CONSULTING AND NON-COMPETITION AGREEMENT
Exhibit 10.1
CONSULTING AND NON-COMPETITION AGREEMENT
This Consulting and Non-Competition Agreement (“Agreement”) is made and entered into this 1st day of April, 2008 by and between Xxxxxxx X. Xxxxx, an individual (hereinafter “Consultant”), and Terra Industries Inc., a Maryland corporation, having offices at 000 Xxxxxx Xxxxxx, Xxxxx Xxxx, Xxxx 00000, and its subsidiaries (hereinafter referred to collectively as “Terra”).
NOW, THEREFORE, the parties mutually agree as follows:
1. | Appointment. Pursuant to the terms of this Agreement, Terra hereby retains Consultant to provide
consulting services as specified from time to time throughout the term hereof. The term of this Agreement (the
“Initial Consulting Term”) shall commence on April 5, 2008 and, unless sooner terminated pursuant to
Section 4 hereof, shall expire on April 5, 2009. The Initial Consulting Term may be extended by mutual written
agreement between Terra and Consultant, with any such extension beyond April 5, 2009 referred to as the
“Extended Consulting Term.” The Initial Consulting Term and any Extended Consulting Term shall be
referred to collectively as the “Consulting Term.” Consultant shall report to Terra’s Chief Executive
Officer or to such other person designated by Terra’s Chief Executive Officer. Terra’s Chief Executive Officer,
or his designee, shall determine and communicate to Consultant all consulting priorities, duties and reporting
responsibilities. The nature and duration of duties assigned to Consultant hereunder shall vary. |
2. |
a. | Terra shall pay Consultant $1,400 per day worked during the Initial Consulting Term (the
“Daily Consulting Fee”), plus expenses, as provided in Section 3. Except as set forth in
Section 4, regardless of the number of days actually worked during the Initial Consulting Term, the
Consultant shall be entitled to a minimum aggregate payment of $50,400 (“Minimum Consulting
Fee”) for consulting services during the Initial Consulting Term. Consultant shall xxxx Terra
monthly for his services and expenses. Terra shall pay Consultant within 15 days of receipt of
Consultant’s xxxx, provided that, in order for the full amount of the Minimum Consulting Fee to be
considered a short-term deferral for purposes of Section 409A of the Internal Revenue Code of 1986, as
amended (the “Section 409A”), the Minimum Consulting Fee shall be paid to Consultant in full on
or prior to March 15, 2009, even if Consultant works fewer than 36 days prior to March 15, 2009.
Notwithstanding the payment of any unearned portion of the Minimum Consulting Fee on March 15, 2009,
Consultant will be required to continue to perform consulting services, as needed, through April 5, 2009
pursuant to this Agreement, and will be paid the Daily Consulting Fee for each day of such services to
the extent that the aggregate number of days during the Initial Consulting Term on which Consultant has
provided consulting services exceeds 36 days. |
b. | Consultant’s daily rate for consulting services during the Extended Consulting Term, if any,
shall be mutually agreed and Consultant shall have no guaranteed minimum fee unless specifically
negotiated. |
3. | Travel Approval and Expenses. All travel or other expenses undertaken by Consultant pursuant to this
Agreement must be authorized in advance by Terra. Terra shall reimburse Consultant for all reasonable expenses
incurred by Consultant. Terra’s Administrative Policy Manual shall govern all aspects of Consultant’s undertaking
and reimbursement of travel expenses. |
4. |
a. | Unless the parties mutually agree in writing to extend this Agreement following expiration of
the Initial Consulting Term on terms and conditions mutually agreed to at such time, this Agreement will
automatically terminate upon expiration of the Initial Consulting Term. Moreover, either party may
terminate this Agreement prior to the expiration of the Initial Consulting Term on 10 days’ written
notice to the other party, provided that if Consultant terminates this Agreement prior to the expiration
of the Initial Consulting Term for reasons other than death or Disability (as defined in the Employment
Severance Agreement between Terra and Consultant, dated October 5, 2006 (the “Employment Severance
Agreement”)), all unvested Restricted Stock Awards and Performance Share Awards shall be immediately
forfeited. |
b. | If this Agreement is terminated prior to March 15, 2009 by Consultant, other than as a result
