Exhibit 10.22

MANAGEMENT AGREEMENT

                    This Management Agreement (this “Agreement”) is effective
April 8, 2009 (the “Effective Date”) by and between Vaughan Foods, Inc. (the
“Company”) and Mark E. Vaughan (the “Executive”) with respect to the following:.

                    WHEREAS, the Executive currently serves as a senior
executive officer of the Company; and

                    WHEREAS, the Company desires to provide stability to the
Employer/Employee relationship of the Executive by entering into this Agreement
with the Executive; and

                    WHEREAS, the Board of Directors of the Company believes it
in the best interest of the Company to provide continuity of its senior
management by entering into employment agreements with certain members of its
senior management team.

                    NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

 

 

16.

Term of Agreement; Defined Terms.

          (a) Term of Agreement. This Agreement shall not have any specific
duration and shall continue in full force and effect unless and until (i) the
Executive’s employment is terminated by either party in accordance with Section
3, and (ii) all obligations and liabilities of the parties arising in connection
with such termination or otherwise accruing under this Agreement have been fully
satisfied. Notwithstanding any contrary provision in this Agreement, nothing in
this Agreement constitutes a guarantee of continued employment but instead
provides for certain rights and benefits during the Executive’s employment with
the Company and if such employment terminates.

          (b) Defined Terms. Capitalized terms used throughout this Agreement
have the meaning ascribed to such terms in Exhibit “A” attached hereto.

 

 

17.

Terms, Conditions, and Benefits of Employment.

          (a) Position and Duties. The Executive shall serve as President and
Chief Operating Officer of the Company or in such other substantially equivalent
position(s) requested by the Board with the appropriate authority, duties, and
responsibilities attendant to such position(s). The Executive shall devote his
full working time, best efforts, abilities, knowledge, and experience to the
Company’s business and affairs as necessary to faithfully perform his duties,
responsibilities, and authorities under this Agreement. The Executive may,
without violating this Agreement, (i) serve on corporate, civic, charitable, or
industry boards or committees, (ii) deliver lectures, fulfill speaking
engagements, or teach at educational institutions, or (iii) manage personal
investments, so long as such activities do not significantly interfere with the
Executive’s obligations under this Agreement; provided, however, that the
Executive shall not serve on the board of any business, hold any other position
with any business, or otherwise engage in any

--------------------------------------------------------------------------------

business activity, without the prior written consent of his Supervisor. If the
Executive conducted any such activities as of the Effective Date, then the
continuation of such activities (or similar activities for the same
organization) after the Effective Date shall be permitted.

          (b) Annual Base Salary. The Executive shall receive an Annual Base
Salary, which may be increased from time to time in the Company’s discretion but
shall not be reduced unless the Company reduces the salaries of similarly
situated executives, in which case the Annual Base Salary may be reduced by the
same percentage and shall be restored to its prior level when, and to the same
extent as, the Company restores the salaries of such similarly situated
executives. Any increase in Annual Base Salary shall not limit or reduce any
other obligation owed to the Executive under this Agreement.

          (c) Annual Bonus. The Executive shall be eligible to participate in a
program in which he may receive an Annual Bonus. If the Compensation Committee
establishes a target for the Annual Bonus as a percentage of the Annual Base
Salary, then such target shall not be less than the targets for similarly
situated executives of the Company. Unless otherwise payable under Sections
4(b)(i)(B) or 4(c), the Executive must be actively employed for the entire year
upon which the Annual Bonus is based to be eligible to receive such Annual
Bonus.

          (d) Incentive Awards. In the Compensation Committee’s discretion, the
Company may provide the Executive with annual equity grants, or cash awards in
lieu of such grants, which shall be comparable to the grants or awards made to
similarly situated executives of the Company.

          (e) Disability. The Company shall provide the same disability
insurance coverage benefits to the Executive as provided to similarly situated
executives of the Company. If, during his employment with the Company, the
Executive receives Short-Term Disability Payments, then the Company shall pay
the Executive the difference between the Short-Term Disability Payments and the
portion of his then-current Annual Base Salary the Company would have paid him
while receiving Short-Term Disability Payments. If the Executive is Disabled
during his employment with the Company and otherwise entitled to receive salary
and bonus payments under this Agreement, then any such salary and bonus payments
(or such payments in lieu of salary and bonus payments) shall be reduced by the
amount of any Short-Term Disability Payments received by the Executive for the
period of short-term disability and any benefits paid for the same period under
the Company-provided disability insurance coverage.

          (f) Expenses. The Company shall reimburse the Executive for all
reasonable business-related expenses incurred and accounted for in accordance
with its standard policies and procedures for expense reimbursements and
deductibles under Section 162 of the Code.

          (g) Other Employee Benefits. During the term of this Agreement, the
Executive shall be entitled to participate in all employee benefit, welfare, and
other plans, practices, policies, and programs applicable to similarly situated
executives of the Company, subject to the terms of such plans, practices,
policies, and programs as they may be amended from time to time. Specifically,
the Executive shall be entitled to four (4) weeks of paid vacation a year, which
if not taken may not be carried over to another year. During any CIC Period, the
Company shall continue to provide the Executive (and the Executive’s dependents,
if applicable) with the same level of

2

--------------------------------------------------------------------------------

health (including dental), disability, and life (including accidental
death/dismemberment) insurance benefits as were provided to the Executive (and
the Executive’s dependents, if applicable) immediately before the Change in
Control upon terms and conditions that are not materially less favorable to the
Executive than as in effect immediately before the Change in Control with
respect to each of such health, disability, and life insurance coverages.

          (h) Fringe Benefits. To the extent not otherwise covered under this
Agreement, the Company shall provide the Executive with fringe benefits and
perquisites to the same extent and on the same terms as those benefits are
provided by the Company from time to time to similarly situated executives of
the Company.

 

 

18.

Termination of Employment; Suspensions; Change in Control.

          (a) Termination Upon Death. The Executive’s employment with the
Company shall terminate immediately upon the Executive’s death.

          (b) Reassignment of Duties and Termination Due to the Executive
Becoming Disabled.

                    (i) Reassignment. Whether or not the Executive is Disabled,
the Company may reassign his duties during any time he has become physically or
mentally incapable of performing his essential job functions with or without
reasonable accommodation or job protection as required by law and no such
reassignment shall be deemed Good Reason for the Executive to terminate his
employment under Section 3(d).

                    (ii) Termination. If the Executive becomes Disabled, then
the Company may give the Executive written notice of its intent to terminate his
employment, in which case such employment shall terminate effective on the
thirtieth (30th) day after receipt of such notice as long as the Executive has
not been medically released and returned to full-time duty before such thirtieth
(30th) day.

          (c) Termination by the Company; Cause. The Company may terminate the
Executive’s employment with the Company at any time whether with or without
Cause. If the Company terminates the Executive’s employment for Cause, then such
termination shall not be effective unless and until the Board (i) provides
reasonable notice and an opportunity to the Executive and his counsel (if
applicable) to be heard at a meeting called to discuss the Executive’s
employment and (ii) subsequently provides the Executive with a copy of a
resolution duly adopted by at least a three-fifths (3/5) majority of the Board
specifying that the Board has determined in good faith that Cause exists for
terminating the Executive’s employment.

