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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
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Crop Growers Corporation
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
227297108
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(CUSIP Number)
David Sonenstein
777 San Marin Drive, Novato, CA 94998
(415) 899-2000
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
March 5, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box /X/.
Check the following box if a fee is being paid with this statement / /. (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class
of securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Continued on following page(s))
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CUSIP No. 227297108 13D
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(1) Names of Reporting Persons. S.S. or I.R.S. Identification Nos. of Above
Persons
Fireman's Fund Insurance Company 94 - 1610280
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(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) / /
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(3) SEC Use Only
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(4) Source of Funds*
WC
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
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(6) Citizenship or Place of Organization
California
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Number of Shares (7) Sole Voting
Beneficially Owned Power 2,582,194 (1) shares of common stock
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting
Power none
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(9) Sole Dispositive
Power 2,582,194 (1) shares of common stock
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(10) Shared Dispositive
Power none
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,582,194 (1) shares of common stock
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
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(13) Percent of Class Represented by Amount in Row (11)
29.62%
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(14) Type of Reporting Person*
IC CO
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*SEE INSTRUCTION BEFORE FILLING OUT!
(1) Includes 10,000 shares of Series A Convertible Preferred Stock, which
converts to 754,717 shares of common stock.
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ITEM 1. SECURITY AND ISSUER.
This Schedule relates to the Common Stock of Crop Growers Corporation
("Crop Growers"). The principal executive offices of Crop Growers are
located at 10895 Lowell, Suite 300, Overland Park, Kansas 66210.
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is filed by Fireman's Fund Insurance Company ("FFIC"), a
corporation organized under the laws of the State of California. The principal
business of FFIC is insurance. The address of the principal business and the
principal office of FFIC is 777 San Marin Drive, Novato, California 94998.
FFIC is a wholly-owned subsidiary of Allianz of America, Inc. ("AZOA").
Allianz Aktiengesellschaft Holding ("AZ AG") holds 90% of the voting securities
of AZOA. AZ AG's business address is Koniginstrasse 28, 80802 Munich, Federal
Republic of Germany. AZOA's business address is 55 Green Farms Road, Westport,
Connecticut 06881.
The following information is provided with respect to each member of the
Board of Management of AZ AG:
Dr. Henning Schulte-Noelle, Chairman
Koniginstrasse 28, 80802 Munich
Federal Republic of Germany
Principal occupation: Chairman of the Board of Management,
AZ AG; Director, President and CEO, AZOA; Director, FFIC
Citizenship: German
Mr. Detlev Bremkamp
Koniginstrasse 28, 80802 Munich
Federal Republic of Germany
Principal occupation: Member of the Board of Management
Citizenship: German
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Dr. Reiner Hagemann
Koniginstrasse 28, 80802 Munich
Federal Republic of Germany
Principal occupation: Member of the Board of Management
Citizenship: German
Dr. Gerhard Rupprecht
Koniginstrasse 28, 80802 Munich
Federal Republic of Germany
Principal occupation: Member of the Board of Management
Citizenship: German
Dr. Diethart Breipohl
Koniginstrasse 28, 80802 Munich
Federal Republic of Germany
Principal occupation: Member of the Board of Management, AZ AG; Director,
AZOA
Citizenship: German
Dr. Roberto Gavazzi
Koniginstrasse 28, 80802 Munich
Federal Republic of Germany
Principal occupation: Member of the Board of Management
Citizenship: Italian
Mr. Herbert Hansmeyer
777 San Marin Drive
Novato, CA 94998
Principal occupation: Member of the Board of Management, AZ AG; Director,
AZOA; Director, Chairman of the Board, FFIC Citizenship: German
The following information is provided with respect to each executive
officer and director of AZOA:
Dr. Henning Schulte-Noelle, Chairman
Koniginstrasse 28, 80802 Munich
Federal Republic of Germany
Principal occupation: Chairman of the Board of Management, AZ
AG; Director, President and CEO, AZOA; Director, FFIC
Citizenship: German
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Mr. Lowell C. Anderson
1750 Hennepin Avenue
Minneapolis, MN 55403
Principal occupation: Director, AZOA
Citizenship: U.S.A.
Dr. Diethart Breipohl
Koniginstrasse 28, 80802 Munich
Federal Republic of Germany
Principal occupation: Member of the Board of Management, AZ AG; Director,
AZOA
Citizenship: German
Mr. Herbert Hansmeyer
777 San Marin Drive
Novato, CA 94998
Principal occupation: Member of the Board of Management, AZ AG; Director,
AZOA; Director, Chairman of the Board, FFIC Citizenship: German
Mr. David P. Marks
55 Green Farms Road
Westport, CT 06881
Principal occupation: Director, Secretary and Assistant Treasurer, AZOA;
Executive Vice President, FFIC
Citizenship: U.S.A.
Dr. Hans Jurgen Schinzler
500 Lexington Avenue
New York, NY 10022
Principal occupation: Director, AZOA
Citizenship: German
Mr. Joe L. Stinnette, Jr.
777 San Marin Drive
Novato, CA 94998
Principal occupation: Director, AZOA; Director, President and Chief
Executive Officer, FFIC
Citizenship: U.S.A.
Mr. Ronald M. Clark
55 Green Farms Road
Westport, CT 06881
Principal occupation: Treasurer and Assistant Secretary, AZOA
Citizenship: U.S.A.
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The following information is provided with respect to each executive
officer and director of FFIC:
Mr. Gary E. Black
777 San Marin Drive
Novato, CA 94998
Principal occupation: Director, Executive Vice President, FFIC
Citizenship: U.S.A.
Mr. Herbert Hansmeyer
777 San Marin Drive
Novato, CA 94998
Principal occupation: Member of the Board of Management, AZ AG;
Director, Chairman of the Board, FFIC
Citizenship: German
Mr. David R. Pollard
777 San Marin Drive
Novato, CA 94998
Principal occupation: Director, Executive Vice President, FFIC
Citizenship: U.S.A.
Mr. Jeffrey H. Post
777 San Marin Drive
Novato, CA 94998
Principal occupation: Director, Executive Vice President,
Chief Financial Officer and Actuary, FFIC
Citizenship: U.S.A.
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Mr. Thomas E. Rowe
777 San Marin Drive
Novato, CA 94998
Principal occupation: Director, Executive Vice President, FFIC
Citizenship: U.S.A.
Dr. Henning Schulte-Noelle
Koniginstrasse 28, 80802 Munich
Federal Republic of Germany
Principal occupation: Chairman of the Board of Management, AZ
AG; Director, President and CEO, AZOA; Director, FFIC
Citizenship: German
Mr. Joe L. Stinnette, Jr.
777 San Marin Drive
Novato, CA 94998
Principal occupation: Director, AZOA; Director, President
and Chief Executive Officer, FFIC
Citizenship: U.S.A.
Mr. David P. Marks
55 Green Farms Road
Westport, CT 06881
Principal occupation: Director, Secretary and Assistant
Treasurer, AZOA; Executive Vice President, FFIC
Citizenship: U.S.A.
Mr. Harold N. Marsh, III
777 San Marin Drive
Novato, CA 94998
Principal occupation: Senior Vice President & Treasurer
Citizenship: U.S.A.
Mr. Thomas A. Swanson
777 San Marin Drive
Novato, CA 94998
Principal occupation: Senior Vice President, General
Counsel & Corporate Secretary
Citizenship: U.S.A.
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FFIC, AZOA, AZ AG and their respective executive officers and directors
have not, during the last five years, been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding been or become subject to a judgment, decree
or final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
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ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
FFIC utilized funds from its working capital to effectuate the
purchase of 10,000 shares of Crop Growers Series A Convertible Preferred
Stock on July 10, 1996. The total purchase price for those securities was
$10,000,000. When purchasing the shares of Crop Growers Common Stock owned
by Mr. John Hemmingson and Mr. Gary Black, FFIC anticipates utilizing funds
from its working capital. The aggregate purchase price for the securities
owned by Mr. Hemmingson and Mr. Black is $18,274,770.
FFIC estimates that the total consideration payable upon the
consummation of the merger (including amounts payable with respect to its Series
A Convertible Preferred Stock and its common stock purchased from Mr. Hemmingson
and Mr. Black, and including amounts needed to settle outstanding Crop Growers
stock options) with Crop Growers is approximately $92,500,000. FFIC currently
expects to utilize working capital funds to effectuate such payment.
ITEM 4. PURPOSE OF TRANSACTION.
On July 10, 1996, FFIC and Crop Growers entered into a stock
purchase agreement (the "Stock Purchase Agreement") pursuant to which FFIC
purchased 10,000 shares of Crop Growers' Series A Convertible Preferred
Stock, $.01 par value (the "Preferred Shares"), for an aggregate purchase
price of $10,000,000. The Preferred Shares are convertible into 754,717
shares of Crop Growers Common Stock, or approximately 8.66% of the
outstanding Crop Growers Common Stock, assuming conversion of the Preferred
Shares and assuming that any other outstanding rights to purchase, convert
into or exchange for Crop Growers Common Stock are not exercised. The Stock
Purchase Agreement contains a "standstill" provision which, in general terms,
requires Crop Growers to consent to any FFIC acquisition of Common Stock
which results in FFIC holding greater than 20% of the outstanding Common
Stock of Crop Growers. On February 4, 1997, FFIC filed a Schedule 13G with
the Securities and Exchange Commission (the "Commission") to report its
beneficial ownership of the Common Stock subject to conversion of the
Preferred Shares.
On September 23, 1996, FFIC and each of John J. Hemmingson
("Hemmingson") and Gary A. Black ("Black") entered into separate Right of
First Offer and First Refusal Agreements (the "Right of First Refusal
Agreements"). Under the Right of First Refusal Agreements, FFIC was granted
certain first offer and first refusal rights with respect to the shares of
Crop Growers Common Stock owned by each of Hemmingson and Black. Such first
offer and first refusal rights became operative at such time that either
Hemmingson or Black notified FFIC of their intent to sell shares of Crop
Growers Common Stock.
On February 14, 1997, Hemmingson notified FFIC that he had received an
offer for all shares of Crop Growers Common Stock owned by him and was offering
to sell such shares to FFIC on the same terms as those contained in the offer
Hemmingson had received. On February 17, 1997, Black notified FFIC that he had
received an offer for all shares of Crop Growers Common Stock owned by him and
was offering to sell such shares to FFIC on the same terms as those contained in
the offer Hemmingson had received.
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On March 5, 1997, FFIC notified each of Hemmingson and Black that FFIC
would exercise its rights under the Right of First Refusal Agreements and/or
accept the offer made by Black, and purchase all shares of Crop Growers Common
Stock owned by Hemmingson and Black. According to Hemmingson's February 14,
1997 notice to FFIC, Hemmingson currently owns 1,145,703 shares of Crop Growers
Common Stock and Black currently owns 681,744 shares of Crop Growers Common
Stock.
On March 5, 1997, FFIC and Crop Growers entered into an Acquisition
Agreement (the "Acquisition Agreement") pursuant to which Crop Growers, subject
to certain conditions, would merge with a subsidiary or affiliate of FFIC, with
Crop Growers being the surviving corporation (the "Acquisition"). Under the
terms of the Acquisition Agreement, each common stockholder of Crop Growers
would be entitled to receive $10.25 per share in cash, options to purchase Crop
Growers Common Stock would be settled in cash based on the excess, if any, of
$10.25 over the exercise price, and FFIC or an affiliate of FFIC would become
the holder of all the outstanding shares of Crop Growers Common Stock and rights
to acquire Crop Growers Common Stock. The Acquisition is subject to a number of
conditions, including shareholder approval, insurance regulatory approval and
the expiration of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvement Act (the "HSR Act").
As a result of the purchase of the shares of Crop Growers Common
Stock owned by Hemmingson and Black, FFIC would beneficially own 2,582,194
shares of Crop Growers Common Stock, or 29.62% of the Crop Growers Common
Stock, assuming conversion of the Preferred Shares and assuming that any
other outstanding rights to purchase, convert into or exchange for Crop
Growers Common Stock are not exercised. Upon consummation of the
Acquisition, FFIC will own, directly or through an affiliate, 100% of the
outstanding shares of Crop Growers Common Stock.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The aggregate number of shares of Crop Growers Common Stock
beneficially owned by each person named in Item 2 above is as follows: After
the purchase of the Preferred Shares on July 10, 1996, FFIC beneficially
owned 754,717 shares of Crop Growers Common Stock, as determined in
accordance with the provisions of Rule 13d-3 of the Securities Act of 1934,
as amended ("Rule 13d-3"). In its representations contained in the Stock
Purchase Agreement, Crop Growers stated that the number of outstanding shares
of Crop Growers Common Stock on May 31, 1996 was 8,149,131. Accordingly, on
July 10, 1996, after its purchase of the Preferred Shares, FFIC was the
beneficial owner of approximately 8.48% of the Common Stock of Crop Growers,
as determined in accordance with the provisions of Rule 13d-3. (This
percentage was erroneously reported as 9.4% in the Schedule 13G filed by FFIC
on February 4, 1997.)
After acquiring the shares of Crop Growers Common Stock owned by
Hemmingson and Black, FFIC will beneficially own 2,582,194 shares of Crop
Growers Common
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Stock, as determined in accordance with the provisions of Rule 13d-3. In a
press release dated March 6, 1997, Crop Growers stated that the number of
outstanding shares of Crop Growers Common Stock on February 28, 1997 was
7,962,251. Accordingly, after acquiring the shares of Crop Growers Common
Stock owned by Hemmingson and Black, FFIC will be the beneficial owner of
approximately 29.62% of the Common Stock of Crop Growers, as determined in
accordance with the provisions of Rule 13d-3.
