UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
 
 Date of report (Date of earliest event reported)              January 15, 2009                        
                    

 
DARLING INTERNATIONAL INC.
(Exact Name of Registrant as Specified in Charter)

 
Delaware
 
000-24620
 
 
36-2495346
 
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
   
(IRS Employer
Identification No.)
 
 
 
 
 
251 O’CONNOR RIDGE BLVD., SUITE 300, IRVING, TEXAS                   75038
(Address of Principal Executive Offices)                                                      (Zip Code)

 
Registrant’s telephone number, including area code:                        (972) 717-0300
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

        /  /   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

       /  /     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

       /  /     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

       /  /     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

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Item 5.02.
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e)

Amended and Restated Employment Agreement

On January 15, 2009, Darling International Inc. (the “ Company ”) entered into that certain Amended and Restated Employment Agreement with Randall C. Stuewe, the Company’s Chairman and Chief Executive Officer (the “ Amended Employment Agreement ”), effective January 1, 2009, which was approved by the compensation committee (the “ Compensation Committee ”) of the Board of Directors of the Company (the “ Board ”) on January 15, 2009.  The Amended Employment Agreement amends and restates that certain Employment Agreement, dated February 3, 2003, as amended by Amendment No. 1, dated July 1, 2003, and Amendment No. 2, dated October 13, 2006.

Set forth below is a brief description of the material terms and conditions of the Amended Employment Agreement.  The summary set forth below is not intended to be complete and is qualified in its entirety by reference to the full text of the Amended Employment Agreement attached hereto as Exhibit 10.1.

Pursuant to the Amended Employment Agreement, Mr. Stuewe is employed as the Company’s Chairman and Chief Executive Officer through December 31, 2009 with automatic one year extensions thereafter unless Mr. Stuewe’s employment is terminated earlier (i) by the Company without cause (as defined in the Amended Employment Agreement) on not less than thirty days prior notice to Mr. Stuewe, (ii) by the Company for cause or upon Mr. Stuewe’s death or disability or (iii) by Mr. Stuewe for good reason (as defined in the Amended Employment Agreement).

The Amended Employment Agreement provides for a minimum annual base salary of $675,000, subject to increases at the discretion of the Compensation Committee, and an annual bonus paid pursuant to the Company’s employee bonus plan in accordance with personal and Company performance targets established annually by the Compensation Committee in consultation with Mr. Stuewe.  The Amended Employment Agreement also provides for Mr. Stuewe to receive standard retirement and welfare benefits for executive officers of the Company.  Further, Mr. Stuewe is entitled to receive an allowance of $2,000 per month for the exclusive purpose of purchasing or leasing a new automobile of his choice.

Pursuant to the Amended Employment Agreement, Mr. Stuewe is entitled to the following severance and other payments upon his termination:

·  
Termination upon Death:  In the event that Mr. Stuewe’s employment with the Company terminates as the result of his death, Mr. Stuewe’s designated beneficiary is entitled to receive the following amounts: (i) accrued but unpaid base salary through the date of termination, in a lump sum payment, within thirty days of termination; (ii) earned but unpaid bonus for a completed fiscal year, in a lump sum payment, within thirty days of termination; (iii) business expenses and accrued vacation pay, in a lump sum payment, within thirty days of termination; (iv) amounts to which Mr. Stuewe is entitled pursuant to Mr. Stuewe’s participation in employee benefit plans (collectively, the above amounts, the “ Accrued Entitlements ” ); and (v) death benefits equal to two times Mr. Stuewe’s then-effective base salary pursuant to a group life insurance policy maintained at the Company’s expense.
 

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·  
Termination upon Disability:  In the event that Mr. Stuewe’s employment with the Company terminates as the result of his disability (as defined in the Amended Employment Agreement), Mr. Stuewe is entitled to receive (i) the Accrued Entitlements and (ii) $10,000 per month until Mr. Stuewe reaches sixty-five years of age pursuant to a group disability policy maintained at the Company’s expense.
 
·  
Termination for Cause; Resignation without Good Reason:  If the Company terminates Mr. Stuewe for cause (as defined in the Amended Employment Agreement) or Mr. Stuewe resigns without good reason (as defined in the Amended Employment Agreement), Mr. Stuewe is entitled to receive the Accrued Entitlements only.
 
·  
Termination without Cause; Resignation for Good Reason:  If the Company terminates Mr. Stuewe without cause or Mr. Stuewe resigns for good reason (other than following a change of control), Mr. Stuewe is entitled to receive the following payments, among others:  (i) the Accrued Entitlements; (ii) a lump sum payment, within thirty days of the date of termination, equal to two times Mr. Stuewe’s base salary at the highest rate in effect in the preceding twelve months; and (iii) an amount equal to the bonus that he would have been entitled to at year end, but only if the Company’s performance to the termination date would entitle him to such bonus.
 
·  
Termination upon a Change of Control of the Company:  If the Company terminates Mr. Stuewe without cause within twelve months following a change of control (as defined in the Amended Employment Agreement) or Mr. Stuewe resigns for good reason within ninety days following a change of control, Mr. Stuewe is entitled to the following payments, among others:  (i) the Accrued Entitlements; (ii) a lump sum payment, within thirty days of the date of termination, equal to three times Mr. Stuewe’s base salary at the highest rate in effect in the preceding twelve months; and (iii) an amount equal to the bonus that he would have been entitled to at year end, but only if the Company’s performance to the termination date would entitle him to such bonus.

Pursuant to the Amended Employment Agreement, subject to certain exceptions, during Mr. Stuewe’s employment with the Company and for a period of (i) two years thereafter in the event of termination without cause, (ii) three years thereafter in the event of termination upon a change of control and (iii) one year thereafter in each other instance (the “ Restricted Period ”), Mr. Stuewe may not have any ownership interest in, or be an employee, salesman, consultant, officer or director of, any entity that engages in the United States, Canada or Mexico in a business that is similar to that in which the Company is engaged in such territory.  Subject to certain limitations, the Amended Employment Agreement also prohibits Mr. Stuewe from soliciting the Company’s customers, employees or consultants during the Restricted Period.  Further, Mr. Stuewe is required by the Amended Employment Agreement to keep all confidential information in confidence during his employment and at all times thereafter.

The Amended Employment Agreement contains a provision that provides that, if following a change of control, Mr. Stuewe’s employment is terminated and as a result of such change of control an excise tax penalty is imposed on Mr. Stuewe under Section 280G of the Internal Revenue Code of 1986, as amended (the “ Code ”), the Company would be required to make a gross-up payment to Mr. Stuewe sufficient to cover such excise tax.  Additionally, the Amended Employment Agreement was amended in certain respects to comply with Section 409A of the Code and the guidance promulgated thereunder.

 
Amended and Restated Senior Executive Termination Benefits Agreement

On January 15, 2009, the Board entered into that certain Amended and Restated Senior Executive Termination Benefits Agreement with John O. Muse (the “ Amended Termination Benefits Agreement ”), which was approved by the Compensation Committee on January 15, 2009.  The Amended Termination Benefits Agreement amends that certain Senior Executive Termination Benefits Agreement, dated December 31, 2007, as amended by that First Addendum to Senior Executive Termination Benefits Agreement, dated December 9, 2008.
 

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Set forth below is a brief description of the material terms and conditions of the Amended Termination Benefits Agreement.  The summary set forth below is not intended to be complete and is qualified in its entirety by reference to the full text of the Amended Termination Benefits Agreement attached hereto as Exhibit 10.2.

Pursuant to the Amended Termination Benefits Agreement, the Company must provide Mr. Muse certain benefits (discussed below) upon any termination of his employment except (i) termination by reason of the voluntary resignation by Mr. Muse (other than termination following a change in control), (ii) termination for cause (as defined in the Amended Termination Benefits Agreement) or (iii) termination upon normal retirement (as defined in the Amended Termination Benefits Agreement) by Mr. Muse.  Neither permanent nor long-term disability status nor the death of Mr. Muse is deemed a termination for purposes of the Amended Termination Benefits Agreement.  Termination with the exceptions set forth above is referred to herein as an “Eligible Termination Event.”

Subject to the mitigation provisions discussed below and Mr. Muse’s execution of a release of claims in respect of his employment with the Company, the Company must provide Mr. Muse the following benefits upon an Eligible Termination Event: (i) (A) periodic payment in the amount of Mr. Muse’s then-effective base salary until Mr. Muse has been paid one and one-half times his annual base salary at the highest rate in effect in the preceding twelve months (the “ Termination Payment Amount ”) or (B) in the case of a change in control (as defined in the Amended Termination Benefits Agreement) and if the Company terminates Mr. Muse’s employment without cause within twelve months following such change in control or Mr. Muse resigns within ninety days following such change in control (a “ Change in Control Termination ”), a lump sum payment, within thirty days of the date of termination or resignation, equal to three times Mr. Muse’s annual base salary at the highest rate in effect in the preceding twelve months, (ii) any accrued vacation pay due but not yet taken at the date of the Eligible Termination Event, (iii) life, disability, health and dental insurance, and certain other similar fringe benefits of the Company (or similar benefits provided by the Company) (the “ Fringe Benefits ”) in effect immediately prior to the date of termination for a period of eighteen months from the date of termination, or thirty-six months in the case of a Change in Control Termination, to the extent allowed under the applicable policies.

Mr. Muse is not entitled to any bonus under any Company executive bonus plan for the year in which the Eligible Termination Event occurs.

In addition, upon an Eligible Termination Event, the Company will engage an outplacement counseling service of national reputation, at its own expense, to assist Mr. Muse in obtaining employment until the earliest of (i) two years from the date of the Eligible Termination Event, (ii) such date as Mr. Muse obtains employment or (iii) Company expenses related thereto equal $10,000.

Mr. Muse is required to mitigate any Termination Payment Amount paid under the Amended Termination Benefits Agreement by seeking other comparable employment as promptly as practicable after the Eligible Termination Event.  Such Termination Payment Amount due under the Amended Termination Benefits Agreement will be offset against or reduced by any amount earned from such other employment.  The Fringe Benefits will terminate upon Mr. Muse’s obtaining such other employment.

The Amended Termination Benefits Agreement also contains obligations on Mr. Muse’s part regarding nondisclosure of confidential information, return of Company property, non-solicitation of employees during employment and for a period of one year following the termination of employment for any reason, non-disparagement of the Company and its business and continued cooperation in certain matters involving the Company.
 

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The Amended Termination Benefits Agreement contains a provision that provides that, if following a change of control, Mr. Muse’s employment is terminated and as a result of such change of control an excise tax penalty is imposed on Mr. Muse under Section 280G of the Code, the Company would be required to make a gross-up payment to Mr. Muse sufficient to cover such excise tax.
 
 
Executive Compensation Program

On January 15, 2009, the Compensation Committee adopted an executive compensation program (the “ Program ”) for certain executives, including the Company’s Chief Executive Officer (the “ CEO ”), the Company’s Executive Vice Presidents (including the Company’s principal financial officer), the three most highly compensated executive officers, if any, other than the CEO, the principal financial officer and the Executive Vice Presidents, and such other executive officers as the Compensation Committee or the CEO may determine from time to time, pursuant to the Company’s 2004 Omnibus Incentive Plan (the “ Omnibus Plan ”).  The Program also provides for equity grants to the Company’s non-employee directors.

