EXHIBIT 10.9
CENEX HARVEST STATES
EXECUTIVE LONG-TERM VARIABLE COMPENSATION PLAN
(2001 - 2003)
01 PLAN
PURPOSE AND OBJECTIVE
Cenex Harvest States wishes to focus on increasing shareholder value, therefore,
the Long-Term Variable Compensation Plan will be provided for key executives who
can have influence on long-term business success.
In addition, this Plan will have the following objectives:
* To link executive pay with long-term business performance and align
management and member interests.
* To provide for a competitive pay element and encourage retention of key
executives.
ADMINISTRATION
This Plan is administered by the President of Cenex Harvest States with the
assistance of the Vice President of Human Resources.
The President and/or President's designee(s) will have the following
responsibilities:
* Approval of the Plan that will assure that objectives are met.
* Approval of the three-year performance measurements and financial
targets.
* Review and report on the results of each Plan.
PLAN TERM
This Plan shall consist of a three (3) year performance period beginning
SEPTEMBER 1, 2000 AND CONCLUDING AUGUST 31, 2003 after the completion of three
full years. This plan will be labeled the 01 PLAN.
The President and Board of Directors may, at their discretion, authorize the
commencement of a new three-year plan prior to the beginning of each fiscal
year. Therefore, there may be three plans in operation concurrently, but
expiring in three consecutive years. A new plan document will prepared for each
separate plan. The next three year plan, if any, shall be labeled 02 PLAN.
1
ELIGIBILITY
Eligibility for participation in this Plan includes the President and other
officers of Cenex Harvest States as designated by the President. The President
shall approve all participants and may withhold participation for business
reasons.
AWARD OPPORTUNITIES
The award opportunities available with this Plan are illustrated as follows:
POSITION MAXIMUM AWARD
-------- -------------
President 300%
Executive Vice President 225%
Senior Vice President 180%
Vice President 150%
The award potential is expressed as a percentage of an individual employee's
position midpoint at the conclusion of the final year of the three-year Plan.
The award opportunities specified represent the potential for the cumulative
three-year Plan and not individual years.
PERFORMANCE DETERMINATION
The Company performance must meet the minimum level of Pre-Tax Earnings Per Unit
of Sales and Net Income levels established within the Company Performance Matrix
before any participants can receive grants from this Plan.
When the minimum is achieved, the following performance allocations will
determine individual executive grants.
OUTPUT INPUT
BUSINESS UNITS 3-YEAR BUSINESS UNITS 3-YEAR
POSITION CUMULATIVE RESULTS CUMULATIVE RESULTS
-------- ------------------ ------------------
All Eligible 50% 50%
2
PERFORMANCE MEASUREMENT
The President will establish the Business Unit Performance Targets for the
"Input" and "Output" groups. Determining the business unit performance will be a
matrix consisting of earnings per unit of sales and net company earnings. The
combination of minimum earnings per unit of sales and net earnings must be
achieved before any options can be granted from this section of the plan.
The following charts illustrate the business unit matrices for 2001-2003.
COMPANY PERFORMANCE MATRIX INPUTS- 3 YEAR (2001-2003)
PRE TAX EARNINGS PER UNIT OF SALES
--------------------------------------------------------------
.90 .95 1.0 1.05 1.1
------------ ------------ ----------- ------------ -----------
MAXIMUM 5.54 80% 85% 90% 95% 100%
------------ ------------ ----------- ------------ -----------
70% 75% 85% 90% 95%
------------ ------------ ----------- ------------ -----------
TARGET 5.04 60% 70% 80% 85% 90%
------------ ------------ ----------- ------------ -----------
50% 60% 70% 75% 85%
------------ ------------ ----------- ------------ -----------
MINIMUM 4.53 40% 50% 60% 70% 80%
------------ ------------ ----------- ------------ -----------
$261MM $275.5MM $290MM $304.5MM $319MM
------------ ------------ ----------- ------------ -----------
MIN TARGET NET EARNINGS MAX
------------ ------------------------------------- -----------
COMPANY PERFORMANCE MATRIX OUTPUTS - 3 YEAR (2001-2003)
PRE TAX EARNINGS PER BUSHEL
------------------------------------------------------------
.90 .95 1.0 1.05 1.1
------------ ------------ ----------- ------------ -----------
MAXIMUM .0551 80% 85% 90% 95% 100%
------------ ------------ ----------- ------------ -----------
70% 75% 85% 90% 95%
------------ ------------ ----------- ------------ -----------
TARGET .0501 60% 70% 80% 85% 90%
------------ ------------ ----------- ------------ -----------
50% 60% 70% 75% 85%
------------ ------------ ----------- ------------ -----------
MINIMUM .0451 40% 50% 60% 70% 80%
------------ ------------ ----------- ------------ -----------
$261MM $275.5MM $290MM $304.5MM $319MM
------------ ------------ ----------- ------------ -----------
MIN TARGET NET EARNINGS MAX
------------ ------------------------------------- -----------
Each three-year Plan will have established by the President specific targets for
EVA and Net Earnings which will be the measurement basis for the Plan.
3
AWARD APPROVAL AND GRANT PROCESS
All awards from this Plan shall be made as grants in the Share Option Plan.
At the conclusion of the Plan period, the President assisted by the Vice
President, Human Resources, will prepare a report summarizing the performance
results against the established Plan and the individual grants to be made.
It will be the policy to make grants no later than the conclusion of the
calendar quarter following the Plan conclusion.
The operating rules pertaining to the Share Option Agreement will govern the
operation of that Plan.
OTHER PARTICIPATION PROVISIONS
Participants who terminate, or are terminated during the term of the Plan, will
forfeit all rights to any payments which may be made from this Plan.
Participants who retire will be eligible for a pro rata portion of any grant
based upon the ratio of full service months as an active employee during the
Plan period to the full-thirty six month term of the Plan. Grants will be
determined and distributed after the conclusion of the Plan period.
Employees hired or promoted into a position otherwise eligible for participation
may begin participation immediately if approved by their supervisor and the
President. Grants will be based upon full months participation during the Plan
period.
NON-RECURRING EVENTS
Non-recurring business events which have a substantial impact on Cenex Harvest
States financial results during the Plan period may be excluded from the
calculations for determining grants from the Plan.
Such events could include major gains or losses from acquisitions (including
planned short-term losses), divestitures, lawsuits, significant business
write-offs, casualty losses, or a sale of assets.
Amounts to be excluded will be determined by the President and approved by the
Board of Directors.
4
OTHER CONDITIONS
Cenex Harvest States, its President and Board of Directors reserve the right to
amend or terminate this Plan without the consent of the participants. Incentive
awards earned by completion of a Plan will not be disqualified by plan amendment
or termination.
Nothing in this Plan can be interpreted as a contract for employment or for
eligibility in any other compensation or benefit program provided for
executives.
5