EXHIBIT 10.40
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of January 14, 2000 by and between
Xxxx X. Xxxxxxx (hereafter "Xxxxxxx") and Cenex Harvest States Cooperatives, a
Minnesota cooperative corporation (together with all affiliates, the "Company").
WHEREAS, Xxxxxxx is an integral part of the Company's management;
WHEREAS, the Company is contemplating the possible full consolidation
of its business with the business of Farmland Industries, Inc. through
a merger or other similar transaction (the "Consolidation") and desires
to assure both itself and Xxxxxxx of continuity in the event of the
Consolidation; and
WHEREAS, the Company or its successor, after that Consolidation,
intends to appoint Xxxxxxx as its Chief Executive Officer on or before
January 1, 2004;
NOW, THEREFORE, it is hereby agreed to by and between the parties as
follows:
1. Employment
(a) The Company hereby agrees to and does hereby employ Xxxxxxx as
President and General Manager, and Xxxxxxx hereby agrees to
accept employment with the Company as President and General
Manager, for the period set forth in Paragraph 2 below (the
period of employment) upon the other terms and conditions set
forth in this Agreement.
(b) Upon the Company's consolidation with Farmland Industries,
Inc., Xxxxxxx will be appointed President of the consolidated
entity. Each of the Chief Executive Officer and Xxxxxxx will
have direct reports from the Senior Management team, as set
forth on Exhibit B. The Chief Executive Officer shall not
demote or discharge Xxxxxxx, unilaterally change the initially
agreed reporting relationships, or otherwise cause a material
adverse change to Xxxxxxx'x status without the agreement of
the Executive Committee of the Board of Directors. If Xxxxxxx
claims that any such change in his status has occurred, he
will be entitled to seek relief from the Executive Committee
of the Board of Directors. If the Executive Committee supports
Xxxxxxx'x position, it shall remedy the change in status. If
the Executive Committee does not support Xxxxxxx'x position,
he will be entitled to resign his employment and receive the
severance benefits described in paragraph 5(b) below.
2. Period of Employment; Termination of Agreement
The period of employment shall commence on the date of this Agreement
and, subject to the provisions of Paragraphs 5 and 6 below, shall
continue for a rolling three (3) year
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period, provided that Xxxxxxx'x employment may be earlier terminated by
either party subject to the rights and obligations of the parties set
forth herein.
3. Performance
Throughout the period of employment, Xxxxxxx agrees to devote his full
time and attention during normal business hours to the business of the
Company, except for earned vacations and except for illness or
incapacity.
4. Compensation
(a) For all services to be rendered by Xxxxxxx in any capacity
during the period of employment, Xxxxxxx shall be paid as
annual compensation a base salary of at least $600,000. The
Board will annually review Xxxxxxx'x annual compensation and
determine what is appropriate for a cost of living increase,
merit increase, and/or increase in responsibilities or duties.
(b) During the term of his employment hereunder, Xxxxxxx shall be
compensated for fiscal year 2000 (ending August 31, 2000) with
annual variable pay of the maximum level eligible of 90% of
his base salary. The long term variable pay including the
years 1999, 2000, and 2001 shall be at the targeted level of
66.6% of the bonus potential. Xxxxxxx shall further be
entitled to any additional employee benefits separately made
available to him from time to time by the Board in its
discretion.
(c) The Company shall bear such ordinary and necessary business
expenses incurred by Xxxxxxx in performing his duties
hereunder as the Company determines from time to time,
provided that Xxxxxxx accounts promptly for such expenses to
the Company in the manner prescribed from time to time by the
Company.