(b) FFIC has the sole power to vote and dispose of the 2,582,194
shares of Crop Growers Common Stock that it will beneficially own after
acquiring the shares owned by Hemmingson and Black. No other person is known to
have or share the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, such securities.
(c) Other than the acquisition of shares of Common Stock from
Hemmingson and Black and as proposed in the Acquisition Agreement, FFIC has not
engaged in any transaction in the past sixty days with respect to the Common
Stock of Crop Growers.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
(i) Stock Purchase Agreement, dated as of July 10, 1997, by and
between FFIC and Crop Growers. (See Item 4 for description).
(ii) Right of First Offer and First Refusal Agreement, dated as of
September 23, 1996, between FFIC, Crop Growers and John J. Hemmingson (the
"Hemmingson Right of First Refusal Agreement"). Under this agreement,
Hemmingson granted to FFIC certain first offer and first refusal rights with
respect to shares of Crop Growers Common Stock owned by Hemmingson. In the
event Hemmingson wishes to sell shares of Crop Growers Common Stock but does not
have a particular buyer or transaction in mind, he may offer for sale to FFIC
any amount of the shares of Crop Growers Common Stock owned by him. In the
event Hemmingson wishes to enter into a sale with an identified purchaser, he
must offer the subject shares to FFIC on a first refusal basis. This right of
first refusal is subject to certain exemptions, including open market sales
within certain manner of sale provisions and volume limitations contained in
Rule 144 under the Securities Act of 1933, as amended ("Rule 144").
Any purchases of Crop Growers Common Stock by FFIC under the agreement
are subject to regulatory approval. The agreement will automatically terminate
upon the earliest to occur of seven specified conditions.
The foregoing summary of the Hemmingson Right of First Refusal
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Hemmingson Right of First Refusal Agreement, a copy of which is
attached hereto as Exhibit 1 and incorporated herein by reference.
(iii) Right of First Offer and First Refusal Agreement, dated as
of September 23, 1996, between FFIC, Crop Growers and Gary A. Black (the "Black
Right of First Refusal Agreement"). Under this agreement, Black granted to FFIC
certain first offer and first
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refusal rights with respect to shares of Crop Growers Common Stock owned by
Black. In the event Black wishes to sell shares of Crop Growers Common Stock
but does not have a particular buyer or transaction in mind, he may offer for
sale to FFIC any amount of the shares of Crop Growers Common Stock owned by him.
In the event Black wishes to enter into a sale with an identified purchaser, he
must offer the subject shares to FFIC on a first refusal basis. This right of
first refusal is subject to certain exemptions, including open market sales
within certain manner of sale provisions and volume limitations contained in
Rule 144.
Any purchases of Crop Growers Common Stock by FFIC under the agreement
are subject to regulatory approval. The agreement will automatically terminate
upon the earliest to occur of seven specified conditions.
The foregoing summary of the Black Right of First Refusal Agreement
does not purport to be complete and is qualified in its entirety by reference to
the Black Right of First Refusal Agreement, a copy of which is attached hereto
as Exhibit 2 and incorporated herein by reference.
(iv) Acquisition Agreement, dated March 5, 1997, between Crop Growers
and FFIC. The Acquisition Agreement provides for the merger of a subsidiary or
affiliate of FFIC into Crop Growers, with Crop Growers being the surviving
corporation. In the Acquisition, the common stockholders of Crop Growers will
be entitled to receive cash in the amount of $10.25 per share, the holders of
options to acquire shares of Crop Growers Common Stock will receive cash in an
amount equal to the difference between $10.25 and the option exercise price for
each option held, and FFIC or an affiliate of FFIC will become the holder of all
of the outstanding Common Stock and rights to acquire Common Stock of Crop
Growers.
Pursuant to the Acquisition Agreement, Crop Growers has agreed that
Crop Growers and its subsidiaries or representatives will not, directly or
indirectly, take any action to encourage, solicit or initiate discussions or
negotiations with, or furnish any non-public information to, any entity or group
(other than certain "excepted contacts" agreed to by Crop Growers and FFIC, but
with respect to the excepted contacts, only through March 28, 1997) in
connection with any merger, consolidation, sale of assets representing 15% or
more of the consolidated assets of Crop Growers and its subsidiaries, sale of
securities representing 15% or more of the votes attached to the outstanding
securities of Crop Growers or similar transactions involving Crop Growers or its
subsidiaries (an "Acquisition Transaction").
Notwithstanding the limitation described in the foregoing paragraph,
Crop Growers may furnish certain information to any third party, and may
negotiate and participate in discussions and negotiations with such third party
concerning an Acquisition Transaction if such third party has on an unsolicited
basis submitted a bona fide offer or proposal to Crop Growers, provided that if
such offer or proposal is received after March 28, 1997, the Board of Directors
of Crop Growers must first make a determination in good faith, after hearing
advice of its outside counsel, that such action is necessary in order for the
Board of Directors to comply with its fiduciary duties under applicable law.
Crop Growers has agreed to immediately communicate to
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FFIC the receipt of any third party solicitation, proposal or bona fide inquiry
that it may receive as well as a copy thereof and all other particulars thereof.
Under the Acquisition Agreement, Crop Growers has agreed to use its
best efforts to take all action necessary in accordance with applicable law and
its charter documents to call a meeting of its stockholders as promptly as
practicable to consider and vote upon the approval of the Acquisition. The
Board of Directors has agreed to recommend and declare advisable to the Crop
Growers stockholders such approval and Crop Growers has agreed to take all
lawful action to solicit and obtain approval of the Crop Growers stockholders.
The Acquisition Agreement provides that neither the Board of Directors of Crop
Growers nor any committee of such Board of Directors shall (a) withdraw or
modify the approval or recommendation by the Board of Directors of the
Acquisition, (b) approve or recommend any proposed Acquisition Transaction other
than the Acquisition, or (c) cause Crop Growers to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar agreement
with respect to any proposed Acquisition Transaction other than the Acquisition.
Notwithstanding the limitations described above, through March 28,
1997, the Board of Directors of Crop Growers may withdraw or modify it approval
or recommendation of the Acquisition, approve or recommend a superior proposal
(as determined by the Board of Directors in good faith after advice of a
nationally recognized financial advisor) or terminate the Acquisition Agreement,
but in each case only concurrently with the payment of a break-up fee of
$2,400,000 (the "Break-up Fee"). After March 28, 1997, the Board of Directors
of Crop Growers may withdraw or modify it approval or recommendation of the
Acquisition, approve or recommend a superior proposal or terminate the
Acquisition Agreement, but in each case only concurrently with the payment of
the Break-up Fee plus reimbursement of FFIC's expenses relating to the
Acquisition and after a determination in good faith, after hearing advice of its
outside counsel, that such action is necessary in order for the Board of
Directors to comply with its fiduciary duties to stockholders under applicable
law.
The Acquisition Agreement contains various representations and
warranties of the parties thereto. These include representations and warranties
of Crop Growers with respect to corporate existence and power, corporate
authorization, governmental consents and approvals, capitalization,
subsidiaries, Commission reports, absence of certain changes and other matters.
FFIC has also made certain representations and warranties with respect
to corporate existence and power, corporate authorization, governmental consents
and approvals and other matters.
Except as expressly contemplated in the Acquisition Agreement, from
the date of the Acquisition Agreement until the earlier of the consummation
of the Acquisition or the termination of the Acquisition Agreement, Crop
Growers has agreed, with respect to itself and its subsidiaries, to (w)
operate its businesses in the ordinary course of business, (x) not take any
action that could reasonably be expected to jeopardize any of its material
contracts or its good standing with all applicable Departments of Insurance
and similar regulatory agencies, (y) not take any extraordinary action, and
(z) not
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declare, set aside or pay any dividend (other than stated dividends on its
preferred stock) or other distribution in respect of its capital stock,
whether in stock, cash or other property, or issue any capital stock or any
right to acquire, convert into or exchange for capital stock except pursuant
to stock options outstanding on the date of the Acquisition Agreement. Crop
Growers also agreed that, in the event that it adopts a "rights plan,"
"poison pill" or similar plan or arrangement, it will include a provision
expressly exempting FFIC from the operation thereof.
Crop Growers has agreed that the record date for determining
stockholders entitled to vote on the Acquisition or any third party proposed
Acquisition Transaction will be no earlier than 10 business days after FFIC's
receipt of all required approvals under the insurance holding company laws of
states with applicable jurisdiction, and the expiration of the applicable
waiting period under the HSR Act, with respect to FFIC's purchase of Crop
Growers Common Stock from Hemmingson and Black under the Right of First Refusal
Agreements. In the event of a proposed Acquisition Transaction submitted by a
third party, this record date provision shall not require Crop Growers to set a
record date later than December 31, 1997.
Crop Growers has agreed to afford FFIC and its representatives access
during normal business hours prior to the consummation of the Acquisition to the
properties, books, contracts, commitments and records, of Crop Growers and its
subsidiaries and during such period furnish FFIC with such other information
concerning its business, properties and personnel as FFIC may reasonably
request.
Pursuant to the Acquisition Agreement, the respective obligations of
each party to consummate the Acquisition are subject to the satisfaction of the
following conditions: (a) all waivers, consents, authorizations, orders,
approvals or expiration of waiting periods required under any applicable law or
contract to be obtained by any of the parties in order to consummate the
Acquisition shall have been obtained, (b) the representations and warranties of
the parties shall be true and correct in all respects as of the time the
Acquisition is consummated, (c) no injunction, restraining order or other order
of any federal or state court which prevents the consummation of the Acquisition
shall be in effect, (d) no statute, rule or regulation shall have been enacted
by any state or governmental agency that would prevent the consummation of the
Acquisition and (e) the Crop Growers stockholders shall have approved the
Acquisition.
The Acquisition Agreement may be terminated and the Acquisition
contemplated therein may be abandoned at the earlier of (u) such time as the
parties shall mutually agree, (v) at the option of Crop Growers, on or after
December 31, 1997, if by that date all of the conditions set forth in Section 10
of the Acquisition Agreement shall have not been satisfied or waived, (w) at the
option of FFIC, on or after December 31, 1997, if by that date all of the
conditions set forth in Section 11 of the Acquisition Agreement shall have not
been satisfied or waived, (x) at the option of Crop Growers in accordance with
Section 3(c) of the Acquisition Agreement, provided that Crop Growers complies
with certain conditions, including, without limitation, payment of the Break-up
Fee, (y) at the option of FFIC, if the Board of Directors of Crop Growers, among
other things, fails to recommend that the stockholders of Crop Growers vote in
favor of the Acquisition or approves or recommends a proposed Acquisition
Transaction other than the
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Acquisition, and (z) at the option of any of the parties thereto if the
stockholders of Crop Growers do not approve the Acquisition.
Under the Acquisition Agreement, effective as of the closing of the
Acquisition, the Board of Directors of Crop Growers will consist of nominees
selected by FFIC.
The foregoing summary of the Acquisition Agreement does not purport to
be complete and is qualified in its entirety by reference to the Acquisition
Agreement, a copy of which is attached hereto as Exhibit 3 and incorporated
herein by reference.
(v) Consent Agreement, dated March 5, 1997, between Crop Growers
and FFIC (the "Consent Agreement"). As discussed above, the Stock Purchase
Agreement contains a "standstill" provision which, in general terms, requires
Crop Growers to consent to any FFIC acquisition of Common Stock which results
in FFIC holding greater than 20% of the outstanding Common Stock of Crop
Growers. Under the terms of the Consent Agreement, Crop Growers gave its
consent to the extent required to FFIC's acquisition of more than 20% of the
outstanding shares of Crop Growers Common Stock under the standstill
provision and for purposes of Section 203 of the Delaware General Corporation
Law.
Under the Consent Agreement, FFIC agreed, with respect to any
shareholder vote on an acquisition or other specified transactions, to vote its
shares which exceed 20% of the voting power of Crop Growers outstanding
securities in accordance with the pro rata voting of other Crop Growers
stockholders who are not "interested stockholders" of Crop Growers under Section
203 of the Delaware General Corporation Law.
In addition, the Consent Agreement contains a provision which amends
the standstill provision of the Stock Purchase Agreement. Under this
provision, the restrictions of the standstill provision will immediately
terminate at the time when any person or group (as defined in Commission
regulations) publicly announces an intention to make or makes or commences a
tender or exchange offer, other than a tender exchange offer which has been
approved by the Board of Directors of Crop Growers before the earliest to
occur of such announcement, making or commencement, for more than 15% of the
outstanding Crop Growers Common Stock.
The foregoing summary of the Consent Agreement does not purport to be
complete and is qualified in its entirety by reference to the Consent Agreement,
a copy of which is attached hereto as Exhibit 4 and incorporated herein by
reference.
(vi) Letter of Intent re Revolving Credit Working Capital Facility,
dated March 5, 1997, between FFIC and Crop Growers (the "Letter of Intent").
Pursuant to the Letter of Intent, and as an express condition of the Acquisition
Agreement, FFIC has agreed to extend a $15 million revolving credit working
capital facility (the "Revolving Credit Facility") to Crop Growers in the event
that Crop Growers, after using its reasonable best efforts, is unable to obtain
a working capital facility from a commercial bank or banks on reasonable terms
not involving any guarantee or similar support by FFIC, by March 31, 1997.
The terms and conditions of the Revolving Credit Facility call for a
term of one year, no fees, monthly interest payments payable in arrears on the
first day of each month and no prepayment penalty. The interest rate is to be
the Bank of America Base Rate. The Revolving Credit Facility is to be secured
by a pledge of all Crop Growers assets, including a security
15
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interest in expiration rights and records of Crop Growers and each of its agency
subsidiaries. The maintenance of financial ratios and minimum tangible net
worth will be set forth in the definitive documentation.