The Program supersedes the Company’s Long-Term Incentive Program Policy Statement, which was adopted under the Omnibus Plan on June 16, 2005; however, such prior program will remain in effect in respect of awards granted thereunder.

Set forth below is a brief description of the material terms and conditions of the Program.  The summary set forth below is not intended to be complete and is qualified in its entirety by reference to the full text of the Program attached hereto as Exhibit 10.3.

Elements of Compensation.

Base Salary:  Base salary ranges will be determined for a program participant based on the participant’s position and responsibility and will generally be set at or near the 50th percentile of base salary paid to similarly situated executives of general industrial companies that have similar total revenue and market capitalization and/or compete with the Company for management talent (“ Peer Companies ”).  However, the Compensation Committee has the authority to deviate from such percentile target.

Annual Incentives:  Each program participant has the opportunity to receive an annual cash incentive award, which will be awarded upon the program participant’s achievement of both of two separate components:  the Company’s realization of certain financial measures (which will comprise 75% of the annual cash incentive award) and the achievement of specific strategic, operational and personal goals (“ SOPs ”) designed for each plan participant (which will comprise 25% of the annual cash incentive award).

The financial measures component of the annual cash incentive award will be based on the Company’s yearly return on gross investment (“ROGI”),   which is defined as earnings before interest, taxes, depreciation and amortization divided by the sum of total assets plus accumulated depreciation minus other liabilities (other than those incurred to financing institutions), including, but not limited to, accounts payable, accrued expenses, pension liabilities, other non-current liabilities and deferred income taxes.  The Compensation Committee has the ability to adjust annual ROGI based on extraordinary events.  A program participant may receive between 25% and 400% of his/her target payout depending on the Company’s annual ROGI as compared to the ROGI of its Peer Companies during the same period.
 

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The SOPs component of the annual cash incentive award is based on both the Company’s achievement of a minimum ROGI target and a program participant’s achievement of individual SOPs.  A program participant may receive between 0% and 100% of his/her target payout with respect to the SOPs component depending on such participant’s performance for the fiscal year.  Each program participant must achieve a minimum of 75% of his/her SOPs to receive any payout for the SOPs component of the annual cash incentive award.

Long Term Incentives:  The long term incentive element of compensation will be awarded to program participants in the form of a yearly equity grant, which will be composed of 75% restricted stock and 25% stock options; however, the Company will only award such yearly equity grants if the Company meets certain defined financial objective(s) for the relevant prior fiscal year as determined by the Compensation Committee.  A program participant’s target dollar value of his/her grant will be set at an amount between 20% and 70% of his/her base salary, and the program participant can receive a grant equal to between 50% and 150% of such target dollar value depending on the Company’s trailing five-year ROGI as compared to the trailing five-year ROGI of Peer Companies.

Restricted stock grants will have no exercise price and will vest over a period of three years, with 25% vesting immediately upon issuance and 25% vesting on each of the next three anniversaries of the grant date.  Stock options will have an exercise price equal to the fair market value of the Company’s common stock on the third business day after the Company releases its annual financial results and will vest over a period of three years with 25% vesting immediately upon issuance and 25% on each of the next three anniversaries of the grant date.

Non-Employee Director Grants.

Non-employee directors will automatically be granted stock options for 4,000 shares of the Company’s common stock on the date of their initial election to the Board by the stockholders.  The stock options will have an exercise price equal to the grant date fair market value and will vest in 25% increments on the sixth month anniversary of the grant and on each of the first, second and third annual anniversaries of the date of the grant.

Each non-employee director will automatically be granted stock options for 4,000 shares of the Company’s common stock if the Company achieves 90% of the 50th percentile for the Peer Group ROGI for the most recently completed fiscal year.  The stock options will have an exercise price equal to the fair market value of the Company’s common stock on the third business day after the Company releases its annual financial results and will vest in 25% increments on the sixth month anniversary of the grant date and on each of the first, second and third annual anniversaries of the grant date.
 
 
Amendment No. 1 to Non-Employee Director Restricted Stock Award Plan

On January 15, 2009, the Compensation Committee adopted an amendment to the Non-Employee Director Restricted Stock Award Plan approved on March 9, 2006 pursuant to the Omnibus Incentive Plan.  Set forth below is a brief description of Amendment No. 1 to Non-Employee Director Restricted Stock Award Plan (the “ Amendment ”), which is not intended to be complete and is qualified in its entirety by reference to the full text of the Amendment attached hereto as Exhibit 10.4.

The Amendment changes the date on which awards are granted from the third business day to the fourth business day after the Company releases its annual financial results for its last completed fiscal year.  The Amendment also changes the date on which the fair market value used in calculating the number of shares of restricted stock to be awarded is determined from the second business day to the third business day after the Company releases its annual financial results for its last completed fiscal year.
 

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Item 9.01.
Financial Statements and Exhibits.

(d)           Exhibits.

 
10.1
Amended and Restated Employment Agreement, dated as of January 1, 2009, between Darling International Inc. and Randall C. Stuewe

 
10.2
Amended and Restated Senior Executive Termination Benefits Agreement, dated as of January 15, 2009, between Darling International Inc. and John O. Muse

 
10.3
Darling International Inc. Compensation Committee Executive Compensation Program Policy Statement adopted January 15, 2009

 
10.4
Amendment No. 1 to Non-Employee Director Restricted Stock Award Plan, effective as of January 15, 2009



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 
      DARLING INTERNATIONAL INC.  
       
       
 Date:   January 21, 2009
 By:  
    /s/   John O. Muse        
     John O. Muse  
     Executive Vice President  
     Finance and Administration  
 
 
 

 

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EXHIBIT LIST

10.1           Amended and Restated Employment Agreement, dated as of January 1, 2009, betweenDarling International Inc. and Randall C. Stuewe

10.2           Amended and Restated Senior Executive Termination Benefits Agreement, dated as ofJanuary 15, 2009, between Darling International Inc. and John O. Muse

10.3           Darling International Inc. Compensation Committee Executive Compensation ProgramPolicy Statement adopted January 15, 2009

10.4           Amendment No. 1 to Non-Employee Director Restricted Stock Award Plan, effective asof January 15, 2009




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  EXHIBIT 10.01
 

 
 
 
AMENDED AND RESTATED
 
EMPLOYMENT AGREEMENT
 
 
 
 
This Amended and Restated Employment Agreement (this “ Agreement ”), dated as of January 1, 2009 (the “Effective Date”), is entered into by and between DARLING INTERNATIONAL INC., a Delaware corporation (“ Employer ” or the “ Company ”), and RANDALL C. STUEWE (“ Employee ”).
 
 
WHEREAS, Employee and Employer previously entered into that certain Employment Agreement, dated as of February 3, 2003, as amended by Amendment No. 1, dated as of July 1, 2003, and Amendment No. 2, dated as of October 13, 2006 (collectively, the “ Prior Employment Agreement ”);
 
 
WHEREAS, Employer desires to employ Employee and Employee desires to be employed by Employer, under the terms and pursuant to the conditions set forth herein; and
 
 
WHEREAS, this Agreement amends, restates and supersedes the Prior Employment Agreement in its entirety.
 
 
NOW, THEREFORE, for and in consideration of the mutual covenants, agreements, understandings, undertakings, representations, warranties and promises hereinafter set forth, and intending to be legally bound thereby, the parties hereto agree as follows:
 
1.   Employment as Chairman and Chief Executive Officer.   Employer hereby engages Employee, and Employee hereby agrees, to serve as Employer’s chairman and chief executive officer during the Employment Period (as defined below), upon the terms and subject to the conditions set forth in this Agreement.  While serving as chairman and chief executive officer, Employee shall carry out such duties as are assigned by Employer’s Board of Directors (the “ Board ”), which are consistent with Employee’s position as chairman and chief executive officer, and shall have full authority to manage the business of Employer subject to the direction of the Board.

2.   Director.   Employer hereby agrees to appoint Employee to a vacant position on the Board and thereafter to nominate Employee for election to the Board at each annual meeting of the stockholders of Employer held during the Employment Period.  Employee hereby agrees to serve as a director during the Employment Period.  The Board agrees to elect Employee as Chairman of the Board immediately upon Employee’s appointment to the Board.  Employer now provides, and agrees to use all reasonable efforts to continue to provide, at its expense, directors and officer’s liability insurance (“ D and O ”) with limits of not less than $30 million at all times during the Employment Period, provided that if the Board determines that such “D and O” coverage cannot be obtained at reasonable cost, Employee may elect to voluntarily terminate his employment.
 
 
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3.   Base Salary.   Employee shall receive a minimum base salary of $675,000 per annum during the Employment Period as compensation for the services contemplated hereby, payable in accordance with Employer’s payroll policy for senior executive employees (the “ Base Salary ”).  A copy of said policy has been provided to Employee prior to execution of this Agreement.  Employer’s Compensation Committee will review the Base Salary annually and increase the Base Salary as appropriate to ensure that Employee’s compensation is commensurate with compensation paid to like employees in the industry.  In no event shall the Base Salary be reduced during the Employment Period.

4.   Employment Period.   “ Term ” means the period beginning January 1, 2009 and extending through December 31, 2009; provided, however, that the Term shall automatically extend for successive one (1) year periods after December 31, 2009 (last day of the original Term), unless Employee’s employment (and therefore the Term) is earlier terminated (i) by Employer without Cause on not less than thirty (30) days prior notice to Employee, (ii) by Employer in accordance with Section 10(a) or (b) hereof, or (iii) by Employee for Good Reason (as hereinafter defined) in accordance with Section 10(c) hereof.  The term “ Employment Period ” means all times during which Employee is employed by Employer, commencing on the date of this Agreement and continuing throughout the Term and any extensions thereof.

5.   Exclusive Services; Employee Representations .

(a)   During the Employment Period, Employee shall at all times faithfully, industriously and to the best of his ability, experience and talent, perform all of the duties of chief executive officer and shall devote all of his business time and efforts to the performance of such duties and to the promotion of the interests and business of Employer; provided , however , Employee may devote time to personal and family investments to the extent that such investments do not conflict with Employer’s business or interfere with the performance of Employee’s duties under this Agreement.  The existence of such a conflict shall be determined in good faith by the Board.

(b)   Employee represents and warrants to Employer that (i) Employee is under no contractual or other restriction or obligation that is inconsistent with the execution of this Agreement, the performance of his duties hereunder, or the other rights of Employer hereunder and (ii) Employee is under no physical or mental disability that would hinder the performance of his duties under this Agreement.  Employee agrees to conform to any standard testing program that Employer requires for all of its employees.

6.   Place of Performance.   Employee shall perform his duties hereunder principally at Employer’s corporate headquarters in Irving, Texas, or such other location within the Dallas/Fort Worth metropolitan area as may be designated by the Board from time to time.  However, Employee shall also render services at such other place or places within or without the United States as necessary for the effective management of Employer.  If Employee is required to render such services at a location away from corporate headquarters in Irving, Texas, or such other location within the Dallas/Fort Worth metropolitan area as may be designated by the Board from time to time, Employer shall furnish first class transportation and living expenses as may be reasonably required for Employee.
 
