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Exhibit 10-O
DONALDSON COMPANY, INC.
DEFERRED COMPENSATION AND 401(K) EXCESS PLAN
(2003 RESTATEMENT)
As Amended and Restated Effective as of January 1, 2003
DONALDSON COMPANY, INC.
DEFERRED COMPENSATION AND 401(K) EXCESS PLAN
(2003 RESTATEMENT)
TABLE OF CONTENTS
PAGE
SECTION 1. ESTABLISHMENT AND PURPOSE.......................................1
1.1. Establishment
1.2. Purpose
1.3. Relation to Master Stock Plans
SECTION 2. DEFINITIONS.....................................................2
2.1. Account
2.2. Affiliate
2.3. Beneficiary
2.4. Board
2.5. Change of Control
2.5.1. Affiliate
2.5.2. Beneficial Owner
2.5.3. Exchange Act
2.5.4. Person
2.6. Code
2.7. Committee
2.8. Company
2.9. Company Credit
2.10. Deferral Credit
2.11. Disability, Disabled
2.12. Effective Date
2.13. Eligible Employee
2.14. ERISA
2.15. ESOP
2.16. Fixed Matching Credit
2.17. 401(k) Plan
2.18. Long Term Incentive Deferral Credit
2.19. Participant
2.20. Plan
2.21. Plan Year
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2.22. Profit Sharing Credit
2.23. Recognized Compensation
2.24. Restricted Stock Deferral Credits
2.25. Termination of Employment
2.26. Valuation Date
2.27. Variable Credit
2.28. Vested
2.29. Year of Service
SECTION 3. ELIGIBILITY AND PARTICIPATION....................................8
3.1. Commencement of Participation
3.2. Termination of Participation
3.3. Overriding Exclusion
SECTION 4. DEFERRED COMPENSATION AMOUNTS....................................9
4.1. Salary Deferral Credits
4.2. Bonus Deferral Credits
4.3. Excess Deferral Credits
4.4. Long Term Incentive Deferral Credits
4.5. Restricted Stock Deferral Credits
4.6. Company Credits
4.7. Vesting
4.8. Reduction for Tax Withholding
SECTION 5. TIME AND MANNER OF PAYMENTS.....................................13
5.1. Time of Payment
5.2. Manner of Payment
5.3. Changes in Time and Manner of Payment
5.4. Hardship Distributions
5.4.1. When Available
5.4.2. Purposes
5.4.3. Limitations
5.5. Change in Control Distributions
5.6. Acceleration of Payments
5.6.1. When Available
5.6.2. Forfeiture
5.7. Death Benefit
5.8. Beneficiary Designation
SECTION 6. DEFERRED COMPENSATION ACCOUNT...................................16
6.1. Participant Accounts
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6.2. Investment of Accounts
6.3. Assumption of Risk
6.4. Charges Against Accounts
SECTION 7. FUNDING.........................................................17
7.1. Funding
7.2. Corporate Obligation
SECTION 8. FORFEITURE OF BENEFITS..........................................18
SECTION 9. ADMINISTRATION..................................................19
9.1. Authority
9.2. Liability
9.3. Procedures
9.4. Claim for Benefits
9.5. Claims Procedure
9.5.1. Original Claim
9.5.2. Claims Review Procedure
9.5.3. General Rules
9.6. Payments upon Imposition of Federal or State Taxes
9.7. Legal Fees
9.8. Errors in Computations
SECTION 10. MISCELLANEOUS...................................................23
10.1. Not an Employment Contract
10.2. Nontransferability
10.3. Tax Withholding
10.4. Expenses
10.5. Governing Law
10.6. Amendment and Termination
10.7. Rules of Interpretation
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DONALDSON COMPANY, INC.
DEFERRED COMPENSATION AND 401(k) EXCESS PLAN
(2003 RESTATEMENT)
SECTION 1
ESTABLISHMENT AND PURPOSE
1.1. ESTABLISHMENT. Effective as of December 21, 1997, Donaldson Company, Inc.
established a nonqualified, unfunded supplemental deferred compensation plan for
a select group of highly compensated employees known as the "DONALDSON COMPANY,
INC. DEFERRED COMPENSATION AND 401(k) EXCESS PLAN." Except as otherwise
explicitly provided in this amended and restated plan document, effective as of
January 1, 2003, the Plan document is amended and restated to be as set forth
herein.
1.2. PURPOSE. The purposes of this Plan are to enable the Company to supplement
the benefits for a select group of management or highly compensated employees
under the Donaldson Company, Inc. Retirement Savings Plan which will be reduced
because of the compensation limitation under section 401(a)(17) of the Code; to
provide a means whereby certain amounts payable by the Company to a select group
of management or highly compensated employees may be deferred to some future
period; and to attract and retain certain executive employees of outstanding
competence.
1.3. RELATION TO MASTER STOCK PLANS. All benefits provided by this Plan that are
attributable to Long Term Incentive and Restricted Stock Deferral Credits are
subject to any applicable terms, conditions and restrictions required by the
Donaldson Company, Inc. 2001 Master Stock Incentive Plan if they are credited
after December 31, 2001, or the Donaldson Company, Inc. 1991 Master Stock
Compensation Plan if they are credited on or before December 31, 2001.
SECTION 2
DEFINITIONS
The following words and phrases shall have the following meanings, unless a
different meaning is plainly required by the context. Any masculine terminology
used in the Plan shall also include the feminine gender and the definition of
any terms in the singular shall also include the plural.
2.1. ACCOUNT -- the deferred compensation account established under this Plan
for a Participant pursuant to Section 6.1.
2.2. AFFILIATE -- a business entity which is under "common control" with the
Company or which is a member of an "affiliated service group" that includes the
Company, as those terms are defined in section 414(b), (c) and (m) of the Code.
