CHS Inc. 2018 Annual Variable Pay Plan Master Plan Document

 

The purpose of the CHS Annual Variable Pay Plan (the “Plan”) is to provide a direct financial incentive for eligible employees (each a “Participant”) who contribute to the achievement of company and business unit financial goals, as well as individual employee performance goals that are aligned with organizational priorities and CHS Leadership Expectations.

The objectives of this Plan are to:

Each performance period for the Plan (“Performance Period”) will be a CHS fiscal year, currently September 1 through August 31. A new Performance Period begins each fiscal year.

Except as may be expressly determined for any Performance Period, the Threshold Return on Invested Capital (ROIC) Performance, as identified in the Plan Appendix, must be met in order for all or a portion of award compensation to be earned under the Plan.

Company ROIC and business unit ROA goals are defined in the following Plan Goals section and the Plan Appendix.

Corporate functions and business units have predetermined goals and weightings which include CHS ROIC, CHS or business unit Return on Assets (ROA), and individual goals.

The President and Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) establish, and the CHS Board of Directors approves, the Threshold, Target and Maximum ROIC and ROA Performance Targets at the corporate level for each Performance Period established pursuant to the Plan. Business unit ROA goals are determined by the CEO and CFO in collaboration with senior finance and business unit leaders. The ROIC and ROA performance targets for each such Performance Period are measured only over the entire Performance Period.

Compensation for any Performance Period is earned as a percent of the Target award, and is mathematically interpolated when performance results occur between the three financial Performance Targets.

The company ROIC and business unit ROA Performance Targets are published in the Plan Appendix after the beginning of each new Performance Period.

Goals are weighted based on whether Participants are in a corporate function or a business unit. The table below illustrates goal weightings by employee groups.

ROIC is measured at the enterprise level for corporate and business unit Participants, ROA is measured at the enterprise level for corporate Participants, and at the business unit level, as determined by the CEO and CFO in collaboration with senior finance and business unit leaders, for business unit Participants. ROIC and ROA goals are communicated to business unit leaders and Participants by Finance. Individual goals are determined by the Participant’s manager and the Participant.

Each Participant’s variable pay award opportunity pursuant to the Plan for any Plan Period (“Potential Award”) varies by grade level and/or position, and is expressed as a percent of base pay. The Company can vary a Participant’s potential award by grade level and/or position at the sole discretion of the Plan Administrators. For salaried employees, the base pay used to establish the potential award is the employee’s base salary at the end of the Performance Period (August 31). For hourly employees, the base pay used to establish the potential award is actual earnings during the Performance Period, to include base pay and overtime earnings.

Actual compensation earned under the Plan for any Performance Period is determined, approved and issued as soon as administratively feasible following the close of the Performance Period. No compensation shall be deemed earned under the Plan until after approval by the CHS Board of Directors. Awards can be modified or terminated without Participant consent for any reason up until the CHS Board of Directors approves the amounts earned under the awards. Once such amounts are approved, the awards cannot be modified or terminated, except as is expressly provided in the Plan. In all cases, any compensation earned under the Plan shall be paid no later than November 30 following the Performance Period for which it was earned. Compensation paid under the Plan is paid through the same process as the Participant’s paycheck. All payments are subject to appropriate withholdings.

The CFO and Head of Human Resources administer the Plan (each a Plan Administrator). The Plan Administrators, along with the CEO, are authorized to make all decisions as required in the administration of the Plan and to exercise their discretion to define, interpret, construe and apply Plan provisions, approve, administer, withdraw, and make any exceptions to the terms of the Plan. Any adjustments to the Plan based on extraordinary business conditions requires CHS Board of Directors and CFO approval at the company level, and CEO and CFO approval at the business unit level.

^* This plan document applies to eligible U.S. employees and expatriates. Plan documents are customized by region for eligible international Participants.

^* Primary eligibility for the Plan is defined by business unit and position. Groups of employees that are not eligible for the Plan after consideration of the eligibility rules above include: Energy Certified Energy Specialists; Energy Transportation and Distribution Drivers; Energy Zip Trip store employees; Business Solutions commissioned sales employees; Production Incentive eligible employees; Ag Associates; Country Operations employees below the Vice President level with location codes outside of Inver Grove Heights. This list can be changed at any time by the Plan Administrators.

CHS reserves the right to change or cancel this plan at any time. This document does not intend to create an employment contract or provide a guarantee of continued employment. Contact your manager or HR Business Partner for more information on the CHS Annual Variable Pay Plan. There is no vested right to any payment prior to the award determination and the CHS Annual Variable Pay Plan does not give rise to any vested right to future payments.

Non-recurring business events, which have a substantial impact on CHS financial results during the Plan Period, may be excluded from the calculations for determining awards. Such events could include major gains or losses from acquisitions (including planned short-term losses), divestitures, lawsuits, significant business write-offs, casualty losses or sale of assets.

All awards under this Plan shall be subject to recovery or the penalties pursuant to any applicable law, rule or regulation or applicable stock exchange rule, including, without limitation, Section 304 of the Sarbanes-Oxley Act of 2002, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any applicable stock exchange listing rule adopted Pursuant thereto.