 
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7.   Options.

(a)   On the initial approval by the Board of Directors or Compensation Committee of the first iteration of the Agreement (prior to any amendments) (the “ Approval Date ”), Employer granted Employee stock options (the “ Management Options ”) to purchase 250,000 shares of Employer’s common stock (at an option exercise price equal to 100% of the Fair Market Value of Employer’s common stock on the Approval Date pursuant to the terms of Employer’s 1994 Flexible Stock Option Plan, as amended (the “ Option Plan ”), and of the applicable stock option agreement under the Option Plan), with 62,500 of such Management Options immediately exercisable and 62,500 of such Management Options exercisable on a cumulative basis from and after each of the first, second and third anniversary of the commencement of the Approval Date (so that an aggregate of 250,000 Management Options became exercisable by the third anniversary of the Approval Date).

(b)   At the commencement of the term of the Prior Employment Agreement (the “ Prior Term ”), Employer granted Employee 250,000 additional Management Options at an option exercise price equal to 100% of the Fair Market Value of Employer’s common stock on the date of commencement of the Prior Term, pursuant to the terms of the Option Plan and of the stock option agreement under the Option Plan, with 62,500 of such Management Options immediately exercisable and 62,500 of such Management Options exercisable on the first, second and third anniversary of the commencement of the Prior Term (so that an aggregate of 250,000 of such Management Options became exercisable by the third anniversary of the commencement of the Prior Term).

(c)   The Management Options shall be “incentive stock options” to the maximum extent permitted under Section 422 of the Internal Revenue Code of 1986, as amended (the “ Code ”).

8.   Bonus.

(a)   During the Employment Period, Employee shall be entitled to participate in an employee bonus plan as established from time to time by the Board (the “ Bonus Plan ”) and shall be entitled to receive a bonus (the “ Bonus ”) paid in accordance with performance targets established annually by the Compensation Committee in consultation with the Employee; provided , however , that if no Bonus compensation metric has been approved by the Compensation Committee for a given year, the calculated Bonus shall be paid based upon the prior year’s metric.
 
 
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(b)   Except as provided in Section 11 of this Agreement, Employee shall not be entitled to a Bonus for any fiscal year unless Employee is employed on the last day of such fiscal year or it shall be determined by arbitration under Section 14 that Employer wrongfully discharged Employee.

Nothing contained in this Section 8 shall be construed as limiting the ability of Employee to receive a special bonus out of a bonus pool established by Employer based upon the net proceeds to Employer’s stockholders from the sale of the entire company or otherwise.

9.   Employee Benefits.

(a)   During the Employment Period, Employee shall be entitled to participate in any employee benefit plans or programs that Employer has or shall establish in the future for other senior executive employees of Employer, in each case to the extent that Employee is eligible under the terms of such plans or programs.

(b)   During the Employment Period, Employee shall be entitled to receive an allowance of $2,000.00 (Two Thousand Dollars) per month for the exclusive purpose of purchasing or leasing a new automobile of his choice.  Employer shall pay or reimburse Employee for all insurance premiums for both casualty and liability exposure for the vehicle.  Employer shall pay or reimburse Employee for all operational expenses, fuel, registration and taxes in said vehicle.

(c)   During the Employment Period, Employee shall be entitled to reimbursement for all ordinary and necessary business expenses incurred by Employee in connection with the performance of his duties hereunder subject to submission of appropriate documentation thereof in compliance with such policies and procedures relating thereto as Employer may adopt from time to time.

(d)   During the Employment Period, Employee will accrue and be entitled to use up to four weeks of vacation each year, at full pay, in accordance with Employer’s vacation policy in effect from time to time.

(e)   Any reimbursements made to Employee pursuant to this Agreement or otherwise shall be paid no later than the last day of the calendar year following the calendar year in which the expense was incurred.

10.   Termination.

(a)   Death or Disability of Employee.   If Employee dies or becomes disabled during the Employment Period, the Employment Period shall automatically terminate.  For these purposes, Employee shall be deemed “Disabled” if Employee shall become physically or mentally incapacitated or disabled or otherwise unable fully to discharge Employee’s duties hereunder for a period of ninety (90) consecutive calendar days or for one hundred twenty (120) calendar days in any one hundred eighty (180) calendar-day period (“ Disability ”).  A determination of Disability shall be made by a physician satisfactory to both Employee and Employer; provided , however, that if Employee and Employer do not agree on a physician, Employee and Employer shall each select a physician and these two physicians shall together select a third physician, and the determination by a majority of the three physicians as to Disability shall be binding on all parties.
 
 
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(b)   Termination by Employer for Cause.   The Employment Period may be terminated by Employer at any time for Cause.  For the purposes of this Agreement, “ Cause ” shall mean:
 
(i)   Employee’s breach of any of the covenants contained in Section 12 of this Agreement;

(ii)   Employee’s conviction by, or entry of a plea of guilty or nolo contendere in, a court of competent and final jurisdiction for any crime (whether felony or misdemeanor) involving moral turpitude or punishable by imprisonment in the jurisdiction involved;
 
(iii)   Employee’s commission of any crime, act of fraud, embezzlement or theft upon or against (x) Employer in connection with his duties with Employer or in the course of his employment with Employer or otherwise, or (y) any third party whether prior to or subsequent to the date hereof;

(iv)   Employee’s continuing repeated failure or refusal to perform Employee’s duties as required by this Agreement (including, without limitation, Employee’s inability to perform Employee’s duties hereunder as a result of chronic alcoholism or drug addiction and/or as a result of any failure to comply with any laws, rules or regulations of any governmental entity with respect to Employee’s employment by Employer), provided that termination of Employee’s employment pursuant to this subsection (iv) shall not constitute valid termination for Cause unless Employee shall have first received written notice from the Board stating with specificity the nature of such failure or refusal and affording Employee at least fifteen (15) days to correct the act or omission complained of; or
 
(v)   gross negligence, insubordination, material violation by Employee of any duty of loyalty to Employer or any other material misconduct on the part of Employee, provided that termination of Employee’s employment pursuant to this subsection (y) shall not constitute valid termination for Cause, unless Employee shall have first received written notice from the Board stating with specificity the nature of such failure or refusal and affording Employee at least fifteen (15) days to correct the act or omission complained of.
 
 
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(c)   Termination by Employer without Cause; Employee Resignation for Good Reason.   At any time during the Employment Period, Employer may terminate Employee’s employment without Cause, or Employee may resign for Good Reason (as defined below), by giving written notice of termination, subject to the severance and other payment obligations set forth herein upon termination of the Employment Period.

(i)   Good Reason ” shall mean, without the Employee’s consent, the occurrence of any of the following events or actions, provided that (except as set forth in clause (c)(i)(6) of this definition) no finding of Good Reason shall be effective unless and until the Employee has provided the Employer, within sixty (60) calendar days of becoming aware of the facts and circumstances underlying the finding of Good Reason, with written notice thereof in accordance with Section 17(d) below stating with specificity the facts and circumstances underlying the finding of Good Reason and, if the basis is capable of being cured by the Employer, providing the Employer with an opportunity to cure the same within thirty (30) calendar days after receipt of such notice in accordance with Section 17(d):

(1)   any material reduction in Employee’s Base Salary;

(2)   assignment to Employee of substantial duties materially inconsistent with Employee’s position as chief executive officer or experience, or demotion to a lesser position;

(3)   any failure to nominate the Employee to the Board or removal of the Employee from the Board (other than for cause or because of legal or regulatory requirements);

(4)   Employer’s failure to pay or provide any amount of compensation or any material benefit which is due, owing and payable pursuant to the terms hereof or of any written plan, program, arrangement or policy of Employer;

(5)   a material increase in the indebtedness of Employer over Employee’s objection; or

(6)   Employee’s resignation within ninety (90) days following a Change of Control of Employer (as defined below).

11.   Severance Payments.

(a)   Termination upon Death.   In the event Employee’s employment with the Employer terminates as a consequence of the Employee’s death, Employee’s designated beneficiary shall be entitled to receive the following amounts:

(i)   accrued but unpaid Base Salary through the date of termination, in a lump sum payment, within thirty (30) days of termination;

(ii)   earned but unpaid Bonus for a completed fiscal year in a lump sum payment, within thirty (30) days of termination;
 
 
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(iii)   un-reimbursed business expenses and accrued vacation pay owed to the Employee, in a lump sum payment, within thirty (30) days of termination;

(iv)   amounts arising pursuant to Employee’s participation in, or benefits under, any employee benefit plans, programs or arrangements, payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements (amounts set forth in (i) through (iv) hereinafter referred to as “ Accrued Entitlements ”); and

(v)   death benefits equal to two (2) times Employee’s then-effective Base Salary from a group life insurance policy maintained by Employer at its sole expense.

(b)   Termination upon Disability.   In the event Employee’s employment with the Employer terminates as a consequence of the Employee’s Disability, Employee shall be entitled to receive payments equal to the Accrued Entitlements (in accordance with the timing set forth in the definition thereof).

(c)   Upon Employee’s being deemed Disabled during the Employment Period, Employee or his legal representatives shall be entitled to receive ten-thousand dollars ($10,000) per month until age 65 under a group disability policy maintained by Employer at its sole expense.

(d)   Termination for Cause, Resignation without Good Reason .  If Employer terminates Employee’s employment for Cause or Employee resigns without Good Reason, then the Employee shall be entitled to receive payments equal to the Accrued Entitlements (in accordance with the timing set forth in the definition thereof); provided , further , that: (i) if Employee shall dispute the Board’s termination for Cause, pending resolution of such dispute by arbitration in accordance with Section 14 hereof, Employer shall continue to pay Employee the amounts described in Section 3,  subject to Employee’s agreement to repay such amounts (the “ Repayment Obligation ”) in the event the results of such arbitration shall justify the Board’s determination, and (ii) pending final disposition of any criminal or civil proceeding against Employee, Employer may suspend Employee but shall continue to pay the amounts described herein, subject to the Repayment Obligation.

(e)   Termination without Cause; Resignation for Good Reason.   If Employer terminates Employee’s employment during the Employment Period without Cause, or the Employee resigns for Good Reason other than following a Change of Control as set forth in Section 11(f) (“ Termination without Cause ”), Employer shall pay to the Employee:

(i)   his Accrued Entitlements (in accordance with the timing set forth in the definition thereof);
 
 
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(ii)   a lump sum payment within thirty (30) days of the date of termination equal to two (2) times Employee’s Base Salary at the highest rate in effect in the preceding twelve (12) months;

(iii)   an amount equal to the Bonus that would be earned on the Termination Date based on the Employer’s performance on such date, provided that Employer has met or exceeded the performance target for that year as of the date of termination payable at the time Bonus amounts are customarily paid to employees of the Employer, but in no event later than the 15th day of the third month after the end of year in which the termination occurs;

(iv)   continuing coverage under Employer’s then-existing health and dental insurance for Employee, his spouse and dependent children (if any), for a period of two (2) years; provided , however , to the extent such coverage cannot be provided under the Employer's health or welfare plans without jeopardizing the tax status of such plans, for underwriting reasons or because of the tax impact on Employee, the Company shall pay Executive each month during such two (2) year period an amount equal to the COBRA continuation coverage premium under the Employer's group medical plans less the amount of the Employee's portion of the premium as if Executive was an active employee (the “ Cash Equivalent Payments ”) along with a full tax gross up with respect to the Cash Equivalent Payments so Employee has no after tax consequences with respect to the Cash Equivalent Payments and related tax gross up (provided such payments shall cease upon the Employee becoming employed by another employer and eligible for medical coverage with such employer);

(v)   reimbursement of reasonable relocation expenses from the Dallas/Fort Worth metropolitan area to Monterey, California, which reimbursement shall be limited to realtor’s fees and closing costs for the sale of Employee’s Texas home and reasonable costs of moving Employee’s household goods from the Dallas/Fort Worth metropolitan area to Monterey, California; and

(vi)   within thirty (30) days of the date of termination, an amount equal to the pension plan benefit that would have accrued to the account of Employee under the Employer’s salaried employees’ pension plan for the two (2)-year period following termination, assuming for purposes of such calculation that Employee’s annual compensation during such period is equal to his Base Salary at the highest rate in effect for the preceding twelve (12) months prior to termination.

