ARTICLE I—PURPOSE | ||||
1.1 Purpose | ||||
1.2 Effective Date | ||||
ARTICLE II—DEFINITIONS | ||||
2.1 Account | 2 | |||
2.2 Base Annual Salary | 2 | |||
2.3 Beneficiary | 2 | |||
2.4 Board | 2 | |||
2.5 Bonus | 2 | |||
2.6 Change in Control | 2 | |||
2.7 Code | 4 | |||
2.8 Committee | 4 | |||
2.9 Compensation | 5 | |||
2.10 Compensation Committee | 5 | |||
2.11 Corporation | 5 | |||
2.12 Deferral Commitment | 5 | |||
2.13 Deferral Period | 5 | |||
2.14 Determination Date | 5 | |||
2.15 Director | 5 | |||
2.16 Elective Deferred Compensation | 6 | |||
2.17 Executive | 6 | |||
2.18 Fees | 6 | |||
2.19 Financial Hardship | 6 | |||
2.20 Fiscal Year | 6 | |||
2.21 Interest Rate | 6 | |||
2.22 Participant | 6 | |||
2.23 Participation Agreement | 7 | |||
2.24 Plan | 7 | |||
2.25 Retirement | 7 | |||
2.26 Retirement Plan | 7 | |||
2.27 Separation from Service | 7 | |||
2.28 Specified Employee | 9 | |||
2.29 Termination | 9 | |||
2.30 Valuation Date | 9 | |||
ARTICLE III—ELIGIBILITY AND DEFERRAL COMMITMENTS | 9 | |||
3.1 Eligibility and Participation | 9 | |||
3.2 Deferral Election | 10 |
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3.3 Modification of Deferral Commitment | 10 | |||
ARTICLE IV—DEFERRED COMPENSATION ACCOUNT | 11 | |||
4.1 Account | 11 | |||
4.2 Interest; Determination of Accounts | 11 | |||
4.3 Statement of Account | 11 | |||
ARTICLE V—PLAN BENEFITS | 11 | |||
5.1 Plan Benefits | 11 | |||
5.2 Form of Benefit Payment | 12 | |||
5.3 Hardship Distributions | 13 | |||
5.4 Golden Parachute Payments | 13 | |||
5.5 Withholding on Benefit Payments | 14 | |||
5.6 Time of Payment | 14 | |||
5.7 Payment to Guardian | 14 | |||
ARTICLE VI—BENEFICIARY DESIGNATION | 14 | |||
6.1 Beneficiary Designation | 14 | |||
6.2 Changes to Designation | 15 | |||
6.3 Change in Marital Status | 15 | |||
6.4 No Beneficiary Designation | 15 | |||
6.5 Effect of Payment | 16 | |||
ARTICLE VII—ADMINISTRATION | 16 | |||
7.1 Committee; Duties | 16 | |||
7.2 Agents | 16 | |||
7.3 Binding Effect of Decisions | 16 | |||
7.4 Indemnity of Committee | 16 | |||
ARTICLE VIII—CLAIMS PROCEDURE | 17 | |||
8.1 Claim | 17 | |||
8.2 Denial of Claim | 17 | |||
8.3 Review of Claim | 17 | |||
8.4 Final Decision | 17 | |||
ARTICLE IX—AMENDMENT AND TERMINATION OF THE PLAN | 18 | |||
9.1 Amendment | 18 | |||
9.2 Termination | 18 | |||
ARTICLE X—MISCELLANEOUS | 18 | |||
10.1 Unfunded Plan | 18 |
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10.2 Unsecured General Creditor | 19 | |||
10.3 Trust Fund | 19 | |||
10.4 Nonassignability | 19 | |||
10.5 Not a Contract of Employment | 20 | |||
10.6 Protective Provisions | 20 | |||
10.7 Governing Law | 20 | |||
10.8 Validity | 20 | |||
10.9 Notice | 20 | |||
10.10 Successors | 20 | |||
10.11 Compliance with Code Section 409A | 21 |
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DEFERRED COMPENSATION PLAN
(a) | Rules That Apply to Pre-2005 Credits. Amounts credited under the Plan which relate entirely to services performed before January 1, 2005, shall continue to be governed by the terms of the Prior Plan Statement, attached hereto as Appendix A. | ||
(b) | Rules That Apply to 2005, 2006 and 2007 Credits. Amounts credited under the Plan which relate all or in part to services performed on or after January 1, 2005, but before January 1, 2008, shall be governed by the terms of the Prior Plan Statement subject to any modifications necessary to comply the deferred compensation provisions in section 409A of the Code and proposed regulations and other guidance issued prior to final regulations thereunder. | ||
(c) | Rules That Apply to Post-2007 Credits. Amounts credited under the Plan which relate all or in part to services performed on or after January 1, 2008, will be governed by the terms of this Plan Statement, the terms of which are intended to comply with the deferred compensation provisions in section 409A of the Code. |
(a) | Change in the Ownership of the Corporation. A Change in the Ownership of the Corporation shall occur on the date that any one person, or more than one “person acting as a group” (as defined in Treasury Regulation §1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the Corporation that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Corporation. If any one person, or more than one person acting as a group, is considered to own more than 50% of the total fair market value or total voting power of the stock of the Corporation, the acquisition of additional stock by the same person or persons shall not cause a Change in the Ownership of the Corporation (or cause a “Change in the Effective Control of the Corporation”). An |
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increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Corporation acquires its stock in exchange for property shall be treated as an acquisition of stock for purposes of this section. Notwithstanding the foregoing, a Change in Ownership of the Corporation shall only occur when there is a transfer of stock of the Corporation (or issuance of stock of the Corporation) and stock in the Corporation remains outstanding after the transaction. | |||
