UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by
the Registrant
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Filed by a
Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
Penford
Corporation
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the date of its filing.
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Form, Schedule or Registration Statement No.:
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Date Filed:
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Centennial,
Colorado
December 21,
2009
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of
Shareholders of Penford Corporation to be held on Tuesday,
January 26, 2010 at 3:00 p.m. (Mountain Time) at the
Inverness Hotel and Conference Center, 200 Inverness Drive West,
Englewood, Colorado 80112.
In addition to the items set forth in the accompanying Notice of
Annual Meeting of Shareholders and Proxy Statement, Company
management and the Board of Directors will be available to
provide an opportunity to discuss matters of interest to you as
a shareholder. The 2009 Annual Report to Shareholders is also
enclosed with these materials.
Your vote is important. Whether or not you plan to attend,
please vote promptly to ensure that your shares are represented.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in Penford Corporation.
Very truly yours,
Thomas D. Malkoski
President and Chief Executive Officer
PENFORD
CORPORATION
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To be held on January 26,
2010
The Annual Meeting of Shareholders of Penford Corporation (the
“Company”) will be held at the Inverness Hotel and
Conference Center, 200 Inverness Drive West, Englewood, Colorado
80112, on Tuesday, January 26, 2010, at 3:00 p.m.
(Mountain Time), for the following purposes:
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1.
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To elect three directors.
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To ratify the appointment of Ernst & Young LLP as the
Company’s independent registered public accounting firm for
the Company’s fiscal year ending August 31, 2010.
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To transact such other business as may properly come before the
meeting.
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The Board of Directors has no knowledge of any other business to
be transacted at the meeting.
A copy of the Company’s Annual Report to Shareholders for
the fiscal year ended August 31, 2009, which contains
financial statements and other information of interest to
shareholders, accompanies this notice and the enclosed proxy.
The record date for the annual meeting is December 4, 2009.
Only shareholders of record at the close of business on that
date can vote at the meeting.
By Order of the Board of Directors,
Christopher L. Lawlor
Secretary
December 21, 2009
IMPORTANT
Whether or not you plan to attend
the meeting in person, we urge you to vote your shares at your
earliest convenience. This will ensure the presence of a quorum
at the meeting. An envelope for which no postage is required if
mailed in the United States is enclosed if you wish to vote by
mail. You may also vote via the Internet, as explained on the
enclosed proxy.
Responding promptly will save the Company the
additional expense of further solicitation.
Submitting your
vote by proxy will not prevent you from voting your shares at
the meeting if you desire to do so, as your proxy is revocable
at your option.
1
TABLE OF
CONTENTS
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2
PENFORD
CORPORATION
7094 South Revere Parkway
Centennial, Colorado 80112
PROXY
STATEMENT
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors (sometimes
referred to as the “Board”) of Penford Corporation, a
Washington corporation (“Penford” or the
“Company”), to be voted at the Company’s 2010
Annual Meeting of Shareholders to be held at 3:00 p.m.
(Mountain Time) at the Inverness Hotel and Conference Center,
200 Inverness Drive West, Englewood, Colorado 80112, on Tuesday,
January 26, 2010.
The items of business scheduled to be voted on at the Annual
Meeting of Shareholders are the election of directors and the
ratification of the appointment of Ernst & Young LLP
as the Company’s independent registered public accounting
firm for the Company’s fiscal year ending August 31,
2010. This proxy statement includes a more detailed description
of each of these proposals. The Company will also consider any
other business that properly comes before the Annual Meeting of
Shareholders.
Proxies may be submitted by mail or the Internet, or by
following the telephone voting procedures described in the proxy
and voting instruction card that accompanies this proxy
statement. Any shareholder who executes a proxy may revoke their
proxy at any time prior to its exercise by delivering a written
revocation to the Secretary of the Company, by submission of a
proxy with a later date, or by voting in person at the meeting.
The right to revoke a proxy is not limited by or subject to
compliance with a specified formal procedure, but written notice
should be given to the Secretary of the Company at or before the
Annual Meeting of Shareholders so that the number of shares
represented by proxy can be recomputed.
The candidates for director who are elected will be those
receiving the largest number of affirmative (for) votes cast by
the shares entitled to vote in the election, up to the number of
directors to be elected. Shares held by persons who abstain from
voting on the election of directors will not be counted in the
election. The proposal to ratify the appointment of the
Company’s independent registered public accounting firm
will be approved if it receives the affirmative (for) vote of a
majority of the total votes cast on the proposal.
Banks and brokers who have not received voting instructions from
their clients can vote on their clients’ behalf on the
ratification of the appointment of the Company’s
independent registered public accounting firm. For more
information about the treatment and effect of abstentions and
broker non-votes, please refer to the information set forth
below under the caption “Voting Tabulation.”
Please
note that this year the rules that guide how brokers vote their
clients’ shares have changed. Brokers may no longer vote a
client’s shares on the election of directors in the absence
of specific instructions from the shareholder as to how to vote.
Shareholders are requested to please vote their proxy so that
their vote can be counted.
Shareholders of record at the close of business on
December 4, 2009 will be entitled to vote at the meeting on
the basis of one vote for each share held. On December 4,
2009, there were outstanding 11,356,665 shares of common
stock of the Company.
These proxy materials, together with the Company’s Annual
Report to Shareholders, are being mailed to shareholders on or
about December 21, 2009. The costs of this solicitation are
being borne by the Company.
ELECTION
OF DIRECTORS
(Proposal #1)
The Board of Directors consists of eight members and is divided
into three classes. Directors in each class are generally
elected for a three-year term. This year, Jeffrey T. Cook,
Thomas D. Malkoski and Sally G. Narodick, each of whom is a
current director, have been nominated by the Board of Directors
to be re-elected for a three-year term that expires at the
Annual Meeting of Shareholders to be held in 2013. Unless a
shareholder indicates otherwise, each signed proxy will be voted
for the election of these nominees.
3
Management expects that each of the nominees will be available
for election, but if any of them is not a candidate at the time
the election occurs, proxies will be voted for the election of
another nominee designated by the Board of Directors.
No family relationship exists among any of the directors or
executive officers. No arrangement or understanding exists
between any director or executive officer and any other person
pursuant to which any director was selected as a director or
executive officer of the Company.
The Board has determined that each of the nominees and
continuing directors is “independent” under the
applicable legal and Nasdaq listing standards, except for
Mr. Malkoski who is the current President and Chief
Executive Officer of the Company. To enable the Board to make
this determination, the Board’s Governance Committee
reviewed information provided by each of the directors. None of
the directors identified as independent has any current material
relationship with the Company (other than as a director and a
shareholder) or its officers. The Nasdaq independence standards
applied by the Board are posted on the Company’s web site,
www.penx.com
, under the “Investor Relations”
heading and “Corporate Governance”
sub-heading.
Nominees
for Election — Term to Expire in 2013
Jeffrey T. Cook, 53, is the President and Chief Operating
Officer of Stellar Holdings, Inc. a Seattle based private real
estate investment and development firm. Mr. Cook has been a
member of the Board of Directors since 1998. He previously
served Penford Corporation as President from January 2002 to
January 2003, President and Chief Executive Officer from
September 1998 to January 2002, Vice President, Finance and
Chief Financial Officer from 1991 to August 1998, and was the
Corporate Treasurer prior to that time. He joined the Company in
1983. He is a graduate of Stanford University with a B.A. in
Economics. Mr. Cook also serves as a board member of Port
Blakely Company, a privately held natural resources and real
estate development company headquartered in Seattle, Washington,
and Powerit Holdings, Inc., a leader in intelligent energy
demand management also headquartered in Seattle.
Thomas D. Malkoski, 53, joined Penford Corporation as Chief
Executive Officer and was appointed to the Board of Directors in
January 2002. He was named President of Penford Corporation in
January 2003. From 1997 to 2001 he served as President and Chief
Executive Officer of Griffith Laboratories, North America, a
formulator, manufacturer and marketer of ingredient systems to
the food industry. Previously, he served as Vice
President/Managing Director of the Asia Pacific and South
Pacific regions for Chiquita Brands International.
Mr. Malkoski began his career at the Procter and Gamble
Company, a marketer of consumer brands, progressing through
major product category management responsibilities.
Mr. Malkoski holds a Masters of Business Administration
degree from the University of Michigan.
Sally G. Narodick, 64, has served as a member of the Board of
Directors of the Company since August 1993. Ms. Narodick
was an educational technology and
e-learning
consultant until she retired in March 2004. From 1998 to 2000,
she served as Chief Executive Officer of Apex Online Learning,
an Internet educational software company. Previously,
Ms. Narodick served as an education technology consultant,
both independently and for the Consumer Division of IBM from
1996 to 1998. From 1989 to 1996, Ms. Narodick served as
Chair and Chief Executive Officer of Edmark Corporation, an
educational software company that was sold to IBM in 1996. A
graduate of Boston University, Ms. Narodick earned an M.A.
in Teaching from Columbia Teachers College and an M.B.A. from
New York University. She also serves as a board member of
Cray, Inc.
The
Board of Directors recommends a vote FOR each of the nominees as
a director.
Continuing
Directors — Term to Expire in 2011
William E. Buchholz, 67, joined Penford Corporation’s Board
of Directors in January 2003. He has been a business consultant
and private investor since 2002. From 2001 to 2002,
Mr. Buchholz served as Senior Vice President of Finance and
Administration, Chief Financial Officer, and Secretary at
MessageMedia, a Colorado-based email messaging service and
software company. Mr. Buchholz was Senior Vice President
and Chief Financial Officer of Nalco Chemical Company, a
specialty chemicals company, with responsibilities for all
finance functions including audit, tax, financial systems,
U.S. and international treasury, and investor relations
from 1992 to 1999.
4
Prior to that, he served as Vice President and Chief Financial
Officer of Cincinnati Milacron, an industrial equipment
supplier. Mr. Buchholz is a certified public accountant and
holds an M.B.A., Finance and a B.A., Accounting, both from
Michigan State University.
John C. Hunter III, 62, has served as a director of the Company
since October 1998. From 1999 until his retirement in 2004,
Mr. Hunter was the Chairman, President and Chief Executive
Officer of Solutia, Inc., an international producer of
high-performance, chemical-based materials used to make
consumer, household, automotive and industrial products.
Mr. Hunter also served as President and Chief Operating
Officer of Solutia, Inc. from 1997 to 1999. From 1992 to 1997,
Mr. Hunter was President, Fibers for Monsanto Company. He
graduated from the Georgia Institute of Technology with a B.S.
in Chemical Engineering and holds an M.B.A. from the University
of Houston. Mr. Hunter also serves as a board member of
Energizer Holdings, Inc.
