Document:

EX - 10.5 8.31.14

Exhibit 10.5
ANNUAL VARIABLE PAY PLAN DOCUMENT 
Plan Measurement Period: Fiscal Year 2014
Plan Effective: 9-1-2013 to 8-31-2014

PLAN PURPOSE
The purpose of the CHS Annual Variable Pay Plan (the Plan) is to provide a direct financial incentive for eligible employees who contribute to the achievement of the company and individual business unit’s financial goals. CHS annual variable pay goals include:

		
	•
	Pay competitively in the local and national labor markets

		
	•
	Focus employees on the achievement of company and business unit financial results

		
	•
	Reward employees based on company and individual performance

ELIGIBILITY
		
	•
	Employees must have a hire or transfer date on or before August 1 of the fiscal Plan year to be eligible for participation.

		
	•
	Eligibility for full time (A1 status) and part time (A2, A3 and A4 status) employees is based on business needs and determined by individual business units.

		
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	Employees who become eligible, transfer to an eligible position with a different percent opportunity, or transfer to an ineligible position during the Plan year are prorated by the number of days worked in an eligible position.

		
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	Employees covered through other types of bonus, commission, contracts or incentive plans are not eligible for the CHS Annual Variable Pay Plan unless approved by the Vice President of Human Resources.

		
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	Eligible employees must be employed and actively working at the end of the fiscal year (August 31), or have status of retirement, disability, leave of absence, or deceased and meet the criteria in the status table below, to receive an award. Paid Time Off (PTO, floating holidays, etc.) does not constitute “employment” at year end.

		
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	Employees with unpaid lay-off status at the end of the fiscal year (August 31) are not eligible for the Plan.

		
	•
	Employees may forfeit their eligibility for an award for the entire fiscal year if it is determined that they have failed to meet job performance criteria and standards, which includes but is not limited to documented performance issues, acts of misconduct, dishonesty or violation of CHS policies and procedures.  Any award forfeitures must be reviewed with the division Human Resources Director.

The following table outlines how awards are prorated when there is a change in status:
	
			
	Status Category
	Period of Time Included
	Period of Time Excluded

	Full Time/Part Time & Temp/Seasonal
	Days as Full Time/Part Time
	Days as Temp/Seasonal

	Short Term Disability
	First 90 days of STD
	STD days beyond 90 days

	Worker’s Compensation
	First 90 days of Worker’s Comp
	Days beyond 90 days

	Long Term Disability (LTD)
	LTD time excluded (days actually worked and first 90 days of STD included)
	LTD time excluded

	Retirement (Defined as age 55 & 10 yrs. Credited Service or age 65)
	Days actually worked
	PTO and days beyond last  day worked

	Deceased
	Days actually worked
	PTO and days beyond last day worked

	Family Medical Leave Act (FMLA)
	First 90 days (Coord. with STD)
	Days beyond 90 days w/ STD

	Military Leave
	First 90 days 
	Days beyond 90 days

	Personal Leave (Unpaid)
	First 90 days (Discretionary)
	Days beyond 90 days

	Position Elimination (Payment is discretionary based on circumstances; Requires HR approval)
	Days actually worked
	PTO and days beyond last day worked

	Break in Service (Separation)
	Days actually worked before and after separation, when employee returns within 90 days as verified and approved by Human Resources
	Time worked prior to separation if employee returns after 90 days 

PLAN GOALS
Plan Trigger: CHS must meet the company’s threshold profit goal in order for any Plan components including business unit and individual goals to pay out. Each operating division determines the Plan award mix.

Corporate functions and operating divisions have predetermined goals and weightings which include CHS Total Earnings, Business Segment Earnings if applicable, and Team/Individual/Personal goals if applicable.

CHS company objectives are set at three levels of Return on Adjusted Equity (ROAE): 8% threshold, 10% target, and 14% maximum. Corresponding profitability goals that need to be achieved in order to meet ROAE objectives are as follows:  

	
				
	LEVEL
	DESCRIPTION
	CHS ROAE(1)
	CHS PROFIT

	Maximum
	Generates a full payout
	14%
	$698.1 Million

	 
	12%
	$602.0 Million

	Target
	Expected level for the year
	10%
	$505.6 Million

	 
	9.0%
	$457.6 Million

	Threshold
	Minimum level required for a payout
	8.0%
	$409.5 Million

		
	(1)
	Business Unit ROAE Levels will vary from company ROAE goals.

