EMPLOYMENT AGREEMENT
Execution Version
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and effective as of September 18, 2012 between AgFeed Industries, Inc., a Nevada corporation (the “Company”), and K. Xxxx X. Xxxxxxx (the “Executive”).
WHEREAS, the Executive is employed by the Company in a key employee capacity and the Executive’s services are valuable to the conduct of the business of the Company; and
WHEREAS, the Company and the Executive desire to specify the terms and conditions on which the Executive will continue employment with the Company as of the effective date set forth above and under which the Executive may receive severance in the event that the Executive separates from service with the Company under circumstances specified herein.
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants, agreements and conditions set forth in this Agreement, and intending to be legally bound, the parties agree as follows:
(i) The Executive shall serve as the Chief Executive Officer of the Company (or in such other capacity as the Board of Directors of the Company may assign to or confer upon the Executive from time to time), accountable to the Board of Directors. The Executive shall have the duties and responsibilities customarily incident to such position, together with such other duties and responsibilities as the Board of Directors may assign to or confer upon the Executive from time to time.
(ii) The Executive shall travel to such places, including, without limitation, the site of such facilities of the Company and its affiliates as are established from time to time, at such times as are advisable for the performance of the Executive’s duties and responsibilities under this Agreement.
(iii) The Executive shall submit to the Company all business, commercial and investment opportunities or offers presented to the Executive or of which the Executive becomes aware which relate to the business of the Company (the “Company Opportunities”). Unless approved by the Board of Directors of the Company, the Executive shall not accept or pursue, directly or indirectly, any Company Opportunities on the Executive’s own behalf.
2. Term. The term of the Executive’s employment under this Agreement shall commence on the date of this Agreement and shall continue until December 31, 2015, unless terminated at any time by mutual agreement of the Company and the Executive or by either the Company or the Executive pursuant to Section 4 (the “Term”). If the Term expires in accordance with this Agreement and the Executive remains employed with the Company thereafter, then the Executive shall be an at-will employee of the Company during the period that the Executive remains employed with the Company, except for any period during which the Executive is employed under any other written employment agreement with the Company.
| Performance Objective | Bonus Payout | |||
| Successful completion of restatement of financial statements by 12/31/12 | $ | 200,000 | ||
| Continued employment until 12/31/12 | $ | 200,000 | ||
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To the extent the 2012 Bonus becomes payable as a result of the performance objectives having been achieved (as determined by the Board of Directors or the Compensation Committee thereof), the Company shall pay the 2012 Bonus to the Executive by no later than March 1, 2013. For years subsequent to 2012, the Executive will be eligible to participate in such incentive compensation arrangements as the Board of Directors or the Compensation Committee thereof establishes from time to time for the Executive, with the understanding that the parties intend for the Executive’s total direct compensation (i.e., base salary plus target cash incentives and the grant date value of equity awards) for each year of the Term to equal at least $1.2 million subject to an annual cost of living increase equal to the increase, if any, in the Consumer Price Index for All Urban Consumers for the previous calendar year (such amount, as adjusted, the “Target Total Direct Compensation”); provided, however, that if there is a material change in the assets or the business of the Company, then the Compensation Committee may adjust the Target Total Direct Compensation as appropriate to reflect comparable peer companies. If the Executive breaches any provision set forth in Sections 5, 6 or 7, then Company, to the extent permitted by applicable law, may refuse to pay the Executive any bonus payments on the date otherwise due pursuant to this Section 3(b) or on the terms of any such bonus plans.
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(i) his Base Salary and Benefits as accrued through the effective date of such termination; and
(ii) an amount equal to the greater of (A) the Executive’s then current Base Salary payable for the remainder of the Term or (B) two (2) times the aggregate of (x) the Executive’s then current Base Salary and (y) the Executive’s target annual bonus payout value for the calendar year in which the Executive’s employment terminates.
