SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT is made and entered into the 23rd day of
September, 1996, by and between Crop Growers Corporation, a Delaware corporation
(the "Company"), and Xxxx X. Xxxxxxxxxx (the "Executive"),
W I T N E S S E T H:
WHEREAS, the Executive previously served as an executive, officer and
director of the Company and was employed by the Company under an Employment
Agreement dated June 22, 1994, as amended March 29, 1996 (the "Employment
Agreement"), and an Amendment To Employment Agreement Providing For A Leave of
Absence dated on or about May 9, 1996 (the "Leave of Absence Agreement"); and
WHEREAS, the parties have negotiated a mutual consent separation and
termination of the Employment Agreement and Leave of Absence Agreement; and
WHEREAS, the parties desire to reduce to writing their agreement with
respect to the separation of the Executive from the affairs of the Company and
the termination of the Employment Agreement and the Leave of Absence Agreement;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual covenants and
agreements contained herein, the receipt and sufficiency of which is hereby duly
acknowledged, the Executive
and the Company covenant and agree as follows:
1.0 IRREVOCABLE PROXY. Concurrently with the execution of this Separation
Agreement, the Executive will sign the Agreement Granting Irrevocable
Proxy as well as the Irrevocable Proxy which are attached hereto as
Exhibit "A" (the "Proxy Agreement") and Exhibit "B" (the "Irrevocable
Proxy") and will deliver the signed Proxy Agreement and Irrevocable
Proxy to the Great Falls, Montana, office of Xxxxxx & Whitney, to be
held in escrow by that law firm until receipt of necessary approvals
under the applicable insurance laws of the States of Kansas and North
Dakota. Once approved by the Insurance Commissioners of those states,
the Irrevocable Proxy and Proxy Agreement will be delivered to an
institutional Proxy Holder (the "Proxy Holder") for execution and
delivery and shall thereafter be effective. With respect to the Proxy
Agreement and the Irrevocable Proxy, the parties specifically agree
that:
a. All shares (the "Shares") of capital stock of the Company,
including common stock, owned beneficially or of record by the
Executive, including any shares or other voting securities
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that may be acquired by the Executive in the future, shall be
subject to the Proxy Agreement and the Irrevocable Proxy as set
forth therein, and the Executive shall not have any voting rights
with respect to the Shares prior to the termination of the
Irrevocable Proxy.
b. During the term of this Separation Agreement, the Executive may
not sell, gift, pledge, encumber or otherwise transfer the Shares
to a spouse, child or to any other person who is an affiliate of
the Executive or in circumstances where the Executive retains any
beneficial ownership of the Shares transferred. However, if
concurrently with such transfer, the transferee agrees in writing
that the Shares being transferred remain subject to this
Separation Agreement, the Proxy Agreement and the Irrevocable
Proxy, then the Executive may make such transfer. Nothing in
this Separation Agreement, the Proxy Agreement or the Irrevocable
Proxy, however, shall limit the right of the Executive to sell,
gift, pledge, encumber or otherwise transfer all or part of the
Shares to
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persons who are not affiliates of the Executive and with respect
to which the Executive retains no beneficial ownership, and any
Shares sold, gifted or otherwise transferred after the date
hereof to persons other than affiliates and with respect to which
the Executive retains no beneficial ownership, are expressly
excluded from the scope and application of this Separation
Agreement. The Company acknowledges that stock sales made by the
Executive pursuant to Rule 144 or Rule 144(f) promulgated under
the Securities Act of 1933, as amended, may be made without
violation of the transfer restrictions of this Section 1.0.b.
Certificate evidencing the Shares will have the following legend
affixed to them:
"The shares represented by this
certificate may not be transferred
without compliance with the transfer
restrictions contained in the Separation
Agreement dated September 23, 1996,
between the Corporation and Xxxx
Xxxxxxxxxx.
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Copies of such agreement may be
obtained upon written request to
the Secretary of the Corporation."