	
				
	ROAE is a percentage determined by dividing Adjusted Year end Earnings (forecasted earnings minus preferred stock dividends) by Adjusted Beginning Year Equity (beginning year equity minus preferred stock) . Equity is the difference between total assets and total liabilities in the balance sheet.
	 ROAE 
	=
	Adjusted Year End Earnings

	Adjusted Beginning Year Equity

Plan payouts are triggered by CHS ROAE/profitability levels, but may also be tied to business unit and individual performance. Awards are prorated when results occur between the three levels of performance. 

AWARD PAYOUT METHODOLOGY
Award opportunity varies by grade level. See your manager or Human Resources Representative for more information on the annual variable pay opportunity percent for your grade level. Maximum variable pay opportunity is two times your annual target opportunity percent and is expressed as a percentage of your pay basis. Pay basis for exempt employees is base salary at the end of the fiscal year (August 31). Pay basis for non-exempt employees is actual eligible fiscal year earnings, excluding lump-sum PTO payments, profit sharing, and/or bonus awards paid during the fiscal year.

Illustrative Example:
Here is an example of a hypothetical award calculation for an operations participant with $55,000 pay basis and a maximum award potential of 10.0%.

	
						
	Contributing Factors
	Measure Weighting
	X
	Performance
Result
	=
	Weighted Performance as Percentage of Maximum Opportunity

	CHS ROAE/Profitability
	30%
	X
	60%
	=
	18%

	Business Unit ROAE/Profitability &
Individual Performance
	70%
	X
	50%
	=
	35%

	Total Performance Results =
	53%

	Payment Calculation:  $55,000 x 10% x 53% = $2,915

TIMING OF PAYMENT
Plan awards are determined, approved and issued as soon as administratively feasible following the close of the CHS fiscal year. All payments are subject to appropriate withholdings.

CHS reserves the right to change or cancel this plan at any time. The CEO has the authority to make adjustments based on extraordinary business conditions. This document does not intend to create an employment contract or provide a guarantee of continued employment. We want you to understand how your Annual Variable Pay Plan works. If you have questions, see your manager or contact your Human Resources Representative.EX - 10.6 8.31.14

Exhibit 10.6
LONG-TERM INCENTIVE PLAN
Plan XII (2012 - 2014)

Purpose and Objective

Our mission at CHS is to improve company profitability and shareholder value.  The CHS Long-Term Incentive Plan is provided to executives and key employees who can have influence on long-term business success.

The objectives of this Plan are to:
		
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	Link a component of the participants’ pay with long-term business performance

		
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	Encourage executives to provide competitive returns to our shareholders’ equity over the long term

		
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	Maintain a competitive pay element

		
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	Retain key executives and employees

Plan Name and Effective Date

The name of this Plan is CHS Long-Term Incentive Plan, Plan XII.  This is a three (3) year performance plan, effective from September 1, 2011 through August 31, 2014. 

New three year performance periods begin each fiscal year. Therefore, there are three plans in operation concurrently as illustrated below.  

	
					
	2012
	2013
	2014
	2015
	2016

	2012-2014 Plan
	 
	 

	 
	2013-2015 Plan
	 

	 
	 
	2014-2016 Plan

Administration

The CFO and Vice President of Human Resources administer this Plan.  

The Plan Administrators will:
		
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	Communicate plan design to participants

		
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	Review and report the results of each Plan 

		
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	Ensure accurate and timely distribution of awards

Eligibility

Participants are nominated by members of the CHS Senior Leadership team (“SLT”), and must be approved by the SLT.  The SLT shall review and approve any potential participants, and grant approval for continuation for all new and current participants on an annual basis. 

Performance Measurement

The CEO and the CFO establish the company Return on Adjusted Equity (ROAE) threshold, target, maximum and superior performance levels.  These levels are approved by the Board of Directors.  CHS must meet the established ROAE threshold level before participants can receive awards from this Plan.

The following chart includes Plan XII’s established ROAE measures and the required Net Income to reach each ROAE level.

	
					
	‘000S excluded
	THRESHOLD LEVEL
	TARGET LEVEL
	MAXIMUM LEVEL
	SUPERIOR PERFORMANCE LEVEL

	Return On Adjusted Equity
	8.0%
	10.0%
	14.0%
	20.0%

	Three Year 2012-2014 Net Income Required to Achieve ROAE
	$1,077,155
	$1,328,036
	$1,829,797
	$2,582,439

Award Opportunities and Calculation  

The award opportunity potential is expressed as a percentage of each participant’s average salary over the three-year Plan period.   The award opportunity percent varies by position and grade level. The salary and percent opportunity used to calculate the award are based on status as of August 31st of each of the plan years.  

