OReilly Automotive, Inc. Deferred Compensation Plan, as amended and restated effective as of January 1, 2021
Exhibit 10.23 – Deferred Compensation Plan
O’REILLY AUTOMOTIVE, INC.
DEFERRED COMPENSATION PLAN
As Amended and Restated Effective as of January 1, 2021
O’REILLY AUTOMOTIVE, INC.
DEFERRED COMPENSATION PLAN
Table of Contents
PURPOSE, DEFINITIONS AND CONSTRUCTION
Purpose of the Plan
The Plan was established by the Company effective as of January 1, 1997 to permit certain select management employees to defer payment of a portion of their compensation and to accumulate Employer matching contributions on a deferred basis. The Plan is not intended to, and does not, qualify under sections 401(a) and 501(a) of the Internal Revenue Code, and is designed and intended to be a plan described in section 201(2) of ERISA. The Plan is amended and restated as set forth herein effective as of the Effective Date or as otherwise specified herein.
The following terms, when found in the Plan, shall have the meanings set forth below:
(a)Account: The account established for a Participant pursuant to Section 5.1.
(b)Base Compensation: A Participant’s base salary from the Employer, including amounts deferred under this Plan and any other Employer plan or program providing for elective deferrals from base salary (such as the Employer’s cafeteria plan or 401(k) plan).
(c)Beneficiary: The person or persons designated (or deemed designated) by a Participant under Section 7.3 to receive any benefits payable hereunder after the death of the Participant.
(f)Code: The Internal Revenue Code of 1986, as it may be amended from time to time, including any successor and including applicable Treasury regulations.
(h)Company: O’Reilly Automotive, Inc. and any successor thereto that assumes sponsorship of the Plan.
(i)Date Certain: The certain day of any month in any year specified by a Participant in a Deferral Election made pursuant to Section 6.2.
(k)Determination Date: The last Valuation Date reasonably preceding the payment date.
(l)Disabled or Disability: A Participant’s “disability” as defined by Treasury regulation section 1.409A-3(i)(4), including a deemed disability as defined by Treasury regulation section 1.409A-3(i)(4)(iii).
(n)Eligible Employee: An employee of the Employer who has been designated by the most senior human resources officer of the Company, by name, position, or in any other specifically identifiable manner, as being in the class of persons who are eligible to participate in the Plan. No person shall be selected as an Eligible Employee except a common law employee of the Employer whose taxable year is the Plan Year and who is a member of a “select group of management or highly compensated employees” of the Employer within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
(o)Employer: The Company and each wholly owned subsidiary of the Company. For purposes of Section 1.2(w), the term “Employer” includes all persons with whom such Employer would be considered a single employer under Code sections 414(b) and/or 414(c) except determined by using the default 50% ownership threshold specified in Treasury regulation 1 409A-1(h)(3).
(q)Level One Participant: Any Participant who is prohibited by the terms of the Employer’s 401(k) plan from making elective contributions to such 401(k) plan. Status as a Level One Participant depends solely on the maximum permissible elective contribution under the Employer’s 401(k) plan and not on whether the Participant actually elects to make or not make contributions to such plan.
(r)Level Two Participant: A Participant who is not a Level One Participant.
(t)Participant: An Eligible Employee who has met the requirements of Section 2.1 hereof, and whose participation has not been terminated in accordance with Section 2.3
(u)Plan: The O’Reilly Automotive, Inc. Deferred Compensation Plan, as set forth herein, and as it may be amended from time to time.
(w)Separates from Service or Separation from Service: A Participant’s “separation from service” with the Employer within the meaning of Code section 409A(a)(2)(A)(i) and Treasury regulation 1.409A-1(h). To the extent permitted by Treasury regulation section 1.409A-1(h)(5), a Participant may be considered to have such a separation from service even if he continues to provide services as an independent contractor or non-employee director of the Employer.
(x)Valuation Date: Each date as of which the Plan is valued and gains or losses allocated, which shall be each date on which NASDAQ (or any successor exchange) is open for business.
(y)Year of Service: Shall have the same meaning as a “Year of Service for Vesting purposes” under the terms of the O’Reilly Automotive, Inc. Profit Sharing and Savings Plan.