Upon receipt from the Executive and his brokerage firm of all documentation
and information reasonably required by the Company, the Company will
promptly cause its transfer agent to remove the above legend from all
shares sold by the Executive pursuant to Rule 144 and Rule 144(f). For the
purposes of this Separation Agreement, the Proxy Agreement and the
Irrevocable Proxy, the term "beneficial ownership" shall have the meaning
set forth in Rule 13d-3(a) under the Securities and Exchange Act of 1934.
c. The costs and expenses of the Proxy Holder under the Proxy
Agreement shall be paid by the Company, up to $25,000 per twelve
(12) month period, in accordance with a fee arrangement to be
entered between the Proxy Holder and the Company. The Executive
and Xxxx Xxxxx shall each pay his proportionate share of any
remaining costs, and expenses of the Proxy Holder.
2.0 EMPLOYMENT AGREEMENT AND LEAVE OF ABSENCE AGREEMENT.
The Employment Agreement and the Leave of Absence
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Agreement are hereby terminated, effective as of the close of business
on June 30, 1996.
2.1 In conjunction with the termination of the Employment Agreement
and the Leave of Absence Agreement, the Executive will be
entitled to receive all compensation, benefits and reimbursements
of business expenses (in accordance with the Company's policy) to
which he was entitled under these Agreements through June 30,
1996, except as otherwise provided by Section 7.0 hereof.
Thereafter, the Executive will not be entitled to any
compensation, benefits and/or reimbursements except as noted in
Section 2.2 and 3 of this Separation Agreement. All such
expenses (which do not include any expenses under the
indemnification agreement described in section 3.0) shall have
been submitted to the Company.
2.2 The Executive shall be entitled to all post employment benefit
relationships required by law to be made available to the
terminated employees under the Employee Retirement Income
Security Act of 1974 (e.g., the Executive has certain rights
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with respect to amounts in the Company's 401(k) plan and health
benefit rights under COBRA) and under Section 6 (Stock Options)
hereof, but shall not be entitled to any other benefits under the
Employment Agreement and Leave of Absence Agreement.
2.3 The Executive covenants and agrees that for a period commencing
on June 30, 1996, and continuing for a period of six (6) months
thereafter, the Executive will not:
a. Solicit any customers who were customers of the Company
within the twelve (12) months immediately preceding June 30,
1996, for the benefit of any company or business described
in sub-part b., below; or
b. Own any part of a competitor; [i.e., a business enterprise
which competes with the Company in offering the same
products or services which in the Company's fiscal year
ended prior to the date of this Separation Agreement
generated ten percent (10%) or more of the Company's total
revenues as reflected
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in the Company's most recent annual audited financial
statements], or work on a full time, part time or consulting
basis for any corporation, partnership, sole proprietorship
or any other legal entity which is a competitor
(irrespective of the actual location of the competitor)
within the continental United States. Excepted from this
restriction is ownership of a public company as to which the
Executive owns five percent (5%) or less of the outstanding
common stock of such company.
2.4 The Executive acknowledges and accepts that the Company has
terminated its business relationship and ceased all business
dealings with the Executive, either directly or indirectly, as an
employee, director, officer, voting shareholder or consultant
with the Company and acknowledges that the Company has so
certified to the United States Department of Agriculture, Federal
Crop Insurance Corporation ("FCIC"). As such, and except as
stated otherwise in this Separation Agreement, the
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Executive understands and agrees that he will not have access to
the offices of or property owned or leased by the Company (for
the purposes of this Section 2.0 of the Separation Agreement,
"Company" shall refer to Crop Growers Corporation or any of the
entities affiliated with Crop Growers Corporation) or use of or
access to any of the Company's employees, facilities, properties,
chattels, services and/or other assets. Further, the Executive
agrees that he will not have contact with any employee or
director of the Company for any purpose related to the business
of the Company. The foregoing, however, is not intended to
prohibit limited contact or communications between the Executive
and the Company (a) initiated by the Company, (b) relating to
personal affairs of the Executive, including without limitation
inquiries relating to health insurance, 401(k), stock option
matters or matters relating to this Separation Agreement or (c)
relating to the access described below in this Section. This
Section 2.4 shall terminate and be of no further
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force or effect upon the expiration or termination of any period
of suspension or debarment imposed by the FCIC pursuant to 7
C.F.R. Section 3017.320(a)(i).