(f)   Termination upon a Change of Control of Employer .  If Employer terminates Employee’s employment during the Employment Period without Cause within twelve (12) months following a Change of Control, or the Employee resigns for Good Reason within ninety (90) days following a Change of Control (“ Termination upon a Change of Control ”), Employer shall pay Employee:
 
 
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(i)   his Accrued Entitlements (in accordance with the timing set forth in the definition thereof);

(ii)   a lump sum payment within thirty (30) days of the date of termination equal to three (3) times the Employee’s annual Base Salary at the highest rate in effect in the preceding twelve (12) months;

(iii)   an amount equal to the Bonus that would be earned on the Termination Date based on the Employer’s performance on such date, provided that Employer has met or exceeded the performance target for that year as of the date of termination payable at the time Bonus amounts are customarily paid to employees of the Employer, but in no event later than the 15th day of the third month after the end of year in which the termination occurs;

(iv)   continuing coverage under Employer’s then-existing health and dental insurance for Employee, his spouse and dependent children (if any), for a period of three (3) years; provided , however , to the extent such coverage cannot be provided under the Employer's health or welfare plans without jeopardizing the tax status of such plans, for underwriting reasons or because of the tax impact on Employee, the Company shall pay Executive each month during such three (3) year period Cash Equivalent Payments along with a full tax gross up with respect to the Cash Equivalent Payments so Employee has no after tax consequences with respect to the Cash Equivalent Payments and related tax gross up (provided such payments shall cease upon the Employee becoming employed by another employer and eligible for medical coverage with such employer);

(v)   reimbursement of reasonable relocation expenses from the Dallas/Fort Worth metropolitan area to Monterey, California, which reimbursement shall be limited to realtor’s fees and closing costs for the sale of Employee’s Texas home and reasonable costs of moving Employee’s household goods from the Dallas/Fort Worth metropolitan area to Monterey, California; and

(vi)   within thirty (30) days of the date of termination, an amount equal to the pension plan benefit that would have accrued to the account of Employee under the Employer’s salaried employees’ pension plan for the two (2)-year period following termination, assuming for purposes of such calculation that Employee’s annual compensation during such period is equal to his Base Salary at the highest rate in effect for the preceding twelve (12) months prior to termination.

For purposes of this Agreement “ Change of Control ” means the occurrence of any of the following events:
 
(1)   Any Person, as defined in Employer’s 2004 Omnibus Incentive Plan (the “ Omnibus Plan ”), becomes the Beneficial Owner (as defined in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934) of thirty-five percent (35%) or more of the combined voting power of the then outstanding voting securities of Employer entitled to vote generally in the election of its Directors (the “ Outstanding Employer Voting Securities ”); provided , however , that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from Employer, including without limitation, a public offering of securities; (ii) any acquisition by Employer or any of its Subsidiaries (as defined in the Omnibus Plan); (iii) any acquisition by an employee benefit plan or related trust sponsored or maintained by Employer or any of its Subsidiaries; or (iv) any acquisition by any Person pursuant to a transaction which complies with clauses (i), (ii), and (iii) of Section 11(f)(vi)(3) below;
 
 
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(2)   Individuals who  constitute the Board of Directors as of the Effective Date (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board of Directors; provided , however , that any individual becoming a Director subsequent to the Effective Date whose election to the Board of Directors, or nomination for election by Employer’s shareholders, was approved by a vote of at least a majority of the Directors then comprising the Incumbent Board, shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election or removal of the Directors of Employer or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors;

(3)   Consummation of a reorganization, merger, or consolidation to which Employer is a party or a sale or other disposition of all or substantially all of the assets of Employer (a “ Business Combination ”), unless, following such Business Combination: (i) all or substantially all of the individuals and entities who were the Beneficial Owners of Outstanding Voting Securities immediately prior to such Business Combination are the Beneficial Owners, directly or indirectly, of more than fifty percent (50%) of the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors (or election of members of a comparable governing body) of the entity resulting from the Business Combination (including, without limitation, an entity which as a result of such transaction owns all or substantially all of Employer or all or substantially all of Employer’s assets either directly or indirectly or through one or more Subsidiaries) (the “ Successor Entity ”) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Employer Voting Securities; (ii) no Person (excluding any Successor Entity or any employee benefit plan or related trust of Employer, such Successor Entity, or any of their Subsidiaries) is the Beneficial Owner, directly or indirectly, of thirty-five percent (35%) or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (or comparable governing body) of the Successor Entity, except to the extent that such ownership existed prior to the Business Combination; and (iii) at least a majority of the members of the board of directors (or comparable governing body) of the Successor Entity were members of the Incumbent Board (including persons deemed to be members of the Incumbent Board by reason of the proviso of Section 11(f)(vi)(2)) at the time of the execution of the initial agreement or of the action of the Board of Directors providing for such Business Combination; or
 
 
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(4)   Approval by the shareholders of Employer of a complete liquidation or dissolution of Employer.

12.   Certain Covenants.

(a)   Non-Competition Agreement.   During the Employment Period, and for a period of (i) two (2) years thereafter in the event of Termination without Cause, (ii) three (3) years thereafter in the event of Termination upon a Change of Control or (iii) one (1) year thereafter in each other instance (each, the “ Restricted Period ”), Employee shall not have any ownership interest (of record or beneficial) in, or have any interest as an employee, salesman, consultant, officer or director in, or otherwise aid or assist in any manner, any firm, corporation, partnership, proprietorship or other business that engages in any city, state, or part thereof in the United States, Canada and/or Mexico (the “ Restricted Territory ”) in a business that is similar to that in which Employer is engaged in the Restricted Territory or part thereof or continues to solicit customers or potential customers therein; provided , however , that Employee may own, directly or indirectly, solely as an investment, securities of any entity if Employee (i) is not a controlling person of, or a member of a group which controls, such entity and (ii) does not, directly or indirectly, own one percent (1%) or more of any class of securities of any such entity.

(b)   Confidentiality Agreement.   Employee acknowledges that the nature of Employee’s engagement by Employer is such that Employee will have access to Confidential Information (hereinafter defined) which has great value to Employer.  “ Confidential Information ” includes, in whole or in part, information concerning Employer’s or its affiliates’ experimental and development plans, trade secrets, secret procedures, information relating to ideas, improvements, and inventions, disclosures, processes, systems, formulas, composition, patents, patent applications, machinery, material research activities and plans, customers or vendors and prospective customers, Employer’s or its affiliates’ product costs, prices, profits and volume of sales, and future business plans, and other confidential or proprietary information belonging to Employer or its affiliates or relating to Employer’s or its affiliates’ affairs, including, without limitation, such information that has been disclosed to one or more third parties pursuant to distribution agreements, joint research agreements or other agreements entered into by Employer or any of its affiliates.  Employee acknowledges that except for Employee’s engagement by Employer, Employee would not otherwise have access to the Confidential Information.  During the Employment Period and at all times thereafter, Employee shall keep all of the Confidential Information in confidence and shall not disclose any of the same to any other person for any reason, whether or not developed by Employee, except Employer’s personnel entitled thereto and other persons designated in writing by the Board.  Employee shall not cause, suffer or permit the Confidential Information to be used for the gain or benefit of any party outside Employer or for Employee’s personal gain or benefit outside the scope of Employee’s engagement by Employer.  The Employer shall have the right to communicate with any of the future or prospective employers of Employee concerning Employee’s continuing obligation to hold and safeguard the Confidential Information.
 
 
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Upon the termination of the Employment Period for any reason, Employee shall promptly deliver to Employer all correspondence, drawings, blueprints, manuals, letters, notes, notebooks, reports, flow-charts, programs, proposals, price lists, customer lists, company credit cards, company vehicles and any documents concerning Employer’s or its affiliates’ customers or concerning products or processes used by Employer or its affiliates and, without limiting the foregoing, will promptly deliver to Employer and any and all other documents or materials containing or constituting Confidential Information.

(c)   Solicitation of Business.   During the Restricted Period, Employee shall not (i) solicit or assist any other person to solicit any business (other than for Employer) from any present or past customer of Employer, (ii) request or advise any present or future customer of Employer to withdraw, curtail or cancel its business dealings with Employer or (iii) commit any other act or assist others to commit any act that might injure the business of Employer.

(d)    Solicitation of Employees.   During the Restricted Period, Employee shall not, directly or indirectly, hire, solicit or encourage to leave the employment of Employer or any of its affiliates, any employee of Employer or any of its affiliates or hire any such employee who has left the employment of Employer or any of its affiliates within one year of the termination of such employee’s employment with Employer or any of its affiliates.

(e)   Solicitation of Consultants.   During the Restricted Period, Employee shall not, directly or indirectly, hire, solicit or encourage to cease work with Employer or any of its affiliates any consultant then under an oral or written contract with Employer or any of its affiliates.

(f)   Right and Remedies upon Breach.   If Employee breaches or threatens to commit a breach of any of the provisions of this Section 12 (the “ Restrictive Covenants ”), Employer shall have the following rights and remedies, each of which rights and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not lieu of, any other rights and remedies available to Employer under law or in equity:

(i)   Specific Performance.   The right and remedy to have the Restrictive Covenants specifically enforced by any court having equity jurisdiction, all without the need to post a bond or any other security or to prove any amount of actual damage or that money damages would not provide an adequate remedy, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to Employer and that money damages will not provide adequate remedy to Employer; and

(ii)   Accounting and Indemnification.   The right and remedy to require Employee (i) to account for and pay over to Employer all compensation, profits, monies, accruals, increments or other benefits derived or received by Employee or any associated party deriving such benefits as a result of any such breach of the Restrictive Covenants; and (ii) to indemnify Employer against any other losses, damages (including special and consequential damages), costs and expenses, including actual attorneys’ fees and court costs, which may be incurred by them and which result from or arise out of any such breach or threatened breach of the Restrictive Covenants.
 
 
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(g)   Severability of Covenants/Blue Pencilling.   If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions.  If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration of such provision or the area covered thereby, such court shall have the power to reduce the duration or area of such provision and, in its reduced form, such provision shall then be enforceable and shall be enforced.  Employee hereby waives any and all right to attack the validity of the Restrictive Covenants on the ground of the breadth of their geographic scope or the length of their term.