of death or Disability, Terra shall make a lump sum payment to Consultant equal to the excess, if any,
of (i) the product of (A) three multiplied by the number of full months that have passed since the first
day of the Initial Consulting Term and (B) $1,400, over (ii) the aggregate of all Daily Consulting Fees
earned by and paid to Consultant prior to the date of termination, any such payment to be paid not later
than March 15, 2009. |
c. | If this Agreement is terminated prior to March 15, 2009 by Terra for any reason other than
Cause (as defined in the Employment Severance Agreement) or as a result of Consultant’s death or
Disability, Terra will make a lump sum payment to Consultant equal to either (i) the amount of any
unpaid portion of the Minimum Consulting Fee plus any unpaid Daily Consulting Fees earned for services
in excess of 36 days during the Initial Consulting Term or (ii) if the full amount of the Minimum
Consulting Fee has already been paid prior to the date of termination, the amount of any unpaid Daily
Consulting Fees earned as of the date of termination. In the case of the immediately preceding
sentence, any unpaid portion of the Minimum Consulting Fee will be paid not later than March 15, 2009,
and any additional unpaid Daily Consulting Fees for services in excess of 36 days during the Initial
Consulting Term will be paid not later than 15 days of Terra’s receipt of Consultant’s xxxx for such
services. |
Page 2 of 10
d. | If this Agreement is terminated prior to the expiration of the Initial Consulting Term by
Terra for Cause, Terra will have no obligation to make any further payments to Consultant hereunder,
other than with respect to Daily Consulting Fees earned by Consultant prior to the date of termination
and for any expenses incurred in accordance with Section 3. The amount of any earned Daily Consulting
Fees up to the Minimum Consulting Fee will be paid to Consultant not later than March 15, 2009, and any
additional unpaid Daily Consulting Fees for services in excess of 36 days during the Initial Consulting
Term will be paid not later than 15 days of Terra’s receipt of Consultant’s xxxx for such services. |
5. | Work Product. All work product generated by Consultant as a result of his activities hereunder shall be
the sole and exclusive property of Terra, and Consultant shall endeavor to take all appropriate action to ensure
Terra obtains the sole benefit therefrom. |
6. |
a. | It is understood by the parties hereto that Consultant shall at all times during the Initial
Consulting Term and any Extended Consulting Term be an independent contractor with respect to Terra and
there shall not be implied any relationship of employer-employee, partnership, joint venture, principal
and agent or the like by the agreements contained herein. Consultant shall not be entitled to
participate in any employee benefit plans or other benefits or conditions of employment available to the
employees of Terra and its affiliates. |
b. | Consultant shall not have any authority to act as an agent of Terra and its affiliates,
except on authority specifically so delegated in a prior writing from Terra’s Chief Executive Officer,
and he shall not represent to the contrary to any person. Under no circumstances shall Consultant have
or claim to have power of decision hereunder in any activity on behalf of Terra, nor shall Consultant
have the power or authority hereunder to obligate, bind or commit Terra in any respect. Consultant
shall not (i) direct the work of any employee of Terra, (ii) make any management decisions on behalf of
Terra or (iii) undertake to commit Terra to any course of action in relation to third persons. Although
Terra may specify the results to be achieved by Consultant and may control and direct him in that
regard, Terra shall not exercise or have the power to exercise such level of control over Consultant as
would indicate or establish that a relationship of employer and employee exists between Terra and
Consultant. Subject to the terms of the Agreement, Consultant shall have full and complete control over
the manner and method of rendering consulting services hereunder. |
c. | To the extent consistent with applicable law, Terra shall not withhold or deduct from any
amounts payable under this Agreement any amount or amounts in respect of income taxes or other
employment taxes of any other nature on behalf of Consultant. Consultant shall be solely responsible