          (d) Termination by the Executive; Good Reason. The Executive may
terminate his employment with the Company at any time whether with or without
Good Reason. If the Executive believes Good Reason exists for terminating his
employment, then he shall give the Company written notice of the acts or
omissions constituting Good Reason within thirty (30) days after learning of
such acts or omissions constituting Good Reason (the “Good Reason Notice”). No
termination of employment for Good Reason shall be effective unless (i) within
thirty (30) days after receiving the Good Reason Notice, the Company fails to
either cure such acts or omissions or notify the Executive of the intended
method of cure, and (ii) the Executive delivers a Notice of Termination to the
Company and subsequently resigns within thirty (30)

3

--------------------------------------------------------------------------------

days after the Company’s deadline in Section 3(d)(i) expires. Notwithstanding
the previous sentence and at the Company’s request, the Executive shall provide
services consistent with his then-current authority, duties, and
responsibilities for up to ninety (90) days after having provided the Good
Reason Notice to the Company.

          (e) Paid Suspensions. Notwithstanding any contrary provision in this
Agreement, the Company may suspend the Executive with pay for up to thirty (30)
days pending an investigation authorized by the Company or the Board, or pursued
by, or at the request of, a governmental authority, to determine whether the
Executive has engaged in acts or omissions constituting Cause. Any such paid
suspension shall not constitute Good Reason for the Executive to terminate his
employment under Section 3(d). The Executive shall cooperate with the Company in
connection with any such investigation. If the Executive’s employment is
subsequently terminated for Cause in connection with such investigation, then
the Executive shall repay any amounts paid by the Company to the Executive
during such paid suspension.

          (f) Effect of a Change in Control on Timing of Termination Date. If
the Company terminates the Executive’s employment other than for Cause or the
Executive becoming Disabled and a Change in Control occurs following the
Termination Date, then such Change in Control shall be deemed to have occurred
immediately prior to the Termination Date if either (i) the Termination Date
occurs following the execution of an agreement that provides for a transaction
or transactions that, if consummated, constitutes such Change in Control, or
(ii) the Executive reasonably demonstrates that such termination was either (A)
requested by a third party who had indicated an intention or taken steps
reasonably calculated to effect the Change in Control or who effectuates such
Change in Control, or (B) was otherwise in connection with, or in anticipation
of, such Change in Control.

          (g) Notice of Termination. Any termination of the Executive’s
employment by the Company or by the Executive shall be effective only when
communicated by a Notice of Termination given to the other party in accordance
with Section 15(d). In the event of a termination by the Executive for Good
Reason, a Notice of Termination shall be effective only if given within the time
limit established by Section 3(d).

          (h) Effect of Termination and Duties Upon Termination. If, on the
Termination Date, the Executive is a member of the board of directors (or any
similar governing body) or an officer of the Company or any Affiliate, or holds
any other position with the Company or an Affiliate, then the Executive shall
resign and be deemed to have resigned from all such positions as of the
Termination Date. Between the date a Notice of Termination is delivered and the
Termination Date, the Executive shall continue to perform his duties under this
Agreement and such services for the Company as are necessary and appropriate for
a smooth transition to the Executive’s replacement, if any. Notwithstanding the
foregoing sentence, the Company may relieve the Executive from further duties
under this Agreement after receiving a Notice of Termination; provided, however,
that prior to the Termination Date, the Executive shall continue to be treated
as a Company employee for other purposes and the Executive’s rights to
compensation or benefits shall not be reduced by reason of the relief. Upon the
Termination Date, the Executive shall return to the Company any keys, credit
cards, passes, confidential documents or material, or other property belonging
to the Company, and all writings, files, records, correspondence,

4

--------------------------------------------------------------------------------

notebooks, notes, and other documents and things (including any copies thereof)
containing any Confidential Information.

 

 

19.

Obligations of the Company Upon Termination.

          (a) Accrued Obligations. Upon any termination of the Executive’s
employment for any reason, the Company shall pay the Executive (i) his accrued
Annual Base Salary and accrued, unused vacation through the Termination Date in
a lump sum in cash within thirty (30) days after the Termination Date, and (ii)
if the Executive is actively employed during the entire year upon which such
Annual Bonus is based under Section 2(c) before the Termination Date, the Annual
Bonus at the same time as such bonuses are paid to similarly situated executives
of the Company but in no event later than two and one-half (2½) months after the
end of the taxable year in which any substantial risk of forfeiture with respect
to such bonus lapses (the payments in (i) and (ii) shall be referred to as the
“Accrued Obligations”).

          (b) Good Reason; Other Than for Cause, Death, or Becoming Disabled. If
(x) the Company terminates the Executive’s employment other than for Cause, the
Executive’s death, or the Executive becoming Disabled, or (y) the Executive
terminates his employment for Good Reason, then the Company shall, in addition
to the payment of the Accrued Obligations, have the following obligations to the
Executive:

                    (i) the Company shall pay the Executive within thirty (30)
days after the Termination Date

                              (A) a lump sum in cash equal to 1 times the sum
of:

                                        (1) the greater of (x) the Executive’s
then-current Annual Base Salary, and (y) the Executive’s Annual Base Salary at
any time during the two (2) years before the Termination Date; and

                                        (2) the average of the Annual Bonuses
received by the Executive within three (3) years before the Termination Date
(or, if termination occurs during the CIC Period, the greater of (x) the average
Annual Bonus received by the Executive within three (3) years before the
Termination Date, and (y) the average Annual Bonus received by the Executive
within three (3) years before the Change in Control); provided, however, if the
Executive’s employment began in the same calendar year as the termination of
such employment, then the Annual Bonus amount used for calculating the lump sum
payment due shall be determined by the Compensation Committee in its discretion;
and

                              (B) any applicable Prorated Annual Bonus; and

                    (ii) the Company shall provide the Executive

                              (A) for the period allowed under Section 4980B of
the Code, with the same level of health and dental insurance benefits for the
Executive (and his dependents, if applicable) upon substantially similar terms
and conditions (including contributions required by the Executive for such
benefits) as existed immediately before the Termination Date (or, if more
favorable to the Executive, as such benefits and terms and conditions existed
immediately before

5

--------------------------------------------------------------------------------

the Change in Control, if applicable); provided, however, if the Executive is
not eligible to continue participating in the Company plans providing such
benefits, then the Company shall otherwise provide such benefits on the same
after-tax basis as if continued participation had been permitted. The Company’s
obligations under this subparagraph (A) shall apply against its coverage
obligations under COBRA. Notwithstanding the foregoing, if the Executive becomes
eligible to receive health and dental insurance benefits through subsequent
employment, then the Executive shall ensure that a coordination of benefits
occurs so that the medical and dental plan of the Executive’s new employer shall
be responsible for such medical and dental benefits that are available under the
new employer’s plans before any medical and dental benefits are provided
pursuant to this subparagraph (A);

                              (B) for three (3) years following the Termination
Date, with the same level of life insurance benefits upon substantially similar
terms and conditions (including contributions required by the Executive for such
benefits) as existed immediately before the Termination Date (or, if more
favorable to the Executive, as such benefits and terms and conditions existed
immediately before the Change in Control); provided, however, if the Executive
is not eligible to continue participating in the Company plans providing such
life insurance benefits, then the Company shall otherwise provide such benefits
on the same after-tax death benefit basis as if continued participation had been
permitted.