The foregoing summary of the Letter of Intent does not purport to be
complete and is qualified in its entirety by reference to the Letter of Intent,
a copy of which is attached hereto as Exhibit 5 and incorporated herein by
reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Right of First Offer and First Refusal Agreement, dated as of
September 23, 1996, between Fireman's Fund Insurance Company, Crop
Growers Corporation and John J. Hemmingson.
Exhibit 2 Right of First Offer and First Refusal Agreement, dated as of
September 23, 1996, between Fireman's Fund Insurance Company, Crop
Growers Corporation and Gary A. Black.
Exhibit 3 Acquisition Agreement, dated March 5, 1997, between Crop Growers
Corporation and Fireman's Fund Insurance Company.
Exhibit 4 Consent Agreement, dated March 5, 1997, between Crop Growers
Corporation and Fireman's Fund Insurance Company.
Exhibit 5 Letter of Intent re Revolving Credit Working Capital Facility,
dated March 5, 1997, between Fireman's Fund Insurance Company and
Crop Growers Corporation.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Date: March 10, 1997
FIREMAN'S FUND INSURANCE COMPANY
By /s/ Thomas A. Swanson
-----------------------------------
Thomas A. Swanson
Senior Vice President, General Counsel
and Corporate Secretary
16
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INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
Exhibit 1 Right of First Offer and First Refusal Agreement, dated as of
September 23, 1996, between Fireman's Fund Insurance Company,
Crop Growers Corporation and John J. Hemmingson.
Exhibit 2 Right of First Offer and First Refusal Agreement, dated as of
September 23, 1996, between Fireman's Fund Insurance Company,
Crop Growers Corporation and Gary A. Black.
Exhibit 3 Acquisition Agreement, dated March 5, 1997, between Crop
Growers Corporation and Fireman's Fund Insurance Company.
Exhibit 4 Consent Agreement, dated March 5, 1997, between Crop Growers
Corporation and Fireman's Fund Insurance Company.
Exhibit 5 Letter of Intent re Revolving Credit Working Capital Facility,
dated March 5, 1997, between Fireman's Fund Insurance Company and
Crop Growers Corporation.
<PAGE>
RIGHT OF FIRST OFFER AND FIRST REFUSAL AGREEMENT
This Right of First Offer and First Refusal Agreement (the
"AGREEMENT"), dated as of September 23, 1996, is entered into by and among
FIREMAN'S FUND INSURANCE COMPANY, a California corporation ("FFIC"), JOHN J.
HEMMINGSON, an individual ("HEMMINGSON") and CROP GROWERS CORPORATION, a
Delaware corporation (the "COMPANY").
RECITALS
A. FFIC and the Company are parties to that certain Stock Purchase
Agreement dated as of July 10, 1996, whereby FFIC is purchasing shares of the
Company's Series A Convertible Preferred Stock (the "SHARES").
B. In fulfillment of a condition to the purchase of the Shares by
FFIC, Hemmingson desires to grant FFIC the right of first offer and first
refusal to purchase certain shares of the Company's Common Stock which might
otherwise be transferred, offered for sale or sold by Hemmingson to third
parties in certain circumstances, upon the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
SECTION 1. DEFINITIONS
1.1 "FIRST REFUSAL STOCK" shall mean all shares of the Common Stock (as
defined below) now or hereafter beneficially owned by Hemmingson. The number of
shares of First Refusal Stock currently owned by Hemmingson, as well as all
currently outstanding options and warrants to purchase shares of First Refusal
Stock, is set forth on EXHIBIT A hereto, which Exhibit shall automatically be
amended from time to time to reflect the changes in the number of shares
beneficially owned by Hemmingson, including dispositions of Common Stock not
subject to the rights generated hereunder or dispositions which occur after
complying with the notice provisions of Section 2 herein.
1.2 "COMMON STOCK" shall mean the Company's Common Stock and shares of
the Company's Common Stock issued or issuable upon exercise of options or
warrants to purchase shares of the Company's Common Stock.
<PAGE>
SECTION 2. RIGHT OF FIRST OFFER AND RIGHT OF FIRST REFUSAL
2.1 RIGHT OF FIRST OFFER.
(a) Hemmingson may, if he desires to sell, transfer, assign or
otherwise dispose of any shares of First Refusal Stock to any person other than
the Company and does not have a particular transaction or a particular buyer in
mind, make a written offer (the "OFFER") to FFIC (pursuant to the terms of
Section 7.1 of this Agreement) to sell all or part of his First Refusal Stock at
a stated price (the "OFFER PRICE");
(b) If FFIC does not agree to pay the Offer Price, it must within 15
days after it receives the Offer (the "RESPONSE DUE DATE") either state a price
(in a notice pursuant to the terms of Section 7.1 of this Agreement) at which it
is willing to purchase the shares (the "COUNTER-OFFER PRICE") or state that it
is not interested in purchasing the shares which are the subject of the Offer in
a notice pursuant to the terms of Section 7.1 of this Agreement;
(c) If Hemmingson is unwilling to accept the Counter-Offer Price,
Hemmingson shall be free for a period of 180 days after the Response Due Date to
sell the shares which are the subject of the Offer to any third party at any
price which exceeds 105% of the Counter-Offer Price free and clear of any
further obligations under Sections 2 and 3 of this Agreement;
(d) If FFIC declines to state a Counter-Offer Price, Hemmingson may for
a period of 180 days after the Response Due Date sell the shares which are the
subject of the Offer to a third party at 95% or more of the Offer Price free and
clear of any further obligations under Sections 2 and 3 of this Agreement;
(e) If FFIC does not respond by the Response Due Date to the Offer,
such silence shall be deemed the same as a statement that FFIC is unwilling to
purchase the subject shares at the Offer Price, thereby freeing Hemmingson for a
period of 180 days after the Response Date to sell the shares which are the
subject of the Offer at 95% or more of the Offer Price.
2.2 RIGHT OF FIRST REFUSAL. In the event that Hemmingson desires, at
any time, to enter into a sale, transfer, assignment or other disposition of any
shares of First Refusal Stock, or any shares of First Refusal Stock are subject
to any involuntary transfer, other than (in each case) a sale to the Company, a
sale to a third party after Hemmingson has complied with the terms of Section
2.1 above, or sales which satisfy any of the conditions in Section 2.3 below,
Hemmingson shall deliver a notice (the "NOTICE") to FFIC (with a copy to the
Company) at least twenty (20) days prior to the closing date of such sale,
pursuant to the provisions set forth in Section 7.1 of this Agreement. The
Notice shall describe in reasonable detail the proposed sale including, without
limitation, the number of shares of First Refusal Stock to be sold, the terms of
such sale, the consideration to be paid, and the name and address of each
prospective purchaser. For purposes of this Section 2.2, in the case of any
involuntary transfer of First Refusal Stock by Hemmingson (including, without
limitation, transfers as the result of any bankruptcy action), the First Refusal
Stock to be transferred shall be valued at fair market value, to be determined
by an appraiser mutually agreeable to the parties, if necessary.
2.3 EXEMPTIONS. The offer procedure and notice requirements specified
in Sections 2.1 and 2.2 and the provisions of Section 3 shall be inapplicable in
the following sales of First Refusal Stock:
2
<PAGE>
(a) Any sales of First Refusal Stock in open market transactions made
in accordance with the manner of sale provisions set forth in Rule 144(f) ("RULE
144(F)") under the Securities Act of 1933, as amended from time to time (the
"SECURITIES ACT") which are within the volume limitations set forth in
Rule 144(e)(1) under the Securities Act, as amended from time to time
("RULE 144(E)(1)"), PROVIDED THAT, Hemmingson confirms to the Company in writing
concurrent with any particular sale that such sale is not part of a negotiated
transaction and Hemmingson is unaware of the identity of the prospective
purchaser;
(b) Any sales of First Refusal Stock in open market transactions made
in accordance with the manner of sale provisions set forth in Rule 144(f) in an
amount greater than the limits imposed by Rule 144(e)(1); PROVIDED THAT,
Hemmingson shall provide FFIC with a certificate at the time of the transaction,
stating that (i) such sale is not part of a negotiated transaction,
(ii) Hemmingson is unaware of the identity of the prospective purchaser, and
(iii) Hemmingson is not aware of any active purchaser of the Company's stock
whose participation in such sale would exceed the FFIC Total (defined below), or
which, when combined with shares of Common Stock beneficially owned by such
party and its affiliates, would give such party and its affiliates beneficial
ownership of a number of shares of Common Stock which is equal to or greater
than the FFIC Total;
(c) Any sales or other dispositions of First Refusal Stock in a
transaction, or a series of transactions with the same party or its affiliates,
in an amount which neither (i) exceeds the FFIC Total, nor (ii) when combined
with the shares of Common Stock beneficially owned by such party and its
affiliates, would give such party and its affiliates beneficial ownership of a
number of shares of Common Stock which is equal to or greater than the FFIC
Total; or
(d) Any transfers of First Refusal Stock to any spouse, child or
immediate family member of Hemmingson, or to a trust established for the sole
benefit of any of the foregoing or any combination of the foregoing, so long as
the recipient thereof continues to be obligated under this Agreement to the same
extent as Hemmingson is obligated.
2.4 APPLICATION OF THIS AGREEMENT TO PARTICULAR TRANSACTIONS. In
determining whether or not a particular transaction or series of transactions is
exempt under Section 2.3(c), Hemmingson shall be obligated only to conduct a
review of publicly available information with regard to the prospective buyer
and obtain a certification from the prospective buyer addressed to FFIC that the
transaction or series of transactions will not result in the prospective buyer
beneficially owning more than 754,717 shares of Common Stock, such number of
shares representing FFIC's current beneficial ownership of the Company's Common
Stock on an as-converted basis (the "FFIC TOTAL"). FFIC hereby undertakes to
notify Hemmingson promptly in the event of any change in the FFIC Total. Until
Hemmingson receives notice of such change, he is entitled to rely on information
previously given him by FFIC.
SECTION 3. PURCHASE RIGHT
3.1 PURCHASE OF FIRST REFUSAL STOCK.
(a) Hemmingson hereby grants FFIC the right, and FFIC shall have the
right, exercisable upon written notice to Hemmingson in accordance with Section
7.1 of this Agreement within twenty (20) days after receipt by FFIC of the
Notice, to purchase all, but not less than all, of the shares of
3
<PAGE>
First Refusal Stock which are the subject of the Notice at the price and upon
the terms specified in the Notice.
(b) Whenever Hemmingson and FFIC agree to a sale of First Refusal Stock
pursuant to Section 2.1 above or FFIC exercises its right of first refusal under
Section 3.1(a) above, the closing of such purchase shall occur within fifteen
(15) days thereafter, subject to the receipt of regulatory approval, if any is
needed (including, without limitation, expiration or early termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended), at the offices of the Company in Overland Park, Kansas or
at such other date or place as the parties shall mutually determine; PROVIDED,
HOWEVER, that if such required regulatory approval is not received within
fifteen (15) days after Hemmingson and FFIC agree to a sale of First Refusal
Stock, FFIC will pay simple interest to Hemmingson on the total purchase price
at a rate equivalent to the prime rate established from time to time by Bank of
America NT & SA for the period from the fifteenth day after Hemmingson and FFIC
agree to a sale until the closing of such purchase and PROVIDED FURTHER that if
such regulatory approval is not obtained prior to 90 days after Hemmingson and
FFIC agree to a sale of First Refusal Stock, Hemmingson shall, at any time
thereafter, be permitted to sell the subject shares of First Refusal Stock
without restriction, and FFIC shall pay interest to Hemmingson in the amount
described in this sentence for the period ending on such 90th day.
3.2 SUBSEQUENT SALES. The exercise or non-exercise of the rights of
FFIC under this Agreement to purchase shares of First Refusal Stock offered by
Hemmingson shall not adversely affect its rights to purchase shares of First
Refusal Stock in subsequent offerings by Hemmingson pursuant to Sections 2 and 3
of this Agreement.
3.3 MECHANICS OF SALE UNDER SECTION 2.2. With respect to transactions
covered by Section 2.2 of this Agreement, if FFIC elects not to purchase the
shares of First Refusal Stock subject to the Notice, Hemmingson may, not later
than ninety (90) days following delivery to FFIC of the Notice, consummate a
sale of the First Refusal Stock covered by the Notice on the terms and
conditions described in the Notice. Any proposed transfer on terms and
conditions materially more favorable to the proposed buyer from those described
in the Notice, as well as any subsequent proposed sale of any of the First
Refusal Stock by Hemmingson, shall again be subject to the first refusal rights
of FFIC and shall require compliance by Hemmingson with the procedures described
in Sections 2 and 3 of this Agreement.
SECTION 4. LEGENDS; TRANSFER PROCEDURES
4.1 LEGENDS. Each certificate representing shares of the Company now
or hereafter beneficially owned by Hemmingson shall be endorsed with the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN FIRST OFFER AND FIRST REFUSAL RIGHTS AS SET FORTH IN A
CERTAIN RIGHT OF FIRST OFFER AND FIRST REFUSAL AGREEMENT DATED
SEPTEMBER 23, 1996 BY AND BETWEEN JOHN J. HEMMINGSON, FIREMAN'S
FUND INSURANCE COMPANY AND CROP GROWERS CORPORATION. COPIES OF
SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE CORPORATION."
4
<PAGE>
4.2 TRANSFER PROCEDURES. Transfers of First Refusal Stock in
accordance with Sections 2.3(a) and 2.3(b) of this Agreement are subject to the
procedures set forth in that certain General Letter to Brokers, a copy of which
is attached hereto as EXHIBIT B. The Company is hereby authorized and directed
to cause the removal of the legend described in Section 4.1 and permit the
transfer of all shares of First Refusal Stock which are sold in accordance with
Sections 2.3(a) or 2.3(b) upon compliance with the applicable procedure
described in Exhibit B.