(h)   Enforceability in Jurisdictions.   Employer and Employee intend to, and do hereby, confer jurisdiction to enforce the Restrictive Covenants upon the courts of any jurisdiction within the geographical scope of such covenants.  If the courts of any one or more of such jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of the breadth of such scope or otherwise, it is the intention of Employer and Employee that such determination not bar or in any way affect the right of Employer to the relief provided above in the courts of any other jurisdiction within the geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, such covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants.

(i)   Inventions, etc.   To the fullest extent permitted by law, Employee shall assign, and does hereby assign, to Employer all of Employee’s right, title and interest in and to all inventions, improvements, developments, trade secrets, discoveries, computer software, trade names and trademarks conceived, improved, developed, discovered or written by Employee, alone or in collaboration with others, during the Employment Period, Employee shall promptly and fully disclose to Employer all matters within the scope of this paragraph, and shall, upon request of Employer, execute, acknowledge, deliver and file any and all documents necessary or useful to vest in Employer all of Employee’s right, title and interest in and to all such matters.  All expenses incurred in connection with the execution, acknowledgement, delivery and filing of any papers or documents within the scope of this paragraph shall be borne by Employer.  All matters within the scope of this paragraph shall constitute trade secrets and Confidential Information of Employer until such matters cease to be trade secrets by operation of law.

 
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13.   Certain Additional Payments .

(a)   Anything in this Agreement to the contrary notwithstanding, if prior to the second anniversary of the change in ownership or effective control of Employer (as those events are determined for purposes of Section 280G of the Code) it shall be determined that any payment, benefit or distribution by the Employer to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise), including but not limited to for such determination acceleration of vesting and benefits as determined in regulations promulgated pursuant to Section 280G of the Code, but determined without regard to any additional payments required under this Section 13 (a “ Payment ”) would be subject to the excise tax imposed by Section 4999 of the Code or any successor provision, or any interest or penalties are incurred by the Employee with respect to any such excise tax (such excise taxes, together with any such interest and penalties, are hereinafter collectively referred to as the “ Excise Tax ”), then the Employee shall be entitled to receive an additional payment (a “ Gross-Up Payment ”) in an amount such that after payment by the Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.  

(b)   Subject to the provisions of Section 13(c), all determinations required to be made under this Section 13, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized certified public accounting firm as may be designated by the Employer (the “ Accounting Firm ”) which shall provide detailed supporting calculations both to the Employer and the Employee within forty-five (45) business days of the receipt of notice from Employee to the Employer that there has or may have been a Payment (a “ Payment Notice ”), or such earlier time as is requested by the Employer; provided that for purposes of determining the amount of any Gross-Up Payment, the Employee shall be deemed to pay federal income tax at the actual rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the rates applicable to individuals in the state or locality of the Employee’s residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the actual rates.  All fees and expenses of the Accounting Firm shall be borne solely by the Employer.  Any Gross-Up Payment, as determined pursuant to this Section 13, shall be paid by the Employer to the Employee (or directly to the Internal Revenue Service or other appropriate taxing authority for the benefit of the Employee), on or prior to the later of (i) the due date for the payment of any Excise Tax, income tax or other amount comprising the Gross-Up Payment to the relevant taxing authority, and (ii) the forty-fifth (45 th ) day following the Employer’s receipt of the Payment Notice, but in no event later than the end of Employee’s taxable year following the year in which any Excise Tax, income tax or other amount comprising the Gross-Up Payment was remitted to the relevant taxing authority.  Subject to the following provisions of this Section 13 to the contrary, any determination by the Accounting Firm shall be binding upon the Employer and Employee.  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Employer should have been made (“ Underpayment ”), or that additional amounts were paid to the Employee (“ Overpayment ”) consistent with the calculations required to be made hereunder.  In the event that the Employer exhausts its remedies pursuant to Section 13(c) and the Employee thereafter is required to make a payment of any Excise Tax, or there has been an Overpayment, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Employer to or for the benefit of the Employee, or the Employee shall return to the Employer the amount of such Overpayment, as the case may be.  Without extending any time period set forth in this Section 13 for any Gross-Up Payment or Underpayment due hereunder, such amount shall be paid no later than the end of the calendar year following the calendar year in which the Employee pays the related tax, as stated in Section 17(j).
 
 
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(c)   The Employee shall notify the Employer in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Employer of the Gross-Up Payment or would require a re-calculation of amounts as set forth in Section 13(a).  Such notification shall be given as soon as practicable but no later than five (5) business days after the Employee is informed in writing of such claim and shall apprise the Employer of the nature of such claim and the date on which such claim is requested to be paid.  The Employee shall not pay such claim unless directed to do so by the Employer.  If the Employer notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall:
 
 
(i)
give the Employer any information reasonably requested by the Employer relating to such claim;
 
 
(ii)
take such action in connection with contesting such claim as the Employer shall request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Employer;
 
 
(iii)
cooperate with the Employer in good faith in order effectively to contest such claim; and
 
 
(iv)
permit the Employer to participate in any proceedings relating to such claim;
 
provided , however , that the Employer shall bear and pay directly all costs and expenses (including additional interest and penalties) reasonably incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses.  The Employer shall control all proceedings taken in connection with such contest, and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either pay the tax claimed to the appropriate taxing authority on behalf of the Employee and direct the Employee to sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Employer shall determine; provided , however , that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount.  Furthermore, the Employer’s control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
 
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(d)  If, after the receipt by the Employee of a payment by the Employer of an amount on the Employee’s behalf pursuant to Section13(c), the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall (subject to the Employer’s complying with the requirements of Section 13(c)) promptly pay to the Employer the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto).  If, after payment by the Employer of an amount on the Employee’s behalf pursuant to Section13(c), a determination is made that the Employee shall not be entitled to any refund with respect to such claim, the Employee shall so notify the Employer, and the Employee shall co-operate with the Employer, at the Employer’s request, to contest such denial of refund.
 
(e)  The parties intend that this Section 13 shall be in compliance with the Sarbanes-Oxley Act of 2002 (“ SOX ”).  If any provision of this Section 13 is inconsistent with SOX, the parties agree to reform this Section 13 to comply therewith.

14.   Arbitration.

(a)   Any dispute arising under or with respect to this Agreement shall be resolved by Arbitration in accordance with the Rules of the American Arbitration Association (“ AAA ”) in Dallas, Texas.  Employer shall appoint one (1) arbitrator and Employee shall appoint one (1) arbitrator and such arbitrators shall appoint a third arbitrator who shall act as chairman of the arbitration panel, provided that (i) if the party commencing the arbitration shall fail to appoint an arbitrator upon such commencement, (ii) if the responding party shall fail to appoint an arbitrator within thirty (30) days of receipt of notice of commencement of the arbitration or (iii) the arbitrators selected by the parties shall fail to appoint such third arbitrator within thirty (30) days after selection of such two (2) arbitrators, the AAA shall appoint such arbitrator or arbitrators.

(b)   The decision of a majority of the arbitrators shall be final and binding upon the parties hereto or any person claiming any interest through one of the parties.  The arbitrators may award costs, including reasonable counsel fees and expenses, to the benefit of the prevailing party as determined in their sole discretion.  The fees of the arbitrators shall be shared equally by the parties.
 
 
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(c)   Nothing contained in the arbitration provisions herein shall limit the relief available to Employer under Sections 10 or 12, including commencement by Employer of an action in any court of competent jurisdiction.

15.   Return of Employer’s Property.   If this Agreement is terminated for any reason, Employer shall have the right, at its option, to require Employee to vacate his offices prior to the effective date of termination and to cease all activities on Employer’s behalf.  Upon the termination of his employment in any manner, Employee shall immediately surrender to Employer all lists, books and records of, or in connection with, Employer’s business, and all other property belonging to Employer, it being distinctly understood that all such lists, books and records, and other documents, are the property of Employer.

16.   Withholding.   The Employer shall be entitled to withhold from any payments or deemed payments any amount of federal and state income, FICA and other withholding tax it determines to be required by law.

17.   Miscellaneous.

(a)   Entire Agreement; Modification.   This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior oral or written understandings between the parties concerning such subject matter.  This Agreement may be modified only by a written instrument duly executed by each party.

(b)   Survival.   Notwithstanding the termination of this Agreement or Employee’s employment hereunder, Sections 5, 10, 11, 12, 13, 14, 15, 16 and 17 hereof shall survive any such termination.

(c)   Waiver.   The failure of either party hereto at any time to enforce performance by the other party of any provision of this Agreement shall in no way affect such party’s rights thereafter to enforce the same, nor shall the waiver by either party of any breach of any provisions hereof be deemed to be a waiver by such party of any other breach of the same or any other provision hereof.

(d)   Notices.   All notices and other communications required or permitted under this Agreement shall be in writing, served personally on, e-mailed or mailed by certified or registered United States mail to, the party to be charged with receipt thereof.  Notices and other communications served by mail shall be deemed given hereunder 72 hours after deposit of such notice or communication in the United States Post Office as certified or registered mail with postage pre-paid and duly addressed to whom such notice or communication is to be given, in the case of:

 
(i)
Employer:
 
Darling International Inc.
 
251 O’Connor Ridge Boulevard, Suite 300
 
Irving, Texas 75038
 
E-mail: Jmuse@darlingii.com
 
Attention: Chief Financial Officer
 
 
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or

 
(ii)
Employee:
 
Randall C. Stuewe
 
26192 Paseo Del Sur
 
Monterey, CA 93940
 
E-mail: rcsteuwe@aol.com

Any such party may change said party’s address for purposes of this Section by giving to the party intended to be bound thereby, in the manner provided herein, a written notice of such change.

(e)   Severability.   Subject to Section 12(g) hereof, if any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be held invalid or unenforceable by a court of competent jurisdiction, the remainder of this Agreement or the application of any such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.  Subject to Section 12(g) hereof, if any of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, scope, activity or subject, it shall be construed by limiting and reducing it, so as to be valid and enforceable to the extent compatible with the applicable law or the determination by a court of competent jurisdiction.

(f)   Governing Law.   This Agreement shall be governed by, and interpreted exclusively in accordance with, the internal laws of the State of Texas, without regard to the conflict of law principles thereof.  Subject to the arbitration provisions of this Agreement and Section 12(h) hereof, Employee hereto hereby irrevocably and unconditionally consents to submit to the jurisdiction of the courts of the State of Texas or of the United States of America located in the State of Texas for any actions, suits or proceedings arising out of or relating to this Agreement and the transactions contemplated hereby, and further agrees that service of any process, summons, notice or document by United States registered or certified mail in accordance with Section 17(d) of this Agreement shall be effective service of process for any action, suit or proceeding brought in any such court.  Subject to the arbitration provisions of this Agreement, Employee hereby irrevocably and unconditionally waives any objection of personal jurisdiction and the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby, in the courts of the State of Texas or of the United States of America located in the State of Texas, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.  A claim or a series of related claims with respect to which injunctive relief is sought may be heard in the jurisdiction where it is alleged that the primary activity which is the subject of such claim(s) occurred.
 