                    (iii) if the value of any benefits or payment provided under
subparagraphs (A) and (B) above is subject to income taxes, and would not have
been subject to income taxes if the Executive had continued employment with the
Company, then the Company shall pay the Executive a Gross-Up Payment (as
described in Section 7(a)) in an amount equal to the aggregate amount of the
additional federal, state, and local income taxes payable by the Executive as a
result of the receipt of such benefit or payment by December 31 of the year next
following the Executive’s taxable year in which the income taxes were incurred;
and

                    (iv) the Company shall pay, or reimburse the Executive, for
a reasonable amount of outplacement services from a mutually agreeable service
provider for twelve (12) months following the Termination Date. The amount of
such outplacement services shall be commensurate with the Executive’s title and
position with the Company and other executives similarly situated in other
companies within the Company’s peer industry group. Any reimbursement of such
expenses shall be made by December 31 of the Executive’s taxable year following
the year the expenses were incurred.

          (c) Death or Disabled. If the Executive’s employment terminates due to
death or because he is Disabled, then this Agreement shall terminate without
further obligations to the Executive or his legal representatives, as
applicable, under this Agreement, other than the obligation to pay, within
thirty (30) days after the Termination Date, (i) the Accrued Obligations, and
(ii) any applicable Prorated Annual Bonus.

          (d) Cause; Other than for Good Reason. If the Executive’s employment
is terminated for Cause or the Executive terminates his employment without Good
Reason, then this Agreement shall terminate without further obligations to the
Executive under this Agreement other than for payment of the Accrued
Obligations.

6

--------------------------------------------------------------------------------

          (e) Application of Section 409A of the Code. Notwithstanding the above
paragraphs of this Section 4, if the Company determines that (i) the Executive
is a “specified employee” within the meaning of Section 409A of the Code
(“Section 409A”) as of the date of his “separation from service” as defined by
Section 409A (“Separation from Service”), and (ii) any amount of any payment to
be made under this Section 4 is subject to Section 409A, then such amount shall
not be paid to the Executive until six (6) months after the date of his
Separation from Service (or, if earlier, the date of his death). In such case,
the portion of the payment so delayed shall be paid in a single lump sum in cash
on the first (1st) day of the seventh (7th) month following the Executive’s
Separation from Service (or, if earlier, upon his death).

          (f) General Release. The Company’s obligation to make the payments
described under Section 4(b) shall be conditioned on the Executive signing and
not revoking the general form of release attached as Exhibit “B” or such other
form acceptable to the Company within the time periods provided in such release.
The Company shall not be required to make any payment under Section 4(b) until
the period for the Executive to revoke the release has expired.

20.      Non-Exclusivity of Rights. Except as specifically provided in Sections
4(b)(ii)(A) and 4(b)(v), nothing in this Agreement shall prevent or limit the
Executive’s right to participate in any plan, program, policy, or practice
provided by the Company or any Affiliate and for which the Executive may
qualify, nor shall anything in this Agreement limit or otherwise affect such
rights as the Executive may have under any other contract or agreement with the
Company or any Affiliate. Amounts that are vested benefits or that the Executive
is otherwise entitled to receive under any plan, policy, practice, or program
of, or any contract or agreement with, the Company or any Affiliate at or after
the Termination Date shall be payable in accordance with such plan, policy,
practice, program, contract, or agreement, except as explicitly modified by this
Agreement; provided, however, that the Executive shall not be eligible for
severance benefits under any other severance program, policy, practice, or plan
of the Company or any Affiliate providing benefits upon involuntary termination
of employment.

21.      Full Settlement. The Company’s payment and other obligations under this
Agreement shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right, or action against the Executive or others. The
Executive shall have no obligation to seek employment or otherwise mitigate his
damages under this Agreement and amounts payable to the Executive under this
Agreement shall not be reduced whether or not the Executive obtains other
employment, except as provided in Section 4(b)(ii) of this Agreement.

 

 

22.

Certain Additional Payments by the Company.

          (a) Gross-Up Payment. Notwithstanding any contrary provision of this
Agreement and except as provided below, if any payment, benefit, or distribution
by the Company, any Affiliate, or trusts established by the Company or any
Affiliate for the benefit of its employees, to or for the benefit of the
Executive (whether pursuant to this Agreement or otherwise but determined
without regard to any additional payments required under this Section 7) (each,
a “Payment”) is determined to be subject to excise tax imposed by the Code,
including Section 4999 of the Code, or any interest or penalties are incurred by
the Executive with respect to such an excise tax (such excise tax and any such
interest and penalties shall referred to as the “Excise Tax”), then the
Executive shall be entitled to receive an additional payment (a “Gross-Up
Payment”) in an

7

--------------------------------------------------------------------------------

amount such that, after payment by the Executive of all taxes (including any
applicable interest or penalties) and Excise Tax imposed upon or related to the
Gross-Up Payment, the Executive retains a Gross-Up Payment amount equal to the
Excise Tax imposed upon the Payments.

          (b) Determinations and Tax Notice. Subject to Section 7(c), all
determinations required under this Section 7, including whether and when a
Gross-Up Payment is required and its amount, shall be made by a nationally
recognized certified public accounting firm designated and paid by the Company
(the “Accounting Firm”), which shall provide its analysis and detailed
supporting calculations to both the Company and the Executive within fifteen
(15) business days after the Executive delivers to the Company any written
notice of any claim by the Internal Revenue Service that may require the
Company’s Gross-Up Payment (the “Tax Notice”). The Company shall pay any
Gross-Up Payment due under this Section 7 to the Executive within five (5) days
after receiving the Accounting Firm’s determination but in no event later than
December 31 of the year next following the taxable year in which the Executive
received the Payment. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, then it shall furnish the Executive with an opinion
supporting the determination not to report an Excise Tax on the Executive’s
federal income tax return. Any determination by the Accounting Firm shall be
binding upon the parties. Due to the uncertainty of the application of Section
4999 of the Code when the initial determination is made by the Accounting Firm,
it is possible that Gross-Up Payments that will not have been made by the
Company should have been made (“Underpayment”), consistent with the calculations
required under this Section 7. If the Company exhausts its remedies pursuant to
Section 7(c) and the Executive thereafter is required to pay any Excise Tax,
then 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 but in no event later than the December 31 of
the year next following the taxable year in which the Executive received the
Payment.

          (c) Contests. The Tax Notice shall be given as soon as practicable but
no later than ten (10) business days after the Executive receives written notice
of such claim describing the nature of such claim and indicating the due date
for such claim. The Executive shall not pay such claim until thirty (30) days
after delivering the Tax Notice to the Company (or such shorter period imposed
by the Internal Revenue Service). If the Company notifies the Executive in
writing before the expiration of such period that it desires to contest such
claim, then the Executive shall:

                    (i) provide any information reasonably requested by the
Company relating to such claim;

                    (ii) contest such claim as the Company shall reasonably
request in writing, including, without limitation, accepting legal
representation reasonably selected by the Company;

                    (iii) cooperate with the Company in good faith to
effectively contest such claim; and

                    (iv) permit the Company to participate in any proceedings
relating to such claim.