SECTION 5. RECAPITALIZATION
In the event that, as the result of a stock split or stock dividend or
combination of shares or any other change, or exchange for other securities, by
reclassification, or recapitalization of the shares, the parties hereto shall be
entitled to new or additional or different shares of stock or securities, such
new or additional or different shares or securities shall be subject to all of
the provisions of this Agreement.
SECTION 6. TERMINATION OF AGREEMENT
The rights and obligations of the parties hereunder shall terminate upon
the earliest to occur of:
(a) the acquittal of Hemmingson of the criminal charges brought against
Hemmingson in the Indictments now pending against Hemmingson in the United
States District Court for the District of Columbia, being number 96-0181 on the
docket of said court and in the United States District Court for the Eastern
District of Louisiana, being number 96-198 on the docket of said court
(collectively, the "Indictments");
(b) the withdrawal or dismissal of those criminal charges referenced in
each of the Indictments (without any plea arrangement or plea bargain entered
into by Hemmingson);
(c) one year after the expiration or termination of any period of
suspension or debarment imposed on Hemmingson by the Federal Crop Insurance
Corporation pursuant to 7 C.F.R. Section 3017.320(a)(i);
(d) the death of Hemmingson;
(e) January 1, 2000;
(f) FFIC's beneficial ownership of the Company's common stock on an as-
converted basis shall fall below 5% of all outstanding shares on a fully diluted
basis; or
(g) Hemmingson's beneficial ownership of the Company's common stock
shall be 4% or less of all issued and outstanding shares of the Company's common
stock.
SECTION 7. MISCELLANEOUS
7.1 NOTICES. Any notice or other communication under or relating to
this agreement shall be given in writing and shall be deemed sufficiently given
and served for all purposes when personally delivered, delivered via reputable
overnight courier or given by telefax with receipt
5
<PAGE>
verified by printout of the transmitting machine (or otherwise confirmed in
writing, in which case the notice shall be deemed given when such written
confirmation is received). All communications shall be sent to the party to be
notified at the address set forth below or at such other address as such party
may designate by ten (10) days advance written notice to the other parties
hereto:
(a) If to FFIC:
Fireman's Fund Insurance Company
777 San Marin Drive
Novato, California 94998
Attn: Bruce F. Friedberg
Fax: (415) 899-2627
with a copy to:
Fireman's Fund Insurance Company
777 San Marin Drive
Novato, California 94998
Attn: General Counsel's Office
Fax: (415) 899-2852
(b) If to Hemmingson:
P.O. Box 145
Spokane, Washington
with a copy to:
Robert E. Woods, Esq.
Briggs and Morgan
2400 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Fax: (612) 334-8650
(c) If to the Company:
Crop Growers Corporation
10895 Lowell, 3rd Floor
P.O. Box 25951
Overland Park, KS 66225-5951
Attn: Chief Executive Officer
Fax: (406) 791-9594
6
<PAGE>
with a copy to:
Jack Manning, Esq.
Dorsey & Whitney
507 Davidson Building
8 Third Street North
Great Falls, MT 59401
Fax: (406) 727-3638
7.2 ASSIGNMENT. Neither Hemmingson nor FFIC may assign its rights and
obligations under this Agreement to any party without the prior written consent
of the other party.
7.3 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
7.4 AMENDMENTS AND WAIVERS. Any amendment or modification of this
Agreement shall be effective only if evidenced by a written instrument executed
by duly authorized representatives of the parties hereto. Any party may waive
its individual rights hereunder, which shall be effective only if evidenced by a
written instrument executed by a duly authorized representative of such party.
In no event shall such waiver of any rights hereunder constitute the waiver of
such rights in any future instance unless the waiver so specifies in writing.
7.5 GOVERNING LAW. This Agreement is being executed and delivered and
shall be governed by and construed in accordance with the laws of the State of
Delaware.
7.6 BEST EFFORTS. The Company agrees to use its best efforts to comply
with the terms of this Agreement, to inform the parties hereto of any known
breach hereof and to assist the parties hereto in the exercise of their rights
and performance of their obligations hereof.
7.7 ATTORNEYS' FEES. If any party shall bring an action in law or equity
against any other party to enforce or interpret any of the terms, covenants and
provisions of this Agreement, the prevailing party in such action shall be
entitled to reasonable attorneys' fees, which the other party hereby agrees to
pay.
7.8 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties pertaining to its subject matter and supersedes all prior
written or oral agreements and understandings of the parties with respect to
such subject matter.
7.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original but all of which together shall constitute one
instrument.
7
<PAGE>
7.10 SINGULAR AND PLURAL, ETC. Whenever the singular number is used herein
and where required by the context, the same shall include the plural, and the
neuter gender shall include the masculine and feminine genders and vice versa.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year indicated above.
FFIC: FIREMAN'S FUND INSURANCE COMPANY
By /s/ Bruce F. Friedberg
-------------------------------
Name: Bruce F. Friedberg
Title: Senior Vice President
HEMMINGSON:
/s/ John J. Hemmingson
-------------------------------
John J. Hemmingson
COMPANY: CROP GROWERS CORPORATION
By /s/ David Hill
-------------------------------
Name: David Hill
Title: Chief Financial Officer and
Secretary
8
<PAGE>
RIGHT OF FIRST OFFER AND FIRST REFUSAL AGREEMENT
This Right of First Offer and First Refusal Agreement (the "AGREEMENT"),
dated as of September 23, 1996, is entered into by and among FIREMAN'S FUND
INSURANCE COMPANY, a California corporation ("FFIC"), GARY A. BLACK, an
individual ("BLACK") and CROP GROWERS CORPORATION, a Delaware corporation (the
"COMPANY").
RECITALS
A. FFIC and the Company are parties to that certain Stock Purchase
Agreement dated as of July 10, 1996, whereby FFIC is purchasing shares of the
Company's Series A Convertible Preferred Stock (the "SHARES").
B. In fulfillment of a condition to the purchase of the Shares by FFIC,
Black desires to grant FFIC the right of first offer and first refusal to
purchase certain shares of the Company's Common Stock which might otherwise be
transferred, offered for sale or sold by Black to third parties in certain
circumstances, upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
SECTION 1. DEFINITIONS
1.1 "FIRST REFUSAL STOCK" shall mean all shares of the Common Stock (as
defined below) now or hereafter beneficially owned by Black. The number of
shares of First Refusal Stock currently owned by Black, as well as all currently
outstanding options and warrants to purchase shares of First Refusal Stock, is
set forth on EXHIBIT A hereto, which Exhibit shall automatically be amended from
time to time to reflect the changes in the number of shares beneficially owned
by Black, including dispositions of Common Stock not subject to the rights
generated hereunder or dispositions which occur after complying with the notice
provisions of Section 2 herein.
1.2 "COMMON STOCK" shall mean the Company's Common Stock and shares of
the Company's Common Stock issued or issuable upon exercise of options or
warrants to purchase shares of the Company's Common Stock.
<PAGE>
Section 2. RIGHT OF FIRST OFFER AND RIGHT OF FIRST REFUSAL
2.1 RIGHT OF FIRST OFFER.
(a) Black may, if he desires to sell, transfer, assign or otherwise
dispose of any shares of First Refusal Stock to any person other than the
Company and does not have a particular transaction or a particular buyer in
mind, make a written offer (the "OFFER") to FFIC (pursuant to the terms of
Section 7.1 of this Agreement) to sell all or part of his First Refusal Stock at
a stated price (the "OFFER PRICE");
(b) If FFIC does not agree to pay the Offer Price, it must within 15
days after it receives the Offer (the "RESPONSE DUE DATE") either state a price
(in a notice pursuant to the terms of Section 7.1 of this Agreement) at which it
is willing to purchase the shares (the "COUNTER-OFFER PRICE") or state that it
is not interested in purchasing the shares which are the subject of the Offer in
a notice pursuant to the terms of Section 7.1 of this Agreement;
(c) If Black is unwilling to accept the Counter-Offer Price, Black
shall be free for a period of 180 days after the Response Due Date to sell the
shares which are the subject of the Offer to any third party at any price which
exceeds 105% of the Counter-Offer Price free and clear of any further
obligations under Sections 2 and 3 of this Agreement;
(d) If FFIC declines to state a Counter-Offer Price, Black may for a
period of 180 days after the Response Due Date sell the shares which are the
subject of the Offer to a third party at 95% or more of the Offer Price free and
clear of any further obligations under Sections 2 and 3 of this Agreement;
(e) If FFIC does not respond by the Response Due Date to the Offer,
such silence shall be deemed the same as a statement that FFIC is unwilling to
purchase the subject shares at the Offer Price, thereby freeing Black for a
period of 180 days after the Response Date to sell the shares which are the
subject of the Offer at 95% or more of the Offer Price.
2.2 RIGHT OF FIRST REFUSAL. In the event that Black desires, at any
time, to enter into a sale, transfer, assignment or other disposition of any
shares of First Refusal Stock, or any shares of First Refusal Stock are subject
to any involuntary transfer, other than (in each case) a sale to the Company, a
sale to a third party after Black has complied with the terms of Section 2.1
above, or sales which satisfy any of the conditions in Section 2.3 below, Black
shall deliver a notice (the "NOTICE") to FFIC (with a copy to the Company) at
least twenty (20) days prior to the closing date of such sale, pursuant to the
provisions set forth in Section 7.1 of this Agreement. The Notice shall
describe in reasonable detail the proposed sale including, without limitation,
the number of shares of First Refusal Stock to be sold, the terms of such sale,
the consideration to be paid, and the name and address of each prospective
purchaser. For purposes of this Section 2.2, in the case of any involuntary
transfer of First Refusal Stock by Black (including, without limitation,
transfers as the result of any bankruptcy action), the First Refusal Stock to be
transferred shall be valued at fair market value, to be determined by an
appraiser mutually agreeable to the parties, if necessary.
2.3 EXEMPTIONS. The offer procedure and notice requirements specified
in Sections 2.1 and 2.2 and the provisions of Section 3 shall be inapplicable in
the following sales of First Refusal Stock:
2
<PAGE>
(a) Any sales of First Refusal Stock in open market transactions made
in accordance with the manner of sale provisions set forth in Rule 144(f) ("RULE
144(F)") under the Securities Act of 1933, as amended from time to time (the
"SECURITIES ACT") which are within the volume limitations set forth in
Rule 144(e)(1) under the Securities Act, as amended from time to time
("RULE 144(E)(1)"), PROVIDED THAT, Black confirms to the Company in writing
concurrent with any particular sale that such sale is not part of a negotiated
transaction and Black is unaware of the identity of the prospective purchaser;
(b) Any sales of First Refusal Stock in open market transactions made
in accordance with the manner of sale provisions set forth in Rule 144(f) in an
amount greater than the limits imposed by Rule 144(e)(1); PROVIDED THAT, Black
shall provide FFIC with a certificate at the time of the transaction, stating
that (i) such sale is not part of a negotiated transaction, (ii) Black is
unaware of the identity of the prospective purchaser, and (iii) Black is not
aware of any active purchaser of the Company's stock whose participation in such
sale would exceed the FFIC Total (defined below), or which, when combined with
shares of Common Stock beneficially owned by such party and its affiliates,
would give such party and its affiliates beneficial ownership of a number of
shares of Common Stock which is equal to or greater than the FFIC Total;
(c) Any sales or other dispositions of First Refusal Stock in a
transaction, or a series of transactions with the same party or its affiliates,
in an amount which neither (i) exceeds the FFIC Total, nor (ii) when combined
with the shares of Common Stock beneficially owned by such party and its
affiliates, would give such party and its affiliates beneficial ownership of a
number of shares of Common Stock which is equal to or greater than the FFIC
Total; or
(d) Any transfers of First Refusal Stock to any spouse, child or
immediate family member of Black, or to a trust established for the sole benefit
of any of the foregoing or any combination of the foregoing, so long as the
recipient thereof continues to be obligated under this Agreement to the same
extent as Black is obligated.
2.4 APPLICATION OF THIS AGREEMENT TO PARTICULAR TRANSACTIONS. In
determining whether or not a particular transaction or series of transactions is
exempt under Section 2.3(c), Black shall be obligated only to conduct a review
of publicly available information with regard to the prospective buyer and
obtain a certification from the prospective buyer addressed to FFIC that the
transaction or series of transactions will not result in the prospective buyer
beneficially owning more than 754,717 shares of Common Stock, such number of
shares representing FFIC's current beneficial ownership of the Company's Common
Stock on an as-converted basis (the "FFIC TOTAL"). FFIC hereby undertakes to
notify Black promptly in the event of any change in the FFIC Total. Until Black
receives notice of such change, he is entitled to rely on information previously
given him by FFIC.
SECTION 3. PURCHASE RIGHT
3.1 PURCHASE OF FIRST REFUSAL STOCK.
(a) Black hereby grants FFIC the right, and FFIC shall have the right,
exercisable upon written notice to Black in accordance with Section 7.1 of this
Agreement within twenty (20) days after receipt by FFIC of the Notice, to
purchase all, but not less than all, of the shares of First Refusal Stock which
are the subject of the Notice at the price and upon the terms specified in the
Notice.