for the payment of any Federal, state, local or other income and/or self-employment taxes in respect of
the amounts payable to Consultant under this Agreement and shall hold Terra and its affiliates and their
officers, directors and employees harmless from any liability arising from Consultant’s failure to
comply with the foregoing provisions of this sentence. |
Page 3 of 10
7. |
a. | Section 7 of the Employment Severance Agreement shall remain in effect and the term
“Confidential Information” shall have the meaning set forth in Section 7 of the Employment
Severance Agreement. |
b. | Consultant agrees that upon the expiration of the Consulting Term, upon Terra’s request, he
shall promptly return all of the Confidential Information which may be in writing or other concrete
form, including any drafts, working documents or reports containing Confidential Information. |
8. |
a. | Consultant agrees that Consultant shall not, without the prior written consent of Terra, from
April 5, 2008 through July 26, 2010 (such period, the “Restriction Period”), directly or
indirectly (other than in Consultant’s capacity as a consultant of Terra): |
(i) | engage in any activity or business, or establish any new business that is in
competition with Terra or its affiliates (such activity or business, a “Competitive
Activity”), including (A) operating, attempting to operate or participating in the operation of
a business relating to the production and marketing of nitrogen products; (B) soliciting or
attempting to solicit any customer or client or prospective customer or client of Terra or any of
its affiliates (including, without limitation, actively sought prospective customers or clients),
to purchase any goods or services of the type sold by Terra or any of affiliates from anyone other
than Terra or its affiliates; and (C) assisting any Person in any way to do, or attempt to do,
anything prohibited by (A) or (B) above; or |
(ii) | (A) solicit, recruit or hire, any person who is at such time, or who at any time
during the six-month period prior to such solicitation or hiring had been, an employee of, or
exclusive consultant then under contract with, Terra or its affiliates, without Terra’s prior
written consent; (B) solicit or encourage any employee of Terra or its affiliates to leave the
employment of Terra or its affiliates; or (C) intentionally interfere with the relationship of
Terra or any of its affiliates with any person or entity who or which is employed by or otherwise
engaged to perform services for Terra or any such affiliate. |
The Restriction Period shall be deemed automatically extended for a period equal to any period during which Consultant is in violation of the provisions of this Section 8(a).
b. | Notwithstanding anything to the contrary contained in this Agreement, Consultant’s passive
ownership of less than an aggregate of 2% of any class of stock of an entity engaged, directly or
indirectly, in Competitive Activities will not be deemed to result in a breach of Section 8(a), provided
that such stock is listed on a national securities exchange or is quoted on the National Market System
of NASDAQ. |
c. | If a final and non-appealable judicial determination is made that any of the provisions of
this Section 8 constitutes an unreasonable or otherwise unenforceable restriction against Consultant,
the provisions of this Section 8 will not be rendered void but will be deemed to be modified to the
minimum extent necessary to remain in force and effect for the greatest period and to the greatest
extent that such court determines constitutes a reasonable restriction under the circumstances.
Moreover, notwithstanding the fact that any provision of this Section 8 is determined not to be
specifically enforceable, Terra will nevertheless be entitled to recover monetary damages as a result of
Consultant’s breach of such provision. |
Page 4 of 10
9. |
a. | Consultant acknowledges that Terra and its affiliates have expended and shall continue to
expend substantial amounts of time, money and effort to develop business strategies, employee and
customer relationships and goodwill to build an effective organization. Consultant acknowledges that
Terra has a legitimate business interest and right in protecting its Confidential Information, goodwill,
employee and customer relationships, and that Terra would be seriously damaged by the disclosure of
Confidential Information and the loss or deterioration of its customer and employee relationships.
