ALAMO GROUP INC.

 

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

Section 1.  Background and Purpose of the Plan.

 

            (a)         Background.    The name of this plan is the Alamo Group
Inc. Supplemental Executive Retirement Plan (the “Plan”).  The Board of Alamo
Group Inc., a Delaware corporation (the “Company”) has adopted the Plan as of
January 3, 2011 (the “Effective Date”).    

 

            (b)        Purpose.  The purpose of the Plan is to provide the
executive management team of the Company and its Subsidiaries with a
supplemental retirement benefit through the use of a defined benefit
non-qualified supplemental executive retirement plan.  The Plan is not intended
to constitute either a qualified plan under the provisions of Section 401 of the
Code or a funded plan subject to ERISA.  The obligation of the Company to make
payments under the Plan constitutes solely an unsecured, but legally
enforceable, promise of the Company to make such payments, and no person,
including any Employee, shall have any lien, prior claim, or other security
interest in any property of the Company as a result of the Plan.  Rather, any
employee participating in the Plan shall have the status of a general unsecured
creditor of the Company. 

 

Section 2.  Definitions.

 

            For purposes of the Plan, in addition to terms defined elsewhere in
the Plan, the following terms shall be defined as set forth below:

 

            (a)        “Board” means the Board of Directors of the Company.

 

            (b)        “Cause” means, unless a Participant is party to a written
employment agreement with the Company or a Subsidiary which contains a
definition of “cause”, “termination for cause,” or any other similar term or
phrase, in which case “Cause” shall have the meaning set forth in such
agreement, conduct involving one or more of the following: (i) the substantial
and continuing failure of the Participant to render services to the Company or
any Subsidiary in accordance with the Participant’s obligations and position
with the Company or Subsidiary, provided the Company or any Subsidiary provides
the Participant with adequate notice of such failure and, if such failure is
capable of cure, the Participant fails to cure such failure within thirty (30)
days of the notice; (ii) dishonesty, gross negligence, or breach of fiduciary
duty; (iii) the Participant’s conviction of, or no contest plea to, an act of
theft, fraud, or embezzlement; (iv) the commission of a felony; or (v) a
material breach of the terms of an agreement between the Participant, on the one
hand, and the Company or any Subsidiary on the other hand, or a material breach
of any material company policy.

 

            (c)        “Change in Control” means the first to occur of any one
of the events set forth in the following paragraphs:

 

 

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 (i) a change in the ownership of the Company which occurs on the date that any
one person, or more than one person acting as a group (as such terms are defined
in Section 13(d)(3) of the Exchange Act), becomes the “beneficial owner” (as
defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of Shares
representing more than fifty percent (50%) of the total voting power of the
issued and outstanding stock of the Company entitled to vote in the election of
directors of the Company (“Voting Stock”) and such person or group has the power
and authority to vote such Shares;

 

(ii) a change in the effective control of the Company which occurs on the date
that a majority of members of the Board is replaced during any twelve (12) month
period by directors whose appointment or election is not endorsed by a majority
of the members of the Board prior to the date of the appointment or election; or

 

(iii) any sale, lease, exchange, or other disposition (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company (together with the assets of the Company’s direct and indirect
subsidiaries) to any person or  more than one person acting as a group (as such
terms are defined in Section 13(d)(3) of the Exchange Act); provided, however,
that for purposes of this subsection (iii), a transfer of assets by the Company
to an entity that is controlled by the Company’s stockholders immediately after
the transfer will not be considered a Change in Control;  or

 

(iv) the consummation of a merger or consolidation of the Company with another
entity in which immediately following the consummation of the transaction, those
stockholders of the Company immediately before the consummation of the
transaction cease to own collectively at least fifty percent (50%) of the Voting
Stock of the Company, so long as such merger or consolidation constitutes a
“change in control” as defined in Treasury Regulation Section 1.409A-3(i)(5)(v)
and the stock in the Company remains outstanding after the transaction. 

 

            (d)        “Code” means the Internal Revenue Code of 1986, as
amended from time to time, or any successor thereto.

 

            (e)        “Committee” means the Compensation Committee of the
Board, as appointed from time to time by at least a majority of the whole
Board. 