The Company (x) shall pay all costs and expenses (including additional interest
and penalties)

8

--------------------------------------------------------------------------------

related to 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) imposed as a result of such representation and payment of costs and
expenses, (y) 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 (z) may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, in which case, the Executive shall administratively and
judicially prosecute such contest to a determination as the Company shall
determine; provided, however, that the Company’s control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
under this Agreement 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. If the Company directs the Executive to pay such
claim and sue for a refund, then the Company shall, to the extent permitted by
law, advance the amount of such payment to the Executive, on an interest-free
basis, and shall indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest or penalties)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance. The Company shall make any payment in reimbursement of
costs and expenses, Excise Tax, income tax, or other amounts due the Executive
under this Section 7(c) no later than December 31 of the year following the year
in which (x) the taxes that are the subject of the audit are remitted to the
taxing authority, or (y) there is a final and non-appealable settlement or other
resolution of the litigation.

          (d) Refunds. If, after receiving an advance from the Company pursuant
to Section 7(c), the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall promptly pay the Company the amount
of such refund (together with any interest paid or credited after applicable
taxes). If, after receiving an advance from the Company pursuant to
Section 7(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund before the
expiration of thirty (30) days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset the amount of the Gross-Up Payment required to be paid.

 

 

23.

Confidential Information and Non-Solicitation.

          (a) Confidential Information. Given his position and employment with
the Company, the Executive acknowledges that he will be using, acquiring, and
adding to Confidential Information of a special and unique nature and value to
the Company and its strategic plan and financial operations. The Executive
further acknowledges that all Confidential Information belongs exclusively to
the Company, is material and proprietary, and is critical to the Company’s
success. Accordingly, the Executive shall use Confidential Information only to
the Company’s benefit and shall not at any time during or after his employment
with the Company directly or indirectly disclose any Confidential Information to
any person or use any Confidential Information for the Executive’s own benefit,
for the benefit of others, or to the Company’s detriment.

          (b) Legally Required Disclosure. If any court or agency requests the
Executive to disclose Confidential Information, then the Executive shall
promptly notify the Company and

9

--------------------------------------------------------------------------------

take reasonable steps to prevent such disclosure until the Company receives such
notice and has an opportunity to respond to such court or agency. If the
Executive obtains information that may be subject to the attorney-client
privilege of the Company or any Affiliate, then the Executive shall take
reasonable steps to maintain the confidentiality of such information and to
preserve such privilege.

          (c) Exceptions. Confidential Information shall not include knowledge
that was acquired during the course of the Executive’s employment under this
Agreement that is generally known to persons of the Executive’s experience in
other companies in the same industry.

          (d) Legal Proceedings. This Section 8 shall not unreasonably restrict
the Executive’s ability to disclose Confidential Information in any legal
proceeding involving any claim for breach or enforcement of this Agreement. If
the parties dispute whether information may be disclosed in accordance with this
Section 8(d), then the matter shall be considered an Employment Matter and
decided in accordance with Section 10.

          (e) Other Obligations. This Agreement supplements, rather than
supplants, the Executive’s obligations under any Company policy relating to
confidential information and any agreement of the Executive relating to
confidentiality, inventions, copyrightable material, business and/or technical
information, trade secrets, solicitation of employees, interference with
business relationships, competition, and other similar matters that protect the
business and operations of the Company or its Affiliates.

          (f) Non-Solicitation. During his employment with the Company and for
eighteen (18) months following the date such employment terminates, regardless
of the reason for such termination, the Executive shall not directly or
indirectly hire, employ, solicit for employment, attempt to solicit for
employment, or communicate with about changing employment, any person who was an
employee of the Company or its Affiliate within six (6) months of such hiring,
employing, soliciting, or communicating.

          (g) Remedies. The Executive acknowledges and agrees that the Company
will have no adequate remedy at law and could be irreparably harmed if the
Executive breaches or threatens to breach his obligations under this Section 8.
The Company shall be entitled to equitable and/or injunctive relief to prevent
any such breach or threatened breach and to specific performance in addition to
any other available legal or equitable remedies. The Executive shall not, in any
equity proceeding relating to the enforcement of this Section 8, raise the
defense that the Company has an adequate remedy at law.

          (h) Survival. The Executive’s obligations under this Section 8 shall
survive any termination of the Executive’s employment or of this Agreement.

 

 

24.

Assignment; Successors.

          (a) Assignment. The Company’s rights and obligations under this
Agreement may not be assigned to any entity other than an Affiliate without the
Executive’s consent. The Executive’s duties, responsibilities, authorities,
compensation, and benefits are personal to the Executive and may not be assigned
to any person or entity without written consent from the

10

--------------------------------------------------------------------------------

Company other than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives.

          (b) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the Company and its successors and assigns.

          (c) Assumption. The Company shall require any successor or assignee
(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
assume expressly and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform if no such
succession or assignment had taken place.

 

 

25.

Dispute Resolution and Guarantees of Payment.

          (a) Mandatory Arbitration. Subject to Section 10(b), any Employment
Matter shall be finally settled by arbitration in Oklahoma City, Oklahoma
administered by the AAA under its Employment Arbitration Rules then in effect;
provided, however, that the AAA’s Employment Arbitration Rules shall be modified
as follows: (i) each arbitrator shall agree to treat as confidential evidence
and other information presented, and (ii) there shall be no authority to award
punitive damages or liquidated or indirect damages unless such damages could be
awarded by a court of competent jurisdiction. The decision of the arbitrator(s)
shall be enforceable in any court of competent jurisdiction.

          (b) Injunctions and Enforcement of Arbitration Awards. Either party
may bring an action or special proceeding in a state or federal court of
competent jurisdiction in Oklahoma City, Oklahoma to enforce any arbitration
award under Section 10(a). The Company also may bring such an action or
proceeding, in addition to its rights under Section 10(a) and whether or not an
arbitration proceeding has been or is ever initiated, to temporarily,
preliminarily, or permanently enforce Sections 8 or 11. The Executive agrees
that (i) violating Sections 8 or 11 would damage the Company in ways that cannot
be measured or repaired, (ii) the Company shall be entitled to an injunction,
restraining order, or other equitable relief restraining any actual or
threatened violation of Sections 8 or 11, (iii) the Company shall not be
required to post a bond or prove actual damages when seeking such an injunction,
restraining order, or other equitable relief, and (iv) remedies at law for such
violations would be inadequate.

          (c) Waiver of Jury Trial. To the extent permitted by law, the parties
waive any and all rights to a jury trial with respect to any Employment Matter.

          (d) Attorney Fees.

                    (i) If (A) a claim for arbitration or a lawsuit in
connection with an Employment Matter (an “Employment Matter Claim”) is filed by
either of the parties, and (B) the Executive is ultimately successful in respect
of one or more material claims or defenses brought, raised or pursued in
connection with such Employment Matter Claim, then the Company shall reimburse
the Executive for all legal fees and expenses reasonably incurred in connection
with such Employment Matter Claim, provided that such legal fees are reasonable
and are calculated on an hourly rather than a contingency fee basis, as well as
all costs and expenses reasonably incurred in connection with pursuing or
defending any such Employment Matter Claim. Except as

11

--------------------------------------------------------------------------------

provided in Section 10(d)(ii) below, the Company shall make such reimbursement
to the Executive as soon as practicable following final resolution of the
Employment Matter Claim, but no later than December 31 of the year immediately
following the year of such resolution, provided that the Company receives
appropriate documentation of such attorneys’ fees, costs, and expenses, which
shall be provided by the Executive no later than the later of (x) December 31 of
the year in which resolution occurs, or (y) sixty (60) days following the
resolution of the Employment Matter Claim.