Note: Participants who entered the plan prior to 9-01-11 will have awards calculated based on whichever value is higher, base salary or salary range midpoint, as defined in transition methodology. Participants entering the plan 9-01-11 or later will have awards calculated based on three year average salary.

Award Approval Process

At the conclusion of the Plan period, the CFO and Vice President of Human Resources will prepare a report summarizing CHS performance results against the established Plan, which shall determine individual awards, and communicate your personal LTI award.  After the completion of the annual company financial audit, Long Term Incentive Awards are credited to your CHS Deferred Compensation Plan account and are subject to the operating rules of the CHS Deferred Compensation Plan.

Note: Awards for achieving results from 8% ROAE through 20% ROAE will be contributed to the CHS Deferred Compensation plan. However, due to IRC section 409A rules, earned awards for results beyond 14% ROAE will be paid in cash to all participants upon the completion of the vesting period (January 2017).  The table below provides an illustration.
	
					
	DISTRIBUTION ELECTIONS PER 409A RULES

	 
	Award Attributable to
	Award Attributable to
>14% ROAE

	Award Level
	8%
ROAE
	10%
ROAE
	14%
ROAE

	Plan 2012-2014
	Participant Makes Distribution Elections
	Award Deferred to Full Vesting Date - 1-1-17
And Paid in Cash

	Plan 2013-2015
	Award Deferred to Full Vesting Date - 1-1-18
And Paid in Cash

	Plan 2014-2016
	Participant Makes Distribution Elections

Note: The IRC section 409A rules also apply to awards from the 2013-2015 LTI Plan. 
Beginning with the 2014-2016 Plan you will be able to make distribution elections on your entire award.

Plan Accrual, Award and Vesting

While this plan is in operation it has the potential to be running concurrently with two other three-year plans.  Provisions have been made to spread awards out among concurrent plans to ensure that no plan is overly influenced by a single year’s performance.  

The following chart provides a hypothetical example to demonstrate a typical performance/measurement period, award, and vesting schedule.  

This example shows that Plan XII is accrued based on Fiscal Year 2012-2014 performance, and awarded in November of 2014.  Funds are vested 1/3 each year, beginning January 2015, and are subject to the provisions of the CHS Deferred Compensation Plan. 

Effect on Change in Employment Status

New Participants
Participants must be in a plan a minimum of six months in order to be eligible for an award. Awards for all new participants will be pro-rated based upon full month(s) participation out of the 36 month plan performance period. 

Employees who are approved and enroll in the CHS Deferred Compensation Plan by the last day in February will have awards directed to the CHS Deferred Compensation Plan, and are subject to terms of the plan. Participants approved after this date will begin participation in the CHS Deferred Compensation Plan September first of the following fiscal year.  

Retirement, Death or Permanent Disability
Current Plan in Operation: Participants who retire (defined as age 55 and 10 years Credited Service or age 65 as defined by CHS Deferred Compensation Plan rules), die or become permanently disabled during a plan period will receive any potential award for the plan period prorated by the number of full month(s) of participation in the 36 month plan performance period. Participants must be in a plan a minimum of six months in order to be eligible for an award. The pro-rated award will be determined and processed after the conclusion of the plan period in accordance with normal plan procedures.  This award will immediately vest and will be subject to the provisions of the CHS Deferred Compensation Plan.

Previous Plan(s): Participants who retire (defined as age 55 and 10 years Credited Service or age 65 as defined by CHS Deferred Compensation Plan rules), die or become permanently disabled will receive all earned, yet unvested, awards from previous plan(s), as they will immediately vest.  All awards remain subject to the provisions of the CHS Deferred Compensation Plan.

Termination
Participants who terminate, or are terminated during the term of the Plan, will forfeit all rights to un-awarded plan benefits and any non-vested awards being held in the CHS Deferred Compensation Plan. Vested awards are subject to the provisions of the CHS Deferred Compensation Plan.

Non-Recurring Events

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 a sale of assets.

Amounts to be excluded will be determined by the CEO and CFO, and approved by the Board of Directors.

Amendments or Termination of Plan

During the course of any three year plan, CHS may amend or terminate this Plan without prior notification or the consent of the participants.  Once the three year measurement period is completed and audited, awards cannot be modified or terminated.

Nothing in this plan can be interpreted as a contract for employment, continued employment or continued participation in the CHS Long Term Incentive Plan, or in any other CHS compensation or benefit program.

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