTY TRANSACTIONS CULBRO INVESTMENT Griffin maintained an intercompany account with Culbro in which intercompany transactions, including cash transfers and the liability for benefit and insurance costs and allocated general and administrative expenses described below, were recorded. The balance in the intercompany account at the end of each period presented has been included in Culbro Investment in the consolidated balance sheet. The Culbro F-6 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) (UNAUDITED) 4. RELATED PARTY TRANSACTIONS (CONTINUED) Investment account also includes the cumulative net earnings of Griffin and its capital stock. The changes in the Culbro Investment account are summarized as follows:
FOR THE 13 WEEKS ENDED ---------------------------- MARCH 2, 1996 MARCH 1, 1997 ------------- ------------- Balance beginning of period........................................................ $ 61,299 $ 47,449 Net loss........................................................................... (1,471) (2,013) ------------- ------------- 59,828 45,436 ------------- ------------- Transactions with Culbro: Liability Assumption............................................................. -- 47,621 Net operating cash flow transferred to Culbro.................................... (7,026) (1,957) Allocated Culbro general and administrative expenses............................. 387 426 Intercompany income tax benefits................................................. (919) (1,234) ------------- ------------- Total transactions with Culbro, net................................................ (7,558) 44,856 ------------- ------------- Balance end of period.............................................................. $ 52,270 $ 90,292 ------------- ------------- ------------- -------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES A portion of Culbro management time and resources were related to Griffin's operations, and Culbro also performed certain specific administrative functions for Griffin, including legal, tax, treasury, human resources and internal audit. The consolidated statement of operations reflects general and administrative expenses of $0.4 million in each of the thirteen-week periods ended March 2, 1996 and March 1, 1997, allocated by Culbro to Griffin for these services. These charges were based principally on Griffin's proportionate share of expenses relating to the Culbro corporate activities associated with Griffin's operations and are considered by management to be reasonable. These amounts may not necessarily be indicative of the actual general and administrative expenses Griffin would have incurred had it operated independently during the periods presented. 5. LONG-TERM DEBT Long-term debt includes:
NOVEMBER 30, 1996 MARCH 1, 1997 ----------------- ------------- Credit Agreement........................................... $ 36,000 $ -- Mortgages.................................................. 2,644 2,626 Capital leases............................................. 479 512 ------- ------ Total...................................................... 39,123 3,138 Less: due within one year.................................. 277 242 ------- ------ Total long-term debt....................................... $ 38,846 $ 2,896 ------- ------ ------- ------
F-7 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) (UNAUDITED) 5. LONG-TERM DEBT (CONTINUED) On February 27, 1997, pursuant to the Distribution Agreement, Culbro's general corporate debt that had been included in Griffin's financial statements was assumed by GC Holdings, and therefore will not be part of Griffin's debt structure prospectively. 6. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION INVENTORIES Inventories consists of:
NOVEMBER 30, 1996 MARCH 1, 1997 ----------------- ------------- Raw materials and supplies................................. $ 742 $ 1,126 Work-in-process............................................ 15,112 16,662 Finished goods............................................. 11,676 12,321 ------- ------------- $ 27,530 $ 30,109 ------- ------------- ------- -------------
PROPERTY AND EQUIPMENT Property and equipment consist of:
ESTIMATED USEFUL LIVES NOVEMBER 30, 1996 MARCH 1, 1997 ---------------------- ----------------- ------------- Land............................... $ 5,982 $ 5,998 Buildings and improvements......... 10 to 40 years 3,807 3,807 Machinery and equipment............ 3 to 20 years 12,337 12,438 ------- ------------- 22,126 22,243 Accumulated depreciation........... (9,450) (9,572) ------- ------------- $ 12,676 $ 12,671 ------- ------------- ------- -------------
F-8 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholder of Griffin Land & Nurseries, Inc. In our opinion, the accompanying combined balance sheet and the related combined statements of operations and of cash flows present fairly, in all material respects, the combined financial position of Griffin Land & Nurseries, Inc. (a wholly-owned subsidiary of Culbro Corporation) at December 2, 1995 and November 30, 1996 and the results of their combined operations and their combined cash flows for each of the fiscal years ended December 3, 1994, December 2, 1995 and November 30, 1996 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP New York, New York April 7, 1997 F-9 GRIFFIN LAND & NURSERIES, INC. COMBINED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS)
FOR THE FISCAL YEARS ENDED, -------------------------------- DEC. 3, DEC. 2, NOV. 30, 1994 1995 1996 ---------- --------- --------- Net sales and other revenue..................................................... $ 43,024 $ 41,756 $ 46,531 Costs and expenses: Cost of goods sold............................................................ 30,034 28,389 34,210 Selling, general and administrative expenses.................................. 14,257 12,557 12,666 Other nonrecurring expense.................................................... 3,600 -- 900 ---------- --------- --------- Operating (loss) profit......................................................... (4,867) 810 (1,245) Gain on sale of Eli Witt stock.................................................. 2,691 -- -- (Loss) income from equity investments, net...................................... (1,728) (153) 303 Other nonoperating income, net.................................................. 1,446 923 1,917 Interest expense................................................................ 7,978 8,193 7,805 ---------- --------- --------- Loss before income tax benefit.................................................. (10,436) (6,613) (6,830) Income tax benefit.............................................................. (3,279) (2,348) (2,767) ---------- --------- --------- Loss from continuing operations................................................. (7,157) (4,265) (4,063) ---------- --------- --------- Discontinued operation: Loss on sale of discontinued operation, net of tax benefit and reversal of deferred taxes of $4,182.................................................... -- -- (1,311) Income from discontinued operation, net of taxes (1994--$2,273; 1995--$2,580; 1996--$527)................................................................. 3,324 3,685 768 ---------- --------- --------- Net income (loss) from discontinued operation................................... 3,324 3,685 (543) ---------- --------- --------- Net loss........................................................................ $ (3,833) $ (580) $ (4,606) ---------- --------- --------- ---------- --------- ---------
See Notes to Combined Financial Statements. F-10 GRIFFIN LAND & NURSERIES, INC. COMBINED BALANCE SHEET (DOLLARS IN THOUSANDS)
DEC. 2, NOV. 30, 1995 1996 ---------- ---------- PRO FORMA FOR LIABILITY ASSUMPTION (A) NOV. 30, 1996 --------------- (UNAUDITED) ASSETS CURRENTS ASSETS Cash and cash equivalents................................................ $ 7,687 $ 7,371 $ 7,371 Accounts receivable, less allowance of $338 and $302..................... 3,961 3,962 3,962 Inventories.............................................................. 25,931 27,530 27,530 Deferred income taxes.................................................... -- 4,047 2,470 Other current assets..................................................... 1,572 1,158 1,158 ---------- ---------- --------------- TOTAL CURRENT ASSETS..................................................... 39,151 44,068 42,491 Property and equipment, net.............................................. 12,619 12,676 12,676 Real estate held for sale or lease, net.................................. 31,907 26,862 26,862 Investment in preferred stock of Eli Witt................................ 15,122 -- -- Investment in Centaur Communications, Ltd................................ 14,392 14,695 14,695 Other assets, including investments in real estate joint ventures of $7,964 and $3,403...................................................... 10,356 3,474 3,474 Net assets of discontinued operation..................................... 42,108 -- -- ---------- ---------- --------------- TOTAL ASSETS............................................................. $ 165,655 $ 101,775 $ 100,198 ---------- ---------- --------------- ---------- ---------- --------------- LIABILITIES AND CULBRO INVESTMENT CURRENT LIABILITIES Accounts payable and accrued liabilities................................. $ 8,114 $ 7,093 $ 5,559 Long-term debt due within one year....................................... 7,968 277 277 ---------- ---------- --------------- TOTAL CURRENT LIABILITIES................................................ 16,082 7,370 5,836 Long-term debt........................................................... 72,737 38,846 2,846 Deferred income taxes.................................................... 3,692 -- -- Other noncurrent liabilities and deferred credit......................... 11,845 8,110 3,662 ---------- ---------- --------------- TOTAL LIABILITIES........................................................ 104,356 54,326 12,344 COMMITMENTS AND CONTINGENCIES (SEE NOTE 14) -- -- -- CULBRO INVESTMENT........................................................ 61,299 47,449 87,854 ---------- ---------- --------------- TOTAL LIABILITIES AND CULBRO INVESTMENT.................................. $ 165,655 $ 101,775 $ 100,198 ---------- ---------- --------------- ---------- ---------- ---------------
- ------------------------ (a) Reflects the reduction of certain liabilities that were transferred to and assumed by General Cigar Holdings, Inc. pursuant to a Distribution Agreement. The liabilities include principally the Culbro debt of $36 million, certain accrued retirement obligations and other items. See Notes to Combined Financial Statements. F-11 GRIFFIN LAND & NURSERIES, INC. COMBINED STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS)
FOR THE FISCAL YEARS ENDED, --------------------------------- DEC. 3, DEC. 2, NOV. 30, 1994 1995 1996 ---------- --------- ---------- OPERATING ACTIVITIES: Net loss........................................................................ $ (3,833) $ (580) $ (4,606) Adjustments to reconcile net loss to cash provided by (used in) operating activities: Depreciation and amortization................................................... 2,142 2,416 2,405 Loss (income) from discontinued operation, before tax........................... (5,597) (6,265) 4,198 Gain on sale of Eli Witt common stock........................................... (2,691) -- -- Loss (income) from equity investments........................................... 1,728 153 (303) Discount and interest on subordinated note...................................... 1,446 2,349 2,167 Accretion and dividend income on preferred stock of Eli Witt.................... (1,446) (2,349) (2,167) Proceeds from sale of investment in real estate joint venture................... -- -- 4,042 Deferred income taxes........................................................... (2,995) 1,533 (7,739) Changes in assets and liabilities which increased (decreased) cash: Accounts receivable........................................................... (991) (177) (303) Inventories................................................................... (554) (1,159) (1,599) Real estate held for sale or lease............................................ 3,248 611 506 Accounts payable and accrued liabilities...................................... (4,714) 499 (1,474) Other, net...................................................................... 2,612 (902) 2,648 ---------- --------- ---------- Net cash used in operating activities of continuing operations.................. (11,645) (3,871) (2,225) Cash provided by operating activities of discontinued operation................. 10,235 9,435 3,547 ---------- --------- ---------- Net cash (used in) provided by operating activities............................. (1,410) 5,564 1,322 ---------- --------- ---------- INVESTING ACTIVITIES: Proceeds from sale of discontinued operation.................................... -- -- 35,030 Additions to property and equipment............................................. (625) (847) (1,378) Investment in Eli Witt subordinated note........................................ -- (5,000) -- Proceeds from Eli Witt repayment of a mortgage loan to the Company.............. 8,000 -- -- Proceeds from the sale of Eli Witt common stock................................. 672 -- -- Investing activities of discontinued operation.................................. (2,317) (1,450) (947) ---------- --------- ---------- Net cash provided by (used in) investing activities............................. 5,730 (7,297) 32,705 ---------- --------- ---------- FINANCING ACTIVITIES: Net transactions with Culbro.................................................... 15,854 17,453 (9,244) Payments of debt................................................................ (27,928) (14,829) (25,099) Increase in debt................................................................ 11,669 -- -- ---------- --------- ---------- Net cash (used in) provided by financing activities............................. (405) 2,624 (34,343) ---------- --------- ---------- Net increase (decrease) in cash and cash equivalents............................ 3,915 891 (316) Cash and cash equivalents at beginning of year.................................. 2,881 6,796 7,687 ---------- --------- ---------- Cash and cash equivalents at end of year........................................ $ 6,796 $ 7,687 $ 7,371 ---------- --------- ---------- ---------- --------- ----------
See Notes to Combined Financial Statements. F-12 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1. CERTAIN TRANSACTIONS The accompanying combined financial statements include the accounts of Griffin Land & Nurseries, Inc. ("Griffin") and reflect its financial position, results of operations and cash flows after elimination of intercompany accounts and transactions. Prior to March 18, 1997, Griffin was known as Culbro Land Resources, Inc. Griffin is a wholly owned subsidiary of Culbro Corporation ("Culbro"). Griffin, Culbro and General Cigar Holdings, Inc. ("GC Holdings"), a Culbro subsidiary, entered into a Distribution Agreement (the "Distribution Agreement") on February 27, 1997. The Distribution Agreement provided for (i) the consummation of the Asset Transfers (see below), (ii) the distribution of Griffin's common stock to the existing shareholders of Culbro (the "Distribution") following the initial public offering (the "Offering") of GC Holdings Class A common stock, and (iii) following the Distribution, the merger of Culbro, subject to certain conditions, with and into GC Holdings (the "Merger"). The Offering was completed on February 28, 1997. The Distribution is contingent principally upon (i) either a tax ruling (which has been applied for by Culbro) or an opinion of counsel satisfactory to Culbro that the Distribution constitutes a tax free organization under Section 355 of the Internal Revenue Code and (ii) approval of the Merger by the holders of 66 2/3% of the outstanding Culbro common stock. Pursuant to the Distribution Agreement, Culbro transferred to Griffin substantially all the non-tobacco related assets of Culbro, including: (i) all of the outstanding common stock of Imperial Nurseries, Inc., a wholly owned subsidiary of Culbro; (ii) approximately 5,500 acres of land in Connecticut and Florida, as well as nursery wholesale service centers; (iii) Culbro's interests in Eli Witt and assets previously owned by The Eli Witt Company ("Eli Witt") (see Note 12); (iv) its 25% interest in Centaur Communications, Ltd. ("Centaur"); and (v) all licenses, permits, accounts receivable, prepaid expenses, reserves and other current assets (other than cash) related to the real estate and landscape nursery businesses. The Distribution Agreement also provided for the assumption by Griffin of all of the liabilities related to the businesses and assets transferred to Griffin from Culbro. Pursuant to the Distribution Agreement, $7.0 million in cash was transferred to Griffin and is reflected on the historical balance sheets. Griffin continues to operate the real estate business owned prior to the Asset Transfers (see below). All of the transferred assets and related liabilities are included in the accompanying combined financial statements at Culbro's historical cost. The Distribution Agreement also provided for the transfer to and assumption by GC Holdings of all of Culbro's general corporate debt and certain other liabilities, principally retirement obligations, which are included in Griffin's historical financial statements. See Note 4 for the pro forma effect of these liability transfers on Griffin's financial position and results of operations. As a result of the transfers described above ( the "Asset Transfers"), Culbro is a holding company, substantially all of the assets of which are the stock of Griffin and GC Holdings. Pursuant to the terms of the Distribution Agreement, Griffin and GC Holdings will operate independently of each other. Prior to March 18, 1997, Culbro held all 1,000 then, issued and outstanding shares of common stock, par value $0.01 per share, of Griffin (the "Original Shares"). On March 18, 1997, pursuant to an amended and restated certificate of incorporation of Griffin, each Original Share was exchanged for one share of Class B Common Stock, par value $0.01 per share, of Griffin (the "Class B Common Stock"). Prior to the Distribution Date, Griffin intends to file an Amended and Restricted Certificate of Incorporation, the form of which is filed as an exhibit to the Registration Statement on Form 10 of which this Information Statement forms a part, pursuant to which each share of Class B Common Stock will be exchanged for one F-13 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1. CERTAIN TRANSACTIONS (CONTINUED) share of newly-authorized common stock, par value $0.01 per share (the "Common Stock"). Prior to the Distribution, Griffin will effect a stock split such that the number of issued and outstanding shares of Common Stock will equal the number of then-outstanding shares of common stock, par value $1, of Culbro. The Distribution Agreement provides for the pro rata distribution by Culbro to the shareholders of Culbro of the Common Stock. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying combined financial statements of Griffin include the accounts of Griffin's real estate operations, Imperial Nurseries, Inc. ("Imperial Nurseries") and CMS Gilbreth Packaging Systems, Inc. ("CMS Gilbreth"), which was sold in 1996 (see Note 3) and is reported as a discontinued operation in these statements. The combined financial statements have been presented as if Griffin had operated as an independent stand-alone entity for all periods presented. Such financial statements may not necessarily present the financial position, results of operations and cash flows Griffin would have reported had it actually operated as a stand-alone entity. See Note 4 for combined condensed unaudited pro forma financial information. All intercompany transactions have been eliminated. Griffin accounts for its investments in Centaur, Eli Witt and real estate joint ventures under the equity method. Prior to April 1994, Eli Witt was a consolidated subsidiary of Griffin. Results of real estate joint ventures are included in operating profit. BUSINESS SEGMENTS Griffin is engaged in the landscape nursery and real estate businesses. Imperial Nurseries, the landscape nursery segment, is engaged in growing plants which are sold principally to garden centers, wholesalers and merchandisers, and operating sales and service centers which sell principally to landscapers. Griffin's real estate segment builds and manages commercial and industrial properties and develops residential subdivisions on real estate in Connecticut and Massachusetts that was previously owned by Culbro and transferred to Griffin in accordance with the Distribution Agreement. FISCAL YEAR Griffin's fiscal year ends on the Saturday nearest November 30. Fiscal years 1994, 1995 and 1996 ended December 3, 1994, December 2, 1995 and November 30, 1996, respectively. Fiscal 1994 included 53 weeks, and fiscal 1995 and fiscal 1996 each contained 52 weeks. INVENTORIES Griffin's inventories are stated at the lower of cost or market using the average cost method. Raw materials and work in process are landscape nursery stock, a substantial amount of which will not be used or sold within one year. It is industry practice to include such inventories in current assets. F-14 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY AND EQUIPMENT Property and equipment are carried at cost. Depreciation is determined on a straight-line basis over the estimated useful asset lives for financial reporting purposes and principally on accelerated methods for tax purposes. REVENUE AND GAIN RECOGNITION In the landscape nursery business, sales and the related cost of sales are recognized upon shipment of products. Sales returns are not material. In the real estate business, gains on real estate sales are recognized in accordance with SFAS No. 66, "Accounting for Sales of Real Estate." FAIR VALUE OF FINANCIAL INSTRUMENTS The amounts included in the financial statements for accounts receivable, accounts payable and accrued liabilities reflect their fair values because of the short-term maturity of these instruments. The fair values of Griffin's other financial instruments are discussed in Note 8. EARNINGS PER SHARE Griffin is a wholly owned subsidiary of Culbro and its historical capital structure does not permit a meaningful presentation of earnings per share. Accordingly, earnings per share are not presented herein. RECENTLY ISSUED ACCOUNTING STANDARDS In March 1995, the Financial Accounting Standards Board ("FASB") issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This Statement requires that long-lived assets and certain intangibles held and used by a business entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Prior to the issuance of this Statement, Griffin periodically reviewed its long-lived assets, considering future performance of those assets and the need for adjustments to their carrying values. Griffin has adopted this Statement and performs such reviews in accordance with the methods prescribed by SFAS No. 121. In October 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based Compensation." This Statement establishes a fair value method of accounting for, or disclosing, stock-based compensation plans. Griffin intends to adopt the disclosure provisions of this statement which require disclosing the pro forma effect on net income and earnings per share of the fair value method of accounting for stock-based compensation. The adoption of the disclosure provisions will not affect combined financial condition, results of operations, or cash flows. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the period reported. Actual results could differ from those estimates. F-15 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Estimates are used when accounting for allowance for uncollectible accounts receivable, depreciation and amortization, employee benefit plans, taxes, and contingencies, among others. 3. BUSINESS DISPOSITION On November 8, 1996, Griffin completed the sale of its labeling and packaging systems business, CMS Gilbreth. Net proceeds, after sale expenses, were $35.0 million, and Griffin recorded a pretax loss of $5.5 million on the sale, net of operating profit of $1.6 million earned during the phase-out period. The sale proceeds were used to repay debt. CMS Gilbreth is reported as a discontinued operation in the accompanying financial statements. Net sales of CMS Gilbreth were $51.1 million and $51.0 million in 1994 and 1995, respectively, and $43.6 million in 1996 through the date of sale. 4. COMBINED CONDENSED PRO FORMA FINANCIAL INFORMATION (UNAUDITED) The following combined condensed unaudited pro forma statement of operations of Griffin gives effect to: (i) the assumption by GC Holdings of the liability portion of the Asset Transfers, (ii) the use of proceeds from the sale of CMS Gilbreth, (iii) the exchange of preferred stock of Eli Witt in satisfaction of Griffin's obligations to a third party under an exchangeable subordinated note and (iv) the elimination of the allocated portion of Culbro's nonrecurring expense for the cost of terminating a long-term compensation plan and severance for certain employees in contemplation of the Distribution, that will not be incurred in the future as a result of the Distribution. The combined condensed unaudited pro forma statement of operations assumes that these transactions took place at the beginning of fiscal 1996. The combined condensed unaudited pro forma balance sheet reflects the assumption by GC Holdings of the liability portion of the Asset Transfers and its effect on related deferred taxes as if they occurred at the balance sheet date. The effect of the sale of CMS Gilbreth and the exchange of preferred stock of Eli Witt are reflected (eliminated) in Griffin's historical 1996 combined balance sheet. The combined condensed unaudited pro forma financial information presented herein may not necessarily reflect the results of operations and financial position had these transactions actually taken place on the assumed dates. COMBINED CONDENSED PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
1996 --------- Net sales.......................................................................... $ 46,531 --------- Operating loss..................................................................... (345) Income from equity investment...................................................... 303 Interest expense................................................................... 508 --------- Loss before income tax benefit..................................................... (550) Income tax benefit................................................................. (317) --------- Loss from continuing operations.................................................... $ (233) --------- ---------
F-16 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 4. COMBINED CONDENSED PRO FORMA FINANCIAL INFORMATION (UNAUDITED) (CONTINUED) COMBINED CONDENSED PRO FORMA BALANCE SHEET (UNAUDITED)
NOV. 30, 1996 ---------- Current assets.................................................................... $ 42,491 Property and equipment, net....................................................... 12,676 Real estate held for sale or lease, net........................................... 26,862 All other assets.................................................................. 18,169 ---------- Total assets...................................................................... $ 100,198 ---------- ---------- Current liabilities............................................................... $ 5,836 Long-term debt.................................................................... 2,846 Other noncurrent liabilities...................................................... 3,662 ---------- Total liabilities................................................................. 12,344 Culbro Investment................................................................. 87,854 ---------- Total liabilities and Culbro Investment........................................... $ 100,198 ---------- ----------
F-17 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 5. INDUSTRY SEGMENT INFORMATION Griffin's businesses operate in two industry segments: landscape nursery and real estate (see Note 2). Griffin has no operations outside of the United States, and export sales are not material. Capital expenditures and depreciation and amortization presented herein include amounts related to capital leases.