(b) | Change in the Effective Control of the Corporation. A Change in the Effective Control of the Corporation shall occur on the date that either: |
(i) | Any one person, or more than one “person acting as a group” (as defined in Treasury Regulation §1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Corporation possessing 30% or more of the total voting power of the stock of the Corporation; or | ||
(ii) | A majority of the members of the board of directors of the Corporation is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Corporation’s board of directors prior to the date of the appointment or election; provided that such an event shall only constitute a Change in Effective Control of the Corporation if no other corporation is a majority shareholder. |
Notwithstanding the foregoing, if any one person, or more than one “person acting as a group” (as defined in Treasury Regulation §1.409A-3(i)(5)(vi)(D)), is considered to effectively control the Corporation, the acquisition of additional control of the Corporation by the same person or persons is not considered to cause a Change in the Effective Control of the Corporation (or to cause a Change in the Ownership of the Corporation). | |||
(c) | Change in the Ownership of a Substantial Portion of the Corporation’s Assets. A Change in the Ownership of a Substantial Portion of the Corporation’s Assets occurs on the date that any one person, or more than one “person acting as a group” (as defined in Treasury Regulation §1.409A-3(i)(5)(vii)(C)), acquires assets from the Corporation that have a total Gross Fair Market Value equal to or more than 40% of the total Gross Fair Market Value of all of the assets of the Corporation immediately prior to such acquisition or acquisitions. For purposes of this paragraph, “Gross Fair Market Value” means the value of the assets of the Corporation, or the value of |
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the assets being disposed of, determined without regard to any liabilities associated with such assets. | |||
Notwithstanding the foregoing, a Change in the Ownership of a Substantial Portion of the Corporation’s Assets will not occur when there is a transfer to an entity that is controlled by the shareholders of the transferring corporation immediately after the transfer. A transfer of assets by the Corporation is not treated as a Change in the Ownership of the Corporation’s Assets if the assets are transferred to: |
(i) | A shareholder of the Corporation (immediately before the asset transfer) in exchange for, or with respect to, its stock; or | ||
(ii) | An entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Corporation; or | ||
(iii) | A person, or more than one person acting as a group, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Corporation; or | ||
(iv) | An entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person, or more than one person acting as a group, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Corporation. |
For purposes of this paragraph (c), a person’s status shall be determined immediately after the transfer of the assets. | |||
(d) | This section shall be interpreted in accordance with Section 409A of the Code, and to the extent any provision herein conflicts with the terms of Section 409A of the Code, such provision shall be deemed void. |
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(a) | For an Executive, the total Base Annual Salary and Bonus remuneration payable by the Corporation to the Executive for services performed for the Corporation. | ||
(b) | For a Director, all of the Fees payable by the Corporation for service on the Board. |
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(a) | With respect to an Executive, the date on which a Participant has a Separation from Service on or after attaining age fifty-five (55), and | ||
(b) | With respect to a Director, the date on which such Participant has a Separation from Service on or after attaining age seventy (70). |
(a) | With respect to an Executive, a severance of the Executive’s employment relationship with Penford Corporation and all business entities that are treated as a single employer with the Penford Corporation under the rules of section 414(b) and (c) of the Code, including the 80% standard therein (“Affiliates”) for any reason other than the Executive’s death. |
(i) | A transfer from employment with the Penford Corporation to employment with an Affiliate, or vice versa, shall not constitute a Separation from Service. |