A business entity shall also be treated as an Affiliate if, and to the extent
that, such treatment is required by regulations under section 414(o) of the
Code. In addition to said required treatment, the Committee may, in its
discretion, designate as an Affiliate any business entity which is not such a
"common control" or "affiliated service group" business entity but which is
otherwise affiliated with the Company, subject to such limitations as the
Committee may impose.
2.3. BENEFICIARY -- any person or entity validly designated by the Participant
in accordance with Section 5 to receive the benefits, if any, payable from the
Participant's Account after the Participant's death. Designated persons or
entities shall not be considered Beneficiaries until the death of the
Participant.
2.4. BOARD -- the Board of Directors of the Company.
2.5. CHANGE OF CONTROL -- a "Change in Control" shall be deemed to have occurred
if the event set forth in any one of the following paragraphs shall have
occurred:
(a) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company's then
outstanding securities, excluding any Person who becomes such
a Beneficial Owner in connection with a transaction described
in clause (i) of paragraph (c) below; or
(b) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals
who, on the date hereof, constitute the Board and any new
director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for
election by the Company's stockholders was
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approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were
directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or
recommended; or
(c) there is consummated a merger or consolidation of the Company
or any direct or indirect subsidiary of the Company with any
other corporation, other than (i) a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity
or any parent thereof), in combination with the ownership of
any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any subsidiary of the
Company, at least 60% of the combined voting power of the
securities of the Company or such surviving entity or any
parent thereof outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the
Company's then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at
least 60% of the combined voting power of the voting
securities of which are owned by stockholders of the Company
in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions. Solely for
purposes of this Section 2.5, the following words and phrases shall have the
following meanings:
2.5.1. AFFILIATE -- an "affiliate" within the meaning of Rule 12b-2
promulgated under Section 12 of the Exchange Act.
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2.5.2. BENEFICIAL OWNER -- a "beneficial owner" within the meaning of
Rule 13d-3 under the Exchange Act.
2.5.3. EXCHANGE ACT -- the Securities Exchange Act of 1934, as amended
from time to time.
2.5.4. PERSON -- a "person" within the meaning of Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
2.6. CODE -- the Internal Revenue Code of 1986, including applicable regulations
for the specified section of the Code. Any reference in this Plan Statement to a
section of the Code, including the applicable regulation, shall be considered
also to mean and refer to any subsequent amendment or replacement of that
section or regulation.
2.7. COMMITTEE -- the Human Resources Committee of the Board of Directors of the
Company.
2.8. COMPANY -- Donaldson Company, Inc. and, except in determining under Section
2.5 hereof whether or not any Change in Control has occurred, shall include any
successor by merger, purchase or otherwise.
2.9. COMPANY CREDIT -- any amount credited to an Eligible Employee in accordance
with Section 4.6. Company Credits include Fixed Matching Credits, Variable
Credits and Profit Sharing Credits.
2.10. DEFERRAL CREDIT -- any amount credited to an Eligible Employee in
accordance with Sections 4.1, 4.2, 4.3, 4.4 or 4.5.
2.11. DISABILITY, DISABLED -- a physical or mental impairment which constitutes
total and permanent disability and during which the Eligible Employee is not
receiving any payments of an Early Retirement Pension or a Vested Benefit under
the Pension Plan, and the Eligible Employee either:
(a) is eligible to receive long-term disability benefits under the
Company's separate long-term disability insurance plan (which
program shall be administered on a uniform and
nondiscriminatory basis); if such separate long-term
disability coverage is elected by the Eligible Employee, or
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(b) is eligible to receive and is actually receiving (after the
applicable waiting period) benefits under the federal Social
Security Act as in effect at the time of the Disability.
2.12. EFFECTIVE DATE -- December 21, 1997, the original effective date of the
Plan. Except as otherwise explicitly provided herein, this amended and restated
Plan document is effective as of January 1, 2003.
2.13. ELIGIBLE EMPLOYEE -- unless the Committee determines otherwise, each
individual described in (a) or (b) below shall be an Eligible Employee to the
extent and subject to the limitations specified:
(a) OFFICERS. Each person who has been designated as an officer of
the Company by the Company's board of directors shall be an
Eligible Employee until such person ceases to be such an
officer.
(b) EXECUTIVE EMPLOYEES. For purposes of Sections 4.3, 4.4 and 4.5
only, each executive employee of the Company or its
Affiliates, other than an officer described in (a) above,
whose Recognized Compensation for a Plan Year is expected to
exceed the annual compensation limit then in effect under Code
section 401(a)(17) for such Plan Year shall be an Eligible
Employee. Such an executive employee shall cease to be an
Eligible Employee upon the employee's Termination of
Employment, death or Disability, whichever happens first.
2.14. ERISA -- the Employee Retirement Income Security Act of 1974, including
applicable regulations for the specified section of ERISA. Any reference in this
Plan to a section of ERISA, including the applicable regulation, shall be
considered also to mean and refer to any subsequent amendment or replacement of
that section or regulation.
2.15. ESOP -- the tax-qualified, stock bonus plan known as the "Donaldson
Company, Inc. Employee Stock Ownership Plan (1987 Restatement)."
2.16. FIXED MATCHING CREDIT -- any amount credited to an Eligible Employee in
accordance with Section 4.6(a).
2.17. 401(K) PLAN -- the tax-qualified, profit sharing plan known as the
"Donaldson Company, Inc. Retirement Savings Plan (1987 Restatement)."
2.18. LONG TERM INCENTIVE DEFERRAL CREDIT -- any amount credited to an Eligible
Employee in accordance with Section 4.4.
