# **EXHIBIT 10**

# EMPLOYMENT AGREEMENT

 

     THIS AGREEMENT is made effective as of May 10, 2002, byand between Robert B. Terry (hereafter "Executive") and Farmland Industries,Inc., a Kansas cooperative corporation (together with all affiliates, the"Company").

 

     WHEREAS, Executive has been designated as the Company'sPresident and Chief Executive Officer ("Chief Executive Officer"), effective May10, 2002; and

 

     WHEREAS, the Company and Executive desire to set forth theterms and conditions of Executive's employment with the Company and any terminationthereof.

 

     NOW, THEREFORE, it is hereby agreed as follows:

 

     1.     Employment. The Companyhereby agrees to employ Executive as its Chief Executive Officer effective May 10, 2002,and Executive hereby agrees to accept employment with the Company in such position uponthe terms and conditions set forth in this Agreement.

 

     2.     Period of Employment;Termination of Agreement. The period of employment ("Employment Period") asChief Executive Officer shall commence on May 10, 2002 and continue for a rolling two (2)year period until written notice of non-extension is provided by either party. In noevent, will such term be automatically extended beyond Executive's 65thbirthday. Executive's employment may be earlier terminated by either party subject to therights and obligations of the parties set forth herein. 

 

     3.     Position, Duties,Responsibilities.Executive shall be employed as the Chief Executive Officer. Executiveshall exercise such authority and perform such duties and services, consistent with suchposition, as may be assigned to him from time to time by the Board of Directors (the"Board").

 

     4.     Devotion of Time and BestEfforts. Except for vacations and absences due to temporary illness, Executive shalldevote his full time, best efforts and undivided attention and energies during hisemployment to the performance of his duties and to advance the Company's interests, asdetermined by the Board. During his employment, Executive shall not, without the priorapproval of the Board, be engaged in any other business activity which conflicts with theduties of Executive hereunder, whether or not such business activity is pursued for gain,profit or other pecuniary advantage. Executive may continue his current civic andcharitable activities and his current service on various boards. 

 

     5.     Compensation and Benefits.

 

     (a)     Base Salary. TheCompany shall pay Executive an initial "Base Salary" at the rate of Four HundredFifty Thousand Dollars ($450,000) per year. The Board shall annually review the amount ofBase Salary. Such review and any increase shall occur on the current customary schedule.Any such upward adjustment shall not require a written amendment to this Agreement.

 

     (b)     Other Compensation andEmployee Benefits. During the term of this employment hereunder, Executive shall beeligible to participate in the Company's variable pay and long-term incentive compensationprograms. Executive shall be entitled to participate in any additional executivecompensation programs and employee benefit plans generally applicable to senior managementemployees of the Company pursuant to the terms and conditions of such programs and plans.Nothing contained in this Agreement shall preclude the company from terminating oramending any such plan or program in its sole discretion.

 

     (c)     Business Expenses. TheCompany shall bear such ordinary and necessary business expenses incurred by executive inperforming his duties hereunder as the Company determined from time to time, provided thatExecutive accounts promptly for such expenses to the Company in the manner prescribed fromtime to time by the Company.

 

     6.     Early Termination. ThisAgreement may be terminated prior to its scheduled expiration as follows:

 

     (a)     Death. Executive'semployment shall terminate upon Executive's death.

 

      (b)     Termination by theCompany.

 

          (1)     Requestfor Resignation. The Company, by action of the Board, may request Executive'sresignation at any time and for any reason whatsoever, without cause, effective inaccordance with the delivery of a written request for resignation to Executive. Executiveagrees to immediately tender his resignation upon receipt of any such request.

