EMPLOYMENT AGREEMENT
This Employment Agreement is made effective as of May 1, 1999 between
Farmland Industries, Inc., a Kansas cooperative corporation (the "Company") and
H. D. Xxxxxxx, who is presently the President and Chief Executive Officer of the
Company, ("Executive").
WHEREAS;
A.Executive is the principal officer of the Company and an integral
part of its management.
B.The Company is contemplating the possible full consolidation of its
business with the business of Cenex Harvest States Cooperatives
("CHS") through a merger or other similar transaction (the
"Consolidation") and desires to assure both itself and Executive of
continuity in the event of the Consolidation.
C.This Employment Agreement is intended to provide to Executive,
either a severance benefit in the event that his employment
terminates under certain circumstances, as described herein, prior
to December 31, 2000 or a transaction incentive payment if the
Company successfully completes the Consolidation on or before
December 31, 2000.
NOW THEREFORE, it is hereby agreed by and between the parties as follows:
1.Employment. The Company hereby employs Executive and Executive
hereby accepts employment with the Company, subject to the terms
and conditions hereinafter provided.
2.Term. The employment of Executive hereunder will be for the period
commencing on the effective date of this Agreement and ending on
December 31, 2000, provided, however, that either party may
terminate the employment relationship prior to the expiration date
as hereinafter provided. In the event of the Consolidation,
Executive hereby agrees to tender his written resignation effective
December 31, 2000.
3.Position, Duties, Responsibilities. Executive shall be employed as
the Chief Executive Officer or, in the event of the Consolidation,
may be employed as a co-Chief Executive Officer of the Consolidated
Company. Executive shall exercise such authority and perform such
duties and services, consistent with such position, as may be
assigned to him from time to time by the Board of Directors (the
"Board").
4.Devotion of Time and Best Efforts. Except for vacations and
absences due to temporary illness, Executive shall devote his full
time, best efforts and undivided attention and energies during his
employment to the performance of his duties and to advance the
Company's interests, as determined by the Board. During his
employment, Executive shall not, without the prior approval of the
Board be engaged in any other business activity which conflicts
with the duties of Executive hereunder, whether or not such
business activity is pursued for gain, profit or other pecuniary
advantage. Executive may continue his current civic and charitable
activities and his current service on various boards.
5.Early Termination.
a.Death. Executive's employment shall terminate upon Executive's
death.
b.Termination by the Company.
(1)Without Cause. The Company, by action of the Board, may
terminate Executive's employment, at any time and for any
reason whatsoever, without cause, effective upon delivery
of written notice of termination to Executive.
(2)For Cause. The Company, by action of the Board, may
terminate the Executive's employment at any time for
Cause, effective upon delivery of written notice of
termination to Executive. If such termination by the
Company is asserted to be for Cause, such termination
notice shall state the grounds that the Board claims
constitute Cause.
As used herein, "Cause" shall mean (a) willful misconduct
by Executive which is damaging or detrimental to the
business and affairs of the Company, monetarily or
otherwise, as determined by the Board in the exercise of
its good faith business judgment; (b) a material breach
of this Agreement by Executive, (c) chronic alcoholism or
any other form of substance addiction on the part of
Executive, (d) the commission by Executive of any act
involving fraud or dishonesty or moral turpitude, (e) the
indictment for, being bound over for trial following a
preliminary hearing, or the conviction of Executive of
any felony in either a state or federal court proceeding,
or (f) willful refusal to implement policies promulgated
by the Board.
(3)Disability. The Company, by action of the Board, may
terminate the Executive's employment if Executive
sustains a disability which is serious enough that
Executive is not able to perform the essential functions
of Executive's job, with or without reasonable
accommodations, as defined and if required by applicable
state and federal disability laws. Executive shall be
presumed to have such a disability for purpose of this
Agreement if Executive qualifies, because of illness or
incapacity, to begin receiving disability income
insurance payments under the long-term disability income
insurance policy that Company maintains for the benefit
of Executive. If there is no such policy in effect at
the date of Executive's potential disability, or if
Executive does not qualify for such payments, Executive
shall nevertheless be presumed to have such a disability
if Executive is substantially incapable of performing
Executive's duties for a period of more than twelve (12)
weeks.
c.Termination by Executive.
(1)Voluntary Resignation. Executive may terminate the
Employment Period and Executive's employment at any time
and for any reason whatsoever, effective upon delivery of
written notice of termination to the Company.