2.19. PARTICIPANT -- an Eligible Employee or a former Eligible Employee of the
Company or its Affiliates who has any amount credited to his or her Account in
this Plan.
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2.20. PLAN -- the Donaldson Company, Inc. Deferred Compensation and 401(k)
Excess Plan as set forth herein, and as the same may be amended from time to
time.
2.21. PLAN YEAR -- effective as of January 1, 2001, the twelve (12) consecutive
month period ending on any December 31. Prior to August 1, 2000, the Plan Year
was the twelve (12) consecutive month period ending on any July 31. The period
beginning on August 1, 2000 and ending on December 31, 2000 shall also be a Plan
Year.
2.22. PROFIT SHARING CREDIT -- any amount credited to an Eligible Employee in
accordance with Section 4.6(c).
2.23. RECOGNIZED COMPENSATION -- for purposes of Section 4.3 of the Plan, wages,
tips and other compensation paid to the Participant by the Employer and
reportable in the box designated "wages, tips, other compensation" on Treasury
Form W-2 (or any comparable successor box or form) for the applicable period but
determined without regard to any rules that limit the remuneration included in
wages based on the nature or location of the employment or the services
performed (such as the exception for agricultural labor in section 3401(a)(2) of
the Code) and further determined without regard to any amounts paid or
reimbursed by the Employer for moving expenses incurred by the Participant (but
only to the extent that at the time of the payment it is reasonable to believe
that these amounts are deductible by the Participant under section 217 of the
Code); subject, however, to the following:
(a) INCLUDED ITEMS. In determining a Participant's Recognized
Compensation there shall be included elective contributions
made by the Employer on behalf of the Participant that are not
includible in gross income under sections 125, 402(e)(3),
402(h), 403(b), 414(h)(2) and 457 of the Code including
elective contributions authorized by the Participant under a
Retirement Savings Agreement, a cafeteria plan or any other
qualified cash or deferred arrangement under section 401(k) of
the Code.
(b) EXCLUDED ITEMS. In determining a Participant's Recognized
Compensation there shall be excluded all of the following: (i)
reimbursements or other expense allowances including foreign
service allowances, station allowances, foreign tax
equalization payment and other similar payments, (ii) welfare
and fringe benefits (both cash and noncash) including
third-party sick pay (i.e., short-term and long-term
disability insurance benefits), income imputed from insurance
coverages and premiums, employee discounts and other similar
amounts, payments for vacation or sick leave accrued but not
taken, final payments on account of Termination of Employment,
death or Disability (e.g., severance payments) and settlement
for accrued but unused vacation and sick leave, (iii) moving
expenses, and (iv) deferred compensation (both when deferred
and when received).
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(c) ATTRIBUTION TO PERIODS. A Participant's Recognized
Compensation shall be considered attributable to the period in
which it is actually paid and not when earned or accrued;
provided, however, amounts earned but not paid in a Plan Year
because of the timing of pay periods and pay days may be
included in the Plan Year when earned if these amounts are
paid during the first few weeks of the next Plan Year, the
amounts are included on a uniform and consistent basis with
respect to all similarly situated Participants and no amount
is included in more than one Plan Year.
(d) EXCLUDED PERIODS. Amounts received after the Participant's
Termination of Employment, death or Disability shall not be
taken into account in determining a Participant's Recognized
Compensation.
(e) MULTIPLE EMPLOYERS. If a Participant is employed by more than
one Employer in a Plan Year, a separate amount of Recognized
Compensation shall be determined for each Employer.
2.24. RESTRICTED STOCK DEFERRAL CREDITS -- any amount credited to an Eligible
Employee in accordance with Section 4.5.
2.25. TERMINATION OF EMPLOYMENT -- the complete severance of an employee's
employment relationship with the Company and all Affiliates, if any, for any
reason other than the employee's death or Disability.
2.26. VALUATION DATE -- for Plan Years beginning on or after August 1, 2000,
each December 31 and each other day that the New York Stock Exchange is open and
conducting business, or such other date or dates as the Committee may establish.
2.27. VARIABLE CREDIT -- any amount credited to an Eligible Employee in
accordance with Section 4.6(b).
2.28. VESTED -- nonforfeitable.
2.29. YEAR OF SERVICE -- a one-year period of employment with the Company in
which the Participant completes at least 1,000 hours of service.
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SECTION 3
PARTICIPATION
3.1. COMMENCEMENT OF PARTICIPATION. An Eligible Employee shall become a
Participant in the Plan when the Eligible Employee is first credited with any
amount pursuant to Section 4.
3.2. TERMINATION OF PARTICIPATION. A person shall cease to be a Participant as
soon as all amounts credited to the Participant's Account have been paid in
full.
3.3. OVERRIDING EXCLUSION. Notwithstanding anything apparently to the contrary
in this Plan or in any written communication, summary, resolution or document or
oral communication, no individual shall be a Participant in this Plan, develop
benefits under this Plan or be entitled to receive benefits under this Plan
(either for the employee or his or her survivors) unless such individual is a
member of a select group of management or highly compensated employees (as that
expression is used in ERISA). If a court of competent jurisdiction, any
representative of the U.S. Department of Labor or any other governmental,
regulatory or similar body makes any direct or indirect, formal or informal,
determination that an individual is not a member of a select group of management
or highly compensated employees (as that expression is used in ERISA), such
individual shall not be (and shall not have ever been) a Participant in this
Plan at any time. If any person not so defined has been erroneously treated as a
Participant in this Plan, upon discovery of such error such person's erroneous
participation shall immediately terminate AB INITIO and upon demand such person
shall be obligated to reimburse the Company for all amounts erroneously paid to
him or her.