Consultant further acknowledges that Terra and its affiliates are entitled to protect and preserve the
going concern value of Terra to the extent permitted by law. |
b. | In light of the foregoing acknowledgments, Consultant agrees that the covenants contained in
Sections 7 and 8 are reasonable and properly required for the adequate protection of the businesses and
goodwill of Terra and its affiliates. Consultant further acknowledges that, although Consultant’s
compliance with the covenants contained in Sections 7 and 8 may prevent Consultant from earning a
livelihood in a business similar to the business of Terra, Consultant’s experience and capabilities are
such that Consultant has other opportunities to earn a livelihood and adequate means of support for
Consultant and Consultant’s dependents. |
10. | Restricted Stock Awards and Performance Share Awards. Consultant currently holds shares of Terra common
stock that are subject to vesting conditions (“Restricted Stock Awards”) and performance share awards
entitling Consultant to delivery of shares of Terra common stock upon satisfaction of performance goals
(“Performance Share Awards”), in each case that were granted under the Terra Industries Inc. Stock
Incentive Plan of 2002 and are governed by an award agreement. Subject to the terms and conditions of this
Section 10, in consideration for (a) the consulting services to be provided by Consultant, and with the
expectation that Consultant will provide substantial consulting services to Terra during the Consulting Term, and
(b) for Consultant’s compliance with the obligations set forth in Sections 7 and 8, Consultant’s outstanding
Restricted Stock Awards and Performance Share Awards will remain outstanding following April 4, 2008 and available
for vesting according to the terms of the corresponding award agreements as if Consultant had remained employed
through the end of the Restriction Period. For the avoidance of doubt, the terms and conditions of the Restricted
Stock Awards and Performance Share Awards relating to death, Disability, Change in Control and satisfaction of
performance goals, as set forth in the applicable award agreements, will continue to apply during the Restriction
Period. Notwithstanding any provision of this Agreement or any other agreement between Consultant and Terra to
the contrary, in the event that this Agreement is terminated prior to the expiration of the Initial Consulting
Term pursuant to Section 4(b) or 4(d) or in the event of Consultant’s breach of any of the covenants set forth in
Section 7 or 8 herein, as determined by Terra’s Board of Directors in its sole discretion, any Restricted Stock
Awards or Performance Share Awards that are unvested as of such time shall be immediately forfeited, and
Consultant shall be entitled to no further payments or benefits with respect thereto. |
Page 5 of 10
11. | Indemnity. Terra shall defend, indemnify and hold harmless Consultant from and against any and all
suits, claims, causes of action, damages, losses, liabilities, obligations, costs or expenses (including
reasonable attorneys’ fees) incurred by or asserted against Consultant arising out of, relating to, or otherwise
resulting in whole or in part from any of the services or other activities performed by Consultant for Terra under
this Agreement, excluding those arising out of the willful acts or omissions by, or gross negligence of,
Consultant. |
12. | Cooperation. Consultant agrees that, upon reasonable notice and without the necessity of Terra’s
obtaining a subpoena or court order, Consultant shall provide reasonable cooperation in connection with any suit,
action or proceeding (or any appeal from any suit, action or proceeding), and any investigation and/or defense of
any claims asserted against Terra or any of its affiliates, that relates to events occurring during the Consulting
Term as to which Consultant may have relevant information (including but not limited to furnishing relevant
information and materials to Terra or its designee and/or providing testimony at depositions and at trial),
provided that Terra shall reimburse Consultant for expenses reasonably incurred in connection with any such
cooperation occurring after termination or expiration of the Consulting Term, and provided that any such
cooperation occurring after the termination or expiration of the Consulting Term shall be scheduled to the extent
reasonably practicable so as not to unreasonably interfere with Consultant’s business or personal affairs. |
13. |
a. | It is intended that the provisions of this Agreement comply with Section 409A, and all
provisions of this Agreement shall be construed and interpreted in a manner consistent with the
requirements for avoiding taxes or penalties under Section 409A. |
b. | Neither Consultant nor any of Consultant’s creditors or beneficiaries shall have the right to
subject any deferred compensation (within the meaning of Section 409A) payable under this Agreement or
under any other plan, policy, arrangement or agreement of or with Terra or any of its affiliates (this