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Notwithstanding the foregoing, the Company’s obligation to the Executive for any payments or other rights under this Subsection (c) shall (x) be subject to the Executive having executed and delivered to the Company a release in substantially the form reasonably satisfactory to the Company, within twenty-one (21) days of the Executive’s employment termination date, and such release not having been revoked by the Executive (or his estate or representative), and (y) cease if the Company notifies the Executive that the Executive is in material violation of any of the provisions of any of Sections 5 through 7; provided, that the Company’s exercise of rights pursuant to this sentence shall not limit in any manner the exercise by the Company of any other right or remedy in respect thereof. Except as otherwise required by applicable law or as provided by this Subsection (c), the Company shall not have any further obligation to Executive with respect to any salary, bonus, compensation, severance, payments or benefits after his employment termination date, and the Executive shall not be entitled to any other salary, bonus, compensation, severance, payments or benefits from the Company after his employment termination date.
Notwithstanding any provision in this Subsection (c) to the contrary, if the Executive is a Specified Employee (as defined below) at the time the Executive’s employment terminates, then, to the extent any payment required to be made hereunder to the Executive as a result of such termination of employment exceeds an amount equal to the lesser of (x) two times the Executive’s annual rate of pay for the prior calendar year and (y) two times the dollar limitation in effect under Code Section 401(a)(17) for the year in which such termination from employment occurs, such excess shall be paid to the Executive in a single cash lump sum on the first business day after the date that is six months following such termination of employment.
(i) The Executive’s employment pursuant to this Agreement and this Agreement shall terminate automatically on the date of the Executive’s death or Disability. In the event of the termination of the Executive’s employment due to his death or Disability, the Executive (or, in the event of the Executive’s death, his estate) shall be entitled to receive only his Base Salary and Benefits as accrued through the effective date of such termination and shall forfeit any unpaid bonuses and any unaccrued or nonvested Benefits.
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(ii) The Executive may designate a beneficiary to receive any remaining Base Salary, Benefits or other amounts payable under Sections 3 and 4 in the event of the Executive’s death after the Executive becomes entitled to receive any Base Salary, Benefits or other amounts payable thereunder (the “Beneficiary”). The initial Beneficiary shall be designated on Schedule A hereto. Changes to the designation of the Beneficiary shall be made by filing a written designation with the Company in such form as the Company may provide and may be made by the Executive from time to time by similar action. If no such designation or change is made by the Executive or if the Executive is not survived by his designated Beneficiary, any remaining Base Salary, Benefits or other amounts payable under Sections 3 and 4 at the time of the Executive’s death shall be paid to the Executive’s estate.
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(a) own or control, whether as shareholder, member, partner, director or otherwise, or manage, operate, be employed or compensated by, or consult with, whether as an executive, officer, employee, consultant or otherwise, in any capacity where Confidential Information would reasonably be considered useful to, any Conflicting Organization conducting or planning to conduct business in the Territory (as defined below);
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(b) undertake any action on behalf of any Conflicting Organization in any way related to the sale or marketing of products or services that compete with products or services researched, developed, assembled, produced, marketed, distributed, sold or repaired by the Company or within the Company’s active research, development, expansion or business plans, to any current or prospective customers of the Company as to whom the Executive, or persons reporting to the Executive, made sales or Substantial Sales Efforts (as defined below), or provided customer support, within the twelve (12) month period preceding the last day of his employment with the Company (regardless of the reason that such employment ceases);
(c) undertake any action on behalf of any person (including the Executive) or entity in any way related to the solicitation or encouragement of any person who served as an employee, commissioned salesperson or consultant of, or who performed similar services for, the Company within the twelve (12) month period preceding the last day of the Executive’s employment with the Company (regardless of the reason that such employment ceases), to leave such person’s employment, engagement or other relationship with the Company, unless such person has been separated from his employment, engagement or other relationship with the Company and each of its affiliates for a period of six (6) consecutive months; or
(e) engage in any practice the purpose of which is to evade the provisions of this covenant not to compete;
provided, however, that (i) the foregoing shall not prohibit the ownership of less than five percent (5%) of the securities of any corporation or other entity that is listed on a national securities exchange or traded in the national over-the-counter market and (ii) the foregoing shall not apply if the Company materially breaches its material obligation under the Agreement, the Executive provides notice of such breach to the Company and the Company fails to cure such breach within ninety (90) days. The Company may sell, assign or otherwise transfer this covenant not to compete, in whole or in part, to any person or entity that purchases all or any portion of the Business. Recognizing the specialized nature of the Company, the Executive acknowledges and agrees that the duration, geographic scope and activity restrictions of this covenant not to compete are reasonable.