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(g)   Non-transferability of Interest; Assignment by Employer.   None of the rights of Employee to receive any form of compensation payable pursuant to this Agreement shall be assignable or transferable except through a testamentary disposition or by the laws of descent and distribution upon the death of Employee.  Any attempted assignment, transfer, conveyance, or other disposition (other than as aforesaid) of any interest in the rights of Employee to receive any form of compensation to be made by Employer pursuant to this Agreement shall be null and void.  In the event of any sale, transfer or other disposition of all or substantially all of Employer’s assets or business, whether by merger, consolidation or otherwise to any entity or person, this Agreement and the rights and obligations of Employer hereunder shall be transferred to such entity or person.  This Agreement shall be binding upon and inure to the benefit of the parties, and their legal representatives, heirs, and, subject to the preceding sentences of this Section17(g), their successors and assigns.

(h)   Counterparts.   This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.

(i)   Headings.   The headings preceding the text of the sections and subsections hereof are inserted solely for convenience of reference, and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.

(j)   Compliance with Code Section 409A .

(i)   Six Month Delay for Specified Employees . If any payment, compensation or other benefit provided to the Employee in connection with his employment termination is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the Employee is a specified employee as defined in Section 409A(2)(B)(i), no part of such payments shall be paid before the day that is six (6) months plus one (1) day after the date of termination or earlier death (the “ New Payment Date ”).  The aggregate of any payments that otherwise would have been paid to the Employee during the period between the date of termination and the New Payment Date shall be paid to the Employee in a lump sum on such New Payment Date.  Thereafter, any payments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the time period originally scheduled, in accordance with the terms of this Agreement.  Notwithstanding the foregoing, to the extent that the foregoing applies to the provision of any ongoing welfare benefits to the Employee that would not be required to be delayed if the premiums therefor were paid by the Employee, the Employee shall pay the full cost of premiums for such welfare benefits during the six-month period and the Company shall pay the Employee an amount equal to the amount of such premiums paid by the Employee during such six-month period and the related tax gross up contemplated by Section 11(f)(iv) hereof promptly after its conclusion.
 
 
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(ii)   Compliance .  The Parties acknowledge and agree that the interpretation of Section 409A and its application to the terms of this Agreement is uncertain and may be subject to change as additional guidance and interpretations become available.  Anything to the contrary herein notwithstanding, all benefits or payments provided by the Company to the Employee that would be deemed to constitute “nonqualified deferred compensation” within the meaning of Section 409A are intended to comply with Section 409A.  If, however, any such benefit or payment is deemed to not comply with Section 409A, the Company and the Employee agree to renegotiate in good faith any such benefit or payment (including, without limitation, as to the timing of any severance payments payable hereof) so that either (i) Section 409A will not apply or (ii) compliance with Section 409A will be achieved; provided , however , that any resulting renegotiated terms shall provide to the Employee the after-tax economic equivalent of what otherwise has been provided to the Employee pursuant to the terms of this Agreement, and provided further , that any deferral of payments or other benefits shall be only for such time period as may be required to comply with Section 409A.

(iii)   Termination as Separation from Service . A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A, and for purposes of any such provision of this Agreement, references to a “resignation,” “termination,” “terminate,” “termination of employment” or like terms shall mean separation from service.

(iv)   Payments for Reimbursements, In-Kind Benefits and Tax Gross-Ups .  All reimbursements for costs and expenses under this Agreement shall be paid in no event later than the end of the calendar year following the calendar year in which the Employee incurs such expense.  With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided , however , that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect.  Any tax Gross-Up payments under this Agreement shall be paid in no event later than the end of the calendar year following the year in which any Excise Tax, income tax or other amount comprising a gross-up payment was remitted to the relevant taxing authority.

(v)   Payments within Specified Number of Days .  Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.
 
 
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(vi)   Installments as Separate Payment . If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payment.


 [The Remainder of this Page Is Intentionally Left Blank.]
 
 
 
 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date hereinabove set forth.
 
 

 
    "EMPLOYER or COMPANY"    
       
   DARLING INTERNATIONAL INC.    
       
 By:  
   /s/   John O. Muse    
     
John O. Muse                      
  Executive Vice President    
 
 
 
  "EMPLOYEE"    
       
       
 By:  
   /s/   Randall C. Stuewe    
     
Randall C. Stuewe                      
       
 

 

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EXHIBIT 10.02



AMENDED AND RESTATED
SENIOR EXECUTIVE
TERMINATION BENEFITS AGREEMENT


This Amended and Restated Senior Executive Termination Benefits Agreement (the “Agreement”), dated as of January 15, 2009 (the “ Effective Date ”), by and between Darling International Inc., a Delaware corporation (the “ Company ”), and John O. Muse (the “ Executive ”).

W I T N E S S E T H:

WHEREAS, the Executive and the Company previously entered into that certain Senior Executive Termination Benefits Agreement, dated as of December 31, 2007, as amended by that First Addendum to Senior Executive Termination Benefits Agreement dated as of December 9, 2008 (collectively, the “Prior Agreement”); and

WHEREAS, the Executive has made and, if he continues to be employed by the Company, will continue to make valuable contributions to the productivity and profitability of the Company; and

WHEREAS, the Company considers that providing severance benefits will operate as an incentive for the Executive to remain employed by the Company; and

WHEREAS, this Agreement amends, restates and supersedes the Prior Agreement in its entirety;

NOW, THEREFORE, to induce the Executive to remain employed by the Company, and to acknowledge the “At Will” status of the Executive’s employment by the Company, and for other good and valuable consideration, the Company and the Executive agree as follows:
 
1.             Circumstances Triggering Receipt of Severance Benefits .

 
Subject to the Executive’s execution of a general release (on the Company’s standard form) in favor of the Company pursuant to which the Executive waives, effective as of the Termination Date (as hereinafter defined), any and all claims, known or unknown, relating to the Executive’s employment by the Company or the termination thereof, the Company shall provide the Executive with the benefits set forth in Section 3 upon any termination of the Executive’s employment for any reason except the following:

 
(a)
Termination by reason of the Executive’s “voluntary termination” other than a Change in Control Termination (as hereinafter defined) . For the purposes of this Agreement, “ voluntary termination ” shall mean the voluntary resignation by the Executive of his employment with the Company;
 

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(b)
Termination with Cause .” For the purposes hereof, “ Cause ” shall mean termination of employment of the Executive by the Company following (1) failure of the Executive to render services to the Company in accordance with the reasonable directions of the Company’s Chief Executive Officer or Board of Directors, which failure shall continue after written notice from the Company, (2) the commission by the Executive of an act of fraud or dishonesty or of an act which he knew to be in material violation of his duties to the Company (including the unauthorized disclosure of confidential information) or (3) following a felony conviction of the Executive; or

 
(c)
Termination upon the Executive’s normal retirement .  For the purposes of this Agreement, “normal retirement” shall mean the termination of employment of the Executive by the Company or the Executive in accordance with the Company’s retirement policy (including early retirement, if included in such policy and elected by the Executive in writing) generally applicable to its senior executive employees, or in accordance with any other retirement agreement entered into by and between the Executive and the Company.

 
For the purpose of this Agreement, the placement of the Executive on permanent or long-term disability status as defined by the Company’s long-term disability policy covering the Executive and the death of the Executive shall not be deemed a termination and shall not qualify the Executive for the benefits set forth in this Agreement.

2.             No Entitlement of Employment and Acknowledgment of “At Will” Status .

 
This Agreement shall not be construed as and does not constitute a promise or guaranty of continued employment. In consideration of this Agreement, the Executive acknowledges and agrees that his employment with the Company is “At Will”. The Executive understands that his employment with the Company is not for a specified term and is at the mutual consent of the Executive and the Company and, therefore, the Company can terminate the employment relationship at will, with or without Cause.

3.             Termination Benefits .

 
Subject to the conditions set forth in Section 1, and subject to the mitigation provisions contained in Section 5, the following benefits (subject to any changes in benefit programs that may occur in the future and any applicable payroll or other taxes required to be withheld) shall be provided to the Executive:

 
(a)
Compensation . Commencing on the Termination Date (as defined below), the Executive shall be paid periodically, according to his unit’s wage practices, the amount of his periodic base salary until he has been paid one and one-half (1.5) times his annual base salary (“ Termination Pay Amount ”) at the highest rate in effect in the preceding twelve (12) months.  Each such periodic termination payment is hereby designated a separate payment for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”).  Notwithstanding the foregoing, if a Change in Control (as hereinafter defined) of the Company occurs and if either the Company terminates the Executive’s employment without Cause within twelve (12) months following such Change in Control or the Executive resigns within ninety (90) days following such Change in Control (either such event being referred to herein as a “ Change in Control Termination ”) then in lieu of the Termination Pay Amount, and not in addition thereto, the Executive shall receive a lump sum payment within thirty (30) days of the date of termination or resignation, as the case may be, equal to three (3) times the Executive’s annual base salary at the highest rate in effect in the preceding twelve (12) months (the “ Change in Control Termination Payment ”).
 

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(b)
Vacation Pay . Any accrued vacation pay due but not yet taken at the Termination Date shall be paid to the Executive on the date his employment with the Company is terminated (the “Termination Date”).

(c)  
Welfare Benefits, etc. The Executive’s participation (including dependent coverage) in any life, disability, health and dental plans, and any other similar fringe benefits of the Company (except business accident insurance and continued contributions to qualified retirement plans) in effect immediately prior to the Termination Date shall be continued, or equivalent benefits provided by the Company, for a period of eighteen (18) months from the Termination Date, or thirty-six (36) months in the case of a Change in Control Termination, to the extent allowed under the policies or agreements pursuant to which the Company obtains and provides such benefits.

(d)  
Bonus and Retirement Benefits .  The Executive shall not be entitled to any bonus under the Company’s executive bonus plan for the year in which his termination occurs. The Agreement shall not affect the Executive’s entitlement to benefits under the Company’s retirement plan accrued as of his termination.

(e)  
Executive Outplacement Counseling .  The Company shall engage an outplacement counseling service of national reputation, at its own expense provided that such expense shall not exceed Ten Thousand Dollars ($10,000), to assist the Executive in obtaining employment, until the earliest of (i) two years from the Termination Date, (ii) such date as the Executive has obtained employment, or (iii) until such time the Company’s expenses equal Ten Thousand Dollars ($10,000).