1994 1995 1996 ---------- ---------- ---------- NET SALES AND OTHER REVENUE Landscape nursery.................................................. $ 35,315 $ 34,894 $ 37,045 Real estate........................................................ 7,709 6,862 9,486 ---------- ---------- ---------- $ 43,024 $ 41,756 $ 46,531 ---------- ---------- ---------- ---------- ---------- ---------- OPERATING PROFIT (LOSS) Landscape Nursery.................................................. $ (604) $ 1,732 $ 1,650 Real estate (a).................................................... (2,241) 1,228 (300) ---------- ---------- ---------- Industry segment totals............................................ (2,845) 2,960 1,350 General corporate expense, net (b)................................. 2,022 2,150 2,595 (Loss) income from equity investments, net......................... (1,728) (153) 303 Other nonoperating income, net..................................... 1,446 923 1,917 Gain on sale of Eli Witt common stock.............................. 2,691 -- -- Interest expense................................................... 7,978 8,193 7,805 ---------- ---------- ---------- Loss before income tax benefit..................................... $ (10,436) $ (6,613) $ (6,830) ---------- ---------- ---------- ---------- ---------- ---------- IDENTIFIABLE ASSETS Landscape nursery.................................................. 40,636 42,881 43,948 Real estate........................................................ 42,455 41,228 31,664 ---------- ---------- ---------- Industry segment totals............................................ 83,091 84,109 75,612 General corporate.................................................. 40,502 39,438 26,163 Net assets of discontinued operation............................... 43,828 42,108 -- ---------- ---------- ---------- $ 167,421 $ 165,655 $ 101,775 ---------- ---------- ---------- ---------- ---------- ----------
- ------------------------ (a) Real estate segment operating loss in 1994 includes a $3.6 million charge for the write off of development costs expended in earlier years. (b) General corporate expense in 1996 includes an allocation to Griffin by Culbro of $0.9 million for the termination of a compensation plan, severance and other expenses in contemplation of the Distribution (see Note 1). F-18 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 5. INDUSTRY SEGMENT INFORMATION (CONTINUED)
DEPRECIATION AND AMORTIZATION CAPITAL EXPENDITURES ------------------------------- ------------------------------- 1994 1995 1996 1994 1995 1996 --------- --------- --------- --------- --------- --------- Landscape nursery...................... $ 594 $ 789 $ 1,258 $ 912 $ 1,132 $ 1,116 Real estate............................ 31 58 120 912 917 889 --------- --------- --------- --------- --------- --------- Industry segment totals................ 625 847 1,378 1,824 2,049 2,005 General corporate...................... -- -- -- 318 367 400 --------- --------- --------- --------- --------- --------- $ 625 $ 847 $ 1,378 $ 2,142 $ 2,416 $ 2,405 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
6. RELATED PARTY TRANSACTIONS CULBRO INVESTMENT The Company maintained an intercompany account with Culbro in which intercompany transactions, including cash transfers and the liability for benefit and insurance costs and allocated general and administrative expenses described below, were recorded. The balance in the intercompany account at the end of each period presented has been included in Culbro Investment in the combined balance sheet. The Culbro Investment account also includes the cumulative results of Griffin and its capital stock. The changes in the Culbro Investment account are summarized as follows:
FOR THE FISCAL YEARS ENDED, ------------------------------- DEC. 3, DEC. 2, NOV. 30, 1994 1995 1996 --------- --------- --------- Balance beginning of year.............................................. $ 32,406 $ 44,426 $ 61,299 Net loss............................................................... (3,833) (580) (4,606) --------- --------- --------- 28,573 43,846 56,693 --------- --------- --------- Transactions with Culbro: Net operating cash flow transferred from (to) Culbro................. 14,420 15,141 (5,498) Allocated Culbro general and administrative expenses................. 2,439 2,080 1,776 Allocated Culbro other nonrecurring expense.......................... -- -- 900 Intercompany income taxes (benefits)................................. (1,006) 232 (6,422) --------- --------- --------- Total transactions with Culbro, net.................................... 15,853 17,453 (9,244) --------- --------- --------- Balance end of year.................................................... $ 44,426 $ 61,299 $ 47,449 --------- --------- --------- --------- --------- --------- Average intercompany balance due to Culbro............................. $ 3,961 $ 20,614 $ 24,718 --------- --------- --------- --------- --------- ---------
TREASURY Through February 27, 1997, Griffin's treasury activities were integrated into Culbro's cash management system. Griffin's cash receipts were transferred daily into Culbro's cash account and Griffin's cash disbursement accounts were reimbursed by Culbro on a daily basis. The difference between cash transferred by Griffin to Culbro and reimbursements by Culbro to Griffin's disbursement accounts has been reflected in Culbro Investment in the combined balance sheet. F-19 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 6. RELATED PARTY TRANSACTIONS (CONTINUED) INTERCOMPANY ACTIVITIES Griffin's employees participate in certain benefit programs which are sponsored and administered by Culbro. See Note 9 for discussion of employee benefit plan costs. Griffin's risk insurance and employee medical coverage are provided through insurance policies and programs purchased by Culbro on behalf of Griffin and Culbro's other subsidiaries. The cost of these items was allocated based on the specific insurance data related to each subsidiary of Culbro. All direct charges relating to Griffin for these services, and Griffin's participation in these plans, have been charged to Griffin by Culbro and included in Griffin's combined financial statements. A portion of Culbro management time and resources were related to the operations of Griffin, and Culbro also performed certain specific administrative functions for Griffin, including legal, tax, treasury, human resources and internal audit. In addition to the direct charges above for employee benefits and risk insurance, the combined statement of operations reflects general and administrative expenses of $2.4 million, $2.1 million and $1.8 million for fiscal 1994, fiscal 1995 and fiscal 1996, respectively, allocated by Culbro to Griffin for these services. These charges were based principally on Griffin's proportionate share of expenses relating to the Culbro corporate activities associated with Griffin's operations and are considered by management to be reasonable. These amounts may not necessarily be indicative of the actual general and administrative expenses Griffin would have incurred had it operated independently during the years presented. In lieu of Griffin being charged interest on its intercompany balance with Culbro, all of the interest on Culbro's general corporate debt is included in Griffin's statement of operations. All of the general corporate debt of Culbro is included in Griffin's financial statements because management determined that this debt related to Culbro's non-tobacco businesses. See Notes 4 and 8. LEASES Griffin as lessor and General Cigar Co., Inc. ("General Cigar"), a wholly owned subsidiary of GC Holdings, as lessee, have entered into a lease for certain agricultural land in Connecticut and Massachusetts (the "Agricultural Lease") and, prior to the Distribution, will enter into a lease for certain commercial space in Connecticut (the "Commercial Lease"). The Agricultural Lease is for approximately 500 acres of arable land allocated to Griffin for possible commercial development in the long-term, but which will provide General Cigar with a source of growing Connecticut Shade wrapper tobacco. General Cigar's use of the land is limited to the cultivation of cigar wrapper tobacco. The Agricultural Lease has an initial term of ten years and provides for the extension of the lease for additional periods thereafter. In addition, at Griffin's option the Agricultural Lease may be terminated with respect to 100 acres of such land annually upon one year's prior notice. The rent payable by General Cigar under the Agricultural Lease is approximately equal to the aggregate amount of all taxes and other assessments payable by Griffin attributable to the land leased. The Commercial Lease will be for approximately 25,000 square feet of office space in the Griffin Center South office complex in Bloomfield, Connecticut. The Commercial Lease will have an initial term of ten years and provides for the extension of the lease for additional annual periods thereafter. The rent payable by General Cigar under the Commercial Lease will be at market rates. F-20 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 7. INTERCOMPANY INCOME TAXES All tax liabilities were paid by Culbro and accordingly Griffin's tax liabilities are reflected in the Culbro Investment account. Historically, the combined results of operations of Griffin were included in Culbro's consolidated U.S. federal income tax returns, and will be included in such returns through the date the Distribution is consummated. The income tax provisions and deferred tax liabilities have been calculated in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes" as if Griffin had filed separate tax returns. The income tax provision (benefit) for fiscal 1994, fiscal 1995 and fiscal 1996 are summarized as follows:
1994 1995 1996 --------- --------- --------- Continuing operations: Current federal............................................. $ (2,229) $ (2,973) $ 1,788 Current state and local..................................... (18) (205) 138 Deferred, principally federal............................... (1,032) 830 (4,693) --------- --------- --------- Income tax benefit from continuing operations................. (3,279) (2,348) (2,767) --------- --------- --------- Discontinued operation: Current federal............................................. 2,374 2,057 (553) Current state and local..................................... 365 292 (277) Deferred, principally federal............................... (466) 231 (2,825) --------- --------- --------- Income tax provision (benefit) from discontinued operation.... 2,273 2,580 (3,655) --------- --------- --------- Total income tax (benefit) provision.......................... $ (1,006) $ 232 $ (6,422) --------- --------- --------- --------- --------- ---------
The reasons for the difference between the United States statutory income tax rate and the effective rates for continuing operations are shown in the following table:
1994 1995 1996 --------- --------- --------- Tax benefit at statutory rates................................ $ (3,548) $ (2,315) $ (2,391) State and local income taxes.................................. (12) (133) 90 Foreign investment............................................ (119) 54 (106) Subsidiary loss accounted for under the equity method......... 706 -- -- Other......................................................... (306) 46 (360) --------- --------- --------- $ (3,279) $ (2,348) $ (2,767) --------- --------- --------- --------- --------- ---------
F-21 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 7. INTERCOMPANY INCOME TAXES (CONTINUED) The significant components of the net deferred tax asset (liability) are as follows:
1995 1996 --------- --------- Depreciation and amortization...................................................... $ (2,835) $ (1,390) Postretirement benefit obligations................................................. 782 604 Pension liabilities................................................................ 754 668 Deferred income attributable to deconsolidated subsidiary.......................... (1,483) -- Inventories........................................................................ 1,751 1,880 Other.............................................................................. (2,661) 2,285 --------- --------- $ (3,692) $ 4,047 --------- --------- --------- ---------
In connection with the Distribution Agreement, Culbro and Griffin entered into a Tax Sharing Agreement which provides, among other things, for the allocation between Culbro and Griffin of federal, state, local and foreign tax liabilities for all periods through the Distribution and Merger. With respect to the consolidated tax returns filed by Culbro, the Tax Sharing Agreement provides that Griffin will be liable for any amounts that it would have been required to pay with respect to any deficiencies assessed, generally as if it had filed separate tax returns. 8. LONG-TERM DEBT Long-term debt includes:
DEC 2, NOV. 30, 1995 1996 ----------- ----------- Credit Agreement.............................................................. $ 40,000 $ 36,000 Senior Notes.................................................................. 21,000 -- Exchangeable Subordinated Note, 10% (face value $15 million).................. 12,700 -- Mortgages..................................................................... 6,525 2,644 Capital leases................................................................ 480 479 ----------- ----------- Total......................................................................... 80,705 39,123 Less: due within one year..................................................... 7,968 277 ----------- ----------- Total long-term debt.......................................................... $ 72,737 $ 38,846 ----------- ----------- ----------- -----------
F-22 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) 8. LONG-TERM DEBT (CONTINUED) As of November 30, 1996, the annual principal payment requirements under the terms of the mortgages are $0.1 million for each of the years 1997 through 2001. The mortgages are on two office buildings and three industrial buildings which had a combined net book value of $4.4 million at November 30, 1996. The interest rates on these mortgages range from 9.0% to 10.2%. On June 5, 1996, Culbro and its banks entered into the Second Amended and Restated Credit Agreement (the "1996 Credit Agreement") which replaced the previous 1993 Credit Agreement that was scheduled to terminate in December 1996. The 1996 Credit Agreement provided $65 million to Culbro and its subsidiaries for general working capital purposes and an additional $20 million which was used to repay the balance of Culbro's Senior Notes. Amounts borrowed by Culbro under these credit facilities were used to fund Griffin's operations and are reflected in the accompanying combined financial statements. As per the terms of the Distribution Agreement, the entire amount borrowed under the Credit Agreement as of the date of the Distribution Agreement was assumed by GC Holdings, and therefore will not be part of Griffin's debt structure prospectively. In October 1996, Griffin's real estate business satisfied a nonrecourse mortgage of approximately $3.8 million on a commercial property by transferring the property to the lender in satisfaction of the outstanding mortgage. The net book value of the property was substantially equal to the mortgage balance. In November 1996, Griffin exchanged shares of preferred stock of Eli Witt in satisfaction of the principal and accrued interest on a $15 million subordinated note payable to a third-party originally due August 1998. Interest expense in fiscal 1994, fiscal 1995 and fiscal 1996 included $0.5 million, $0.9 million and $0.8 million, respectively, for amortization of the original issue discount on the subordinated note. In 1993, Culbro entered into two interest rate swap agreements with major banks as a hedge against interest rate exposure on its variable rate debt. One such agreement, to fix the borrowing rate at 4.74% on $30 million of variable rate debt, expired in March 1996. A similar interest rate swap agreement, that fixed the borrowing rate at 4.89% on an additional $20 million of variable rate debt, expired in September 1995. The effect of these swap agreements was to increase interest expense in fiscal 1994 by $0.4 million, reflecting the excess of payments made to the banks over payments received. In fiscal 1995 and fiscal 1996, interest expense was reduced by $0.6 million and $0.1 million, respectively, reflecting payments received from the banks under these agreements. Management believes that because the interest rate on the 1996 Credit Agreement adjusts to current market rates, this debt, as stated on the November 30, 1996 balance sheet, approximated its fair market value. Management also believes that the amounts reflected on the balance sheet for its other debt facilities reflected their current market values based on market interest rates for comparable risks, maturities and collateral. 9. RETIREMENT BENEFITS PENSION PLAN Griffin's employees participate in Culbro's noncontributory defined benefit pension plan, which covers substantially all employees of Culbro and its subsidiaries. The plan's benefits are based on employees' years of service and compensation. Contributions to the plan are made in accordance with the provisions of the Employee Retirement Income Security Act. Pension expense of $0.2 million, $0.1 million F-23 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) 9. RETIREMENT BENEFITS (CONTINUED) and $0.1 million for fiscal 1994, fiscal 1995 and fiscal 1996, respectively, included in the combined statement of operations, reflects Griffin's direct share of Culbro's consolidated pension expense based on the benefit costs attributable to its employees, as determined by the plan's actuaries. As per the terms of the Distribution Agreement, the plan will be assumed by GC Holdings. Upon completion of the Distribution, Griffin will terminate its participation in the plan, and Griffin's employees' years of service and benefits accrued at that time will be frozen at the date of termination. All vested pension obligations as of the date of the Distribution Agreement for Griffin's current and former employees will be assumed by GC Holdings. In connection with the Distribution and Merger, Griffin and GC Holdings entered into an Employee Benefits Administration Agreement to define the responsibilities for the administration of the plan. In connection with the Distribution Griffin will establish the Griffin Land & Nurseries, Inc. 401(k) Savings Plan. Griffin may at its discretion "match" employee deferrals each year. OTHER POSTRETIREMENT BENEFITS Through the date of the Distribution, Griffin's employees will participate in Culbro's postretirement benefits program which provides principally health and life insurance benefits to certain of its retired employees. The annual cost of such benefits attributable to Griffin's employees under the plan's benefit formula was $0.1 million in fiscal 1994, fiscal 1995 and fiscal 1996. Griffin expects that it will continue to provide its employees with the same level of retiree medical benefits as those provided under the Culbro program. Griffin's proportionate share of the present value of the liabilities for accumulated postretirement benefits, as determined by the Plan's actuaries, is shown below. None of these liabilities have been funded at December 2, 1995 and November 30, 1996. Under the terms of the Distribution Agreement, the liability for Griffin's current retirees postretirement benefits will be assumed by GC Holdings.
1995 1996 --------- --------- Retirees................................................................... $ 1,276 $ 905 Fully eligible active participants......................................... 416 317 Other active participants.................................................. 245 105 Unrecognized net gain from experience differences and assumption changes... 175 213 --------- --------- Liability for other postretirement benefits................................ $ 2,112 $ 1,540 --------- --------- --------- ---------
Discount rates of 7.50% and 7.75% were used to compute the accumulated postretirement benefit obligations at December 2, 1995 and November 30, 1996, respectively. Because Griffin's obligation for retiree medical benefits is fixed, any increase in the medical cost trend would have no effect on the accumulated postretirement benefit obligation, service cost or interest cost. F-24 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) 10. STOCK OPTION PLANS Upon consummation of the Distribution and Merger, Culbro will convert all employee stock options outstanding under Culbro's stock option plans into options to purchase shares of common stock, par value $0.01 per share, of Griffin and shares of common stock of Culbro. The number of outstanding options and exercise prices will be adjusted to preserve the value of the Culbro options. The combined financial statements of Griffin do not reflect any effects that these plans have had in Culbro's consolidated financial statements. The status of, and transactions in, the Culbro employee stock option plans for the periods presented are summarized below: EMPLOYEES STOCK OPTION PLANS The Culbro 1996 Stock Plan (the "1996 Plan"), the 1992 Stock Plan (the "1992 Plan") and the 1991 Employees Incentive Stock Option Plan (the "1991 Plan") for officers and key employees, made available 500,000, 300,000 and 210,000 shares of common stock, respectively, for purchase at prices equal to the fair market value at date of grant. A portion of the options outstanding under these plans may be exercised as incentive stock options, which under current tax laws do not provide any tax deductions to Culbro. Options are not exercisable until three years from the date of grant and may be exercised over a period ending not later than ten years from the date of grant. The exercise period for each grant was determined by Culbro's Compensation Committee. F-25 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) 10. STOCK OPTION PLANS (CONTINUED) At November 30, 1996, a total of 400,000 and 40,300 shares under the 1996 Plan and 1992 Plan, respectively, were available for future grant. There are no shares available for future grant under the 1991 Plan. None of the options outstanding at November 30, 1996 may be exercised as stock appreciation rights. Transactions under the 1996, 1992 and 1991 Plans are summarized as follows: Options outstanding at November 27, 1993.......................... 280,700 Granted during 1994............................................... 88,300 Expired, canceled and exercised................................... (33,400) --------- Options outstanding at December 3, 1994........................... 335,600 Granted during 1995............................................... 68,000 Expired, canceled and exercised................................... (92,200) --------- Options outstanding at December 2, 1995........................... 311,400 Granted during 1996............................................... 134,400 Expired, canceled and exercised................................... (103,286) --------- Options outstanding at November 30, 1996.......................... 342,514 --------- --------- Option prices range between:...................................... $12.25 and $80.00 Options exercisable: December 3, 1994................................................ 109,000 December 2, 1995................................................ 86,100 November 30, 1996............................................... 78,114 Expiration date of the 1991 Plan.................................. 2001 Expiration date of the 1992 Plan.................................. 2002 Expiration date of the 1996 Plan.................................. 2006 Number of option holders at November 30, 1996..................... 13
CULBRO NONEMPLOYEE DIRECTORS STOCK OPTION PLAN Options granted under the 1996 Stock Option Plan for Nonemployee Directors (the "1996 Nonemployee Plan") and the 1992 Stock Option Plan for Nonemployee Directors (the "1992 Nonemployee Plan") will also be converted into options to purchase common shares of Griffin and shares of common stock of Culbro. Under these plans 70,000 options have been made available to purchase shares of Culbro common stock for purchase at prices equal to the fair market value at date of grant. Options canceled become available for future grant. Options are not exercisable until three years from the date of grant and may be exercised over a period ending not later than eight years from the date of grant. As of November 30, 1996, 18,000 options remained available for future grant under the 1996 Nonemployee Plan and 3,000 options remained available for future grant under the 1992 Nonemployee Plan. None of the F-26 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) 10. STOCK OPTION PLANS (CONTINUED) options outstanding at November 30, 1996 may be exercised as stock appreciation rights. Transactions under the 1992 and 1996 Plans for Nonemployee Directors are as follows: Options outstanding at Nov. 27, 1993................................ 14,000 Granted during 1994................................................. 14,000 --------- Options outstanding at Dec. 3, 1994................................. 28,000 Granted during 1995................................................. 14,000 --------- Options outstanding at Dec. 2, 1995................................. 42,000 Granted during 1996................................................. 7,000 Exercised during 1996............................................... (6,000) --------- Options outstanding at Nov. 30, 1996................................ 43,000 --------- --------- Options prices range between:....................................... $ 14.38 and $ 63.81 Number of option holders at Nov. 30, 1996........................... 7
EMPLOYMENT AGREEMENT Upon consummation of the Distribution and Merger, stock options of Culbro issued in accordance with the terms of an employment agreement entered into in May 1994 between Culbro and an officer of Culbro will become stock options of both Griffin and GC Holdings. The agreement provided for the issuance of 125,000 Culbro stock options, exercisable at the rate of 25,000 per year from 1995 through 1999 at an option price of $4.00 per share. Through November 30, 1996, 15,000 of these options have been exercised under this agreement. Griffin's proportionate share of the annual compensation expense for this agreement is less than $0.1 million, reflecting the difference between the option price and the quoted market price at the date of grant, is included in the financial statements for each of the years presented. GRIFFIN STOCK OPTION PLAN Effective as of the Distribution Date, Griffin will establish the Griffin Land & Nurseries, Inc. 1997 Stock Option Plan (the "Griffin Stock Option Plan"). A total of approximately 700,000 shares of common stock will be available for issuance under the Griffin Stock Option Plan. Of such 700,000 shares, 250,000 will be available for issuance with respect to new options that may be granted to certain officers, employees, consultants and directors of Griffin following the Distribution. The Griffin Stock Option Plan will be administered by the Compensation Committee of the Board of Directors of Griffin. Options granted under the Griffin Stock Option Plan may be either incentive stock options or non-qualified stock options. Incentive stock options issued under the Griffin Stock Option Plan will satisfy certain Internal Revenue Code requirements applicable thereto. F-27 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) 11. LEASES CAPITAL LEASES Future minimum lease payments under capital leases for transportation equipment and the present value of such payments as of November 30, 1996 were: 1997................................................................. $ 220 1998................................................................. 156 1999................................................................. 113 2000................................................................. 43 --------- Total minimum lease payments......................................... 532 Less: Amounts representing interest.................................. 53 --------- Present value of minimum lease payments (a).......................... $ 479 --------- ---------
- ------------------------ (a) Includes current portion of $0.2 million at November 30, 1996. At December 2, 1995 and November 30, 1996, machinery and equipment included capital leases amounting to $0.5 million, which is net of accumulated depreciation at December 2, 1995 and November 30, 1996 of $1.6 million and $1.5 million, respectively. Depreciation expense relating to capital leases was $0.3 million, $0.2 million and $0.2 million in fiscal 1994, fiscal 1995 and fiscal 1996, respectively. OPERATING LEASES Future minimum rental payments under noncancellable leases as of November 30, 1996 were: 1997................................................................. $ 263 1998................................................................. 241 1999................................................................. 216 2000................................................................. 105 2001................................................................. 25 --------- Total minimum lease payments......................................... $ 850 --------- ---------
Total rental expense for all operating leases in fiscal 1994, fiscal 1995 and fiscal 1996 was $0.2 million, $0.3 million and $0.3 million, respectively. F-28 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) 11. LEASES (CONTINUED) As lessor, Griffin's real estate activities consist of the leasing of office and industrial space in Connecticut. Future minimum rentals to be received under noncancellable leases as of November 30, 1996 were: 1997................................................................ $ 1,593 1998................................................................ 1,338 1999................................................................ 1,055 2000................................................................ 981 2001................................................................ 905 Later years......................................................... 1,546 --------- Total minimum rental revenue........................................ $ 7,418 --------- ---------
Total rental revenue from all leases in 1996 were $2.8 million, $2.8 million and $2.5 million in fiscal 1994, fiscal 1995 and fiscal 1996, respectively. 12. INVESTMENTS INVESTMENT IN CENTAUR Griffin owns approximately 25% of the outstanding common stock of Centaur, a publishing business in the United Kingdom. Approximately $6.6 million of the book value of Griffin's investment, which was $14.7 million at November 30, 1996, represents the excess of the cost of Griffin's investment over the book value of its equity in Centaur and is being amortized on a straight-line basis over 40 years. Griffin's equity income (loss) from the investment in Centaur of $0.4 million, $(0.2) million and $0.3 million in fiscal 1994, fiscal 1995 and fiscal 1996, respectively, is included in the income (loss) from equity investments on the combined statement of operations. F-29 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) 12. INVESTMENTS (CONTINUED) Centaur's unaudited summarized statement of operations and balance sheet are as follows:
TWELVE MONTHS ENDED ------------------------------- NOV. 30, NOV. 30, NOV. 30, 1994 1995 1996 --------- --------- --------- Net sales.................................................... $ 55,929 $ 61,227 $ 69,450 Costs and expenses........................................... 52,790 60,816 65,932 --------- --------- --------- Income before taxes.......................................... 3,139 411 3,518 Income taxes................................................. 1,071 387 1,544 --------- --------- --------- Net income................................................... $ 2,068 $ 24 $ 1,974 --------- --------- --------- --------- --------- --------- NOV. 30, NOV. 30, 1995 1996 --------- --------- Current assets............................................... $ 18,480 $ 27,514 Publishing rights............................................ 20,529 21,278 Other noncurrent assets...................................... 5,014 6,270 --------- --------- Total assets................................................. $ 44,023 $ 55,062 --------- --------- --------- --------- Current liabilities.......................................... $ 7,796 $ 15,246 Other noncurrent liabilities................................. 5,850 5,404 --------- --------- Total liabilities............................................ 13,646 20,650 Shareholders' equity......................................... 30,377 34,412 --------- --------- Total liabilities and shareholders' equity................... $ 44,023 $ 55,062 --------- --------- --------- ---------
INVESTMENT IN REAL ESTATE JOINT VENTURES Included in other assets at December 2, 1995 and November 30, 1996 is $8.0 million and $3.4 million, respectively, for Griffin's 30% interest in a real estate joint venture that owns commercial properties in Connecticut. Results of these investments are included in operating profit. In 1996, all of the assets of one of the real estate joint ventures were sold. Griffin received net proceeds of $4.0 million from the sale and recorded a pretax loss on sale of $0.4 million. INVESTMENT IN ELI WITT Griffin owns 50.1% of the outstanding common stock of Eli Witt, a wholesale distribution company. Prior to 1994, Eli Witt was a consolidated subsidiary. In April 1994, as a result of transactions related to an Eli Witt acquisition, Griffin no longer had unilateral control of Eli Witt. Accordingly, Griffin deconsolidated Eli Witt and accounted for its investment in the common stock of Eli Witt under the equity method. Through November 30, 1996, Eli Witt was in a common deficit position, and as such, Griffin has a negative basis in its common equity investment in Eli Witt. Accordingly, Griffin has not recognized the results of Eli Witt subsequent to its deconsolidation in April 1994. The equity loss of $2.1 million through the deconsolidation date is included in net income (loss) from equity investments in the 1994 combined statement of operations. F-30 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) 12. INVESTMENTS (CONTINUED) In 1995, Griffin invested an additional $5 million in Eli Witt in the form of a subordinated note receivable due August 1, 1998. Griffin applied this additional investment to reduce the negative basis in its common equity investment in Eli Witt from approximately $6.5 million to approximately $1.5 million. In November 1996, Eli Witt filed for protection under Chapter 11 of the Federal Bankruptcy Law. In connection with such filing Eli Witt sold all of its operating assets to another wholesale distributor in March 1997. Shareholders of Eli Witt are not expected to receive any proceeds from the sale. Griffin has no investment related to Eli Witt on its 1996 combined balance sheet. See Note 14. 13. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION OTHER NONRECURRING EXPENSE Other nonrecurring expense in 1996 includes the allocation to Griffin of charges recorded by Culbro in connection with the termination of a management long-term incentive compensation plan which was based on Culbro's stock price, and the acceleration of the vesting of benefits under the plan and accurals for severance and related expenses in connection with a headcount reduction at the Culbro corporate office in anticipation of the Distribution. Griffin's allocable share of these expenses was determined substantially on the same basis as the allocation of Culbro's general and administrative expenses referred to in Note 6 and is considered by management to be reasonable. The other nonrecurring expense of $3.6 million in the 1994 combined statement of operations reflects a charge in the real estate business to write off development costs expended in earlier years for certain discontinued projects which management decided not to proceed with as originally planned. OTHER NONOPERATING INCOME, NET Included in other nonoperating income, net, in each of the three fiscal years presented is the accrual of dividend and accretion income on the preferred stock of Eli Witt held by Griffin, which is equal to the interest expense on the subordinated note, that was satisfied by the exchange of the preferred stock in 1996. In 1995, other nonoperating income, net, also included expenses related to Griffin's support of the refinancing of Eli Witt. INVENTORIES Inventories consists of:
DEC. 2, NOV. 30, 1995 1996 --------- --------- Raw materials and supplies.............................................. $ 523 $ 742 Work-in-process......................................................... 11,603 15,112 Finished goods.......................................................... 13,805 11,676 --------- --------- $ 25,931 $ 27,530 --------- --------- --------- ---------
F-31 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) 13. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION (CONTINUED) PROPERTY AND EQUIPMENT Property and equipment consist of:
ESTIMATED USEFUL DEC. 2, NOV. 30, LIVES 1995 1996 ---------------- --------- --------- Land.................................................. $ 6,029 $ 5,982 Buildings and improvements............................ 10 to 40 years 3,912 3,807 Machinery and equipment............................... 3 to 20 years 11,901 12,337 --------- --------- 21,842 22,126 Accumulated depreciation.............................. (9,223) (9,450) --------- --------- $ 12,619 $ 12,676 --------- --------- --------- ---------
Total depreciation expense was $1.0 million, $1.2 million and $1.2 million for fiscal 1994, fiscal 1995, and fiscal 1996, respectively. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses include trade payables of $1.7 million and $2.0 million at December 2, 1995 and November 30, 1996, respectively, accrued salaries, wages and other compensation of $0.9 million and $1.2 million at December 2, 1995 and November 30, 1996, respectively, and other accrued liabilities, primarily accrued worker's compensation and general liability insurance, of $5.5 million and $3.9 million at December 2, 1995 and November 30, 1996, respectively. SUPPLEMENTAL CASH FLOW INFORMATION Interest and tax payments were made by Culbro on behalf of Griffin. Griffin has been included in Culbro's consolidated federal income tax returns (see Note 7). Accordingly, tax and interest payments made by Culbro are reflected in Net transactions with Culbro on the combined statement of cash flows. Interest payments were $7.3 million, $6.0 million and $5.9 million in fiscal 1994, fiscal 1995 and fiscal 1996, respectively, including payments of $6.8 million, $5.4 million and $5.4 million in fiscal 1994, fiscal 1995 and fiscal 1996, respectively under Culbro's general corporate debt facilities that were either repaid by Griffin or transferred to GC Holdings pursuant to the Distribution Agreement. In 1996, Griffin's real estate business exchanged a commercial property in satisfaction of the outstanding nonrecourse mortgage on that property. Also in 1996, Griffin exchanged preferred stock of Eli Witt that it held in satisfaction of a subordinated note payable and all accrued interest thereon. There was no cash paid or received in either of these transactions. 14. COMMITMENTS AND CONTINGENCIES Culbro (or GC Holding's following the Merger) and Griffin entered into a services agreement (the "Services Agreement") pursuant to which Culbro agreed to provide a number of administrative and other services to Griffin for a period of at least one year. These services include administration of Griffin's insurance policies, internal audit, preparation of tax returns, transportation and general in-house legal F-32 GRIFFIN LAND & NURSERIES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) 14. COMMITMENTS AND CONTINGENCIES (CONTINUED) services. Griffin will make an annual payment of approximately $0.6 million to, and will reimburse out-of-pocket expenses incurred by, Culbro, in connection with such services. Culbro will make the above services available to Griffin on an as-needed basis for a period of at least one year following the Distribution. As a result of the Asset Transfers described in Note 1, Griffin acquired 50.1% interest in Eli Witt. Culbro, Eli Witt and other parties engaged in two complex acquisitions and reorganizations in 1993 and 1994, pursuant to which Culbro received significant distributions from Eli Witt to repay debt, including substantial amounts Culbro had previously borrowed from unaffiliated third parties to fund Eli Witt's business. Culbro subsequently loaned $5 million to Eli Witt. It is anticipated that these transactions (including the transfer of funds to Culbro) will be reviewed by Eli Witt creditors and other parties in interest in connection with Eli Witt's Chapter 11 filing. To date, one creditor has written to the unsecured creditors committee proposing an inquiry into this matter. Management does not believe that the above referenced matter will have a material adverse effect upon the financial condition of Griffin. F-33 GRIFFIN LAND & NURSERIES, INC. ADDITIONAL FINANCIAL DATA The following additional financial data should be read in conjunction with the financial statements included elsewhere herein.
