EMPLOYMENT AGREEMENT
THIS AGREEMENT is made between Farmland Industries, Inc. ("Farmland"), with
its principal place of business at 3315 North Oak Trafficway, Kansas City,
Missouri 64116, and William Fielding ("Fielding").
WHEREAS, Fielding and Farmland desire and agree to enter into an employment
relationship by means of this Employment Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is mutually covenanted and
agreed by and between the parties as follows:
1. POSITION AND TERM. Farmland hereby employs Fielding to serve as the
managing executive of Farmland Foods, Inc. ("Foods") and to provide executive
management to its Livestock Production business unit, catfish operations and
Farmland National Beef L.P. ("FNB"). Farmland shall employ Fielding and
Fielding agrees to remain employed under the terms of this Agreement for an
initial period commencing on February 1, 2000 and ending on
August 31, 2004. The parties may provide for one or more extensions of this
Agreement through written amendments. The period of Fielding's employment,
including any extensions, shall be referred to as the "Employment Period".
Fielding will devote his best efforts to Farmland and shall perform the duties
of the position outlined herein and such other duties as may be reasonably
assigned by Farmland. While it is understood and agreed that Fielding's job
capacities may change at Farmland's discretion, Fielding's level of
responsibility shall not be substantially reduced at any time. Fielding shall
not, without the prior written consent of Farmland, render services of a
business, professional, or commercial nature to any other person or firm,
whether for compensation or otherwise during the Employment Period.
2. EMPLOYMENT AT WILL. The parties acknowledge this Employment Agreement
does not create any obligation on Fielding's part to work for Farmland nor on
Farmland's part to employ Fielding for any fixed period of time and that this
Employment Agreement may be terminated at any time with or without cause.
3. EARLY TERMINATION.
(a)DEATH. Fielding's employment shall terminate upon his death.
(b) TERMINATION BY THE COMPANY
(i)WITHOUT CAUSE. Farmland may terminate Fielding's employment, at
any time and for any reason whatsoever, without cause, effective
upon delivery of written notice of termination to Fielding.
(ii) FOR CAUSE. Farmland may terminate Fielding's employment at any
time for Cause, effective upon delivery of written notice of
termination to Fielding. If such termination by Farmland is
asserted to be for Cause, such termination notice shall state the
grounds constituting Cause. As used herein, "Cause" shall mean:
(a) willful misconduct by Fielding which is damaging or detrimental
to the business and affairs of Farmland, monetarily or otherwise,
as determined by the Chief Executive Officer in the exercise of
good faith business judgment; (b) a material breach of this
Employment Agreement by Fielding which is not "cured" by Fielding
following at least thirty (30) days' written notice of such breach;
(c)gross negligence in the execution of his material assigned
duties; (d) the commission by Fielding of any act involving fraud,
dishonesty or moral turpitude; (e) the indictment for, being bound
over for trial following preliminary hearing, or the conviction of
Fielding of any felony in either a state or federal court
proceeding; or (f) failure to reasonably perform his duties and
obligations or to implement policies and directions promulgated by
Farmland following at least thirty (30) days' written notice of
such failure.
(iii) DISABILITY. Farmland may terminate Fielding's employment if
Fielding sustains a disability which is serious enough that
Fielding is not able to perform the essential functions of his
position, with or without reasonable accommodations, as defined and
if required by applicable state and federal disability laws.
Fielding shall be presumed to have such a disability if he
qualifies to begin receiving disability income insurance payments
under any applicable Long Term Disability Income plan. Further,
Fielding shall be presumed to have such a disability if he is
substantially incapable of performing his duties for a period of
more than twelve (12) weeks.
(c) TERMINATION BY FIELDING
(i)VOLUNTARY RESIGNATION. Fielding may terminate his employment at
any time and for any reason whatsoever, effective upon delivery of
written notice of termination to Farmland.
(ii) "GOOD REASON" RESIGNATION. Fielding may terminate this contract
and his employment for "Good Reason" following at least thirty (30)
days' written notice of the asserted "Good Reason" to Farmland, if
such "Good Reason" is not then "cured" by Farmland. If such
termination by Fielding is asserted to be for "Good Reason", such
termination shall state the grounds that Fielding claims
constitutes Good Reason. As used herein, "Good Reason" shall mean
a material breach of this Employment Agreement by Farmland, or a
demotion such that Fielding does not serve in substantially the
capacity described herein, or Farmland's forcing of a change in the
basic strategic direction previously discussed.