(2)Good Reason Resignation. Executive may terminate the
Employment Period and Executive's employment at any time
for Good Reason, effective upon delivery of written
notice of termination to the Company. If such
termination by Executive is asserted to be for "Good
Reason", such termination notice shall state the grounds
that Executive claims constitute Good Reason. As used
herein, "Good Reason" shall mean a material breach of
this Agreement by the Company. A demotion such that
Executive does not serve as the Chief Executive Officer,
or Co-Chief Executive Officer of the Company shall
constitute "Good Reason".
6.Compensation.
a.Base Salary. During his employment, the Company shall pay
Executive an initial "Base Salary" at the rate of Six Hundred,
Thirty-Five Thousand, Six Hundred Dollars ($635,600) per year,
commencing on the effective date of this Agreement, payable in
accordance with the Company's regular payroll practices and
policies which are in effect from time to time. The Board
shall annually review the amount of Base Salary. Such review
and any increase shall occur on the current customary
schedule. Any such upward adjustment shall not require a
written amendment to this Agreement and shall not affect any
other provisions of this Agreement, which shall remain in
effect unless changed by a written amendment to this Agreement
or terminated by either party as provided herein.
b.Annual Variable and Long-Term Incentive Compensation. During
his employment, Executive shall be entitled to receive
compensation under the annual Variable Compensation Plan and
the Management Long-Term Incentive Plan payable within the
current customary time frame on terms that are no less
favorable to Executive than the terms currently in existence.
In the event that either of these plans is discontinued or
amended effective during his employment, and the amount of
variable compensation due Executive under the replacement or
amended plans is less than Executive would have received under
the current plans, the Executive shall be entitled to receive
the amount of variable compensation that would have been
payable under the current plans.
7.Benefit Plans.
a.General. During the Employment Period, Executive shall be
eligible to participate in all executive compensation and
employee benefit plans or programs generally applicable to
senior management employees of the Company pursuant to the
terms and conditions of such plans and programs. Nothing
contained in this Agreement shall preclude the Company from
terminating or amending any such plan or program.
b.Qualified Plans. Executive shall be entitled to Company
contributions and benefits with respect to Base Salary under
the Company's qualified pension plans determined in the same
manner as for other participants in those plans, subject to
any contribution or benefit limitations. However, if such
plans as in effect on the date of execution of this Agreement
are modified in a manner, which will reduce future benefits
under those plans for Executive, then, as a means to make up
for those reductions, the Company shall establish a new
nonqualified plan or amend an existing nonqualified plan which
shall provide for any lost benefits under the Company's
pension plan.
c.Nonqualified Plans.
(1)Deferred Compensation Plan. Executive shall continue to
be eligible to participate in the Deferred Compensation
Plan. If this plan should be amended or terminated prior
to the end of the Employment Period, the terms of the
plan will be maintained with respect to Executive, unless
Executive agrees to accept the modified provisions of a
revised plan or a new plan intended to replace the plan.
(2)Supplemental Executive Retirement Plan. Executive will
be entitled to benefits under this plan on terms no less
favorable than those set forth in the restatement of the
plan effective January 1, 1997; however, if this plan
should be amended or terminated prior to the completion
of payments under it to Executive, the terms of the plan
will be maintained with respect to Executive, unless
Executive agrees to accept the modified provisions of a
revised plan or a new plan intended to replace that
restatement.
8.Post-Termination Payments by the Company.
a.Terminations Without Cause or Resignation for Good Reason. In
the event that Executive's employment is terminated prior to
December 31, 2000 by the Company without Cause or by Executive
for Good Reason, and the Executive signs (and does not
rescind, as allowed by law) a Release of Claims in a form
satisfactory to the Company which assures, among other things,
that Executive will not commence any type of litigation or
other claims as a result of the termination, and honors all of
Executive's other obligations as required by this Agreement,
the Company will continue to pay Executive all of the
compensation provided for in Paragraph 6 of this Agreement as
if he had remained employed through December 31, 2000. In
addition, Executive will be entitled to a Severance Payment
("Severance Pay") in an amount equal to 2.99 x Executive's
average annual income from the Company included in Executive's
gross income for the five calendar years ending December 31,
1999. The Severance Pay shall be paid on or before January
31, 2001. Severance Pay shall not be considered as income or
compensation in determining Executive's benefits under any
non-qualified benefit plan, including the Supplemental
Executive Retirement Plan. In no event will Executive be
entitled to both Severance Pay and a Transaction Incentive.