SCHEDULES PAGE - --------------- --------- II Valuation and Qualifying Accounts and Reserves........................................... S-2 III Real Estate and Accumulated Depreciation................................................. S-3/S-4
S-1 GRIFFIN LAND & NURSERIES, INC. SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (DOLLARS IN THOUSANDS)
BALANCE AT CHARGED TO BEGINNING COSTS AND CHARGED TO DEDUCTIONS BALANCE AT DESCRIPTION OF YEAR EXPENSES OTHER ACCOUNTS FROM RESERVES END OF YEAR - ---------------------------------------------------- ----------- ------------- --------------- ------------- ----------- FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1996 Reserves: Uncollectible accounts--Trade..................... 338 70 22 128(1) 302 ----- ----- --- --- ----- Inventories....................................... 1,000 16 300 351(2) 965 ----- ----- --- --- ----- FOR THE FISCAL YEAR ENDED DECEMBER 2, 1995 Reserves: Uncollectible accounts--Trade..................... 351 147 3 163(1) 338 ----- ----- --- --- ----- Inventories....................................... 743 1,007 -- 750(2) 1,000 ----- ----- --- --- ----- FOR THE FISCAL YEAR ENDED DECEMBER 3, 1994 Reserves: Uncollectible accounts--Trade..................... 365 141 22 177(1) 351 ----- ----- --- --- ----- Inventories....................................... 250 493 -- -- 743 ----- ----- --- --- -----
NOTES: (1) Accounts receivable written off. (2) Inventories disposed. S-2 GRIFFIN LAND & NURSERIES, INC. SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION (DOLLARS IN THOUSANDS)
COST CAPITALIZED GROSS AMOUNT AT SUBSEQUENT TO INITIAL COST ACQUISITION NOVEMBER 30, 1996 ---------------------- ------------------------ ---------------------- ENCUM- BLDG & CARRYING BLDG & DESCRIPTION BRANCES LAND IMPROVE IMPROVE COSTS LAND IMPROVE - ----------------------------------------- ----------- --------- ----------- ----------- ----------- --------- ----------- Land - CT................................ $ $ 4,611 $ -- $ 6,976 $ 80 $ 4,691 $ 6,976 Restaurant 1936 Blue Hills Avenue Bloomfield, CT........................... 1 -- 1,266 -- 1 1,266 Residential Develpment Meadow Park Culbro Homes Windsor, CT.............................. 88 -- 1,518 2,156 88 3,674 Commercial Buildings 29 & 35 Griffin Road South Bloomfield, CT........................... 696 47 -- 2,486 -- 47 2,486 Commercial Building 55 Griffin Road South Bloomfield, CT........................... 3 -- 1,815 -- 3 1,815 Commercial Building 204 West Newberry Bloomfield, CT........................... 1 -- 1,540 24 1 1,564 Commercial Building 206 West Newberry Bloomfield, CT........................... 1 -- 1,452 23 1 1,475 Commercial Building 210 West Newberry Bloomfield, CT........................... -- -- 666 -- -- 666 Commercial Building 310, 320, 330 West Newberry Bloomfield, CT........................... 5 -- 2,938 40 5 2,978 Industrial Buildings 14, 15 & 16 International Drive East Granby, CT.......................... 1,948 106 1,723 3,367 -- 106 5,090 ----------- --------- ----------- ----------- ----------- --------- ----------- $ 2,644 $ 4,863 $ 1,723 $ 24,024 $ 2,323 $ 4,943 $ 27,990 ----------- --------- ----------- ----------- ----------- --------- ----------- ----------- --------- ----------- ----------- ----------- --------- ----------- ACCUM DATE OF DESCRIPTION TOTAL DEPR CONSTR DATE OF ACQ DEPR LIFE - ----------------------------------------- --------- --------- ----------- ----------- --------- Land - CT................................ 11,667 (361) Restaurant 1936 Blue Hills Avenue Bloomfield, CT........................... 1,267 (510) 1983 40 yrs Residential Develpment Meadow Park Culbro Homes Windsor, CT.............................. 3,762 -- Commercial Buildings 29 & 35 Griffin Road South Bloomfield, CT........................... 2,533 (1,156) 1977 40 yrs Commercial Building 55 Griffin Road South Bloomfield, CT........................... 1,818 (553) 1985 40 yrs Commercial Building 204 West Newberry Bloomfield, CT........................... 1,565 (314) 1988 40 yrs Commercial Building 206 West Newberry Bloomfield, CT........................... 1,476 (332) 1988 40 yrs Commercial Building 210 West Newberry Bloomfield, CT........................... 666 (161) 1988 40 yrs Commercial Building 310, 320, 330 West Newberry Bloomfield, CT........................... 2,983 (477) 1991 40 yrs Industrial Buildings 14, 15 & 16 International Drive East Granby, CT.......................... 5,196 (2,207) 1978 1989 40 yrs --------- --------- $ 32,933 $ (6,071) --------- --------- --------- ---------
S-3 GRIFFIN LAND & NURSERIES, INC. SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION (DOLLARS IN THOUSANDS)
FISCAL YEAR ENDED NOVEMBER 30, 1996 COST RESERVE - --------------------------------------------------------------------------------------------- --------- --------- Balance at beginning of period............................................................... $ 38,086 $ (6,179) Changes during the period: Improvements............................................................................. 592 Additions to reserve charged to costs and expenses....................................... (822) Disposals & retirements.................................................................. (4,648) 930 Cost of sales............................................................................ (1,097) --------- --------- Balance at end of period..................................................................... $ 32,933 $ (6,071) --------- --------- --------- --------- FISCAL YEAR ENDED DECEMBER 2, 1995 COST RESERVE - --------------------------------------------------------------------------------------------- --------- --------- Balance at beginning of period............................................................... $ 38,450 $ (5,118) Changes during the period: Improvements............................................................................. 802 Additions to reserve charged to costs and expenses....................................... (814) Reclassification......................................................................... (247) Cost of sales............................................................................ (1,166) --------- --------- Balance at end of period..................................................................... $ 38,086 $ (6,179) --------- --------- --------- --------- FISCAL YEAR ENDED DECEMBER 3, 1994 COST RESERVE - --------------------------------------------------------------------------------------------- --------- --------- Balance at beginning of period............................................................... $ 41,698 $ (4,338) Changes during the period: Improvements............................................................................. 1,624 Additions to reserve charged to costs and expenses....................................... (780) Cost of sales............................................................................ (4,872) --------- --------- Balance at end of period..................................................................... $ 38,450 $ (5,118) --------- --------- --------- ---------
S-4 PART II ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES Prior to March 18, 1997, Culbro Corporation held all 1,000 then-issued and outstanding shares of common stock, par value $0.01 per share, of Griffin (the "Original Shares"). On March 18, 1997, pursuant to an amended and restated certificate of incorporation of Griffin, each Original Share was exchanged for one share of Class B Common Stock, par value $0.01 per share (the "Class B Common Stock"). Prior to the Distribution Date, Griffin intends to file an Amended and Restated Certificate of Incorporation, the form of which is filed as an exhibit to this Registration Statement, pursuant to which each share of Class B Common Stock will be exchanged for one share of newly-authorized common stock, par value $0.01 per share (the "Common Stock"). Prior to the Distribution, Griffin will effect a stock split such that the number of issued and outstanding shares of Common Stock will equal the number of then-outstanding shares of common stock, par value $0.01, of Culbro Corporation. ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS Griffin Land & Nurseries, Inc. is a Delaware corporation. Reference is made to Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL"), which enables a corporation in its original certificate of incorporation or an amendment thereto to eliminate or limit the personal liability of a director for violations of the director's fiduciary duty, except (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL (providing for liability of directors for unlawful payments of dividends of unlawful stock purchase or redemptions) or (iv) for any transaction from which a director derived an improper personal benefit. Reference is also made to Section 145 of the DGCL, which provides that a corporation may indemnify any person, including an officer or director, who is, or is threatened to be made, party to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer, director, employee or agent of such corporation or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such officer, director, employee or agent acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the corporation's best interest and, for criminal proceeding, had no reasonable cause to believe that his conduct was unlawful. A Delaware corporation may indemnify any officer or director in any action by or in the right of the corporation under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses that such officer or director actually and reasonably incurred. Article VII of the Bylaws of Griffin Land & Nurseries, Inc. (filed as Exhibit 3.2) provides for indemnification of the officers and directors to the full extent permitted by applicable law. ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements--see pages F-1 and S-1 (b) Exhibits
EXHIBIT NO. DESCRIPTION - --------- ---------------------------------------------------------------------------------------------------- 2.1 Form of Distribution Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, as amended)
II-1
EXHIBIT NO. DESCRIPTION - --------- ---------------------------------------------------------------------------------------------------- 3.1 Form of Amended and Restated Certificate of Incorporation of Griffin Land & Nurseries, Inc. 3.2 Form of Bylaws of Griffin Land & Nurseries, Inc. 10.1 Form of Tax Sharing Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 10.2 Form of Benefits and Employment Matters Allocation Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 10.3 Form of Services Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 10.4 Form of Agricultural Lease between Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 10.5 Employment Agreement between Culbro Corporation and Jay M. Green, dated as of April 8, 1994 and as amended on January 11, 1997 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 10.6 Form of 1997 Stock Option Plan of Griffin Land & Nurseries, Inc. 10.7 Form of 401(k) Plan of Griffin Land & Nurseries, Inc. 10.8 1996 Stock Plan of Culbro Corporation, dated as of March 15, 1996 (incorporated by reference to the definitive proxy statement of Culbro Corporation, dated March 15, 1996, for its Annual Meeting of Shareholders held on April 11, 1996) 10.9 1992 Stock Plan of Culbro Corporation, dated December 10, 1993 (incorporated by reference to the definitive proxy statement of Culbro Corporation, dated March 3, 1993, for its Annual Meeting of Shareholders held on April 8, 1993) 10.10 Stock Option Plan for Non-employee Directors of Culbro Corporation, dated December 10, 1993 (incorporated by reference to the definitive proxy statement of Culbro Corporation, dated March 3, 1993, for its Annual Meeting of Shareholders held on April 8, 1993) 10.11 1991 Employees Incentive Stock Option Plan of Culbro Corporation, dated as of January 31, 1991 and as amended on February 12, 1985 (incorporated by reference to the definitive proxy statement of Culbro Corporation, dated April 9, 1991, for its Annual Meeting of Shareholders held on May 9, 1993) 10.12 Annual Incentive Compensation Plan of Culbro Corporation, dated as of December 7, 1995 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 10.13 Annual Incentive Compensation Plan of General Cigar Co., Inc., dated as of December 7, 1995 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 10.14 Long Term Performance Plan of Culbro Corporation for the three-year period 1995-1997 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended)
II-2
EXHIBIT NO. DESCRIPTION - --------- ---------------------------------------------------------------------------------------------------- 10.15 Deferred Incentive Compensation Plan of Culbro Corporation, dated as of December 13, 1982 and as amended on February 12, 1985 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 21.1 Subsidiaries of Griffin Land & Nurseries, Inc.
II-3 SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of New York, State of New York on June 3, 1997. GRIFFIN LAND & NURSERIES, INC. By: /s/ FREDERICK M. DANZIGER ----------------------------------------- Frederick M. Danziger PRESIDENT II-4 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - --------- ---------------------------------------------------------------------------------------------------- 2.1 Form of Distribution Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, as amended) 3.1 Form of Amended and Restated Certificate of Incorporation of Griffin Land & Nurseries, Inc. 3.2 Form of Bylaws of Griffin Land & Nurseries, Inc. 10.1 Form of Tax Sharing Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 10.2 Form of Benefits and Employment Matters Allocation Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 10.3 Form of Services Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 10.4 Form of Agricultural Lease between Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 10.5 Employment Agreement between Culbro Corporation and Jay M. Green, dated as of April 8, 1994 and as amended on January 11, 1997 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 10.6 Form of 1997 Stock Option Plan of Griffin Land & Nurseries, Inc. 10.7 Form of 401(k) Plan of Griffin Land & Nurseries, Inc. 10.8 1996 Stock Plan of Culbro Corporation, dated as of March 15, 1996 (incorporated by reference to the definitive proxy statement of Culbro Corporation, dated March 15, 1996, for its Annual Meeting of Shareholders held on April 11, 1996) 10.9 1992 Stock Plan of Culbro Corporation, dated December 10, 1993 (incorporated by reference to the definitive proxy statement of Culbro Corporation, dated March 3, 1993, for its Annual Meeting of Shareholders held on April 8, 1993) 10.10 Stock Option Plan for Non-employee Directors of Culbro Corporation, dated December 10, 1993 (incorporated by reference to the definitive proxy statement of Culbro Corporation, dated March 3, 1993, for its Annual Meeting of Shareholders held on April 8, 1993) 10.11 1991 Employees Incentive Stock Option Plan of Culbro Corporation, dated as of January 31, 1991 and as amended on February 12, 1985 (incorporated by reference to the definitive proxy statement of Culbro Corporation, dated April 9, 1991, for its Annual Meeting of Shareholders held on May 9, 1993) 10.12 Annual Incentive Compensation Plan of Culbro Corporation, dated as of December 7, 1995 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended)
EXHIBIT NO. DESCRIPTION - --------- ---------------------------------------------------------------------------------------------------- 10.13 Annual Incentive Compensation Plan of General Cigar Co., Inc., dated as of December 7, 1995 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 10.14 Long Term Performance Plan of Culbro Corporation for the three-year period 1995-1997 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 10.15 Deferred Incentive Compensation Plan of Culbro Corporation, dated as of December 13, 1982 and as amended on February 12, 1985 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended) 21.1 Subsidiaries of Griffin Land & Nurseries, Inc.
EX-3.1 2 EXH 3.1-FORM OF AMENDED AND RESTATED CERT OF INC. Exhibit 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF GRIFFIN LAND & NURSERIES, INC. Griffin Land & Nurseries, Inc. (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware (the "DGCL"), does hereby certify as follows: 1. The present name of the Corporation is Griffin Land & Nurseries, Inc. The Corporation was originally incorporated under the name "Culbro Realty and Development Corporation" and its original certificate of incorporation was filed with the office of the Secretary of State of the State of Delaware on March 10, 1970. 2. This Amended and Restated Certificate of Incorporation was duly adopted by the Board of Directors of the Corporation (the "Board") and by the sole stockholder of the Corporation in accordance with Sections 228, 242, and 245 of the DGCL. 3. This Amended and Restated Certificate of Incorporation restates and integrates and amends the certificate of incorporation of the Corporation, as heretofore amended, supplemented and/or restated (the "Certificate of Incorporation"). 4. Upon the filing (the "Effective Time") of this Certificate of Incorporation pursuant to the DGCL, each share of the Corporation's Class B Common Stock, $0.01 par value per share, issued and outstanding immediately prior to the Effective Time (the "Old Common Stock") shall be reclassified as and changed into one validly issued, fully paid, and non-assessable share of Common Stock authorized by subparagraph (a) of Article FOURTH of the Certificate of Incorporation (totaling 1,000 shares of Common Stock), without any action by the holder thereof (the "Reclassification"). Each certificate that theretofore represented a share or shares of Old Common Stock shall thereafter represent that number of shares of Common Stock into which the share or shares of Old Common Stock represented by such certificate shall have been reclassified. 5. The text of the Certificate of Incorporation is amended and restated in its entirety as follows: FIRST: The name of the corporation (the "Corporation") is Griffin Land & Nurseries, Inc. SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, Wilmington, Delaware 19801, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the DGCL. FOURTH: (a) Authorized Capital Stock. The Corporation is authorized to issue 15 million shares of capital stock, of which 10 million shares shall be shares of Common Stock, $0.01 par value ("Common Stock") and 5 million shares shall be shares of Preferred Stock, $0.01 par value ("Preferred Stock"). (b) Preferred Stock. The Board is expressly authorized to provide for the issuance of all or any shares of the Preferred Stock in one or more classes or series, and to fix for each such class or series such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board providing for the issuance of such class or series, including, without limitation, the authority to provide that any such class or series may be (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; or (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock, of the Corporation at such price or prices or at such rates of exchange and with such adjustments; all as may be stated in such resolution or resolutions. FIFTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders: (a) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. (b) The directors shall have concurrent power with the stockholders to adopt, amend, or repeal the By-Laws of the Corporation. (c) The number of directors of the Corporation shall be as from time to time fixed by, or in the manner provided in, the By-Laws of the Corporation. Election of directors need not be by written ballot unless the By-Laws so provide. (d) No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. If the DGCL is amended hereafter to 2 authorize the further elimination or limitation of liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent authorized by the DGCL, as so amended. Any repeal or modification of this Article FIFTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification. (e) In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Certificate of Incorporation and any By-Laws adopted by the stockholders; provided, however, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted. (f) The Corporation expressly elects not to be governed by Section 203 of the DGCL. SIXTH: Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the Corporation may be kept (subject to any provision contained in the DGCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the ByLaws. SEVENTH: The Corporation shall indemnify its directors and officers to the fullest extent authorized or permitted by law, as now or hereafter in effect, and such right to indemnification shall continue as to a person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of his or her heirs, executors and personal and legal representatives; provided, however, that, except for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors. The right to indemnification conferred by this Article SEVENTH shall include the right to be paid by the Corporation the expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article SEVENTH to directors and officers of the Corporation. The rights to indemnification and to the advance of expenses conferred in this Article SEVENTH shall not be exclusive of any other right which any person may have or hereafter acquire under this Certificate of Incorporation, the By-Laws, any statute, agreement, vote of stockholders or disinterested directors or otherwise. 3 Any repeal or modification of this Article SEVENTH by the stockholders of the Corporation shall not adversely affect any rights to indemnification and to the advancement of expenses of a director or officer of the Corporation existing at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification. EIGHTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed in this Certificate of Incorporation, the By-Laws or the laws of the State of Delaware, and all rights herein conferred upon stockholders are granted subject to such reservation. 4 IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be duly executed this day of June __, 1997. GRIFFIN LAND & NURSERIES, INC. By: _______________________________ Name: Frederick M. Danziger Title: President 5 EX-3.2 3 EXH 3.2-FORM OF BY-LAWS Exhibit 3.2 BY-LAWS OF GRIFFIN LAND & NURSERIES, INC. ------------------------------------------------------------ ARTICLE I Offices Section 1.1. Registered Offices. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 1.2. Other Offices. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II Stockholders Section 2.1. Annual Meetings. An annual meeting of stockholders shall be held for the election of directors at such date, time and place, either within or without the State of Delaware, as may be designated by resolution of the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting. Section 2.2. Special Meetings. Special meetings of stockholders for any purpose or purposes may be called at any time by the Board of Directors, but such special meetings may not be called by any other person or persons. Section 2.3. Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given that shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the certificate of incorporation or these by-laws, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. Section 2.4. Adjournments. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 2.5. Quorum. Except as otherwise provided by law, the certificate of incorporation or these by-laws, at each meeting of stockholders the presence in person or by proxy of the holders of a majority in voting power of the outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. In the absence of a quorum, the stockholders so present may, by a majority in voting power thereof, adjourn the meeting from time to time in the manner provided in Section 2.4 of these by-laws until a quorum shall attend. Shares of its own stock belonging to the corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the corporation, shall neither be entitled to vote nor be counted for quorum purposes, provided, however, that the foregoing shall not limit the right of the corporation or any subsidiary of the corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 2.6. Organization. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in his absence by the Vice Chairman of the Board, if any, or in his absence by the President, or in his absence by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by 2 a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.7. Voting; Proxies. Except as otherwise provided by the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by him which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by delivering a proxy in accordance with applicable law bearing a later date to the Secretary of the corporation. Voting at meetings of stockholders need not be by written ballot. At all meetings of stockholders for the election of directors a plurality of the votes cast shall be sufficient to elect. All other elections and questions shall, unless otherwise provided by law, the certificate of incorporation or these by-laws, be decided by the affirmative vote of the holders of a majority in voting power of the shares of stock which are present in person or by proxy and entitled to vote thereon. Section 2.8. Fixing Date for Determination of Stockholders of Record. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date: (1) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty nor less than ten days before the date of such meeting; (2) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than ten days from the date upon which the resolution fixing the record date is adopted by the Board of Directors; and (3) in the case of any other action, shall not be more than sixty days prior to such other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action of the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation in accordance with applicable law, or, if prior action by the Board of Directors is required by law, shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action; and (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 3 Section 2.9. List of Stockholders Entitled to Vote. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. Upon the willful neglect or refusal of the directors to produce such a list at any meeting for the election of directors, they shall be ineligible for election to any office at such meeting. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders. Section 2.10. Action By Written Consent of Stockholders. Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of minutes of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall, to the extent required by law, be given to those stockholders who have not consented in writing. Section 2.11. Inspectors of Election. The corporation may, and shall if required by law, in advance of any meeting of stockholders, appoint one or more inspectors of election, who may be employees of the corporation, to act at the meeting or any adjournment thereof and to make a written report thereof. The corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. In the event that no inspector so appointed or designated is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector or inspectors so appointed or designated shall (i) ascertain the number of shares of capital stock of the corporation outstanding and the voting power of each such share, (ii) determine the shares of capital stock of the corporation represented at the meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their determination of the number of shares of capital stock of the corporation represented at the meeting and such inspectors' count of all votes and ballots. Such certification and report shall specify such other information as may be required by law. In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the corporation, the inspectors may consider such information as is permitted by applicable law. No person who is a candidate for an office at an election may serve as an inspector at such election. 4 Section 2.12. Conduct of Meetings. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting. The Board of Directors of the corporation may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. 5 ARTICLE III Board of Directors Section 3.1. Number; Qualifications. The Board of Directors shall consist of one or more members, the number thereof to be determined from time to time by resolution of the Board of Directors. Directors need not be stockholders. Section 3.2. Election; Resignation; Vacancies. The Board of Directors shall initially consist of the persons named as directors in the statement of sole incorporator, and each director so elected shall hold office until the first annual meeting of stockholders or until his successor is elected and qualified. At the first annual meeting of stockholders and at each annual meeting thereafter, the stockholders shall elect directors each of whom shall hold office for a term of one year or until his successor is elected and qualified. Any director may resign at any time upon written notice to the corporation. Any newly created directorship or any vacancy occurring in the Board of Directors for any cause may be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum, or by a plurality of the votes cast at a meeting of stockholders, and each director so elected shall hold office until the expiration of the term of office of the director whom he has replaced or until his successor is elected and qualified. Section 3.3. Compensation of Directors. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 3.4. Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board of Directors may from time to time determine, and if so determined notices thereof need not be given. Section 3.5. Special Meetings. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the President, any Vice President, the Secretary, or by any member of the Board of Directors. Notice of a special meeting of the Board of Directors shall be given by the person or persons calling the meeting at least twenty-four hours before the special meeting. Section 3.6. Telephonic Meetings Permitted. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting. Section 3.7. Quorum; Vote Required for Action. At all meetings of the Board of Directors a majority of the whole Board of Directors shall constitute a quorum for the transaction of business. Except in cases in which the certificate of incorporation, these by-laws or applicable law otherwise provides, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. 6 Section 3.8. Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in his absence by the Vice Chairman of the Board, if any, or in his absence by the President, or in their absence by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 3.9. Action by Written Consent of Directors. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee. 7 ARTICLE IV Committees Section 4.1. Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent permitted by law and to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it. Section 4.2. Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article III of these by-laws. 8 ARTICLE V Officers Section 5.1. Executive Officers; Election; Qualifications; Term of Office; Resignation; Removal; Vacancies. The Board of Directors shall elect a President and Secretary, and it may, if it so determines, choose a Chairman of the Board and a Vice Chairman of the Board from among its members. The Board of Directors may also choose one or more Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers. Each such officer shall hold office until the first meeting of the Board of Directors after the annual meeting of stockholders next succeeding his election, and until his successor is elected and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the corporation. The Board of Directors may remove any officer with or without cause at any time, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the corporation. Any number of offices may be held by the same person. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting. Section 5.2. Powers and Duties of Executive Officers. The officers of the corporation shall have such powers and duties in the management of the corporation as may be prescribed in a resolution by the Board of Directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board of Directors. The Board of Directors may require any officer, agent or employee to give security for the faithful performance of his duties. Section 5.3. Compensation. The rates and method of compensation of all officers of the corporation shall be fixed by the Board of Directors or a committee thereof. 9 ARTICLE VI Stock Section 6.1. Certificates. Every holder of stock shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the corporation certifying the number of shares owned by him in the corporation. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Section 6.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 6.3. Legends. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in section 202 of the General Corporation Law of the State of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights or each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Section 6.4. Transfer of Stock. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Upon receipt of proper transfer instructions from the registered owner of uncertificated shares such uncertificated shares shall be canceled and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the corporation. 10 ARTICLE VII Indemnification Section 7.1. Right to Indemnification. The corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (an "Indemnitee") who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he, or a person for whom he is the legal representative, is or was a director or officer of the corporation or, while a director or officer of the corporation, is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such Indemnitee. Notwithstanding the preceding sentence, except as otherwise provided in Section 7.3, the corporation shall be required to indemnify an Indemnitee in connection with a Proceeding (or part thereof) commenced by such Indemnitee only if the commencement of such Proceeding (or part thereof) by the Indemnitee was authorized by the Board of Directors of the corporation. Section 7.2. Prepayment of Expenses. The corporation shall pay the expenses (including attorneys' fees) incurred by an Indemnitee in defending any Proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Indemnitee to repay all amounts advanced if it should be ultimately determined that the Indemnitee is not entitled to be indemnified under this Article VII or otherwise. Section 7.3. Claims. If a claim for indemnification or payment of expenses under this Article VII is not paid in full within sixty days after a written claim therefor by the Indemnitee has been received by the corporation, the Indemnitee may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the corporation shall have the burden of proving that the Indemnitee is not entitled to the requested indemnification or payment of expenses under applicable law. Section 7.4. Nonexclusivity of Rights. The rights conferred on any Indemnitee by this Article VII shall not be exclusive of any other rights which such Indemnitee may have or hereafter acquire under any statute, provision of the certificate of incorporation, these by-laws, agreement, vote of stockholders or disinterested directors or otherwise. Section 7.5. Other Sources. The corporation's obligation, if any, to indemnify or to advance expenses to any Indemnitee who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced by any amount such Indemnitee may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise. Section 7.6. Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article VII shall not adversely affect any right or protection hereunder of any 11 Indemnitee in respect of any act or omission occurring prior to the time of such repeal or modification. Section 7.7. Other Indemnification and Prepayment of Expenses. This Article VII shall not limit the right of the corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Indemnitees when and as authorized by appropriate corporate action. 12 ARTICLE VIII Miscellaneous Section 8.1. Dividends. Dividends upon the capital stock of the corporation subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Section 8.2. Reserves. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 8.3. Fiscal Year. The fiscal year of the corporation shall be determined by resolution of the Board of Directors. Section 8.4. Seal. The corporate seal shall have the name of the corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. Section 8.5. Waiver of Notice of Meetings of Stockholders, Directors and Committees. Any written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice. Section 8.6. Interested Directors; Quorum. No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (1) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. 13 Section 8.7. Form of Records. Any records maintained by the corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs, or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. Section 8.8. Amendment of By-Laws. These by-laws may be altered or repealed, and new by-laws made, by the Board of Directors, but the stockholders may make additional by-laws and may alter and repeal any by-laws whether adopted by them or otherwise. 14 EX-10.6 4 EXH 10.6-1997 FORM OF STOCK OPTION PLAN Exhibit 10.6 GRIFFIN LAND & NURSERIES, INC. 1997 STOCK OPTION PLAN Griffin Land & Nurseries, Inc., a Delaware corporation, has adopted The Griffin Land & Nurseries, Inc. 1997 Stock Option Plan (the "Plan"), effective as of the Distribution Date (as such term is defined below), for the benefit of its eligible employees, consultants and directors. The Plan consists of two plans, one for the benefit of key Employees (as such term is defined below) and consultants and one for the benefit of Independent Directors (as such term is defined below). The purposes of this Plan are as follows: (1) To provide an additional incentive for directors, key Employees and consultants to further the growth, development and financial success of the Company by personally benefiting through the ownership of Company Common Stock and thus to benefit directly from its growth, development and financial success. (2) To enable the Company to obtain and retain the services of directors, key Employees and consultants considered essential to the long range success of the Company by offering them an opportunity to own Common Stock of the Company which will reflect the growth, development and financial success of the Company. ARTICLE I DEFINITIONS 1.1 General. Wherever the following terms are used in this Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. 1.2 Award Limit. "Award Limit" shall mean 150,000 shares of Common Stock, as adjusted pursuant to Section 7.3. 1.3 Board. "Board" shall mean the Board of Directors of the Company. 1.4 Change in Control. "Change in Control" shall mean a change in ownership or control of the Company effected through either of the following transactions: (a) any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to the Company's stockholders which the Board does not recommend such stockholders to accept; or (b) there is a change in the composition of the Board over a period of thirty-six (36) consecutive months (or less) such that a majority of the Board members (rounded up to the nearest whole number) ceases, by reason of one or more proxy contests for the election of Board members, to be comprised of individuals who either (i) have been Board members continuously since the beginning of such period or (ii) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board. 1.5 Code. "Code" shall mean the Internal Revenue Code of 1986, as amended. 1.6 Committee. "Committee" shall mean the Compensation Committee of the Board, or another committee or subcommittee of the Board, appointed as provided in Section 6.1. 1.7 Common Stock. "Common Stock" shall mean the common stock of the Company, par value $0.01 per share, and any equity security of the Company issued or authorized to be issued in the future, but excluding any preferred stock and any warrants, options or other rights to purchase Common Stock. Debt securities of the Company convertible into Common Stock shall be deemed equity securities of the Company. 1.8 Company. "Company" shall mean Griffin Land & Nurseries, Inc., a Delaware corporation. 1.9 Corporate Transaction. "Corporate Transaction" shall mean any of the following stockholder-approved transactions to which the Company is a party: (a) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the State in which the Company is incorporated, form a holding company or effect a similar reorganization as to form whereupon this Plan and all Options are assumed by the successor entity; (b) the sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, in complete liquidation or dissolution of the Company in a transaction not covered by the exceptions to clause (a), above; or (c) any reverse merger in which the Company is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities are transferred or issued to a person or persons different from those who held such securities immediately prior to such merger. 2 1.10 Cullman Group. "Cullman Group" shall mean the group consisting of Edgar M. Cullman, Edgar M. Cullman, Jr., Susan R. Cullman, John L. Ernst, Frederick M. Danziger and the members of their families and trusts for their benefit, partnerships in which they own substantial interests and charitable foundations on whose boards of directors they sit. 1.11 Director. "Director" shall mean a member of the Board. 1.12 Distribution. "Distribution" shall mean the special distribution by Culbro Corporation, a New York corporation, of one share of the Company's Common Stock for each share of Culbro Corporation common stock, par value $1.00 per share. 1.13 Distribution Date. "Distribution Date" shall mean the date the Distribution is consummated. 1.14 Employee. "Employee" shall mean any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company, or of any corporation which is a Subsidiary. 1.15 Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 1.16 Fair Market Value. "Fair Market Value" of a share of Common Stock as of a given date shall be (i) the closing price of a share of Common Stock on the principal exchange on which shares of Common Stock are then trading, if any (or as reported on any composite index which includes such principal exchange), on the trading day previous to such date, or if shares were not traded on the trading day previous to such date, then on the next preceding date on which a trade occurred, or (ii) if Common Stock is not traded on an exchange but is quoted on Nasdaq or a successor quotation system, the mean between the closing representative bid and asked prices for the Common Stock on the trading day previous to such date as reported by Nasdaq or such successor quotation system; or (iii) if Common Stock is not publicly traded on an exchange and not quoted on Nasdaq or a successor quotation system, the Fair Market Value of a share of Common Stock as established by the Committee (or the Board, in the case of Options granted to Independent Directors) acting in good faith; provided, however, that with respect to Options granted to any individual in connection with the Distribution, the "Fair Market Value" of a share of Common Stock shall be the mean between the opening representative bid and asked price for the Common Stock as reported on Nasdaq on the first trading day immediately following the date of the Distribution. 1.17 Incentive Stock Option. "Incentive Stock Option" shall mean an option which conforms to the applicable provisions of Section 422 of the Code and which is designated as an Incentive Stock Option by the Committee. 1.18 Independent Director. "Independent Director" shall mean a member of the Board who is not an Employee of the Company and who is not a member of the Cullman Group. 3 1.19 Non-Qualified Stock Option. "Non-Qualified Stock Option" shall mean an Option which is not designated as an Incentive Stock Option by the Committee. 1.20 Option. "Option" shall mean a stock option granted under Article III of this Plan. An Option granted under this Plan shall, as determined by the Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that Options granted to Independent Directors and consultants shall be Non-Qualified Stock Options. 1.21 Optionee. "Optionee" shall mean an Employee, consultant or Independent Director granted an Option under this Plan. 1.22 Plan. "Plan" shall mean the Griffin Land & Nurseries, Inc. 1997 Stock Option Plan. 1.23 QDRO. "QDRO" shall mean a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. 1.24 Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended from time to time. 1.25 Section 162(m) Participant. "Section 162(m) Participant" shall mean any key Employee designated by the Committee as a key Employee whose compensation for the fiscal year in which the key Employee is so designated or a future fiscal year may be subject to the limit on deductible compensation imposed by Section 162(m) of the Code. 1.26 Subsidiary. "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 1.27 Termination of Consultancy. "Termination of Consultancy" shall mean the time when the engagement of an Optionee as a consultant to the Company or a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement; but excluding terminations where there is a simultaneous commencement of employment with the Company or any Subsidiary. The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a Termination of Consultancy resulted from a discharge for good cause, and all questions of whether a particular leave of absence constitutes a Terminations of Consultancy. Notwithstanding any other provision of this Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate a consultant's service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing. 1.28 Termination of Directorship. "Termination of Directorship" shall mean the time when an Optionee who is an Independent Director ceases to be a Director for any 4 reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Independent Directors. 1.29 Termination of Employment. "Termination of Employment" shall mean the time when the employee-employer relationship between an Optionee and the Company or any Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding (i) terminations where there is a simultaneous reemployment or continuing employment of an Optionee by the Company or any Subsidiary, (ii) at the discretion of the Committee, terminations which result in a temporary severance of the employee-employer relationship, and (iii) at the discretion of the Committee, terminations which are followed by the simultaneous establishment of a consulting relationship by the Company or a Subsidiary with the former employee. The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether a particular leave of absence constitutes a Terminations of Employment; provided, however, that, with respect to Incentive Stock Options unless otherwise determined by the Committee in its discretion, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. Notwithstanding any other provision of this Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate an Employee's employment at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing. ARTICLE II SHARES SUBJECT TO PLAN 2.1 Shares Subject to Plan. (a) The shares of stock subject to Options shall be Common Stock, initially shares of the Company's Common Stock, par value $0.01 per share. The aggregate number of such shares which may be issued upon exercise of such Options under the Plan shall not exceed (i) seven hundred thousand (700,000), reduced by (ii) the number of shares of Common Stock into which shares of the par value $1.00 common stock of Culbro Corporation previously granted and outstanding under the Culbro Corporation 1991 Employees Incentive Stock Option Plan, the Culbro Corporation 1992 Stock Plan, the Culbro Corporation 1996 Stock Plan, the 1993 Stock Option Plan for Non-Employee Directors of Culbro Corporation, and the 1996 Stock 5 Option Plan for Non-Employee Directors of Culbro Corporation are redenominated as options with respect to the Company's Common Stock in connection with the Distribution. The shares of Common Stock issuable upon exercise of such Options may be either previously authorized but unissued shares or treasury shares. (b) The maximum number of shares which may be subject to Options granted under the Plan to any individual in any fiscal year shall not exceed the Award Limit. To the extent required by Section 162(m) of the Code, shares subject to Options which are canceled continue to be counted against the Award Limit and if, after grant of an Option, the price of shares subject to such Option is reduced, the transaction is treated as a cancellation of the Option and a grant of a new Option and both the Option deemed to be canceled and the Option deemed to be granted are counted against the Award Limit. 2.2 Add-back of Options. If any Option expires or is canceled without having been fully exercised, the number of shares subject to such Option but as to which such Option was not exercised prior to its expiration, cancellation or exercise may again be optioned hereunder, subject to the limitations of Section 2.1. Furthermore, any shares subject to Options which are adjusted pursuant to Section 7.3 and become exercisable with respect to shares of stock of another corporation shall be considered cancelled and may again be optioned hereunder, subject to the limitations of Section 2.1. Shares of Common Stock which are delivered by the Optionee or withheld by the Company upon the exercise of any Option, in payment of the exercise price thereof, may again be optioned subject to the limitations of Section 2.1. Notwithstanding the provisions of this Section 2.2, no shares of Common Stock may again be optioned if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code. ARTICLE III GRANTING OF OPTIONS 3.1 Eligibility. Any Employee or consultant selected by the Committee pursuant to Section 3.4(a)(i) shall be eligible to be granted an Option. Each Independent Director of the Company shall be eligible to be granted Options at the times and in the manner set forth in Section 3.4(d). 3.2 Disqualification for Stock Ownership. No person may be granted an Incentive Stock Option under this Plan if such person, at the time the Incentive Stock Option is granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any then existing Subsidiary or parent corporation (within the meaning of Section 422 of the Code) unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code. 3.3 Qualification of Incentive Stock Options. No Incentive Stock Option shall be granted to any person who is not an Employee. 6 3.4 Granting of Options (a) The Committee shall from time to time, in its absolute discretion, and subject to applicable limitations of this Plan: (i) Determine which Employees are key Employees and select from among the key Employees or consultants (including Employees or consultants who have previously received Options under this Plan) such of them as in its opinion should be granted Options; (ii) Subject to the Award Limit, determine the number of shares to be subject to such Options granted to the selected key Employees or consultants; (iii) Subject to Section 3.3, determine whether such Options are to be Incentive Stock Options or Non-Qualified Stock Options and whether such Options are to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code; and (iv) Determine the terms and conditions of such Options, consistent with this Plan; provided, however, that the terms and conditions of Options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall include, but not be limited to, such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. (b) Upon the selection of a key Employee or consultant to be granted an Option, the Committee shall instruct the Secretary of the Company to issue the Option and may impose such conditions on the grant of the Option as it deems appropriate. Without limiting the generality of the preceding sentence, the Committee may, in its discretion and on such terms as it deems appropriate, require as a condition on the grant of an Option to an Employee or consultant that the Employee or consultant surrender for cancellation some or all of the unexercised Options which have been previously granted to him under this Plan or otherwise. An Option, the grant of which is conditioned upon such surrender, may have an Option price lower (or higher) than the exercise price of such surrendered Option, may cover the same (or a lesser or greater) number of shares as such surrendered Option, may contain such other terms as the Committee deems appropriate, and shall be exercisable in accordance with its terms, without regard to the number of shares, price, exercise period or any other term or condition of such surrendered Option. (c) Any Incentive Stock Option granted under this Plan may be modified by the Committee to disqualify such Option from treatment as an "incentive stock option" under Section 422 of the Code. (d) During the term of the Plan, each person who is an Independent Director on the date of the Distribution shall automatically be granted (i) an Option to purchase three thousand (3,000) shares of Common Stock (subject to adjustment as provided in Section 7.3) on the date of the Distribution and (ii) an Option to purchase two thousand (2,000) shares of 7 Common Stock (subject to adjustment as provided in Section 7.3) on the date of each annual meeting of stockholders following the Distribution at which the Independent Director is reelected to the Board. During the term of the Plan, a person who is initially elected to the Board after the date of the Distribution and who is an Independent Director at the time of such initial election automatically shall be granted (i) an Option to purchase three thousand (3,000) shares of Common Stock (subject to adjustment as provided in Section 7.3) on the date of such initial election and (ii) an Option to purchase two thousand (2,000) shares of Common Stock (subject to adjustment as provided in Section 7.3) on the date of each annual meeting of stockholders after such initial election at which the Independent Director is reelected to the Board. Members of the Board who are employees of the Company who subsequently retire from the Company and remain on the Board will not receive an initial Option grant pursuant to clause (i) of the preceding sentence, but to the extent that they are otherwise eligible, will receive, after retirement from employment with the Company, Options as described in clause (ii) of the preceding sentence. All the foregoing Option grants authorized by this Section 3.4(d) are subject to stockholder approval of the Plan. ARTICLE IV TERMS OF OPTIONS 4.1 Option Agreement. Each Option shall be evidenced by a written Stock Option Agreement, which shall be executed by the Optionee and an authorized officer of the Company and which shall contain such terms and conditions as the Committee (or the Board, in the case of Options granted to Independent Directors) shall determine, consistent with this Plan. Stock Option Agreements evidencing Options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. Stock Option Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code. 4.2 Option Price. The price per share of the shares subject to each Option shall be set by the Committee; provided, however, that such price shall be no less than the par value of a share of Common Stock, unless otherwise permitted by applicable state law, and (i) in the case of Options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code, such price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted; (ii) in the case of Incentive Stock Options such price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code); (iii) in the case of Incentive Stock Options granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code), such price shall not be less than 110% of the Fair Market Value of a share of Common Stock on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code); and (iv) in the case of Options granted to Independent 8 Directors, such price shall equal 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted. 4.3 Option Term. The term of an Option shall be set by the Committee in its discretion; provided, however, that, (i) in the case of Options granted to Independent Directors, the term shall be ten (10) years from the date the Option is granted, without variation or acceleration hereunder, but subject to Section 5.6, and (ii) in the case of Incentive Stock Options, the term shall not be more than ten (10) years from the date the Incentive Stock Option is granted, or five (5) years from such date if the Incentive Stock Option is granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code). Except as limited by requirements of Section 422 of the Code and regulations and rulings thereunder applicable to Incentive Stock Options, the Committee may extend the term of any outstanding Option in connection with any Termination of Employment or Termination of Consultancy of the Optionee, or amend any other term or condition of such Option relating to such a termination. 4.4 Option Vesting (a) The period during which the right to exercise an Option in whole or in part vests in the Optionee shall be set by the Committee and the Committee may determine that an Option may not be exercised in whole or in part for a specified period after it is granted; provided, however, that unless otherwise determined by the Committee, Options granted to Employees and consultants shall become fully exercisable upon the third anniversary of the date of the Option grant, without variation or acceleration hereunder except as provided in Section 7.3(b); provided, further, that initial Option grants to Independent Directors (upon the Distribution Date or initial election to the Board) shall be fully exercisable immediately upon the date of the Option grant, and subsequent Option grants to Independent Directors shall become fully exercisable upon the second anniversary of the date of the Option grant, without variation or acceleration hereunder except as provided in Section 7.3(b). At any time after grant of an Option, the Committee may, in its sole and absolute discretion and subject to whatever terms and conditions it selects, accelerate the period during which an Option (except an Option granted to an Independent Director) vests. (b) No portion of an Option which is unexercisable at Termination of Employment, Termination of Directorship or Termination of Consultancy, as applicable, shall thereafter become exercisable, except as may be otherwise provided by the Committee in the case of Options granted to Employees or consultants either in the Stock Option Agreement or by action of the Committee following the grant of the Option. (c) To the extent that the aggregate Fair Market Value of stock with respect to which "incentive stock options" (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by an Optionee during any calendar year (under the Plan and all other incentive stock option plans of the Company and any parent or subsidiary corporation (within the meaning of Section 422 of the Code) of the Company) exceeds $100,000, such Options shall be treated as Non-Qualified Options to the 9 extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted. For purposes of this Section 4.4(c), the Fair Market Value of stock shall be determined as of the time the Option with respect to such stock is granted. 4.5 Consideration. In consideration of the granting of an Option, the Optionee shall agree, in the written Stock Option Agreement, to remain in the employ of (or to consult for or to serve as an Independent Director of, as applicable) the Company or any Subsidiary for a period of at least one year (or such shorter period as may be fixed in the Stock Option Agreement or by action of the Committee following grant of the Option) after the Option is granted (or, in the case of an Independent Director, until the next annual meeting of stockholders of the Company). Nothing in this Plan or in any Stock Option Agreement hereunder shall confer upon any Optionee any right to continue in the employ of, or as a consultant for, the Company or any Subsidiary, or as a director of the Company, or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which are hereby expressly reserved, to discharge any Optionee at any time for any reason whatsoever, with or without good cause. ARTICLE V EXERCISE OF OPTIONS 5.1 Partial Exercise. An exercisable Option may be exercised in whole or in part. However, an Option shall not be exercisable with respect to fractional shares and the Committee (or the Board, in the case of Options granted to Independent Directors) may require that, by the terms of the Option, a partial exercise be with respect to a minimum number of shares. 5.2 Manner of Exercise. All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following to the Secretary of the Company or his office: (a) A written notice complying with the applicable rules established by the Committee (or the Board, in the case of Options granted to Independent Directors) stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Optionee or other person then entitled to exercise the Option or such portion of the Option; (b) Such representations and documents as the Committee (or the Board, in the case of Options granted to Independent Directors), in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act of 1933, as amended, and any other federal or state securities laws or regulations. The Committee or Board may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars; 10 (c) In the event that the Option shall be exercised pursuant to Section 7.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option; and (d) Full cash payment to the Secretary of the Company for the shares with respect to which the Option, or portion thereof, is exercised. However, the Committee (or the Board, in the case of Options granted to Independent Directors), may in its discretion (i) allow a delay in payment up to thirty (30) days from the date the Option, or portion thereof, is exercised; (ii) allow payment, in whole or in part, through the delivery of shares of Common Stock owned by the Optionee, duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; (iii) allow payment, in whole or in part, through the surrender of shares of Common Stock then issuable upon exercise of the Option having a Fair Market Value on the date of Option exercise equal to the aggregate exercise price of the Option or exercised portion thereof; (iv) allow payment, in whole or in part, through the delivery of property of any kind which constitutes good and valuable consideration; (v) allow payment, in whole or in part, through the delivery of a full recourse promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code) and payable upon such terms as may be prescribed by the Committee or the Board; (vi) allow payment, in whole or in part, through the delivery of a notice that the Optionee has placed a market sell order with a broker with respect to shares of Common Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; or (vii) allow payment through any combination of the consideration provided in the foregoing subparagraphs (ii), (iii), (iv), (v) and (vi). In the case of a promissory note, the Committee (or the Board, in the case of Options granted to Independent Directors) may also prescribe the form of such note and the security to be given for such note. The Option may not be exercised, however, by delivery of a promissory note or by a loan from the Company when or where such loan or other extension of credit is prohibited by law. 5.3 Conditions to Issuance of Stock Certificates. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; (b) The completion of any registration or other qualification of such shares under any state or federal law, or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Committee or Board shall, in its absolute discretion, deem necessary or advisable; (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee (or Board, in the case of Options granted to Independent Directors) shall, in its absolute discretion, determine to be necessary or advisable; 11 (d) The lapse of such reasonable period of time following the exercise of the Option as the Committee (or Board, in the case of Options granted to Independent Directors) may establish from time to time for reasons of administrative convenience; and (e) The receipt by the Company of full payment for such shares, including payment of any applicable withholding tax. 5.4 Rights as Stockholders. The holders of Options shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until certificates representing such shares have been issued by the Company to such holders. 5.5 Ownership and Transfer Restrictions. The Committee (or Board, in the case of Options granted to Independent Directors), in its absolute discretion, may impose such restrictions on the ownership and transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the respective Stock Option Agreement and may be referred to on the certificates evidencing such shares. The Committee may require the Employee to give the Company prompt notice of any disposition of shares of Common Stock acquired by exercise of an Incentive Stock Option within (i) two years from the date of granting (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) such Option to such Employee or (ii) one year after the transfer of such shares to such Employee. The Committee may direct that the certificates evidencing shares acquired by exercise of an Option refer to such requirement to give prompt notice of disposition. 5.6 Limitations on Exercise of Options Granted to Independent Directors. No Option granted to an Independent Director may be exercised to any extent by anyone after the first to occur of the following events: (a) The expiration of twelve (12) months from the date of the Optionee's death; (b) the expiration of twelve (12) months from the date of the Optionee's Termination of Directorship by reason of his permanent and total disability (within the meaning of Section 22(e)(3) of the Code); (c) the expiration of three (3) months from the date of the Optionee's Termination of Directorship for any reason other than such Optionee's death or his permanent and total disability, unless the Optionee dies within said three-month period; or (d) The expiration of ten years from the date the Option was granted. 12 ARTICLE VI ADMINISTRATION 6.1 Compensation Committee. The Compensation Committee (or another committee or a subcommittee of the Board assuming the functions of the Committee under this Plan) shall consist solely of two or more Independent Directors appointed by and holding office at the pleasure of the Board, each of whom is both a "non-employee director" as defined by Rule 16b-3 and an "outside director" for purposes of Section 162(m) of the Code. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may be filled by the Board. 6.2 Duties and Powers of Committee. It shall be the duty of the Committee to conduct the general administration of this Plan in accordance with its provisions. The Committee shall have the power to interpret this Plan and the agreements pursuant to which Options are granted, and to adopt such rules for the administration, interpretation, and application of this Plan as are consistent therewith and to interpret, amend or revoke any such rules. Notwithstanding the foregoing, the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to Options granted to Independent Directors. Any such grant under this Plan need not be the same with respect to each Optionee. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under this Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. 6.3 Majority Rule; Unanimous Written Consent. The Committee shall act by a majority of its members in attendance at a meeting at which a quorum is present or by a memorandum or other written instrument signed by all members of the Committee. 6.4 Compensation; Professional Assistance; Good Faith Actions. Members of the Committee shall receive such compensation, if any, for their services as members as may be determined by the Board. All expenses and liabilities which members of the Committee incur in connection with the administration of this Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers, or other persons. The Committee, the Company and the Company's officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee or the Board in good faith shall be final and binding upon all Optionees, the Company and all other interested persons. No members of the Committee or Board shall be personally liable for any action, determination or interpretation made in good faith with respect to this Plan or Options and the Board shall be fully protected by the Company in respect of any such action, determination or interpretation. 13 ARTICLE VII MISCELLANEOUS PROVISIONS 7.1 Not Transferable. Options under this Plan may not be sold, pledged, assigned, or transferred in any manner other than by will or the laws of descent and distribution or pursuant to a QDRO, unless and until Options have been exercised. No Option shall be liable for the debts, contracts or engagements of the Optionee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence. During the lifetime of the Optionee, only he may exercise an Option (or any portion thereof) granted to him under the Plan, unless it has been disposed of pursuant to a QDRO. After the death of the Optionee, any exercisable portion of an Option may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement, be exercised by his personal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution. 