farm and agribusiness purchase and sale transactions: key

Farm and Agribusiness Purchase and Sale Transactions: Key Legal Issues for Buyers and SellersIdentifying Threshold Considerations, Negotiating the Purchase and Sale Agreement, Conducting Due Diligence

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TUESDAY, SEPTEMBER 24, 2019

Presenting a live 90-minute webinar with interactive Q&A

Marisa N. Bocci, Partner, K&L Gates, Seattle

Tyler L. Buswell, Shareholder, Kirton McConkie, Salt Lake City

Christopher Criglow, Partner, Stoel Rives, Portland, Ore.

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Farm and Agribusiness Purchase

and Sale Transactions

Key Legal Issues for Buyers and Sellers

STRAFFORD

SEPTEMBER 24, 2019

Farm and Agribusiness Purchase and Sale Transactions: Bocci, Buswell, Criglow (9.24.19)

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Marisa Bocci, Esq.K&L Gates LLP Chris Criglow, Esq.

Stoel Rives [email protected]

PRESENTED BY

Marisa Bocci, Esq.K&L Gates [email protected]

Tyler Buswell, Esq.Kirton McConkie [email protected]


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Agenda

Overview: What is a Farm Deal?

Basic Anatomy of a Transaction

Key Terms of the Agreement

Regulatory Considerations

Questions


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Overview


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Farm and (or) Agribusiness Transactions

What is being sold?

Land, improvements, equipment, crops?

A working farm, an operating business?

Subject to a third-party tenant or other interest?

Who is the buyer? Who is the seller?

Neighboring owner, national producer/processor, investor

(domestic or foreign), multi-generational farmer?

What is the timeline?

Pre- or Post-harvest? During harvest?

These issues will dictate the structure, terms, and overall

approach to the transaction.


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Anatomy of a Deal


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Basic Anatomy of the Transaction

Letter of Intent (“LOI”)

Purchase & Sale Agreement or Asset Purchase Agreement

Consideration

Assets/Liabilities – Included & Excluded

Due Diligence Period; Access Rights

Representations and Warranties

Covenants

Conditions Precedent to Closing

Indemnification

Closing Deliveries

Post-Closing

Consideration Mechanics

Security for Post-Closing Obligations

Integration & OperationsFarm and Agribusiness Purchase and Sale Transactions: Bocci, Buswell, Criglow (9.24.19)

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Key Terms


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Key Terms of the Agreement:

Consideration

Purchase price

Allocation between real and personal property?

Earn-out?

Per acre determination?

Deposit

Reimbursements & Prorations

Crop expenses (if purchasing crop in the ground)

Rents, contract payments

Impositions (post-closing adjustment?)


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Assets/Liabilities

What is included in the transaction? What is Seller

keeping post-closing?

Detailed description of included and excluded

assets

Retained land (land division/lot line adjustment,

access, and water rights)

Mineral rights (surface waivers)

Equipment, rolling stock, or livestock (schedules)

Clear definition of excluded liabilities (all liabilities

not expressly assumed)


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Examples of assets to be considered:

1) Owned and leased real property

2) Owned and leased personal property

3) Intellectual property

4) Accounts Receivable

5) Inventory

6) Appurtenant rights

Easements

Water rights

Mineral rights


Assets/Liabilities


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Examples of liabilities to be considered:

1) Debt

2) Contract liabilities/obligations

3) Employee liabilities/obligations

4) Litigation

5) Food Safety/Workplace Safety

6) Accounts Payable

7) Environmental and Property Condition Matters


Assets/Liabilities


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Due Diligence

Timeline and access rights

AS-IS (except as otherwise expressly represented or warranted)

Buyer concerns during the Due Diligence Period:

Entry onto the property to conduct

Land title survey; the appurtenant easements – especially for water

Zoning and land use

Phase I Environmental Site Assessment; Phase II?

Water facilities (wells, pipes, pumps); off-site facilities

Soil studies

Inspection of the equipment and improvements

Wetlands?

Endangered Species Act?


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Review of Due Diligence Materials (requested by Buyer):

Land Title: Prior land title surveys, title insurance policies or

commitments, deeds, easements, leases agreements

Environmental: environmental reports, notices, orders, restrictive

covenants

Operational/Regulatory: land use and other regulatory permits,

notices, audits, reports, property condition, engineering, plans

Water Rights/Delivery: permits, certificates, agreements,

easements, wells, well logs

Farming Operations/Production: soils analysis, crop rotation and

yields, applications (inputs)

Organic certifications (if applicable)

Equipment: detailed listing, maintenance records, warranties,

registered titles

Permits & Licenses: Safe Harbor? What can be assumed?