b.Termination For Cause, or Voluntary Resignation. If
Executive's employment is terminated prior to December 31,
2000 by the Company for Cause or by Executive as a Voluntary
Resignation, Executive shall be entitled only to his rights
(a) to receive the unpaid portion of his Base Salary, prorated
to the date of termination, (b) to receive reimbursement for
any ordinary and reasonable business expenses for which he had
not yet been reimbursed, (c) to receive payment for accrued
and unused vacation days, (d) to receive his incentive
compensation for each full or partial (on a pro rata basis)
year during which he was employed, to the extent earned and
accrued, pursuant to the terms and conditions of the
applicable incentive compensation plan(s), (e) to receive
payments under the Company's pension, profit sharing, deferred
compensation or other benefit plans in which the Executive has
participated, all to the extent and in accordance with the
terms of such plans, and (f) to continue certain health
insurance at his expense pursuant to COBRA.
c.Transaction Incentive. If the Company and CHS complete the
Consolidation prior to December 31, 2000 and Executive remains
actively employed through December 31, 2000, Executive shall
become entitled to an incentive payment of 2.99 x his average
annual income from the Company includable in Executive's gross
income for the five calendar years ending December 31, 1999
(the "Transaction Incentive"). In the event that Executive's
employment is terminated by death or disability after the
Consolidation, Executive or Executive's estate shall be paid
the full Transaction Incentive. In the event that Executive's
employment is terminated by death or disability prior to the
Consolidation, Executive, Executive's estate or any
beneficiary designated by Executive shall be entitled to a
partial Transaction Incentive, prorated for the period of his
employment between May 1, 1999 and the closing of the
Consolidation. (For example, if Executive is terminated for
one of these reasons on November 30, 1999 and the
Consolidation occurs on June 1, 2000, Executive or Executive's
estate would be entitled to 7/13 of the Transaction
Incentive.) The Transaction Incentive shall be paid on or
before January 31, 2001. The Transaction Incentive shall not
be considered as income or compensation in determining
Executive's benefits under any non-qualified benefit plan,
including the Supplemental Executive Retirement Plan.
x.Xxxxxxxxx Pay or Transaction Incentive Limitation. The amount
of Severance Pay or Transaction Incentive provided for herein
shall be reduced to the extent necessary to avoid any portion
thereof becoming non-deductible under Section 280 G of the
Internal Revenue Code of 1986, as amended from time to time,
or giving rise to excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended from time to time.
9.Other Executive Obligations. Executive agrees that the following
provisions will apply throughout Executive's period of active or
inactive employment, and will continue to apply even if Executive's
employment and the Employment Period are terminated under Paragraph
5, regardless of the reason for termination:
a.Nondisclosure of Confidential Information. Except to the
extent required in furtherance of the Company's business in
connection with matters as to which Executive is involved as
an employee, Executive will not, during the term of his
employment and for an unlimited period thereafter, directly or
indirectly: (1) disclose or furnish to, or discuss with, any
other person or entity any confidential information concerning
the Company or its business or employees, acquired during the
period of his employment by the Company; (2) individually or
in conjunction with any other person or entity, employ or
cause to be employed, any such confidential information in any
way whatsoever or (3) without the written consent of the
Company, publish or deliver any copies, abstracts or summaries
of any papers, documents, lists, plans, specifications or
drawings containing any such confidential information.
b.Non-Interference. Executive will not, during the term of his
employment and for an unlimited period thereafter, directly or
indirectly attempt to encourage, induce or otherwise solicit
any employee or other person or entity to breach any agreement
with the Company or otherwise interfere with the advantageous
business relationship of the Company with any person or
entity. Executive specifically agrees not to solicit, on
Executive's own behalf or on behalf of another, any of the
Company's employees to resign from their employment with the
Company in order to go to work elsewhere. Executive further
specifically agrees not to make any disparaging remarks of any
sort or otherwise communicate any disparaging remarks about
the Company or any of its members, equity holders, directors,
officers or employees, directly or indirectly, to any of the
Company's employees, members, equity holders, directors,
customers, vendors, competitors, or other people or entities
with whom the Company has a business or employment
relationship.
c.Non-Competition. Executive agrees that during the term of his
employment and thereafter for a period of two (2) years,
Executive will not directly or indirectly engage in or carry
on a business that is in direct competition with any
significant business unit of the Company as conclusively
determined by the Board of Directors. Further, Executive
agrees that during this same period of time he will not act as
an agent, representative, consultant, officer, director,
independent contractor or employee of any entity or enterprise
that is in direct competition with any significant business
unit of the Company as conclusively determined by the Board of
Directors.