                    (ii) If an Employment Matter Claim is filed by either of the
parties during the CIC Period, or (B) an Employment Matter Claim has been filed
prior to a Change in Control but has not been resolved as of the effective date
of a Change in Control, then the Executive may submit his request for
reimbursement of attorneys’ fees, costs and expenses on a monthly basis during
the pendency of such Employment Matter Claim. Within sixty (60) days following
the Company’s receipt of each such monthly request and appropriate documentation
supporting such request for reimbursement of attorneys’ fees, costs and
expenses, the Company shall reimburse the Executive (or pay directly to the
Executive’s attorney) the Executive’s attorneys’ fees, costs and expenses that
the Company is obligated, pursuant to Section 10(d)(i) above, to reimburse with
respect to such Employment Matter Claim. In the event the Executive ultimately
fails to be successful with respect to at least one of the Executive’s material
claims or defenses brought, raised or pursued in connection with such contest or
dispute, the Executive shall repay the Company the amount of any such
reimbursement received in connection with such dispute in accordance with this
Section 10(d) (without interest) as soon as practicable following the final
resolution of such matter.

          (e) Secondary Liability for Payment. If any Affiliate is not otherwise
obligated to provide benefits to the Executive by this Agreement, then the
Company shall take, and cause each such Affiliate (the “Guarantors”) to take,
such actions as are necessary to cause the Guarantors to jointly and severally
guarantee the payment of benefits otherwise due to the Executive under this
Agreement if the Company fails to pay such benefit within thirty (30) days of
the due date for such payment; provided, however, that no entity organized under
the laws of any jurisdiction outside the United States shall have an obligation
to enter into such guarantee. Each of the Guarantors shall be subrogated to the
Executive’s rights under this Agreement to the extent of any payments by each
such Guarantor to or on account of the Executive under this Section 10(e).

26.      Non-Disparagement. The Executive shall not make any negative or
disparaging comments regarding the Company or its Representatives or its or
their respective performance, operations, or business practices, or otherwise
take any action that could reasonably be expected to adversely affect the
Company or such Representatives or their personal or professional reputations.
The Executive may truthfully respond to inquiries by government agencies or to
inquiries by any person through a subpoena or other valid judicial process
without violating this Section 11, provided that the Executive delivers written
notice of such required disclosure to the Company promptly before making such
disclosure, unless such notice to the Company is prohibited by applicable law,
court order, subpoena, process, or governmental decree.

12

--------------------------------------------------------------------------------

 

 

27.

Indemnification and Insurance.

          (a) Indemnity. The Company shall, to the maximum extent permitted by
law, defend, indemnify, and hold harmless the Executive and the Executive’s
heirs, estate, executors, and administrators against any costs, losses, claims,
suits, proceedings, damages, or liabilities to which they may become subject to
arising from, based on, or relating to the Executive’s employment by the Company
(and any predecessor of the Company), or the Executive’s service as an officer
or member of the board of directors (or any similar governing body) of the
Company (or any predecessor of the Company) or any Affiliate, including without
limitation reimbursement for any legal or other expenses reasonably incurred by
the Executive in connection with investigation and defending against any such
costs, losses, claims, suits, proceedings, damages, or liabilities.

          (b) Insurance. The Company shall maintain directors and officers
liability insurance in commercially reasonable amounts (as reasonably determined
by the Board), and the Executive shall be covered under such insurance to the
same extent as other similarly situated executives of the Company; provided,
however, that the Company shall not be required to maintain such insurance
coverage if the Board determines that it is unavailable at reasonable cost,
provided that the Executive is given written notice of any such determination
promptly after it is made.

          (c) Gross-Up. If the value of any benefits or payment provided under
Section 12(a) is subject to income taxes, then the Company shall make a Gross-up
Payment (as described in Section 7(a)) to the Executive, by December 31 of the
year next following the Executive’s taxable year in which the income taxes were
incurred, such that, after payment of all taxes imposed on or related to such
Gross-up Payment, the Executive retains an amount equal to 75% of the federal,
state, and local income taxes imposed upon such benefits or payment.  

28.      Executive to Provide Assistance with Claims. During his employment with
the Company and following the termination of such employment, regardless of the
reason for such termination, the Executive shall assist the Company in defending
any claims that may be made against the Company, and shall assist the Company in
prosecuting any claims that may be made by the Company, to the extent that such
claims may relate to the Executive’s services for the Company. The Executive
shall promptly inform the Company if he learns of any lawsuits involving such
claims that may be filed against the Company. The Company shall reimburse the
Executive for all reasonable out-of-pocket expenses associated with such
assistance, including travel expenses, incurred and accounted for in accordance
with its standard policies and procedures for expense reimbursements and
deductibles under Section 162 of the Code. For periods after the Termination
Date, the Company shall provide reasonable compensation to the Executive for
such assistance at a rate to be determined by the Company in its discretion. The
Executive shall promptly inform the Company if asked to assist in any
investigation of the Company that may relate to the Executive’s services for the
Company, regardless of whether a lawsuit has then been filed against the Company
with respect to such investigation. For purposes of this Section 13, the term
“Company” shall include the Company and its Affiliates.

29.      Entire Agreement. Except as provided in Section 8(e), this Agreement
constitutes the entire agreement among the parties with respect to its subject
matters and supersedes any and all prior or contemporaneous oral and written
agreements and understandings with respect to such subject matters, including
without limit all prior agreements relating to employment, severance, or change
in control; provided, however, that this Agreement shall not adversely affect
the

13

--------------------------------------------------------------------------------

Executive’s rights under the terms of any option on stock of the Company or any
other award based on the stock of the Company.

 

 

30.

Miscellaneous.

          (a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Oklahoma, without reference to its
conflict-of-laws principles.

          (b) Captions. The captions of this Agreement are not part of this
Agreement and shall have no force or effect.

          (c) Amendment. This Agreement may not be amended or modified except by
a written agreement executed by the parties or their respective successors and
legal representatives.

          (d) Notices. All notices and other communications under this Agreement
shall be in writing and sent to the other party by either hand delivery,
pre-paid overnight carrier, or registered or certified U.S. mail (return receipt
requested) postage prepaid, addressed as follows:

 

 

 

If to the Executive:

 

 

 

Mark E. Vaughan

 

Vaughan Foods, Inc.

 

216 NE 12th Street

 

Moore, Oklahoma 73160

 

 

 

If to the Company:

 

 

 

Vaughan Foods, Inc.

 

216 NE 12th Street

 

Moore, Oklahoma 73160

 

 

 

With copies to:

 

 

 

J. Dudley Hyde, Esq.

 

McAfee & Taft A Professional Corporation

 

10th Floor, Two Leadership Square

 

211 N. Robinson

 

Oklahoma City, Oklahoma 73102

or to such other address as either party shall have furnished to the other in
writing. Such notice shall be deemed given (i) in the case of hand delivery, the
day of delivery; (ii) in the case of overnight delivery, the next business day
or the day designated for delivery; and (iii) in the case of certified or
registered U.S. mail, five (5) days after deposit in the U.S. mail; provided,
however, that in no event shall any such notices be deemed to be given later
than the date they are actually received.