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(b) Whenever Black and FFIC agree to a sale of First Refusal Stock
pursuant to Section 2.1 above or FFIC exercises its right of first refusal under
Section 3.1(a) above, the closing of such purchase shall occur within fifteen
(15) days thereafter, subject to the receipt of regulatory approval, if any is
needed (including, without limitation, expiration or early termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended), at the offices of the Company in Overland Park, Kansas or
at such other date or place as the parties shall mutually determine; PROVIDED,
HOWEVER, that if such required regulatory approval is not received within
fifteen (15) days after Black and FFIC agree to a sale of First Refusal Stock,
FFIC will pay simple interest to Black on the total purchase price at a rate
equivalent to the prime rate established from time to time by Bank of America NT
& SA for the period from the fifteenth day after Black and FFIC agree to a sale
until the closing of such purchase and PROVIDED FURTHER that if such regulatory
approval is not obtained prior to 90 days after Black and FFIC agree to a sale
of First Refusal Stock, Black shall, at any time thereafter, be permitted to
sell the subject shares of First Refusal Stock without restriction, and FFIC
shall pay interest to Black in the amount described in this sentence for the
period ending on such 90th day.
3.2 SUBSEQUENT SALES. The exercise or non-exercise of the rights of
FFIC under this Agreement to purchase shares of First Refusal Stock offered by
Black shall not adversely affect its rights to purchase shares of First Refusal
Stock in subsequent offerings by Black pursuant to Sections 2 and 3 of this
Agreement.
3.3 MECHANICS OF SALE UNDER SECTION 2.2. With respect to transactions
covered by Section 2.2 of this Agreement, if FFIC elects not to purchase the
shares of First Refusal Stock subject to the Notice, Black may, not later than
ninety (90) days following delivery to FFIC of the Notice, consummate a sale of
the First Refusal Stock covered by the Notice on the terms and conditions
described in the Notice. Any proposed transfer on terms and conditions
materially more favorable to the proposed buyer from those described in the
Notice, as well as any subsequent proposed sale of any of the First Refusal
Stock by Black, shall again be subject to the first refusal rights of FFIC and
shall require compliance by Black with the procedures described in Sections 2
and 3 of this Agreement.
SECTION 4. LEGENDS; TRANSFER PROCEDURES
4.1 LEGENDS. Each certificate representing shares of the Company now
or hereafter beneficially owned by Black shall be endorsed with the following
legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
FIRST OFFER AND FIRST REFUSAL RIGHTS AS SET FORTH IN A CERTAIN RIGHT
OF FIRST OFFER AND FIRST REFUSAL AGREEMENT DATED SEPTEMBER 23, 1996 BY
AND BETWEEN GARY A. BLACK, FIREMAN'S FUND INSURANCE COMPANY AND CROP
GROWERS CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION."
4.2 TRANSFER PROCEDURES. Transfers of First Refusal Stock in accordance
with Sections 2.3(a) and 2.3(b) of this Agreement are subject to the procedures
set forth in that certain General Letter to Brokers, a copy of which is attached
hereto as EXHIBIT B. The Company is hereby
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authorized and directed to cause the removal of the legend described in Section
4.1 and permit the transfer of all shares of First Refusal Stock which are sold
in accordance with Sections 2.3(a) or 2.3(b) upon compliance with the applicable
procedure described in Exhibit B.
SECTION 5. RECAPITALIZATION
In the event that, as the result of a stock split or stock dividend or
combination of shares or any other change, or exchange for other securities, by
reclassification, or recapitalization of the shares, the parties hereto shall be
entitled to new or additional or different shares of stock or securities, such
new or additional or different shares or securities shall be subject to all of
the provisions of this Agreement.
SECTION 6. TERMINATION OF AGREEMENT
The rights and obligations of the parties hereunder shall terminate upon
the earliest to occur of:
(a) the acquittal of Black of the criminal charges brought against
Black in the Indictment now pending against Black in the United States District
Court for the District of Columbia, being number 96-0181 on the docket of said
court (the "Indictment");
(b) the withdrawal or dismissal of those criminal charges referenced in
the Indictment (without any plea arrangement or plea bargain entered into by
Black);
(c) one year after the expiration or termination of any period of
suspension or debarment imposed on Black by the Federal Crop Insurance
Corporation pursuant to 7 C.F.R. Section 3017.320(a)(i);
(d) the death of Black;
(e) January 1, 2000;
(f) FFIC's beneficial ownership of the Company's common stock on an as-
converted basis shall fall below 5% of all outstanding shares on a fully diluted
basis; or
(g) Black's beneficial ownership of the Company's common stock shall be
4% or less of all issued and outstanding shares of the Company's common stock.
SECTION 7. MISCELLANEOUS
7.1 NOTICES. Any notice or other communication under or relating to
this Agreement shall be given in writing and shall be deemed sufficiently given
and served for all purposes when personally delivered, delivered via reputable
overnight courier or given by telefax with receipt verified by printout of the
transmitting machine (or otherwise confirmed in writing, in which case the
notice shall be deemed given when such written confirmation is received). All
communications shall be sent to the party to be notified at the address set
forth below or at such other address as such party may designate by ten (10)
days advance written notice to the other parties hereto:
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(a) If to FFIC:
Fireman's Fund Insurance Company
777 San Marin Drive
Novato, California 94998
Attn: Bruce F. Friedberg
Fax: (415) 899-2627
with a copy to:
Fireman's Fund Insurance Company
777 San Marin Drive
Novato, California 94998
Attn: General Counsel's Office
Fax: (415) 899-2852
(b) If to Black:
3325 - 15th Avenue South
Great Falls, MT 59405
Fax: (406) 454-1245
with a copy to:
Ronald G. Vantine, Esq.
Lindquist & Vennum P.L.L.P.
4200 IDS Center
Minneapolis, MN 55402
Fax: (612) 371-3207
(c) If to the Company:
Crop Growers Corporation
10895 Lowell, 3rd Floor
P.O. Box 25951
Overland Park, KS 66225-5951
Attn: Chief Executive Officer
Fax: (406) 791-9594
with a copy to:
Jack Manning, Esq.
Dorsey & Whitney
507 Davidson Building
8 Third Street North
Great Falls, MT 59401
Fax: (406) 727-3638
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7.2 ASSIGNMENT. Neither Black nor FFIC may assign its rights and
obligations under this Agreement to any party without the prior written consent
of the other party.
7.3 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
7.4 AMENDMENTS AND WAIVERS. Any amendment or modification of this
Agreement shall be effective only if evidenced by a written instrument executed
by duly authorized representatives of the parties hereto. Any party may waive
its individual rights hereunder, which shall be effective only if evidenced by a
written instrument executed by a duly authorized representative of such party.
In no event shall such waiver of any rights hereunder constitute the waiver of
such rights in any future instance unless the waiver so specifies in writing.
7.5 GOVERNING LAW. This Agreement is being executed and delivered and shall
be governed by and construed in accordance with the laws of the State of
Delaware.
7.6 BEST EFFORTS. The Company agrees to use its best efforts to comply
with the terms of this Agreement, to inform the parties hereto of any known
breach hereof and to assist the parties hereto in the exercise of their rights
and performance of their obligations hereof.
7.7 ATTORNEYS' FEES. If any party shall bring an action in law or equity
against any other party to enforce or interpret any of the terms, covenants and
provisions of this Agreement, the prevailing party in such action shall be
entitled to reasonable attorneys' fees, which the other party hereby agrees to
pay.
7.8 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties pertaining to its subject matter and supersedes all prior
written or oral agreements and understandings of the parties with respect to
such subject matter.
7.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original but all of which together shall constitute one
instrument.
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7.10 SINGULAR AND PLURAL, ETC. Whenever the singular number is used herein
and where required by the context, the same shall include the plural, and the
neuter gender shall include the masculine and feminine genders and vice versa.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year indicated above.
FFIC: FIREMAN'S FUND INSURANCE COMPANY
By /s/ Bruce F. Friedberg
-------------------------------
Name: Bruce F. Friedberg
Title: Senior Vice President
BLACK:
/s/ Gary A. Black
-------------------------------
Gary A. Black
COMPANY: CROP GROWERS CORPORATION
By /s/ David Hill
-------------------------------
Name: David Hill
Title: Chief Financial Officer and
Secretary
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ACQUISITION AGREEMENT
This Acquisition Agreement dated March 5, 1997 between Crop Growers
Corporation, a Delaware corporation (the "COMPANY"), and Fireman's Fund
Insurance Company, a California corporation (the "BUYER"), sets forth the
agreement of the parties with respect to an acquisition (the "ACQUISITION") on
the terms and conditions set forth herein.
1. ACQUISITION. The Acquisition will consist of the merger of a
subsidiary or affiliate of the Buyer into the Company, with the Company being
the surviving corporation, in which (i) the common stockholders of the Company
will be entitled to receive cash in the amount of $10.25 per share (as
constituted on the date hereof) upon surrender of the relevant stock certificate
following the closing, (ii) the holders of options to acquire common stock of
the Company will receive a cash settlement equal to the spread (if any)
represented by each option, based on such price per share, and (iii) the Buyer
or an affiliate of the Buyer will become the holder of all the outstanding
common stock and rights to acquire common stock of the Company.
2. EFFECT OF THIS ACQUISITION AGREEMENT; IMPLEMENTATION DOCUMENTATION.
It is understood that this Acquisition Agreement constitutes a binding agreement
as to the terms of and the parties' respective obligations with respect to the
Acquisition. The parties hereto shall promptly and diligently negotiate in good
faith and use their respective best efforts to enter into implementing
agreements with respect to the Acquisition (collectively, the "IMPLEMENTATION
AGREEMENTS"), each of which shall be consistent with the terms hereof. Although
the parties hereto intend to diligently negotiate and promptly enter into the
Implementation Agreements, the parties acknowledge and agree that this
Acquisition Agreement contains all of the substantive terms of the Acquisition,
and, in the event that the parties do not enter into the Implementation
Agreements, that this Acquisition Agreement is a binding agreement and shall
form the basis for consummation of the Acquisition as contemplated hereby.
3. NO SOLICITATION.
(a) Except with respect to those entities listed in the Company's
letter to the Buyer (the "EXCEPTED CONTACTS") (but with respect to the Excepted
Contacts only through March 28, 1997), until the earlier of the termination of
this Acquisition Agreement pursuant to its terms or the consummation of the
Acquisition, neither the Company nor any of its subsidiaries or representatives
shall, directly or indirectly, take any action to (i) encourage, solicit or
initiate the submission of any Acquisition Proposal, (ii) enter into any
agreement for or relating to a Third Party Transaction, or (iii) participate in
any way in discussions or negotiations with, or furnish any non-public
information to, any person in connection with any Acquisition Proposal.
Notwithstanding any other provision of this Section 3(a), the Company may, in
response
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to an unsolicited BONA FIDE offer or proposal made by a third party to it,
provide information to or have discussions or negotiations with such third
party; provided, however, that if such offer or proposal is received after March
28, 1997, the Board of Directors must first make a determination in good faith,
after hearing advice of its outside counsel, that such action is necessary in
order for the Board of Directors to comply with its fiduciary duties under
applicable law. The Company will immediately communicate to the Buyer the
receipt of any third party solicitation, proposal or BONA FIDE inquiry that the
Company or any of its representatives may receive in respect of any such
transaction, or of any request for such information, including in each case a
copy thereof and all other particulars thereof.
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(b) "ACQUISITION PROPOSAL" means any proposed Acquisition
Transaction. "ACQUISITION TRANSACTION" means any (i) merger, consolidation or
similar transaction involving the Company, (ii) sale, lease or other disposition
directly or indirectly by merger, consolidation, share exchange or otherwise of
any assets of the Company or its subsidiaries representing 15% or more of the
consolidated assets of the Company and its subsidiaries, (iii) issue, sale or
other disposition of (including by way of merger, consolidation, share exchange
or any similar transaction) securities (or options, rights or warrants to
purchase, or securities convertible into, such securities) representing 15% or
more of the votes attached to the outstanding securities of the Company, (iv)
transaction in which any person shall acquire Beneficial Ownership or the right
to acquire Beneficial Ownership, or any Group shall have been formed which has
Beneficial Ownership or has the right to acquire Beneficial Ownership, of 15% or
more of the outstanding shares of common stock of the Company, (v)
recapitalization, restructuring, liquidation, dissolution, or other similar type
of transaction with respect to the Company or any of its subsidiaries, or (vi)
transaction which is similar in form, substance or purpose to any of the
foregoing transactions. "THIRD PARTY TRANSACTION" shall mean an Acquisition
Transaction with a party unrelated to the Buyer. "BENEFICIAL OWNERSHIP" and
"GROUP" shall have the meanings stated in Regulation 13D-G under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT").
(c) The Company will use its best efforts to take all action
necessary in accordance with applicable law and its certificate of incorporation
and bylaws to convene a meeting of its stockholders as promptly as practicable
to consider and vote upon the approval of the Acquisition. The Board of
Directors of the Company shall recommend and declare advisable to its
stockholders such approval and the Company shall take all lawful action to
solicit, and use all best efforts to obtain, approval of its stockholders, and
neither the Board of Directors of the Company nor any committee of such Board of
Directors shall (i) withdraw or modify the approval or recommendation by such
Board of Directors or such committee of the Acquisition, (ii) approve or
recommend any Acquisition Proposal other than the Acquisition, or (iii) cause
the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement with respect to any Acquisition
Proposal other than the Acquisition. Notwithstanding the foregoing, no later
than March 28, 1997, the Board of Directors of the Company may withdraw or
modify its approval or recommendation of the Acquisition, approve or recommend a
Superior Proposal or terminate this Acquisition Agreement, but in each case only
concurrently with the payment of the amount required by Section 14(d) or 14(e),
as applicable. A "SUPERIOR PROPOSAL" means any BONA FIDE Acquisition Proposal,
the terms of which the Board of Directors of the Company determines in its good
faith judgment (after hearing the advice of a financial advisor of nationally
recognized reputation) to be more favorable to the Company's stockholders than
the Acquisition. Further, after March 28, 1997, the Board of Directors of the
Company may withdraw or modify its approval or recommendation of the
Acquisition, approve or recommend a Superior Proposal or terminate this
Acquisition Agreement, but in each case only concurrently with the payment of
the amount required by Section 14(d) or 14(e), as applicable, and after a
determination in good faith, after hearing advice of its outside counsel, that
such action is necessary in
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order for the Board of Directors to comply with its fiduciary duties to
stockholders under applicable law.