 

          (2)     ForCause. The Company, by action of the Board, may terminate the Executive's employmentat any time for Cause, effective upon delivery of written notice of termination toExecutive. If such termination by the Company is asserted to be for Cause, suchtermination notice shall state the grounds that the Board claims constitute Cause. As usedherein, "Cause" shall mean (a) willful misconduct by Executive which is damagingor detrimental to the business and affairs of the Company, monetarily or otherwise, asdetermined by the Board in the exercise of its good faith business judgment; (b) amaterial breach of this Agreement by Executive, (c) chronic alcoholism or any other formof substance addiction on the part of Executive, (d) the commission by Executive of anyact involving fraud or dishonesty or moral turpitude, (e) the indictment for, being boundover for trial following a preliminary hearing, or the conviction of Executive of, anycriminal act in either a state or federal court proceeding, or (f) willful refusal toimplement policies promulgated by the Board.

 

          (3)     Disability.The Company, by action of the Board, may terminate the Executive's employment if Executivesustains a disability which is serious enough that Executive is not able to perform theessential functions of Executive's job, with or without reasonable accommodations, asdefined and if required by applicable state and federal disability laws. Executive shallbe presumed to have such a disability for purpose of this Agreement if Executivequalifies, because of illness or incapacity, to begin receiving disability incomeinsurance payments under the long-term disability income insurance policy that the Companymaintains for the benefit of Executive. If there is no such policy in effect at the dateof Executive's potential disability, or if Executive does not qualify for such payments,Executive shall nevertheless be presumed to have such a disability if Executive issubstantially incapable of performing Executive's duties for a period of more than twelve(12) weeks.

 

     (c)     Termination by Executive.

 

          (1)     VoluntaryResignation. Executive may terminate the Employment Period and Executive's employmentat any time and for any reason whatsoever, effective upon delivery of written notice ofresignation to the Company.

 

          (2)     GoodReason Resignation. Executive may terminate the Employment Period and resign hisemployment at any time for Good Reason, effective upon delivery of written notice ofresignation to the Company. If such resignation by Executive is asserted to be for"Good Reason," such resignation and notice shall state the grounds thatExecutive claims constitute Good Reason. As used herein "Good Reason" shall meana material breach of this Agreement by the Company, which breach is not cured withinthirty (30) days of the Company's receipt of notice of such breach, or a demotion suchthat Executive does not serve as the Chief Executive Officer of the Company.

 

     7.     Post-Termination Paymentsby the Company.

 

     (a)     Resignation Requested byCompany or Resignation for Good Reason. In the event that Executive's employment isterminated prior to expiration of the term by the Company through a Request forResignation or by Executive for Good Reason, and the Executive:

 

          (1)     signs(and does not rescind, as allowed by law) a Release of Claims in a form satisfactory tothe Company which assures, among other things, that Executive will not commence any typeof litigation or other claims as a result of his employment or termination of employment;and

 

          (2)     honorsall of Executive's other obligations as required by this Agreement; the Company willprovide Executive severance benefits ("Severance Benefits") as follows: 

                (i)a severance payment equal to Executive's then existing Base Salary for a period of two (2)years from the early termination of this Agreement;

 

               (ii)additional severance in the form of pro-rata payouts under any variable compensation plan,long-term incentive program or other bonus arrangements then in effect;

 

               (iii)vested benefits under the Company-sponsored pension plan, 401(k) plan, SERP, and deferredcompensation plan, in accordance with the terms and conditions of such plans;

 

               (iv)continued employment benefits (or their equivalent) for a period of two (2) years from theearly termination of this Agreement on the same terms generally available to other seniorofficers: life insurance, health and dental insurance, and other non-pension,non-retirement benefits then generally provided to senior officers of the Company;

 

          (b)     Terminationby Reason of Death or Disability, Termination by the Company for Cause or Termination byExecutive Through Voluntary Resignation. If Executive's employment is terminated priorto expiration of the term by reason of the Executive's death or disability, by the Companyfor Cause, or by Executive as a Voluntary Resignation, Executive shall be entitled only tohis rights (a) to receive the unpaid portion of this Base Salary, prorated to the date oftermination, (b) to receive reimbursement for any ordinary and reasonable businessexpenses for which he had not yet been reimbursed, (c) to receive payment for accrued andunused vacation days, (d) to receive his variable or incentive compensation for each fullor partial year (on a pro rata basis) during which he was employed, to the extent earnedand accrued, pursuant to the terms and conditions of the applicable compensation plan(s),(e) to receive vested benefits under the Company's pension plan, 401(k) plan, SERP,deferred compensation or other benefit plans in which the Executive has participated, allto the extent and in accordance with the terms of such plans, and (f) to continue certainhealth insurance at his expense pursuant to COBRA.