           

            (f)         “Company” means Alamo Group Inc., a Delaware
corporation.

 

            (g)        “Credited Service” means a Participant’s continuing and
uninterrupted period of employment with the Company and/or Subsidiary commencing
on the first day for which such Participant is paid, or entitled to payment
(including for periods prior to implementation of this Plan), for the
performance of duties with the Company and/or Subsidiary and terminating with
the Participant’s cessation of participation in the Plan.  “Credited Service”
shall also include partial periods of interrupted employment, as determined by
the Committee. 

 

 

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            (h)        “Disability” means (i) that a Participant cannot engage
in any substantial gainful activity by reason of a medically determinable
physical or mental impairment, and (ii) that a physician has determined that the
Participant’s condition described in (i) has lasted or can be expected to last
continuously for at least twelve (12) months or can lead to death. 

 

            (i)         “Effective Date” means January 3, 2011.

 

            (j)         “Employee” means an employee of the Company or any of
its Subsidiaries.       

 

            (k)        “Exchange Act” means the Securities Exchange Act of 1934,
as amended from time to time.     

           

            (l)         “ERISA” means the Employee Retirement Income Security
Act of 1974, as amended from time to time.

 

            (m)       “Final Cash Compensation” means the three-year average of
the annualized base salary compensation payable to a Participant in cash by the
Company or a Subsidiary for the calendar year as of the last date in the
Participant’s final year of Credited Service and the two preceding calendar
years: (i) before any requisite tax withholding and payroll deductions, (ii)
including base pay, other regular earnings, any amounts deferred under a salary
reduction agreement pursuant to the Company’s 401(k) plan, a Subsidiary’s 401(k)
plan, or under a “cafeteria plan” (within the meaning of Section 125 of the
Code) maintained by the Company or a Subsidiary, and (iii) excluding cash
bonuses, severance pay, expense reimbursements, any expenses of Participant paid
by the Company or a Subsidiary on behalf of Participant, taxable fringe
benefits, group term life insurance, expatriate compensation, exercised stock
options or other equity compensation, and short and long-term disability paid by
a third party.  For example, if a Participant has an annual base salary of
$100,000 on January 1st, receives a raise on April 30th such that Participant’s
new annual base salary is $120,000 going forward for a particular year, the
Participant’s annualized base salary for that year used to calculate Final Cash
Compensation is $120,000 for purposes of this Plan. 

 

            (n)        “Normal Retirement Age” means age 65. 

 

            (o)        “Participant” means an Employee who is eligible and has
been selected to participate in the Plan pursuant to Section 3.       

                       

            (p)        “Plan” means the Alamo Group Inc. Supplemental Executive
Retirement Plan, as set forth herein and as amended from time to time. 

 

            (q)        “Retirement Benefit” means, as of any given date of
determination, the vested portion only of the retirement benefit calculated
under Sections 4 and 5 hereof. 

 

            (r)        “Separation from Service” shall mean a separation from
service as defined in Code Section 409A and the Treasury Regulations and rulings
issued thereunder.

 

 

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            (s)        “Subsidiary” means a direct or indirect subsidiary of the
Company, provided that the Company (or an entity defined as a Subsidiary herein)
owns fifty percent (50%) or more of the combined voting power of all classes of
such Subsidiary’s stock entitled to vote, and the Company (or an entity defined
as a Subsidiary herein) owns fifty percent (50%) or more of the total value of
shares of all classes of such Subsidiary’s stock outstanding.      

 

Section 3.  Eligible Employees and Notification.    

 

            An Employee is eligible to become a Participant in the Plan if such
Employee is a member of a select group of key management or other highly
compensated employees of the Company and/or a Subsidiary, as determined by the
Board.  An eligible Employee shall become a Participant in the Plan as of the
date he or she is selected by the Board for inclusion as a Participant in the
Plan.  Following the Board’s selection of a Participant for inclusion as a
Participant, the Committee shall notify each Participant of his or her
participation in the Plan.  Ongoing eligibility and participation of
Participants shall be determined by the Board in its sole discretion, and no
Employee shall have a right to initial or ongoing participation in this Plan.   
Exhibit A attached hereto lists those Employees who are Participants as of the
Effective Date, and will be updated by the Committee to reflect those Employees
who become Participants after the Effective Date. 