4. ACCESS. The Company shall (and shall cause each of its subsidiaries
to) afford to the Buyer and its agents and representatives full access during
normal business hours throughout the period prior to the consummation of the
Acquisition to all of its properties, books, contracts, commitments and records
and during such period shall (and shall cause each of its subsidiaries to)
furnish promptly to such parties (i) a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of federal or
state securities or insurance laws and (ii) all other information concerning its
business, properties and personnel as such party may reasonably request,
including any financial and operating data. Any such access shall commence
forthwith, and shall be conducted in such a manner so as not to interfere
unreasonably with the business or operations of the Company. The Buyer shall
maintain the confidentiality of any non-public information received by it or its
representatives pursuant to this Section 4.
5. CONSENTS. The parties hereto will use their respective reasonable
best efforts to (i) obtain all material consents, authorizations, orders and
approvals of or from private parties or Government Entities, required, proper or
advisable in connection with this Acquisition Agreement and the Acquisition and
(ii) resolve any action, suit, proceeding or investigation which shall have been
instituted or which a Government Entity shall have indicated its intention to
institute which jeopardizes the Acquisition; PROVIDED, HOWEVER, that no party
hereto shall be obligated to take any such action which, in the reasonable
opinion of such party (following consultation with its counsel), would (x) have
a material adverse effect on the assets, properties, liabilities, obligations,
financial condition, results of operations or business (a "MATERIAL ADVERSE
EFFECT") of such party and its subsidiaries taken as a whole or (y) have a
Material Adverse Effect or materially restrict or impair the effective
ownership, operation or control of the Company by the Buyer following the
consummation of the Acquisition. "GOVERNMENTAL ENTITY" means any federal, state
or local governmental or regulatory agency, authority or instrumentality,
whether domestic or foreign.
6. ANNOUNCEMENTS. The parties hereto will consult and cooperate with
each other and agree upon the terms and substance of all press releases,
announcements and public statements with respect to this Acquisition Agreement
and the Acquisition, provided that such consultation and cooperation shall not
interfere with any obligation of either party hereto to disclose any information
as required by applicable law. Any press release or other announcement by any
party with respect to the Acquisition will be subject to the consent and
approval of the other party, which consent or approval will not be unreasonably
withheld.
7. INTERIM OPERATIONS. Except as set forth on the disclosure schedule
delivered concurrently herewith ("DISCLOSURE SCHEDULE") or expressly required or
permitted by this Acquisition Agreement, from and after the date hereof until
the earlier of (i) the consummation of the Acquisition or (ii) the termination
of this Acquisition
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Agreement pursuant to its terms, the Company will and will cause its
subsidiaries to (w), except as otherwise agreed to by Buyer orally or in
writing, operate its businesses in the ordinary course of business, (x) not take
any action or fail to take any action which would or could reasonably be
expected to jeopardize any of its material contracts or its good standing with
all applicable Departments of Insurance and similar regulatory agencies with
jurisdiction over the Company, (y) not take any extraordinary action or fail to
take any action, the failure of which to be taken would be an extraordinary
action, and (z) not declare, set aside or pay any dividend (other than stated
dividends on its preferred stock) or other distribution in respect of its
capital stock, whether in stock, cash or other property, or issue any capital
stock or any right to acquire, convert into or exchange for capital stock except
pursuant to stock options outstanding on the date hereof. The Company agrees
that, in the event it adopts a "rights plan," "poison pill" or similar plan or
arrangement, it will include a provision expressly exempting the Buyer from the
operation thereof.
8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Buyer that:
(a) ORGANIZATION AND QUALIFICATIONS. The Company and each subsidiary
of the Company is a corporation duly incorporated or organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization and has the requisite corporate power and authority, and all
governmental permits, approvals and other authorizations, necessary to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except for such exceptions as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company and its subsidiaries
taken as a whole (a "COMPANY MATERIAL ADVERSE EFFECT").
(b) CAPITALIZATION. The authorized capital stock of the Company is
as set forth on the Disclosure Schedule. Except as set forth thereon, no shares
of capital stock or other voting securities of the Company are issued, reserved
for issuance or outstanding. Except as set forth above and except as
contemplated herein, there are no options or agreements relating to the issued
or unissued capital stock of the Company or any subsidiary of the Company, or
obligating the Company or any subsidiary to issue, transfer, grant or sell any
shares of capital stock of, or other equity interests in, or securities
convertible into or exchangeable for any capital stock or other equity interests
in, the Company or any subsidiary. There are no outstanding contractual
obligations of the Company or any subsidiary to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or any subsidiary.
(c) AUTHORITY RELATIVE TO THIS ACQUISITION AGREEMENT. The Company
has all necessary corporate power and authority to execute and deliver this
Acquisition Agreement, to perform its obligations hereunder and, subject to
adoption of this Acquisition Agreement (or the Implementation Agreements) by the
stockholders of the Company as contemplated hereby (the "STOCKHOLDER APPROVAL"),
to consummate the Acquisition. The execution and delivery of this Acquisition
Agreement by the
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Company and the consummation by it of the Acquisition have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company is necessary to authorize this Acquisition Agreement
or to consummate the Acquisition (other than the Stockholder Approval). This
Acquisition Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery thereof by
each other party hereto, constitutes the legal, valid and binding obligation of
the Company, enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights generally and by equitable
principles.
(d) NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(i) The execution and delivery of this Acquisition Agreement by
the Company does not, and the performance of its obligations hereunder and the
consummation of the Acquisition by it will not, (A) conflict with or violate the
certificate of incorporation or bylaws of the Company or any of its
subsidiaries, (B) subject to the making of the filings and obtaining the
approvals identified in Section 8(d)(ii), conflict with or violate any law,
rule, regulation, order, judgment or decree (collectively, "LAWS") applicable to
the Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected, or (C) except as
disclosed in the Disclosure Schedule, conflict with, result in any breach of,
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in a loss or modification adverse to the
Company or its subsidiaries of any right or benefit under, give to others any
right of termination, amendment, acceleration, repurchase, repayment, increased
payments or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of the Company or any subsidiary pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation, whether written or oral
(collectively, a "CONTRACT"), to which the Company or any subsidiary is a party
or by which the Company or any subsidiary or any property or asset of the
Company or any subsidiary is bound or affected, except, in the case of clauses
(B) and (C), for any such conflicts, violations or other consequences which
would not, individually or in the aggregate, prevent or delay in any material
respect the consummation of the Acquisition or prevent the Company from
performing its obligations under this Acquisition Agreement in any material
respect and which, in any case, would not, individually or in the aggregate,
have a Company Material Adverse Effect.
(ii) The execution and delivery of this Acquisition Agreement by
the Company does not, and the performance of its obligations hereunder and the
consummation of the Acquisition by it will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Government
Entity for or by either party, except (A) for applicable requirements of (1) the
Exchange Act (in the case of the Company only) and the filing of a certificate
of merger under the Delaware General Corporation Law, (2), to the knowledge of
the Company on the date hereof, the state insurance holding company laws of the
states of Kansas, Nebraska, North Dakota
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and Texas (in the case of the Buyer only) and (3) the Hart-Scott-Rodino
Antitrust Improvement Act (the "HSR ACT") and (B) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, prevent or delay in
any material respect consummation of the Acquisition, or otherwise prevent the
Company from performing its obligations hereunder in any material respect, and
would not, individually or in the aggregate, have a Company Material Adverse
Effect.
(e) SECURITIES REPORTS AND FINANCIAL STATEMENTS. Except as set forth
on the Disclosure Schedule, each form, report, schedule, registration statement
and definitive proxy statement filed by the Company with the Securities and
Exchange Commission ("SEC") since December 31, 1995 and prior to the date hereof
(as such documents have been amended prior to the date hereof, collectively the
"COMPANY SEC REPORTS"), as of their respective dates, complied in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act and the rules and regulations thereunder. Except as set forth in the
Disclosure Schedule, none of the Company SEC Reports, as of their respective
dates, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except for such statements, if any, as have been modified or
superseded by subsequent Company SEC Reports filed prior to the date hereof.
The consolidated financial statements of the Company and its subsidiaries
included in such reports comply in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of the
unaudited interim financial statements, as permitted by Form 10-Q of the SEC)
and fairly present (subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments) the consolidated financial
position of the Company and its subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended. Except as set forth in the Disclosure Schedule, since December 31, 1995,
neither the Company nor any of its subsidiaries has incurred any liabilities or
obligations (whether absolute, accrued, fixed, contingent, liquidated,
unliquidated or otherwise and whether due or to become due) of any nature,
except liabilities, obligations or contingencies (i) which are reflected on the
unaudited balance sheet of the Company and its subsidiaries, as of September 30,
1996 (including the notes thereto), or (ii) which (A) were incurred in the
ordinary course of business after such interim date and are consistent with past
practices, (B) are disclosed in the Company SEC Reports filed after such date,
or (C) would not, individually or in the aggregate, have a Company Material
Adverse Effect. Since December 31, 1995, there has been no change in any of the
significant accounting (including tax accounting) policies, practices or
procedures of the Company or any material subsidiary.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as contemplated by
this Acquisition Agreement, as disclosed in any Company SEC Report
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or as set forth in the Disclosure Schedule, since December 31, 1995, (i) the
Company and its subsidiaries have conducted their respective businesses only in
the ordinary course, consistent with past practice, and have not taken any
action that would be inconsistent with the covenants set forth in Section 7 if
they had applied during such period, and (ii) there has not occurred or arisen
any event that, individually or in the aggregate, has had or, insofar as
reasonably can be foreseen, is likely in the future to have, a Company Material
Adverse Effect other than any developments that generally affect the industry in
which the Company operates.
9. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
(a) ORGANIZATION AND QUALIFICATIONS. The Buyer is a corporation duly
incorporated or organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite power and
authority and all governmental permits, approvals and other authorizations
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted, except for such exceptions as would not,
individually or in the aggregate, have a Material Adverse Effect on the Buyer
and its subsidiaries, taken as a whole (a "BUYER MATERIAL ADVERSE EFFECT").
(b) AUTHORITY RELATIVE TO THIS ACQUISITION AGREEMENT. The Buyer has
all necessary corporate power and authority to execute and deliver this
Acquisition Agreement, to perform its obligations hereunder and to consummate
the Acquisition. The execution and delivery of this Acquisition Agreement by
the Buyer and the consummation by it of the Acquisition have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Buyer is necessary to authorize this Acquisition
Agreement or to consummate the Acquisition. This Acquisition Agreement has been
duly and validly executed and delivered by the Buyer and, assuming the due
authorization, execution and delivery thereof by each other party hereto,
constitutes the legal, valid and binding obligations of the Buyer, except as
enforcement may be limited by bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights generally and by equitable
principles.
(c) NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(i) The execution and delivery of this Acquisition Agreement by
the Buyer does not, and the performance of its obligations hereunder and the
consummation of the Acquisition by it will not (A) conflict with or violate the
certificate of incorporation or bylaws of the Buyer, (B) subject to the making
of the filings and obtaining the approvals identified in Section 9(c)(ii),
conflict with or violate any Laws applicable to the Buyer or by which any
property or asset of the Buyer is bound or affected, or (C) conflict with or
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, result in the loss or
modification in a manner materially adverse to the Buyer of any material right
or benefit under, or give to others any right of termination, amendment,
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acceleration, repurchase or repayment, increased payments or cancellation of, or
result in the creation of a lien or other encumbrance on any property or asset
of the Buyer pursuant to, any Contract to which the Buyer is a party or by which
the Buyer or any property or asset of the Buyer is bound or affected, except, in
the case of clauses (B) and (C), for any such conflicts or violations which
would not prevent or delay in any material respect the consummation of the
Acquisition, or otherwise, individually or in the aggregate, prevent the Buyer
from performing its obligations under this Acquisition Agreement in any material
respect.
(ii) The execution and delivery of this Acquisition Agreement by
the Buyer does not, and the performance of its obligations hereunder and the
consummation of the Acquisition by it will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, except (A) for applicable requirements of (1) the insurance company
holding laws of certain states and (2) the HSR Act, and (B) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not, individually or in the aggregate, prevent
or delay in any material respect consummation of the Acquisition, or otherwise
prevent the Buyer from performing its obligations hereunder in any material
respect.
10. CONDITIONS TO THE COMPANY'S OBLIGATION. The obligation of the Company
to consummate the Acquisition is subject to the satisfaction of each of the
following conditions:
(a) All waivers, consents, authorizations, orders, approvals or
expiration of waiting periods required under any Law or Contract to be obtained
by the Company in order to consummate the Acquisition shall have been obtained,
except where the failure to have obtained any such waiver, consent,
authorization, order or approval would not have a Company Material Adverse
Effect.
(b) The representations and warranties of the Buyer set forth herein
shall be true and correct in all respects as of the date hereof, and as of the
time the Acquisition is consummated, other than, in all such cases, such
failures to be true and/or correct as would not in the aggregate reasonably be
expected to have a Buyer Material Adverse Effect; PROVIDED, HOWEVER, that if any
of the representations and warranties are already qualified in any respect by
materiality or as to a Buyer Material Adverse Effect, for purposes of this
Section 10(b) such materiality or Buyer Material Adverse Effect qualification
will be in all respects ignored (but subject to the overall standard as to Buyer
Material Adverse Effect set forth immediately prior to this proviso), and the
Buyer shall have complied in all material respects with all covenants and
agreements set forth herein to be performed by it.