5. Termination with Severance Allowance
(a) Termination by the Company Not for Cause. In the event of
termination of the employment of Xxxxxxx by the Company during
the period of employment for any reason other than for cause,
as defined in paragraph 6(a), death or disability, the Company
shall:
(i) pay Xxxxxxx a severance allowance in the amount of 2.99
times the greater of
(A) his then-current base salary plus
short-term and long-term target bonus ("Target
Bonus"), or
(B) the amount payable in base salary plus
Target Bonus for calendar year 1999;
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(ii) provide a five-year enhancement to his retirement plan,
except that no such enhancement shall be provided if the
termination occurs after Xxxxxxx has attained the age of 60;
(iii) include the amount of the severance paid as salary for
purposes of pension cash balance calculation;
(iv) bear the entire cost of Xxxxxxx'x COBRA family health
insurance coverage for one (1) year;
(v) continue his family health insurance thereafter up to age
65 (or any revised age for Medicare eligibility), upon
Xxxxxxx'x payment of the retiree premium rate, except for any
period during which Xxxxxxx is eligible for coverage, without
any exclusions for preexisting conditions, through another
employee group plan; and
(vi) continue his existing executive perquisites for a period
of three (3) years.
Said severance allowance shall be in lieu of all other severance
payable to Xxxxxxx under Company severance policies.
(b) Termination by Xxxxxxx if the Consolidation is closed on or
before December 31, 2001. If the Consolidation is closed on or
before December 31, 2001; and if (i) Xxxxxxx is not appointed
to the position of Chief Executive Officer of the consolidated
Company or its successor on or before January 1, 2004, or (ii)
Xxxxxxx resigns his employment at any time between the closing
of the Consolidation and December 31, 2003 pursuant to
paragraph 1(b), the Company shall:
(i) pay Xxxxxxx a severance allowance in the amount of 2.99
times the greater of
(A) his then-current base salary plus Target Bonus,
or
(B) the amount payable in base salary plus Target
Bonus for calendar year 1999;
(ii) provide a five-year enhancement to his retirement plan,
except that no such enhancement shall be provided if the
termination occurs after Xxxxxxx has attained the age of 60;
(iii) include the amount of the severance paid as salary for
purposes of pension cash balance calculation;
(iv) bear the entire cost of Xxxxxxx'x COBRA family health
insurance coverage for one (1) year;
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(v) continue his family health insurance thereafter up to age
65 (or any revised age for Medicare eligibility), upon
Xxxxxxx'x payment of the retiree premium rate, except for any
period during which Xxxxxxx is eligible for coverage, without
any exclusions for preexisting conditions, through another
employee group plan; and
(vi) continue his existing executive perquisites for a period
of three (3) years.
Said severance allowance shall be in lieu of all other severance
payable to Xxxxxxx under Company severance policies.
(c) Termination by Xxxxxxx if the Consolidation is not closed on or
before December 31, 2000. If the Consolidation is not closed on or
before December 31, 2000 and Xxxxxxx is not offered the position of
Chief Executive Officer of the Company on or before December 31, 2000,
this shall be deemed an event of termination without cause. In that
event, the Company shall:
(i) pay Xxxxxxx a xxxxxxxxx allowance in the amount of 2.99
times the greater of
(A) his then-current base salary plus Target Bonus,
or
(B) the amount payable in base salary plus Target
Bonus for calendar year 1999;
(ii) provide a five-year enhancement to his retirement plan,
except that no such enhancement shall be provided if the
termination occurs after Xxxxxxx has attained the age of 60;
(iii) include the amount of the severance paid as salary for
purposes of pension cash balance calculation;
(iv) bear the entire cost of Xxxxxxx'x COBRA family health
insurance coverage for one (1) year;
(v) continue his family health insurance thereafter up to age
65 (or any revised age for Medicare eligibility), upon
Xxxxxxx'x payment of the retiree premium rate, except for any
period during which Xxxxxxx is eligible for coverage, without
any exclusions for preexisting conditions, through another
employee group plan; and
(vi) continue his existing executive perquisites for a period
of three (3) years.
Said severance allowance shall be in lieu of all other severance
payable to Xxxxxxx under Company severance policies.
