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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as
of this ___ day of October, 1996, by and between PREMIUM STANDARD FARMS, INC.,
a Delaware corporation (the "Company"), and XXXXXX X. XXXXX, an individual (the
"Employee").
WHEREAS, the Company desires to retain Employee in its employment in an
executive capacity upon the terms and conditions set forth below; and
WHEREAS, Employee desires to be employed by the Company in an executive
capacity upon the terms and conditions set forth below; and
WHEREAS, the Company and Employee desire to set forth, in writing, the
terms and conditions of their agreements and understandings.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Employment. The Company hereby employs Employee and Employee hereby
accepts employment with the Company, upon the terms and conditions contained
herein. During the term of Employee's employment hereunder, Employee shall
have the title, status and duties of President and Chief Operating Officer of
the Company. During the term of Employee's employment hereunder, Employee will
serve the Company faithfully and to the best of his ability under the direction
of the Board of Directors of the Company (the "Board") and shall devote
substantially all his working time and attention to the business of the Company
and to the performance of his duties hereunder. Employee will also serve upon
request of the Board, and for no additional compensation, in the position, or
positions, of an officer or director of any subsidiary of the Company.
2. Term. The term of Employee's employment under this Agreement shall
commence as of the date hereof (the "Effective Date") and shall end December
31, 1999, unless sooner terminated by either party in accordance with the
provisions of this Agreement (the "Initial Employment Term"); provided,
however, this Agreement shall be automatically extended without further action
by either party for additional one-year periods, unless written notice of
either party's intention not to extend the term of Employee's employment
hereunder has been given to the other party at least six months prior to the
expiration of the then effective term.
3. Salary.
3.1 Base Salary. The Company will pay to Employee a minimum annual base
salary ("Base Salary") of Two Hundred Twenty-Five Thousand Dollars ($225,000),
payable at
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such intervals consistent with the Company's payroll policies for other senior
executive officers, with such annual increases as are necessary to reflect
changes in the cost of living and as may be provided under the terms of this
Agreement. Once increased, such greater amount shall constitute Employee's
Base Salary.
3.2 Annual Review. Employee's Base Salary shall be reviewed by the
Compensation Committee of the Board on each anniversary of Employee's initial
hire date. Employee's Base Salary may be increased (but not decreased) based
upon Employee's performance. In addition to any increases under this Section
3.2, the Board may, in its sole discretion, increase Employee's Base Salary at
any time.
4. Employee Benefits; Signing Bonus; Performance Bonus.
4.1 General. Employee will be included, to the extent eligible thereunder
by virtue of his position, tenure, salary, age and other qualifications, in all
employee benefit plans, programs or arrangements (including, without
limitation, any plans, programs or arrangements providing for retirement
benefits, incentive compensation, profit sharing, bonuses, disability benefits,
health and life insurance, or vacation and paid holidays) which shall be
established by the Company for, or made available to, its other senior
executive officers.
4.2 Signing Bonus. Upon receipt by the Company of a fully executed copy of
this Agreement, the Company shall pay to Employee a one-time signing bonus of
One Hundred Thousand Dollars ($100,000).
4.3 Executive Performance Bonus. Employee will be eligible to participate
in an executive performance bonus (the "Executive Performance Bonus") as
determined by the Board in its sole discretion, in accordance with the
Company's general management bonus policy; provided, however, in no event will
the Executive Performance Bonus paid to Employee be an amount equal to or
greater than fifty percent (50%) of Employee's Base Salary.
4.4 The Membership Interest Unit Option. Pursuant to the terms and
conditions of the PSF Holdings, L.L.C. Management Option Plan (the "Plan") and
the PSF Holdings, L.L.C. Membership Interest Unit Option Agreement, by and
between the Company and Employee, dated even date herewith (the "Option
Agreement"), the Company will grant Employee an Option to purchase 110,000
Units (as those terms are defined in the Plan and the Option Agreement).
4.5 Company Automobile. Employee will have the use of a Class 1
automobile, as defined in the Company's automobile policy, owned or leased by
the Company for the performance of Employee's services hereunder. The Company
will reimburse Employee for reasonable expenses incurred in connection with
Employee's use of such automobile in accordance with the Company's expense
reimbursement policy.
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4. 6 Reimbursement of Expenses. The Company will reimburse Employee for
reasonable travel and other business expenses incurred by him in the
fulfillment of his duties hereunder upon Employee's presentation to the Company
of an itemized account of such expenditures.
4. 7 Relocation Expenses. The Company will reimburse Employee for
reasonable expenses associated with relocating to the Kansas City area
including, but not limited to, realtors' real estate commission(s), moving
company and storage costs, and the costs associated with reasonable
house-hunting trips for Employee and his spouse to the Kansas City area.