7. Rights to Intellectual Property.
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10. Certain Definitions. As used in this Agreement:
(a) “Cause” means the Executive having: (i) violated any provision of Section 5, 6 or 7 of this Agreement or any non-competition agreement, confidentiality agreement or similar agreement with the Company or any of its affiliates; (ii) materially violated any provision of any section of this Agreement other than Section 5, 6 or 7, or any other obligations or conditions of employment (such as failure to comply with the Company’s policies or procedures), and failure to cure such violation within ten (10) days after demand by the Company (except that no cure period will be allowed for a second offense or for any conduct falling within any of the remaining clauses of this definition); (iii) breached any fiduciary duty that the Executive owes to the Company; (iv) become, in the reasonable opinion of the majority of the Board of Directors of the Company, as determined in good faith, addicted or dependent on intoxicants or drugs of any nature; (v) committed any misdemeanor involving theft or deception or any felony; or (vi) engaged in dishonesty, disloyalty or fraud involving the Company’s business, assets, employees, customer or suppliers.
(b) “Confidential Information” means all ideas, information, knowledge and discoveries, whether or not patentable, trademarkable or copyrightable, that are not generally known in the trade or industry and about which the Executive has knowledge as a result of his employment with the Company or any of its affiliates, including product specifications, manufacturing procedures, methods, equipment, compositions, technology, patents, know-how, inventions, improvements, designs, business plans, marketing plans, cost and pricing information, internal memoranda, formula, development programs, sales methods, customer, supplier, sales representative, distributor and licensee lists, mailing lists, customer usages and requirements, computer programs, information constituting “trade secrets” under applicable law and other confidential or proprietary technical or business information and data. However, “Confidential Information” shall not include any information that now or hereafter is in the public domain by means other than disclosure by the Executive in violation of this Agreement (or any other agreement containing confidentiality obligations on the part of the Executive).
(c) “Conflicting Organization” means any person (including the Executive as a sole proprietor) or entity engaged in or planning or attempting to become engaged in the research, development, assembly, production, marketing, distribution, sale or repair of products or services that compete with products or services researched, developed, assembled, produced, marketed, distributed, sold or repaired by the Company or within the Company’s actual or demonstrably anticipated research, development, expansion or business plans.
(d) “Disability” means the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness, which is determined to be total and/or permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative (such agreement as to acceptability not to be withheld unreasonably). The determination of Disability shall be made by the Board of Directors of the Company in good faith.
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(e) “Good Reason” means (i) any material violation by the Company of any provision of this Agreement and failure to cure such violation within ten (10) days after demand by the Executive; (ii) other than for Cause, any reduction by the Company in the Executive’s Base Salary or in the Executive’s bonus potential (as historically and consistently applied) that is not consistent with the manner in which the Company established such bonus potential as for 2012 (but excluding any change in such items that applies to substantially all other comparable level executives of the Company who are entitled thereto); or (iii) other than for Cause, any material adverse change, without the prior consent of the Executive, in his conditions of employment with the Company from such conditions of employment in effect as of the date of this Agreement, including any material reduction in the nature or scope of the Executive’s title or responsibilities as in effect immediately after the date of this Agreement; provided that any such reduction that results solely from becoming part of a larger organization following a merger or similar transaction shall not be considered Good Reason unless the Executive’s scope of responsibilities, authority and/or opportunity is also reduced or the business plan for the Company is materially changed. Notwithstanding anything to the contrary herein, the Executive’s resignation shall not be considered to be for Good Reason unless the Executive provides written notice to the Company of the condition constituting Good Reason within ninety (90) days of the initial existence of such condition, and the Company fails to remedy such condition within thirty (30) days after receipt of such notice from the Executive.