For purposes of the Agreement, “ Change in Control ” means the occurrence of any of the following events:
 

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(1)   Any Person, as defined in the Company’s 2004 Omnibus Incentive Plan (the “ Omnibus Plan ”), becomes the Beneficial Owner (as defined in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934) of thirty-five percent (35%) or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of its Directors (the “ Outstanding Employer Voting Securities ”); provided , however , that the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, including without limitation, a public offering of securities; (ii) any acquisition by the Company or any of its Subsidiaries (as defined in the Omnibus Plan); (iii) any acquisition by an employee benefit plan or related trust sponsored or maintained by the Company or any of its Subsidiaries; or (iv) any acquisition by any Person pursuant to a transaction which complies with clauses (i), (ii), and (iii) of clause (3) of this definition below;

(2)   Individuals who  constitute the Board of Directors as of the Effective Date (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board of Directors; provided , however , that any individual becoming a Director subsequent to the Effective Date whose election to the Board of Directors, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the Directors then comprising the Incumbent Board, shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election or removal of the Directors of the Company or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors;

(3)   Consummation of a reorganization, merger, or consolidation to which the Company is a party or a sale or other disposition of all or substantially all of the assets of the Company (a “ Business Combination ”), unless, following such Business Combination: (i) all or substantially all of the individuals and entities who were the Beneficial Owners of Outstanding Voting Securities immediately prior to such Business Combination are the Beneficial Owners, directly or indirectly, of more than fifty percent (50%) of the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors (or election of members of a comparable governing body) of the entity resulting from the Business Combination (including, without limitation, an entity which as a result of such transaction owns all or substantially all of the Company or all or substantially all of the Company’s assets either directly or indirectly or through one or more Subsidiaries) (the “ Successor Entity ”) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Employer Voting Securities; (ii) no Person (excluding any Successor Entity or any employee benefit plan or related trust of the Company, such Successor Entity, or any of their Subsidiaries) is the Beneficial Owner, directly or indirectly, of thirty-five percent (35%) or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (or comparable governing body) of the Successor Entity, except to the extent that such ownership existed prior to the Business Combination; and (iii) at least a majority of the members of the board of directors (or comparable governing body) of the Successor Entity were members of the Incumbent Board (including persons deemed to be members of the Incumbent Board by reason of the proviso of clause 2 of this definition at the time of the execution of the initial agreement or of the action of the Board of Directors providing for such Business Combination; or
 

 

 


(4)   Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

4.             Entirety .

 
This Agreement constitutes the entire agreement between the parties pertaining to the subject matter contained herein and supersedes all prior and contemporaneous agreements, representations and understandings of the parties. No supplement, modification or amendment of this Agreement shall be binding unless referring specifically to this Agreement and executed in writing by the parties hereto.  In no event will the Executive be entitled to severance under both this Agreement and the Company’s severance policy, if any, as it is the intent of the parties hereto that the severance provided for in this Agreement shall be in lieu of, and not in addition to, the severance that the Executive would otherwise be entitled to under the Company’s severance policy, if any.

5.             Mitigation .

 
The Executive is required to mitigate the Termination Pay Amount by seeking other comparable employment as promptly as practicable after the Termination Date and amounts due hereunder shall be offset against or reduced by any amount earned from such other employment. The benefits provided for in Section 3(c) shall terminate upon the Executive’s obtaining such other employment. The Executive hereby agrees to notify the Company promptly upon obtaining employment.

6.             Certain Obligations of Executive .

 
In order to induce the Company to enter into this Agreement, the Executive hereby agrees to the following obligations, which obligations of the Executive shall be in addition to, and shall not limit, any other obligation of the Executive to the Company with respect to the matters set forth herein or otherwise:

(a)  
Nondisclosure .  The Executive hereby agrees that all documents, records, techniques, business secrets, price and route information, business strategy and other information, whether in electronic form, hardcopy or other format, which have come into his possession from time to time during his employment by the Company or which may come into his possession during his employment, shall be deemed to be confidential and proprietary to the Company and the Executive further agrees to retain in confidence any confidential information known to him concerning the Company and its affiliates and their respective businesses, unless such information (i) is publicly disclosed by the Company or (ii) is required to be disclosed by valid legal process; provided, however, that prior to any such disclosure, if reasonably practicable, the Executive must first notify the Company and cooperate with the Company (at the Company’s expense) in seeking a protective order.
 
 
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(b)  
Return of Property .  The Executive agrees that, upon termination of the Executive’s employment with the Company for any reason, the Executive will return to the Company, in good condition, all property of the Company and any of its affiliates, including without limitation, keys; building access cards; computers; cellular telephones; automobiles; the originals and all copies (in whatever format) of all management, training, marketing, pricing, strategic, routing and selling materials; promotional materials; other training and instructional materials; financial information; vendor, owner, manager and product information; customer lists; other customer information; and all other selling, service and trade information and equipment.  If such items are not returned, the Company will have the right to charge the Executive for all reasonable damages, costs, attorneys’ fees and other expenses incurred in searching for, taking, removing and/or recovering such property.

(c)  
Nonsolicitation .  During the period of employment with the Company and for a period of 12 months thereafter, the Executive will not, on the Executive’s own behalf or on behalf of any other person, partnership, association, corporation or other entity, or otherwise act indirectly to hire or solicit or in any manner attempt to influence or induce any employee of the Company or its affiliates to leave the employment of the Company or its affiliates, nor will the Executive use or disclose to any person, partnership, association, corporation or other entity any information obtained while an employee of the Company concerning the names and addresses of the employees of the Company or its affiliates.

(d)  
Nondisparagement .  The Executive shall not, either during the term of this Agreement or at any time thereafter, make statements, whether orally or in writing, concerning the Company, any of its directors, officers, employees or affiliates or any of its business strategies, policies or practices, that shall be in any way disparaging, derogatory or critical, or in any way harmful to the reputation of the Company, any such persons or entities or business strategies, policies or practices.

(e)  
Cooperation .  The Executive agrees to cooperate, at the request and expense of the Company, in the prosecution and/or defense of any claim or litigation in which the Company or any affiliate is involved on the Termination Date or thereafter that includes subject matter as to which the Executive has knowledge and/or expertise.
 
 
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(f)  
Damages.   Notwithstanding anything in this Agreement to the contrary, if the Executive breaches the covenants contained in this Section 6, the Company will have no further obligations to the Executive pursuant to this Agreement or otherwise and may recover from the Executive all such damages to which it may be entitled at law or in equity.  In addition, the Executive acknowledges that any such breach may result in immediate and irreparable harm to the Company for which money damages are likely to be inadequate.  Accordingly, the Company may seek whatever relief it determines to be appropriate to protect the Company’s rights under this Agreement, including, without limitation, an injunction to prevent the Executive from disclosing any trade secrets or confidential or proprietary information concerning the Company to any person or entity, to prevent any person or entity from receiving from the Executive or using any such trade secrets or confidential or proprietary information and/or to prevent any person or entity from retaining or seeking to retain any other employees of the Company.  The Executive acknowledges good and sufficient consideration for the covenants of this Section 6.

7.            Successors .

 
The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession has taken place.

8.            Governing Law .

 
The validity, interpretation, construction and performance of this Agreement shall be governed by the internal laws of the State of Texas.

9.             Termination .

This Agreement shall terminate on December 31, 2009.

10.             Certain Additional Payments .

(a)   Anything in this Agreement to the contrary notwithstanding, if prior to the second anniversary of the change in ownership or effective control of the Company (as those events are determined for purposes of Section 280G of the Code) it shall be determined that any payment, benefit or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise), including but not limited to for such determination acceleration of vesting and benefits as determined in regulations promulgated pursuant to Section 280G of the Code, but determined without regard to any additional payments required under this Section 10 (a “ Payment ”) would be subject to the excise tax imposed by Section 4999 of the Code or any successor provision, or any interest or penalties are incurred by the Executive with respect to any such excise tax (such excise taxes, together with any such interest and penalties, are hereinafter collectively referred to as the “ Excise Tax ”), then the Executive shall be entitled to receive an additional payment (a “ Gross-Up Payment ”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.  
 
 
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(b)   Subject to the provisions of Section 10(c), all determinations required to be made under this Section10, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized certified public accounting firm as may be designated by the Company (the “ Accounting Firm ”) which shall provide detailed supporting calculations both to the Company and the Executive within forty-five (45) business days of the receipt of notice from Executive to the Company that there has or may have been a Payment (a “ Payment Notice ”), or such earlier time as is requested by the Company; provided that for purposes of determining the amount of any Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the actual rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the rates applicable to individuals in the state or locality of the Executive’s residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the actual rates.  All fees and expenses of the Accounting Firm shall be borne solely by the Company.  Any Gross-Up Payment, as determined pursuant to this Section10, shall be paid by the Company to the Executive (or directly to the Internal Revenue Service or other appropriate taxing authority for the benefit of the Executive), on or prior to the later of (i) the due date for the payment of any Excise Tax, income tax or other amount comprising the Gross-Up Payment to the relevant taxing authority, and (ii) the forty-fifth (45 th ) day following the Company’s receipt of the Payment Notice, but in no event later than the end of Executive’s taxable year following the year in which any Excise Tax, income tax or other amount comprising the Gross-Up Payment was remitted to the relevant taxing authority.  Subject to the following provisions of this Section 10 to the contrary, any determination by the Accounting Firm shall be binding upon the Company and Executive.  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“ Underpayment ”), or that additional amounts were paid to the Executive (“ Overpayment ”) consistent with the calculations required to be made hereunder.  In the event that the Company exhausts its remedies pursuant to Section 10(c) and the Executive thereafter is required to make a payment of any Excise Tax, or there has been an Overpayment, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive, or the Executive shall return to the Company the amount of such Overpayment, as the case may be.  Without extending any time period set forth in this Section 10 for any Gross-Up Payment or Underpayment due hereunder, such amount shall be paid no later than the end of the calendar year following the calendar year in which the Executive pays the related tax, except as stated in Section 11.
 
 
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(c)   The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment or would require a re-calculation of amounts as set forth in Section10(a).  Such notification shall be given as soon as practicable but no later than five (5) business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid.  The Executive shall not pay such claim unless directed to do so by the Company.  If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
 
(i)
give the Company any information reasonably requested by the Company relating to such claim;
 
 
(ii)
take such action in connection with contesting such claim as the Company shall request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company;
 
 
(iii)
cooperate with the Company in good faith in order effectively to contest such claim; and
 
 
(iv)
permit the Company to participate in any proceedings relating to such claim;
 
provided , however , that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) reasonably incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses.  The Company shall control all proceedings taken in connection with such contest, and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either pay the tax claimed to the appropriate taxing authority on behalf of the Executive and direct the Executive to sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided , however , that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount.  Furthermore, the Company’s control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
 
 
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(d)           If, after the receipt by the Executive of a payment by the Company of an amount on the Executive’s behalf pursuant to Section 10(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company’s complying with the requirements of Section10(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto).  If, after payment by the Company of an amount on the Executive’s behalf pursuant to Section 10(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim, the Executive shall so notify the Company, and the Executive shall co-operate with the Company, at the Company’s request, to contest such denial of refund.
 
(e)           The parties intend that this Section 10 shall be in compliance with the Sarbanes-Oxley Act of 2002 (“ SOX ”).  If any provision of this Section 10 is inconsistent with SOX, the parties agree to reform this Section 10 to comply therewith.

11.             Compliance with Code Section 409A .

To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder.  Notwithstanding any provision of this Agreement to the contrary, and if and only to the extent it becomes necessary to prevent any accelerated or additional tax under Section 409A of the Code, if the Executive is a “specified employee” as defined in Section 409A of the Code, any severance pay or benefits constituting deferred compensation to which Section 409A applies and payable by reason of the Executive’s termination of employment (severance pay and benefits up to $450,000 are not subject to Section 409A) shall be deferred (without any adjustment to the amount of such payments or benefits ultimately paid or provided to the Executive) until the date that is six (6) months following such termination (or the earliest date as is permitted under Section 409A of the Code).

IN WITNESS WHEREOF , the parties have caused this Agreement to be executed and delivered as of the day and year first above set forth.