(c) No injunction, restraining order or other order of any federal or
state court which prevents the consummation of the Acquisition shall be in
effect.
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(d) No statute, rule or regulation shall have been enacted by any
state or governmental agency that would prevent the consummation of the
Acquisition.
(e) The Stockholder Approval shall have been obtained.
11. CONDITIONS TO THE BUYER'S OBLIGATION. The obligation of the Buyer to
consummate the Acquisition is subject to the satisfaction of each of the
following conditions:
(a) All waivers, consents, authorizations, orders, approvals or
expiration of waiting periods required under any Law or Contract to be obtained
by any of the parties hereof in order to consummate the Acquisition shall have
been obtained, except where the failure to have obtained any waiver, consent,
authorization, order or approval would not have a Company Material Adverse
Effect or a Buyer Material Adverse Effect.
(b) The representations and warranties of the Company set forth
herein shall be true and correct in all respects as of the date hereof, and as
of the time the Acquisition is consummated, other than, in all such cases, such
failures to be true and/or correct as would not in the aggregate reasonably be
expected to have a Company Material Adverse Effect; PROVIDED, HOWEVER, that if
any of the representations and warranties is already qualified in any respect by
materiality or as to a Company Material Adverse Effect, for purposes of this
Section 11(b) such materiality or Company Material Adverse Effect qualification
will be in all respects ignored (but subject to the overall standard as to
Material Adverse Effect set forth immediately prior to this proviso), and the
Company shall have complied in all material respects with all covenants and
agreements set forth herein to be performed by it.
(c) No injunction, restraining order or other order of any federal or
state court which prevents the consummation of the Acquisition shall be in
effect.
(d) No statute, rule or regulation shall have been enacted by any
state or governmental agency that would prevent the consummation of the
Acquisition.
(e) Except as set forth in the Disclosure Schedule, no Company
Material Adverse Effect shall have occurred between the date hereof and
consummation of the Acquisition other than any developments that generally
affect the industry in which the Company operates.
(f) The Stockholder Approval shall have been obtained.
12. CONSENT. Concurrently herewith, the Company and the Buyer have
entered into a Consent Agreement (the "CONSENT AGREEMENT"), subject to the terms
and conditions stated therein, pursuant to which the Company is delivering its
consent to the Buyer's purchase of up to (i) 1,145,703 shares of Company common
stock from
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John J. Hemmingson and (ii) 681,774 shares of Company common stock from Gary A.
Black.
13. WORKING CAPITAL LINE OF CREDIT. Concurrently herewith, the Buyer and
the Company have entered into a Letter of Intent re Revolving Credit Working
Capital Facility (the "LETTER OF INTENT"), subject to the terms and conditions
stated therein, to furnish the Company a working capital line of credit.
14. TERMINATION. This Acquisition Agreement shall terminate at the
earlier of:
(a) Such time as the parties shall mutually agree.
(b) At the option of the Company, on or after December 31, 1997, if
by that date all of the conditions set forth in Section 10 shall not have been
satisfied or waived.
(c) At the option of the Buyer, on or after December 31, 1997, if by
that date all of the conditions set forth in Section 11 shall not have been
satisfied or waived.
(d) At the option of the Company in accordance with Section 3(c),
provided the Company has complied with all provisions thereof, and provided
further that the Company simultaneously pays to the Buyer the sum of $2.4
million plus, if said termination occurs after March 28, 1997, Buyer's out-of-
pocket costs (including, without limitation, outside legal fees and expenses)
and internal legal costs as the Buyer shall reasonably determine (collectively,
the "TERMINATION FEE AMOUNT") in immediately available funds.
(e) At the option of the Buyer, if (i) the Board of Directors of the
Company or any committee of such Board of Directors shall have (A) withdrawn or
modified its approval or recommendation of this Acquisition Agreement (or the
Implementation Agreements) or the Acquisition, or (B) failed to recommend that
the stockholders of the Company vote in favor of the Acquisition, or (C)
approved or recommended any Acquisition Proposal other than the Acquisition, or
(ii) the Board of Directors of the Company or any committee of such Board of
Directors shall have resolved to do any of the foregoing. The Company shall
promptly following termination for any of the reasons set forth in this clause
(e) pay to the Buyer the Termination Fee Amount in immediately available funds.
(f) At the option of any of the parties hereto if the stockholders of
the Company do not approve the Acquisition.
In the event this Acquisition Agreement is terminated pursuant to Section 14(f)
because the Company stockholders did not approve the Acquisition and prior to
eighteen (18) months following such termination the Company enters into a
binding agreement for a Third Party Transaction, the Company shall pay to the
Buyer the Termination Fee
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Amount in immediately available funds simultaneously with its entry into such
binding agreement.
15. RECORD DATE. The Company agrees that the record date for determining
stockholders entitled to vote on (or give consents or exercise appraisal rights
with respect to) the Acquisition or any Third Party Transaction will be no
earlier than 10 business days after the Buyer's receipt of all required
approvals under the insurance holding company laws of states with applicable
jurisdiction, and the expiration of the applicable waiting period under the HSR
Act, with respect to the Buyer's purchase of 1,145,703 shares of Company common
stock from John J. Hemmingson and 681,774 shares of Company common stock from
Gary A. Black, provided that, in the case of a Third Party Transaction, this
Section 15 shall not require the Company to set a record date later than
December 31, 1997. This Section 15 shall continue in effect (with respect to
any Third Party Transaction) notwithstanding any termination of this Acquisition
Agreement in accordance with its terms or otherwise
16. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. This Acquisition Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
the party against whom enforcement of any such modification or amendment is
sought. Any party hereto may, in its sole election, solely as to itself and not
as to any other party hereto, only by an instrument in writing, waive compliance
by another party hereto with any term or provision hereof on the part of such
other party hereto to be performed or complied with. The waiver by any party
hereto of a breach of any term or provision hereof shall not be construed as a
waiver of any subsequent breach.
(b) ENTIRE AGREEMENT. This Acquisition Agreement, the Letter of
Intent, the Consent Agreement and the Stock Purchase Agreement dated July 10,
1996, each between the Company and Buyer, contain the entire agreement between
the parties hereto with respect to the transactions contemplated hereby and
thereby. This Acquisition Agreement is not intended to confer upon any other
person any rights or remedies hereunder.
(c) APPLICABLE LAW. This Acquisition Agreement shall be exclusively
governed by and construed in accordance with the internal laws of the State of
Delaware without regard to its rules of conflicts of laws.
(d) EXPENSES. Except as otherwise included herein, in the event the
Acquisition contemplated hereby is not consummated for any reason, then all
expenses incurred by each party will be borne by the party incurring such
expenses
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Acquisition Agreement.
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(f) COUNTERPARTS. This Acquisition Agreement and any amendments
hereto may be executed in any number of counterparts, each of which shall be
deemed to be an original but all of which together shall constitute but one
agreement
(g) SUCCESSORS AND ASSIGNS. This Acquisition Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors. This Acquisition Agreement may not be assigned by any party without
prior consent of all parties hereto, provided that any party hereto may assign
its rights and obligations hereunder to any affiliate to implement the
Acquisition, provided that such affiliate agrees to be bound hereby, provided
that such party remains liable hereunder, and that such assignment does not
adversely effect the Acquisition from the perspective of the other parties.
(h) BINDING EFFECT. This Acquisition Agreement shall, subject to the
terms and conditions hereof, be in all respects binding upon each of the Company
and the Buyer from and after the date hereof
(i) SURVIVAL. None of the representations or warranties set forth in
Sections 8 and 9 hereof shall survive the consummation of the Acquisition.
(j) BOARD OF DIRECTORS. Effective as of the closing of the
Acquisition, the Board of Directors of the Company will consist of nominees
selected by the Buyer.
(k) INDEMNIFICATION; INSURANCE. The Implementation Documents will
provide, among other things, that the Company will maintain in effect all rights
to indemnification existing in favor of any director, officer, employee or agent
of the Company and its subsidiaries (the "INDEMNIFIED PARTIES") as provided in
its certificate of incorporation, by-laws or in indemnification agreements with
the Company or any of its subsidiaries, all of which shall survive the
consummation of the Acquisition and shall continue in full force and effect for
a period of not less than four years from the effective time of the Acquisition
(the "EFFECTIVE TIME"); PROVIDED, that in the event any claim or claims are
asserted or made within such four-year period, all rights to indemnification in
respect of any such claim or claims shall continue until final disposition of
any and all such claims. It is understood and agreed that the Company shall
advance, indemnify and hold harmless, as and to the full extent permitted by
applicable law, each Indemnified Party against any losses, claims, damages
liabilities, costs, expenses (including attorneys' fees and expenses),
judgments, fines and amounts paid in settlement in connection with any
threatened or actual claim, action, suit, proceeding or investigation (whether
asserted or arising before or after the Effective Time). In addition, the
Implementation Documents will provide that the Company shall cause to be
maintained in effect for not less than four years from the Effective Time any
current policies of the directors' and officers' liability insurance maintained
by the Company; PROVIDED, that the Company will be permitted to substitute
therefor policies of at least the same coverage containing terms and conditions
which are no less advantageous and provided that such substitution shall not
result in any gaps or lapses in coverage with respect to matters occurring prior
to the Effective Time; PROVIDED, FURTHER, that the
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Company shall not be required to pay an annual premium in excess of 200% of the
last annual premium paid by the Company prior to the date hereof and if it is
unable to obtain the insurance required, it shall obtain as much comparable
insurance as possible for an annual premium equal to such maximum amount
[remainder of page left blank intentionally]
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IN WITNESS WHEREOF, the parties hereto have executed this Acquisition Agreement.
CROP GROWERS CORPORATION
By: /s/ Lawrence T. Martinez
-----------------------------------
Name: Lawrence T. Martinez
Title: Chief Financial Officer
FIREMAN'S FUND INSURANCE
COMPANY
By: /s/ Harold N. Marsh III
-----------------------------------
Name: Harold N. Marsh III
Title: Senior Vice President & Treasurer
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CONSENT AGREEMENT
This Consent Agreement dated March 5, 1997 is entered into between Crop
Growers Corporation, a Delaware corporation (the "COMPANY"), and Fireman's Fund
Insurance Company, a California corporation (the "INVESTOR").
The Company and the Investor are parties to a Stock Purchase Agreement (the
"STOCK PURCHASE AGREEMENT") dated July 10, 1996. The Company, the Investor and
John J. Hemmingson ("HEMMINGSON") are parties to a Right of First Offer and
First Refusal Agreement dated September 23, 1996 (the "HEMMINGSON AGREEMENT").
The Company, the Investor and Gary A. Black ("BLACK") are parties to a Right of
First Offer and First Refusal Agreement dated September 23, 1996 (the "BLACK
AGREEMENT").
Pursuant to the Hemmingson Agreement and, in the view of the Investor,
pursuant to the Black Agreement, the Investor has been given the right of first
refusal with respect to a pending sale by Hemmingson of 1,145,703 shares of
Company common stock and by Black of 681,774 shares of Company common stock.
Such 1,145,703 shares and 681,774 shares of Company common stock are herein
collectively called the "SHARES."
The Company has determined that it is in the best interests of it and its
stockholders to give its consent to the Investor's exercise of its right of
first refusal as to the Shares on the terms and conditions stated in this
Agreement.
NOW, THEREFORE, the parties hereby agree as follows
1. CONSENT. (a) The Company hereby consents, to the extent necessary, to
the Investor's purchases (the "PURCHASES") of up to (i) 1,145,703 shares of
Company common stock from Hemmingson and (ii) 681,774 shares of Company common
stock from Black. Without limiting the generality of the foregoing consent, it
shall be deemed given under (i) Section 5.2 of the Stock Purchase Agreement,
(ii) Section 4.3 of the Separation Agreement dated September 23, 1996 between
the Company and Hemmingson and (iii) Section 203 of the Delaware General
Corporation Law.
(b) The Company hereby represents and warrants that its Board of Directors
has approved the Purchases.
2. VOTING; TENDER.
(a) With respect to any vote or consent of stockholders of the Company
with respect to (or tender offer approved by the Board of Directors ("APPROVED
TENDER"), the consummation of which would constitute) any Acquisition
Transaction taken on or
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before December 31, 1997, the Investor agrees to vote (or give a consent with
respect to or tender in an Approved Tender, as the case may be), and to cause
its Affiliates to vote (or give a consent with respect to or tender in an
Approved Tender, as the case may be), the Excess Shares in the manner stated in
Section 2(c).
(b) "ACQUISITION TRANSACTION" means any (i) merger, consolidation or
similar transaction involving the Company, (ii) sale, lease or other disposition
directly or indirectly by merger, consolidation, share exchange or otherwise of
any assets of the Company or its subsidiaries representing 15% or more of the
consolidated assets of the Company and its subsidiaries, (iii) issue, sale or
other disposition of (including without limitation, by way of merger,
consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) representing 15% or more of the votes attached to the outstanding
securities of the Company, (iv) transaction in which any Person shall acquire
Beneficial Ownership or the right to acquire Beneficial Ownership, or any Group
shall have been formed which has Beneficial Ownership or has the right to
acquire Beneficial Ownership, of 15% or more of the outstanding shares of common
stock of the Company, (v) recapitalization, restructuring, liquidation,
dissolution, or other similar type of transaction with respect to the Company or
any of its subsidiaries, or (vi) transaction which is similar in form, substance
or purpose to any of the foregoing transactions. "EXCESS SHARES" means the
number of shares of Company common stock, if any, owned or controlled by the
Investor or any of its Affiliates whose voting power, together with the voting
power of all Voting Stock owned or controlled by the Investor or any of its
Affiliates, exceeds the greater of (i) 1,742,593 votes (as the shares of the
Company's Voting Stock is constituted on the date hereof, as adjusted for any
stock split, stock dividend, combination, reverse stock split or
recapitalization effected after the date of this Agreement) and (ii) 20% of the
voting power of all Voting Stock outstanding at the time of such vote or
consent. "BENEFICIAL OWNERSHIP," "AFFILIATE" and "GROUP" have the meanings
stated in Regulation 13D-G under the Securities Exchange Act of 1934, as
amended. "VOTING STOCK" means any stock or other security that has the right,
irrespective of contingent events or conditions, to vote on or consent to a
particular Acquisition Transaction. A "PERSON" means any individual,
corporation, partnership, limited liability company, trust, unincorporated
association or entity of any kind.