7.2 Amendment, Suspension or Termination of this Plan. Except as otherwise provided in this Section 7.2, this Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the Committee. However, without approval of the Company's stockholders given within twelve months before or after the action by the Board or the Committee, no action of the Board or the Committee may, except as provided in Section 7.3, increase the limits imposed in Section 2.1 on the maximum number of shares which may be issued under this Plan, and no action of the Board or the Committee may be taken that would otherwise require stockholder approval as a matter of applicable law, regulation or rule. Furthermore, no modification of the Award Limit shall be effective prior to the approval of the Company's stockholders. No amendment, suspension or termination of this Plan shall, without the consent of the holder of Options, alter or impair any rights or obligations under any Options theretofore granted unless the Stock Option Agreement (described in Section 4.1) itself otherwise expressly so provides. No Options may be granted during any period of suspension or after termination of this Plan, and in no event may any Incentive Stock Option be granted under this Plan after the first to occur of the following events: (a) The expiration of ten years from the date the Plan is adopted by the Board; or (b) The expiration of ten years from the date the Plan is approved by the Company's stockholders under Section 7.4. 14 7.3 Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events. (a) Subject to Section 7.3(d), in the event that the Committee (or the Board, in the case of Options granted to Independent Directors) determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company (including, but not limited to, a Corporate Transaction), or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, in the Committee's sole discretion (or in the case of Options granted to Independent Directors, the Board's sole discretion), affects the Common Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Option, then the Committee (or the Board, in the case of Options granted to Independent Directors) shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares of Common Stock (or other securities or property) with respect to which Options may be granted under the Plan, (including, but not limited to, adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued and adjustments of the Award Limit), (ii) the number and kind of shares of Common Stock (or other securities or property) subject to outstanding Options, and (iii) the exercise price with respect to any Option. (b) Subject to Sections 7.3(b)(vi) and 7.3(d), in the event of any Corporate Transaction or other transaction or event described in Section 7.3(a) or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations, or accounting principles, the Committee (or the Board, in the case of Options granted to Independent Directors) in its discretion is hereby authorized to take any one or more of the following actions whenever the Committee (or the Board, in the case of Options granted to Independent Directors) determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Option granted under this Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles: (i) In its sole and absolute discretion, and on such terms and conditions as it deems appropriate, the Committee (or the Board, in the case of Options granted to Independent Directors) may provide, either by the terms of the agreement or by action taken prior to the occurrence of such transaction or event and either 15 automatically or upon the optionee's request, for either the purchase of any such Option, for an amount of cash equal to the amount that could have been attained upon the exercise of such Option or realization of the Optionee's rights had such Option been currently exercisable or the replacement of such Option with other rights or property selected by the Committee (or the Board, in the case of Options granted to Independent Directors) in its sole discretion; (ii) In its sole and absolute discretion, the Committee (or the Board, in the case of Options granted to Independent Directors) may provide, either by the terms of such Option, or by action taken prior to the occurrence of such transaction or event that it cannot vest, be exercised or become payable after such event; (iii) In its sole and absolute discretion, and on such terms and conditions as it deems appropriate, the Committee (or the Board, in the case of Options granted to Independent Directors) may provide, either by the terms of such Option or by action taken prior to the occurrence of such transaction or event, that for a specified period of time prior to such transaction or event, such Option shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in (i) Section 4.4 or (ii) the provisions of such Option; (iv) In its sole and absolute discretion, and on such terms and conditions as it deems appropriate, the Committee (or the Board, in the case of Options granted to Independent Directors) may provide, either by the terms of such Option, or by action taken prior to the occurrence of such transaction or event, that upon such event, such Option, be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; and (v) In its sole and absolute discretion, and on such terms and conditions as it deems appropriate, the Committee (or the Board, in the case of Options granted to Independent Directors) may make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Options, and/or in the terms and conditions of (including the exercise price), and the criteria included in, outstanding Options, and Options which may be granted in the future. (vi) None of the foregoing discretionary actions taken under this Section 7.3(b) shall be permitted with respect to Options granted under Section 3.4(d) to Independent Directors to the extent that such discretion would be inconsistent with the applicable exemptive conditions of Rule 16b-3. In the event of a Change in Control or a Corporate Transaction, to the extent that the Board does not have the ability under Rule 16b-3 to take or to refrain from taking the discretionary actions set forth in Section 7.3(b)(iii) above, each Option granted to an Independent Director shall be exercisable as to all shares covered thereby upon such Change in Control or during the five days immediately preceding the consummation of such Corporate Transaction and subject to such consummation, notwithstanding anything to the contrary in Section 4.4 or the 16 vesting schedule of such Options. In the event of a Corporate Transaction, to the extent that the Board does not have the ability under Rule 16b-3 to take or to refrain from taking the discretionary actions set forth in Section 7.3(b)(ii) above, no Option granted to an Independent Director may be exercised following such Corporate Transaction unless such Option is, in connection with such Corporate Transaction, either assumed by the successor or survivor corporation (or parent or subsidiary thereof) or replaced with a comparable right with respect to shares of the capital stock of the successor or survivor corporation (or parent or subsidiary thereof). (c) Subject to Section 7.3(d) and 7.8, the Committee (or the Board, in the case of Options granted to Independent Directors) may, in its discretion, include such further provisions and limitations in any Option agreement or certificate, as it may deem equitable and in the best interests of the Company. (d) With respect to Options which are granted to Section 162(m) Participants and are intended to qualify as performance-based compensation under Section 162(m)(4)(C), no adjustment or action described in this Section 7.3 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of the Code or would cause such Option to fail to so qualify under Section 162(m)(4)(C), as the case may be, or any successor provisions thereto. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the Committee (or the Board, in the case of Options granted to Independent Directors) determines that the Option is not to comply with such exemptive conditions. The number of shares of Common Stock subject to any Option shall always be rounded to the next whole number. 7.4 Approval of Plan by Stockholders. This Plan will be submitted for the approval of the Company's stockholders within twelve months after the date of the Board's initial adoption of this Plan. Options may be granted prior to such stockholder approval, provided that such Options shall not be exercisable prior to the time when this Plan is approved by the stockholders, and provided further that if such approval has not been obtained at the end of said twelve-month period, all Options previously granted under this Plan shall thereupon be canceled and become null and void.(1) 7.5 Tax Withholding. The Company shall be entitled to require payment in cash or deduction from other compensation payable to each Optionee of any sums required by federal, state or local tax law to be withheld with respect to exercise of any Option. The Committee (or the Board, in the case of Options granted to Independent Directors) may in its discretion and in satisfaction of the foregoing requirement allow such Optionee to elect to have the Company withhold shares of Common Stock otherwise issuable under such Option (or allow the return of shares of Common Stock) having a Fair Market Value equal to the sums required to be withheld. - ---------- (1) See note 2. 17 7.6 Loans. The Committee may, in its discretion, extend one or more loans to key Employees in connection with the exercise or receipt of an Option granted under this Plan. The terms and conditions of any such loan shall be set by the Committee. 7.7 Forfeiture Provisions. Pursuant to its general authority to determine the terms and conditions applicable to awards under the Plan, the Committee (or the Board, in the case of Options granted to Independent Directors) shall have the right (to the extent consistent with the applicable exemptive conditions of Rule 16b-3) to provide, in the terms of Options to require the recipient to agree by separate written instrument, that (i) any proceeds, gains or other economic benefit actually or constructively received by the recipient upon any receipt or exercise of the Option, or upon the receipt or resale of any Common Stock underlying such Option, must be paid to the Company, and (ii) the Option shall terminate and any unexercised portion of such Option (whether or not vested) shall be forfeited, if (a) a Termination of Employment, Termination of Consultancy or Termination of Directorship occurs prior to a specified date, or within a specified time period following receipt or exercise of the Option, or (b) the recipient at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Committee (or the Board, as applicable). 7.8 Limitations Applicable to Section 16 Persons and Performance-Based Compensation. Notwithstanding any other provision of this Plan, this Plan, and any Option granted to any individual who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan, Options granted hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. Furthermore, notwithstanding any other provision of this Plan, any Option which is granted to a Section 162(m) Participant and is intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as performance-based compensation as described in Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the extent necessary to conform to such requirements. 7.9 Effect of Plan Upon Options and Compensation Plans. The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company or any Subsidiary. Nothing in this Plan shall be construed to limit the right of the Company (i) to establish any other forms of incentives or compensation for Employees, Directors or Consultants of the Company or any Subsidiary or (ii) to grant or assume options or other rights or awards otherwise than under this Plan in connection with any proper corporate purpose including but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association. 18 7.10 Compliance with Laws. This Plan, the granting and vesting of Options under this Plan and the issuance and delivery of shares of Common Stock and the payment of money under this Plan or under Options hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan and Options granted hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. 7.11 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Plan. 7.12 Governing Law. This Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof. * * * I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Griffin Land & Nurseries, Inc. on ______________ ____, 1997. Executed on this ____ day of _______________, 1997. GRIFFIN LAND & NURSERIES, INC. ------------------------------ Secretary 19 EX-10.7 5 EXH 10.7-FORM OF 401(K) SAVINGS PLAN Exhibit 10.7 GRIFFIN LAND & NURSERIES, INC. 401(k) SAVINGS PLAN GRIFFIN LAND & NURSERIES, INC. 401(k) SAVINGS PLAN TABLE OF CONTENTS Page ---- Preamble.................................................................... 1 ARTICLE I DEFINITIONS............................... 1 Section 1.1 - General................................................. 1 Section 1.2 - Accounts................................................ 1 Section 1.3 - Active Participant...................................... 2 Section 1.4 - Administrator........................................... 2 Section 1.5 - Annual Addition......................................... 2 Section 1.6 - Bargaining Unit......................................... 3 Section 1.7 - Beneficiary............................................. 3 Section 1.8 - Board................................................... 3 Section 1.9 - Break in Service Year................................... 3 Section 1.10 - Code.................................................... 4 Section 1.11 - Company; Company Affiliate.............................. 4 Section 1.12 - Compensation............................................ 5 Section 1.13 - Contribution Percentage................................. 5 Section 1.14 - Deferral Percentage..................................... 6 Section 1.15 - Deferred Compensation................................... 6 Section 1.16 - Deferred Compensation Account........................... 6 Section 1.17 - Direct Rollover......................................... 6 Section 1.18 - Disability Retirement................................... 7 Section 1.19 - Disability Retirement Date.............................. 7 Section 1.20 - Distributee............................................. 7 Section 1.21 - Distribution............................................ 7 Section 1.22 - Distribution Date....................................... 7 Section 1.23 - Eligible Retirement Plan................................ 7 Section 1.24 - Eligible Rollover Distribution.......................... 7 Section 1.25 - Employee................................................ 8 Section 1.26 - ERISA................................................... 8 Section 1.27 - Hardship................................................ 8 Section 1.28 - Highly Compensated Employee............................. 9 Section 1.29 - Hour of Service......................................... 10 Section 1.30 - Investment Fund......................................... 11 Section 1.31 - Leveling Method......................................... 11 Section 1.32 - Matching Account........................................ 11 Section 1.33 - Military Leave.......................................... 11 Section 1.34 - Normal Retirement....................................... 12 Page ---- Section 1.35 - Normal Retirement Date.................................. 12 Section 1.36 - Participant............................................. 12 Section 1.37 - Payday.................................................. 12 Section 1.38 - Plan.................................................... 12 Section 1.39 - Plan Representative..................................... 12 Section 1.40 - Plan Year............................................... 12 Section 1.41 - Qualified Account....................................... 13 Section 1.42 - Rollover Account........................................ 13 Section 1.43 - Rules of the Plan....................................... 13 Section 1.44 - Separation from the Service............................. 13 Section 1.45 - Service................................................. 13 Section 1.46 - Spousal Consent......................................... 14 Section 1.47 - Spouse; Surviving Spouse................................ 14 Section 1.48 - Statutory Compensation.................................. 14 Section 1.49 - Trust................................................... 14 Section 1.50 - Trust Agreement......................................... 15 Section 1.51 - Trust Fund.............................................. 15 Section 1.52 - Trustee................................................. 15 Section 1.53 - Vested.................................................. 15 Section 1.54 - Years of Vesting Service................................ 15 ARTICLE II ELIGIBILITY............................... 15 Section 2.1 - Requirements for Participation........................... 15 Section 2.2 - Notice of Participation.................................. 16 Section 2.3 - Enrollment Form.......................................... 16 Section 2.4 - Inactive Status.......................................... 17 ARTICLE III PARTICIPANTS' DEFERRALS......................... 17 Section 3.1 - Deferral of Compensation................................. 17 Section 3.2 - Suspension of Deferral................................... 17 Section 3.3 - Commencement, Resumption or Change of Deferred Compensation........................ 18 Section 3.4 - Deposit in Trust......................................... 18 Section 3.5 - Withdrawal from Deferred Compensation Account other than for Hardship........................ 18 Section 3.6 - Hardship Withdrawal from Deferred Compensation Account................................... 19 Section 3.7 - Other Withdrawals Prohibited............................. 21 Section 3.8 - Deferral Percentage Fail-Safe Provisions................. 21 ii Page ---- ARTICLE IV CONTRIBUTIONS OF THE COMPANY...................... 24 Section 4.1 - Determination of Annual Contribution..................... 24 Section 4.2 - Maximum Annual Contribution.............................. 24 Section 4.3 - Contribution Date........................................ 24 ARTICLE V PARTICIPATION IN COMPANY CONTRIBUTIONS AND FORFEITURES......... 25 Section 5.1 - Deferred Compensation Account............................ 25 Section 5.2 - Matching Account; Qualified Account...................... 25 Section 5.3 - Allocation of Company Contributions...................... 25 Section 5.4 - Allocation of Forfeitures................................ 26 Section 5.5 - Contribution Percentage Fail-Safe Provisions............. 26 Section 5.6 - Reemployment Rights after Qualified Military Service..... 28 ARTICLE VI INVESTMENT OF ACCOUNTS......................... 29 Section 6.1 - Investment Options....................................... 29 Section 6.2 - Description of Investment Funds.......................... 30 Section 6.3 - Effect of Non-Election................................... 30 ARTICLE VII VALUATION OF THE TRUST FUND AND ACCOUNTS................ 31 Section 7.1 - Determination of Values.................................. 31 Section 7.2 - Allocation of Values..................................... 31 Section 7.3 - Applicability of Account Values.......................... 31 ARTICLE VIII VESTING OF INTERESTS.......................... 32 Section 8.1 - Vesting of Accounts...................................... 32 Section 8.2 - Additional Vesting of Accounts........................... 32 ARTICLE IX EMPLOYMENT AFTER NORMAL RETIREMENT DATE................. 32 Section 9.1 - Continuation of Employment............................... 32 Section 9.2 - Continuation of Participation............................ 33 Section 9.3 - Mandatory In-Service Distributions....................... 33 iii Page ---- ARTICLE X BENEFITS UPON RETIREMENT........................ 33 Section 10.1 - Normal or Disability Retirement......................... 33 Section 10.2 - Rights Upon Normal or Disability Retirement............. 33 Section 10.3 - Distribution of Accounts................................ 33 Section 10.4 - Determination of Value of Accounts...................... 35 ARTICLE XI BENEFITS UPON DEATH........................... 35 Section 11.1 - Designation of Beneficiary.............................. 35 Section 11.2 - Distribution on Death................................... 35 Section 11.3 - Determination of Value of Accounts...................... 36 ARTICLE XII BENEFITS UPON RESIGNATION OR DISCHARGE................. 36 Section 12.1 - Distributions on Resignation or Discharge............... 36 Section 12.2 - Determination of Value of Accounts...................... 37 Section 12.3 - Forfeitures............................................. 37 Section 12.4 - Restoration of Forfeitures.............................. 37 ARTICLE XIII TOP-HEAVY PROVISIONS........................... 38 Section 13.1 - Top-Heavy Determination................................. 38 Section 13.2 - Minimum Benefits........................................ 41 Section 13.3 - Vesting................................................. 41 Section 13.4 - Limitation on Benefits.................................. 42 ARTICLE XIV ADMINISTRATIVE PROVISIONS........................ 43 Section 14.1 - Duties and Powers of the Administrator.................. 43 Section 14.2 - Expenses of Administration.............................. 43 Section 14.3 - Payments................................................ 44 Section 14.4 - Statement to Participants............................... 44 Section 14.5 - Inspection of Records................................... 44 Section 14.6 - Claims Procedure........................................ 44 Section 14.7 - Conflicting Claims...................................... 46 Section 14.8 - Effect of Delay or Failure to Ascertain Amount Distributable or to Locate Distribute.......... 46 Section 14.9 - Service of Process...................................... 46 iv Page ---- Section 14.10 - Limitations Upon Powers of the Administrator........... 46 Section 14.11 - Effect of Administrator Action......................... 47 Section 14.12 - Contributions to Rollover Accounts..................... 47 Section 14.13 - Direct Rollovers....................................... 48 Section 14.14 - Loans to Participants or Former Participants, Spouses or Beneficiaries............... 48 Section 14.15 - Distributions Pursuant to Qualified Domestic Relations Orders.................. 50 Section 14.16 - Correction of Administrative Error; Special Contribution................................. 50 ARTICLE XV TERMINATION, DISCONTINUANCE, AMENDMENT, MERGER, ADOPTION OF PLAN................... 51 Section 15.1 - Termination of Plan; Discontinuance of Contributions...................................... 51 Section 15.2 - Amendment of Plan....................................... 52 Section 15.3 - Retroactive Effect of Plan Amendment.................... 52 Section 15.4 - Consolidation or Merger; Adoption of Plan by Other Companies............................ 52 ARTICLE XVI MISCELLANEOUS PROVISIONS......................... 53 Section 16.1 - Identification of Fiduciaries........................... 53 Section 16.2 - Allocation of Fiduciary Responsibilities................ 53 Section 16.3 - Limitation on Rights of Employees....................... 54 Section 16.4 - Limitation on Annual Additions; Treatment of Otherwise Excessive Allocations.................... 54 Section 16.5 - Governing Law........................................... 55 Section 16.6 - Genders and Plurals..................................... 56 Section 16.7 - Titles.................................................. 56 Section 16.8 - References.............................................. 56 v Griffin Land & Nurseries, Inc. (the "Company"), a corporation organized under the laws of the State of Delaware, by resolution of its Board of Directors adopted on _______________, 1997, adopted the Griffin Land & Nurseries, Inc. 401(k) Savings Plan (the "Plan") and Trust for the exclusive benefit of its eligible Employees, effective as of ________________, 19___. The purposes of the Plan are: (1) To permit Participants to share in the Company's success. (2) To stimulate and maintain among Participants a sense of responsibility, cooperative effort and a sincere interest in the progress and success of the Company. (3) To increase the efficiency of Participants and to encourage them to remain with the Company until retirement from active service. (4) To provide security for Participants by establishing a plan under which each Participant's share of Company contributions, his deferrals and the earnings thereon will be invested and accumulated to create a fund to benefit him in the event of his disability or other termination of employment. The Plan is intended to comply with the provisions of Sections 401, 401(k), 402(a) and other applicable provisions of the Internal Revenue Code, similar provisions of applicable state law, the Employee Retirement Income Security Act of 1974, as amended and Section 7(e)(4) of the Fair Labor Standards Act of 1938, as amended. ARTICLE I DEFINITIONS Section 1.1 - General Whenever any of the following terms is used in the Plan with the first letter or letters capitalized, it shall have the meaning specified below unless the context clearly indicates to the contrary. Section 1.2 - Accounts "Account" or "Accounts" of a Participant or former Participant shall mean, as the context indicates, any one or more of his Deferred Compensation Account, his Rollover Account, his Qualified Account, or his Matching Account, if any, in the Trust Fund established in accordance with Sections 5.1, 14.12, 5.2(b), and 5.2(a), respectively. Section 1.3 - Active Participant "Active Participant" shall mean a Participant who is an Employee and is not (a) in a Bargaining Unit, or (b) a non-resident alien who receives no earned income from the Company which constitutes income from sources within the United States. Section 1.4 - Administrator "Administrator" shall mean the Company acting through its chief executive officer or his delegate. Section 1.5 - Annual Addition "Annual Addition" of a Participant for the Plan Year in question shall mean the sum of (a) Company contributions and forfeitures allocated to his Matching Account and his Qualified Account for that Plan Year, (b) Company contributions and forfeitures allocated to his Deferred Compensation Account for that Plan Year (excluding any excess amounts determined under Code Section 402(g) which are distributed to him pursuant to Section 17.4(b) not later than the April 15 following the calendar year in which such excess amounts were deferred), (c) Company contributions and forfeitures allocated to his accounts under all other qualified defined contribution plans, if any, of the Company and any Company Affiliate for that Plan Year, (d) His personal contributions under the Plan (excluding any excess amounts distributed to him pursuant to Section 16.4(b)) and all other qualified defined contribution plans, if any, of the Company and any Company Affiliate for that Plan Year, and (e) Except for purposes of Section 16.4(a)(i), the sum of (i) Company contributions allocated after March 31, 1984 to an individual medical account as defined in Code Section 415(l)(1), if any, which is maintained under a qualified pension or annuity plan, and 2 (ii) Company contributions paid or accrued for Plan Years ending after December 31, 1985, if any, and allocated to the separate account of a Key Employee (as defined in Section 13.1(b)(iv)) for the purpose of providing post-retirement medical benefits, whether or not such allocations or contributions have been recharacterized or distributed pursuant to Sections 3.5, 3.6, 3.8 or 5.5. If, in a particular Plan Year, the Company contributes an amount to a Participant's Accounts because of an erroneous forfeiture in a prior Plan Year, or because of an erroneous failure to allocate amounts in a prior Plan Year, the contribution shall not be considered an Annual Addition with respect to the Participant for that particular Plan Year, but shall be considered an Annual Addition for the Plan Year to which it relates. If the amount so contributed in the particular Plan Year takes into account actual investment gains attributable to the period subsequent to the Plan Year to which the contribution relates, the portion of the total contribution which consists of such gains shall not be considered as an Annual Addition for any Plan Year. Section 1.6 - Bargaining Unit "Bargaining Unit" shall mean a bargaining unit covered by a collective bargaining agreement with the Company (a) if retirement benefits were the subject of good faith bargaining with respect to such agreement, and (b) if such agreement does not provide for the coverage under the Plan of Employees in such unit. Section 1.7 - Beneficiary "Beneficiary" shall mean a person or trust properly designated by a Participant or former Participant to receive benefits, or such Participant's Spouse or heirs at law, as provided in Article XI. Section 1.8 - Board "Board" shall mean the Board of Directors of the Company. Section 1.9 - Break in Service Year "Break in Service Year" of an Employee or former Employee shall mean the three hundred and sixty-five day period 3 (a) which begins on the later of (i) the date of his last Separation from the Service, or (ii) if the Employee furnishes to the Administrator such timely information as the Administrator may reasonably require to establish that the Employee's absence from work is for any of the following reasons or purposes, the second anniversary of the first day of his absence from work a by reason of pregnancy of the Employee, b by reason of the birth of a child of the Employee, c by reason of the placement of a child with the Employee in connection with the adoption of such child by the Employee, or d for purposes of caring for such child for a period beginning immediately following such birth or placement, and (b) during no part of which he was an Employee or employed by a Company Affiliate. Section 1.10 - Code "Code" shall mean the Internal Revenue Code of 1986, as amended. Section 1.11 - Company; Company Affiliate (a) "Company" shall mean Griffin Land & Nurseries, Inc. any other company which subsequently adopts the Plan as a whole or as to any one or more divisions, in accordance with Section 15.4(c), and any successor company which continues the Plan under Section 15.4(a). (b) "Company Affiliate" shall mean any employer which, at the time of reference, was, with the Company, a member of a controlled group of corporations or trades or businesses under common control, or a member of an affiliated service group, as determined under regulations issued by the Secretary of the Treasury or his delegate under Code Sections 414(b), (c), (m) and 415(h) and any other entity required to be aggregated with the Company pursuant to regulations issued under Code Section 414(o). 4 Section 1.12 - Compensation (a) "Compensation" of a Participant for any Plan Year shall mean his wages and all other payments of compensation for that Plan Year as reported on Form W-2 (currently entitled "wages, tips, other compensation") and as described in Treas. Reg. Section 1.415-2(d)(11)(i), exclusive of reimbursed moving expenses to the extent that at the time of payment it is reasonable to believe that such expenses are deductible by the Participant under Code Section 217 (related to relocation expenses) and including amounts not includable in gross income by reason of Code Sections 125 (cafeteria plans), 402(e)(3)(401(k) plans), 402(h) or 403(b), but in no event greater than $160,000 (adjusted for increases in the cost of living described in Code Section 401(a)(17) and, if the Plan Year is less than twelve months, such limit shall be reduced to an amount equal to such limit multiplied by a fraction, the numerator representing the number of months in the Plan Year and the denominator of which is twelve). (b) The Administrator may elect for any Plan Year and solely for the purposes of Sections 1.13 and 1.14 to exclude from Compensation of Participants that part thereof deferred under Article III and under cafeteria plans. Section 1.13 - Contribution Percentage (a) "Contribution Percentage" for a Plan Year shall mean, with respect to eligible Participants who are Highly Compensated Employees as a group and to eligible Participants who are not Highly Compensated Employees as a group, the average of the decimal numbers obtained, as to each such Participant, by dividing (i) his allocations described in subsection (b), by (ii) his Compensation for that Plan Year. (b) The allocations described in this subsection are (i) allocations to his Matching Account under Section 5.3(b) (and, to the extent elected by the Administrator under Section 5.5(b), amounts credited to his Qualified Account for that Plan Year), excluding any amounts forfeited under Section 5.5(b)(vi), and (ii) allocations to his Deferred Compensation Account, to the extent that the Administrator elects to take such allocations into account under Section 5.5. (c) For purposes of this Section, all plans required to be taken into account under Code Section 401(m)(2)(B) shall be treated as a single plan. (d) The Administrator may elect to limit Compensation of a Participant taken into account for purposes of subsection (a)(ii) to amounts received by him for that 5 portion of the Plan Year during which he was eligible to receive allocations to his Matching Account; provided, however, that such determination shall be applied uniformly to all Participants for the year in question. Section 1.14 - Deferral Percentage (a) "Deferral Percentage" for a Plan Year shall mean, with respect to eligible Participants who are Highly Compensated Employees as a group and to eligible Participants who are not Highly Compensated Employees as a group, the average of the decimal numbers obtained, as to each such Participant, by dividing (i) the amount, if any, credited to his Deferred Compensation Account for that Plan Year in question under this Plan and any other plans which are aggregated with this Plan under Code Section 401(k)(3)(A) (including any excess amounts described in Code Section 402(g) if he is a Highly Compensated Employee but excluding any excess amounts distributed to him pursuant to Section 16.4(b)) (and, to the extent elected by the Administrator under Section 3.8(d), amounts credited to his Qualified Account for that Plan Year), by (ii) his Compensation for that Plan Year. (b) The Administrator may elect to limit Compensation of a Participant taken into account for purposes of subsection (a)(ii) to amounts received by him for that portion of the Plan Year during which he was eligible to defer Compensation; provided, however, that such determination shall be applied uniformly to all Participants for the year in question. Section 1.15 - Deferred Compensation "Deferred Compensation" of a Participant shall mean an amount contributed by the Company to the Plan for him under Section 4.1(a). Section 1.16 - Deferred Compensation Account "Deferred Compensation Account" of a Participant shall mean his individual account in the Trust Fund established in accordance with Section 5.1. Section 1.17 - Direct Rollover "Direct Rollover" shall mean a payment by the Plan to an Eligible Retirement Plan designated by a Distributee. 