          (e) Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, and this

14

--------------------------------------------------------------------------------

Agreement shall be construed as if such invalid or unenforceable provisions were
omitted (but only to the extent such provision cannot be appropriately reformed
or modified). If any such provision may be made enforceable by limitation, then
such provision shall be deemed to be so limited and shall be enforceable to the
maximum extent permitted by applicable law.

          (f) Withholdings. The Company may withhold from any amounts payable
under this Agreement all amounts authorized by the Executive or required to be
withheld under any applicable federal, state, local, or foreign law or
regulation.

          (g) Waiver. The waiver by either party of a breach of any term or
provision of this Agreement shall not operate or be construed as a waiver of a
subsequent breach of the same term or provision by either party or of the breach
of any other term or provision of this Agreement.

          (h) Representations and Warranties. The Executive represents and
warrants that (i) he is not, and shall not become, a party to any agreement,
contract, arrangement, or understanding, whether of employment or otherwise,
that would in any way restrict or prohibit him from undertaking or performing
the duties required by this Agreement or that would in any way restrict or
prohibit his ability to be employed by the Company in accordance with this
Agreement; (ii) his employment by the Company does not and shall not violate the
terms of any policy of, or any agreement with, any prior employer regarding
confidentiality or competition; and (iii) his position with the Company shall
not require him to improperly use any trade secrets or confidential information
of any prior employer or any other person or entity for whom he has performed
services.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

15

--------------------------------------------------------------------------------

          IN WITNESS WHEREOF, the Company and the Executive have executed this
Amended and Restated Severance Agreement as of the Effective Date.

 

 

 

/s/ Mark E. Vaughan

 

--------------------------------------------------------------------------------

 

Mark E. Vaughan

 

 

 

Vaughan Foods, Inc.

 

 

 

/s/ Herbert B. Grimes

 

--------------------------------------------------------------------------------

 

By: Herbert B. Grimes

 

Its: Chairman of the Board and Chief Executive Officer

16

--------------------------------------------------------------------------------

Exhibit A

Definitions

Definitions. The following terms, when used throughout this Agreement, shall
have the following meanings:

 

 

 

 

42.

“AAA” means the American Arbitration Association.

 

 

43.

“Accounting Firm” has the meaning ascribed to such term in Section 7(b).

 

 

44.

“Act” means the Securities Exchange of Act of 1934, as amended from time to
time.

 

 

45.

“Accrued Obligations” has the meaning ascribed to such term in Section 4(a).

 

 

46.

“Affiliate” means, with respect to the Company, any person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, the Company; provided, however, that a natural person
shall not be considered an Affiliate.

 

 

47.

“Agreement” has the meaning set forth in the preamble.

 

 

48.

“Annual Base Salary” means the annual base salary of the Executive as in effect
from time to time. During the term of this Agreement, the Annual Base Salary
shall be $260,000 per year, plus the use of a company vehicle. The Annual Base
Salary is reviewed annually. When the Company and its subsidiaries collectively
achieve annualized revenue of at least $125,000,000 (based on 6-month trailing
average), Executive’s then current Annual Base Salary shall be increased by
$26,000. Any increase in Annual Base Salary shall not service to limit or reduce
any obligations of Executive in this Agreement. The Annual Base Salary shall not
be reduced after any increase, and the term “Annual Base Salary” shall refer to
the Annual Base Salary as so increased. The Annual Base Salary shall be payable
in regular installments in accordance with the Company’s general payroll
practices and shall be subject to FICA and income tax withholding.

 

 

49.

“Annual Bonus” means, with respect to any given year, the annual bonus payable
to the Executive with respect to that year, as determined by the Compensation
Committee in its discretion. The Annual Bonus target shall be up to 50% of
Annual Base Salary in accordance with the Company’s Bonus Performance Plan
proposed by the senior management of the Company and approved by the Board.
Executive shall only be eligible to receive a Annual Bonus at the end of such
fiscal year if Executive remains employed by the Company or an Affiliate at
such, time or under the terms of a separate severance arrangement if not then
employed by the Company. See Section 4(b)(i) if the Executive is terminated for
Good Reason.

 

 

50.

“Board” means, at any given time, the Company’s Board of Directors at that time.

- 1 -

--------------------------------------------------------------------------------

 

 

 

 

51.

“Cause” means any of the following:

 

 

 

(a)

the willful failure by the Executive to substantially perform the Executive’s
duties for the Company or an Affiliate (other than due to physical or mental
incapacity) within thirty (30) days after receiving a written demand for
substantial performance from the Supervisor, the CEO, or the Board;

 

 

 

 

(b)

the willful engaging by the Executive in illegal or dishonest conduct or gross
misconduct that is materially and demonstrably injurious to the Company or an
Affiliate; or

 

 

 

 

(c)

the conviction of the Executive of a felony or any crime of moral turpitude, a
guilty or nolo contendere plea by the Executive with respect to a felony or any
crime of moral turpitude, or the deferred adjudication or unadjudicated
probation of the Executive with respect to a felony or any crime of moral
turpitude;

 

 

 

 

provided, however, that (x) an act or omission by the Executive shall be
considered “willful” only if it was not in good faith and was without reasonable
belief that it was in the Company’s best interests, and (y) any act or omission
by the Executive based upon authority granted by resolution duly adopted by the
Board, the instructions of the Supervisor, or the advice of counsel for the
Company shall be conclusively presumed to be in good faith and in the Company’s
best interests.

 

 

52.

“CEO” means, at any given time, the Chief Executive Officer of the Company at
that time.

 

 

53.

“Change in Control” means the occurrence of any one of the following events:

 

 

 

(a)

The Incumbent Directors cease for any reason to constitute at least a majority
of the Board;

 

 

 

 

(b)

any person is or becomes a “beneficial owner” (as defined in Rule 13d-3 under
the Act), directly or indirectly, of Company securities representing 30% or more
of either (x) the Company’s outstanding shares of common stock or (y) the
combined voting power of the Company’s then outstanding securities eligible to
vote in the election of directors (each, “Company Securities”); provided,
however, that the event described in this paragraph (b) shall not be deemed to
be a Change in Control by virtue of any of the following acquisitions or
transactions: (A) by the Company or any subsidiary, (B) by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
subsidiary, (C) by an underwriter temporarily holding securities pursuant to an
offering of such securities, or (D) pursuant to a Non-Qualifying Transaction;

 

 

 

 

(c)

the consummation of a merger, consolidation, statutory share exchange, or
similar form of corporate transaction involving the Company or any of its
subsidiaries that requires the approval of the Company’s stockholders, whether
for such transaction or the issuance of securities in the transaction (a
“Reorganization”), or the sale or other disposition of all or substantially all
of the Company’s assets to an entity that is not an Affiliate (a “Sale”),
unless:

- 2 -

--------------------------------------------------------------------------------

 

 

 

 

 

 

(i)

the holders of the Company’s shares of common stock either receive in such
Reorganization or Sale, or hold immediately following the consummation of the
Reorganization or Sale, more than 50% of each of the outstanding common stock
and the total voting power of securities eligible to vote in the election of
directors of (x) the corporation resulting from such Reorganization or the
corporation that has acquired all or substantially all of the assets of the
Company in connection with a Sale (in either case, the “Surviving Corporation”),
or (y) if applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of 100% of the voting securities eligible to
elect directors of the Surviving Corporation (the “Parent Corporation”),

 

 

 

 

 

 

(ii)

no person (other than any employee benefit plan (or related trust) sponsored or
maintained by the Surviving Corporation or the Parent Corporation) is or
becomes, as a result of the Reorganization or Sale, the beneficial owner,
directly or indirectly, of 30% or more of the outstanding shares of common stock
or the total voting power of the outstanding voting securities eligible to vote
in the election of directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation), and

 

 

 

 

 

 

(iii)

at least a majority of the members of the board of directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation)
following the consummation of the Reorganization or Sale were Incumbent
Directors at the time of the Board’s approval of the execution of the initial
agreement providing for such Reorganization or Sale;

 

 

 

 

 

 

(any Reorganization or Sale that satisfies all of the criteria specified in (i),
(ii) and (iii) above shall be deemed to be a “Non-Qualifying Transaction”); or

 

 

 

 

(d)

the Company’s stockholders approve a plan of complete liquidation or dissolution
of the Company.