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SECTION 4
DEFERRED COMPENSATION AMOUNTS
4.1. SALARY DEFERRAL CREDITS. An Eligible Employee may elect to have all or a
portion of the salary which the Eligible Employee would otherwise have received
and included in gross income credited to his or her Account. Such election must
comply with the rules and limits established by the Committee and must be made
by giving advance written notice to the Company on an election form approved by
the Committee. Elections with respect to salary earned during a pay period must
be received by the Company prior to the beginning of the pay period to which the
election applies. Participant elections will remain effective until the earlier
of: (i) the time a revised election is received and becomes effective, or (ii)
the following January 1. Revised elections will take effect on the first day of
the first pay period commencing after the pay period in which the election is
received by the Company.
4.2. BONUS DEFERRAL CREDITS. An Eligible Employee may elect to have all or a
portion of the annual bonus which the Eligible Employee would otherwise have
received and included in gross income credited to his or her Account. Such
election must comply with the rules and limits established by the Committee and
must be made by giving advance written notice to the Company on an election form
approved by the Committee. Effective August 1, 1997, elections with respect to
annual bonuses must be received by the Company prior to April 1 of the year for
which the bonus was earned; provided, however, that the Committee may permit an
employee who becomes an Eligible Employee after April 1 of that year to make an
election for the remainder of that year effective with respect to bonuses earned
on or after the date the election is received.
4.3. EXCESS DEFERRAL CREDITS. An Eligible Employee may elect to have a portion
of Recognized Compensation which the Eligible Employee would otherwise have
received and included in gross income deferred and credited to his or her
Account. Such deferral shall be made only from the Eligible Employee's
Recognized Compensation after he or she has reached the annual deferral limit
under section 402(g) of the Code, if the Eligible Employee's elective deferrals
to the 401(k) Plan reach that limit. Otherwise, such deferral shall be made only
from the Participant's Recognized Compensation in excess of the annual
compensation limit in effect for the Plan Year under section 401(a)(17) of the
Code. An election under this Section 4.3 must be made by giving advance written
notice to the Company on an election form approved by the Committee. Elections
with respect to Recognized Compensation earned during a pay period must be
received by the Company prior to the beginning of the pay period to which the
election applies. An election will remain effective until a revised election is
received and becomes effective.
4.4. LONG TERM INCENTIVE DEFERRAL CREDITS. An Eligible Employee may elect to
have all or a portion of the long term performance share award under the
Donaldson Company, Inc. 1991 Master Stock Compensation Plan, or any subsequent
stock compensation plan maintained by the Company, (the "LTCP Plan") which the
Eligible Employee would otherwise have received and included in
-9-
gross income credited to his or her Account. Such election must comply with the
rules and limits established by the Committee and must be made by giving advance
written notice to the Company on an election form approved by the Committee.
Elections with respect to such long term performance share awards must be
received by the Company not less than one year prior to the end of the
"Incentive Cycle" (as defined in the LTCP Plan) with respect to which the award
was earned; provided, however, that the Committee may permit an employee who
becomes an Eligible Employee after the commencement of an "Incentive Cycle" to
submit an election with respect to the award for such "Incentive Cycle" no later
than 30 days after such employee becomes an Eligible Employee.
(a) STOCK UNITS. After the end of the Incentive Cycle, the
Participant's Account shall be credited with a number of Stock
Units equal to the number of shares of common stock of the
Company ("Common Stock") deferred by the Participant.
(b) ADJUSTMENT. In the event of any change in the outstanding
shares of Common Stock by reason of any stock split or stock
dividend in the form of a split, the Committee shall adjust
the number of Stock Units in a Participant's Account so that
such number equals the number of Stock Units in the Account
prior to the event, multiplied by a fraction, the denominator
of which is the number of Stock Units in the Account prior to
the event, and the numerator of which is the number of shares
of Common Stock the Participant would have had after the event
if the Participant had shares of Common Stock immediately
prior to the event equal in number to the number of Stock
Units in the Participant's Account immediately prior to the
event. In the event of any dividend (other than a stock
dividend in the form of a split), recapitalization, merger,
consolidation, spinoff, reorganization, combination or
exchange of shares or other similar corporate change, then if
the Committee, or the board of directors of a successor
corporation, shall determine, in its sole discretion, that
such change equitably requires an adjustment in the number of
Stock Units then held in the Participant's Account, such
adjustment shall be made by the Committee or said board and
shall be conclusive and binding for all purposes of the Plan.
(c) DIVIDEND UNITS. The number of Stock Units in a Participant's
Account shall be automatically increased as of each Common
Stock dividend payment date in an amount equal to the number
of shares of Common Stock that could be purchased on such
dividend payment date with the cash dividends that would be
paid on a number of shares of Common Stock equal to the number
of Stock Units in the Participant's Account on the record date
for such dividend.
4.5. RESTRICTED STOCK DEFERRAL CREDITS. An Eligible Employee may irrevocably
elect to receive a credit to his or her Account in lieu of all or a portion of
the restricted stock awarded to that Eligible Employee under the Donaldson
Company, Inc. 1991 Master Stock Compensation Plan, or
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any subsequent stock compensation plan maintained by the Company. Such election
must comply with the rules and limits established by the Committee, must be made
by giving advance written notice to the Company on an election form approved by
the Committee, and shall apply only as to restricted stock for which no election
under Code Section 83(b) has been made and for which no amount was paid by the
Eligible Employee. Elections with respect to any such restricted stock must be
received by the Company not less than one year prior to the date on which the
restrictions applicable to such restricted stock would otherwise lapse (the
"Lapse Date") unless the Lapse Date is less than one year after this Section 4.5
first becomes effective and the election is authorized by the Committee.
(a) STOCK UNITS. The Eligible Employee's Account shall be credited
as of the Lapse Date with a number of Stock Units equal to the
number of shares of restricted stock whose restrictions lapse
on that date that are subject to the Eligible Employee's
election.