James E. Warjone, 66, has served as a director of the Company
since January 2001. Mr. Warjone is Chairman and Chief
Executive Officer of The Port Blakely Companies, a private
company that owns and operates commercial forests in Washington,
Oregon and New Zealand, operates an international log and lumber
trading company, and also develops real estate in Washington
State. Mr. Warjone has been with Port Blakely since 1978.
He earned his B.S. in economics from Claremont Men’s
College. Mr. Warjone also serves as a board member of The
Joshua Green Corporation, Uwajamaya, the Association of
Washington Business, the Greater Seattle Chamber of Commerce,
the Washington Roundtable, the National Alliance of Forest
Owners, and the Pacific Science Center.
Continuing
Directors — Term to Expire in 2012
R. Randolph Devening, 67, was appointed to the Board of
Directors in August 2003. Until his retirement in 2001,
Mr. Devening served for seven years as Chairman, President
and Chief Executive Officer and as President and Chief Executive
Officer of Foodbrands America, Inc., a company that produces,
markets and distributes branded and processed food products for
the food service and retail markets. Prior to that, he served as
Vice Chairman, Chief Financial Officer and Director from 1993 to
1994, and Executive Vice President, Chief Financial Officer and
Director from 1989 to 1993 for Fleming Companies, Inc., a
wholesale food distributor. Mr. Devening holds an
undergraduate degree in International Relations from Stanford
University and an MBA in Finance and Marketing from Harvard
University Graduate School of Business. Mr. Devening also
serves as a director of Safety-Kleen, Inc. and Banctec, Inc.,
and as an advisor to Hall Brothers Capital Partners.
Paul H. Hatfield, 73, has served as a director of the Company
since October 1994 and as Chairman of the Board since January
2003. Mr. Hatfield has been Principal of the Hatfield
Capital Group, a private investment company, since 1997. He
served as Chairman, President and Chief Executive Officer of
Petrolite Corporation until July 1997. Previously, he worked for
Ralston Purina Company from 1959 until his retirement in 1995.
He served as a Vice President of Ralston as well as the
President and Chief Executive officer of Protein Technologies
International, Inc., then a wholly-owned subsidiary of Ralston.
He is also a director of Maritz Inc.
INFORMATION
ABOUT THE BOARD AND ITS COMMITTEES
Board
of Directors
The Board of Directors provides guidance and strategic oversight
to the Company’s management with the objective of
optimizing shareholders’ returns on their investment in the
Company. The Board is designed to assure that there is
independent review and oversight as well as approval of
significant strategic and management decisions affecting the
Company. Regular meetings of the Board are held five times per
year and special meetings are scheduled when required. The Board
held 16 meetings in fiscal year 2009. No director attended fewer
than 75% of the total number of meetings of the Board and of the
committees of the Board on which he or she served during fiscal
year 2009.
5
Attendance
Policy at Annual Meeting of Shareholders
Each director is expected to attend the Annual Meeting of
Shareholders in the absence of extenuating circumstances. All
directors attended the 2009 Annual Meeting of Shareholders held
on January 26, 2009 except for Messrs. Devening and
Hunter, who were unable to attend.
Committees
Established by the Board
The Board has established the following standing committees,
each of which is composed solely of independent directors, to
assist in discharging its responsibilities.
Audit Committee —
The Audit Committee, which
met seven times in fiscal year 2009, is comprised of William E.
Buchholz (Chair), Jeffrey T. Cook, John C. Hunter III and
James E. Warjone. The committee selects the independent
registered public accounting firm; reviews the proposed scope of
the independent audit; reviews the annual financial statements
and the report of the independent registered public accounting
firm; reviews the independent registered public accounting
firm’s recommendations relating to accounting, internal
controls and other matters; reviews internal controls and
accounting policies with management; and approves policies
relating to risk management matters. The Board of Directors has
determined that each member of the Audit Committee has
sufficient knowledge in financial and auditing matters to serve
on the committee. In addition, the Board has determined that
Mr. Buchholz is an “audit committee financial
expert” as defined by the Securities and Exchange
Commission rules. The Audit Committee charter is available on
the Company’s web site at
www.penx.com
, under the
“Investor Relations” heading and “Corporate
Governance”
sub-heading.
Executive Compensation and Development Committee —
The Executive Compensation and Development Committee, which
met five times in fiscal year 2009, is comprised of Sally G.
Narodick (Chair), R. Randolph Devening and James E. Warjone. The
committee establishes the compensation of executive officers,
provided that as to the salary of the Chief Executive Officer,
the committee recommends an appropriate salary to the Board for
approval. The committee also monitors the Company’s benefit
plans, works with management to set fiscal year incentive
compensation goals for recommendation to the Board, determines
executive bonus payments, and authorizes awards under the
Company’s 2006 Long-Term Incentive Plan. In addition, the
committee reviews plans for executive development and succession
on a regular basis. The Executive Compensation and Development
Committee charter is available on the Company’s web site at
www.penx.com
, under the “Investor Relations”
heading and “Corporate Governance”
sub-heading.
For additional information about Executive Compensation and
Development Committee policies and procedures, please see the
description of the committee’s activities under the
“Executive Compensation” heading below.
Executive Committee —
The Executive Committee,
which did not meet during fiscal year 2009, is comprised of Paul
H. Hatfield (Chair) and the chairs of the other standing
committees (William E. Buchholz, John C. Hunter III and
Sally G. Narodick). The committee is authorized to exercise all
powers and authority of the Board with certain exceptions.
Governance Committee —
The Governance
Committee, which met two times in fiscal year 2009, is comprised
of John C. Hunter III (Chair), R. Randolph Devening, and
Sally G. Narodick. The committee makes recommendations to the
Board for director nominations and the appointment of the
Chairman; reports to the Board on corporate governance matters
and practices, including the effectiveness of the Board, its
committees and individual directors; determines the criteria for
qualification of directors; periodically reviews Board
compensation for non-employee directors and the processes and
policies established by the Board; and approves policies related
to environmental, health and safety matters. The committee
recommends to the Board individuals for nomination for election
to the Board at the Annual Meeting of Shareholders and committee
appointments. The Governance Committee charter is available on
the Company’s web site at
www.penx.com
, under the
“Investor Relations” heading and “Corporate
Governance”
sub-heading.
Committee
Membership
The Board appoints committee chairs and members on an annual
basis with consideration given to the qualifications and
preferences of individual directors. The Governance Committee,
in its deliberations on
6
recommendations for committee appointments, considers that
(i) each member of the Audit Committee must be financially
literate, as such qualification is interpreted by the Board in
its business judgment, (ii) each member of the Governance
Committee, the Audit Committee and the Executive Compensation
and Development Committee must be independent within the meaning
of the Nasdaq corporate governance rules, (iii) each member
of the Audit Committee must meet the independence standards set
forth in
Rule 10A-3
of the Securities and Exchange Act of 1934, as amended, and
(iv) at least one member of the Audit Committee must be a
person who satisfies the definition of an “audit committee
financial expert” as set forth in Item 401 of
Regulation S-K
as promulgated by the Securities and Exchange Commission.
Board
Membership Criteria
The Governance Committee is responsible for reviewing the
requisite skills and characteristics of new Board candidates in
the context of the current composition of the Board. This
assessment includes a review of each candidate’s experience
in corporate governance, industry, finance, administration,
operations
and/or
marketing. An appropriate level of diversity will also be
considered. Director candidates should be able to provide
insights and practical wisdom based on their experience and
expertise. Directors are expected to have sound judgment, borne
of management or policy-making experience that demonstrates an
ability to function effectively in an oversight role. The Board
has not established minimum qualifications for nominees to the
Board.
The Governance Committee annually evaluates the performance of
the Board, each of the committees and each of the members of the
Board. In connection with its annual review, the Governance
Committee makes an assessment of the skills and expertise of its
members and their adherence to Board membership criteria and
other policies of the Board and the Company. It also reviews the
size of its Board and whether it would be beneficial to add
additional members
and/or
any
new skills or expertise, taking into account the overall
operating efficiency of the Board and its committees. If the
Board has a vacancy, or if the Governance Committee determines
that it would be beneficial to add an additional member, the
Governance Committee will take into account the factors
identified above and all other factors which the Governance
Committee in its best judgment deems relevant at such time. The
overall composition of the Board must also comply with the
requirements of the Nasdaq corporate governance rules.
Each Board member is required to annually complete a standard
director and officer questionnaire which solicits information
regarding relationships with the Company and other factors
relating to independence issues, memberships on other boards of
directors, and other information required to be disclosed in the
Company’s proxy statement. Any new candidate for nomination
will be required to provide similar information as well as be
available for interviews as the Governance Committee may
determine to be appropriate. Directors should not have any
interests that would materially impair their ability to
(i) exercise independent judgment, or (ii) otherwise
discharge the fiduciary duties owed as a director to the Company
and its shareholders.
Directors are expected to prepare for, attend and participate in
Board meetings and meetings of the Board committees on which
they serve, to ask questions and require responsive answers, and
to spend the time needed and meet as frequently as necessary to
properly discharge their responsibilities and duties as
directors. Each Board member is expected to ensure that other
existing and planned future commitments do not materially
interfere with the member’s service as a director. Service
on other boards and other commitments will be considered by the
Governance Committee and the Board when reviewing Board
candidates and in connection with the Board’s annual
self-assessment process. The Company’s Bylaws, as amended,
provide that a director is eligible to serve as a director until
the annual meeting of shareholders immediately following such
director’s 75th birthday.
Process
for Identifying and Evaluating Nominees
The Governance Committee may employ a variety of methods for
identifying and evaluating nominees for director. The Governance
Committee regularly assesses the size of the Board, the need for
particular expertise on the Board, the upcoming election cycle
of the Board and whether any vacancies on the Board are expected
due to retirement or otherwise. In the event that vacancies are
anticipated or arise, the Governance Committee considers
potential candidates for director who may come to the Governance
Committee’s attention through current Board members, the
Company’s executive officers, professional search firms,
shareholders or other persons. These candidates will be
evaluated at regular or special meetings of the Governance
Committee and may be considered at any time during the year.