5. Termination of Employment
5.1 Termination without Cause; Resignation for Good Reason.
5.1.1 General. Subject to the provisions of Sections 5.1.2 and 5.1.3, if,
prior to the expiration of the Initial Employment Term, Employee's employment
is terminated by the Company without Cause, as defined in Section 5.3, or if
Employee resigns from his employment for Good Reason, as defined in Section
5.4, the Company shall continue to pay Employee his annual Base Salary as of
the date of termination or resignation for a period of one (1) year following
the date of termination or resignation (such period, as applicable, being
referred to hereinafter as the "Severance Period"); provided, however, notice
by either party of its intention not to extend the Initial Employment Term
beyond December 31, 1999 shall not constitute termination without Cause or
resignation for Good Reason. During the Severance Period, Employee shall also
be eligible to participate on the same terms and conditions as in effect
immediately prior to such termination or resignation in all health, medical,
supplemental medical and life insurance plans or programs ("Employee Welfare
Plans") provided to Employee by the Company pursuant to Section 4 above at the
time of such termination or resignation and which are provided by the Company
to its employees following the date of such termination or resignation;
provided, however, that Employee's eligibility to participate in these Employee
Welfare Plans shall end at such time as Employee becomes eligible to receive
coverage under comparable programs of a subsequent employer. If, during the
Severance Period, Employee is precluded from participating in any Employee
Welfare Plan by its terms or applicable law, the Company will provide Employee
with benefits that are reasonably equivalent to those which Employee would have
received under such plan had Employee been eligible to participate therein.
Anything to the contrary herein notwithstanding, the Company shall have no
obligation to continue to maintain any Employee Welfare Plan during the
Severance Period solely as a result of this Agreement.
5.1.2 Employee will not be required to mitigate the amount of any payment
provided for in Section 5.1.1 by seeking other employment, and the amount of
any such payment will not be reduced by any compensation earned by Employee as
the result of his employment by another employer subsequent to termination of
Employee's employment with the Company.
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5.1.3 Death During Severance Period. In the event of Employee's death
during the Severance Period, the Severance Period shall immediately cease, the
Company shall not be obligated to make any further payments pursuant to this
Section 5, and the provisions of Section 6.1 shall apply as though Employee's
death had occurred immediately prior to termination of Employee's employment
hereunder.
5.1.4 Date of Termination. The date of termination of employment
without Cause shall be the date specified in a written notice of termination to
Employee. The date of resignation for Good Reason shall be the date specified
in the written notice of resignation from Employee to the Company.
5.2.2 Termination for Cause; Resignation Without Good Reason.
5.2.1 General. If Employee's employment hereunder is terminated by the
Company for Cause, or if Employee resigns from his employment hereunder other
than for Good Reason, Employee shall be entitled only to payment of his Base
Salary earned through and including the date of termination or resignation.
Employee shall have no further right to receive any other compensation, or to
participate in any other plan, arrangement, or benefit, after such termination
for Cause or resignation of employment other than for Good Reason.
5.2.2 Date of Termination. Subject to Section 5.3, the date of termination
for Cause shall be the date of receipt by Employee of a written Notice of
Termination provided for in Section 5.2.3. The date of resignation without Good
Reason shall be the date specified in the written notice of resignation from
Employee to the Company, or if no date is specified therein, ten (10) business
days after receipt by the Company of written notice or resignation from
Employee.
5.2.3 Notice of Termination. Termination of Employee's employment for
Cause shall be communicated by delivery to Employee of a copy of a resolution
duly adopted by the affirmative vote of not less than a majority of the entire
membership of the Company's Board at a meeting of the Board called and held for
such purpose (after reasonable notice to Employee and reasonable opportunity
for Employee together with Employee's counsel, to be heard before the Board
prior to such vote), finding that in the good faith opinion of the Board an
event constituting Cause for termination in accordance with Section 5.3 has
occurred and specifying the particulars thereof (a "Notice of Termination").
For purposes of this Agreement, no purported termination of Employee's
employment for Cause shall be effective without delivery of such Notice of
Termination.