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(ii) | Whether a Separation from Service has occurred is determined based on whether the facts and circumstances indicate that the Corporation and the Executive reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding three (3) year period (or the full period of services to the Corporation if the Executive has been providing services to the Corporation for less than twelve months). | ||
(iii) | Separation from Service shall not be deemed to occur while the Executive is on military leave, sick leave or other bona fide leave of absence if the period does not exceed six (6) months or, if longer, so long as the Executive retains a right to reemployment with the Penford Corporation or an Affiliate under an applicable statute or by contract. For this purpose, a leave is bona fide only if, and so long as, there is a reasonable expectation that the Executive will return to perform services for the Penford Corporation or an Affiliate. Notwithstanding the foregoing, a 29-month period of absence will be substituted for such 6-month period if the leave is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of no less than 6 months and that causes the Executive to be unable to perform the duties of his or her position of employment. | ||
(iv) | Where as part of a sale or other disposition of assets by the Corporation to an entity that is not an Affiliate, an Executive providing services to Penford Corporation or to an Affiliate immediately before the transaction and to the buyer immediately after the transaction (“Affected Executive”) would otherwise experience a Separation from Service from as a result of the transaction, the Corporation and the buyer shall have the discretion to specify that the Affected Employee has not experienced a Separation from Service if (i) the transaction results from bona fide, arm’s length negotiations, (ii) all Affected Employees are treated consistently, and (iii) such treatment is specified in writing no later than the closing date of the transaction. |
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(b) | With respect to a non-employee Director, the time at which such individual (i) ceases to serve as a member of the Board, and (ii) is not providing services as an independent contractor to Penford Corporation or any Affiliate, and has no present intent to provide such services in the future. |
(a) | Eligibility. The Committee shall specify the name of each Executive and Director who shall be initially entitled to participate in the Plan as of the next succeeding Deferral Period, except as provided for in subsection (c) below. These names shall be submitted to the Board for approval. Once designated as eligible, an Executive may participate in the Plan each year without further approval until such time, if any, that the Committee determines that the Executive’s employment status no longer deserves reward through participation in the Plan. All Directors are eligible to participate in the Plan each Deferral Period. | ||
(b) | Participation. An eligible Executive and Director may elect to participate in the Plan and to make a Deferral Commitment with respect to any Deferral Period by submitting a Participation Agreement to the Committee no later than: |
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(i) | The last day of the calendar year preceding the Deferral Period in which Salary or Fees are earned by the Participant; and | ||
(ii) | The date that is six (6) months before the end of the Fiscal Year in which a Bonus is earned. |
(c) | Initial Year of Eligibility. In the case of the first year in which an Executive or Director becomes eligible to participate in the Plan, such Executive or Director may make a Deferral Commitment within thirty (30) days of becoming eligible to participate in the Plan. Such Deferral Election shall only be effective with respect to Compensation paid for services to be performed after such Deferral Election has been submitted to the Committee. |
(a) | Election by Executive. By timely execution of a Participation Agreement in accordance with Section 3.1 hereof, an Executive may make a Deferral Commitment by electing to defer receipt of a certain whole percentage or flat dollar amount, up to twenty-five percent (25%), of the Base Annual Salary and a certain whole percentage or flat dollar amount, up to fifty percent (50%), of any Bonus provided, however, that any such Deferral Commitment shall apply only with respect to Base Annual Salary and Bonus payable to the Executive by the Corporation prior to the Executive’s Separation from Service or death. | ||
(b) | Election by Director. By timely execution of a Participation Agreement in accordance with Section 3.1 hereof, a Director may make a Deferral Commitment by electing to defer receipt of a certain whole percentage or flat dollar amount, up to one hundred percent (100%), of Fees. | ||