7
The Governance Committee will consider candidates recommended by
shareholders when the nominations are properly submitted, under
the criteria summarized below in “Shareholder
Nominees.” Included in this discussion is a description of
the deadlines and procedures for shareholder submissions of
director nominees. Following verification of the shareholder
status of persons proposing candidates, the Governance Committee
will make an initial analysis of the qualifications of any
candidate recommended by shareholders or others pursuant to the
criteria summarized above, under the “Board Membership
Criteria” heading, to determine whether the candidate is
qualified for service on the Board, before deciding to undertake
a complete evaluation of the candidate. If a shareholder or
professional search firm provides any materials in connection
with the nomination of a director candidate, such materials will
be forwarded to the Governance Committee as part of its review.
If the Governance Committee determines that additional
consideration is warranted, it may request the third-party
search firm to gather additional information about the
prospective nominee’s background and experience and to
report its findings to the Governance Committee. Other than the
verification of compliance with procedures and shareholder
status, and the initial analysis performed by the Governance
Committee, the Governance Committee will treat a potential
candidate nominated by a shareholder like any other potential
candidate during the review process. In connection with this
evaluation, the Governance Committee will determine whether to
interview the prospective nominee, and if warranted, one or more
members of the Governance Committee, and others as appropriate,
will interview prospective nominees in person or by telephone.
After completing this evaluation and interview, the Governance
Committee will make a recommendation to the full Board as to the
persons who should be nominated by the Board, and the Board will
determine the nominees after considering the recommendation and
report of the Governance Committee.
Shareholder
Nominees
Any shareholder wishing to nominate a candidate should provide
the information described below in a letter addressed to the
Chairman of the Governance Committee, in care of the Corporate
Secretary, no later than 120 days prior to the anniversary
of the date on which the Company’s annual proxy statement
was mailed in connection with the most recent annual meeting.
This means that any shareholder wishing to submit such a
nomination for consideration at the Company’s Annual
Meeting of Shareholders in 2011 should expect to provide such a
letter to the Corporate Secretary not later than August 22,
2010.
The letter must include the following information:
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(i)
|
the name and address of the shareholder recommending the person
to be nominated;
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(ii)
|
a representation that the shareholder is a holder of record of
shares of Penford, including the number of shares held and the
period of holding;
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(iii)
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a description of all arrangements or understandings between the
shareholder and the recommended nominee;
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(iv)
|
information as to any plans or proposals of the type required to
be disclosed in Schedule 13D (i.e., plans involving
acquisitions of Penford’s securities
and/or
plans
involving a potential merger or change of control transaction)
and any proposals that the nominee proposes to bring to the
Board of Directors if elected;
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(v)
|
any other information regarding the recommended nominee as would
be required to be included in a proxy statement filed pursuant
to Regulation 14A promulgated by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of
1934; and
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(vi)
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the consent of the recommended nominee to serve as a director of
Penford if so elected.
|
Additional information may be requested to assist the Governance
Committee in determining the eligibility of a proposed candidate
to serve as a director. This may include requiring that a
prospective nominee complete a director and officer
questionnaire and provide any
follow-up
information requested. In addition, the shareholder and the
notice must meet all other applicable requirements contained in
Penford’s Bylaws. A copy of Penford’s Bylaws is posted
on the Company’s web site at
www.penx.com
under the
under the “Investor Relations” heading and
“Corporate Governance”
sub-heading.
8
Shareholder
Communications
Any shareholder or interested party who wishes to communicate
with the Board of Directors or any specific directors, including
non-management directors, may write to:
Board of Directors
c/o Corporate
Secretary
Penford Corporation
7094 South Revere Parkway
Centennial, Colorado
80112-3932
The mailing envelope must contain a clear notation indicating
that the enclosed letter is a “Shareholder-Board
Communication” or
“Shareholder-Director
Communication.” All such letters must identify the author
as a shareholder and clearly state whether the intended
recipients are all members of the Board or just certain
specified individual directors. The Corporate Secretary will
make copies of all such letters and circulate them to the
appropriate director or directors. The Company generally will
not forward communications that are primarily commercial in
nature, relate to a topic other than corporate governance, or
that request general information about the Company.
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
(Proposal #2)
The Audit Committee has chosen Ernst & Young LLP to
serve as the independent registered public accounting firm for
the Company for the fiscal year ending August 31, 2010.
This firm has served as the independent registered public
accounting firm for the Company since 1985. Representatives of
Ernst & Young LLP are expected to be present at the
Annual Meeting of Shareholders, will be given an opportunity to
make a statement at the meeting if they desire to do so, and
will be available to respond to appropriate questions.
Although not required by the Company’s Bylaws or otherwise,
the Audit Committee and the Board believe it appropriate, as a
matter of good corporate practice, to request that the
shareholders ratify the appointment of Ernst & Young
LLP as the Company’s independent registered public
accounting firm for fiscal year 2010. Assuming that a quorum is
present, the selection of Ernst & Young LLP will be
deemed to have been ratified if more shares are voted in favor
of ratification than are voted against ratification. Abstentions
and broker non-votes are counted for purposes of determining the
presence of a quorum but will not otherwise have any effect on
the outcome of this proposal. If the shareholders should not so
ratify, the Audit Committee will reconsider the appointment and
may retain Ernst & Young LLP or another firm without
re-submitting the matter to the Company’s shareholders.
Even if the shareholders vote on an advisory basis in favor of
the appointment, the Audit Committee may, in its discretion,
direct the appointment of a different independent registered
public accounting firm at any time during the year if it
determines that such a change would be in the best interests of
the Company and the shareholders.
The Board of Directors recommends a vote FOR the
ratification of the appointment of Ernst & Young as
the Company’s independent registered public accounting firm
for the fiscal year ending August 31, 2010.
REPORT OF
THE AUDIT COMMITTEE
The Audit Committee is comprised of four independent Directors
and acts under a written charter approved by the Board of
Directors. A copy of the charter is available at the
Company’s web site at
www. penx.com
under the
“Investor Relations” heading and “Corporate
Governance”
sub-heading.
The Board annually reviews the Nasdaq listing standards’
definition of independence for audit committee members and has
determined that each member of the Audit Committee meets that
standard. The Board has affirmatively determined that each
member of the Audit Committee is able to read and understand
fundamental financial statements as required by the listing
standards of Nasdaq, and that Mr. William E. Buchholz is an
“audit committee financial expert” as such term is
defined by Securities and Exchange Commission rules.
9
The Audit Committee oversees the Company’s financial
reporting process on behalf of the Board of Directors.
Management has the primary responsibility for the financial
statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities,
the Audit Committee reviewed and discussed the audited financial
statements for fiscal year 2009 with management including a
discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial
statements.
The Audit Committee reviewed with Ernst & Young LLP,
the Company’s independent registered public accounting
firm, who are responsible for expressing an opinion on the
conformity of those audited financial statements with generally
accepted accounting principles, their judgments as to the
quality, not just the acceptability, of the Company’s
accounting principles and such other matters as are required to
be discussed with the Audit Committee by the Statement on
Auditing Standards No. 61,“Communication with Audit
Committees,” as amended. In addition, Ernst &
Young LLP has provided the Committee with the written
disclosures and the letter required by the applicable
requirements of the Public Company Accounting Oversight Board
regarding the independent accountant’s communications with
the Audit Committee concerning independence.
The Audit Committee discussed with the Company’s
independent registered public accounting firm the overall scope
and plans for their respective audits. The Committee meets with
the independent registered public accounting firm, with and
without management present, to discuss the results of their
examinations, their evaluations of the Company’s internal
controls, and the overall quality of the Company’s
financial reporting.
In reliance on the reviews and discussions referred to above,
the Committee recommended that the audited financial statements
be included in the Annual Report on
Form 10-K
for the year ended August 31, 2009 for filing with the
Securities and Exchange Commission. The Committee has selected
Ernst & Young LLP as the independent auditor for
fiscal 2010.
William E. Buchholz,
Chair
Jeffrey T. Cook
John C. Hunter III
James E. Warjone
FEES PAID
TO ERNST & YOUNG LLP
Fees
The following table sets forth approximate aggregate fees billed
to the Company by Ernst & Young LLP.
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2009
|
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2008
|
|
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Audit Fees
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|
$
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925,761
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|
$
|
1,038,303
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|
Audit-Related
Fees
(1)
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—
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70,000
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|
Tax
Fees
(2)
|
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71,013
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|
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|
48,564
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All Other Fees
|
|
|
—
|
|
|
|
—
|
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|
|
|
|
|
|
|
|
|
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Total Fees
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|
$
|
996,774
|
|
|
$
|
1,156,867
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|
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(1)
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Consists of fees for professional
services in connection with a registration statement.
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(2)
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Consists of fees for professional
services for tax compliance and tax consulting.
|
The Audit Committee has concluded that the provision of the
non-audit services listed above is compatible with maintaining
the independence of Ernst & Young LLP. The services
described above were approved by the Audit Committee pursuant to
the policy described below. The Audit Committee did not rely on
any of the exceptions to pre-approval under
Rule 2-01(c)(7)(i)(C)
under
Regulation S-X
as promulgated by the Securities and Exchange Commission.
10
Policy
on Audit Committee Pre-Approval of Audit and Permissible
Non-Audit Services of Independent Auditors
The Audit Committee has adopted an Audit and Non-Audit Services
Pre-Approval Policy that sets forth the procedures and the
conditions pursuant to which services proposed to be performed
by the independent registered public accounting firm may be
pre-approved. These services may include audit services,
audit-related services, tax services and other services. The
Audit Committee determines from time to time those permitted
services that have the general pre-approval of the Audit
Committee, which is generally provided for up to one year. Any
pre-approval is detailed as to the particular service or
category of services and is generally subject to a specific
budget. The Audit Committee considers whether such services are
consistent with SEC rules on auditor independence, as well as
whether the independent registered public accounting firm is
best positioned to provide the most effective and efficient
service, for reasons such as its familiarity with the
Company’s business, people, culture, accounting systems,
risk profile and other factors, and whether the service might
enhance the Company’s ability to manage or control risk or
improve audit quality. The independent registered public
accounting firm and management are required to periodically
report to the Audit Committee regarding the extent of services
provided by the independent registered public accounting firm in
accordance with this pre-approval, and the fees for the services
performed to date. The Audit Committee may also pre-approve
particular services on a
case-by-case
basis.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of
December 1, 2009, regarding the beneficial ownership of the
Company’s common stock by any person known to the Company
to be the beneficial owner of more than five percent of such
outstanding common stock, by the directors, by the
Company’s Chief Executive Officer, by the four other
highest paid executive officers in fiscal year 2009, and by the
directors and executive officers as a group.