4. COMPENSATION.
(a)BASE SALARY. During his employment, Farmland shall pay Fielding
an initial "Base Salary" at the rate of Three Hundred Fifty
Thousand Dollars ($350,000) per year, commencing on the effective
date of this Employment Agreement, payable in accordance with
Farmland's regular payroll practices and policies. Farmland shall
annually review the amount of Base Salary. Any upward adjustment
shall not require a written amendment to this Employment Agreement,
which shall remain in effect unless changed by a written amendment.
(b) LUMP SUM PAYMENT. As an inducement to join Farmland and in lieu
of moving allowances and expense reimbursements, Farmland shall
make a one-time lump sum payment of Three Hundred Seventy-Five
Thousand Dollars ($375,000) to Fielding on or before February 1,
2000. If Fielding's employment is terminated under Paragraph
3(b)(ii) or 3(c)(i) on or before February 1, 2001, Fielding shall
be obligated to repay Farmland Two Hundred Seventy-Five Thousand
Dollars ($275,000) of such sum within thirty (30) days of such
termination. If Fielding's employment is terminated under
Paragraph 3(b)(i) on or before February 1, 2001, Fielding shall be
entitled to retain a pro-rated portion of the Two Hundred Seventy-
Five Thousand Dollars ($275,000) based on the percentage of one
year during which Fielding was employed by Farmland and he shall be
obligated to repay Farmland the remainder of said amount.
(c) ANNUAL VARIABLE COMPENSATION. Fielding shall be eligible for
annual variable compensation for each full fiscal year during which
he is employed. Such annual variable compensation shall be based
on the pre-tax earnings of Foods to the extent such earnings exceed
an applicable "base level" of earnings. Such "base level" shall be
as set forth below, but in each year shall be subject to adjustment
based on: (a) annual Capital Expenditures above or below the level
of annual depreciation of Foods' assets (the adjustment shall
provide Farmland a rate of return on such invested capital based on
its assumed cost of capital - 14%); (b) significant events outside
the contemplation of the Business Plan such as material
acquisitions and other extraordinary events or circumstances; and
(c) any other equitable factors as agreed to by the parties.
The base level for FY 2001 (the "FY 2001 Base Level"), before
adjustments, shall be the average annual pre-tax earnings of
Farmland Foods for FY 1998, FY 1999 and FY 2000. The base level
for FY 2002 (the "FY 2002 Base Level"), before adjustments, shall
be the FY 2001 Base Level, as adjusted, plus $15 million. The base
level for FY 2003 (the "FY 2003 Base Level"), before adjustments,
shall be the FY 2002 Base Level, as adjusted, plus $15 million.
The base level for FY 2004 (the "FY 2004 Base Level"), before
adjustments, shall be the FY 2003 Base Level, as adjusted, plus $10
million.
For each fiscal year, Fielding shall be eligible for an annual
variable compensation payment equal to 10% of Foods' pre-tax
earnings to the extent such earnings exceed the applicable Base
Level, but subject to a cap (the "Earnings Cap") on the amount of
such excess pre-tax earnings which shall be considered. (The
applicable Earnings Cap on Foods' excess pre-tax earnings shall be
as follows:
FY 2001 - $15 million
FY 2002 - $15 million
FY 2003 - $10 million
FY 2004 - $10 million
Thus, in FY 2001, Fielding could earn up to $1.5 million in annual
variable compensation ($15 million x 10%).(For example, if Foods
pre-tax earnings in FY 2001 exceed the Base Level by $5.0 million,
Fielding would be entitled to a variable compensation payment of
$500,000.)
To the extent that Foods' pre-tax earnings in any given year either
exceeds the sum of the applicable Base Level plus the applicable
Earnings Cap or falls below the applicable Base Level, a debit or
credit balance will be recognized. In determining the following
year's Annual Variable Compensation, said balance will be added to,
or subtracted from, Foods' pre-tax earnings as the case may be.
Said balance shall be adjusted and carried forward and utilized
from year to year until it is fully utilized, except that any
remaining balance at the end of FY 2004 will be brought to zero.
For example, if Foods' pre-tax earnings in FY 2001 exceed the Base
Level by $25 million, Fielding would receive Annual Variable
Compensation of $1.5 million ($15 million x 10%) and would have a
credit balance of $10 million. The credit balance would be added
to Foods' pre-tax earnings in FY 2002 for purposes of determining
his Annual Variable Compensation. Similarly, any debit balance
would be subtracted from the following year's earnings for purposes
of determining his Annual Variable Compensation.
(d) LONG-TERM INCENTIVE COMPENSATION. Fielding shall be eligible for
a Long-Term Incentive payment ("LTI") based on total pre-tax
earnings of Foods over the four-year period beginning September 1,
2000 and ending August 31, 2004. The LTI shall be based on total
pre-tax earnings over the four-year period to the extent such
earnings exceed an applicable "base level" (the "LTI Base Level").