(c) | Minimum Deferral. Total deferrals by a Participant in a Deferral Period must be fifteen hundred dollars ($1,500) or more. In any partial first year of participation, no minimum deferral shall be required. |
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(a) | Early Withdrawals. A Participant’s Account may be distributed to the Participant before Separation from Service as follows: |
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(i) | Early Withdrawals. A Participant may elect in a Participation Agreement to withdraw all or any portion of the amount deferred by that Participation Agreement as of a date specified in the election. Such date shall not be sooner than seven (7) years after the date the Deferral Period commences. The amount withdrawn shall not exceed the amount of Compensation deferred, excluding earnings. All elections shall be irrevocable except that any election made pursuant to this subsection (a) shall be null and void in the event the Participant has a Separation from Service or dies prior to the specified withdrawal date. | ||
(ii) | Form of Payment. Early withdrawals shall be paid in a lump sum and shall be charged to the Participant’s Account as a distribution. |
(b) | Retirement and Termination Benefits. Upon a Separation from Service except due to death, Corporation shall pay the Participant a benefit equal to the balance in such Participant’s Account as further described in Section 5.2 herein. | ||
(c) | Death Benefit. |
(i) | Pretermination. If a Participant dies while employed by Corporation or serving on the Board, Corporation shall pay to the Participant’s Beneficiary a benefit equal to the balance in such Participant’s Account. The benefit shall be paid in the form elected by the Participant in the applicable Participation Agreement, or, if no such election is on file with the Committee, in a lump sum. | ||
(ii) | Posttermination. If a Participant dies following the Participant’s Separation from Service, Corporation shall pay the Participant’s Beneficiary a benefit equal to the balance, if any, in such Participant’s Account. The benefit shall be paid, or continued to be paid, in the form elected by the Participant in the applicable Participation Agreement for distributions on account of Separation from Service. |
(a) | Forms of Payment. Each Deferral Commitment made by a Participant shall include an election with respect to the form of benefit payment upon death, Termination, Retirement or upon Separation from Service within twenty-four (24) months after a Change in Control. The Participant may choose from the following options: |
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(i) | In up to ten (10) substantially equal annual installments; | ||
(ii) | In a single sum payment; or | ||
(iii) | In a combination of partial lump sum payment, and balance in up to ten (10) substantially equal annual installments, |
Such election shall be irrevocable as of the December 31 prior to the Deferral Period to which such elections apply. | |||
(b) | Small Accounts. If the Participant’s Account balance is under five thousand dollars ($5,000) on the Valuation Date, the Plan Benefits shall be paid in a lump sum notwithstanding anything herein to the contrary. | ||
(c) | Installments. If benefits are paid in installments, the amount of each annual installment shall be determined each year on the twelve (12) month anniversary of the Valuation Date based upon the remaining Account balance, the remaining number of installments and the Interest Rate in effect as of the month preceding the Valuation Date. |
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(a) | The amount of the lump-sum payment shall be valued as of the last day of the month immediately preceding the payment date; and | ||
(b) | The first in a series of installment payments shall include an amount equal to the sum of the monthly payments which would have been paid to the Participant but for the payment deferral. |
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(a) | If the Participant is married at death but was unmarried when the designation was made, the designation shall be void unless the spouse has consented to it in the manner prescribed above. | ||
(b) | If the Participant is unmarried at death but was married when the designation was made: |
(i) | The designation shall be void if the spouse was named as Beneficiary. | ||
(ii) | The designation shall remain valid if a nonspouse Beneficiary was named. |
(c) | If the Participant was married when the designation was made and is married to a different spouse at death, the designation shall be void unless the new spouse has consented to it in the manner prescribed above. |
(a) | The Participant’s surviving spouse; |
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(b) | The Participant’s children in equal shares, except that if any of the children predecease the Participant but leave issue surviving, then such issue shall take by right of representation the share the parent would have taken if living; | ||