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Amount and Nature of
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|
|
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|
Beneficial Ownership of
|
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Name (and Address for Beneficial Owners over 5%)
|
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Common Stock(1)
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Percent of Class
|
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|
T. Rowe Price Associates, Inc.
|
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1,125,500
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9.91
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(4)
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100 East Pratt Street
Baltimore, Maryland 21202
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|
|
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Porter Orlin, LLC
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|
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1,012,900
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|
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8.92
|
(5)
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666 Fifth Avenue
New York, NY 10103
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|
|
|
|
|
|
|
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Rutabaga Capital Management, LLC
|
|
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887,718
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|
|
7.82
|
(6)
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64 Broad Street
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|
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Boston, MA 02109
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|
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Dimensional Fund Advisors, LP
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|
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832,800
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|
|
7.33
|
(7)
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Building One, 6300 Bee Cave Road
Austin, TX 78746
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Zesiger Capital Group, LLC
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739,200
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6.51
|
(8)
|
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320 Park Avenue,
30
th
Floor
New York, NY 10022
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Segall, Bryant & Hamill
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677,420
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|
5.96
|
(9)
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10 South Wacker Drive, Suite 3500
Chicago, IL
60606-7407
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RBF Capital, LLC
|
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590,327
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5.20
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(10)
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100 Drakes Landing Road, Suite 300
Greenbrae, CA 94904
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|
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William E. Buchholz
|
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12,976
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|
*
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Jeffrey T. Cook(2)
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209,770
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|
|
1.85
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(3)
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|
Steven O. Cordier
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235,834
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|
2.04
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(3)
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|
R. Randolph Devening
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|
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7,968
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|
|
|
*
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
|
|
|
|
|
|
Beneficial Ownership of
|
|
|
|
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|
Name (and Address for Beneficial Owners over 5%)
|
|
Common Stock(1)
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Percent of Class
|
|
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Paul H. Hatfield
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80,818
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|
*
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John C. Hunter III
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22,459
|
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|
|
*
|
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|
Timothy M. Kortemeyer
|
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68,094
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|
|
*
|
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|
Christopher L. Lawlor
|
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58,481
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|
*
|
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Thomas D. Malkoski
|
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446,895
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|
3.81
|
(3)
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Sally G. Narodick
|
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|
28,790
|
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|
|
*
|
|
|
John R. Randall
|
|
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92,453
|
|
|
|
*
|
|
|
James E. Warjone
|
|
|
8,444
|
|
|
|
*
|
|
|
All directors and executive officers as a group (14 persons)
|
|
|
1,367,684
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|
|
|
11.18
|
|
|
|
|
|
|
*
|
|
Represents less than 1%
|
|
|
|
(1)
|
|
Unless otherwise indicated,
beneficial ownership represents sole voting and investment
power. The totals include shares that may be acquired within
60 days through the exercise of stock options, as follows:
Mr. Malkoski, 375,000; Mr. Buchholz, 7,859;
Mr. Cordier, 205,000; Mr. Devening, 3,053;
Mr. Hatfield, 33,328; Mr. Hunter, 15,677;
Mr. Kortemeyer 46,500; Mr. Lawlor, 42,500;
Ms. Narodick, 12,075; Mr. Randall, 61,250;
Mr. Warjone, 2,529; and all directors and executive
officers as a group, 876,021.
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|
|
(2)
|
|
Includes 79,800 shares held in
irrevocable trusts for which Mr. Cook shares voting and
investment power.
|
|
|
|
(3)
|
|
For purposes of calculating the
percentage of class owned by this officer or director and the
directors and executive officers as a group, the total shares of
the class includes shares that may be acquired within
60 days through the exercise of stock options set forth in
footnote (1).
|
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|
|
(4)
|
|
Information based on
Schedule 13F dated November 13, 2009. T. Rowe Price
Associates, Inc. had voting authority as follows: sole,
115,500 shares; none, 1,010,000 shares.
|
|
|
|
(5)
|
|
Information based on
Schedule 13F dated November 16, 2009. Porter Orlin,
LLC had voting authority as follows: sole, 999,900 shares;
none, 13,000 shares.
|
|
|
|
(6)
|
|
Information based on
Schedule 13F dated November 9, 2009. Rutabaga Capital
Management, LLC had sole voting power over all shares.
|
|
|
|
(7)
|
|
Information based on
Schedule 13F dated October 28, 2009. Dimensional
Fund Advisors, LP had voting authority as follows: sole,
804,434 shares; none, 28,366 shares.
|
|
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(8)
|
|
Information based on
Schedule 13F dated November 11, 2009. Zesiger Capital
Group, LLC had voting authority as follows: sole,
628,200 shares; none, 111,000 shares.
|
|
|
|
(9)
|
|
Information based on
Schedule 13F dated November 13, 2009. Segall,
Bryant & Hamill had voting authority as follows: sole,
265,470 shares; none, 411,950 shares.
|
|
|
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(10)
|
|
Information based on
Schedule 13G dated July 6, 2009. RFB Capital, LLC had
sole voting power over all shares.
|
REPORT OF
THE
EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE
In connection with the exercise of its duties, the Executive
Compensation and Development Committee has reviewed and
discussed the “Compensation Discussion and Analysis”
set forth below with management. Based upon that review and
those discussions, the Executive Compensation and Development
Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included by reference in
the Company’s Annual Report to Shareholders on
Form 10-K
and included in this Proxy Statement.
Sally G. Narodick,
Chair
R. Randolph Devening
James E. Warjone
12
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Introduction
The Executive Compensation and Development Committee (the
“Committee”) is a Board of Directors committee
comprised of three independent directors. The Committee is
broadly charged by the Board of Directors to establish
compensation and incentive programs for executive officers.
Following review and approval by the Committee, issues
pertaining to executive compensation are reported to the full
Board of Directors, except that with regard to the base salary
of the Chief Executive Officer, the Committee reviews and
recommends an appropriate salary to the full Board for approval.
The following discussion provides an explanation of:
(1) the philosophy and objectives of the Company’s
compensation programs for executive officers, (2) each of
the major elements comprising these compensation programs, and
(3) the rationale for and process used to determine the
amounts of each of these elements.
Compensation
Philosophy and Objectives
The Committee believes that executive officer compensation
should be closely aligned with the performance of the Company on
both a short-term and long-term basis, and that such
compensation should assist the Company in attracting and
retaining key executives critical to its long-term success.
The objectives of the executive officer compensation program
include:
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•
|
Competitive Compensation.
The Company needs to
hire, retain and motivate executives with the requisite skills
and experience to develop, expand and execute upon the
Company’s business initiatives, as this is essential to the
Company’s success in providing value to shareholders.
|
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|
•
|
Performance-Based Compensation.
Variable
compensation tied to Company and individual performance should
represent a significant portion of total compensation for the
Company’s executives.
|
|
|
|
|
•
|
Reward Both Company Performance and Individual
Achievement.
In determining annual incentive and
long-term equity-based incentive awards, the Company considers
both Company performance and individual achievement. Merit
increases to base salaries are weighted towards recognition of
individual performance and achievement.
|
|
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|
|
•
|
Long Term Incentive.
The Company believes that
long term equity-based incentives are a valuable tool to align
the interests of executives and other senior managers with those
of shareholders. These incentives can be accomplished through
awards made under the Company’s Long-Term Incentive Plan,
which was approved by shareholders in 2006.
|
Committee
Practices
Historically, the Committee establishes total annual
compensation for the Chief Executive Officer (subject to full
Board approval for base salary) and other executive officers
after reviewing each component of such executive’s
compensation against surveys and applying the best business
judgment of the Committee. The surveys used for comparison
reflect compensation levels and practices for persons holding
comparably responsible positions at peer group companies and a
broader group of companies of similar size in general industry.
However, the Committee has noted that it is not aware of any
companies that are truly comparable to the Company and it is
also sensitive to the fact that the companies used in these
surveys may differ significantly as to size, products and
markets. Because of the inherent limitations of survey data, the
Committee does not mechanically apply the data but engages in a
review and weighs the survey information with other Company and
individual performance related factors. A significant part of
this review with respect to executive officers other than the
Chief Executive Officer is a discussion with the Chief Executive
Officer of his recommendations and input regarding compensation
for the other executive officers.
13
Benchmarking
The Committee’s comprehensive review of executive
compensation, including its review of benchmarking compensation
studies, generally occurs during a period around the end of each
fiscal year. For the past several years, the Committee has
engaged independent compensation consultant Towers Perrin to
prepare these studies. These studies have provided the Committee
with relevant market data, trends and alternatives to consider
when making compensation decisions, and the Committee has used
the study information to ensure that executive officer
compensation plans remain competitive and that the Committee
understands the plans in relation to market-median levels.
Towers Perrin has been engaged by the Committee and is not
engaged by management in any other material capacity.
In 2009 the Committee decided that a new full executive
compensation study was not necessary since, in the
Committee’s judgment, base salary and annual bonus
compensation were not likely to have changed significantly.
However, the Committee determined that a new study of long term
incentives was appropriate and necessary in light of the
Committee’s concerns regarding the effectiveness of long
term incentives previously granted to the Company’s senior
executives. In this regard, the Committee noted that, at that
time, all options previously granted to the Company’s
senior executives had exercise prices well above the
Company’s then current stock price. Accordingly, in
September 2009, the Committee engaged Towers Perrin to review
current long term incentive trends and competitive values,
provide an overview of available long term incentives, and make
a recommendation regarding long term incentive awards for the
current year.
Peer
Group
As discussed above, the Committee compares total compensation
and its components against a peer group of publicly traded
companies. In 2007, the Committee had engaged Towers Perrin to
review the Company’s appropriate peer group for
compensation purposes. The determination of peer group companies
included assessing those companies which, at the time, were
(i) within the same industry classifications (food
products, chemicals, and oil and gas and consumable fuels) as
the Company, (ii) generally within the revenue (under
$1 billion), total assets (under $1 billion) and
market cap (greater than $200 million) scope of the
Company, (iii) in multiple business lines, with
international operations and with research, product development,
manufacturing and marketing organizational expertise and
(iv) with 5% or more sales growth. As a result of this peer
group review process, the Committee uses a peer group which
currently consists of the following companies:
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|
|
American Vanguard Corp.
|
|
Landec Corp.
|
|
Aventine Renewable Energy Holdings Inc.
|
|
MGP Ingredients Inc.
|
|
Balchem Corp.
|
|
Minerals Technologies Inc.
|
|
Calgon Carbon Corp.
|
|
OMNOVA Solutions Inc.
|
|
Darling International Inc.
|
|
Quaker Chemical Corp
|
|
ICO Inc
|
|
Sensient Technologies Corp.
|
|
Imperial Sugar Co.
|
|
Stepan Co.
|
|
Koppers Holdings Inc.
|
|
|
Towers Perrin evaluated compensation at these peer group
companies in connection with its full study for the Committee in
2008 as well as the 2009 study of long term incentives noted
above.