 

 

 

 

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any person acquires beneficial ownership of more than 30% of
Company Securities due to the Company’s acquisition of Company Securities that
reduces the number of Company Securities outstanding; provided, however, if,
following such acquisition by the Company, such person becomes the beneficial
owner of additional Company Securities that increases the percentage of
outstanding Company Securities beneficially owned by such person, a Change in
Control shall then occur. In addition, if a Change in Control occurs pursuant to
paragraph 12(b) above, then no additional Change in Control shall be deemed to
occur pursuant to paragraph 12(b) by reason of subsequent changes in holdings by
such person (except if the holdings by such person are reduced below 30% and
thereafter increase to 30% or above).

 

 

54.

“CIC Period” means the two-year period following a Change in Control.

 

 

55.

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1986, as
amended from time to time.

- 3 -

--------------------------------------------------------------------------------

 

 

 

 

56.

“Code” means Internal Revenue Code of 1986, as amended from time to time.

 

 

57.

“Company” means Vaughan Foods, Inc., as set forth in the preamble to this
Agreement, and any successor to or assignee of its business and/or assets that
assumes and agrees to perform this Agreement by operation of law or otherwise.

 

 

58.

“Compensation Committee” means, at any given time, the Compensation Committee of
the Board at that time.

 

 

59.

“Confidential Information” means non-public information (including, without
limitation, information regarding litigation and pending litigation) concerning
the Company and its Affiliates that was acquired by or disclosed to the
Executive during his employment with the Company and following the Termination
Date.

 

 

60.

“Disabled” means, with respect to the Executive, that (a) he has received
disability payments under the Company’s long-term disability plan for a period
of three (3) months or more, or (b) based upon the written report (prepared
after a complete physical examination of the Executive) of a mutually agreeable
qualified physician designated by the Company and the Executive or his
representative, the Compensation Committee determines, in accordance with
Section 409A of the Code, that the Executive has become physically or mentally
incapable of performing his essential job functions with or without reasonable
accommodation or job protection as required by law for a continuous period
expected to last for a continuous period of not less than twelve (12) months.

 

 

61.

“Effective Date” has the meaning set forth in the preamble to this Agreement.

 

 

62.

“Employment Matter” means any dispute, controversy, or claim between the parties
arising out of, relating to, or concerning this Agreement, the Executive’s
employment with the Company, or the termination of that employment.

 

 

63.

“Employment Matter Claim” has the meaning ascribed to such term in Section
10(d)(i).

 

 

64.

“Excise Tax” has the meaning ascribed to such term in Section 7(a).

 

 

65.

“Executive” has the meaning set forth in the preamble to this Agreement.

 

 

66.

“Good Reason” means any of the following events, unless the Executive has
consented in writing to such events:

 

 

 

(a)

the assignment of any duties materially inconsistent with the Executive’s
position (including status, offices, titles, and reporting requirements),
authority, duties, or responsibilities under this Agreement, other than an
isolated, insubstantial, or inadvertent action not taken in bad faith and which
the Company remedies promptly after receipt of notice from the Executive;

 

 

 

 

(b)

any material failure by the Company to comply with any provision of this
Agreement, other than an isolated, insubstantial, or inadvertent failure not
occurring

- 4 -

--------------------------------------------------------------------------------

 

 

 

 

 

 

in bad faith and which and which the Company remedies promptly after receipt of
notice from the Executive;

 

 

 

 

(c)

any failure by the Company to comply with and satisfy Section 9(c); or

 

 

 

 

(d)

any relocation of the Executive’s principal office to a location more than fifty
(50) miles from the Executive’s principal office prior to such relocation.

 

 

 

67.

“Good Reason Notice” has the meaning ascribed to such term in Section 3(d).

 

 

68.

“Gross-Up Payment” has the meaning ascribed to such term in Section 7(a).

 

 

69.

“Guarantors” has the meaning ascribed to such term in Section 10(e).

 

 

70.

“Incumbent Directors” means the members of the Board on the Effective Date;
provided, however, that (x) any person becoming a director and whose election or
nomination for election was approved by a vote of at least a majority of the
Incumbent Directors then on the Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as a nominee
for director, without written objection to such nomination) shall be deemed an
Incumbent Director, and (y) no individual initially elected or nominated as a
director of the Company as a result of an actual or threatened election contest
(as described in Rule 14a-11 under the Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of any person (as such term
is used in Sections 13(d)(3) and 14(d)(2) of the Act) other than the Board,
including by reason of any agreement intended to avoid or settle any such
election contest or solicitation of proxies or consents, shall be deemed an
Incumbent Director.

 

 

71.

“Notice of Termination” means a written notice that (i) indicates the specific
termination provision of Section 3 that is being relied upon, (ii) to the extent
applicable, reasonably describes the facts and circumstances claimed to provide
a basis for termination under the provision so indicated, and (iii) specifies
the Termination Date; provided, however, that the failure to describe in the
Notice of Termination any fact or circumstance constituting Good Reason or Cause
shall not waive any right of either party under this Agreement or preclude
either party from asserting such fact or circumstance in enforcing rights under
this Agreement.

 

 

72.

“Payment” has the meaning ascribed to such term in Section 7(a).

 

 

73.

A “person” shall have the meaning ascribed by Section 3(a)(9) of the Act and
shall also mean a natural person, company, government (and any political
subdivision, agency, or instrumentality of a government), corporation,
partnership, limited liability company, trust, unincorporated organization, or
other entity. When two or more persons act as a partnership, limited
partnership, syndicate, or other group for the purposes of acquiring, holding,
or disposing Company Securities, such partnership, limited partnership,
syndicate, or other group shall be deemed a “person” for purposes of this
Agreement.

 

 

74.

“Prorated Annual Bonus” means a prorated amount of an Annual Bonus payable under
Sections 4(b)(i)(B) or 4(c). If the Executive’s employment began in a calendar
year before

- 5 -

--------------------------------------------------------------------------------

 

 

 

 

 

the calendar year in which the Termination Date occurs, the Prorated Annual
Bonus shall be calculated based on the prior year’s Annual Bonus (if any) times
the number of days worked in the year in which the Termination Date occurs
divided by three hundred sixty five (365). If the Executive’s employment began
in the calendar year in which the Termination Date occurs, then the Prorated
Annual Bonus shall be determined by the Compensation Committee in its
discretion.

 

 

75.