 

          (c)     SoleSource of Payments. The post-termination payments provided herein shall be in lieu ofall other compensation, or other payments or consideration of any kind under any contract,plan program or practice related to Executive's employment.

 

     8.     Nonrenewal of Agreement.The Company may elect not to renew this Agreement, and thereby to terminate Executive'semployment hereunder without any severance obligations, upon at least two (2) year's priorwritten notice of non-extension to Executive.

 

    9.     Consulting. If Executivequalifies for Severance Benefits under Paragraph 7(a), Executive agrees to make himselfavailable to the Company as needed to consult for a period of one year followingtermination of employment. Executive shall be available to consult up to an average offorty (40) hours per month. Executive shall be entitled to reasonable compensation for histime in providing such consulting services and to reimbursement of his out of pocketexpenses. 

 

     10.     Other ExecutiveObligations. Executive agrees that the following provisions will apply throughoutExecutive's period of employment and for the specified post-employment period, regardlessof the reason for termination or resignation;

 

          (a)     Nondisclosureof Confidential Information. Except to the extent required in furtherance of theCompany's business in connection with matters as to which Executive is involved as anemployee, Executive will not, during the term of his employment and for an unlimitedperiod thereafter, directly or indirectly: (1) disclose or furnish to, or discuss with,any other person or entity any confidential information concerning the Company or itsbusiness or employees, acquired during the period of his employment by the Company; (2)individually or in conjunction with any other person or entity, employ or cause to beemployed, any such confidential information in any way whatsoever or (3) without thewritten consent of the Company, publish or deliver any copies, abstracts or summaries ofany papers, documents, lists, plans, specifications or drawings containing any suchconfidential information.

 

          (b)     Non-Interference.Executive will not, during the term of his employment and for an unlimited periodthereafter, directly or indirectly attempt to encourage, induce or otherwise solicit anyemployee or other person or entity to breach any agreement with the Company or otherwiseinterfere with the advantageous business relationship of the Company with any person orentity. Executive specifically agrees not to solicit, on Executive's own behalf or onbehalf of another, any of the Company's employees to resign from their employment with theCompany in order to go to work elsewhere. Executive further specifically agrees not tomake any disparaging remarks of any sort or otherwise communicate any disparaging remarksabout the Company or any of its members, equity holders, directors, officers or employees,directly or indirectly, to any of the Company's employees, members, equity holders,directors, customers, vendors, competitors, or other people or entities with whom theCompany has a business or employment relationship.

 

         (c)     Non-Competition.Executive agrees that during the term of his employment and thereafter for a period of two(2) years, Executive will not directly or indirectly engage in or carry on a business thatis in direct competition with any significant business unit of the Company as conclusivelydetermined by the Board of Directors. Further, Executive agrees that during this sameperiod of time he will not act as an agent, representative, consultant, officer, director,independent contractor or employee of any entity or enterprise that is in directcompetition with any significant business unit of the Company as conclusively determinedby the Board of Directors.

 

          (d)     Cooperationin Claims. For an unlimited period following his period of employment, at the requestof the Company, Executive will cooperate with the Company with respect to any claims orlawsuits by or against the Company where Executive has knowledge of the facts involved insuch claims or lawsuits. Executive shall be entitled to reasonable compensation forExecutive's time and expense in rendering such cooperation. Further, Executive willdecline to voluntarily aid, assist or cooperate with any party who has claims or lawsuitsagainst the Company, or with their attorneys or agents. The Company and Executive bothacknowledge, however, that nothing in this paragraph shall prevent Executive from honestlytestifying at an administrative hearing, arbitration, deposition or in court, in responseto a lawful and properly served subpoena in a proceeding involving the Company.