Targets
Taking into account the limitations of the survey data discussed
above and the need to be competitive, the Committee targets base
salary for executive officers at between the 50th and 75th
percentile and the cash bonus component at between the 75th and
100th percentile. However, the Committee has also concluded that
it should exercise discretion and set targets or award
compensation in excess of or below these targets after applying
its best business judgment. As noted above, the program is
intended to be competitive with other high-performing
organizations and to enable the Company to attract, reward and
retain exceptional talent.
14
Compensation
Program Elements
The Committee’s policy is that the compensation package for
executive officers shall consist of three components:
(i) annual base salary; (ii) the potential to earn
incentive bonuses, and (iii) long-term incentives,
including stock option or other equity based awards designed to
align management’s interests with those of shareholders.
Base
Salary
Historically, base salaries for senior executive officers have
been reviewed on an annual basis and at the time of promotion or
other increase in responsibilities. Increases in salary have
been based on evaluation of such factors as the levels of
responsibility, individual performance, experience, current pay,
and Company peer group pay levels. In addition to the market
data from the peer group and other sources, the Committee has
considered other factors in arriving at or adjusting each
executive officer’s base salary, including: (1) each
executive officer’s scope of responsibilities;
(2) each executive officer’s qualifications, skills
and experience; (3) internal pay equity among senior
executives; (4) individual job performance, including both
impact on current financial results and contributions to
building longer-term shareholder value and (5) with respect
to executive officers other than the Chief Executive Officer,
the recommendation of the Chief Executive Officer. During the
past several years, salary adjustments for the Company’s
Chief Executive Officer and other senior executive officers have
been effective as of the beginning of the calendar year
following the Committee’s annual review in the fall of each
year.
In October 2009 the Company’s Board of Directors decided
that as in the preceding year, salaries for the Company’s
Chief Executive Officer and other senior executive officers
would not be raised during 2010. This decision was made in light
of the Company’s efforts to conserve resources and reduce
costs during the ongoing recession and in light of the difficult
business conditions and challenges facing the Company.
Annual
Bonus Incentive Compensation
The executive bonus plan (the “Bonus Plan”) is
designed to drive Company and operating unit performance
consistent with its objectives.
Near the start of each fiscal year, the Committee selects
participants in the Bonus Plan, sets target percentages and
objective quantitative and qualitative performance goals, and
approves individual performance goals for the current year. For
fiscal year 2009, the Committee determined that achievement of
quantitative metrics would constitute 70% of target attainment
and achievement of individual qualitative goals would constitute
30% of target attainment for the Chief Executive Officer and the
other named executives.
The Chief Executive Officer recommends performance goals. After
review and discussion of the Chief Executive Officer’s
recommendations, the Committee determines both the types of, and
the targets for, the corporate and operating business
executives, as well as individual performance goals and the
percentage of bonus payout to be tied to each of the performance
goals. Performance goals are generally tied to the
Company’s Board-approved budget and operating plans, as
well as the Company’s long-term strategic objectives.
Individual qualitative performance metrics are tailored to each
executive officer and include such metrics as identifying
opportunities and successfully implementing programs. Individual
objectives for fiscal 2009 included objectives relating to the
Company’s capital structure, strategic projects, the
ethanol initiative, product line growth and organizational
effectiveness.
Target bonus amounts, payable in cash, are expressed as a
percentage of base salary. Bonus targets for executive officers
have ranged from 40% to 100% of base salary depending on
position and overall responsibility:
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
100
|
%
|
|
Chief Financial Officer
|
|
|
75
|
%
|
|
Other Executive Officers
|
|
|
40
|
%
|
Actual bonus payments are increased above the target bonus
levels for results that exceed the performance goals and are
decreased below the target bonus levels, and may be reduced to
zero, for results that do not fully meet the goals, with the
amount of the increase or decrease based on a linear sliding
scale determined by the Committee.
15
For each quantitative performance measure, the Committee
establishes a threshold, target and maximum goal. No bonus on
the quantitative portion is generally payable unless a minimum
threshold is attained and the overall payouts may not exceed
200% of target bonus.
For fiscal year 2009 the Committee established quantitative
goals for corporate executives based upon the following
elements: earnings before interest and taxes (“EBIT”)
(target of $24 million; weighted 35%); return on invested
capital (target of 9.5%; weighted 15%); and earnings per share
(target of $1.25; weighted 20%). EBIT is calculated as the
Company’s net income plus interest expense less interest
income plus income tax expense. Return on invested capital is
calculated as the ratio (expressed as a percentage) of EBIT for
the fiscal year divided by the sum of average debt and average
equity.
With respect to two named executive officers assigned to
operating business units, 20% of target attainment for these
officers was dependent upon overall corporate performance, a
goal established to encourage operating units to support the
Company’s objective of achieving
cross-unit
cooperation, sales and support. The remaining 80% of target
attainment was based upon goals related to operating unit
performance, including operating unit earnings, revenue growth,
volume, and return on net assets. Because disclosure of specific
numerical quantitative goals for operating units would signal
where the Company is shifting its focus, give competitors
insight into areas where the Company is changing its approach,
and impair the Company’s ability to leverage these actions
for competitive advantage, the Company is not disclosing these
confidential operating unit targets. Knowledge of these targets
could be used by the Company’s much larger and better
capitalized competitors to take advantage of the Company. The
targets are set at aggressive levels each year to motivate high
business performance and support the attainment of longer-term
objectives. These targets, individually or together, are
designed to be challenging to attain. For fiscal year 2009 and
the two preceding fiscal years, the level of target attainment
for the Industrial Ingredients business has ranged from zero to
approximately 144% and for the Food Ingredients business between
approximately 42% and 147%.
The after effects of the 2008 flood and the recessionary
business environment affected volumes and prices for many of the
Company’s key products and therefore the ability to meet
quantitative goals under the 2009 Bonus Plan. Quantitative goals
under the Bonus Plan were not achieved other than for the Food
Ingredients business. Therefore, only Mr. Randall, the
President of the Company’s Food Ingredients business,
received a bonus based on both the quantitative and qualitative
components of the Bonus Plan for 2009.
The Committee determined that although executives other than
Mr. Randall would not receive a bonus based on the
quantitative component under the Bonus Plan, they would receive
bonuses under the Bonus Plan based on a qualitative assessment
of their performance. The Committee made a subjective evaluation
of the Chief Executive Officer’s contributions and it
reviewed and concurred with the Chief Executive Officer’s
subjective evaluation of the qualitative contributions of the
other named executives. However, since the quantitative
objectives for these executives had not been met, the Committee
determined that the amount paid for fiscal year 2009 would be
one-quarter of what each executive would have received based on
their qualitative assessment if quantitative goals had been met.
Significant qualitative objectives established under the 2009
Bonus Plan related to leadership and management of the
Company’s recovery from the flood that struck the Cedar
Rapids plant in June 2008, leadership of the Company through a
period of broad economic uncertainty and unprecedented industry
challenges, the implementation of strategic steps involving the
Company’s Australia/New Zealand Operations, and various
other strategic projects.
With regard to fiscal year 2010, the Committee determined that
the design of the 2010 Bonus Plan would be similar to that of
the Bonus Plan for 2009, except that for fiscal 2010 only, the
Committee decided to increase each of the executive target
percentages noted in the table above by 5%. The Committee
increased target percentages for 2010 in order to tie pay with
performance to a greater extent and avoid an increase in the
Company’s fixed costs for executive salaries.
In addition, for both incentive and retention purposes, the
Committee determined to make all executives other than
Mr. Randall eligible for incentive/retention bonuses
payable after each of the first three fiscal quarters of 2010,
with each such payment in an amount equal to the
executive’s award under the 2009 Bonus Plan. These bonuses
will be paid only if (a) the Company has met its bank
credit agreement covenants during the preceding fiscal 2010
quarter; (b) the Company has on hand on the date that any
payment determination is made an aggregate
16
amount of cash and unused bank credit agreement revolver
capacity equal to $3 million or more; and (c) the
executive is employed with the Company at the time any payment
is made. The determination as to whether the requirements of
clauses (a) and (b) above have been met will be made
on the date that the Company submits its quarterly compliance
certificate due under the bank credit agreement. If either of
the requirements of clauses (a) and (b) has not been
met, or if the executive is not an employee of the Company on
the date of any payment, then these bonuses will not be paid.
The incentive/retention bonuses payable in fiscal year 2010 are
independent of the Company’s 2010 Bonus Plan.
Long-Term
Incentives
The Company’s 2006 Long-Term Incentive Plan (the
“LTIP”) is administered by the Committee, which
determines to whom stock option, restricted stock or other
equity-based awards are granted, the number of shares subject to
each grant, the vesting schedule and exercise price. The LTIP
provides that all stock options to executive officers and others
must be granted at no less than 100% of fair market value on the
date of the grant. Awards under the LTIP typically reward
service and performance over a longer period of time than other
methods of compensation and focus on the Company’s
long-term strategic goals.
The Committee believes that including a significant level of
equity-based awards helps align the financial interests of
management with those of the Company’s shareholders since
the ultimate value of equity-based awards is tied to the value
of the Company’s stock and these awards provide executives
with a further equity stake in the Company. In making LTIP
awards, the Committee considers the Company’s financial
performance, each executive’s level of responsibilities,
the need to retain executive talent, the long-term incentive
compensation practices for similar positions at peer group and
other comparable companies, and the advice of the
Committee’s consultant. The Committee has not adopted
specific targets for long term incentive compensation. In
addition, prior to making an LTIP grant, the Committee considers
the Company’s share price, the volatility of the share
price and potential dilution. Options and restricted stock
generally vest ratably over three or four years. The Committee
generally expects to continue to consider LTIP awards for
executives at or near the conclusion of the Company’s
fiscal year. However, the Committee may in the future, applying
its best judgment at the time, make LTIP awards at additional or
different times.
In October 2007 the Committee decided for the first time to
grant restricted stock awards as long-term incentive
compensation for the Company’s named executive officers.