(b) DIVIDENDS AND ADJUSTMENTS. Stock Units credited to a
Participant's Account under this Section 4.5 shall be
increased due to cash dividends and subject to adjustment as
provided in subsections (b) and (c) of Section 4.4 above.
4.6. COMPANY CREDITS.
(a) FIXED MATCHING CREDITS. Any Eligible Employee who elects
Deferral Credits in lieu of receiving Recognized Compensation
shall be credited with a Fixed Matching Credit to the Eligible
Employee's Account. The amount of an Eligible Employee's Fixed
Matching Credit shall equal the amount the Eligible Employee
would have received on the deferrals made under Sections 4.1,
4.2 and 4.3, as set forth in Section 3.2 of the ESOP, if such
deferrals had been made to the 401(k) Plan, without regard to
the annual compensation limit then in effect under Code
section 401(a)(17), taking into account only salary, bonus and
Recognized Compensation after the Eligible Employee's
Recognized Compensation reached the annual compensation limit
in effect for the Plan Year under section 401(a)(17) of the
Code, and the deferrals on such salary, bonus and Recognized
Compensation. Notwithstanding the foregoing, any Eligible
Employee who retires either during a Plan Year or after the
end of a Plan Year in which such Eligible Employee is a
Participant in this Plan and who receives a bonus after the
end of the Plan Year that was earned in the Plan Year in which
such Eligible Employee retired shall receive a Fixed Matching
Credit of four percent (4%) of the bonus amount in such
Eligible Employee's Account.
(b) VARIABLE CREDITS. Any Eligible Employee who elects Deferral
Credits in lieu of receiving Recognized Compensation may be
credited with a Variable
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Credit to the Eligible Employee's Account. The amount of an
Eligible Employee's Variable Credit shall equal the amount the
Eligible Employee would have received on the deferrals made
under Sections 4.1, 4.2 and 4.3, as set forth in Section 3.3
of the ESOP, if such deferrals had been made to the 401(k)
Plan, without regard to the annual compensation limit then in
effect under Code section 401(a)(17). Notwithstanding the
foregoing provisions of this subsection (b), effective for
Plan Years beginning on or after January 1, 2001, Variable
Credits shall be permanently discontinued.
(c) PROFIT SHARING CREDITS. The Board may, in its sole discretion,
cause the Account of an Eligible Employee to be credited with
Profit Sharing Credits for a Plan Year. Such Profit Sharing
Credits shall equal the amount the Eligible Employee would
have received if the profit sharing contribution to the 401(k)
Plan and ESOP for that Eligible Employee had been made without
regard to the annual compensation limit then in effect under
Code section 401(a)(17), minus the amount of profit sharing
contributions actually made to the Eligible Employee's account
in the 401(k) Plan and ESOP.
4.7. VESTING. Subject to the forfeiture provisions of Section
8, the Accounts of all Participants shall be 100% Vested at
all times.
4.8. REDUCTION FOR TAX WITHHOLDING. Notwithstanding anything
in Sections 4.4(a) and 4.5(a) to the contrary, the number of
Stock Units credited pursuant to those sections shall be
reduced by the number of shares whose aggregate fair market
value on the crediting date equals the amount of any taxes
that must be withheld at the time of crediting due to the
Eligible Employee's deferral election.
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SECTION 5
TIME AND MANNER OF PAYMENTS
5.1. TIME OF PAYMENT. Payment of a Participant's Account under the Plan will
commence as soon as administratively feasible (but no more than twenty (20)
days) following the occurrence of the earliest of the following events:
(a) death,
(b) Disability, or
(c) the date of distribution selected by the Participant in
writing at a time and on a form prescribed by the Committee.
Distribution of a Participant's Account attributable to Deferral Credits under
Sections 4.1, 4.2, 4.4 and 4.5, and no other portion, may begin prior to the
Participant's Termination of Employment. In no event may payment of the portion
of a Participant's Account attributable to a Deferral Credit begin less than one
year after the date the Deferral Credit was first elected.
5.2. MANNER OF PAYMENT. A Participant's Account will be paid to the Participant
in either a single lump-sum payment or in annual installments of not more than
twenty (20) years. The Participant must elect a manner of payment at the time
the Participant elects his or her date of distribution pursuant to Section
5.1(c). In the event no election was made by the Participant, payment shall be
in a single lump-sum. Payment of the portion of a Participant's Account
attributable to Deferral Credits other than Long Term Incentive and Restricted
Stock Deferral Credits shall be in cash. Payment to a Participant of the portion
of the Participant's Account attributable to Long Term Incentive and Restricted
Stock Deferral Credits shall be made, net of withholding taxes, exclusively in
shares of Common Stock. Payment to a Participant on or after the date certified
in writing by the Committee or its delegate as the date on which distributions
in stock of the portion of the Participant's Account attributable to Company
Credits are administratively feasible shall be made, net of withholding taxes,
exclusively in shares of Common Stock. Payment prior to that certified date of
such portion of a Participant's Account shall be in cash. For purposes of
determining any tax withholding on a payment, the value of Common Stock will be
the market price of such Common Stock as of the close of business on the day
prior to the date as of which the payment is made.
5.3. CHANGES IN TIME AND MANNER OF PAYMENT. Notwithstanding the foregoing, a
Participant may make a new election concerning selection of the time and form of
payment authorized pursuant to this Section 5 (the "New Election") in accordance
with the following terms and conditions, unless waived or modified by the
Committee:
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(a) A New Election shall only be permitted once and must be made
and become effective as hereinafter provided, if at all, prior
to the Participant's Termination of Employment, death or
Disability, whichever happens first;
(b) A New Election shall become effective twelve months after it
is received by the Company; and
(c) If any of the events set forth in Section 5.1 of the Plan
occur prior to the effective date of a New Election with
respect to previously credited deferrals, then payments shall
be paid hereunder to or with respect to the Participant
according to the elections in effect at the time of the event.