The LTI Base Level shall be the sum of the individual FY 2001-04
Base Levels (as defined above), as adjusted, plus $50 million. To
be eligible, Fielding must be employed through the end of the four-
year period. The amount of the LTI shall be equal to ten percent
(10%) of the first $50 million of such excess pre-tax earnings and
five percent (5%) of any additional excess pre-tax earnings.
If progress is made toward exceeding the LTI Base Level, Farmland
may, at its sole discretion, provide one or more partial advances
on any projected Long-Term Incentive Compensation payments, such
advances to be in the form of loans and subject to appropriate
interest charges.
(e) BEEF/PORK MARKETING INCENTIVE. At Farmland's sole discretion, an
incentive may be established and paid based on a beef/pork joint
marketing "P&L" which the parties anticipate establishing.
(f) BENEFIT PLANS. During the Employment Period, Fielding shall be
eligible to participate in all employee benefit plans or programs
generally applicable to senior management employees of Farmland
pursuant to the terms and conditions of such plans and programs.
Nothing contained in this Agreement shall preclude Farmland from
terminating or amending any such plan or program.
5. POST-TERMINATION PAYMENTS BY THE COMPANY.
(a)TERMINATIONS WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON. In the
event that Fielding's employment is terminated prior to August 31,
2004 by Farmland without Cause or by Fielding for Good Reason, and
Fielding signs (and does not rescind, as allowed by law) a Release
of Claims in a form satisfactory to Farmland which assures, among
other things, that Fielding will not commence any litigation or
other claims as a result of his employment or termination, and
honors all of Fielding's other obligations as required by this
Agreement, Farmland will provide Fielding a severance payment equal
to two years Base Salary and Fielding will be entitled to a pro-
rata payment under his then existing annual Variable Compensation
Plan and Long-Term Incentive Plan, if applicable objectives are
achieved.
(b) TERMINATION FOR CAUSE, OR VOLUNTARY RESIGNATION. If Fielding's
employment is terminated prior to August 31, 2004 by Farmland for
Cause or by Fielding as a Voluntary Resignation, Fielding shall be
entitled only to his rights (a) to receive the unpaid portion of
his Base Salary, prorated to the date of termination, (b) to
receive reimbursement for any ordinary and reasonable business
expenses for which he had not yet been reimbursed, (c) to receive
payment for accrued and unused vacation days, (d) to receive
payments under Farmland's pension, deferred compensation or other
benefit plans in accordance with the terms of such plans, and (e)
to continue certain health insurance at his expense pursuant to
COBRA.
6. PENSION BENEFIT. If Fielding is not fully vested under applicable
pension plans at the time of his termination, Farmland shall provide Fielding a
supplemental benefit equal in value to the amount of the unvested benefit.
7. OTHER EMPLOYEE OBLIGATIONS. Fielding agrees that the following
provisions will apply throughout Fielding's period of active or inactive
employment, and will continue to apply even if Fielding's employment and the
Employment Period are terminated under Paragraph 3 regardless of the reason for
termination:
(a) NON-COMPETITION. Fielding agrees that during the Employment
Period and thereafter for a period of two (2) years, Fielding will
not directly or indirectly engage in or carry on a business that is
in direct competition with any significant business unit of
Farmland. Further, Fielding 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 Farmland. Fielding agrees that the restrictions
and remedies set forth herein are reasonable. Notwithstanding the
foregoing, if any of the covenants set forth herein shall be held
to be invalid or unenforceable, the remaining parts thereof shall
nevertheless continue to be valid and enforceable. In the event
the provisions relating to time periods and/or areas of restriction
shall be declared by a court of competent jurisdiction to exceed
the maximum time periods or areas of restriction permitted by law,
then such time periods and areas of restriction shall be amended to
become, and shall thereafter be, the maximum periods and/or areas
of restriction which said court deems reasonable and enforceable.
(b) NOTICES. Notices hereunder shall be in writing and shall be
provided as follows:
If to Fielding:
Mr. William Fielding
c/o Farmland Foods, Inc.
10150 North Executive Hills Boulevard
Kansas City, MO 64153
If to Farmland:
Mr. Robert Honse
Farmland Industries, Inc.
3315 North Oak Trafficway
Kansas City, MO 64116
and to
Vice President & General Counsel
Farmland Industries, Inc.
3315 North Oak Trafficway, Dept. 62
Kansas City, MO 64116
(c) MISSOURI LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Missouri, unless
otherwise pre-empted by federal law.
Dated this 31st day of January, 2000.
FARMLAND INDUSTRIES, INC.
WILLIAM FIELDING
By: /s/ ROBERT HONSE /s/ WILLIAM FIELDING
Robert Honse
Senior Vice President and
Chief Operating Officer