 

          (e)     Remedies.The parties recognize and agree that, because any breach by Executive of the provisions ofthis Paragraph 10 would result in damages difficult to ascertain, the Company shall beentitled to injunctive and other equitable relief to prevent a breach or threatened breachof the provisions of this Paragraph 10. Accordingly, the parties specifically agree thatthe Company shall be entitled to temporary and permanent injunctive relief to enforce theprovisions of this Paragraph 10 and that such relief may be granted without the necessityof proving actual damages or irreparable harm.

 

          (f)     Enforceability.Executive agrees that considering Executive's relationship with the Company, and given theterms of this Agreement, the restrictions and remedies set forth in Paragraph 10 arereasonable. Notwithstanding the foregoing, if any of the covenants set forth above shallbe held to be invalid or unenforceable, the remaining parts thereof shall neverthelesscontinue to be valid and enforceable as though the invalid or unenforceable parts have notbeen included therein. In the event the provisions relating to time periods and/or areasof restriction shall be declared by a court of competent jurisdiction to exceed themaximum time periods or areas of restriction permitted by law, then such time periods andareas of restriction shall be amended to become and shall thereafter be the maximumperiods and/or areas of restriction which said court deems reasonable and enforceable.Executive also agrees that the Company's action in not enforcing a particular breach ofany part of Paragraph 10 will not prevent the Company from enforcing any other breachesthat the Company discovers, and shall not operate as a waiver by the Company against anyfuture enforcement of a breach.

 

     11.     Notices. Noticeshereunder shall be in writing and shall be delivered personally or sent return receiptrequested and postage prepaid, addressed as follows:

 

          c/o Farmland Industries,Inc.          12200 North Ambassador Drive          Kansas City, MO 64163

 

     If to the Company     Chairmanof the Board          c/o Corporate Secretary          Farmland Industries, Inc.          12200 North Ambassador Drive          Kansas City, MO 64163

 

     with a copy to:     VicePresident and General Counsel          Farmland Industries, Inc.          12200 North Ambassador Drive          Kansas City, MO 64163

 

     12.     Binding Agreement. Theprovisions of this Agreement shall be binding upon, and shall inure to the benefit of, therespective heirs, legal representatives and successors of the parties hereto.

 

     13.     Missouri Law. ThisAgreement shall be governed by and construed in accordance with the laws of the State ofMissouri, unless otherwise pre-empted by federal law.

 

     14.     Captions and SectionHeadings. Captions and paragraph headings used herein are for convenience only and arenot a part of this Agreement and shall not be used in construing it.

 

     15.     Invalid Provisions. Ifany provision of this Agreement shall be unlawful, void, or for any reason unenforceable,it shall be deemed severable from, and shall in no way affect the validity orenforceability of, the remaining provisions of this Agreement.

 

     16.     Waiver of Breach. Thefailure to enforce at any time any of the provisions of this Agreement, or to require atany time performance by the other party of any of the provisions hereof, shall in no waybe construed to be a waiver of such provisions or to affect either the validity of thisAgreement or any part hereof or the right of either party thereafter to enforce each andevery provision in accordance with the terms of this Agreement. 

 

     17.     Entire Agreement. ThisAgreement contains the entire agreement between the parties with respect to the subjectmatter hereof and supersedes all prior and contemporaneous agreements, representations andunderstandings of the parties with respect thereto. No modification or amendment of any ofthe provisions of this Agreement shall be effective unless in writing specificallyreferring hereto and signed by Executive and a member of the Board upon authorization ofthe Board to do so. 

     

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the dateset forth above. 

 

EXECUTIVE                                      FARMLAND INDUSTRIES, INC.

 

 

 ROBERT B.TERRY                             By:  HARRYFEHRENBACHER                             Robert B.Terry                                             Harry Fehrenbacher, Chairman of the                                                                       Boardof Directors

 

                                                              By: JODYBEZNER                                                                                           JodyBezner, Vice-Chairman of the                                                              Boardof Directors