5.4. HARDSHIP DISTRIBUTIONS.
5.4.1. WHEN AVAILABLE. A Participant may receive a hardship
distribution from the Deferral Credits in his or her Account if the Committee
determines that such hardship distribution is for a purpose described in Section
5.4.2 and the conditions in Section 5.4.3 have been fulfilled. To receive such a
distribution, the Participant must file a written hardship distribution
application with the Committee and furnish such documentation as the Committee
may require. In the application, the Participant shall specify the basis for the
distribution and the dollar amount to be distributed. If such hardship
distribution is approved by the Committee, distribution shall be made as soon as
administratively feasible (but no more than twenty (20) days) following the
approval of a completed application by the Committee. Hardship distributions
shall be made in a lump-sum payment of either cash or Common Stock, as required
by Section 5.2. The amount of each hardship distribution shall be taken from the
portion of the Account attributable to the earliest enrollment (including
related earnings) first.
5.4.2. PURPOSES. Hardship distributions shall be allowed under Section
5.4.1 only if the Participant establishes that the hardship distribution is to
be made on account of an immediate and heavy financial need of the Participant
for which the Participant does not have other available resources.
5.4.3. LIMITATIONS. The amount of the hardship distribution shall not
exceed the amount of the Participant's proven immediate and heavy financial
need. A hardship distribution shall not be made after the death of the
Participant. The amount of approved hardship distribution shall not exceed the
value of the Account.
5.5. CHANGE IN CONTROL DISTRIBUTIONS. Notwithstanding any other provision of
this Section 5, a Participant or Beneficiary will receive a distribution of his
or her entire Account if a Change in Control occurs. Distribution of the entire
Account shall be made on the date of the Change in Control. Such distribution
shall be made in a single lump-sum cash payment.
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5.6. ACCELERATION OF PAYMENTS.
5.6.1. WHEN AVAILABLE. A Participant or Beneficiary may receive an
accelerated payment of his or her entire Account (after reduction for the
forfeiture described in Section 5.6.2). To receive such an accelerated payment,
the Participant or Beneficiary must file a written payment application with the
Committee. Payment of the accelerated payment (after reduction for the
forfeiture described in Section 5.6.2) shall be made as soon as administratively
feasible (but no more than twenty (20) days) following the approval of a
completed application by the Committee. Such accelerated payment shall be made
in a lump-sum payment of either cash or Common Stock, as required by Section
5.2. The amount of the accelerated payment shall be equal to the value of the
Account as of such distribution date (after reduction for the forfeiture
described below).
5.6.2. FORFEITURE. Upon the approval of an accelerated payment, there
shall be irrevocably forfeited from the Account of the Participant or
Beneficiary an amount equal to six percent (6%) of the Account. In addition, the
Participant will not be an Eligible Employee under this Plan for two (2) years
following such accelerated payment.
5.7. DEATH BENEFIT. In the event of a Participant's death, the Company shall pay
the amount of the Participant's Account as of the date of death (as adjusted
from time to time pursuant to Section 6.2) in a lump-sum or in installments, as
previously elected by the Participant, to the Participant's designated
Beneficiary as soon as administratively feasible. In the event no election was
made by the Participant, payment shall be in a single lump-sum. Payment to a
Participant's designated Beneficiary shall be in cash to the extent the
Participant would have been paid in cash, and in Common Stock of the Company
(and cash for fractional shares) to the extent the Participant would have been
paid in Common Stock.
5.8. BENEFICIARY DESIGNATION. A Participant shall submit to the Company upon
initial designation as an Eligible Employee in the Plan, and at such other times
as the Participant desires, on a form provided by the Committee, a written
designation of the beneficiary or beneficiaries to whom payment of the
Participant's Account under the Plan shall be made in the event of the
Participant's death. Beneficiary designations shall become effective only when
received by the Company. Beneficiary designations first received by the Company
after the Participant's death, and any designations in effect at the time a
valid subsequent designation is received by the Company, shall be invalid and
have no effect. If a Participant has not designated a Beneficiary, or if no
designated Beneficiary is living on the date of distribution, the Participant's
Account shall be distributed to those persons entitled to receive the
Participant's benefit under the Donaldson Company, Inc. Salaried Employees'
Pension Plan (1997 Restatement), as amended from time to time.
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SECTION 6
DEFERRED COMPENSATION ACCOUNT
6.1. PARTICIPANT ACCOUNTS. The Committee shall cause a bookkeeping account to be
kept in the name of each Participant which shall reflect the value of the
Deferral Credits and Company Credits, and any earnings (including Dividend
Units) thereon, credited to a Participant. Deferral Credits shall be credited to
a Participant's Account as of the date the amounts deferred otherwise would have
become due or payable. Company Credits shall be credited at such times as the
Committee shall direct.
6.2. INVESTMENT OF ACCOUNTS. Amounts credited to a Participant's Account, other
than those described in Section 4.4, will be adjusted for gains and losses to
the same extent that equal amounts would have been adjusted if they had been
invested as directed by the Participant in the subfund or subfunds designated by
the Committee. Amounts described in Section 4.4 will be adjusted as set forth in
that section.
6.3. ASSUMPTION OF RISK. The Participant, by electing to make deferrals under
this Plan, assumes all risk in connection with any decrease in value of the
Participant's Account.
6.4. CHARGES AGAINST ACCOUNTS. There shall be charged against each Participant's
bookkeeping account any payments made to the Participant or the Participant's
Beneficiary in accordance with Section 5.