(d) Additional Payments. In the event that Xxxxxxx becomes entitled to
payments under paragraph 5(a), 5(b), or 5(c) of this Agreement, the
Company shall cause its independent auditors promptly to review, at the
Company's sole expense, the applicability
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of Section 4999 of the Code to such payments. If such auditors shall
determine that any payment or distribution of any type by the Company
to Xxxxxxx or for his benefit, whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise
(the "Total Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties with respect to
such excise tax (such excise tax, together with any such interest and
penalties, are collectively referred to as the "Excise Tax"), then
Xxxxxxx shall be entitled to receive an additional cash payment (a
"Gross-Up Payment") within 30 days of such determination equal to an
amount such that after payment by Xxxxxxx of all taxes (including any
interest or penalties imposed with respect to such taxes), including
any Excise Tax, imposed upon the Gross-Up Payment, Xxxxxxx would retain
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Total Payments. For purposes of the foregoing determination,
Xxxxxxx'x tax rate shall be deemed to be the highest statutory marginal
state and Federal tax rate (on a combined basis) (including Xxxxxxx'x
share of F.I.C.A. and Medicare taxes) then in effect. If no
determination by the Company's auditors is made prior to the time a tax
return reflecting the Total Payments is required to be filed by
Xxxxxxx, he will be entitled to receive a Gross-Up Payment calculated
on the basis of the Total Payments reported by Xxxxxxx in such tax
return, within 30 days of the filing of such tax return. In all events,
if any tax authority determines that a greater Excise Tax should be
imposed upon the Total Payments than is determined by the Company's
independent auditors or reflected in Xxxxxxx'x tax return pursuant to
this Section 6, Xxxxxxx shall be entitled to receive the full Gross-Up
Payment calculated on the basis of the amount of Excise Tax determined
to be payable by such tax authority from the Company within 30 days of
such determination.
(e) Request and Release. In order to obtain the severance allowance
provided for in this Agreement, Xxxxxxx must submit a request for
severance and must sign a complete release of all claims. The Company
shall have no obligation to pay any severance allowance unless and
until Xxxxxxx shall have submitted the request for severance and signed
a full and complete release of all claims, to be drafted by Legal
Counsel for the Company.
6. Termination without Severance Allowance
(a) Termination by the Company for Cause. The Company may
terminate Xxxxxxx'x employment for cause without incurring
further obligation. For the purpose of this Agreement,
termination of Xxxxxxx'x employment shall be deemed to have
been for cause only:
(i) if termination of Xxxxxxx'x employment shall have
been the result of an act or acts of fraud, theft or
embezzlement on the part of Xxxxxxx which, if
convicted, would constitute a felony and which
results or which is intended to result directly or
indirectly in gain or personal enrichment of Xxxxxxx
at the expense of the Company; or
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(ii) if termination of Xxxxxxx'x employment results from
Xxxxxxx'x willful and material misconduct, including
willful and material failure to perform his duties,
and Xxxxxxx has been given written notice by the
Board of Directors with respect to such and Xxxxxxx
does not cure within a reasonable time; or
(iii) if there has been a breach by Xxxxxxx during the
period of employment of the provisions of Paragraph 3
above, relating to the time to be devoted to the
affairs of the Company, and with respect to any
alleged breach of Paragraph 3 hereof, Xxxxxxx shall
have substantially failed to remedy such alleged
breach within thirty days from Xxxxxxx'x receipt of
notice from the Board of Directors.
(b) Nonrenewal of Agreement. Except as otherwise provided in
paragraph 5(b) and/or 5(c) above, the Company may elect not to
renew this Agreement, and thereby to terminate Xxxxxxx'x
employment hereunder without any severance obligations, upon
at least three (3) years' prior written notice to Xxxxxxx.
(c) Termination by Xxxxxxx. Xxxxxxx shall have the right to
terminate his employment in his sole discretion, with or
without cause, by providing thirty (30) days notice of his
intent to resign. Except as otherwise provided in paragraph
5(b) and/or 5(c) above, Xxxxxxx shall in that event receive no
further compensation or severance allowance.