6 Section 1.18 - Disability Retirement "Disability Retirement" of a Participant shall mean his Separation from the Service authorized by the Administrator upon its finding, based on competent medical evidence, that the Participant, as a result of mental or physical disease or condition, will be permanently unable to discharge his assigned duties. Section 1.19 - Disability Retirement Date "Disability Retirement Date" of a Participant shall mean the date (prior to his Normal Retirement Date) fixed by the Administrator for his Disability Retirement. Section 1.20 - Distributee "Distributee" shall mean a Participant or former Participant, Surviving Spouse of a Participant or former Participant, or a Spouse or former Spouse of a Participant or former Participant who is an alternate payee under a "qualified domestic relations order," as defined in Code Section 414(p). Section 1.21 - Distribution "Distribution" shall mean the special distribution by Culbro Corporation, a New York corporation, of one share of Griffin Land & Nurseries, Inc. common stock, par value $0.01 per share for each share of Culbro Corporation common stock, par value $1.00 per share. Section 1.22 - Distribution Date "Distribution Date" shall mean the date the Distribution is consummated. Section 1.23 - Eligible Retirement Plan "Eligible Retirement Plan" shall mean an individual retirement account (described in Code Section 408(a)), an individual retirement annuity (described in Code Section 408(b)), an annuity plan (described in Code Section 403(a)), or a qualified trust (described in Code Section 401(a)), that will accept a Distributee's Eligible Rollover Distribution; provided, however, that in the case of an Eligible Rollover Distribution to a Distributee who is a Surviving Spouse of a Participant or former Participant, an "Eligible Retirement Plan" shall mean only an individual retirement account or an individual retirement annuity. Section 1.24 - Eligible Rollover Distribution (a) Except as provided in subsection (b), "Eligible Rollover Distribution" shall mean any distribution of all or any portion of a Participant's or former Participant's Accounts to a Distributee. 7 (b) "Eligible Rollover Distribution" shall not mean any distribution (i) that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's Beneficiary, (ii) that is paid for a specified period of ten years or more, (iii) that is part of a series of distributions during a calendar year to the extent that such distributions are expected to total less than $200 or a total lump sum distribution which is equal to less than $200, as described in Temp. Reg. Section 1.401(a)(31)-1T A-11, (iv) to the extent such distribution is required under Code Section 401(a)(9), or (v) to the extent such distribution is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). Section 1.25 - Employee "Employee" shall mean any person who renders services to the Company in the status of an employee as the term is defined in Code Section 3121(d). Except as provided in subsection 1.28(b) and Section 1.29, "Employee" shall not include leased Employees treated as Employees of the Company pursuant to Code Sections 414(n) and 414(o), employees of a Company Affiliate or independent contractors treated as Employees of the Company unless otherwise designated by the Administrator. Section 1.26 - ERISA "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. Section 1.27 - Hardship (a) "Hardship" of a Participant as determined by the Administrator in its discretion on the basis of all relevant facts and circumstances and in accordance with the following nondiscriminatory and objective standards, uniformly interpreted and consistently applied, and without regard to the existence of other resources which are reasonably available to the Participant in question, shall mean any one or more of the following: (i) Unreimbursed expenses for medical care described in Code Section 213(d) previously incurred by him, his spouse, or his dependent 8 (as described in Code Section 152) or necessary for him, his spouse or his dependent to obtain medical care. (ii) Costs directly related to the purchase (excluding mortgage payments) of a principal residence for him. (iii) Payment of tuition and related educational fees for the next twelve months of post-secondary education for him, his spouse, children, or his dependents (as so described). (iv) Payments necessary to prevent his eviction from his principal residence, or foreclosure on the mortgage of his principal residence. (v) Any other event identified by the Commissioner of Internal Revenue in revenue rulings, notices and/or other documents of general applicability for inclusion in the foregoing list. (b) A financial need shall not fail to qualify as immediate and heavy merely because such need was reasonably foreseeable by the Participant or voluntarily incurred by him. Section 1.28 - Highly Compensated Employee (a) For any current Plan Year, a "Highly Compensated Employee" shall mean any Employee who (i) in the previous Plan Year a was a five percent owner of the Company or a Company Affiliate (within the meaning of Code Section 416(i)(1)) at any time during the Plan Year, b had Statutory Compensation in excess of $80,000 (adjusted at the same time and in the same manner as under Code Section 415(d), except that the base period shall be the calendar quarter ending September 30, 1996), and c if the Company elects, was in the group consisting of the top twenty percent of Employees when ranked by Statutory Compensation for the Plan Year in question, (ii) in the current Plan Year was a five percent owner of the Company or a Company Affiliate (within the meaning of Code Section 416(i)(1)) at any time during the Plan Year, 9 and any former Employee, who during the Plan Year in which he separated from the Service or during any Plan Year ending on or after his fifty-fifth birthday, was described in paragraph (i) or (ii). (b) For purposes of this Section, "Statutory Compensation" shall include Compensation deferral amounts and other amounts required to be taken into account pursuant to Code Section 414(q)(4), and "Employee" shall include leased Employees treated as Employees of the Company pursuant to Code Section 414(n) or 414(o) and shall include Employees of a Company Affiliate, but shall not include Employees on a leave of absence throughout the Plan Year, or Employees who receive Statutory Compensation for the Plan Year in an amount less than 50% of such Employee's average annual compensation for the three consecutive calendar years preceding the Plan Year during which such Employee received the greatest amount of Statutory Compensation. Section 1.29 - Hour of Service (a) "Hour of Service" of an Employee (including a leased Employee pursuant to Code Sections 414(n) and (o)) shall mean the following: (i) Each hour for which he is paid or entitled to payment by the Company or a Company Affiliate for the performance of services. (ii) Each hour in or attributable to a period of time during which he performs no duties (irrespective of whether he has had a Separation from the Service) due to a vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or a leave of absence for which he is so paid or so entitled to payment by the Company or a Company Affiliate, whether direct or indirect; provided, however, that no such hours shall be credited to an Employee if attributable to payments made or due under a plan maintained solely for the purpose of complying with applicable workers' compensation, unemployment compensation or disability insurance laws or to a payment which solely reimburses the Employee for medical or medically related expenses incurred by him. (iii) Each hour for which he is entitled to back pay, irrespective of mitigation of damages, whether awarded or agreed to by the Company or a Company Affiliate. (b) Hours of Service under subsections (a)(ii) and (a)(iii) shall be calculated in accordance with 29 C.F.R. ss. 2530.200b-2(b). Each Hour of Service shall be attributed to the Plan Year or initial eligibility year in which it occurs except to the extent that the Company, in accordance with 29 C.F.R. ss. 2530.200b-2(c), credits such Hour to another computation period under a reasonable method consistently applied. (c) The Hours of Service of an Employee occurring prior to the Distribution Date shall be determined by the Administrator from reasonably accessible 10 records by means of appropriate calculations and approximations or, if such records are insufficient to make an appropriate determination, by reasonable estimation. (d) For purposes of Section 1.45, an Hour of Service of any Employee who completes an Hour of Service as an Employee on the date immediately prior to Distribution Date and who becomes an Employee of the Company on or prior to December 31, 1998 shall also include each hour prior to such date that would be described in subsection (a) above if the phrase "Culbro Corporation and its affiliates under Code Sections 414(b), (c), (m), (o) and 414(h)" were substituted in lieu of "the Company or a Company Affiliate" in each instance where such phrase appears. Section 1.30 - Investment Fund "Investment Fund" shall mean one of the investment funds of the Trust Fund which is authorized by the Administrator at the time of reference. Section 1.31 - Leveling Method "Leveling Method" shall mean the method of determining the excess amounts under Section 3.8(a), 3.8(b) or 5.5(a) under which the actual deferral ratio or the actual contribution ratio, as applicable, of the Highly Compensated Employee with the highest dollar amount of deferrals or contributions, as applicable, shall be reduced to the extent required to enable the Plan to satisfy Section 3.8(a) or 3.8(b) or Section 5.5(a) or to cause such Highly Compensated Employee's deferrals or contributions, as applicable, to equal the deferrals or contributions of the Highly Compensated Employee with the next highest dollar amount of deferrals or contributions, as applicable, or such other method which is permitted under Code Section 401(k)(8)(C). This process shall be repeated until Section 3.8(a), 3.8(b) or Section 5.5(a) is satisfied. Section 1.32 - Matching Account "Matching Account" of a Participant shall mean his individual account established in accordance with Section 5.2(a). Section 1.33 - Military Leave Any Employee who leaves the Company or a Company Affiliate directly to perform service in the Armed Forces of the United States or in the United States Public Health Service under conditions entitling him to reemployment rights, as provided in the laws of the United States, shall, solely for purposes of the Plan and irrespective of whether he is compensated by the Company or a Company Affiliate during such period of service, be on Military Leave. An Employee's Military Leave shall expire if such Employee voluntarily resigns from the Company or such Company Affiliate during such period of service or if he fails to make application for reemployment within the period specified by such laws for the preservation of his reemployment rights. For purposes of computing an Employee's Service, 11 no more than 365 days of Service shall be credited for any Military Leave except as required by Treas. Reg. ss. 1.410(a)-7(b)(6)(iii). Section 1.34 - Normal Retirement "Normal Retirement" of a Participant shall mean his Separation from the Service upon his Normal Retirement Date, or after such date (except by death) as permitted under Article X. Section 1.35 - Normal Retirement Date "Normal Retirement Date" of a Participant shall mean the later of (a) the first day of the calendar month coincident with or next following his sixty-fifth birthday, or (b) the fifth anniversary of the date he commences participation in the Plan. Section 1.36 - Participant "Participant" shall mean any person included in the Plan as provided in Article II. Section 1.37 - Payday "Payday" of a Participant shall mean the regular and recurring established day for payment of Compensation to Employees in his classification or position. Section 1.38 - Plan "Plan" shall mean the Griffin Land & Nurseries, Inc. 401(k) Savings Plan. Section 1.39 - Plan Representative "Plan Representative" shall mean any person or persons designated by the Administrator to function in accordance with the Rules of the Plan. Section 1.40 - Plan Year "Plan Year" shall be the twelve consecutive month period commencing on January 1 and ending on December 31, except that the first "Plan Year" shall be the period from the Distribution Date through December 31, 1997. 12 Section 1.41 - Qualified Account "Qualified Account" of a Participant shall mean his individual account in the Trust Fund, if any, established in accordance with Section 5.2(b), pursuant to Sections 3.7 and 3.8. Section 1.42 - Rollover Account "Rollover Account" of a Participant shall mean his individual account in the Trust Fund established in accordance with Section 14.12. Section 1.43 - Rules of the Plan "Rules of the Plan" shall mean the rules adopted by the Administrator pursuant to Section 14.1(a)(ii) for the administration, interpretation or application of the Plan. Section 1.44 - Separation from the Service (a) "Separation from the Service" of an Employee shall mean his resignation from or discharge by the Company or a Company Affiliate, or his death, Normal or Disability Retirement but not his transfer among the Company and Company Affiliates. (b) A leave of absence or sick leave authorized by the Company or a Company Affiliate in accordance with established policies, a vacation period, a temporary layoff for lack of work or a Military Leave shall not constitute a Separation from the Service; provided, however, that (i) continuation upon a temporary layoff for lack of work for a period in excess of twelve months shall be considered a discharge effective as of the twelve month anniversary of the date an Employee is first absent (with or without pay) due to such layoff, and (ii) failure to return to work upon expiration of any leave of absence, sick leave, or vacation or within three days after recall from a temporary layoff for lack of work, or upon expiration of a Military Leave shall be considered a resignation effective as of the date of expiration of any such leave of absence, sick leave, vacation, or Military Leave. Section 1.45 - Service "Service" of an Employee, expressed in days, shall mean the period of elapsed time which, or the sum of such periods each of which, is measured from (a) his first Hour of Service, or his first Hour of Service following a Break in Service Year, as the case may be, to 13 (b)(i) the first day of his first subsequent Break in Service Year, or (ii) the first day of the twelve month period immediately preceding the first day of his first subsequent Break in Service Year if the Break in Service Year occurs for the reasons described in Section 1.9(a)(ii). Section 1.46 - Spousal Consent "Spousal Consent" to an election, designation or other action of a Participant, shall mean the written consent thereto of the Spouse of the Participant, witnessed by a Plan Representative or a notary public, which acknowledges the effect of such election on the rights of the Spouse, and, in the case of consent to a Beneficiary designation, with such designation not being changeable without further Spousal Consent unless the prior Spousal Consent expressly permits such changes without the necessity of further Consent. Spousal Consent shall be deemed to have been obtained if it is established to the satisfaction of the Plan Representative that it cannot actually be obtained because there is no Spouse, or because the Spouse could not be located, or because of such other circumstances as the Secretary of the Treasury by regulation may prescribe. Any Spousal Consent shall be effective only with respect to the Spouse in question. Section 1.47 - Spouse; Surviving Spouse "Spouse" or "Surviving Spouse" of a Participant or former Participant shall mean the spouse to whom he was married throughout the 365-day period ending on the date of his death; provided, however, that to the extent required by a qualified domestic relations order issued in accordance with Code Section 414(p), a former Spouse shall be treated as a Surviving Spouse. Section 1.48 - Statutory Compensation "Statutory Compensation" of a Participant for any Plan Year shall mean his wages and all other payments of compensation for that Plan Year as reported on Form W-2 (currently entitled "wages, tips, other compensation") and as described in Treas. Reg. Section 1.415-2(d)(11)(i) and, effective as of January 1, 1998, including any elective deferral as defined in Code Section 402(g)(3) and any amounts not includable in gross income by reason of Code Section 125 (cafeteria plan) or Code Section 457 (deferred compensation plan of state and local governments and tax-exempt organizations). Section 1.49 - Trust "Trust" shall mean the trust established pursuant to the Trust Agreement. 14 Section 1.50 - Trust Agreement "Trust Agreement" shall mean that certain Trust Agreement Pursuant to Griffin Land & Nurseries, Inc. 401(k) Savings Plan Trust, providing for the investment and administration of the Trust Fund. By this reference, the Trust Agreement is incorporated herein. Section 1.51 - Trust Fund "Trust Fund" shall mean the fund established under the Trust Agreement by contributions made by the Company and Participants pursuant to the Plan and from which any distributions under the Plan are to be made. It shall be composed of separate Investment Funds as permitted under the Rules of the Plan. Section 1.52 - Trustee "Trustee" shall mean the Trustee under the Trust Agreement. Section 1.53 - Vested "Vested," when used with reference to a Participant's Accounts, shall mean non-forfeitable. Section 1.54 - Years of Vesting Service "Years of Vesting Service" of an Employee, measured in years and determined as of the point in time in question, shall mean 1/365th of his days of Service (ignoring any fraction in the result), excluding any days of Service before any contributions are made to his Deferred Compensation Account and before any portion of his Matching Account has become Vested and before five consecutive Break in Service Years. ARTICLE II ELIGIBILITY Section 2.1 - Requirements for Participation (a) Employees of the Company on the Distribution Date who were Participants in the Culbro Companies Incorporated 401(k) Savings Plan as of the date immediately prior to the Distribution Date shall participate in this Plan as of Distribution Date. (b) Except as provided in subsections (c) and (d), any other person who on _______________, 1997 or on the first day of any subsequent calendar month (i) is an Employee, 15 (ii) has completed 365 days of Service, (iii) is not employed in a Bargaining Unit, (iv) has attained his twenty-first birthday, and (v) is not a non-resident alien who receives no earned income from the Company which constitutes income from sources within the United States, shall become a Participant on such day. (c) Any Participant whose participation terminates shall again become a Participant effective as of his first subsequent Hour of Service as an Employee in a position or classification which is not within a Bargaining Unit and who is not a non-resident alien described in Section 2.1(b)(v). (d) A former Employee who was not an Employee on the first day of the calendar month on which he first met all other eligibility requirements shall become a Participant effective as of his first subsequent Hour of Service as an Employee in a position or classification which is not within a Bargaining Unit and who is not a non-resident alien described in Section 2.1(b)(v). Section 2.2 - Notice of Participation On or before the date on which an Employee becomes a Participant, the Administrator shall give him written notice thereof. Section 2.3 - Enrollment Form The Administrator shall provide an enrollment form on which the Participant should set forth (a) his name, date of birth, name of Spouse and other such relevant information, (b) his consent that he, his successors in interest and assigns and all persons claiming under him shall, to the extent consistent with applicable law, be bound by the statements contained therein and the provisions of the Plan and Trust Agreement as they now exist and as they may be amended from time to time, and (c) his statement as to whether he elects to defer Compensation within the limits of Section 3.1, his selection of the amount of his deferral within the limits of Section 3.1, and his authorization for the Company to pay the same to the Trust Fund in accordance with Section 4.1 16 Section 2.4 - Inactive Status (a) A Participant who is transferred directly to a Company Affiliate or to a position or classification which is within a Bargaining Unit or who becomes a non-resident alien described in Section 2.1(b)(v) shall thereupon cease to be an Active Participant. (b) All provisions of the Plan shall otherwise continue to apply to such Participant, except that he shall not defer Compensation under Article III or share in allocations under Article V and Section 16.4 while he is not an Active Participant. (c) If such a Participant is retransferred to a position or classification with the Company which is not within a Bargaining Unit and is not a non-resident alien described in Section 2.1(b)(v), he shall thereupon again be an Active Participant, may again defer Compensation under Article III and shall share in allocations under Article V and Section 16.4. ARTICLE III PARTICIPANTS' DEFERRALS Section 3.1 - Deferral of Compensation Each Participant may elect, in accordance with the Rules of the Plan, to defer for any Plan Year, the lesser of (a) any whole number percentage, which is not less than 1% of his Compensation nor more than a percentage which may be established by the Administrator, for each Payday after his election hereunder in such Plan Year; and (b) such amount as will not cause the total of such deferrals for any calendar year to exceed the excess of $9,500 (adjusted for increases in the cost of living for such calendar year as described in Code Section 402(g)(5)) over any amounts described in Code Section 402(g)(3) for such calendar year and not deferred hereunder. Section 3.2 - Suspension of Deferral A Participant may, upon such prior written notice to the Administrator as is required under the Rules of the Plan, elect to suspend deferral of his Compensation commencing with the first day of next calendar month subsequent to such notice. 17 Section 3.3 - Commencement, Resumption or Change of Deferred Compensation As permitted under the Rules of the Plan, (a) a Participant in the Plan who previously declined to defer a percentage of his Compensation may, upon such prior written notice to the Administrator as is required under the Rules of the Plan, elect to commence deferral of his Compensation under Section 3.1 within the limits thereof; (b) after he has suspended deferral of his Compensation under Section 3.2, a Participant may, upon notice to the Administrator, elect to resume deferral of his Compensation under Section 3.1 within the limits thereof; and (c) a Participant may, upon prior written notice to the Administrator, elect to change his rate of deferral of his Compensation within the limits of Section 3.1. Section 3.4 - Deposit in Trust A Participant's deferrals shall be transmitted to the Trustee in accordance with subsections 4.1(a) and 4.3(a) and shall be invested by the Trustee in accordance with Article VI. Section 3.5 - Withdrawal from Deferred Compensation Account other than for Hardship The Administrator may permit a Participant to make a lump sum withdrawal from his Deferred Compensation Account in the event of (a) a deferral in excess of the limitation of Section 3.1(b), in the amount of principal and interest (computed in a consistent and reasonable manner in accordance with Section 7.2 and Code Section 401(a)(4)) allowed by Code Section 402(g)(2)(A)(ii), (b) a deferral in excess of the limitation of Section 3.8, in the amount of principal and interest allowed by Code Section 401(k)(8) (in which case the Participant shall be deemed to notify the Administrator of such excess amounts made to the Plan and any other plans of the Company or a Company Affiliate), 18 (c) the circumstances specified in Code Section 401(k)(10), in the amount of principal and interest allowed thereunder. See also Section 9.3. Section 3.6 - Hardship Withdrawal from Deferred Compensation Account A Participant may make a withdrawal from his Deferred Compensation Account on account of Hardship, subject to the following requirements: (a) A Participant's aggregate Hardship withdrawals shall not exceed the lesser of (i) the lesser of a the amount by which 1 the aggregate principal amount of his Deferred Compensation Account and his Qualified Account exceeds 2 the unpaid amount due on his outstanding loan or loans, if any under subsection (c)(i) or subsection (d)(iv), and b the amount which is necessary to satisfy the Hardship (including any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution), or (ii) the amount which cannot be satisfied from other resources which are reasonably available to the Participant. (b) Unless the Participant elects that the conditions of subsection (c) and (e) shall apply, the requirements of subsection (d) must be satisfied. (c) The conditions of this subsection are: (i) the Participant shall obtain all distributions (other than Hardship distributions), and all nontaxable loans currently available under all plans maintained by the Company or any Company Affiliate; (ii) the Participant shall not be permitted to make further deferrals of Compensation or voluntary contributions 19 under the Plan (or other plan (whether or not qualified) maintained by the Company or any Company Affiliate) for twelve months thereafter; and (iii) the sum of the Participant's deferrals of Compensation under this Article (and other plans maintained by the Company or any Company Affiliate) in his taxable year in which the Hardship distribution is received and in his next taxable year shall not exceed $9,500 (as adjusted for increases in the cost of living as described in Code Section 402(g)(5)). (d) To meet the requirements of this subsection the Participant must certify to the Administrator in writing that the financial need in question cannot be satisfied (i) through reimbursement or compensation by insurance or otherwise, (ii) by reasonable liquidation of the assets of himself or of those assets which he owns jointly or in common with his spouse, a child, or any other person (but not of property held for his spouse or child under an irrevocable trust or the Uniform Gifts to Minors Act), (iii) by cessation of deferrals under this Article, (iv) by other distributions or nontaxable (at the time of the loan) loans from plans maintained by the Company or by any other employer, or (v) by borrowing from commercial sources on reasonable commercial terms, and the Administrator reasonably relies on such certification and has no actual knowledge to the contrary. (e) The conditions of this subsection, if any, shall be those prescribed by the Commissioner of Internal Revenue through the publication of revenue rulings, notices, and/or other documents of general applicability, as an alternate method under which a Hardship distribution will be deemed to be necessary to satisfy an immediate and heavy financial need. 20 (f) A Participant whose deferrals have been suspended under subsection (c) nevertheless shall be included in determinations under Sections 1.13 and 1.14 if he would otherwise be so included. (g) Hardship withdrawals may not be made more frequently than at twelve month intervals. (h) The Participant's remaining Deferred Compensation Account balance, or, if none, the withdrawal itself shall be reduced by the amount of any administrative expenses charged to the Trust Fund by reason of the withdrawal. Section 3.7 - Other Withdrawals Prohibited Except as provided in Sections 3.5, 3.6, 3.8, 5.5, and 9.3, no distribution shall be made to any Participant from his Deferred Compensation Account, his Qualified Account or any other Account prior to his Separation from the Service. Section 3.8 - Deferral Percentage Fail-Safe Provisions (a) (i) For each Plan Year, the Deferral Percentage with respect to Participants who are Highly Compensated Employees, shall be a not more than 125 percent of, or b not more than two percentage points higher than, and not more than twice, the Deferral Percentage for the preceding Plan Year with respect to Participants who are not Highly Compensated Employees for the preceding Plan Year (using the definition of such term that was in effect during such preceding Plan Year), or such other amount as may be required by Treasury Regulations under Code Section 401(m)(9). The Administrator may elect to apply the current Plan Year's Deferral Percentage for the group of Participants who are not Highly Compensated Employees (using the definition of such term that was in effect during such Plan Year) rather than that of the preceding Plan Year, except that if such election is made, it may not be changed except as provided by the Secretary of the Treasury. (ii) Notwithstanding paragraph (i), for the Plan Year commencing on the Distribution Date the amount taken into account as the Deferral Percentage of Participants who are not Highly Compensated Employees for the preceding Plan Year shall be a 3 percent, or 21 b if the Administrator makes the election permitted by Section 401(k)(3)(E)(ii) of the Code, the actual Deferral Percentage of such Participants determined for such first Plan Year. To the extent necessary to achieve such result (and notwithstanding Section 4.1(a)) as of the end of each Plan Year, the Administrator shall take or cause to be taken one or more of the actions listed in subsection (d). (b) Except as provided in subsection (c), the limitations set forth in subsection (a)(ii) and Section 5.5(a)(i)(a) shall not both be utilized for any Plan Year. (c) The limitation of subsection (b) shall not apply (i) if after the application of subsection (d)(ii), (iii), (iv), and (v) and Section 5.5(b)(ii) and (v) (but only to the extent necessary to meet the requirements of Section 3.8(a)(i)(b) or Section 5.5(a)(i)(a), as applicable) and before the application of paragraph (ii), the sum of the Deferral Percentage and the Contribution Percentage of Participants who are Highly Compensated Employees does not exceed the sum of the Deferral Percentage and the Contribution Percentage of Participants who are not Highly Compensated Employees for the Plan Year in question by more than two percentage points, or (ii) if a the limitation of paragraph (i) is exceeded, and b the sum of the Deferral Percentage and the Contribution Percentage of Participants who are Highly Compensated Employees for such Plan Year does not exceed the greater of 1 the sum of A 125 percent of the greater of the Deferral Percentage, or the Contribution Percentage, of Participants who are not Highly Compensated Employees for the Plan Year in question, and B that percentage which is not more than two percentage points higher than, and not more than twice the lesser of the Deferral Percentage, or the Contribution Percentage, of such group of Participants for such Plan Year, or 22 2 the sum of A 125 percent of the lesser of the Deferral Percentage, or the Contribution Percentage, of the Participants who are not Highly Compensated Employees for the Plan Year in question, and B that percentage which is not more than two percentage points higher than, and not more than twice the greater of the Deferral Percentage, or the Contribution Percentage, of such group of Participants for such Plan Year. (d) In order to achieve the result described in subsections (a) and (b), the following actions shall be taken, as provided under Code Section 401(k), the regulations thereunder and the Rules of the Plan, in the order selected by the Administrator and to the extent necessary: (i) The Administrator shall make the election provided in Section 1.12(b). (ii) Amounts otherwise to be credited under Section 5.3(b) to Matching Accounts for such Plan Year shall be credited instead to Qualified Accounts of the Participants in question. (iii) To the extent permitted by Code Section 401(a)(4) and Treas. Reg. ss. 1.401(k)-1(b)(5) (which are incorporated herein by this reference), the Company may make an additional contribution to the Qualified Accounts of certain Participants which contribution shall be allocated to Participants in inverse order of Compensation received in the Plan Year in question (lowest compensated Participant receiving the first allocation) with each Participant who receives an allocation receiving the maximum allocation permitted by Code Section 415 before any Participant with greater Compensation receives any allocation, until such contribution is fully allocated. (iv) Prior to the end of the following Plan Year, certain amounts described in Section 1.14(a) (and any income thereon earned to the date of distribution computed in a consistent and reasonable manner in accordance with Section 7.2 and Code Section 401(a)(4)) for Highly Compensated Employees shall be reduced according to the Leveling Method and distributed to the Highly Compensated Employees with respect to whom the reduction is made. 23 (e) The amount of any distributions under subsection (d) with respect to a Participant for a Plan Year shall be reduced by any distributions made pursuant to Section 3.5(a) previously distributed to such Participant for his taxable year ending with or within such Plan Year. The amount of any distributions under Section 3.5(a) for any taxable year of a Participant shall be reduced by amounts distributed to such Participant pursuant to subsection (d) for the Plan Year beginning with or within such taxable year. ARTICLE IV CONTRIBUTIONS OF THE COMPANY Section 4.1 - Determination of Annual Contribution (a) Subject to Section 16.4, for each Payday, the Company shall contribute to the Plan for each Participant an amount for his Deferred Compensation Account which is the amount of Deferred Compensation elected by such Participant under Section 3.1 or 3.3. (b) It is the intention of the Company to make recurring and substantial contributions to the Plan for allocation among Participants' Matching Accounts. However, the Company in its sole and absolute discretion reserves the right to fix the amount, if any, of its contribution. Section 4.2 - Maximum Annual Contribution Except for contributions described in Section 14.16, the Company's contribution for any Plan Year shall not exceed the maximum amount deductible by the Company for such Plan Year under Code Section 404(a)(3)(A) and, in any event, shall be less than that amount which would initially result in an Annual Addition of any Participant which exceeds the maximum permissible amount under Section 