 

Section 4.  Vesting.

 

            A Participant shall have a nonforfeitable (vested) right to
Participant’s Retirement Benefit upon the earliest of the following to occur:
(i) Participant achieves ten (10) or more years of Credited Service, or (ii) a
Change in Control occurs.    

 

Notwithstanding the foregoing, if a Participant is terminated as an Employee by
the Company or a Subsidiary for Cause, then the Participant’s Retirement Benefit
shall be immediately forfeited, whether or not such Retirement Benefit is then
vested. 

 

Section 5.  Calculation of Retirement Benefit.

 

(a)         Ten (10) or More Years of Credited Service.  A Participant who has
achieved ten (10) or more years of Credited Service shall have a Retirement
Benefit equal to: (i) twenty percent (20%) of the Participant’s Final Cash
Compensation, (ii) multiplied by fifteen (15). 

 

            (b)        Change in Control.  If a Change in Control occurs after a
Participant has achieved ten (10) or more years of Credited Service, then,
consistent with (a) above, such Participant’s Retirement Benefit shall equal
twenty percent (20%) of the Participant’s Final Cash Compensation, multiplied by
fifteen (15).  However, if a Change in Control occurs before a Participant has
achieved ten (10) or more years of Credited Service, then such Participant’s
Retirement Benefit shall equal: (i) twenty percent (20%) of the Participant’s
Final Cash Compensation, (ii) multiplied by fifteen (15), (iii) multiplied by,
the number of years of Credited Service the Participant has achieved as of the
date of the Change in Control divided by ten (10).  For example, if a
Participant had eight (8) years of Credited Service when a Change in Control
occurred, and Participant’s Final Cash Compensation was $150,000, the
Participant’s Retirement Benefit would equal $360,000 ($150,000 x 20% = $30,000;
$30,000 x 15 = $450,000; $450,000 x 8/10 = $360,000).

 

 

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Section 6.  Payment of Retirement Benefit.

 

            The terms of payment of a Retirement Benefit shall be determined by
the first to occur of the following payment events listed in subsections (a) –
(d) below.  The occurrence of a subsequent payment event shall not alter the
method by which the Retirement Benefit is paid.  By way of example, if a
Participant dies during the annuity period following his or her Separation from
Service, his or her Retirement Benefit shall continue to be payable in
accordance with the installment terms determined under Section 6(a) below.  To
the extent a Participant has a vested right to such Participant’s Retirement
Benefit pursuant to Section 4 hereof, the Company shall pay the Retirement
Benefit to Participant (or Participant’s estate, as applicable), upon the first
of the following events to occur in accordance with the following: 

 

            (a)        Separation from Service.  In connection with a
Participant’s Separation from Service (including Participant’s retirement from
the Company on or after his or her Normal Retirement Age), the Company shall pay
the vested Retirement Benefit to Participant in monthly installments over a
period of fifteen (15) years, the amount of each such installment to equal the
vested Retirement Benefit divided by one hundred eighty (180).  If the
Participant has reached his or her Normal Retirement Age when the Separation
from Service occurs, then the first such monthly installment shall be due and
payable on the first day of the seventh month following the Participant’s
Separation from Service (and not earlier than such date), and each subsequent
installment shall be made monthly thereafter on the first day of the month
following the prior installment payment; otherwise, if the Participant has not
reached his or her Normal Retirement Age when the Separation from Service
occurs, then the first such monthly installment shall be due and payable on the
first day of the month immediately following the Participant’s attainment of his
or her Normal Retirement Age (and not earlier than such date), and each
subsequent installment shall be made monthly thereafter on the first day of the
month following the prior installment payment.

 

(b)        Death.  Following a Participant’s death, the Company shall pay the
vested Retirement Benefit to the Participant’s estate in a single lump sum cash
payment no later than ninety (90) days after the Participant’s death.    