The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, and the singular may indicate the plural, unless the context clearly indicates the contrary. The words “hereof,” “herein,” “hereunder,” and other similar compounds of the word “here” shall, unless otherwise specifically stated, mean and refer to the entire Plan, not to any particular provision or Section. The word “including” and words of similar import when used in this Plan shall mean “including, without limitation,” unless the context otherwise requires or unless otherwise specified. Article and Section headings are included for convenience of reference and are not intended to add to, or subtract from, the terms of the Plan.
|2.1||Initial Eligibility Requirements|
|2.2||Loss of Eligible Employee Status|
If a Participant is demoted, such that he remains an employee of the Employer but is no longer an Eligible Employee, he shall not be eligible to receive additional contributions under Section 4.2, but except as specifically provided in Section 3.4, such demotion shall not result in the cancellation of a Deferral Election under Section 4.1 prior to the end of the Plan Year in which the demotion occurs. No payment of Plan benefits shall be permitted solely as a result of a loss of Eligible Employee status, and payment to such an employee shall occur only as otherwise specified herein.
|2.3||Termination of Participation|
An individual who was a Participant shall cease to be a Participant when the individual is no longer an Eligible Employee and has ceased to have an Account balance under the Plan due to payment of all Plan benefits.
(iv)A Deferral Election under Section 3.2 shall become irrevocable for the Plan Year to which it applies as of December 31 of the prior Plan Year. A Deferral Election that is made prior to such December 31 may be revoked or changed prior to becoming irrevocable by making a new Deferral Election on or before such December 31. A Deferral Election may not be changed or cancelled during the Plan Year to which it relates except as specified in Section 3.4.
(b)A Deferral Election under Section 4.1 shall apply only to Base Compensation and Bonus, as applicable, paid after the effective date of the election for services performed after the date the election is made. For this purpose, Base Compensation with respect to the payroll period containing the last day of the immediately preceding Plan Year that is paid during the immediately following Plan Year in accordance with the Employer’s normal payroll and compensation practices is considered Base Compensation for services performed in such following Plan Year.
(c)Except as provided in Sections 6.3(b) and 6.4(d) with respect to an election to defer a Date Certain or change the form of payment, a Participant’s Deferral Election under Sections 6.2 and 6.4 shall apply only to contributions (and related earnings and losses) made after the date the election is made, and shall not affect or change the time or form of payment for contributions (and related earnings and losses) made prior to such election. A Participant may make up to five different Deferral Elections under Sections 6.2 and 6.3 (including elections under Sections 6.3(b) and 6.4(d)). A Deferral Election is considered different from another Deferral Election if it provides for a different time or form of payment (or both). For example, if a Participant
(i)elects payment in a lump sum after Separation from Service with respect to 50% of his contributions made for the first Plan Year of participation,
(ii)elects payment in a lump sum on the Valuation Date coincident with or immediately following July 4, 2026 with respect to the other 50% of his contributions made for the first Plan Year of participation,
(iii)elects payment in four annual installments upon attainment of age 50 with respect to all contributions made for the second and third Plan Years of participation,
(d)A Deferral Election under Section 6.3(b) or Section 6.4(d) must be made at least twelve months before the date on which or the beginning of the period during which payment would otherwise commence, shall be irrevocable as of the date that is twelve months before such date, and shall not be effective until the first anniversary of the date the election is made.
(e)A Deferral Election under Section 6.4(c) shall not apply to benefits payable to a Beneficiary after the death of a Participant or to benefits payable to the Participant due to his Disability. Such benefits are payable solely in the form of a single lump sum cash payment in accordance with Sections 6.4(a) and 6.4(b).
|3.2||Deferral Election Timing|
A newly Eligible Employee may participate effective as of the beginning of the Plan Year following the Plan Year in which the employee is designated as an Eligible Employee. For those newly Eligible Employees and all other Eligible Employees and Participants, a Deferral Election must be made in the month of December, but no later than December 31, to apply to the immediately following Plan Year. A Deferral Election made after December 31 shall not apply to such immediately following Plan Year. A new Deferral Election shall apply prospectively and, except as provided in Sections 6.3(b) and Section 6.4(d), shall not change the time of payment or the form of payment elected or deemed elected for prior Deferral Elections under Sections 6.2 and 6.4.