5.3 Cause. Termination for "Cause" means termination of Employee's
employment because of (i) any willful material violation by Employee of any law
or regulation applicable to the business of the Company or any of its
subsidiaries or Employee's conviction for, or guilty plea to, a felony or a
crime involving moral turpitude, or any willful perpetration by Employee of a
common law fraud, (ii) Employee's commission of an act involving gross
negligence on the part of Employee in the conduct of his duties under this
Agreement or any
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other employment or consulting agreement with another employer having a
business relationship with the Company, (iii) Employee's commission of an act
of personal dishonesty which involves personal profit in connection with the
Company or any other employer having a business relationship with the Company,
(iv) any material breach by Employee of any provision of this Agreement or any
other employment or consulting agreement with another employer having a
business relationship with the Company including, without limitation, the
continued failure or refusal of Employee to perform the material duties
required of him as an employee of the Company, or (v) any other misconduct by
Employee which is materially injurious to the financial condition or business
reputation of, or is otherwise materially injurious to, the Company or any of
its subsidiaries or affiliates; provided, however, that if any such Cause
relates to Employee's obligations under this Agreement and (x) is susceptible
to cure and (y) does not constitute a repetition of such Cause, the Company
shall not terminate Employee's employment hereunder unless the Company first
gives Employee a Notice of Termination, and Employee has not, within ten (10)
business days following receipt of the notice, cured such Cause, or in the
event such Cause is not susceptible to cure within such ten (10) business day
period, Employee has not taken all reasonable steps within such ten (10)
business day period to cure such Cause as promptly as practicable thereafter.
5.4 Good Reason. For purposes of this Agreement, "Good Reason" means:
5.4.1 A diminution in Employee's position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by Employee; provided, however,
that the creation of additional officer positions shall not be considered a
diminution in Employee's authority so long as Employee continues to hold the
office of President and Chief Operating Officer and performs the duties,
functions and responsibilities within the Company as performed by him prior to
the date hereof;
5.4.2 The Company's failure or refusal to comply with the provisions of
this Agreement; or
5.4.3 The Company (i) files a petition in bankruptcy court or is
adjudicated a bankrupt; (ii) institutes or suffers to be instituted any
procedure in bankruptcy court for reorganization or rearrangement of its
financial affairs; (iii) has a receiver of its assets or property appointed
because of insolvency; or (iv) makes a general assignment for the benefit of
creditors.
6. Death or Permanent Disability.
6.1 Death. If Employee's employment hereunder is terminated by death, the
Company shall, within ninety (90) days of the date of death, make a lump sum
payment to Employee's estate (or other beneficiary designated by him in
writing) equal in amount to Employee's Base Salary as in effect on the date of
death that would have been paid to Employee
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over a period of twelve months. Thereafter, the Company shall have no
further obligation to Employee under the Agreement.
6.2 Permanent Disability. In the event Employee shall become physically or
mentally disabled while employed by the Company under this Agreement so that
Employee is unable to render the services provided for by this Agreement for a
period of six consecutive months, or for shorter periods aggregating six months
during any twelve-month period, the Company may at any time after the last day
of the six consecutive months of disability or the day on which the shorter
periods of disability equal an aggregate of six months, terminate Employee's
employment hereunder for "Permanent Disability" by written notice to Employee.
The Company shall, following such termination, continue to pay Employee's Base
Salary as then in effect for a period of twelve months, and shall continue
during such period Employee's participation in medical benefits programs then
maintained for the Company's senior executive officers (or shall provide
reasonably equivalent benefits). Employee will use his reasonable best efforts
to cooperate with any physician engaged by the Company to determine whether or
not Permanent Disability exists, and the determination of such physician made
in writing to the Company and Employee shall be final and conclusive for all
purposes of this Agreement. Any payments provided for in this Section 6.2
shall be offset (but not below zero) by any salary continuation payments
received by Employee under any plan, program or arrangements in which Employee
participated pursuant to Section 4.1 of this Agreement. Except as provided in
this Section 6.2, upon termination of the Employee's employment hereunder by
virtue of Employee's Permanent Disability, the Company shall have no further
obligation to Employee under this Agreement.
7. Change of Control.
7.1 Notwithstanding anything to the contrary contained herein, if the
Company terminates Employee without Cause upon or within six (6) months
following a Change of Control, as defined below, the Company will pay to
Employee an amount equal to the greater of (i) Employee's annual Base Salary as
of the date of the Change of Control, or (ii) if the Change of Control occurs
during the Initial Employment Term, the remaining portion of Employee's Base
Salary for the Initial Employment Term as of the date Employee's employment is
terminated, as severance pay, and the covenant not to compete set forth in
Section 8.3.1 below will not apply to Employee.