 

(c)        Disability.  A Participant seeking payment of his or her vested
Retirement Benefit hereunder by reason of Disability shall notify the Committee
of the Participant’s Disability, together with such documentation necessary for
the Committee to determine whether the Participant is Disabled within the
meaning of this Plan.  Commencing with the Committee’s determination that a
Participant has a “Disability” under the terms of this Plan, the Company shall
pay the vested Retirement Benefit in monthly installments over a period of
fifteen (15) years, the amount of each such installment to equal the vested
Retirement Benefit divided by one hundred eighty (180).  The first such monthly
installment shall be due and payable on the first day of the month following the
Committee’s determination that a Participant has a “Disability” under the terms
of this Plan, and each subsequent installment shall be made monthly thereafter
on the first day of the month following the prior installment payment. 

 

 

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(d)        Change in Control.  Following a Change in Control, the Company shall
pay the vested Retirement Benefit to the Participant in a single lump sum cash
payment no later than ninety (90) days after the Change in Control. 

 

Section 7.        Claims Procedures.

           

            (a)        Application for Benefits.  The Committee may require any
person claiming a Retirement Benefit under the Plan to submit a written
application, together with such documents, evidence, and information as it
considers necessary to process the claim.

           

            (b)        Action on Application.  Within ninety (90) days after
receipt of an application and all necessary documents and information, the
Committee shall furnish the claimant with a written notice of its decision.  If
the Committee denies the claim in whole or in part, the notice will set forth
(1) specific reasons for the denial, with specific reference to Plan provisions
upon which the denial is based; (2) a description of any additional information
or material necessary to process the application with an explanation why such
material or information is necessary; and (3) an explanation of the Plan’s claim
review procedure.

 

                If special circumstances require an extension of time for
processing the claim, the Committee shall furnish the claimant written notice of
the extension before the end of the initial ninety (90) day period.  In no event
shall the extension exceed a period of ninety (90) days from the end of the
initial period.  The notice shall explain the circumstances requiring an
extension of time and the date by which the Committee expects to render a
decision.

 

                (c)         Claim Review.  The claimant who does not agree with
the decision rendered on his or her application may request that the Committee
review the decision.  The request must be made within sixty (60) days after the
claimant receives the decision, or if the application has neither been approved
nor denied within the ninety (90) day period specified in subsection (b) of this
Section 7, then the request must be made within sixty (60) days after expiration
of the ninety (90) day period.

 

            Each request for review must be in writing and addressed to the
Committee.  Concurrently with filing the request for review, or within the sixty
(60) days request period, the claimant may submit in writing to the Committee a
statement of the issues raised by his or her appeal and supporting arguments and
comments.

 

            During the pendency of his appeal, the claimant may inspect all
documents which are reasonably pertinent to his case, upon reasonable notice to
the Committee.  However, under no circumstance shall the Committee be required
to disclose to any claimant information concerning any person other than the
Participant whose benefit is being claimed, to the extent such information is
normally treated as confidential.

 

 

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            Where the Committee believes that the issues raised by the
claimant’s appeal may be more efficiently or fairly processed by taking
testimony of the claimant or others, it shall set the matter for oral hearing
and give the claimant reasonable notice of the time and place.  Whether or not
an oral hearing is scheduled, the Committee shall proceed promptly to resolve
all issues raised by the claimant’s appeal and shall render a written decision
on the merits, with a statement of the reasons and references to the pertinent
supporting provisions of the Plan, within sixty (60) days following receipt of
the claimant’s request for review.

 

            If special circumstances require an extension of time, the Committee
shall render a decision as soon as possible, but not later than one hundred and
twenty (120) days after receipt of the request for review.  If an extension is
required, the Committee shall furnish to the claimant written notice of the
extension, including an explanation of the circumstances requiring the
extension, before the extension period begins.

           

Section 8.  Administration of the Plan. 

 

            (a)        The Plan shall be administered by the Committee.   