|3.3||Deemed Deferral Elections|
|3.4||Cancellation of Deferral Elections|
CONTRIBUTIONS TO THE PLAN
|4.2||Employer Matching Contributions|
The matching contribution formula set forth below shall be calculated and applied to a Participant’s contributions from Base Compensation. For the avoidance of doubt, Employer matching contributions shall not be credited to a Participant’s account for
contributions from Bonus. A Participant shall be eligible to receive an allocation of the Employer matching contribution for a Plan Year only if the Participant is an Eligible Employee on the last day of such Plan Year or if the Participant Separated from Service during the Plan Year due to death, Disability, or retirement after attainment of age 65. If a Participant is eligible for an allocation of the Employer matching contribution due to a qualifying Separation from Service as described in the preceding sentence, the matching contribution with respect to the portion of the Plan Year preceding the Participant’s Separation from Service shall be allocated not later than as soon as administratively practicable following the date of the Participant’s Separation from Service in accordance with Section 5.2(b).
ALLOCATION AND INVESTMENT
|5.1||Establishment of Account|
Each Participant herein shall have maintained in his name an Account, to which shall be credited his Participant contributions, as well as his share of Employer contributions. A Participant’s Account shall also reflect his allocable share of any gains and losses pursuant to Section 5.4. All distributions with respect to the Account pursuant to Article 6 shall be charged against the Account as of the date of such distribution. At the discretion of the Committee, a Participant’s Account may be divided into one or more subaccounts for recordkeeping purposes.
|5.3||Establishment of Trust|
The Employer may, but shall not be required to, establish a trust fund with regard to the Accounts hereunder, designed to be a grantor trust under Code section 671 and Internal Revenue Service Revenue Procedure 92-64 (or any successor ruling or procedure). However, if the assets of such trust are not available or are insufficient to pay such benefits or if no such trust is established or funded, then benefits hereunder shall be paid from the general assets of the Employer. Notwithstanding anything herein or in any related agreement to the contrary, no person shall have a security interest in any amounts (if any) set aside for the payment of benefits hereunder and, to the extent that any person acquires a right to receive payments or any other rights hereunder, such rights shall be no greater than the rights of any unsecured general creditor of the Employer.
|5.4||Allocation of Investment Earnings and Losses|
PAYMENT OF ACCOUNT
|6.1||Vesting of Account|
Years of Service
|6.2||Forfeiture of Unvested Account Balances|
As of the date of a Participant’s Separation from Service with the Employer (including termination due to any of the events specified under Section 6.1(c) hereof), his vested Account balance shall be determined in accordance with the provisions of Section 6.1 above. Thereafter, as of the Valuation Date coincident with or next following the Participant’s Separation from Service, the nonvested portion of his Account shall be irrevocably forfeited and shall not be payable under the Plan. If a trust is established pursuant to Section 5.3, forfeited amounts shall be returned to the Employer.
|6.3||Timing of Payment|
If a Participant’s Deferral Election does not specify a time of payment, then, with respect to amounts subject to such Deferral Election, the Participant shall be deemed to have elected payment after Separation from Service in accordance with subsection (ii) above.
If payment is deferred pursuant to an effective Deferral Election but the Participant subsequently dies or becomes Disabled, earlier payment shall be made in accordance with subsection (c) or (d) below.
|6.4||Form of Payment|
If a Participant’s Deferral Election does not specify an optional form of payment, the Participant shall be deemed to have elected payment in the form of a single cash lump sum payment with respect to vested amounts subject to such Deferral Election. Except as provided in subsection (d) below, a Participant may not subsequently elect to change the optional form of payment elected or deemed elected under a Deferral Election for so long as he remains a Participant. For purposes of Code section 409A, the entitlement to a series of installment payments shall be treated as the entitlement to a single payment.