Agreement and such other plans, policies, arrangements and agreements, the “Company Plans”) to
any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or
garnishment. Except as permitted under Section 409A, any deferred compensation (within the meaning of
Section 409A) payable to Consultant or for Consultant’s benefit under this Agreement may not be reduced
by, or offset against, any amount owing by Consultant to Terra or any of its affiliates. |
c. | Notwithstanding any provision of this Agreement or any Company Plan to the contrary, in light
of the uncertainty with respect to the proper application of Section 409A, Terra reserves the right to
make amendments to any Company Plan as Xxxxx xxxxx necessary or desirable to avoid the imposition of
taxes or penalties under Section 409A. In any case, Consultant shall be solely responsible and liable
for the satisfaction of all taxes and penalties that may be imposed on Consultant or for Consultant’s
account in connection with any Company Plan (including any taxes and penalties under Section 409A), and
neither Terra nor any of its affiliates shall have any obligation to indemnify or otherwise hold
Consultant harmless from any or all of such taxes or penalties. |
Page 6 of 10
14. |
a. | This Agreement is personal to Consultant and, without the prior written consent of Terra,
shall not be assignable by Consultant otherwise than by will or the laws of descent and distribution,
and any assignment in violation of this Agreement shall be void. |
b. | Notwithstanding the foregoing Section 14(a), this Agreement and all rights of Consultant
hereunder shall inure to the benefit of and be enforceable by Consultant’s personal or legal
representatives, executors, administrators, successors, heirs, devisees and legatees. If Consultant
should die while any amounts would still be payable to him hereunder if he had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Consultant’s devisee, legatee or other designee or, should there be no such designee, to
Consultant’s estate. |
c. | Terra shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or assets of Terra (a
“Successor”) to assume and agree to perform this Agreement in the same manner and to the same
extent that Terra would have been required to perform it if no such succession had taken place. As used
in this Agreement, the term “Terra” shall mean Terra as hereinbefore defined, any Successor and any
permitted assignee to which this Agreement is assigned. |
15. |
a. | This Agreement shall be governed by and construed in accordance with the laws of the State of
Iowa, without regard to the conflicts of law principles thereof. No provision of this Agreement or any
related document shall be construed against or interpreted to the disadvantage of any party hereto by
any court or other governmental or judicial authority by reason of such party’s having or being deemed
to have structured or drafted such provision. |
b. | Each party irrevocably and unconditionally submits to the exclusive jurisdiction and venue of
the United States District Court for the Northern District of Iowa (or, if subject matter jurisdiction
in that court is not available, in any state court located within the city of Sioux City, Iowa) for the
purposes of any suit, action or other proceeding arising out of this Agreement. Except as otherwise
specifically provided in this Agreement, the parties undertake not to commence any suit, action or
proceeding arising out of or relating to this Agreement in a forum other than a forum described in this
Section 15(b); provided, however, that nothing herein shall preclude Terra or Consultant
from bringing any suit, action or proceeding in any other court for the purposes of enforcing the
provisions of this Section 15(b) or enforcing any judgment obtained by Terra or Consultant. |
c. | The agreement of the parties to the forum described in Section 15(b) is independent of the
law that may be applied in any suit, action or proceeding and the parties agree to such forum even if
such forum may under applicable law choose to apply non-forum law. The parties hereby waive, to the
fullest extent permitted by applicable law, any objection that they now or hereafter have to personal
jurisdiction or to the laying of venue of any such suit, action or proceeding brought in an applicable
court described in this Section, and the parties agree that they shall not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such court. The parties agree
that, to the fullest extent permitted by applicable law, a final and non-appealable judgment in any
suit, action or proceeding brought in any applicable court described in Section 15(b) shall be
conclusive and binding upon the parties and may be enforced in any other jurisdiction. |
Page 7 of 10
d. | The parties hereto irrevocably consent to the service of any and all process in any suit,
action or proceeding arising out of or relating to this Agreement by the mailing of copies of such
process to such party at such party’s address specified in Section 20. |
e. | Each party hereto hereby waives, to the fullest extent permitted by applicable law, any right