“Representatives” means, with respect to the Company, its Affiliates and any of
their respective past or present officers, directors, stockholders, partners,
members, managers, agents, and employees.

 

 

76.

“Section 409A” has the meaning ascribed to such term in Section 4(e).

 

 

77.

“Separation from Service” has the meaning ascribed to such term in Section 4(e).

 

 

 

 

78.

“Short-Term Disability Payments” means disability payments under the Company’s
short-term disability policy or plan that are less than 100% of the then-current
Annual Base Salary.

 

 

79.

“Supervisor” means, with respect to the Executive, the person to whom the
Executive reports, as determined by the CEO or the CEO’s designee from time to
time or the Board with respect to the CEO.

 

 

80.

“Tax Notice” has the meaning ascribed to such term in Section 7(b).

 

 

81.

“Termination Date” means the Executive’s last day of employment by the Company
or an Affiliate (including any successor to the Company or such Affiliate as
determined in accordance with Section 9).

 

 

82.

“Underpayment” has the meaning ascribed to such term in Section 7(b).

- 6 -

--------------------------------------------------------------------------------

EXHIBIT B

GENERAL RELEASE

NOTICE

Vaughan Foods, Inc. (the “Company”) is an equal opportunity employer. Various
laws prohibit employment discrimination based on sex, race, color, national
origin, religion, age, disability, eligibility for covered employee benefits,
veteran status, and other legally protected characteristics. You may also have
rights under other federal, state, and/or municipal statutes, orders, or
regulations pertaining to labor, employment, and/or employee benefits. These
laws are enforced through the United States Department of Labor (DOL), the Equal
Employment Opportunity Commission (EEOC), and various other federal, state, and
municipal labor departments, fair employment boards, human rights commissions,
similar agencies, and courts.

This General Release is being provided to you in connection with the Amended and
Restated Employment Agreement previously entered between you and the Company
(the “Employment Agreement”). You have at least twenty-one (21) days from the
date you receive this General Release, if you want it, to consider whether you
wish to sign this General Release and receive the payments and benefits (the
“Severance Benefits”) available under the Employment Agreement for doing so. You
have at least until the close of business twenty-one (21) days from the date you
receive this General Release to make your decision. You may not, however, sign
this General Release until, at the earliest, your last effective date of
employment.

BEFORE SIGNING THIS GENERAL RELEASE YOU SHOULD REVIEW IT CAREFULLY. YOU ALSO
HAVE THE RIGHT TO CONSULT WITH AN ATTORNEY OF YOUR CHOICE.

You may revoke this General Release within seven (7) days after you sign it and
it shall not become effective or enforceable until that revocation period has
expired. If you do not timely sign and return this General Release, or if you
exercise your right to revoke the General Release after signing it, then you
will not be eligible to receive the Severance Benefits. Any revocation must be
in writing and must be received by the Company within the seven-day period
following your execution of this General Release.

GENERAL RELEASE

In consideration of the Severance Benefits offered to me by the Company under
the Employment Agreement, I hereby (i) release and discharge the Company and its
predecessors, successors, affiliates, parent, subsidiaries, and partners and
each of those entities’ current and former employees, officers, directors, and
agents (together, the “Released Parties”) from all claims, liabilities, demands,
and causes of action, known or unknown, fixed or contingent, that I may have or
claim to have against them, including without limit any claims that result from
or arise out of my past employment with the Company, the severance of that
relationship and/or otherwise, or any contract or agreement with or relating to
the Released Parties, and (ii) waive

--------------------------------------------------------------------------------

any and all rights I may have with respect to and promise not to file a lawsuit
to assert any such claims.

This General Release includes, but is not limited to, claims arising under the
Age Discrimination in Employment Act (“ADEA”) and any other federal, state,
and/or municipal statutes, orders, or regulations pertaining to labor,
employment, and/or employee benefits. This General Release also applies without
limitation to any claims or rights I may have growing out of any legal or
equitable restrictions on the rights of the Released Parties not to continue an
employment relationship with their employees, including any express or implied
employment or other contracts, and to any claims I may have against the Released
Parties for fraudulent inducement or misrepresentation, defamation, wrongful
termination, or other torts or retaliation claims in connection with workers’
compensation, any legally protected activity, or alleged whistleblower status,
or on any other basis whatsoever.

It is specifically agreed, however, that this General Release does not have any
effect on any rights or claims under the ADEA I may have against the Company
that arise after the date I execute this General Release or on any vested rights
I may have under any of the Company’s qualified benefit plans or arrangements as
of or after my last day of employment with the Company or on any of the
Company’s obligations under the Employment Agreement.

MISCELLANEOUS

By signing this General Release, I shall, and hereby do, resign from any
corporate, board, and other offices and positions I may hold with the Company
and its affiliates as of the date my employment with the Company terminated.

I agree that (i) none of the Released Parties shall have any obligation to
employ or to hire or rehire me, to consider me for hire, or to deal with me in
any respect with regard to potential future employment; (ii) I shall not ever
apply for or otherwise seek employment with any of the Released Parties for
eighteen (18) months after the Termination Date; and (iii) my forbearance to
seek future employment as just stated shall be construed as being purely
contractual and in no way involuntary, discriminatory, or retaliatory.

I have carefully reviewed and fully understand all the provisions of the
Employment Agreement and General Release, including the foregoing Notice. I have
not relied on any representation or statement, oral or written, relating to the
Employment Agreement or this General Release by the Released Parties that are
not set forth in those documents.

The Employment Agreement and this General Release, including the foregoing
Notice, set forth the entire agreement between me and the Company with respect
to payments and benefits payable to me due to the termination of my employment
with the Company, and supersede all prior agreements and understandings, written
and oral, between the parties with respect to such subject matters. I understand
that my receipt and retention of the Severance Benefits are contingent not only
on my execution and non-revocation of this General Release, but also on my
continued compliance with my other obligations under the Employment Agreement. I
acknowledge that the Company has given me at least twenty-one (21) days to
consider whether I wish to accept or reject the Severance Benefits I am
otherwise eligible to receive under the

2

--------------------------------------------------------------------------------

Employment Agreement in exchange for signing and not revoking this General
Release. I hereby represent and state that I fully understand the effects and
consequences of the Employment Agreement and General Release prior to signing
those documents.

This General Release and the Company’s obligation to provide the Severance
Benefits under the Employment Agreement shall be interpreted and construed to
comply with Section 409A of the Internal Revenue Code (the “Code”). The parties
agree to cooperate and work together in good faith to take all actions
reasonably necessary to effectuate the intent of this paragraph. Notwithstanding
the preceding sentence, I understand and acknowledge that I shall be solely
responsible for any risk that the tax treatment of all or part of the Severance
Benefits may be affected by Section 409A of the Code and impose significant
adverse tax consequences on me, including accelerated taxation, a 20% additional
tax, and interest. Because of the potential tax consequences, I understand that
I have the right, and am encouraged by this paragraph, to consult with a tax
advisor of my choice before signing this General Release.

This General Release shall be governed by the laws of the State of Oklahoma,
without regard to any conflict-of-laws principles, and shall not be modified
unless in a writing signed by both of the parties.

Dated this ___ day of ___________, 20__.

 

 

 

--------------------------------------------------------------------------------

 

Mark E. Vaughan

3

--------------------------------------------------------------------------------