16.4(a). Section 4.3 - Contribution Date (a) The Company's contributions (i) under Section 4.1(a) shall be made as of the earliest date on which such contributions can reasonably be segregated from the general assets of the Company but not later than the 15th business day of the month following the month in which the deferral is withheld by the Company under Section 3.1 or 3.3, and (ii) under Section 4.1(b) shall be made on a monthly basis, as soon as administratively practicable after the last day of each calendar month. and shall be transmitted to the Trustee and held in the Trust Fund. 24 (b) If the Company makes a contribution after the end of the Plan Year for which the contribution is made (i) the Company shall notify the Trustee in writing that the contribution is made for such Plan Year, (ii) the Company shall claim such payment as a deduction on its federal income tax return for its taxable year coinciding with such Plan Year, and (iii) the Administrator and the Trustee shall treat the payment as a contribution by the Company to the Trust actually made on the last day of such taxable year. ARTICLE V PARTICIPATION IN COMPANY CONTRIBUTIONS AND FORFEITURES Section 5.1 - Deferred Compensation Account The Administrator shall maintain for each Participant a Deferred Compensation Account to which shall be credited the amounts determined under Section 4.1(a), debited amounts withdrawn under Section 3.5, 3.6 and 9.3 and to which shall be debited or credited the amounts determined under Section 7.2 and 16.4. Section 5.2 - Matching Account; Qualified Account (a) The Administrator shall maintain a Matching Account for each Participant to which shall be credited the amounts allocated thereto under Sections 5.3(b) and 5.4 and to which shall be debited or credited the amounts determined under Sections 7.2 and 16.4. (b) The Administrator shall maintain a Qualified Account for each Participant to which shall be credited the amounts allocated thereto under Sections 3.8 and 5.4 and to which shall be debited or credited amounts determined under Sections 7.2 and 16.4. Section 5.3 - Allocation of Company Contributions (a) Except as provided in Section 16.4(a), Company contributions under Section 4.1 shall be allocated as provided therein. (b) Except as provided in Section 16.4(a) and Section 5.5(b)(v), each Participant who deferred Compensation at any time during the Plan Year in question shall share in any Company contribution made pursuant to Section 4.1(b) as follows: 25 (i) a percentage (specified in the announcement by the Company to Participants prior to the commencement of the applicable Plan Year) of the amount of such Participant's Deferred Compensation which is less than or equal to 6% of such Participant's Compensation; and (ii) a percentage (specified in the announcement by the Company to Participants prior to the commencement of the applicable Plan Year, but which is not greater than the percentage specified in subparagraph (i)) of the amount of such Participant's Deferred Compensation which is greater that 6% of such Participant's Compensation. Section 5.4 - Allocation of Forfeitures Amounts forfeited in any Plan Year under Sections 11.2(a)(iii), 12.3 and 14.8 shall be applied under Section 4.1(b) to reduce the Company's contribution for such Plan Year and shall be allocated under Section 5.3(b) as if part of such contribution for such Plan Year. Section 5.5 - Contribution Percentage Fail-Safe Provisions (a) (i) For each Plan Year, the Contribution Percentage with respect to Participants who are Highly Compensated Employees, shall be a not more than 125 percent of, or b (to the extent allowed by regulations under Code Section 401(m)(9)) not more than two percentage points higher than, and not more than twice, the Contribution Percentage for the preceding Plan Year with respect to Participants who are not Highly Compensated Employees for the preceding Plan Year (using the definition of such term that was in effect during such preceding Plan Year), or such other amount as may be required by Treasury Regulations under Code Section 401(m)(9). The Administrator may elect to apply the current Plan Year's Contribution Percentage for the group of Participants who are not Highly Compensated Employees (using the definition of such term as in effect for such Plan Year) rather than that of the preceding Plan Year, except that if such election is made, it may not be changed except as provided by the Secretary of the Treasury. (ii) Notwithstanding paragraph (i), for the Plan Year commencing on the Distribution Date, the amount taken into account as the Contribution Percentage of Participants who are not Highly Compensated Employees for the preceding Plan Year shall be a 3 percent, or 26 b if the Administrator so elects, the actual Contribution Percentage of such Participants for such first Plan Year. (b) In order to achieve the result described in subsections (a) and (c) (and notwithstanding Sections 4.1(b), 5.3(b) and 5.4), as of the end of each Plan Year, the Administrator shall take or cause to be taken any of the following actions, in the order selected by the Administrator, (but after application of Section 3.8) and to the extent necessary: (i) The Administrator shall make the election provided in Section 1.12(b). (ii) Allocations to Deferred Compensation Accounts shall be taken into account for purposes of calculating the Contribution Percentage. (iii) Amounts credited in accordance with Section 5.3(b) to Matching Accounts for such Plan Year shall instead be allocated in disproportionately higher amounts to Participants who are not Highly Compensated Employees and in disproportionately lower amounts to Participants who are Highly Compensated Employees using the same aggregate dollar amounts that would otherwise have been allocated pursuant to Section 5.3(b). (iv) To the extent permitted by Code Section 401(a)(4) and Treas. Reg. ss. 1.401(m)-1(b)(5) (which are incorporated herein by this reference), the Company may make an additional contribution to the Qualified Accounts of certain Participants which contribution shall be allocated to Participants in inverse order of Compensation received in the Plan Year in question (lowest compensated Participant receiving the first allocation) with each Participant who receives an allocation receiving the maximum allocation permitted by Code Section 415 before any Participant with greater Compensation receives any allocation, until such contribution is fully allocated. (v) Prior to the end of the following Plan Year, allocations described in Section 1.13(b) (and any income thereon earned to the date of distribution or forfeiture computed in a consistent and reasonable manner in accordance with Section 7.2 and Code Section 401(a)(4)) for Highly Compensated Employees shall be reduced according to the Leveling Method (and, with respect to matching contributions, in conformity with Treas. Reg. ss. 1.401(m)-1(e)(iv)), and, to the extent Vested, shall be distributed to Participants who are Highly Compensated Employees with respect to whom the reduction is made, and to the extent not Vested shall be forfeited and reallocated under Section 5.4 (as described in Treas. Reg. ss. 1.401(m)-1(e)) but not to Highly Compensated Employees whose allocations are reduced or forfeited under this paragraph. 27 (c) If the limitation set forth in Section 3.8(a)(i)(b) is utilized for any Plan Year, the limitation of subsection (a)(ii) shall not also be used for such Plan Year, and vice versa, except as provided in Section 3.8(c). Section 5.6 - Reemployment Rights after Qualified Military Service (a) Solely for purposes of this Section 5.6, the following definitions shall apply: (i) "Qualified Military Service" shall mean any service in the uniformed services (as defined in chapter 43 of title 38, United States Code) by any individual if such individual is entitled to reemployment rights under such chapter with respect to such service. (ii) "Compensation" shall mean a Compensation the Employee would have received during his period of Qualified Military Service if the Employee were not in Qualified Military Service, determined based on the rate of pay the Employee would have received from the Company but for absence during his period of Qualified Military Service, or b if the Compensation the Employee would have received during his period of Qualified Military Service was not reasonably certain, the Employee's average Compensation from the Company during the 12-month period immediately preceding the Qualified Military Service (or, if less, the period of employment immediately preceding the Qualified Military Service). (b) A Participant who leaves the Company as a result of Qualified Military Service and returns to employment with the Company may elect during the period described in subsection (c) to make additional deferrals to his Deferred Compensation Account under the Plan in the amount determined under subsection (d) or such lesser amount, as elected by the Participant. (c) The period determined under this subsection shall be the period which begins on the date of the Employee's reemployment with the Company after his Qualified Miliary Service that extends until the lesser of (i) the product of 3 and the period of Qualified Military Service, and (ii) 5 years. (d) The amount described in this subsection is the maximum amount of deferrals to the Participant's Deferred Compensation Account that the Participant would have 28 been permitted to make in accordance with the limitations described in subsection (f)(i) during the Participant's period of Qualified Military Service if the Participant had continued to be employed by the Company during such period and received Compensation. Proper adjustment shall be made for any contributions actually made during the Participant's period of Qualified Military Service. (e) If the Participant elects to make deferrals to his Deferred Compensation Account under subsection (b), the Company shall make such a matching contribution to his Matching Account with respect to such deferrals and/or contributions as would have been required under the Plan had such deferrals and/or contributions actually been made during the period of such Qualified Military Service. (f) If any deferral or contribution is made by a Participant or the Company pursuant to this Section, (i) such deferral or contribution shall not be subject to any otherwise applicable limitation contained in Code Section 402(g), 404(a) or 415 and shall not be taken into account in applying such limitations to other deferrals, contributions or benefits under the Plan or any other plan, with respect to the Plan Year in which the deferral or contribution is made, (ii) such deferral or contribution shall be subject to the limitations described in paragraph (i) with respect to the Plan Year to which the deferral or contribution relates in accordance with the rules prescribed by the Secretary of the Treasury, (iii) the Plan shall not be treated as failing to meet the requirements of Code Section 401(a)(4), 401(k)(3), 401(k)(11), 401(k)(12), 401(m), 410(b) or 416 by reason of the making of (or the right to make) such deferral or contribution. (g) The Company shall not credit earnings on any deferral or contribution made under this Section before such deferral or contribution is actually made. (h) A Participant reemployed under subsection (b) shall be treated as not incurring a Break in Service Year by reason of his period of Qualified Military Service. For purposes of calculating the Participant's Years of Vesting Service, the Participant shall be credited with an Hour of Service for each hour which would have been credited to him but for his Qualified Military Service. ARTICLE VI INVESTMENT OF ACCOUNTS Section 6.1 - Investment Options 29 (a) As permitted under the Rules of the Plan and upon such prior written notice to the Administrator as is required under the Rules of the Plan, a Participant may elect (i) effective upon becoming a Participant and as of the dates set forth in the Rules of the Plan, to have contributions for such Plan Year to his Accounts held and invested entirely in any one or more Investment Funds in such proportions as are permitted under the Rules of the Plan, or to change any prior such election, and/or (ii) effective only as of the dates set forth in the Rules of the Plan, to have his Accounts as then stated, held and invested under any investment option or options available under paragraph (i) (which option shall be the same option elected for current contributions to his Accounts under paragraph (i)) or to change any prior such election. (b) As permitted under the Rules of the Plan and upon such prior written notice to the Administrator as is required under the Rules of the Plan, a Beneficiary may elect to have his Accounts held and invested under any investment option or options available under subsection (a) or to change any prior such election. (c) Any such election under subsection (a)(i) or subsection (b) shall remain in effect until revoked or modified by the Participant or Beneficiary, as applicable. In case Accounts are invested in more than one Investment Fund, changes in proportions due to investment results shall not require any transfer of values between Investment Funds unless the Participant or Beneficiary so elects under subsection (a)(ii) or subsection (b), as applicable. (d) Purchases and sales of assets in the Investment Funds as required under this Section shall be made within a reasonable time after the election made in subsection (a), and Participants' or Beneficiaries' Accounts shall be adjusted to reflect amounts actually realized or paid in such transactions. Section 6.2 - Description of Investment Funds In making any investment election under Section 6.1, a Participant or Beneficiary shall acknowledge receipt from the Administrator of a description of the Investment Funds and the investment objectives thereof. Section 6.3 - Effect of Non-Election If a Participant or Beneficiary fails or declines to make an election under Section 6.1, the Participant's or Beneficiary's Accounts shall be held in one or more Investment Funds as directed by the Administrator. 30 ARTICLE VII VALUATION OF THE TRUST FUND AND ACCOUNTS Section 7.1 - Determination of Values As of the end of each business day, the Administrator shall determine the fair market value of each asset in each Investment Fund in compliance with the principles of Section 3(26) of ERISA and regulations issued pursuant thereto, based upon information reasonably available to it including data from, but not limited to, newspapers and financial publications of general circulation, statistical and valuation services, records of securities exchanges, appraisals by qualified persons, transactions and bona fide offers in assets of the type in question and other information customarily used in the valuation of property for purposes of the Code. The value of any real property held in the Trust Fund determined as of the end of any Plan Year shall be considered to remain unchanged until the end of the following Plan Year. With respect to securities for which there is a generally recognized market, the published selling prices on or nearest to such valuation date shall establish the fair market value of such security. Fair market value so determined shall be conclusive for all purposes of the Plan and Trust. Section 7.2 - Allocation of Values The difference between the total value of the assets of each Investment Fund, as determined under Section 7.1, and the total of the Accounts therein, shall be allocated by the Administrator among such Accounts in proportion to their respective average stated values during the period since the last allocation of values hereunder, as determined under the Rules of the Plan, such values and determinations being made without taking into account deferrals of Compensation or Company contributions attributable to the period as provided under Section 7.1, ending on such valuation date or allocations of forfeitures for the Plan Year under Article V; provided, however, that gains and losses shall not be allocated with respect to amounts being held in suspense under Section 16.4(b). Section 7.3 - Applicability of Account Values The value of an Account, as determined as of a given date under this Article, plus any amounts subsequently credited thereto under Sections 5.1, 5.2, 5.3, 5.4, 5.5, 3.8, 7.2, 11.2(a)(iii), 12.3, 14.8 and 16.4 and less any amounts withdrawn under Sections 3.5, 3.6, and 9.3 or transferred to suspense under Section 16.4(b), shall remain the value thereof for all purposes of the Plan and Trust until revalued hereunder. 31 ARTICLE VIII VESTING OF INTERESTS Section 8.1 - Vesting of Accounts (a) Each Participant's interest in his Rollover Account, his Qualified Account, and his Deferred Compensation Account shall be Vested at all times. (b) Except as provided in Sections 8.2 and 13.3, the Vested portion of a Participant's Matching Account shall be the percentage of such Account shown on the following tables: Years of Vesting Vested Service Percentage ---------------- ---------- less than 5 0% 5 (or more) 100% Section 8.2 - Additional Vesting of Accounts The interest of a Participant in his Matching Account shall become fully Vested upon the earliest to occur of (a) his death, (b) the later of his sixty-fifth birthday or the fifth anniversary of the date he commences participation in the Plan, (c) his Disability Retirement Date, or (d) the termination or discontinuation of the Plan under Section 15.1, if he is then an affected Employee or employed by a Company Affiliate. ARTICLE IX EMPLOYMENT AFTER NORMAL RETIREMENT DATE Section 9.1 - Continuation of Employment (a) A Participant may, subject to subsection (b) and Section 16.3, remain in the employ of the Company or a Company Affiliate after attaining his Normal Retirement Date. 32 (b) Notwithstanding subsection (a), the Company reserves the right to require a Participant to retire in accordance with Section 12(c) of the Age Discrimination in Employment Act of 1967, as amended and applicable state law. Section 9.2 - Continuation of Participation A Participant retained in the employ of the Company after his Normal Retirement Date under Section 9.1 shall continue as an Active Participant herein. Section 9.3 - Mandatory In-Service Distributions A Participant who is a five percent owner (as defined in Code Section 416) with respect to the Plan Year ending in the calendar year in which the Employee attains age seventy and one half shall receive or commence the receipt of the entire amount credited to his Accounts in accordance with Section 10.3(a), (b), (c) and (d)(ii) on the April 1 following the end of the calendar year in which he attains age seventy and one half. ARTICLE X BENEFITS UPON RETIREMENT Section 10.1 - Normal or Disability Retirement Subject to the provisions of Section 9.1, a Participant shall retire upon his Normal or Disability Retirement Date. Section 10.2 - Rights Upon Normal or Disability Retirement Upon a Participant's Normal or Disability Retirement, he shall be entitled to receive the entire amount credited to his Accounts in accordance with Section 10.3. Section 10.3 - Distribution of Accounts (a) If the entire amount credited to a Participant's Accounts does not exceed $3,500 (and did not exceed such amount at the time of a prior distribution under Sections 3.5, 3.6, and 9.3), such Participant shall receive such amount in one lump sum. (b) If the entire amount credited to a Participant's Accounts exceeds $3,500 (or exceeded such amount at the time of a prior distribution under Section 3.5, 3.6 and 9.3), such Participant shall receive: (i) Payment of such amount in one lump sum, or (ii) If the Participant so elects, Payment of such amount directly from the Trust Fund (as adjusted for gains and losses), in uniform installments of at least $100 payable monthly, quarterly, semi-annually, or 33 annually (as to which the Participant (or his Spouse, if applicable) may elect whether the recalculation rule of Code Section 401(a)(9)(D) shall apply and provided, however, that the first installment may be larger than the remaining installments) to such Participant over a period not longer than the joint and last survivor expectancy of him and his Spouse, if any, reasonably determined from the expected return multiples prescribed in Treas. Reg. ss. 1.72-9, or, if he is not married, over a period not longer than the lesser of a the joint and last survivor expectancy of him and his Beneficiary, reasonably determined from the expected return multiples prescribed in Treas. Reg. ss. 1.72-9, or b the period determined under Proposed Treas. Reg. ss. 1.401(a)(9)-2 A-4 which satisfies the minimum distribution incidental benefit requirement of Code Section 401(a)(9)(G), provided, however, if such Participant fails to make such an election, his Accounts shall be distributed as provided in paragraph (i). (c) At any time before distribution under subsection (b) is made or commences, the Participant may elect to defer such distribution until such later date as he shall then or subsequently specify; provided, however, (i) such date shall be no later than the date referred to in subsection (d)(ii) or (d)(iii), and (ii) if no such date is specified, such amount shall be distributed in one lump sum on the date specified in subsection (d)(ii) or (d)(iii). (d) Distribution under subsection (a) or (b) shall be made or commence not later than the earliest to occur of (i) sixty days after the end of the Plan Year in which such Normal Retirement or Disability Retirement occurs, or (ii) if he is not a five percent owner (as defined in Code Section 416) of the Company with respect to a Plan Year ending in the calendar year in which he attains age seventy and one half, the later of a the April 1 following the calendar year in which his Separation from the Service occurs, or b the April 1 following the calendar year in which he attains age seventy and one half, 34 (iii) if he is such an owner, the April 1 following the calendar year in which he attains age seventy and one half, except as provided in subsection (c). Section 10.4 - Determination of Value of Accounts (a) If a distribution is made under Section 10.3(d), the value of the Participant's Accounts shall be determined as of the valuation date under Article VII next following the Participant's retirement; provided, however, if the distribution is made under Section 10.3(d)(ii) or 10.3(d)(iii), the value of the Participant's Accounts shall be determined as of the valuation date under Article VII which precedes the date specified in Section 10.3(d)(ii) or 10.3(d)(iii) by a period of not less than 30 days or such longer period as is administratively necessary. (b) If a distribution is made under Section 10.3(c), the value of the Participant's Accounts shall be determined as of the valuation date under Article VII next following the date elected by him under Section 10.3(c); provided, however, if the distribution is made under Section 10.3(c)(i), the value of the Participant's Accounts shall be determined as of the valuation date under Article VII which precedes the date specified in Section 10.3(c)(i) by a period of not less than 30 days or such longer period as is administratively necessary. ARTICLE XI BENEFITS UPON DEATH Section 11.1 - Designation of Beneficiary (a) Each Participant or former Participant shall have the right to designate, revoke and redesignate Beneficiaries hereunder and to direct payment of the Vested amount credited to his Accounts to such Beneficiaries. (b) Designation, revocation and redesignation of Beneficiaries must be made in writing in accordance with the Rules of the Plan on a form provided by the Administrator and shall be effective upon delivery to the Administrator. (c) A married Participant may not designate any Beneficiary other than his Spouse without obtaining Spousal Consent thereto. Section 11.2 - Distribution on Death (a) Upon the death of a Participant or former Participant, the Vested amount credited to his Accounts (as determined under Section 8.2) shall be paid in one lump sum not later than ninety days following the Participant's death (or such longer reasonable period as is permitted under Treas. Reg. ss. 1.401(a)-20 A-3(b)(1)) to his then Surviving Spouse, if any, 35 except to the extent, if any, to which such Surviving Spouse has consented under Section 11.1(c) to the designation of other beneficiaries and otherwise, to the person or persons of highest priority who survive him by at least thirty days determined as follows: (i) First, to his then surviving highest priority Beneficiary or Beneficiaries, if any. (ii) Second, to his then surviving heirs at law, if any, as determined in the reasonable judgment of the Administrator under the laws governing succession to personal property of the last jurisdiction in which the Participant was a resident. (iii) Third, to Participants in the Plan to the Plan to be applied to reduce the Company's contribution under Section 4.1(b). (b) Members of a class shall cease to be entitled to benefits upon the earlier of the Administrator's determination that no members of such class exist or the Administrator's failure to locate any members of such class, after making reasonable efforts to do so, within one year after the members of that class became entitled to benefits hereunder had members existed. (c) If payment has commenced prior to the Participant's death, payment of the Participant's Accounts shall be made in such manner that the remaining interest is distributed at least as rapidly as under the method being used as of the date of the Participant's death. Section 11.3 - Determination of Value of Accounts For purposes of this Article, the value of a Participant's Accounts shall be that determined as of the valuation date under Article VII next following the date of the death of the Participant unless the distribution occurs prior to the next following valuation date, in which case, such value shall be determined as of the valuation date under Article VII which precedes the distribution date by a period of not less than 30 days or such longer period as is administratively necessary. ARTICLE XII BENEFITS UPON RESIGNATION OR DISCHARGE Section 12.1 - Distributions on Resignation or Discharge A Participant who has a Separation from the Service due to resignation or discharge shall receive, (a) if the Vested amount credited to his Accounts does not exceed $3,500 (and did not exceed such amount at the time of a prior distribution under Sections 3.5 and 3.6), such amount in one lump sum not later than six months after the end of the Plan Year in which such Separation from the Service 36 occurs, or, if earlier, within sixty days after the end of the Plan Year in which his sixty-fifth birthday occurs, or (b) if the Vested amount credited to his Accounts exceeds $3,500 (or exceeded such amount at the time of a prior distribution under Sections 3.5 and 3.6), such amount in one lump sum payable on such date as he shall at any time elect in writing in accordance with Code Section 411(a)(11) and the Rules of the Plan, but not earlier than the earliest date described in subsection (a) and not later than the April 1 following the calendar year of his attainment of age seventy and one half. Section 12.2 - Determination of Value of Accounts (a) If a distribution is made under Section 12.1(a), the value of the Participant's Accounts shall be determined as of the valuation date under Article VII next following the Participant's Separation from the Service. (b) If a distribution is made under Section 12.1(b), the value of the Participant's Accounts shall be determined as of the valuation date under Article VII next following the date elected by him under Section 12.1(b); provided, however, if the date elected by the Participant is the April 1 following the calendar year of his attainment of age seventy and one half, the value of his Accounts shall be determined as of the valuation date under Article VII which precedes such date by a period of not less than 30 days or such longer period as is administratively necessary. Section 12.3 - Forfeitures (a) If a Participant has a Separation from the Service due to resignation or discharge, the portion of his Matching Account which is not Vested shall be forfeited upon the earlier of his receipt of his distribution under this Article or his completion of five consecutive Break in Service Years. Pending application under Section 5.4, forfeitures shall be held in suspense and shall not be commingled with amounts held in suspense under Section 16.4. (b) If a Participant has a Separation from the Service prior to becoming Vested in any portion of his Matching Account under Section 8.1, a distribution shall be deemed to have occurred upon such Separation from the Service for purposes of subsection (a). Section 12.4 - Restoration of Forfeitures If a Participant whose Matching Account is not then fully Vested (a) has a Separation from the Service, (b) suffers a forfeiture under Section 12.3 of the portion of such Account which is not Vested, 37 (c) again becomes an Employee or employed by a Company Affiliate before he has five consecutive Break in Service Years, and (d) repays to the Plan the full amount, if any, distributed to him from such Account before the end of five consecutive Break in Service Years commencing after his distribution, or, if earlier, the fifth anniversary of his reemployment, then the amount forfeited under Section 12.3 by such Participant shall be restored to his Matching Account, applying forfeitures pending application and Company contributions, in that order, as necessary. ARTICLE XIII TOP-HEAVY PROVISIONS Section 13.1 - Top-Heavy Determination (a) Solely in the event that this Plan ever becomes Top-Heavy, as defined herein, the provisions of this Article shall apply. (b) Solely for the purposes of this Article, the following definitions shall be used: (i) "Aggregation Group" shall mean a each plan of the Company or a Company Affiliate in which a Key Employee is a Participant (including any such plan which has been terminated if such plan was maintained by the Company or Company Affiliate within the last five years ending on the Determination Date for the Plan Year in question), and b each other plan of the Company or a Company Affiliate which enables any plan described in paragraph a to meet the requirements of Code Section 401(a)(4) or 410. (ii) "Determination Date" shall mean, with respect to any Plan Year, the last day of the preceding Plan Year, or in the case of the first Plan Year, the last day of such Plan Year. (iii) "Controlled Group Employee" shall mean any person who renders services to the Company or a Company Affiliate in the status of an employee as the term is defined in Code Section 3121(d). (iv) "Key Employee" shall mean a Controlled Group Employee, a former Controlled Group Employee or the Beneficiary of a former Controlled 38 Group Employee, if, in the Plan Year containing the Determination Date or in any of the four preceding Plan Years, such Controlled Group Employee or former Controlled Group Employee is or was a an officer of the Company or a Company Affiliate whose Statutory Compensation for the Plan Year in question exceeds fifty percent of the amount in effect under Code Section 415(b)(1)(A) (not more than fifty Controlled Group Employees or, if less, the greater of three Controlled Group Employees or ten percent of the Controlled Group Employees shall be treated as officers), b one of the ten Controlled Group Employees owning (or considered as owning within the meaning of Code Section 318) both the largest interest in the Company or a Company Affiliate and more than one-half of one percent interest therein and whose Statutory Compensation for the Plan Year in question equals or exceeds the amount in effect under Code Section 415(c)(1)(A); provided, however, if two Controlled Group Employees have the same interest in the Company or a Company Affiliate, the Controlled Group Employee with the greater Statutory Compensation for such Plan Year shall be treated as having the larger interest, c a five percent owner (within the meaning of Code Section 416(i)(1)(B) and (C)) of the Company or a Company Affiliate or a one percent owner (within the meaning of Code Section 416(i)(1)(B) and (C)) of the Company or a Company Affiliate whose Statutory Compensation for the Plan Year in question exceeds $150,000. (v) "Non-Key Employee" shall mean any Controlled Group Employee who is not a Key Employee. (vi) The Plan shall be Top-Heavy if, as of any Determination Date, the aggregate of the Accounts of Key Employees under all plans in the Aggregation Group (or under this Plan and such other plans as the Company elects to take into account under Code Section 416(g)(2)(A)(ii)) exceeds sixty percent of the aggregate of the Accounts for all Key Employees and Non-Key Employees. In making this calculation as of a Determination Date, a each Account balance as of the most recent valuation date occurring within the Plan Year which includes the Determination Date shall be determined, 39 b an adjustment for contributions due as of the Determination Date shall be determined, c the Account balance of any Controlled Group Employee or former Controlled Group Employee shall be increased by the aggregate distributions made during the five-year period ending on the Determination Date with respect to such Controlled Group Employee or former Controlled Group Employee, d the Account balance of 1 any Non-Key Employee who was a Key Employee for any prior Plan Year, and 2 any former Controlled Group Employee who performed no services for the Company or a Company Affiliate during the five-year period ending on the Determination Date shall be ignored, and e if there have been any rollovers to or from any Account, the balance of such Account shall be adjusted, as required by Code Section 416(g)(4)(A). Notwithstanding the foregoing, this Plan shall be Top-Heavy if, as of any Determination Date, it is required by Code Section 416(g) to be included in an Aggregation Group which is determined to be a Top-Heavy Group. (vii) "Top-Heavy Group" shall mean any Aggregation Group if, as of the Determination Date, the sum of a the present value of the cumulative accrued benefits for all Key Employees under all defined benefit plans in such Aggregation Group, and b the aggregate of the accounts of all Key Employees under all defined contribution plans in such Aggregation Group exceeds sixty percent of a similar sum determined for all Key Employees and Non-Key Employees. 