Due Diligence


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Contracts: contracts to be assumed or available to be

assumed or terminated prior to closing (grower supply, custom

farming/harvesting)

Employees/Labor:

employment agreements

Benefits, payroll, policies

Immigration status (H2A/H2B Program)

Labor contractors

Labor housing

WARN Act/COBRA

Litigation

UCC, liens, judgments (Order searches)

Other resources or uses: solar? wind? Future development?


Due Diligence


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Seller concerns during the Due Diligence Period:

Entry protections

No (control over) invasive testing

Notice, normal business hours

Right to have representative present

Non-interference with tenants or operations

Safety (food) and/or security compliance

Intellectual Property/Trade Secrets

Insurance and indemnification (survive termination)

Restoration of damage (survive termination)

Warranty (no) as to content of due diligence materials

Confidentiality (survive termination)

On-Site Coordination with employees/managers/tenants


Due Diligence


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Non-Industry Specific:

Capacity and authority

Third party or governmental consents

Litigation pending or threatened (including condemnation)

Compliance with laws, permits and licenses (seller,

operations and property)

Title to assets free and clear except for permitted liens

Material contracts (compliance, status)

Third-party rights (tenants; purchase options)

Taxes

Hazardous Materials

Employees/Benefits

FIRPTA; Patriot Act


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Specific to an agribusiness transaction:

Threatened or endangered species; wetlands

Special programs or restrictions (e.g., conservation program)

Well condition; irrigation infrastructure

Water rights (no forfeiture); district compliance

Crop quality; disease status

Protected traits/plant IP

Food safety; supply chain

Crop insurance

AFIDA filings

H2A/H2B; Farm Labor compliance




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Covenants

Pre-Closing Covenants of Seller

Maintenance of property (insurance)

Maintenance of permits

No new (or modifications to) leases or material

contracts

No sale, encumbrance, or lease of the assets

Continuing water rights/water usage

No changes in employee hires and benefits

Continue to operate in ordinary course


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Pre-Closing Mutual Covenants

“No shop”; “No assignment”

Confidentiality

(No) public announcements

Employee and Tenant Communications

IRC 1031 cooperation (at no cost or delay)


Covenants


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Third-Party Dependent:

Third-party or governmental consents

Estoppel certificates (leases, material contracts)

Lot Line Adjustments/Subdivisions (parcel off housing)

Access easements

Title insurance policy (subject only to permitted liens)

No injunction or order


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Mutually Dependent:

Representations and warranties true and correct as of

closing (consider requiring “bring-down” certificates at

closing)

No material adverse changes since satisfaction or waiver of

due diligence period

No default of the other party

All required deliveries

Other – depends on the deal. Closing conditions may be

very transaction-specific.




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Indemnification

Representations and warranties, covenants, retained liabilities

Survival period

Fundamental vs. non-fundamental representations and

warranties

Basket (deductible or threshold)

Cap (carve-outs)

Process for tendering claims

General terms (counsel reasonably satisfactory to the other party,

right to engage counsel, right to approve settlement)


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Closing

Closing costs

Survey

Title insurance; Representation and warranty insurance

Recording, escrow

Transfer taxes; sales taxes

Third-Party Inspectors; Vendors; Brokers; Lawyers

Prorations

Contracts; Leases

Utilities

Cultural Costs (operation inputs/labor/expenses

Closing Logistics

In escrow; in person

Consider rural accessibility

Recording deadlines (desktop recording not always available)


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Key Terms of the Agreement

Post-Closing

Consideration Mechanics

Earn-out to Seller or Seller principal

True-ups/adjustments

Security for Post-Closing Obligations

Winding down/dissolution of Seller entities

Holdbacks; Guarantees; Cross-Defaults

Integration & Operations

Consents; Permit Transfers

Leaseback (a program unto itself…)

Seller occupancy (complete harvest, temporary storage)

Transition services/cooperation/employment (or separation)

Non-Competes; Non-Solicitation Agreements


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Hart Scott Rodino (“HSR Act”)

Commerce test

Size of transaction test (FTC publishes thresholds annually)

Size of parties test (FTC publishes thresholds annually)

Agricultural Foreign Investment Disclosure Act

(“AFIDA”)“foreign” “investment” in “agricultural land”

Mandatory reporting requirements

Significant civil penalties

Analogous State Statutes/Restrictions

Bureau of Reclamation Water (“RRA”)

Qualifications

Cost of water; quantity of water

potential to pre-pay program costs


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Questions?CONTACT THE PANELISTS


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