7.2 For purposes of this Agreement, "Change of Control" means:
(a) A consolidation, merger or similar transaction involving the Company
which has one or more of the following results: (i) the Company is not the
surviving entity; (ii) a single person or entity or a group of persons and/or
entities acting in concert (an "Acquiring Entity") acquire a majority
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amount or more of the Company's Common Stock, followed by a change in a
majority of the membership of the Board, other than as a result of death or
voluntary resignation (for reason unrelated to the transaction) of any member
or members of the Board, within six months from the date the Acquiring Entity
acquires a majority amount or more of the Company's common stock; (iii) there
is a sale or transfer of all or substantially all of the Company's assets; or
(iv) the Company is dissolved or liquidated; or
(b) A consolidation, merger or similar transaction involving PSF
Holdings, L.L.C. ("Holdings") which has one or more of the following results:
(i) Holdings is not the surviving entity; (ii) an Acquiring Entity acquires a
majority amount or more of Holdings' Units, as defined in the Plan, followed by
a change in a majority of the membership of the Board of Directors of Holdings,
other than as a result of death or voluntary resignation (for reason unrelated
to the transaction) of a member or members of the Board of Directors of
Holdings, within six months from the date the Acquiring Entity acquires a
majority amount or more of Holdings' Units; (iii) there is a sale or transfer
of all or substantially all of Holdings' assets; or (iv) Holdings is dissolved
or liquidated.
(c) The provisions of (a) and (b) above notwithstanding, it is not the
intent of the Company to include within the definition of "Change of Control"
changes in the ownership of the Company and/or Holdings which are occasioned by
the transfer or sale of Units and/or Company common stock to one or more
parties who acquire the Units and/or Company common stock for purposes of
maintaining a passive investment in the Company and/or Holdings. For these
reasons, the parties agree that the Board reserves the authority to determine,
in good faith, and in its sole discretion, whether the occurrence of a
particular event (such as the sale of Units and/or Company common stock to an
affiliate, a current investor, or another third-party passive investor) falls
within the definition of a "Change of Control" for purposes of this Agreement.
8. Confidentiality.
8.1 Confidentiality. Employee covenants and agrees with the Company
that he will not at any time, except in performance of his obligations to the
Company hereunder or with the prior written consent of the Company, directly or
indirectly, disclose any secret or confidential information that he may learn
or has learned by reason of his association with the Company or any of its
subsidiaries and affiliates. The term "confidential information" includes
information not previously disclosed to the public or to the trade by the
Company's management, or otherwise in the public domain, with respect to the
Company's or any of its affiliates' or subsidiaries' products, facilities,
applications and methods, trade secrets and other intellectual property,
systems, procedures, manuals, confidential reports, product price lists,
customer lists, technical information, financial information (including the
revenues, costs or profits associated with any of the Company's products),
business plans, prospects or opportunities.
8.2 Exclusive Property. Employee confirms that all confidential
information is and shall remain the exclusive property of the Company. All
business records, papers and documents kept or made by Employee relating to the
business of the Company shall be and remain the property of the Company.
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8.3 Noncompetition.
8.3.1 If the Company terminates Employee's employment for Cause, as defined
in Section 5.3, or Employee terminates his employment with the Company other
than for Good Reason, as defined in Section 5.4, Employee will not, for the two
(2) year period following the termination of Employee's employment under this
Agreement, without the prior written consent of the Board, be or remain
employed or retained by, or consult with or render any services for any person,
firm, partnership, joint venture, limited liability company, association,
corporation or other business organization, entity or enterprise engaged in any
business, which competes directly or indirectly with the business in which the
Company, or any of its subsidiaries or affiliates, is engaged at any time
during the term of this Agreement; provided, however, (i) nothing contained in
this Section 8.3.1 shall prevent Employee from being employed by a company
whose business activities compete, directly or indirectly, with the Company so
long as Employee is employed in a capacity or a division, unit or separate
portion of that other company which does not compete with the business of the
Company, and (ii) the provisions of this Section 8.3.1 shall not apply if
Employee elects to give notice of non-extension as provided in Section 2 prior
to the end of the Initial Employment Term or any one-year renewal period
thereafter. Employee hereby further agrees that Employee will not solicit or
endeavor to entice away from the Company, or any of its affiliates or
subsidiaries, any person who is, or was during the then most recent twelve
month period, employed by or associated with the Company, nor will Employee
solicit or endeavor to entice away from the Company, or any of its affiliates
or subsidiaries, any person or entity who is, or was within the then most
recent twelve month period, a customer, client or prospect of the Company. The
period during which the obligations of this Section 8.3 shall apply to Employee
shall be extended by a period of time equal to any period during which Employee
shall be in breach of such obligations.