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SECTION 7
FUNDING
7.1. FUNDING. The Company and its Affiliates shall be responsible for paying all
benefits due hereunder. For the purpose of facilitating the payment of benefits
due hereunder, the Company may (but shall not be required to) establish and
maintain a grantor trust pursuant to an Agreement between the Company and a
trustee selected by the Company; provided, however, that any such grantor trust
must be structured so that it does not result in any federal income tax
consequences to any Participant until distributions under Section 5 are actually
received. The Company may contribute to a grantor trust thereby created such
amounts as it may from time to time determine.
7.2. CORPORATE OBLIGATION. Neither the officers nor any member of the Board of
Directors of the Company or any of its Affiliates in any way secures or
guarantees the payment of any benefit or amount which may become due and payable
hereunder to or with respect to any Participant. Each Participant and other
person entitled at anytime to payments hereunder shall look solely to the assets
of the Company and its Affiliates for such payments as an unsecured, general
creditor. Nothing herein shall be construed to give a Participant, Beneficiary
or any other person or persons any right, title, interest or claim in or to any
specific asset, fund, reserve, account or property of any kind whatsoever owned
by the Company or in which it may have any right, title or interest now or in
the future. After benefits shall have been paid to or with respect to a
Participant and such payment purports to cover in full the benefit hereunder,
such former Participant or other person or persons, as the case may be, shall
have no further right or interest in the other assets of the Company and its
Affiliates in connection with this Plan.
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SECTION 8
FORFEITURE OF BENEFITS
All unpaid benefits under this Plan accrued under Section 4.6 shall be
permanently forfeited if the Committee determines that the Participant, either
before or after the Participant's Termination of Employment or Disability, or
before the Participant's death:
(a) engaged in criminal or fraudulent conduct resulting in a
hardship to the Company or an Affiliate; or
(b) breached the Participant's written employment agreement with
the Company or an Affiliate.
-18-
SECTION 9
ADMINISTRATION
9.1. AUTHORITY. The Plan shall be administered by the Committee, which shall
have full discretionary power and authority to administer and interpret the Plan
and to determine all factual and legal questions under the Plan, including but
not limited to the entitlement of Participants and Beneficiaries, and the amount
of their respective interests. Except with respect to the portion of a
Participant's Account that is attributable to either Long Term Incentive or
Restricted Stock Deferral Credits, the Committee may delegate or redelegate to
one or more persons, jointly or severally, and whether or not such persons are
members of the Committee or employees of the Company, such functions assigned to
the Committee hereunder as it may from time to time deem advisable. Until
withdrawn or redelegated by the Committee, all of the Committee's delegable
power and authority under this Section 9.1 shall be deemed delegated to the
Company's Vice President in charge of executive compensation, excluding only the
power and authority to act in such a way as would materially increase the cost
of the Plan.
9.2. LIABILITY. No member of the Committee and no director or member of the
management of the Company or its Affiliates shall be liable to any persons for
any actions taken under the Plan, or for any failure to effect any of the
objective or purposes of the Plan, by reason of insolvency or otherwise.
9.3. PROCEDURES. The Committee may from time to time adopt such rules and
procedures as it deems appropriate to assist in the administration of the Plan.
9.4. CLAIM FOR BENEFITS. No employee or other person shall have any claim or
right to payment of any amount hereunder until payment has been authorized and
directed by the Committee.
9.5. CLAIMS PROCEDURE. Until modified by the Committee, the claims procedure set
forth in this Section 9.5 shall be the claims procedure for the resolution of
disputes and disposition of claims arising under the Plan.
9.5.1. ORIGINAL CLAIM. Any employee, former employee, or Beneficiary of
such employee or former employee may, if the employee, former employee or
Beneficiary so desires, file with the Committee a written claim for benefits
under the Plan. Within ninety (90) days after the filing of such a claim, the
Committee shall notify the claimant in writing whether the claim is upheld or
denied in whole or in part or shall furnish the claimant a written notice
describing specific special circumstances requiring a specified amount of
additional time (but not more than one hundred eighty (180) days from the date
the claim was filed) to reach a decision on the claim. If the claim is denied in
whole or in part, the Committee shall state in writing:
(a) the specific reasons for the denial,
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(b) the specific references to the pertinent provisions of this
Plan on which the denial is based,
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary,
and
(d) an explanation of the claims review procedure set forth in
this Section.
9.5.2. CLAIMS REVIEW PROCEDURE. Within sixty (60) days after receipt of
notice that the claim has been denied in whole or in part, the claimant may file
with the Committee a written request for a review and may, in conjunction
therewith, submit written issues and comments. Within sixty (60) days after the
filing of such a request for review, the Committee shall notify the claimant in
writing whether, upon review, the claim was upheld or denied in whole or in part
or shall furnish the claimant a written notice describing specific special
circumstances requiring a specified amount of additional time (but not more than
one hundred twenty days (120) from the date the request for review was filed) to
reach a decision on the request for review.
9.5.3. GENERAL RULES.
(a) No inquiry or question shall be deemed to be a claim or a
request for a review of a denied claim unless made in
accordance with the claims procedure. The Committee may
require that any claim for benefits and any request for a
review of a denied claim be filed on forms to be furnished by
the Committee upon request.
(b) All decisions on original claims shall be made by the
Committee and requests for a review of denied claims shall be
made by the Committee.
(c) The Committee may, in its discretion, hold one or more
hearings on a claim or a request for a review of a denied
claim.
(d) Claimants may be represented by a lawyer or other
representative at their own expense, but the Committee
reserves the right to require the claimant to furnish written
authorization. A claimant's representative shall be entitled
to copies of all notices given to the claimant.