(d) Death. In the event of Xxxxxxx'x death during the period of
employment, the legal representative of Xxxxxxx shall be
entitled to the base or fixed salary provided for in Paragraph
4(a) above for the month in which death shall have occurred,
at the rate being paid at the time of death, and the period of
employment shall be deemed to have ended as of the close of
business on the last day of the month in which death shall
have occurred but without prejudice to any benefits, such as
life insurance, otherwise due in respect of Xxxxxxx'x death.
(e) Disability
(i) In the event of Xxxxxxx'x disability during the
period of employment, Xxxxxxx shall be entitled to an
amount equal to the base or fixed salary provided for
in Paragraph 4(a) above, at the rate being paid at
the time of the commencement of disability, for the
period of such disability but not in excess of twelve
(12) months from the beginning of the period that
establishes such disability, as described in
Paragraph 6(e)(iii) below.
(ii) The amount of any payments due under Paragraph
6(e)(i) shall be reduced by any payments to which
Xxxxxxx may be entitled for the same period because
of disability under any disability or pension plan of
the Company or of any division, subsidiary, or
affiliate thereof, or as the result of
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workers' compensation or nonoccupational disability
payments received from any government entity.
(iii) The term "Disability" as used in this Agreement,
shall mean an illness or accident occurring during
the period of employment which prevents Xxxxxxx from
performing the essential functions of his job under
this Agreement, with reasonable accommodations (as
defined by federal and Minnesota disability laws),
for a period of six consecutive months. The period of
employment shall be deemed to have ended as of the
close of business on the last day of such six-month
period but without prejudice to any payments due
Xxxxxxx from any disability policy or disability
insurance.
7. Performance Incentive
If the Company and Farmland Industries, Inc. complete the Consolidation
prior to December 31, 2001, and Xxxxxxx has not by then resigned or
been terminated for cause, Xxxxxxx shall become eligible to receive a
Performance Incentive payment in an aggregate amount equal to his base
salary plus short-term and long-term target bonus for calendar year
1999. The Performance Incentive shall be payable, in part or in whole,
upon attainment of the objectives set forth in Exhibit A.
8. Noncompetition
Xxxxxxx agrees that during the term of his employment and thereafter
for a period of two (2) years, he 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, Xxxxxxx 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.
9. Successor in Interest
This Agreement and the rights and obligations hereunder shall be
binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, and shall also bind and inure to the
benefit of any successor of the Company by merger or consolidation or
any purchaser or assignee of all or substantially all of its assets,
but, except to any such successor, purchaser, or assignee of the
Company, neither this Agreement nor any rights or benefits hereunder
may be assigned by either party hereto.
10. Construction
Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective
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only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining
provisions of this Agreement.
11. Governing Laws
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Minnesota.
12. Notices
Any notice required or permitted to be given under this Agreement shall
be sufficient if in writing, sent by Certified Mail, Return Receipt
Requested:
If to Xxxxxxx: Xxxx X. Xxxxxxx
00 Xxxx Xxxx Xxxx.
Xxxxxxxxx, XX 00000
If to the Company: Chairman of the Board
Cenex Harvest States Cooperatives
0000 XXXXX Xxxxx
Xxxxx Xxxxx Xxxxxxx, XX 00000
With a copy to: General Counsel
Cenex Harvest States Cooperatives
0000 XXXXX Xxxxx
Xxxxx Xxxxx Xxxxxxx, XX 00000
13. Entire Agreement
This Agreement shall constitute the entire agreement between the
parties, superseding the parties' Agreement of June 16, 1999 and any
prior agreements. This Agreement may not be modified or amended, and no
waiver shall be effective, unless by written document signed by the
Chairman of the Board and Xxxxxxx.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date set forth above.
CENEX HARVEST STATES COOPERATIVES
/s/ Xxxx X. Xxxxxxx By: /s/ Xxxxxx Xxxxxx
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Xxxx X. Xxxxxxx
Its: Chairman of the Board
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