Notwithstanding the above restrictions, the Executive and
his counsel shall have reasonable access to the Company's
employees and to records (including the right to copy the same),
for the purpose of preparing or presenting the Executive's
position, defense or response in connection with any criminal,
civil or administrative matters involving the Executive. The
following procedures shall apply with respect to that access:
a. The Executive and his counsel shall use reasonable efforts
to access information and employees through counsel to the
Company;
b. Reasonable prior notice to review Company books and records
and to interview Company employees shall be submitted to the
Company's CEO, or his designee;
c. Company books, records or files may not be removed from the
Company's offices without the written consent of the Company
or
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pursuant to a subpoena obtained by the Executive.
2.5 The Executive shall continue to be subject to all obligations
with respect to confidentiality existing prior to June 30, 1996.
3.0 INDEMNIFICATION AGREEMENT. The Indemnification Agreement dated June
22, 1994, between the Company and the Executive remains in full force
and effect and the Company will continue to advance expenses to the
Executive in accordance with the terms of the Indemnification
Agreement. The Executive or his counsel will submit requests for such
advances to the Chief Financial Officer of the Company as soon as
reasonably practical after expenses are incurred.
4.0 DISPOSAL OF SHARES. The Executive will prepare a plan to dispose of
such number of shares of the capital stock of the Company owned by the
Executive as is necessary to reduce the Executive's ownership of all
of the capital stock of the Company to less than ten percent (10%) of
all outstanding shares of the capital stock of the Company, on a fully
diluted basis, during the 24 month period ending on June 30, 1998.
For
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purposes of this Separation Agreement, the term "fully diluted basis"
means all outstanding shares together with all shares issuable upon
the conversion of all securities convertible (at that time) into the
voting securities of the Company and the exercise of all vested and
currently exercisable (at that time) outstanding warrants, options or
other rights to purchase shares of voting securities of the Company.
4.1 The Company will purchase 76,000 shares of the common stock of
the Company from the Executive at a price of $9.71667 per share,
without the deduction of any costs or commissions. The closing
of this purchase will occur upon execution and delivery of this
Separation Agreement. The purchase price will be paid to the
Executive by certified check at the closing.
4.2 If and to the extent requested by the Executive, the Company will
purchase up to 8,000 shares of the common stock of the Company
from the Executive on the last business day of each month (the
"Monthly Closing Date") during the four month period from
September 1, 1996, through December
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31, 1996. The purchase price for any shares sold by the
Executive to the Company under this provision will be the average
of the closing bid and ask prices for the Company's common stock
during the thirty (30) calendar day period preceding the
applicable Monthly Closing Date. The full amount of the purchase
price will be paid by the Company by certified check on the
applicable Monthly Closing Date upon delivery by the Executive of
certificates representing the Shares being purchased. Notice by
the Executive to sell shares shall be given at least one (1)
business day prior to the Monthly Closing Date. The Company
reserves the right to postpone the purchase of such shares if the
Company reasonably believes, based upon advice of counsel, that
purchase at such time would create significant securities
concerns or issues (such as under Rules 10b-5 of 10b-6) for it,
provided that this postponement shall not relieve the Company
from its obligation to purchase shares for which purchase was
postponed under this sentence. Any
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such postponed purchase shall be concluded promptly after any
such securities concerns or issues are reasonably resolved based
on advice of counsel, and the purchase price shall remain the
same as if that purchase had closed on the applicable Monthly
Closing Date.
4.3 During the 18 month period from January 1, 1997, through June 30,
1998, the Executive will sell or otherwise dispose of a
sufficient number of shares of the capital stock of the Company
so that, at the expiration of this 18 month period, the number of
shares of the capital stock of the Company beneficially owned by
the Executive will be less than ten percent (10%) of the then
outstanding shares of the capital stock of the Company, on a
fully diluted basis. During each 6 month period during this 18
month period, without the written consent of the Company, the
Executive will not dispose of more than approximately one-third
of the aggregate number of shares which the Executive must
dispose of during this 18 month period required to be disposed of
by this Section 4.3.
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4.4 The Executive warrants and represents that on the date of each
closing, he will have good and marketable title to all such
shares of Company stock which the Company purchases from him
under this Section 4 and that those shares upon delivery to the
Company will be free of all liens, encumbrances, claims or other
transfer restrictions.