 
    DARLING INTERNATIONAL INC.    
       
       
 By:  
   /s/  Randall C. Stuewe    
     
Randall C. Stuewe                      
  Chief Executive Officer    
 
 
 
  EXECUTIVE    
       
       
 By:  
   /s/  John O. Muse    
     
John O. Muse                      
       
 

  10
 

 

 
 
 
 
 
 
 
 

 
  
EXHIBIT 10.3

 

DARLING INTERNATIONAL INC. COMPENSATION COMMITTEE
 
EXECUTIVE COMPENSATION PROGRAM POLICY STATEMENT
 
 
 
This policy is a statement of the plan for implementation of the Executive Compensation Program (the “ Program ”) effective January 15, 2009 for certain executives of Darling International Inc. (the “ Company ”), pursuant to the Company’s 2004 Omnibus Incentive Plan (the “ Omnibus Plan ”) approved by its stockholders in May 2005.  This Program supersedes the prior executive compensation plan, which was adopted under the Omnibus Plan on June 16, 2005 (the “ Prior Program ”); however, the Prior Program will remain in effect in respect of awards heretofore granted under the Prior Program.  Awards granted to employees under the Program are intended to be “qualified performance based compensation” under Article 12 of the Omnibus Plan.

 
Program Objectives
 
·  
Reward Company executives for the achievement of specific annual, long-term and strategic goals of the Company throughout business cycles;
 
·  
Align the short and long-term interests of Company executives with the interests of stockholders;
 
·  
Attract and retain superior executives;
 
·  
Provide compensation to Company executives that is competitive with the compensation paid to similarly situated executives; and
 
·  
Create retention incentives for Company executives and provide an opportunity for increased equity ownership by Company executives.

 
Eligibility and Participation
 
Participants of the Program (each, a “ Program Participant ” and collectively, the “ Program Participants ”) include the Company’s chief executive officer (the “ CEO ”), the Executive Vice President, Finance and Administration (the “ CFO ”), the Company’s Executive Vice Presidents the (“ EVPs ”), the three most highly compensated executive officers, if any, of the Company other than the CEO, the CFO and the EVPs (together with the CEO, the CFO, and the EVPs,  the “ named executive officers ”) and such other executive officers as the Compensation Committee of the Board of Directors of the Company (the “ Compensation Committee ”) or the CEO may determine from time to time.
 
Non-employee directors of the Company will continue to receive formula-based equity compensation as more fully described below.
 
Structure and Implementation
 
The elements of compensation for each Program Participant are base salary, annual incentive bonus and long-term incentive equity awards.
 
 
  

 
 
Base Salary :   The base salary element is intended to compensate the Program Participants for services rendered during each fiscal year.  Base salary ranges will be determined for a Program Participant based on his/her position and responsibility and should generally be set at or near the 50th percentile of base salary paid to similarly situated executives of general industrial companies that have similar total revenue and market capitalization and/or compete with the Company for management talent (“ Peer Companies ”); provided, that the Compensation Committee shall have authority to deviate from such percentile target as it deems necessary or appropriate to achieve the Program objectives.  Salary information of Peer Companies will be determined by using market data supplied by an outside global human resources consulting firm or other independent third party resource.
 
Annual Incentives :  The annual incentive bonus element for each Program Participant will be the possibility of a cash bonus that will be awarded upon the Program Participant’s achievement of both of two separate components:  the Company’s realization of certain financial measures, which will account for 75% of the annual incentive bonus, and the achievement of specific strategic, operational and personal goals (“ SOPs ”) designed for each Plan Participant based on his/her title and roles and responsibilities with the Company.  The SOPs will account for 25% of the annual incentive bonus.
 
The financial measures component will be based on the Company’s yearly return on gross investment (“ ROGI ”), which is defined as earnings before interest, taxes, depreciation and amortization divided by the sum of total assets plus accumulated depreciation minus other liabilities (other than those incurred to financing institutions), including, but not limited to, accounts payable, accrued expenses, pension liabilities, other non-current liabilities and deferred income taxes.  The Company’s yearly ROGI will be calculated as of the end of each fiscal year based on the Company’s financial statements prepared for and presented in Company’s Annual Report on Form 10-K; however, from time to time, the calculation of ROGI will be adjusted in the discretion of the Compensation Committee for excess cash on hand or in extraordinary circumstances.  A Program Participant will receive 100% of his/her target payout with respect to the financial measures component of the annual award if the Company attains an annual ROGI for the fiscal year equal to the 50th percentile of the Peer Companies ROGI as calculated by an outside global human resources firm.  The Compensation Committee will also set a threshold and maximum ROGI for each Program Participant between which Program Participants will receive a percentage of target payout between 25% (for achievement of the 25th percentile of the Peer Companies ROGI (the “ ROGI Threshold ”)) and 400% (for achievement of the 90th percentile of the Peer Companies ROGI) depending on the actual ROGI achieved.
 
The SOPs component of the annual incentive bonus will be based on both the Company’s achievement of the ROGI Threshold and a Program Participant’s achievement of individual SOPs.  A Program Participant may receive between 0% and 100% of his/her target payout with respect to the SOPs component depending on such participant’s performance for the fiscal year.  Prior to each fiscal year, the CEO will set individual, objective SOPs for each Program Participant (other than himself), which objectives will be approved by the Compensation Committee.  With respect to the CEO, the Compensation Committee will set and approve the CEO’s SOPs for each fiscal year.  Following the end of each fiscal year, each Program Participant’s performance will be evaluated against his/her SOPs by the CEO (except with respect to his/her own performance), and the Compensation Committee will determine the percentage of target payout to be awarded to such Program Participant.  In the case of the CEO, the Compensation Committee will evaluate the CEO’s performance against his/her SOPs and determine the payout for the SOPs component of the annual incentive bonus.  Each Program Participant must achieve a minimum of 75% of his/her SOPs to receive any payout for the SOPs component of the annual incentive bonus.
 
 
2
  

 
 
Long Term Incentives :  The long term incentive element of compensation will be awarded to Program Participants in the form of a yearly equity grant, which will be composed of 75% restricted stock and 25% stock options (together, the “ Grant ”); however, the Company will only award such yearly equity grants if the Company meets certain financial objective(s) for the relevant prior fiscal year as determined by the Compensation Committee from time to time.  The target dollar value of the Grant (the “ Target Grant Dollar Value ”) will range from 20% to 70% of the Program Participant’s base salary.  The Target Grant Dollar Value for each Program Participant, including the CEO, will be set by the Compensation Committee.  The actual amount of the award will be based on the Company’s actual trailing five-year ROGI average and may range from between 50% and 150% of the Target Grant Dollar Value.  If the Company’s trailing five-year ROGI average is less than or equal to the 25th percentile of the Peer Companies ROGI, a Program Participant will be eligible to receive Grants equivalent to 50% of his/her Target Grant Dollar Value; if the Company’s trailing five-year ROGI average is between the 25th and 50th percentile of Peer Companies ROGI, a Program Participant will be eligible to receive Grants equivalent to between 50% and 100% of his/her Target Grant Dollar Value; if the Company’s trailing five-year ROGI average is between the 50th and 75th percentile of Peer Companies ROGI, a Program Participant will be eligible to receive Grants equivalent to between 100% and 150% of his/her Target Grant Dollar Value; and if the Company’s trailing five-year ROGI average is over the 75th percentile of Peer Companies ROGI, a Program Participant will be eligible to receive Grants equivalent to a maximum amount of 150% of his/her Target Grant Dollar Value.
 
All financial and other objectives for individual Grants that are intended to be treated as "qualified performance-based compensation" under Article 12 of the Omnibus Plan and Section 162(m) of the Code (as defined in the Omnibus Plan) will be determined prior to the end of the first quarter of the fiscal year during which such performance will be determined.
 
Restricted stock granted under the Program will account for 75% of the total Grant. Restricted stock Grants will have no exercise price and will vest over a period of three years, with 25% vesting immediately upon issuance and 25% vesting on each of the next three anniversaries of the grant date.  Restricted stock will be granted on the fourth business day after the Company releases its annual financial results.  The number of shares of restricted stock granted will be determined using the Fair Market Value of the Company’s common stock on the third business day after the Company releases its annual financial results.
 
Stock options granted under the Program will account for 25% of the total Grant. Stock options will be granted on the fourth business day after the Company releases its annual financial results.  The exercise price of such stock options will be the Fair Market Value of the Company’s common stock on the third business day after the Company releases its annual financial results.  Stock options will vest over a period of three years with 25% vesting immediately upon issuance and 25% on each of the next three anniversaries of the grant date.
 
 
3
  

 
 
The Compensation Committee has the discretion to award or withhold Grants or to provide additional grants outside the Program if it determines that it is in the best interests of the Company to do so.
 
Non Employee Director Grants
 
Non-Employee Directors will automatically be granted stock options for 4,000 shares of the Company’s common stock on the date of their initial election to the Board of Directors by the stockholders.  The exercise price will be the grant date Fair Market Value.  Such grants will vest in 25% increments on the sixth month anniversary of the grant and on each of the first, second and third annual anniversaries of the date of the grant.
 
Each Non-Employee Director will automatically be granted stock options for 4,000 shares of the Company’s common stock if the Company achieves 90% of the 50th percentile for the Peer Group ROGI for the most recently completed fiscal year.  Such grant will be made automatically on the fourth business day after the Company releases its annual financial results. The exercise price of such stock options will be the Fair Market Value of the Company’s common stock on the third business day after the Company releases its annual financial results.  The Non-Employee Director stock options will vest in 25% increments on the sixth month anniversary of the grant date and on each of the first, second and third annual anniversaries of the grant date.
 
Additional Award
 
The Compensation Committee will periodically evaluate the advisability of grants of long-term incentives to the executives and employees of the Company.  The Compensation Committee will make such awards as it determines are appropriate, advisable and in the best interests of the Company.
 
Fair Market Value
 
For purposes of this Program, the term “Fair Market Value” has the meaning ascribed to it in the Omnibus Plan
 

 

 

 

 
 

EXHIBIT 10.04 
 

 

Amendment No. 1 to
Non-Employee Director
Restricted Stock Award Plan
 

Darling International Inc., a Delaware corporation, hereby amends the Non-Employee Director Restricted Stock Award Plan approved March 9, 2006 (the “ Non-Employee Director Plan ”) as follows, effective as of January 15, 2009.
 
 
1.  
The third paragraph of the Non-Employee Director Plan is amended and restated to read in its entirety as follows:
 
Date of Award :  The fourth business day after the Company releases its annual financial results for its last completed fiscal year.
 
 
2.  
The fourth paragraph of the Non-Employee Director Plan is amended and restated to read in its entirety as follows:
 
Number of Shares Granted :  $20,000 divided by the Fair Market Value per Share on the third business day after the Company releases its annual financial results for its last completed fiscal year; provided, however, that if the maximum aggregate Share limit for issuance to Non-Employee Directors under the Plan is exceeded on the Date of Award, each Non-Employee Director shall receive his pro-rata share of the then-remaining Shares issuable under the Plan.
 
 
Except as expressly amended above, the Non-Employee Director Plan shall remain in full force and effect and is herby ratified and confirmed.