40 (viii) "Statutory Compensation" shall have the meaning set forth in Section 1.28(b). Section 13.2 - Minimum Benefits (a) For any Plan Year in which the Plan is Top-Heavy, the total allocation to the Qualified Account and Matching Account of any Employee who is a Non-Key Employee at the end of such Plan Year and is (i) entitled to an allocation to such Account under Section 5.3, or (ii) not entitled to an allocation under such Section solely because he did not elect to defer Compensation under Section 3.1 or 3.3 of the Plan, shall not be less than that determined under subsection (b). (b) The allocation determined under this subsection shall be a percentage of the Statutory Compensation of such Non-Key Employee which is not less than the lesser of (i) three percent, or (ii) that percentage reflecting the ratio of a the allocations under Sections 5.3 and 5.4 to b Statutory Compensation (not in excess of the limit in effect under Code Section 401(a)(17) as adjusted for increases in the cost of living) for the Key Employee with respect to whom such ratio is highest for such Plan Year. (c) An Employee described in subsection (a)(ii) shall be treated as a Participant hereunder. Section 13.3 - Vesting (a) For any Plan Year in which the Plan is Top-Heavy, the Vested percentage of the Matching Account of each Participant who completes an Hour of Service in such Plan Year shall be the percentage of such Account shown on the following table: 41 Years of Vested Vesting Service Percentage --------------- ---------- less than 2 0% 2 20% 3 40% 4 60% 5 (or more) 100% (b) The Vested percentage of a Participant's Matching Account shall be not less than the Vested percentage determined as of the last day of the last Plan Year in which the Plan was not Top-Heavy. (c) For any Plan Year in which the Plan is not Top-Heavy which follows one or more Plan Years for which the Plan has been Top-Heavy, Article VIII shall again become applicable as an amendment to the Plan; thus, each Participant who has had his Vested percentage computed under subsection (a) and who has completed at least three Years of Vesting Service shall be permitted to elect to have his Vested percentage computed in accordance with subsection (a) for such Plan Year and any subsequent Plan Year in which the Plan is no longer Top-Heavy. Such Participant may make such election within an election period beginning no later than the first day of the first Plan Year in which the Plan is no longer Top-Heavy and ending no later than the later of (i) the sixtieth day of such Plan Year, or (ii) a date which is sixty days after the day the Participant is issued written notice of his right to make such election by the Administrator. Section 13.4 - Limitation on Benefits For any Plan Year in which the Plan is Top-Heavy, (a) the denominator of both the defined benefit plan fraction and the defined contribution plan fraction set forth in Code Sections 415(e)(2)(B) and 415(e)(3)(B), respectively, shall be adjusted by substituting 1.0 for 1.25, and (b) the numerator of the "transition fraction" described in Code Section 415(e)(6)(B)(i) shall be calculated by substituting $41,500 for $51,875, but only to the extent required by Code Section 416(h). 42 ARTICLE XIV ADMINISTRATIVE PROVISIONS Section 14.1 - Duties and Powers of the Administrator (a) The Administrator shall administer the Plan in accordance with the Plan and ERISA and shall have full discretionary power and authority: (i) To engage actuaries, attorneys, accountants, appraisers, brokers, consultants, administrators, physicians or other firms or persons and (with its officers, directors and Employees) to rely upon the reports, advice, opinions or valuations of any such persons except as required by law; (ii) To adopt Rules of the Plan that are not inconsistent with the Plan or applicable law and to amend or revoke any such rules; (iii) To construe the Plan and the Rules of the Plan; (iv) To determine questions of eligibility and vesting of Participants; (v) To determine entitlement to allocations of contributions and forfeitures and to distributions of Participants, former Participants, Beneficiaries, and all other persons; (vi) To make findings of fact as necessary to make any determinations and decisions in the exercise of such discretionary power and authority; (vii) To appoint claims and review officials to conduct claims procedures as provided in Section 14.6; and (viii) To delegate any power or duty to any firm or person engaged under paragraph (i) or to any other person or persons. (b) Every finding, decision, and determination made by the Administrator shall, to the full extent permitted by law, be final and binding upon all parties, except to the extent found by a court of competent jurisdiction to constitute an abuse of discretion. Section 14.2 - Expenses of Administration (a) The Company shall indemnify and hold each Employee functioning under Section 14.1(a) or person serving on an investment committee established in accordance with the Trust Agreement harmless from all claims, liabilities and costs (including reasonable attorneys' fees) arising out of the good faith performance of his functions hereunder. 43 (b) The Company may obtain and provide for any such Employee and investment committee member described in subsection (a), at the Company's expense, liability insurance against liabilities imposed on him by law. (c) The Plan shall pay reasonable administrative expenses of the Plan, including, but not limited to, expenses of any such Employee and investment committee member described in subsection (a) and legal fees incurred for services related to the administration of the Plan (including the amending of the Plan); provided, however, that the Company may elect, in its sole and absolute discretion, to pay such administrative expenses from its own assets. Section 14.3 - Payments In the event any amount becomes payable under the Plan to a minor or a person who, in the sole judgment of the Administrator, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor, the Administrator may direct that such payment be made to any person found by the Administrator, in its sole judgment, to have assumed the care of such minor or other person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Trustee, the Administrator and the Company and their officers, directors, employees, owners, agents and representatives. Section 14.4 - Statement to Participants Within one hundred eighty days after the end of each Plan Year, the Administrator shall furnish to each Participant a statement setting forth the value of his Accounts and the Vested percentage thereof and such other information as the Administrator shall deem advisable to furnish. Section 14.5 - Inspection of Records Copies of the Plan and any other documents and records which a Participant is entitled by law to inspect shall be open to inspection by such Participant or such Participant's duly authorized representatives at any reasonable business hour at the principal office of the Company, any Company work site at which at least fifty Employees regularly perform services and such other locations as the Secretary of Labor may require. Section 14.6 - Claims Procedure (a) A claim by a Participant, former Participant, Beneficiary or any other person shall be presented to the claims official appointed by the Administrator in writing within the maximum time permitted by law or under the regulations promulgated by the Secretary of Labor or his delegate pertaining to claims procedures. (b) The claims official shall, within a reasonable time, consider the claim and shall issue his determination thereon in writing. 44 (c) If the claim is granted, the appropriate distribution or payment shall be made from the Trust Fund or by the Company. (d) If the claim is wholly or partially denied, the claims official shall, within ninety days (or such longer period as may be reasonably necessary), provide the claimant with written notice of such denial, setting forth, in a manner calculated to be understood by the claimant (i) the specific reason or reasons for such denial, (ii) specific references to pertinent Plan provisions on which the denial is based, (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary, and (iv) an explanation of the Plan's claim review procedure. (e) The Administrator shall provide each claimant with a reasonable opportunity to appeal the claims official's denial of a claim to a review official (appointed by the Administrator in writing) for a full and fair review. The claimant or his duly authorized representative (i) may request a review upon written application to the review official (which shall be filed with it), (ii) may review pertinent documents, and (iii) may submit issues and comments in writing. (f) The review official may establish such time limits within which a claimant may request review of a denied claim as are reasonable in relation to the nature of the benefit which is the subject of the claim and to other attendant circumstances but which, in no event, shall be less than sixty days after receipt by the claimant of written notice of denial of his claim. (g) The decision by the review official upon review of a claim shall be made not later than sixty days after his receipt of the request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than one hundred twenty days after receipt of such request for review. (h) The decision on review shall be in writing and shall include specific reasons for the decision written in a manner calculated to be understood by the claimant with specific references to the pertinent Plan provisions on which the decision is based. 45 (i) The claims official and the review official shall have full discretionary power and authority to construe the Plan and the Rules of the Plan, to determine questions of eligibility, vesting and entitlements and to make findings of fact as under Section 14.1 and, to the extent permitted by law, the decision of the claims official (if no review is properly requested) or the decision of the review official on review, as the case may be, shall be final and binding on all parties except to the extent found by a court of competent jurisdiction to constitute an abuse of discretion. Section 14.7 - Conflicting Claims If the Administrator is confronted with conflicting claims concerning a Participant's Accounts, the Administrator may interplead the claimants in an action at law, or in an arbitration conducted in accordance with the rules of the American Arbitration Association, as the Administrator shall elect in its sole discretion, and in either case, the attorneys' fees, expenses and costs reasonably incurred by the Administrator in such proceeding shall be paid from the Participant's Accounts. Section 14.8 - Effect of Delay or Failure to Ascertain Amount Distributable or to Locate Distributee (a) If an amount payable under Article X, XI or XII cannot be ascertained or the person to whom it is payable has not been ascertained or located within the stated time limits and reasonable efforts to do so have been made, then distribution shall be made not later than sixty days after such amount is determined or such person is ascertained or located, or as prescribed in subsection (b). (b) If, within one year after a Participant has a Separation from the Service, the Administrator, in the exercise of due diligence, has failed to locate him (or if such Separation from the Service is by reason of his death, has failed to locate the person entitled to his Vested Accounts under Section 11.2), his entire distributable interest in the Plan shall be applied to reduce the Company's contribution under Section 4.1(b); provided, however, that if the Participant (or in the case of his death, the person entitled thereto under Section 11.2) makes proper claim therefor under Section 14.6, the amount so forfeited shall be restored to the Participant's Account or Accounts, as the case may be, applying forfeitures pending application, Company contributions and unallocated earnings and gains of the Trust Fund, in that order, as necessary. Section 14.9 - Service of Process The Secretary of the Company is hereby designated as agent of the Plan for the service of legal process. Section 14.10 - Limitations Upon Powers of the Administrator The Plan shall not be operated so as to discriminate in favor of Highly Compensated Employees. The Plan shall be uniformly and consistently interpreted and applied 46 with regard to all Participants in similar circumstances. The Plan shall be administered, interpreted and applied fairly and equitably and in accordance with the specified purposes of the Plan. Section 14.11 - Effect of Administrator Action Except as provided in Section 14.6, all actions taken and all determinations made by the Administrator in good faith shall be final and binding upon all Participants, the Trustee and any person interested in the Plan or Trust Fund. Section 14.12 - Contributions to Rollover Accounts (a) A Participant may make a contribution to his Rollover Account if such contribution meets the requirements of this Section and is in accordance with the Rules of the Plan. (b) Such contribution will meet the requirements of this Section if (i) it is made by the Participant to the Trust in cash in a lump sum not later than two months after his admission or re-admission to the Plan, and (ii) the amount contributed by the Participant consists of a an Eligible Rollover Distribution as defined in Code Section 402(c)(4) from 1 a qualified trust meeting the requirements of Code Section 402(c)(8), or 2 an employee annuity plan meeting the requirements of Code Section 403(a)(1), or b a tax-free rollover distribution from an individual retirement account or an individual retirement annuity which in turn consisted entirely of an Eligible Rollover Distribution (as defined in Code Section 402(c)(4) from a qualified trust under Code Section 401(a) or an annuity plan under which the Participant was an employee within the meaning of Code Section 401(c)(1) at the time contributions were made on his behalf under the Plan) together with any earnings thereon, and which otherwise meets the requirements of Code Section 408(d)(3). (c) In addition, such contribution will meet the requirements of this Section if 47 (i) the contribution is made within sixty days following the day on which the Participant received the distribution from a qualified trust, annuity plan or individual retirement account or annuity, (ii) such distribution was in the form of money, and (iii) such distribution constituted an Eligible Rollover Distribution within the meaning of Code Section 402(c)(4), no part of which consists of employee contributions. (d) The Administrator may require the Participant to supply information sufficient to determine if his contribution meets the requirements of this Section. If the Administrator determines that such contribution does not meet the requirements of this Section, the contribution shall not be permitted. (e) The Plan will also accept the direct transfer from a plan qualified under Code Section 401(a) of an amount which if paid to the Participant instead of the Plan would have constituted an Eligible Rollover Distribution within the meaning of Code Section 402(c)(4). Such a plan-to-plan transfer must be received by the Trustee within two months after the Participant's admission or re-admission to the Plan. The transferred amount shall be credited to the Participant's Rollover Account. (f) If the Administrator accepts a contribution or transfer pursuant to this Section and later determines that it was improper to do so, in whole or in part, the Plan shall refund the necessary amount to the Participant. Section 14.13 - Direct Rollovers Notwithstanding any provision of the Plan to the contrary, a Distributee may elect, at the time and in the manner prescribed by the Administrator under the Rules of the Plan, to have all or any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan designated by the Distributee in a Direct Rollover. Section 14.14 - Loans to Participants or Former Participants, Spouses or Beneficiaries (a) A Participant, former Participant, Spouse or Beneficiary ("Borrower") may borrow against his Deferred Compensation Account, and/or his Matching Account, and/or his Qualified Account and/or his Rollover Account with the approval of the Administrator in accordance with the provisions of subsection (b). (b) The Administrator shall establish by Rules of the Plan the requirements for loans from the Trust Fund and conditions therefor. Such Rules of the Plan shall be consistent with the following requirements: 48 (i) The Borrower must be a "party in interest" within the meaning of ERISA Section 3(14) on the date the loan is made. (ii) Loans shall not be made available to an individual who is an owner-employee (as defined in Code Section 401(c)(3)) of the Company or a Company Affiliate or a shareholder-employee (as defined in Code Section 1379(d)) of the Company or a Company Affiliate or a member of the family (as defined in Code Section 267(c)(4)) of an owner-employee or shareholder- employee. (iii) The minimum amount which a Borrower may borrow at any one time under this Section is $1,000.00. (iv) The maximum amount which a Borrower may borrow from the Trust Fund shall be an amount which when added to the outstanding balance of all other loans from the Plan and from other qualified plans of the Company or a Company Affiliate does not exceed the lesser of a $50,000 reduced by the excess (if any) of 1 the highest outstanding balance of loans from the Plan during the one year period ending on the day before the date on which the loan is made, over 2 the outstanding balance of loans from the Plan on the date on which such loan was made; or b half of his Vested interest in all of his Accounts. (v) Loans shall not be made to a Borrower under this Section more frequently than at twelve-month intervals. (vi) Such loans must be available to all Borrowers on a reasonably equivalent basis. (vii) The Vested percentage of a Borrower's Deferred Compensation Account, Matching Account, Qualified Account and Rollover Account which is made available for borrowing shall not be higher for Participants or former Participants who are Highly Compensated Employees, officers or shareholders than for other Borrowers. (viii) Such loans shall be made upon promissory notes providing for substantially level amortization (with regular payments by payroll deduction each Payday 49 for a Participant or by direct payments if the Participant does not have a sufficient paycheck on any Payday). A former Participant, Spouse or Beneficiary shall make arrangements for regular direct payments on such loans with the Administrator as provided in the Rules of the Plan. (ix) Each such loan shall be secured by the lesser of the amount of the loan or half of the Vested interest in the Borrower's Accounts, including any such portion of a Borrower's Accounts which is credited after the date of the loan. For purposes of Articles X, XI and XII, the distributable balance of such Accounts shall be reduced by the unpaid balance of the loan secured by such Accounts. (x) Each such loan shall bear a reasonable interest rate, which shall be commensurate with the interest rates charged by persons in the business of lending money for loans which would be made under similar circumstances. The Administrator may adopt a national or regional rate of interest for this purpose. (xi) Each such loan shall be repaid within five years unless the loan is used to acquire any dwelling unit which within a reasonable time is to be used as a principal residence of the Borrower. (xii) The promissory note on any such loan shall be an investment of the affected Accounts of the Borrower receiving such loan and not an investment of the Trust Fund generally. Section 14.15 - Distributions Pursuant to Qualified Domestic Relations Orders Notwithstanding any other provision of the Plan to the contrary, upon receipt by the Administrator of a domestic relations order, as defined in Code Section 414(p), which, but for the time of required payment to the alternate payee, would be a qualified domestic relations order as defined in Code Section 414(p), the amount awarded to the alternate payee shall promptly be paid in the manner specified in such order; provided, however, that no such distribution shall be made prior to the Participant's Separation from the Service if such distribution could adversely affect the qualified status of the Plan. Section 14.16 - Correction of Administrative Error; Special Contribution Notwithstanding any other provision of the Plan to the contrary, the Administrator shall take any and all appropriate actions to correct errors in the administration of the Plan, including, without limitation, errors in the allocation of contributions, forfeitures, and income, expenses, gains and losses to the Accounts of the Participants or Beneficiaries under the Plan. Such corrective actions may include debiting or crediting a Participant's or Beneficiary's Accounts or allocating special contributions made by the Company to the Plan for purposes of 50 correcting any failure to make contributions on a timely basis or properly allocate contributions, forfeitures, or income, expenses, gains and losses. The Administrator shall determine the amount of any such special contributions required to be made by the Company, which may be made in such approximate amounts as the Administrator, acting in its sole discretion, shall determine. In no event shall any corrective action taken by the Administrator under this Section reduce any Participant's or Beneficiary's accrued benefit in violation of Section 411(d)(6) of the Code and the Treasury Regulations thereunder. ARTICLE XV TERMINATION, DISCONTINUANCE, AMENDMENT, MERGER, ADOPTION OF PLAN Section 15.1 - Termination of Plan; Discontinuance of Contributions (a) The Plan is intended as a permanent program but the Board shall have the right at any time to declare the Plan terminated completely as to the Company or as to any division, facility or other operational unit thereof. Discharge or layoff of Employees of the Company or any unit thereof without such a declaration shall not result in a termination or partial termination of the Plan except to the extent required by law. In the event of any termination or partial termination: (i) An allocation of amounts being held under Section 16.4(b) shall be made in accordance with Section 16.4(c). (ii) For each Participant who is then an affected Employee or employed by a Company Affiliate with respect to whom the Plan is terminated or partially terminated, the interest in his Matching Account, including his interest in the forfeitures then held in suspense under Section 12.3 (which shall be applied under Section 5.4), shall become fully Vested. (iii) The Administrator shall direct the Trustee to liquidate the necessary portion of the Trust Fund and distribute it, less, to the extent permitted by law, a proportionate share of the expenses of termination, to the persons entitled thereto in proportion to their Accounts. (iv) Provided that the Company or a Company Affiliate does not maintain another defined contribution plan other than an employee stock ownership plan (as defined in Code Section 4975(e)(7)), such distributions shall be made in the manner prescribed by Section 12.1(a), assuming for such purpose that each person entitled to a distribution under the Plan is a Participant who has had a Separation from the Service due to resignation or discharge on the date of termination. 51 (b) The Board shall have the right at any time to discontinue contributions to the Plan completely as to the Company or as to any division, facility or other operational unit thereof. In the event of complete discontinuance of contributions to the Plan, the Plan and Trust shall otherwise remain in full force and effect except that all Matching Accounts shall thereupon become fully Vested. Section 15.2 - Amendment of Plan As limited in Section 15.1 of the Plan and Section 7.02 of the Trust Agreement, complete or partial amendments or modifications to the Plan (including retroactive amendments to meet governmental requirements or prerequisites for tax qualification) may be made from time to time by the Board; provided, however, that no amendment shall decrease the Vested percentage any Participant has in his Accounts or his accrued benefit. Section 15.3 - Retroactive Effect of Plan Amendment (a) No Plan amendment, unless it expressly provides otherwise, shall be applied retroactively to increase the Vested percentage of a Participant whose Separation from the Service preceded the date such amendment became effective unless and until he again becomes a Participant and additional contributions are allocated to him. (b) No Plan amendment, unless it expressly provides otherwise, shall be applied retroactively to increase the amount of service credited to any person for purposes of Plan participation, vesting or any other Plan purpose with respect to his participation or employment before the date such amendment became effective. (c) Except as provided in subsections (a) and (b), all rights under the Plan shall be determined under the terms of the Plan as in effect at the time the determination is made. Section 15.4 - Consolidation or Merger; Adoption of Plan by Other Companies (a) In the event of the consolidation or merger of the Company with or into any other business entity, or the sale by the Company or its owner of its assets, the successor may continue the Plan by adopting the same by resolution of its board of directors or agreement of its partners or proprietor and, if deemed appropriate, by executing a proper supplemental agreement to the Trust Agreement with the Trustee. If, within ninety days from the effective date of such consolidation, merger or sale of assets, such new corporation, partnership or proprietorship does not adopt the Plan, the Plan shall be terminated in accordance with Section 15.1. (b) The Plan shall not be merged or consolidated with any other plan, nor shall its assets or liabilities be transferred to any other plan, unless each Participant in this Plan would have immediately after the merger, consolidation or transfer (if the plan in question were then terminated) accounts which are equal to or greater in amount than his corresponding Accounts 52 under this Plan had the Plan been terminated immediately before the merger, consolidation or transfer. (c) Any Company Affiliate may, with the approval of the Board, adopt the Plan as a whole company or as to any one or more divisions effective as of the first day of any Plan Year by resolution of its own board of directors or agreement of its partners. Such Company Affiliate shall give written notice of such adoption to the Administrator and to the Trustee by its duly authorized officers. ARTICLE XVI MISCELLANEOUS PROVISIONS Section 16.1 - Identification of Fiduciaries (a) The Administrator (with respect to control and management of Plan assets and in general) and the Trustee shall be named fiduciaries within the meaning of ERISA and, as permitted or required by law, shall have exclusive authority and discretion to control and manage the operation and administration of the Plan within the limits set forth in the Trust Agreement, subject to proper delegation. (b) Such named fiduciaries and every person who exercises any discretionary authority or discretionary control respecting management of the Trust Fund or Plan, or exercises any authority or control respecting the management or disposition of the assets of the Trust Fund or Plan, or renders investment advice for compensation, direct or indirect, with respect to any moneys or other property of the Trust Fund or Plan or has authority or responsibility to do so, or has any discretionary authority or discretionary responsibility in the administration of the Plan, and any person designated by a named fiduciary to carry out fiduciary responsibilities under the Plan, shall be a fiduciary and, as such, shall be subject to provisions of the Plan, the Trust Agreement, ERISA and other applicable laws governing fiduciaries. Any person may act in more than one fiduciary capacity. Section 16.2 - Allocation of Fiduciary Responsibilities (a) Fiduciary responsibilities under the Plan are allocated as follows: (i) The sole power and discretion to manage and control the Plan's assets including, but not limited to, the power to acquire and dispose of Plan assets, is allocated to the Trustee, except to the extent that another fiduciary is appointed in accordance with the Trust Agreement with the power to control or manage (including the power to acquire and dispose of) assets of the Plan. (ii) The sole duties, responsibilities and powers allocated to the Board shall be those expressly retained under Sections 15.1, 15.2 and 15.4. 53 (iii) The sole duties, responsibilities and powers allocated to the Company shall be those expressly retained under the Plan or the Trust Agreement. (iv) All fiduciary responsibilities not allocated to the Trustee, the Board, the Company or any investment manager are hereby allocated to the Administrator, subject to delegation in accordance with Section 14.1(a)(viii). (b) Fiduciary responsibilities under the Plan (other than the power to manage or control the Plan's assets) may be reallocated among those fiduciaries identified as named fiduciaries in Section 16.1 by amending the Plan in the manner prescribed in Section 15.2, followed by such fiduciaries' acceptance of, or operation under, such amended Plan. Section 16.3 - Limitation on Rights of Employees The Plan is strictly a voluntary undertaking on the part of the Company and shall not constitute a contract between the Company and any Employee, or consideration for, or an inducement or condition of, the employment of an Employee. Except as otherwise required by law, nothing contained in the Plan shall give any Employee the right to be retained in the service of the Company or to interfere with or restrict the right of the Company, which is hereby expressly reserved, to discharge or retire any Employee at any time, without notice and with or without cause. Except as otherwise required by law, inclusion under the Plan will not give any Employee any right or claim to any benefit hereunder except to the extent such right has specifically become fixed under the terms of the Plan and there are funds available therefor in the hands of the Trustee. The doctrine of substantial performance shall have no application to Employees or Participants. Each condition and provision, including numerical items, has been carefully considered and constitutes the minimum limit on performance which will give rise to the applicable right. Section 16.4 - Limitation on Annual Additions; Treatment of Otherwise Excessive Allocations (a) In any Plan Year (which shall be the Plan's "limitation year" within the meaning of Treas. Reg. ss. 1.415-2(b)), the Annual Addition of a Participant shall not exceed the least of (i) twenty-five percent of such Participant's Statutory Compensation for such Plan Year, (ii) $30,000.00 (or, if greater, one-quarter of the dollar limitation in effect under Code Section 415(b)(1)(A)), or (iii) the maximum allowed under Code Section 415 (utilizing the adjustments to the "defined contribution fraction" allowed by Section 1106(i)(4) of the Tax Reform Act of 1986 and Code Section 415(e)). 54 (b) If the Annual Addition of a Participant would exceed the limits of subsection (a) as a result of an allocation of forfeitures, a reasonable error in estimating a Participant's Statutory Compensation or under other limited facts and circumstances found justifiable by the Commissioner of Internal Revenue, it shall be reduced until it comes within such limits. Such reduction shall be accomplished by debiting the necessary amount from (i) his allocation of Company contributions for such Plan Year to his Deferred Compensation Account, (ii) his allocation of forfeitures for such Plan Year, (iii) his allocation of Company contributions for such Plan Year to his Matching Account, and (iv) his allocation of Company contributions for such Plan Year to his Qualified Account in such order. The portion of such amount attributable to his Deferred Compensation first shall, to the extent allowed by law, be refunded to him, and otherwise any necessary remainder to the extent allowed by Section 403 of ERISA, shall be returned to the Company and recontributed for the applicable Account of the Participant in the first Plan Year in which allowed under subsection (a), or otherwise held in suspense hereunder and applied to the applicable Account of the Participant in the first Plan Year in which allowed under subsection (a). The balance, if any, of such reduction shall be allocated to the Matching Accounts of persons who are Active Participants at the end of the Plan Year in proportion to their Compensation received while Active Participants in such Plan Year. If any Participant's Annual Addition would, due to such special allocation, exceed the limit of subsection (a), the excess shall be reallocated by a second special allocation, and so on as necessary to allocate such amounts within the limits of subsection (a). Any amounts which cannot be so allocated because of the limitations of subsection (a), shall be held in suspense and shall be allocated and reallocated in succeeding Plan Years, in the order of time, prior to the allocation of any Company or personal contributions. (c) In the event the Plan is terminated while excess amounts are then held in suspense under subsection (b), such excess amounts shall be allocated and reallocated as provided in subsection (b), as of the day before the date of the termination as if such day were the last day of such Plan Year. Any amounts which cannot then be so allocated because of the limits of subsection (a) shall revert to the Company, as provided in the Trust Agreement. Section 16.5 - Governing Law The Plan and Trust shall be interpreted, administered and enforced in accordance with the Code and ERISA, and the rights of Participants, former Participants, Beneficiaries and all other persons shall be determined in accordance therewith; provided, however, that, to the extent that state law is applicable, the laws of the state of residence of the Participant in question, or if none, the state in which the principal office of the Administrator is located shall apply. 55 Section 16.6 - Genders and Plurals Where the context so indicates, the masculine pronoun shall include the feminine pronoun and the singular shall include the plural. Section 16.7 - Titles Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan or Trust Agreement. Section 16.8 - References Unless the context clearly indicates to the contrary, a reference to a statute, regulation or document shall be construed as referring to any subsequently amended, enacted, adopted or executed statute, regulation or document. Executed at _____________, ________________ this ____ day of ___________, 1997. GRIFFIN LAND & NURSERIES, INC. By ------------------------------ Officer 56 EX-21 6 EXH 21-SUBSIDIARIES Exhibit 21 Subsidiaries of Griffin Land & Nurseries, Inc. State or Other Jurisdiction of Name* Incorporation or Organization - ---- ----------------------------- General Witt Receivables Corp. Delaware Imperial Nurseries, Inc. Delaware The Eli Witt Company Delaware (50.1% interest) Centaur Communications England and Wales (25% interest) Culbro Homes, Inc. Delaware Culbro Homes II, Inc. Delaware Culbro Properties, Inc. Delaware Griffin Center Corporation Delaware Meadow Park Associates, Inc. Delaware River Bend Associates, Inc. Delaware Treetop Incorporated Delaware * The names listed are the only names under which the subsidiaries do business. -----END PRIVACY-ENHANCED MESSAGE-----