 

            (b)        The Committee shall have the responsibility for the
general administration of the Plan according to the terms of this Plan and shall
have all powers necessary in its discretion to accomplish those purposes,
including but not limited to the following:

 

(i)         to adopt, alter, and rescind rules and regulations relating to the
Plan as it shall from time to time deem advisable;

 

(ii)        to construe and interpret the terms of the Plan and Retirement
Benefits granted pursuant to the Plan, and to otherwise supervise the
administration of the Plan;

 

(iii)       to correct any defect, supply any omission, or reconcile any
inconsistency that may appear in this Plan; and

 

(iv)       to determine all controversies relating to the administration of the
Plan, including but not limited to: (1) differences in opinion arising between
the Company and/or Subsidiary and a Participant, and (2) any questions it deems
advisable to determine in order to promote the uniform administration of this
plan for the benefit of all interested parties.

 

In exercising such discretion pursuant to this Section 4(b), the Committee shall
ensure that a grant of Retirement Benefits is structured so as to comply with
the requirements of Code Section 409A and the Treasury Regulations thereunder,
and the Committee shall not take any action that would cause an impermissible
acceleration of payment or impermissible additional deferral of compensation for
purposes of Code Section 409A and the Treasury Regulations thereunder.

 

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            (c)        The Committee’s decisions, determinations, and
interpretations will be final, conclusive, and binding on all persons, including
the Company, Subsidiaries, and the Participants.  No member of the Committee,
nor any officer or employee of the Company acting on behalf of the Committee,
shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of the
Committee and each and any officer or employee of the Company and/or Subsidiary
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination, or interpretation. 

 

Section 9.        Tax Withholding.

 

Prior to the delivery of any Retirement Benefit (or installment thereof), the
Company will have the power and the right to deduct or withhold, or require a
Participant to remit to the Company, an amount sufficient to satisfy federal,
state, local, foreign or other taxes (including the Participant’s FICA
obligation) required to be withheld with respect to such Retirement Benefit.

 

Section 10.      No Effect on Employment or Service.

 

            Neither the Plan nor any Retirement Benefit will confer upon a
Participant any right with respect to continuing the Participant’s relationship
as an Employee with the Company or a Subsidiary, nor will they interfere in any
way with the Participant’s right or the Company’s right (or the right of a
Subsidiary) to terminate such relationship at any time, with or without Cause,
to the extent permitted by applicable laws. 

 

Section 11.      Limitation of Rights.

 

            Nothing in this Plan will be construed to give a Participant or any
other person claiming through a Participant any interest or right under this
Plan other than that of any general unsecured creditor of the Company.

 

Section 12.      Term of Plan; Amendment; Termination.

 

            The Plan will become effective upon its adoption by the Board. 
Unless terminated earlier by the Board, the Plan will continue indefinitely from
the Effective Date (the “Plan Term”).  No Retirement Benefit shall be granted
pursuant to the Plan after the end of the Plan Term, but Retirement Benefits
theretofore granted may extend beyond the Plan Term.  The Board may at any time
amend, alter, suspend or terminate the Plan.  The Board reserves the right, in
its sole discretion and for whatever reason it deems appropriate, to amend the
Plan from time to time, or to terminate the Plan at any time; provided, however
that no amendment or termination of the Plan may impair the rights of a
Participant with a vested Retirement Benefit under Section 4 hereof without the
written consent of such Participant. 

 

Section 13.      General Provisions.

 

            (a)        No right or benefit, including the Retirement Benefit,
provided in this Plan will be transferable by the Participant, except upon his
or her death to the Participant’s estate.  No right or benefit under this Plan
will be subject to alienation, sale, assignment, pledge, encumbrance, or charge,
and any attempt to alienate, sell, assign, pledge, encumber, or charge the same
will be void.

 

 

 

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            (b)        If any provision of the Plan is held to be invalid or
unenforceable, the other provisions of the Plan shall not be affected but shall
be applied as if the invalid or unenforceable provision had not been included in
the Plan.

           

            (c)        The Plan and all Retirement Benefits shall be governed by
the laws of the State of Delaware without regard to its principles of conflict
of laws.        

 

 

 

 

 

 

 

 

 

 

 

 

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Exhibit A

 

Participants in the Plan as of the Effective Date

 

 

Donald C. Duncan

Robert H. George

Dan E. Malone

Richard D. Pummell

Ronald A. Robinson

Richard J. Wehrle

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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