|7.1||Administration of the Plan|
The Committee shall administer the claims procedures set forth in this Section 7.2 in accordance with section 503 of ERISA. The Committee shall automatically direct the distribution of all benefits to which a Participant is entitled hereunder. In the event that a Participant believes that he has been denied benefits to which he is entitled under the provisions of the Plan, the Committee shall, upon the request of the Participant, provide to the Participant written notice of the denial which shall set forth:
If a Participant should appeal to the Committee, he, or his duly authorized representative, may submit, in writing, whatever issues and comments he, or his duly authorized representative, feels are pertinent. The Committee shall re-examine all facts related to the appeal and make a final determination as to whether the denial of the claim is justified under the circumstances. The Committee shall advise the Participant in writing of its decision on appeal, the specific reasons for the decision, and the specific Plan provisions on which the decision is based. The notice of the decision shall be given within sixty (60) days (forty-five (45) days in the case of a claim relating to Disability benefits) after the Participant’s written request for review is received, unless special circumstances (such as a hearing) would make the rendering of a decision within such sixty (60)-day period (forty-five (45)-day period in the case of a claim relating to Disability benefits) impracticable. In such case, notice of an extension shall be provided to the Participant within the original sixty (60)-day period (forty-five (45)-day period in the case of a claim relating to Disability benefits), and notice of a final decision regarding the denial of a claim for benefits will be provided within one hundred twenty (120) days (ninety (90) days in the case of a claim relating to Disability benefits) after receipt of the original request for review.
|7.3||Designation of a Beneficiary|
|7.4||Amendment of the Plan|
The Plan may be amended, in whole or in part, from time to time, by the Committee, without the consent of any other party; provided, however, that no amendment shall divest any Participant or Beneficiary of vested credits to his or her Account or of any rights to which he would have been entitled if the Plan had been terminated immediately prior to the effective date of such amendment and further provided that no amendment shall materially increase the cost of the Plan to the Company without the approval of the Board of Directors of the Company.
|7.5||Termination of the Plan|
The Plan may be terminated, at any time, by action of the Board of Directors, without the consent of any other party. The termination of this Plan shall not result in the granting of any additional rights to any Participant, such as, full vesting or funding of his Account, and Plan benefits shall be payable solely as provided under Section 6.2 and, if applicable, Section 7.1 4(d)(iv).
Except as required by ERISA, the right of any Participant or Beneficiary in his Account balance hereunder or in any benefit payable under the Plan or any interest therein shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, garnishment or charge, and any such attempted action shall be void (except for the designation of beneficiaries pursuant to Section 7.3). No such Account, benefit, or interest shall be in any manner liable for or subject to debts, contracts, liabilities, engagements or torts of the person entitled to such Account, benefit, or interest. The preceding sentences shall not prohibit the direct deposit of Plan benefits to a Participant’s or Beneficiary’s savings, checking, or other deposit account in a financial institution.
|7.8||Payments to Incompetents|
Whenever any benefit which shall be payable under the Plan is to be paid to or for the benefit of any person who is then a minor or determined by the Committee, on the basis of qualified medical advice, to be incompetent, the Committee need not require the appointment of a guardian or custodian, but shall be authorized to cause the same to be paid over to the person having custody of the minor or incompetent, or to cause the same to be paid to the minor or incompetent without the intervention of a guardian or custodian, or to cause the same to be paid to a legal guardian or custodian of the minor or incompetent, if one has been appointed, or to cause the same to be used for the benefit of the minor or incompetent.
In the event that any provision of this Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of this Plan but shall be fully severable and this Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein.
The validity and effect of this Plan and the rights and obligations of all persons affected hereby shall be construed and determined in accordance with the internal laws, and not the law of conflicts, of the State of Missouri, except to the extent superseded by federal law.
All amounts payable hereunder shall be reduced by any and all federal, state, and local taxes imposed upon the Participant which are required to be paid or withheld by the Employer or any other payor of Plan benefits.
Neither the failure nor any delay on the part of the Employer or the Committee to exercise any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise or waiver of any such right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right, power or privilege available to the Employer or the Committee at law or in equity.
|7.13||No Right to Employment|
Neither the establishment of the Plan nor the payment of any benefits thereunder nor any action of the Company, the Employer, or the Committee shall be held or construed to confer upon any person any legal right to be continued in the employ of any Employer, and each Employer expressly reserves the right to discharge any employee whenever the interest of the Employer in its sole judgment may so require, without liability to the Employer or the Committee or any affiliate of either.
|7.14||Compliance With Code Section 409A|
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the foregoing instrument comprising the O’Reilly Automotive, Inc. Deferred Compensation Plan as amended and restated effective as of the Effective Date and as otherwise specified herein, O’REILLY AUTOMOTIVE, INC., as the Company, has caused its seal to be affixed hereto and these presents to be duly executed in its name and behalf by its proper officers thereunto authorized this _________ day of October 2020.
O’REILLY AUTOMOTIVE, INC.