(e) The decision of the Committee on an original claim or on a
request for a review of a denied claim shall be served on the
claimant in writing. If a decision or notice is not received
by a claimant within the time specified, the claim or request
for a review of a denied claim shall be deemed to have been
denied.
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(f) Prior to filing a claim or a request for a review of a denied
claim, the claimant or the claimant's representative shall
have a reasonable opportunity to review a copy of this Plan
Statement and all other pertinent documents in the possession
of the Company and its Affiliates.
9.6. PAYMENTS UPON IMPOSITION OF FEDERAL OR STATE TAXES. If any Participant is
determined to be subject to federal or state income tax on any amount accrued on
his or her behalf under this Plan prior to the time of payment hereunder,
federal or state taxes attributable to the amount determined to be so taxable
shall be distributed by the Plan to such Participant. An amount accrued on his
or her behalf under this Plan shall be determined to be subject to federal
income tax upon the earliest of:
(i) a final determination by the United States Internal
Revenue Service addressed to the Participant which is
not appealed to the courts;
(ii) a final determination by the United States Tax Court
or any other Federal Court affirming any such
determination by the Internal Revenue Service; or
(iii) an opinion by the Tax Counsel of the Company,
addressed to the Company that, by reason of Treasury
Regulations, amendments to the Internal Revenue Code,
published Internal Revenue Service rulings, court
decisions or other substantial precedent, amounts
accrued on a Participant's behalf hereunder are
subject to federal or state income tax prior to
payment.
The Company shall undertake at its sole expense to defend any tax claims
described herein which are asserted by the Internal Revenue Service or by any
state revenue authority against any Participant, including attorney fees and
costs of appeal, and shall have the sole authority to determine whether or not
to appeal any determination made by the Internal Revenue Service, by any state
revenue authority or by a lower court. The Company also agrees to reimburse any
Participant for any interest or penalties in respect of federal or state tax
claims hereunder upon receipt of documentation of same.
9.7. LEGAL FEES. If the Company does not pay the benefits required under the
terms of the Plan for reasons other than the insolvency of the Company, the
Company agrees to reimburse any Participant for all legal fees incurred in
enforcing his or her claim to benefits under the Plan.
9.8. ERRORS IN COMPUTATIONS. The Committee shall not be liable or responsible
for any error in the computation of any benefit payable to or with respect to
any Participant resulting from any misstatement of fact made by the Participant
or by or on behalf of any Beneficiary to whom such benefit shall be payable,
directly or indirectly, to the Committee, and used by the Committee in
determining the benefit. The Committee shall not be obligated or required to
increase the benefit
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payable to or with respect to such Participant which, on discovery of the
misstatement, is found to be understated as a result of such misstatement of the
Participant. However, the benefit of any Participant which is overstated by
reason of any such misstatement or any other reason shall be reduced to the
amount appropriate in view of the truth (and to recover any prior overpayment).
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SECTION 10
MISCELLANEOUS
10.1. NOT AN EMPLOYMENT CONTRACT. This Plan is not and shall not be deemed to
constitute a contract of employment between the Company and any employee or
other person, nor shall anything herein contained be deemed to give any employee
or other person any right to be retained in the Company's employ or in any way
limit or restrict the Company's right or power to discharge any employee or
other person at any time and to treat him without regard to the effect which
such treatment might have upon the employee as a Participant in the Plan.
10.2. NONTRANSFERABILITY. A Participant's rights and interest under the Plan,
including amounts payable, may not be assigned, alienated, pledged or
transferred except, in the event of a Participant's death to his Beneficiary. No
benefit payable under this Plan shall be subject to attachment, garnishment,
execution following judgment or other legal process before actual payment to the
Participant or Beneficiary.
10.3. TAX WITHHOLDING. The Company shall withhold the amount of any federal,
state or local income tax or other tax required to be withheld by the Company
under applicable law with respect to any amount payable under the Plan. Any cash
payable in lieu of fractional shares shall be applied to the payment of tax
withholding. The Participant shall not be liable for any tax withholding.
10.4. EXPENSES. All expenses of administering the Plan shall be borne by the
Company.
10.5. GOVERNING LAW. Except to the extent that federal law is controlling, the
Plan shall be construed and enforced in accordance with and governed by the laws
of the State of Minnesota.
10.6. AMENDMENT AND TERMINATION. The Company reserves the power to unilaterally
amend this Plan at any time, either prospectively or retroactively or both by
action of the Committee (with the written concurrence of the Chief Executive
Officer of the Company). The Committee may likewise terminate or curtail the
benefits of this Plan both with regard to persons expecting to receive benefits
in the future and persons already receiving benefits at the time of such action;
provided, however, that the Committee may not amend or terminate the Plan with
respect to benefits that have accrued and are vested pursuant to Section 4 in
any manner that reduces the amount of such benefits or alters the effect of any
participant election previously filed with the Company. No modification of the
terms of this Plan shall be effective unless it is in writing and signed on
behalf of the Company by a person authorized to execute such writing. No oral
representation concerning the interpretation or effect of this Plan shall be
effective to amend the Plan.
10.7. RULES OF INTERPRETATION. The titles given to the various sections of this
Plan are inserted for convenience of reference only and are not part of this
Plan, and they shall not be considered in determining the purpose, meaning or
intent of any provision hereof. This Plan shall be construed and this Plan shall
be administered to create an unfunded plan providing deferred compensation to a
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select group of management or highly compensated employees so that it is exempt
from the requirements of Parts 2, 3 and 4 of Title I of ERISA and qualifies for
a form of simplified, alternative compliance with the reporting and disclosure
requirements of Part 1 of Title I of ERISA.
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Dates Referenced Herein and Documents Incorporated by Reference
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