it may have to a trial by jury in respect of any suit, action or proceeding arising out of or relating
to this Agreement. Each party (i) certifies that no representative, agent or attorney of any other
party has represented, expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other parties
hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and
certifications in this Section 15(c). |
f. | Each party shall bear its own costs and expenses (including reasonable attorneys’ fees and
expenses) incurred in connection with any dispute arising out of or relating to this Agreement. |
16. | Entire Agreement; Termination of Employment Severance Agreement. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained herein and, except as explicitly stated
herein, supersedes all prior agreements, promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative of any party hereto. None of the
parties shall be liable or bound to any other party in any manner by any representations and warranties or
covenants relating to such subject matter except as specifically set forth herein. Effective upon Consultant’s
retirement from Terra, the Employment Severance Agreement is superseded and replaced, except that the following
Sections will survive termination of the Employment Severance Agreement: Section 5 (Certain Additional Payments by
the Company), Section 6 (Noncompetition and Nonsolicitation), Section 7 (Nondisclosure of Confidential
Information), Section 11 (Cooperation) and Section 15 (Dispute Resolution). |
17. | Amendment; No Waiver. Except as set forth in Section 13, no provisions of this Agreement may be amended,
modified, waived or discharged except by a written document signed by Consultant and a duly authorized officer of
Terra. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall
not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement. No failure or delay by either party in
exercising any right or power hereunder will operate as a waiver thereof, nor will any single or partial exercise
of any such right or power, or any abandonment of any steps to enforce such right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have been made by either party, which are
not set forth expressly in this Agreement. |
Page 8 of 10
18. | Severability. If any term or provision of this Agreement is invalid, illegal or incapable of being
enforced by any applicable law or public policy, all other conditions and provisions of this Agreement shall
nonetheless remain in full force and effect so long as the economic and legal substance of the transactions
contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon any such
determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties
as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible. |
19. | Survival. The rights and obligations of the parties under the provisions of this Agreement, including,
without limitation, Sections 7, 8 and 15, shall survive and remain binding and enforceable, notwithstanding the
expiration of the Initial Consulting Term and any Extended Consulting Term, the termination of this Agreement, the
termination of Consultant’s services with Terra for any reason or any settlement of the financial rights and
obligations arising from Consultant’s services hereunder, to the extent necessary to preserve the intended
benefits of such provisions. |
20. | Notices. All notices or other communications required or permitted by this Agreement will be made in
writing and all such notices or communications will be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows: |
If to Terra: |
Attention: General Counsel Fax: (000) 000-0000 |
If to Consultant: | Xxxxxxx X. Xxxxx E 0000 000xx Xxx. Xxxxxxxxx, XX 00000 |
or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
21. | Headings and References. The headings of this Agreement are inserted for convenience only and neither
constitute a part of this Agreement nor affect in any way the meaning or interpretation of this Agreement. When a
reference in this Agreement is made to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. |
Page 9 of 10
22. | Counterpart. This Agreement may be executed in one or more counterparts (including via facsimile), each
of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument
and shall become effective when one or more counterparts have been signed by each of the parties and delivered to
the other party. |
23. | Construction. For purposes of this Agreement, the words “include” and “including”, and variations
thereof, shall not be deemed to be terms of limitation but rather shall be deemed to be followed by the words
“without limitation”. The term “or” is not exclusive. The word “extent” in the phrase “to the extent” shall mean
the degree to which a subject or other thing extends, and such phrase shall not simply mean if. |
In recognition whereof, the parties hereto do affix their signatures on this 1st day of April, 2008.
Consultant | ||
By: /s/ Xxxxxxx X. Xxxxxxx
|
/s/ Xxxxxxx X. Xxxxx | |
Name: Xxxxxxx X. Xxxxxxx
|
Xxxxxxx X. Xxxxx | |
Title: President and Chief Executive Officer
|
Page 10 of 10