The Committee’s determination to award restricted stock at
the time was consistent with trends in long term compensation
reported to the Committee by its independent consultant. In
addition, because executives will receive benefit from
restricted stock if they remain employed by the Company
throughout the period of restriction, the Committee believes
restricted stock grants can be an effective retention tool for
key executives. Finally, the Committee had taken note of the
accounting rule change that required that stock options (like
restricted stock awards) be expensed when granted, whether or
not the options are ever exercised by the executive.
In fiscal year 2009 the Company did not provide any new LTIP
awards to the named executives. However, restricted stock awards
were granted to each of the named executives at the beginning of
fiscal year 2010 (i.e., in late October 2009). In addition,
based upon the recommendation of its consultant, the Committee
approved for fiscal year 2010 performance-based cash awards
under the LTIP for all named executive officers which, if
earned, will generally vest in three years.
In the future the Committee may utilize options, restricted
stock awards, performance-based cash awards,
and/or
other
types of awards and mixtures of awards available under the LTIP,
depending upon the circumstances at the time.
The Board of Directors encourages executive officers to build an
ownership position in Company common stock, but the Board has
not felt it necessary or advisable to establish formal executive
officer stock ownership requirements.
17
Employment
Related Agreements
Except with respect to the change in control agreements
described in more detail below, the Company does not have
employment agreements that provide for continued employment for
any period of time or which guarantee severance benefits upon
termination.
The Company entered into revised change in control agreements
with each of its executive officers in 2006 to provide for
continuity of management in the event of a change in control of
the Company. Pursuant to each agreement, the Company agrees to
provide certain payments and benefits to the participants if
they are terminated within 24 months after a “Change
in Control,” as defined in the agreements. Participants
will not be considered “terminated” for purposes of
these agreements if they die, become disabled or are terminated
for cause. They will, however, be considered
“terminated” if they voluntarily leave the
Company’s employ for certain good reasons (defined as
“Good Reason” in the agreements), and, in the case of
Mr. Malkoski and Mr. Cordier, if they voluntarily
terminate employment during the
30-day
period beginning on the first anniversary of a Change in
Control. A description of the payments and benefits under these
agreements is set forth in the “Change-in-Control
Arrangements” section below.
In October 2009, the Committee decided to increase the period
from 24 months to 30 months during which
Mr. Kortemeyer, the President and General Manager of the
Company’s Industrial Ingredients business, would be
eligible to receive benefits under the Company’s change in
control agreement with him. The Committee elected to make this
change in order to make the period in which Mr. Kortemeyer
is eligible to receive these benefits the same as the period
applicable to Mr. Randall, since they both are presidents
of operating business units.
Benefits
and Perquisites
The Company’s executive officers participate in the
broad-based benefits plans that are available to other employees
and can elect to have a portion of their compensation deferred
as described in the Deferred Compensation Plan section below.
With the exception of a car program and tax preparation
assistance for the Chief Executive Officer and the Chief
Financial Officer, the Company does not provide additional
material perquisites for its executive officers.
Tax and
Accounting Considerations
The Committee considers the tax and accounting implications of
its compensatory programs. Section 162(m) of the
U.S. Internal Revenue Code of 1986, as amended
(“Internal Revenue Code”), generally disallows a tax
deduction to public companies for compensation in excess of
$1 million paid to the Chief Executive Officer or any of
the three other most highly compensated officers (other than the
Chief Executive Officer and Chief Financial Officer).
Performance-based compensation arrangements (such as options but
not restricted stock) may qualify for an exemption from the
deduction limit if such arrangements satisfy various
requirements under Section 162(m). Although the Company
considers the impact of this rule as well as other tax
consequences (such as the non-deductibility of certain change in
control payments) when developing and implementing the
Company’s executive compensation programs, the Company has
not adopted a policy that all compensation must qualify as
deductible. The Committee has also considered the impact of the
deferred compensation requirements of Section 409A of the
Internal Revenue Code and amended the Company’s Deferred
Compensation Plan and change in control agreements in response
to such requirements.
18
Executive
Compensation Tables (Fiscal Year 2009)
2009
Summary Compensation Table
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
Change in
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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and
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
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|
|
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|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Deferred
|
|
|
All Other
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
Compensation
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary ($)
|
|
|
Awards ($)(1)
|
|
|
Awards ($)(1)
|
|
|
Compensation ($)(2)
|
|
|
Earnings ($)(3)
|
|
|
($)(4)
|
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas D. Malkoski
|
|
|
2009
|
|
|
$
|
550,000
|
|
|
$
|
328,786
|
|
|
$
|
311,104
|
|
|
$
|
50,600
|
|
|
$
|
52,061
|
|
|
$
|
45,921
|
|
|
$
|
1,338,472
|
|
|
President and Chief
|
|
|
2008
|
|
|
|
530,000
|
|
|
|
459,973
|
|
|
|
127,936
|
|
|
|
425,000
|
|
|
|
18,968
|
|
|
|
44,614
|
|
|
|
1,606,491
|
|
|
Executive Officer
|
|
|
2007
|
|
|
|
485,000
|
|
|
|
—
|
|
|
|
253,557
|
|
|
|
980,000
|
|
|
|
14,494
|
|
|
|
40,773
|
|
|
|
1,773,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven O. Cordier
|
|
|
2009
|
|
|
|
345,000
|
|
|
|
164,393
|
|
|
|
201,185
|
|
|
|
21,375
|
|
|
|
40,653
|
|
|
|
21,488
|
|
|
|
794,094
|
|
|
Senior Vice President, Chief
|
|
|
2008
|
|
|
|
338,333
|
|
|
|
229,987
|
|
|
|
96,685
|
|
|
|
190,000
|
|
|
|
4,905
|
|
|
|
21,488
|
|
|
|
881,398
|
|
|
Financial Officer
|
|
|
2007
|
|
|
|
321,667
|
|
|
|
—
|
|
|
|
193,679
|
|
|
|
420,000
|
|
|
|
17,253
|
|
|
|
20,763
|
|
|
|
973,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy M. Kortemeyer
|
|
|
2009
|
|
|
|
260,000
|
|
|
|
109,595
|
|
|
|
161,314
|
|
|
|
10,000
|
|
|
|
38,811
|
|
|
|
26,573
|
|
|
|
606,293
|
|
|
Vice President and President,
|
|
|
2008
|
|
|
|
248,333
|
|
|
|
153,324
|
|
|
|
68,932
|
|
|
|
145,000
|
|
|
|
12,658
|
|
|
|
22,675
|
|
|
|
650,922
|
|
|
Penford Industrial Ingredients
|
|
|
2007
|
|
|
|
216,667
|
|
|
|
—
|
|
|
|
122,027
|
|
|
|
170,000
|
|
|
|
10,582
|
|
|
|
23,421
|
|
|
|
542,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John R. Randall
|
|
|
2009
|
|
|
|
255,000
|
|
|
|
93,156
|
|
|
|
100,335
|
|
|
|
80,000
|
|
|
|
56,064
|
|
|
|
22,629
|
|
|
|
607,184
|
|
|
Vice President and President,
|
|
|
2008
|
|
|
|
248,333
|
|
|
|
130,326
|
|
|
|
72,259
|
|
|
|
40,000
|
|
|
|
34,020
|
|
|
|
22,149
|
|
|
|
547,087
|
|
|
Penford Food Ingredients
|
|
|
2007
|
|
|
|
230,000
|
|
|
|
—
|
|
|
|
126,028
|
|
|
|
160,000
|
|
|
|
28,046
|
|
|
|
21,496
|
|
|
|
565,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher L. Lawlor
|
|
|
2009
|
|
|
|
245,000
|
|
|
|
82,196
|
|
|
|
84,542
|
|
|
|
7,625
|
|
|
|
—
|
|
|
|
24,953
|
|
|
|
444,316
|
|
|
Vice President — Human
|
|
|
2008
|
|
|
|
240,000
|
|
|
|
114,993
|
|
|
|
46,909
|
|
|
|
70,000
|
|
|
|
—
|
|
|
|
25,290
|
|
|
|
497,192
|
|
|
Resources,
General Counsel and Secretary
|
|
|
2007
|
|
|
|
226,667
|
|
|
|
—
|
|
|
|
74,444
|
|
|
|
155,000
|
|
|
|
—
|
|
|
|
24,903
|
|
|
|
481,014
|
|
|
|
|
|
|
(1)
|
|
The amounts reflect the dollar
amount recognized for fiscal 2009 for financial statement
reporting purposes in accordance with Accounting Standards
Codification Topic 718, Stock Compensation (“ASC Topic
718”), except that no assumptions were included for
estimated forfeitures related to service-based vesting
conditions. This valuation method values stock options and
awards granted during fiscal 2009 and prior years. A discussion
of the assumptions used in calculating the compensation cost is
set forth in Note 11 of the Notes to Consolidated Financial
Statements in the Company’s Annual Report on
Form 10-K
for the year ended August 31, 2009.
|
|
|
|
(2)
|
|
The amounts reflect the cash awards
paid to the named executive officers on November 13, 2009
for fiscal 2009 performance as further described in the
“Compensation Discussion and Analysis” section of this
Proxy Statement and below.
|
|
|
|
(3)
|
|
The amounts in this column reflect
the actuarial increase in the present value of the named
executive officer’s benefits under the Company’s
qualified pension plan, determined using interest rate and
mortality rate assumptions consistent with those described in
Note 12 of the Notes to Consolidated Financial Statements
in the Company’s Annual Report on
Form 10-K
for the year ended August 31, 2009. These amounts also
include above-market interest on the Company’s nonqualified
deferred compensation plan as follows: Mr. Malkoski,
$8,987; Mr. Randall, $1,852 and Mr. Kortemeyer,
$4,288. The interest earnings are also disclosed in the 2009
Deferred Compensation Table. Interest is credited to a
participant’s account at the monthly equivalent of an
annual yield that is two percentage points higher than the
annual yield of the Moody’s Average Corporate Bond Yield
Index for the preceding month.