d.Cooperation in Claims. During the term of his employment and
for an unlimited period thereafter, at the request of the
Company, Executive will cooperate with the Company with
respect to any claims or lawsuits by or against the Company
where Executive has knowledge of the facts involved in such
claims or lawsuits. Executive shall be entitled to reasonable
compensation for Executive's time and expense in rendering
such cooperation. Further, Executive will decline to
voluntarily aid, assist or cooperate with any party who has
claims or lawsuits against the Company, or with their
attorneys or agents. The Company and Executive both
acknowledge, however, that nothing in this paragraph shall
prevent Executive from honestly testifying at an
administrative hearing, arbitration, deposition or in court,
in response to a lawful and properly served subpoena in a
proceeding involving the Company.
e.Remedies. The parties recognize and agree that, because any
would result in damages difficult to ascertain, the Company
shall be entitled to injunctive and other equitable relief to
prevent a breach or threatened breach of the provisions of
this Paragraph 9. Accordingly, the parties specifically agree
that the Company shall be entitled to temporary and permanent
injunctive relief to enforce the provisions of this Paragraph
9, that such relief may be granted without the necessity of
proving actual damages. The parties further agree that the
right to such relief shall be in lieu of any right to recover
money damages for any such breach.
f.Enforceability. Executive agrees that considering Executive's
relationship with the Company, and given the terms of this
Agreement, the restrictions and remedies set forth in
Paragraph 9 are reasonable. Notwithstanding the foregoing, if
any of the covenants set forth above shall be held to be
invalid or unenforceable, the remaining parts thereof shall
nevertheless continue to be valid and enforceable as though
the invalid or unenforceable parts have not been included
therein. In the event the provisions relating to time periods
and/or areas of restriction shall be declared by a court of
competent jurisdiction to exceed the maximum time periods or
areas of restriction permitted by law, then such time periods
and areas of restriction shall be amended to become and shall
thereafter be the maximum periods and/or areas of restriction
which said court deems reasonable and enforceable. Executive
also agrees that the Company's action in not enforcing a
particular breach of any part of Paragraph 9 will not prevent
the Company from enforcing any other breaches that the Company
discovers, and shall not operate as a waiver by the Company
against any future enforcement of a breach.
10.Notices. Notices hereunder shall be in writing and shall be
prepaid, addressed as follows:
If to Executive:
H. D. Xxxxxxx
c/o Farmland Industries, Inc.
0000 Xxxxx Xxx Xxxxxxxxxx
Xxxxxx Xxxx, XX 00000
If to the Company:
Chairman of the Board
c/o Corporate Secretary
Farmland Industries, Inc.
0000 Xxxxx Xxx Xxxxxxxxxx
Xxxxxx Xxxx, XX 00000
with a copy to:
Vice President and General Counsel
Farmland Industries, Inc.
0000 Xxxxx Xxx Xxxxxxxxxx
Xxxxxx Xxxx, XX 00000
11.Assignment. This Agreement is personal in its nature and the
parties hereto shall not, without the consent of the other, assign
or transfer this Agreement or any rights or obligations hereunder;
provided, however, that the provisions hereof shall inure to the
benefit of, and be binding upon each successor in a change of
control of the Company, whether by merger, consolidation, transfer
of all or substantially all assets, sale or otherwise (and such
successor shall thereafter be deemed the "Company" for purposes of
this Agreement).
12.Binding Agreement. The provisions of this Agreement shall be
binding upon, and shall inure to the benefit of, the respective
heirs, legal representatives and successors of the parties hereto.
13.Missouri Law. This Agreement shall be governed by and construed in
pre-empted by federal law.
14.Captions and Section Headings. Captions and paragraph headings
Agreement and shall not be used in construing it.
15.Invalid Provisions. If any provision of this Agreement shall be
unlawful, void, or for any reason unenforceable, it shall be deemed
severable from, and shall in no way affect the validity or
enforceability of, the remaining provisions of this Agreement.
16.Waiver of Breach. The failure to enforce at any time any of the
provisions of this Agreement, or to require at any time performance
by the other party of any of the provisions hereof, shall in no way
be construed to be a waiver of such provisions or to affect either
the validity of this Agreement or any part hereof or the right of
either party thereafter to enforce each and every provision in
accordance with the terms of this Agreement.
17.Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements,
representations and understandings of the parties with respect
thereto. No modification or amendment of any of the provisions of
this Agreement shall be effective unless in writing specifically
referring hereto and signed by Executive and a member of the Board
upon authorization of the Board to do so.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the date set forth above.
EXECUTIVE FARMLAND INDUSTRIES, INC.
/s/ H. D. XXXXXXX By: /s/ XXXXXX XXXXXXX
_____________________ _______________________________
H. D. Xxxxxxx Xxxxxx Xxxxxxx, Chairman of the
Board of Directors
By: /s/ XXXX XXXXXX
_______________________________
Xxxx Xxxxxx, Vice-Chairman of the
Board of Directors