8.3.2 If the Company gives Employee notice of its intention not to extend
this Agreement for an additional one-year period beyond December 31, 1999 in
accordance with Section 2 above, the Company, in its sole discretion, shall
have the option and right, by giving notice to Employee and paying to Employee
an amount equal to Employee's Base Salary as currently in effect (such amount
to be payable at intervals consistent with the Company's payroll practices for
other senior executives) to prevent Employee from competing with the Company
for a period of one (1) year following the termination of Employee's employment
under this Agreement in the same manner as set forth in Section 8.3.1 above.
8.3.3 If this Agreement is extended for additional one-year periods beyond
December 31, 1999 in accordance with Section 2 above and, thereafter, either
(i) the Company gives Employee notice of its intention not to extend the terms
of this Agreement for additional one-year periods, or (ii) the Company
terminates Employee without Cause, or (iii) Employee resigns for Good Reason,
the Company, in its sole discretion, shall have the option and right, by giving
notice to Employee and paying to Employee an amount equal to Employee's Base
Salary as currently in effect (such amount to be payable at intervals
consistent with the Company's payroll practices for other senior executives) to
prevent Employee from competing
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with the Company for a period of one (1) year following the termination
of Employee's employment under this Agreement in the same manner as set forth
in Section 8.3.1.
8.3.4 Employee shall not be required to mitigate the amount
of any payment provided in Sections 8.3.2 and 8.3.3 by seeking other
employment; provided, however, if Employee violates or breaches the
non-competition provisions set forth in Sections 8.3.2 and 8.3.3, the amount of
any payment provided in Sections 8.3.2 and 8.3.3 will be discontinued, in
addition to all other legal and equitable remedies available to the Company.
8.3.5 The restrictions set forth in this Section 8 are considered by the
parties to be reasonable. However, if any such restriction is found to be
unenforceable because it extends for too long a period of time or over too
great a range of activities or is too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of activities
or geographic area as to which it may be enforceable. In the event of a breach
or a threatened breach of this Section 8, the Company shall be entitled to an
injunction restraining Employee from committing or continuing such breach, as
well as to any and all other legal and equitable remedies permitted by law but
only if the Company has fulfilled all its obligations to Employee pursuant to
this Agreement.
9. Miscellaneous.
9.1 Notices. All notices and communications hereunder shall be in
writing, addressed as follows:
To the Company:
Premium Standard Farms, Inc.
000 X. 0xx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
To Employee:
Xxxxxx X. Xxxxx
Premium Standard Farms, Inc.
000 X. 0xx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Any such notice or communication shall be delivered in person, by cable, by
telecopy (with confirmation copy of such telecopied material delivered in
person or by registered or certified mail, return receipt requested) or by
certified or registered mail, return receipt requested, addressed as above (or
to such other address as such party may designate in writing from time to
time), and the actual date of receipt, as shown by the receipt therefor, shall
determine the time at which notice was given.
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9.2 Severability. If any provision of this Agreement shall be
prohibited by or invalid under applicable law or otherwise determined to be
unenforceable, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of this Agreement.
9.3 Disputes. Any controversy, claim or dispute between the parties
arising out of this Agreement shall be settled by arbitration in Kansas City,
Missouri in accordance with the Expedited Labor Arbitration Rules of the
American Arbitration Association.
9.4 Entire Agreement; Modification. This Agreement constitutes the
entire agreement among the parties hereto and supersedes any and all prior
contracts, arrangements or understandings between the parties. This Agreement
may be amended or modified at any time only by mutual written agreement of the
parties.
9.5 Withholding. The Company may withhold from any amounts payable
under this Agreement such federal, state and local taxes as may be required to
be withheld pursuant to any applicable law or regulation.
9.6 Governing Law. This Agreement shall be construed, interpreted, and
governed in accordance with the laws of the state of Missouri without regard to
conflict of law principles.
9.7 Successors. This Agreement shall be binding upon and inure to the
benefit of, and shall be enforceable by Employee and the Company, their
respective heirs, executors, administrators and assigns. In the event the
Company is merged, consolidated, liquidated by a parent corporation, or
otherwise combined into one or more entities, the provisions of this Agreement
shall be binding upon and inure to the benefit of the parent corporation or the
entity resulting from such merger or to which the assets shall be sold or
transferred, which entity from and after the date of such merger,
consolidation, sale or transfer shall be deemed to be the Company for purposes
of this Agreement. In the event of any other assignment of this Agreement by
the Company, by operation of law or otherwise, the Company shall remain
primarily liable for its obligations hereunder. Employee may not assign this
Agreement.
9.8 Headings. The headings of Sections herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
9.9 Counterparts. This Agreement may be executed by either of the
parties hereto in counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
9.10 Survival. All Sections of this Agreement shall survive beyond the
period during which Employee is employed hereunder, except as otherwise
specifically stated.
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