(c) | The Participant’s estate. |
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(a) | The reasons for denial, with specific reference to the Plan provisions on which the denial is based, | ||
(b) | A description of any additional material or information required and an explanation of why it is necessary, and | ||
(c) | An explanation of the Plan’s claims review procedure. |
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(a) | Notice. A change shall not become effective before the first day of the calendar year which follows the adoption of the amendment and at least thirty (30) days’ written notice of the amendment to the Executive. | ||
(b) | Change in Control. Any change in the definition of Interest Rate after a Change in Control shall apply only to those amounts credited to the Executive’s Account after the Change in Control. |
(a) | Partial Termination. The Board may partially terminate the Plan by instructing the Committee not to accept any additional Deferral Commitments. In the event of such a partial termination, the Plan shall continue to operate and be effective with regard to Deferral Commitments entered into prior to the effective date of such partial termination. | ||
(b) | Complete Termination. The Board may completely terminate the Plan by instructing the Committee not to accept any additional Deferral Commitments, and may terminate all ongoing Deferral Commitments and distribute all Account balances provided such termination and liquidation is consistent with Code Section 409A. |
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PENFORD CORPORATION | ||||
By: | ||||
President and CEO | ||||
Dated: | ||||
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PAGE | ||||
ARTICLE I—PURPOSE | 1 | |||
1.1 Purpose | 1 | |||
1.2 Effective Date | 1 | |||
ARTICLE II—DEFINITIONS | ||||
2.1 Account | 1 | |||
2.2 Base Annual Salary | 1 | |||
2.3 Beneficiary | 1 | |||
2.4 Board | 1 | |||
2.5 Bonus | 1 | |||
2.6 Change in Control | 2 | |||
2.7 Committee | 2 | |||
2.8 Compensation | 2 | |||
2.9 Corporation | 2 | |||
2.10 Deferral Commitment | 2 | |||
2.11 Deferral Period | 3 | |||
2.12 Determination Date | 3 | |||
2.13 Director | 3 | |||
2.14 Early Retirement Date | 3 | |||
2.15 Elective Deferred Compensation | 3 | |||
2.16 Executive | 3 | |||
2.17 Fees | 3 | |||
2.18 Financial Hardship | 3 | |||
2.19 Interest | 3 | |||
2.20 Normal Retirement Date | 4 | |||
2.21 Participant | 4 | |||
2.22 Participation Agreement | 4 | |||
2.23 Plan | 4 | |||
2.24 Plan Benefit | 4 | |||
2.25 Plan Year | 4 | |||
2.26 Retirement | 4 | |||
2.27 Retirement Plan | 4 | |||
2.28 Termination | 5 | |||
ARTICLE III—ELIGIBILITY AND DEFERRAL COMMITMENTS | 5 | |||
3.1 Account | 5 | |||
3.2 Deferral Election | 5 | |||
3.3 Modification of Deferral Commitment | 6 |
(i)
PAGE | ||||
ARTICLE IV—DEFERRED COMPENSATION ACCOUNT | 6 | |||
4.1 Account | 6 | |||
4.2 Interest; Determination of Accounts | 6 | |||
4.3 Statement of Account | 6 | |||
ARTICLE V—PLAN BENEFITS | 6 | |||
5.1 Plan Benefit | 6 | |||
5.2 Commencement of Payments | 7 | |||
5.3 Form of Benefit Payment | 7 | |||
5.4 Hardship Distributions | 8 | |||
5.5 Accelerated Distribution | 9 | |||
5.6 Supplemental Retirement Benefit | 9 | |||
5.7 Golden Parachute Payments | 9 | |||
5.8 Withholding on Benefit Payments | 9 | |||
5.9 Valuation and Settlement | 9 | |||
5.10 Payment to Guardian | 10 | |||
ARTICLE VI—BENEFICIARY DESIGNATION | 10 | |||
6.1 Beneficiary Designation | 10 | |||
6.2 Changes to Designation | 10 | |||
6.3 Change in Marital Status | 10 | |||
6.4 No Beneficiary Designation | 11 | |||
6.5 Effect of Payment | 11 | |||
ARTICLE VII—ADMINISTRATION | 11 | |||
7.1 Committee; Duties | 11 | |||
7.2 Agents | 11 | |||
7.3 Binding Effect of Decisions | 11 | |||
7.4 Indemnity of Committee | 12 | |||
ARTICLE VIII—CLAIMS PROCEDURE | 12 | |||
8.1 Claim | 12 | |||
8.2 Denial of Claim | 12 | |||
8.3 Review of Claim | 12 | |||
8.4 Final Decision | 12 | |||
ARTICLE IX—AMENDMENT AND TERMINATION OF THE PLAN | 12 | |||
9.1 Amendment | 12 | |||
9.2 Corporation’s Right to Terminate | 13 |
(ii)
PAGE | ||||
ARTICLE X—MISCELLANEOUS | 14 | |||
10.1 Unfunded Plan | 14 | |||
10.2 Unsecured General Creditor | 14 | |||
10.3 Trust Fund | 14 | |||
10.4 Nonassignability | 14 | |||
10.5 Not a Contract of Employment | 15 | |||
10.6 Protective Provisions | 15 | |||
10.7 Governing Law | 15 | |||
10.8 Validity | 15 | |||
10.9 Notice | 15 | |||
10.10 Successors | 16 |
(iii)
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Appropriate Account Balance | Payout Period | |
Less than $10,000 | 2 Years | |
$10,000 but less than $50,000 | 5 Years | |
More than $50,000 | 10 Years | |
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PENFORD CORPORATION | ||||
By: | ||||
President and CEO | ||||
Dated: | ||||
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