(f) “Inventions” means all designs, discoveries, improvements, ideas and works of authorship, including novel or improved products, techniques, methods, processes, formulae, samples, prototypes, selection of materials, systems and components, product adjustments and software, whether or not patentable, trademarkable or copyrightable, that (i) relate to (A) the business of the Company or (B) the Company’s actual or anticipated research or development or (ii) result from any work that the Executive performed for Company.
(g) “Specified Employee” shall have the meaning given in Code Section 409A as determined in accordance with the methodology established by the Company as in effect on the date of the Executive’s termination of employment that constitutes a “separation from service” within the meaning of Code Section 409A.
(h) “Substantial Sales Efforts” means marketing, promotional or sales activities undertaken on behalf of the Company in an effort to secure one or more foreseeable business opportunities with a current or prospective customer of the Company, which activities include (i) in-person or voice communications and (ii) preparation of a quotation or proposal or conduct of an on-site visit, and which activities, in the absence of any breach of this Agreement, enjoy a reasonable prospect of success.
(i) “Territory” means the United States, the People’s Republic of China and any other country in which (i) the Company or any of its subsidiaries has direct operations, operates through a joint venture in which it has more than a nominal investment interest or has engaged in substantial (and not isolated) marketing of its products or services and/or (ii) the Company or any of its subsidiaries, with the Executive’s involvement or under the Executive’s direction, has planned to operate a facility or to engage in substantial (and not isolated) efforts to market its products or services, or has considering operating a facility, in each of the cases described in subclauses (i) and (ii) above, within the two (2) year period immediately preceding the Executive’s termination of employment.
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11. Parachute Payment Application
(a) Notwithstanding any other provision of this Agreement, if any payment under this Agreement, or under any other agreement with or plan of the Company or its affiliates (in the aggregate, “Total Payments”), would constitute an “excess parachute payment” (as defined below) and would, but for this Section 11(a), result in the imposition on the Executive of an excise tax (the “Excise Tax”) under Code Section 4999, then the Total Payments to be made to the Executive shall either be (i) delivered in full, or (ii) delivered in an amount equal to one dollar ($1.00) less than the amount that would result in any portion of such Total Payment becoming subject to the Excise Tax, whichever of the foregoing results in the receipt by the Executive the greatest benefit on an after-tax basis (taking into account the applicable federal, state and local income taxes and the Excise Tax).
(b) Within forty (40) days following notice by one party to the other of its belief that there is a payment or benefit due the Executive that will result in an excess parachute payment, the Executive and the Company, at the Company’s expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel (“National Tax Counsel”) selected by the Company’s independent auditors and reasonably acceptable to the Executive (which may be regular outside counsel to the Company), which opinion sets forth (A) the amount of the Base Period Income (as defined below), (B) the amount and present value of the Total Payments, (C) the amount and present value of any excess parachute payments determined without regard to any reduction of Total Payments pursuant to this Section 11 and (D) the net after-tax proceeds to the Executive, taking into account the tax imposed under Code Section 4999 if (x) the Total Payments were reduced in accordance with Section 11(a)(ii) or (y) the Total Payments were not so reduced. The opinion of National Tax Counsel shall be addressed to the Company and the Executive and shall be binding upon the Company and the Executive. If such National Tax Counsel opinion determines that Section 11(a)(ii) applies, then the Termination Payment hereunder or any other payment or benefit determined by such counsel to be includable in Total Payments shall be reduced or eliminated so that under the bases of calculations set forth in such opinion there will be no excess parachute payment. In such event, payments or benefits included in the Total Payments shall be reduced or eliminated by applying the following principles, in order: (1) the payment or benefit with the higher ratio of the parachute payment value to present economic value (determined using reasonable actuarial assumptions) shall be reduced or eliminated before a payment or benefit with a lower ratio; (2) the payment or benefit with the later possible payment date shall be reduced or eliminated before a payment or benefit with an earlier payment date; and (3) cash payments shall be reduced prior to non-cash benefits; provided that if the foregoing order of reduction or elimination would violate Code Section 409A, then the reduction shall be made pro rata among the payments or benefits included in the Termination Payments (on the basis of the relative present value of the parachute payments).