|
|
|
|
(4)
|
|
All Other Compensation consists of
the items in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
|
|
|
Tax
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
Automobile
|
|
|
Preparation
|
|
|
Reimbursements
|
|
|
Contributions for
|
|
|
|
|
|
Name
|
|
Year
|
|
|
Expenses ($)
|
|
|
Fees ($)
|
|
|
($)
|
|
|
401(k) Plans ($)
|
|
|
Total ($)
|
|
|
|
|
Thomas D. Malkoski
|
|
|
2009
|
|
|
$
|
19,575
|
|
|
$
|
2,550
|
|
|
$
|
8,209
|
|
|
$
|
15,587
|
|
|
$
|
45,921
|
|
|
|
|
|
2008
|
|
|
|
19,575
|
|
|
|
—
|
|
|
|
8,171
|
|
|
|
16,868
|
|
|
|
44,614
|
|
|
|
|
|
2007
|
|
|
|
16,944
|
|
|
|
1,520
|
|
|
|
7,095
|
|
|
|
15,214
|
|
|
|
40,773
|
|
|
Steven O. Cordier
|
|
|
2009
|
|
|
|
14,250
|
|
|
|
800
|
|
|
|
6,438
|
|
|
|
—
|
|
|
|
21,488
|
|
|
|
|
|
2008
|
|
|
|
14,250
|
|
|
|
800
|
|
|
|
6,438
|
|
|
|
—
|
|
|
|
21,488
|
|
|
|
|
|
2007
|
|
|
|
13,750
|
|
|
|
800
|
|
|
|
6,213
|
|
|
|
—
|
|
|
|
20,763
|
|
|
Timothy M. Kortemeyer
|
|
|
2009
|
|
|
|
9,750
|
|
|
|
—
|
|
|
|
4,684
|
|
|
|
12,139
|
|
|
|
26,573
|
|
|
|
|
|
2008
|
|
|
|
9,750
|
|
|
|
—
|
|
|
|
4,684
|
|
|
|
8,241
|
|
|
|
22,675
|
|
|
|
|
|
2007
|
|
|
|
9,750
|
|
|
|
—
|
|
|
|
4,684
|
|
|
|
8,987
|
|
|
|
23,421
|
|
|
John R. Randall
|
|
|
2009
|
|
|
|
12,250
|
|
|
|
—
|
|
|
|
5,524
|
|
|
|
4,855
|
|
|
|
22,629
|
|
|
|
|
|
2008
|
|
|
|
12,250
|
|
|
|
—
|
|
|
|
5,524
|
|
|
|
4,375
|
|
|
|
22,149
|
|
|
|
|
|
2007
|
|
|
|
11,750
|
|
|
|
—
|
|
|
|
5,298
|
|
|
|
4,448
|
|
|
|
21,496
|
|
|
Christopher L. Lawlor
|
|
|
2009
|
|
|
|
10,750
|
|
|
|
—
|
|
|
|
5,343
|
|
|
|
8,860
|
|
|
|
24,953
|
|
|
|
|
|
2008
|
|
|
|
10,750
|
|
|
|
—
|
|
|
|
5,344
|
|
|
|
9,196
|
|
|
|
25,290
|
|
|
|
|
|
2007
|
|
|
|
10,750
|
|
|
|
—
|
|
|
|
5,343
|
|
|
|
8,810
|
|
|
|
24,903
|
|
19
Grants of
Plan-Based Awards
The following table summarizes plan-based awards granted to the
Company’s named executive officers during the fiscal year
ended August 31, 2009.
2009
Grants of Plan-Based Awards Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Stock
|
|
|
Option
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Date Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Or Base
|
|
|
Value of
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under
|
|
|
Shares of
|
|
|
Securities
|
|
|
Price of
|
|
|
Stock and
|
|
|
|
|
|
|
|
Non-Equity Incentive Plan Awards(1)
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Option
|
|
|
Awards
|
|
|
Name
|
|
Grant Date
|
|
|
Threshold ($)
|
|
|
Target ($)
|
|
|
Maximum ($)
|
|
|
Units (#)
|
|
|
Options (#)
|
|
|
($/Sh)
|
|
|
($)
|
|
|
|
|
Thomas D. Malkoski
|
|
|
|
|
|
|
137,500
|
|
|
|
550,000
|
|
|
|
1,100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Steven O. Cordier
|
|
|
|
|
|
|
64,688
|
|
|
|
258,750
|
|
|
|
517,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Timothy M. Kortemeyer
|
|
|
|
|
|
|
26,000
|
|
|
|
104,000
|
|
|
|
208,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
John R. Randall
|
|
|
|
|
|
|
25,500
|
|
|
|
102,000
|
|
|
|
204,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Christopher L. Lawlor
|
|
|
|
|
|
|
24,500
|
|
|
|
98,000
|
|
|
|
196,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
(1)
|
|
Amounts reflect the payment levels
under the executive bonus plan described in the Compensation
Discussion and Analysis. Bonuses paid to the named executive
officers for fiscal 2009 are shown in the 2009 Summary
Compensation Table.
|
Outstanding
Equity Awards at Fiscal Year-End
The following table provides information on each named executive
officer’s stock option grants outstanding as of
August 31, 2009.
2009
Outstanding Equity Awards at Fiscal Year-End Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards(1)
|
|
|
Stock Awards(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
|
|
Number of Securities Underlying
|
|
|
|
|
|
|
|
|
|
|
|
Stock That
|
|
|
Stock That
|
|
|
|
|
Unexercised Options (#)
|
|
|
Option Exercise
|
|
|
Option
|
|
|
Grant
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price ($)
|
|
|
Exercise Date
|
|
|
Date
|
|
|
Vested (#)
|
|
|
Vested ($)(3)
|
|
|
|
|
Thomas D. Malkoski
|
|
|
150,000
|
|
|
|
—
|
|
|
|
12.61
|
|
|
|
1/3/12
|
|
|
|
1/3/02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
—
|
|
|
|
13.95
|
|
|
|
2/28/12
|
|
|
|
2/28/02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
14.95
|
|
|
|
10/30/12
|
|
|
|
10/30/02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
12.79
|
|
|
|
8/22/13
|
|
|
|
8/22/03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
—
|
|
|
|
16.34
|
|
|
|
11/3/14
|
|
|
|
11/3/04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,250
|
|
|
|
8,750
|
|
|
|
13.32
|
|
|
|
10/28/15
|
|
|
|
10/28/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
10,000
|
|
|
|
15.92
|
|
|
|
4/21/13
|
|
|
|
4/21/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
60,000
|
|
|
|
17.07
|
|
|
|
8/28/15
|
|
|
|
8/28/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/07
|
|
|
|
22,500
|
|
|
|
144,900
|
|
|
Steven O. Cordier
|
|
|
60,000
|
|
|
|
—
|
|
|
|
17.50
|
|
|
|
7/15/12
|
|
|
|
7/15/02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
—
|
|
|
|
14.95
|
|
|
|
10/30/12
|
|
|
|
10/30/02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
12.79
|
|
|
|
8/22/13
|
|
|
|
8/22/03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
—
|
|
|
|
16.34
|
|
|
|
11/3/14
|
|
|
|
11/3/04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,750
|
|
|
|
6,250
|
|
|
|
13.32
|
|
|
|
10/28/15
|
|
|
|
10/28/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500
|
|
|
|
7,500
|
|
|
|
15.92
|
|
|
|
4/21/13
|
|
|
|
4/21/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
37,500
|
|
|
|
17.07
|
|
|
|
8/28/15
|
|
|
|
8/28/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/07
|
|
|
|
11,250
|
|
|
|
72,450
|
|
|
Timothy M. Kortemeyer
|
|
|
4,000
|
|
|
|
—
|
|
|
|
16.34
|
|
|
|
11/3/14
|
|
|
|
11/3/04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
—
|
|
|
|
13.93
|
|
|
|
8/18/15
|
|
|
|
8/18/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
1,250
|
|
|
|
13.32
|
|
|
|
10/28/15
|
|
|
|
10/28/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500
|
|
|
|
7,500
|
|
|
|
15.92
|
|
|
|
4/21/13
|
|
|
|
4/21/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
30,000
|
|
|
|
17.07
|
|
|
|
8/28/15
|
|
|
|
8/28/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/31/07
|
|
|
|
7,500
|
|
|
|
48,300
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards(1)
|
|
|
Stock Awards(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
|
|
Number of Securities Underlying
|
|
|
|
|
|
|
|
|
|
|
|
Stock That
|
|
|
Stock That
|
|
|
|
|
Unexercised Options (#)
|
|
|
Option Exercise
|
|
|
Option
|
|
|
Grant
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price ($)
|
|
|
Exercise Date
|
|
|
Date
|
|
|
Vested (#)
|
|
|
Vested ($)(3)
|
|
|
|
|
John R. Randall
|
|
|
20,000
|
|
|
|
—
|
|
|
|
12.59
|
|
|
|
2/17/13
|
|
|
|
2/17/03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
16.34
|
|
|
|
11/3/14
|
|
|
|
11/3/04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
5,000
|
|
|
|
15.92
|
|
|
|
4/21/13
|
|
|
|
4/21/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
16.25
|
|
|
|
10/31/13
|
|
|
|
10/31/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
15,000
|
|
|
|
17.07
|
|
|
|
8/28/15
|
|
|
|
8/28/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/07
|
|
|
|
6,375
|
|
|
|
41,055
|
|
|
Christopher L. Lawlor
|
|
|
30,000
|
|
|
|
—
|
|
|
|
15.12
|
|
|
|
4/22/15
|
|
|
|
4/22/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
16.25
|
|
|
|
10/31/13
|
|
|
|
10/31/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
15,000
|
|
|
|
17.07
|
|
|
|
8/28/15
|
|
|
|
8/28/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/07
|
|
|
|
5,625
|
|
|
|
36,225
|
|
|
|
|
|
|
(1)
|
|
Options vest 25% each year on the
anniversary of the grant date. Options granted prior to
January 24, 2006 were granted under the 1994 Stock Option
Plan. All other grants of stock options were granted under the
2006 Long-Term Incentive Plan.
|
|
|
|
(2)
|
|
Stock awards vest 25% each year on
the anniversary of the grant date.
|
|
|
|
(3)
|
|
Market value was determined using
the closing price of the Company’s common stock on
August 31, 2009 of $6.44.
|
Options
Exercised
The following table provides information with respect to option
exercises during the last fiscal year for each of the named
executive officers.