5.0 TERMINATION DATE. Sections 1.0 (excluding only 1.0(c)) 4.0 and 4.3 of
this Separation Agreement shall terminate and the Executive will have
no further obligations under those sections, effective as of the
earliest to occur of:
(i) The acquittal of the Executive of the criminal charges brought
against the Executive in the Indictments now pending against the
Executive 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 (the
"Indictments");
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(ii) The withdrawal or dismissal of those criminal charges referenced
in the Indictments (without any plea arrangement or plea bargain
entered into by the Executive); or
(iii) The expiration or termination of any period of suspension or
debarment imposed by the FCIC pursuant to 7 C.F.R. Section
3017.320(a)(i); or
(iv) Death of the Executive.
For purposes of this Separation Agreement, the earliest of the events
described in the (i) through (iv) are referred to as the "Termination
Date."
6.0 STOCK OPTIONS. All options previously granted the Executive for the
purchase of shares of common stock of the Company shall be amended,
and are hereby amended, so as to remain in effect, and continue to
vest with the passage of time, until the end of the original term of
the applicable option agreement, even though the terms of such option
agreement (or the plan under which the option is granted) may provide
for an earlier termination of the option upon the Executive ceasing to
be an employee of the Company. The Company's committee of
disinterested directors responsible for
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administering the Company's plan pursuant to which the Executive's
stock options were granted has authorized the actions and amendments
contemplated by this Section 6.0.
6.1 The Executive acknowledges and understands that the provisions in
this Section 6 will disqualify any applicable incentive stock
options and make them non-incentive stock options. The Executive
agrees to pay whatever withholding taxes may be payable with
respect to the exercise of any stock option and to give
reasonable assurance thereof to the Company prior to the issuance
of any option shares.
7.0 MISCELLANEOUS OBLIGATIONS. As part of this Separation Agreement, the
Company will forgive any amounts owed by the Executive to the Company
under the note dated May 1, 1996, in the principal amount of $21,000
relating to the Company Ford Explorer automobile purchased by the
Executive, and forgive any amounts owed by the Executive to the
Company relating to Company furniture and equipment previously
provided to the Executive and
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as set forth in Exhibit "C." Further, with respect to the Mercedes
automobile owned by the Executive, the Executive agrees that he is
responsible for any and all payments relating to that vehicle and the
Company agrees it has no right, title or interest in such vehicle.
Finally, Executive agrees that he will relinquish and forego all
rights to any and all payments by the Company related to any and all
accrued vacation or sick day time as of June 30, 1996.
8.0 AUTHORIZATION. The Company warrants and represents that the
execution, delivery and performance of this Separation Agreement has
been duly authorized by its Board of Directors, or any applicable
Committee(s) of the Board of Directors having responsibility for the
particular subject matter, is legally enforceable against the Company
in accordance with its terms and does not conflict with or contravene
the Company's certificate of incorporation, by-laws or any agreement
to which the Company is a party or by which the Company is bound. The
Executive warrants and represents that he has full right, power and
authority to enter into this Separation Agreement.
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9.0 CONSTRUCTION. Nothing in this Separation Agreement shall be construed
or interpreted as evidence or acknowledgment by the Executive or the
Company of any wrongdoing or any impropriety of any nature.
10.0 GOVERNING LAW. This Separation Agreement shall be governed by the
laws of the State of Delaware without giving effect to the conflict of
laws provision thereof.
11.0 COUNTERPARTS. This Separation Agreement may be executed in one or
more counterparts, including by facsimile transmission, each of which
shall be considered to be an original for purposes of the signature of
this Separation Agreement.
12.0 REGULATORY APPROVAL. The parties acknowledge that should the FCIC or
another regulatory body with competent jurisdiction later require the
Company or the Executive to take actions which would require the
amendment of this Separation Agreement, the Company and the Executive
shall meet in an attempt to satisfy such requirements.
13.0 COMPLETE AGREEMENT. This Separation Agreement evidences the complete
agreement by and between the
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Executive and the Company and no modification of this Separation
Agreement save those made in writing and executed by both parties
shall be binding.
EXECUTIVE
--------------------------
XXXX X. XXXXXXXXXX
CROP GROWERS CORPORATION
By:
--------------------------------
Its:
-------------------------------
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