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(c) For purposes of this Agreement: (A) the terms “excess parachute payment” and “parachute payments” shall have the meanings assigned to them in Code Section 280G and such “parachute payments” shall be valued as provided therein. Present economic value for purposes of this Agreement shall be calculated in accordance with Code Section 280G(d)(4); (B) the term “Base Period Income” means an amount equal to the Executive’s “annualized includible compensation for the base period” as defined in Code Section 280G(d)(1); (C) for purposes of the opinion of National Tax Counsel, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors in accordance with the principles of Code Sections 280G(d)(3) and (4), which determination shall be evidenced in a certificate of such auditors addressed to the Company and the Executive; and (D) Executive shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and employment taxation, and state and local income taxes at the highest marginal rate of taxation in the state or locality of Executive’s domicile (determined in both cases in the calendar year in which the payments or benefits are accrued), net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes.
(d) If such National Tax Counsel so requests in connection with the opinion required by this Section 11, the Executive and the Company shall obtain, at the Company’s expense, and the National Tax Counsel may rely on, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by the Executive solely with respect to its status under Code Section 280G.
(e) The Company agrees to bear all costs associated with, and to indemnify and hold harmless, the National Tax Counsel of and from any and all claims, damages, and expenses resulting from or relating to its determinations pursuant to this Section 11, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of such firm.
(f) This Section 11 shall be amended to comply with any amendment or successor provision to Sections 280G or 4999 of the Code. If such provisions are repealed without successor, then this Section 11 shall be cancelled without further effect.
| To the Company: | AgFeed Industries, Inc. |
| 000 Xxxxxxxxx Xxxxxxx Xxxx., Xxxxx 000 | |
| Xxxxxxxxxxxxxx, Xxxxxxxxx 00000 |
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| with a copy to: | Xxxxx X. Xxxxx |
| Xxxxx & Xxxxxxx LLP | |
| 00 Xxxx Xxxxxx | |
| Xxx Xxxx, XX 00000-0000 |
Notices to the Executive shall be addressed to him at his address reflected in the Company’s records. Either party wishing to change the address to which notices, requests, demands and other communications under this Agreement shall be sent shall give notice of such change to the other party.
(e) Governing Law; Consent to Jurisdiction. This Agreement shall be construed and interpreted according to the internal laws of the State of Massachusetts, excluding any choice of law rules that may direct the application of the laws of another jurisdiction. Each party stipulates that any dispute or disagreement between the parties as to the interpretation of any provision of, or the performance of obligations under, this Agreement shall be commenced and prosecuted in its entirety in, and consents to the exclusive jurisdiction and proper venue of, the federal or state courts located in the State of Massachusetts, and each party consents to personal and subject matter jurisdiction and venue in such courts and waive and relinquish all right to attack the suitability or convenience of such venue or forum by reason of their present or future domiciles, or by any other reason. Each party waives any right to trial by jury with respect to any such dispute or disagreement. The parties acknowledge that all directions issued by the forum court, including all injunctions and other decrees, will be binding and enforceable in all jurisdictions and countries.
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[Signature page follows]
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IN WITNESS WHEREOF, the parties have duly executed and delivered this Employment Agreement on the day and year first above written.
| AgFeed Industries, Inc. | ||
| By: | /s/ Xxxxxx Xxxxxxxxx | |
| Name: | Xxxxxx Xxxxxxxxx | |
| Title: | Interim Chief Financial Officer | |
| EXECUTIVE | ||
| /s/ K. Xxxx X. Xxxxxxx | ||
| Name: K. Xxxx X. Xxxxxxx | ||
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Schedule A
Beneficiary