(c) For the period specified in Section 2(a), the Investor will vote (or
give consents with respect to or tender in an Approved Tender, as the case may
be) and cause its Affiliates to vote (or give consents with respect to or tender
in an Approved Tender, as the case may be), or abstain or refrain from voting
(or giving consents with respect to or tendering in an Approved Tender, as the
case may be) and cause its Affiliates to abstain or refrain from voting (or
giving consents with respect to or tendering in an Approved Tender, as the case
may be), the Excess Shares with respect to any Acquisition Transaction in the
same proportions as the shares held by all Non-Interested Stockholders. "NON-
INTERESTED STOCKHOLDERS" means the stockholders of the Company, other than the
Investor and "interested stockholders" of the Company, as such term is defined
in Section 203 of the Delaware General Corporation Law (an "INTERESTED
STOCKHOLDER") .
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(d) The restrictions of this Section 2 shall (i) not apply to any
Acquisition Transaction with, or proposed by, any Person or Group that, after
the date hereof, becomes an Interested Stockholder of the Company without the
prior or concurrent approval of the Board of Directors of the Company and (ii)
terminate (to the extent not already expired under Section 2(a)) at the time, if
any, when any Person or Group publicly announces an intention to make or makes
or commences a tender or exchange offer, other than a tender or exchange offer
which has been approved by the Board of Directors of the Company on or before
the earliest to occur of such announcement, making or commencement, for more
than 15% of the outstanding common stock of the Company.
(e) It is expressly understood that nothing in this Section 2, nor any
other understanding between the Company and the Investor, shall restrict the
Investor in voting, giving consent with respect to or tendering in an Approved
Tender, as the case may be (or not voting, giving consent with respect to or
tendering in an Approved Tender, as the case may be) any stock it holds in the
Company from time to time other than the Excess Shares.
3. AMENDMENT OF STANDSTILL. Section 5.2 of the Stock Purchase Agreement
is hereby amended by adding at the end thereof the following:
Notwithstanding anything to the contrary in this Section 5.2, the
restrictions of this Section 5.2 will immediately terminate (to the extent
not terminated theretofore pursuant to the terms of this Section 5.2) at
the time, if any, when any person or group (as such term is defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended) publicly
announces an intention to make or makes or commences a tender or exchange
offer, other than a tender or exchange offer which has been approved by the
Board of Directors of the Company on or before the earliest to occur of
such announcement, making or commencement, for more than 15% of the
outstanding common stock of the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investor that:
(a) ORGANIZATION AND QUALIFICATIONS. The Company and each subsidiary of
the Company is a corporation duly incorporated or organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization and has the requisite corporate power and authority, and all
governmental permits, approvals and other authorizations necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted, except for such exceptions as would not, individually or in the
aggregate, have a material adverse effect on the assets, properties,
liabilities, obligations, financial condition, results of operations or business
(a "MATERIAL ADVERSE EFFECT") on the Company and its subsidiaries taken as a
whole (a "COMPANY MATERIAL ADVERSE EFFECT").
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(b) AUTHORITY RELATIVE TO THIS CONSENT AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Consent
Agreement and to perform its obligations hereunder. The execution and delivery
of this Consent Agreement by the Company have been duly and validly authorized
by all necessary corporate action and no other corporate proceedings on the part
of the Company is necessary to authorize this Consent Agreement. This Consent
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery thereof by the Investor,
constitutes the legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights generally and by equitable principles.
(c) NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(i) The execution and delivery of this Consent Agreement by the
Company does not, and the performance of its obligations hereunder by it
will not, (A) conflict with or violate the certificate of incorporation or
bylaws of the Company or any of its subsidiaries, (B) subject to the making
of the filings and obtaining the approvals identified herein, conflict with
or violate any law, rule, regulation, order, judgment or decree
(collectively, "LAWS") applicable to the Company or any of its subsidiaries
or by which any property or asset of the Company or any of its subsidiaries
is bound or affected, or (C) conflict with, result in any breach of,
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, result in the loss or modification in a
manner materially adverse to the Company or its subsidiaries of any
material right or benefit under, give to others any right of termination,
amendment, acceleration, repurchase or repayment, increased payments or
cancellation of, or result in the creation of a lien or other encumbrance
on any property or asset of the Company or any subsidiary pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation, whether written or
oral (collectively, a "CONTRACT"), to which the Company or any subsidiary
is a party or by which the Company or any subsidiary or any property or
asset of the Company or any subsidiary is bound or affected.
(ii) The execution and delivery of this Consent Agreement by the
Company does not, and the performance of its obligations hereunder by it
will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any federal, state or local governmental or
regulatory agency, authority or instrumentality, whether domestic or
foreign ("GOVERNMENTAL ENTITY") except for applicable requirements of the
Hart-Scott-Rodino Antitrust Improvement Act (the "HSR ACT").
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
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(a) ORGANIZATION AND QUALIFICATIONS. The Investor is a corporation duly
incorporated or organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite corporate power
and authority and all governmental permits, approvals and other authorizations
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted, except for such exceptions as would not,
individually or in the aggregate, have a Material Adverse Effect on the Investor
and its subsidiaries, taken as a whole (an "INVESTOR MATERIAL ADVERSE EFFECT").
(b) AUTHORITY RELATIVE TO THIS CONSENT AGREEMENT. The Investor has all
necessary corporate power and authority to execute and deliver this Consent
Agreement and to perform its obligations hereunder. The execution and delivery
of this Consent Agreement by the Investor have been duly and validly authorized
by all necessary corporate action and no other corporate proceedings on the part
of the Investor is necessary to authorize this Consent Agreement. This Consent
Agreement has been duly and validly executed and delivered by the Investor and,
assuming the due authorization, execution and delivery thereof by the Company,
constitutes the legal, valid and binding obligation of the Investor, enforceable
against it in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights generally and by equitable principles.
(c) NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(i) The execution and delivery of this Consent Agreement by the
Investor does not, and the performance of its obligations hereunder by it
will not, (A) conflict with or violate the certificate of incorporation or
bylaws of the Investor, (B) subject to the making of the filings and
obtaining the approvals identified herein, conflict with or violate any
Laws applicable to the Investor or by which any property or asset of the
Investor is bound or affected, or (C) conflict with, result in any breach
of, constitute a default (or an event which with notice or lapse of time or
both would become a default) under, result in the loss or modification in a
manner materially adverse to the Investor of any material right or benefit
under, or give to others any right of termination, amendment, acceleration,
repurchase or repayment, increased payments or cancellation of, or result
in the creation of a lien or other encumbrance on any property or asset of
the Investor pursuant to, any Contract to which the Investor is a party or
by which the Investor or any property or asset of the Investor is bound or
affected.
(ii) The execution and delivery of this Consent Agreement by the
Investor does not, and the performance of its obligations hereunder by it
will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity, except for
applicable requirements of (1) the insurance company holding laws of
certain states and (2) the HSR Act.
6. MISCELLANEOUS.
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(a) AMENDMENTS AND WAIVERS. This Consent Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Any
party hereto may, in its sole election, solely as to itself and not as to any
other party hereto, only by an instrument in writing, waive compliance by
another party hereto with any term or provision hereof on the part of such other
party hereto to be performed or complied with. The waiver by any party hereto
of a breach of any term or provision hereof shall not be construed as a waiver
of any subsequent breach.
(b) ENTIRE AGREEMENT. This Consent Agreement, the Stock Purchase
Agreement dated July 10, 1996, the Acquisition Agreement of even date herewith
and the Letter of Intent re Revolving Credit Working Capital Facility of even
date herewith, each between the Investor and the Company, contain the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and thereby. This Consent Agreement is not intended to
confer upon any other person any rights or remedies hereunder.
(c) APPLICABLE LAW. This Consent Agreement shall be exclusively governed
by and construed in accordance with the internal laws of the State of Delaware
without regard to its rules of conflicts of laws.
(d) EXPENSES. All expenses incurred by each party will be borne by the
party incurring such expenses.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Consent Agreement.
(f) COUNTERPARTS. This Consent Agreement and any amendments hereto may be
executed in any number of counterparts, each of which shall be deemed to be an
original but all of which together shall constitute but one agreement.
(g) SUCCESSORS AND ASSIGNS. This Consent Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors.
This Consent Agreement may not be assigned by any party without prior consent of
all parties hereto.
(h) BINDING EFFECT. This Consent Agreement shall, subject to the terms
and conditions hereof, be in all respects binding upon each of the Company and
the Investor from and after the date hereof.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Consent
Agreement.
CROP GROWERS CORPORATION
By: /s/ Lawrence T. Martinez
-------------------------------
Name: Lawrence T. Martinez
Title: Chief Executive Officer
FIREMAN'S FUND INSURANCE
COMPANY
By: /s/ Harold N. Marsh III
-------------------------------
Name: Harold N. Marsh III
Title: Senior Vice President & Treasurer
<PAGE>
FIREMAN'S FUND INSURANCE COMPANY
March 5, 1997
Mr. Lawrence Martinez
Crop Growers Corporation
Executive Centre II
10895 Lowell, Suite 300
Overland Park, Kansas 66210
RE: LETTER OF INTENT RE REVOLVING CREDIT WORKING CAPITAL FACILITY
Dear Larry:
This letter sets forth the key terms discussed in our recent
conversations with Crop Growers Corporation ("Crop Growers") regarding the
proposed $15 million revolving credit working capital facility ("Revolving
Credit Facility") to be provided to Crop Growers by Fireman's Fund Insurance
Company ("Fireman's Fund").
The Revolving Credit Facility will be available in the event Crop
Growers, after using its reasonable best efforts, is unable to obtain a working
capital facility from a commercial bank or banks on reasonable terms not
involving any guarantee or similar support by Fireman's Fund, by March 31, 1997.
An express condition precedent to Fireman's Fund providing the
Revolving Credit Facility to Crop Growers shall be in the execution of an
Acquisition Agreement ("Acquisition Agreement") between Fireman's Fund and Crop
Growers for Fireman's Fund acquisition of all of the shares of Crop Growers and
the absence of any default or termination by Crop Growers thereunder. This
Letter of Intent shall be attached to and/or incorporated into the terms and
conditions of the Acquisition Agreement as an express condition of the
Acquisition Agreement.
Further, the term and conditions of the proposed Revolving Credit
Facility shall include those specified on the attached "Crop Growers Executive
Summary" of "Terms and Conditions - Working Capital Financing" and to be
incorporated into a revolving credit agreement.
<PAGE>
Mr. Lawrence Martinez
Page 2
March 5, 1997
If you agree to the terms set forth herein, please signify your
agreement by countersigning a copy of this Letter of Intent and returning it to
me.
Very truly yours,
/s/ Harold N. Marsh III
---------------------------------
Harold N. Marsh III
Senior Vice President & Treasurer
Attachment
Agreed & Accepted
CROP GROWERS CORPORATION
/s/ Lawrence T. Martinez
- -------------------------------
By: Lawrence T. Martinez
--------------------------
Its: Chief Executive Officer
--------------------------
<PAGE>
CROP GROWERS
Executive Summary
TERMS AND CONDITIONS - WORKING CAPITAL FINANCING
TERMS AND CONDITIONS
- --------------------
Borrower: Crop Growers Corporation ("CGRO") and its
majority-owned agency subsidiaries
Guarantor: None
Type of Financing: Revolving Line of Credit
Amount: up to $15 million (maximum)
Use of Proceeds: Provide working capital financing
Collateral: Pledge of all assets, including security interest
in expiration rights and records, of CGRO and each
of its agency subsidiaries
Borrowing Base: To be determined (based on MPCI expense
reimbursement and underwriting gain receivable by
CGRO at time of advance)
Term: One year facility
Interest Rate: Bank of America Base Rate
Fees: None
Source of Repayment: Collection of MPCI expense reimbursement
(commissions) and underwriting gain under MPCI and
other farm and crop insurance programs
Repayment Schedule: Interest payments monthly/arrears/due 1st of month
Interest calculation - actual days/360 basis
Annual cleanup by October 1 (30 days)
1
<PAGE>
Prepayment Provisions: Prepayment allowed without penalty (mandatory if
Borrower accepts an Acquisition Proposal other
than the Acquisition)
Conditions Precedent: Completion of customary loan documentation
Financial Covenants: In addition to the financial reporting covenants
currently in the MGA, CGRO will not, during the
term of FFIC's financing:
- pay dividends or retire, redeem any of its
stock (except for Series A Preferred Stock)
- incur any indebtedness, with specified
exceptions
- make any acquisitions or expenditures for fixed
assets (in excess of $500,000)
- make any capital contributions to any affiliate
- create, incur, assume liens with specified
exceptions, without FFIC consent
- sell assets, with specified exceptions, without
FFIC consent
Maintenance of financial ratios and minimum
tangible net worth to be determined
Default Rate: Customary terms and practices
Reporting Requirements: SEC Forms 10-K and 10-Q within 5 days of filing
due date
Monthly borrowing base certificate
Subject To: Legal and documentation review
2