2009
Option Exercises and Stock Vested Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
Shares Acquired
|
|
|
Value Realized
|
|
|
Shares Acquired
|
|
|
Value Realized
|
|
|
Name
|
|
on Exercise (#)
|
|
|
on Exercise ($)
|
|
|
on Vesting (#)
|
|
|
on Vesting ($)(1)
|
|
|
|
|
Thomas D. Malkoski
|
|
|
—
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
90,150
|
|
|
Steven O. Cordier
|
|
|
—
|
|
|
|
—
|
|
|
|
3,750
|
|
|
|
45,075
|
|
|
Timothy M. Kortemeyer
|
|
|
—
|
|
|
|
—
|
|
|
|
2,500
|
|
|
|
30,050
|
|
|
John R. Randall
|
|
|
—
|
|
|
|
—
|
|
|
|
2,125
|
|
|
|
25,543
|
|
|
Christopher L. Lawlor
|
|
|
—
|
|
|
|
—
|
|
|
|
1,875
|
|
|
|
22,538
|
|
|
|
|
|
|
(1)
|
|
The value realized on vesting was
determined using the closing price of the Company’s common
stock on the date of vesting.
|
Retirement
Plan
The Company has a defined benefit retirement plan (the
“Retirement Plan”) for salaried
employees.
Prior to January 1, 2005, all North
American-based active employees who were not members of the
collective bargaining unit were eligible to participate in the
Retirement Plan. The Retirement Plan was closed to new entrants
as of January 1, 2005.
Under the Retirement Plan, the normal retirement age is 65;
however, participants may continue to work beyond age 65.
Retirement benefits are calculated based on actual years of
service up to a maximum of 30 years and actual earnings to
the date of retirement. The retirement benefit is calculated as
follows: (1) the sum of (a) 1% of the “Final
Average Monthly Earnings,” defined as the average monthly
earnings during the five consecutive calendar years in which an
employee’s compensation was the highest, plus (b) 0.5%
of the Final Average Monthly Earnings in excess of the monthly
Social Security Covered Compensation, defined as the maximum
salary on which social security taxes are paid during a year,
(2) multiplied by an employee’s years of credited
service up to 30 years. Employees may retire at age 55
if they have completed 20 years of service. The early
retirement benefit is computed
21
in the same manner as the normal retirement calculation
described above except that the employee would receive a
percentage of the normal retirement benefit ranging from 56% at
age 55 to 98% at age 64.
Compensation covered by the Retirement Plan includes salaries
and bonuses as set forth in the Summary Compensation Table,
subject to the Internal Revenue Code
limitations.
The following table shows the years of credited
service and the present value of accumulated benefits for each
of the named executive officers.
2009
Pension Benefits Table(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
Years
|
|
|
Present Value of
|
|
|
Payments During
|
|
|
|
|
|
|
Credited
|
|
|
Accumulated
|
|
|
Last Fiscal Year
|
|
|
Name
|
|
Plan Name
|
|
Service (#)
|
|
|
Benefit ($)(3)
|
|
|
($)
|
|
|
|
|
Thomas D. Malkoski
|
|
Penford Corporation Retirement Plan
|
|
|
7.7
|
|
|
|
127,763
|
|
|
|
—
|
|
|
Steven O. Cordier
|
|
Penford Corporation Retirement Plan
|
|
|
7.1
|
|
|
|
117,588
|
|
|
|
—
|
|
|
Timothy M. Kortemeyer
|
|
Penford Corporation Retirement Plan
|
|
|
10.3
|
|
|
|
75,154
|
|
|
|
—
|
|
|
John R. Randall
|
|
Penford Corporation Retirement Plan
|
|
|
6.5
|
|
|
|
212,599
|
|
|
|
—
|
|
|
Christopher L. Lawlor
|
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
(1)
|
|
Pension benefits vest after five
years of employment. Benefits are paid as an annuity and may not
be paid in a lump-sum.
|
|
|
|
(2)
|
|
Mr. Lawlor was hired
subsequent to the closure of the pension plan to new hires and,
therefore, does not participate in the Plan.
|
|
|
|
(3)
|
|
The assumptions used for
determining present values are consistent with those used for
year end financial reporting as discussed in Note 12 of the
Notes to Consolidated Financial Statements in our Report on
Form 10-K
for the year ended August 31, 2009. In accordance with SEC
guidance, assumptions incorporated into these calculations
include commencement of benefits at the earliest unreduced
retirement age and no pre-retirement decrements.
|
Deferred
Compensation
The Company maintains the Penford Corporation Deferred
Compensation Plan, which is a nonqualified, unfunded deferred
compensation plan that provides the Company’s directors,
officers and certain key employees with the opportunity to defer
a portion of their fees, salaries and bonuses on a tax-deferred
basis. All of the named executive officers are eligible to
participate in the plan. Interest is credited and compounded
monthly based on the monthly equivalent of the annual yield on
Moody’s Average Corporate Long-Term Bond Yield Index. The
Company has established a so-called “rabbi trust” by
entering into a trust agreement with a trustee in order to
assist the Company in meeting its obligations to make deferred
compensation payments to plan participants.
The following table provides information regarding executive
contributions, earnings and account balances for each of the
named executive officers in the Deferred Compensation Plan. No
executive officer made any withdrawals or received any
distributions during fiscal 2009.
2009
Nonqualified Deferred Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
Contributions in
|
|
|
Contributions in
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Balance at Last
|
|
|
|
|
Last Fiscal Year
|
|
|
Last Fiscal Year
|
|
|
Earnings in Last
|
|
|
Withdrawals
|
|
|
Fiscal Year-End
|
|
|
Name
|
|
($)(1)
|
|
|
($)(2)
|
|
|
Fiscal Year ($)(3)
|
|
|
/Distributions ($)
|
|
|
($)
|
|
|
|
|
Thomas D. Malkoski
|
|
$
|
21,250
|
|
|
|
—
|
|
|
$
|
33,110
|
|
|
|
—
|
|
|
$
|
415,075
|
|
|
Steven O. Cordier
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Timothy M. Kortemeyer
|
|
|
—
|
|
|
|
—
|
|
|
|
17,288
|
|
|
|
—
|
|
|
|
214,432
|
|
|
John R. Randall
|
|
|
—
|
|
|
|
—
|
|
|
|
6,572
|
|
|
|
—
|
|
|
|
81,512
|
|
|
Christopher L. Lawlor
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
22
|
|
|
|
|
(1)
|
|
Contributions in this column are
included in the “Non-Equity Incentive Plan
Compensation” column of the Summary Compensation Table.
Participants in the Deferred Compensation Plan may elect to
defer receipt of up to 25% of his or her base annual salary and
up to 50% of any bonus payable.
|
|
|
|
(2)
|
|
The Deferred Compensation Plan does
not provide for contributions by the Company.
|
|
|
|
(3)
|
|
These amounts include above-market
interest of $8,987, $1,852 and $4,288 for Messrs. Malkoski,
Randall and Kortemeyer, respectively. Above market interest is
included in the “Change in Pension Value and Nonqualified
Deferred Compensation Earnings” column of the Summary
Compensation Table.
|
Change-in-Control
Arrangements
The Company has change of control agreements with each of the
named executive officers. These agreements are intended to
provide for continuity of management in the event of a change of
control of the Company. Pursuant to each agreement, Penford
agrees to provide certain benefits to the participants if they
are terminated in connection with a “Change in
Control,” as defined in the agreements and summarized
below. Each of these agreements continues until Penford
terminates the agreement upon twelve months prior written
notice, provided that if a Change in Control occurs prior to the
termination date of the agreement, the agreement will remain in
effect with respect to all rights accruing as a result of the
occurrence of the Change in Control.
To receive the payments and benefits for a termination in
connection with a Change in Control under an agreement,
participants must execute a waiver and release in favor of
Penford. Participants must also agree to noncompetition and
nonsolicitation provisions for a period extending beyond their
termination of employment, as well as to nondisparagement and
confidentiality provisions.
Under these agreements, participants, regardless of whether
their employment is terminated in connection with a Change in
Control, are entitled to vesting immediately prior to a Change
in Control of all options and other equity-based rights and
interests outstanding immediately prior to the Change in Control.
Under these agreements, participants are entitled to certain
benefits if they are terminated within 24 months after a
Change in Control. Participants will not be considered
“terminated” for purposes of these agreements if they
die, become disabled or are terminated for cause. They will,
however, be considered “terminated” if they
voluntarily leave Penford’s employ for certain good reasons
(defined as “Good Reason” in the agreements and
summarized below) and, in the case of Mr. Malkoski and
Mr. Cordier, if they voluntarily terminate employment
during the
30-day
period beginning on the first anniversary of a Change in Control.
Upon a termination in connection with a Change in Control,
participants will be eligible to receive 50% of the compensation
payable to them under the agreement (referred to as the
“CIC Amount”) within 30 days after their
termination of employment and 50% in equal monthly installments
over the compensation period, which for Messrs. Malkoski,
Cordier, Kortemeyer and Randall is 30 months and for
Mr. Lawlor is 24 months. The CIC Amount is the product
of (a) base salary plus the participant’s Average
Target Attainment Bonus (as defined in the agreements) over a
specified period, times (b) 2.5 for Messrs. Malkoski,
Cordier, Kortemeyer and Randall and 2.0 for Mr. Lawlor. In
addition, participants receive a prorated target bonus for the
year of termination and Penford will pay the cost of
outplacement services for a period, which in the case of
Mr. Malkoski and Mr. Cordier would be 12 months
and for the other participants would be 6 months.
Participants will also be entitled to continuation of certain
medical, life and other benefits during the compensation period.
Mr. Malkoski and Mr. Cordier are also entitled to an
additional payment, if necessary, to make them whole as a result
of excise and related taxes imposed by the Internal Revenue Code
on change of control benefits. If such excise taxes would
otherwise be applicable to other participants, such other
participants would have the payments under the agreement reduced
such that the aggregate present value of the payments under the
agreement would not exceed one hundred dollars less than three
times the participant’s base amount (generally average
compensation from Penford for the preceding five years) under
the Internal Revenue Code. In 2008, the agreements were amended
to reflect tax law changes which will likely result in
Messrs. Malkoski and Cordier not receiving the first
payment of the CIC Amount until six months after their
termination of employment.
A general summary of certain definitions used in the agreements
follows:
“Change of Control” generally means any of the
following events: (i) The Company is merged, consolidated
or reorganized (“Reorganization”) with another entity
and as a result of which less than 50% of the outstanding
23
voting interests or securities of the surviving or resulting
entity immediately after the Reorganization are owned in the
aggregate by the former shareholders of the Company, in
substantially the same proportions as their ownership before
such Reorganization; (ii) The Company sells all or
“Substantially All
” (
generally defined as
exceeding 50% of the fair market value of the Company’s
assets) to another entity; (iii) Any person acquires more
than 40% of the outstanding voting securities of the Company; or
(iv) During any 24 month period, individuals who
constitute the Board of Directors of the Company at the
beginning of such period cease to constitute at least a majority
thereof, unless the election, or nomination for election by the
Company’s shareholders, of each new director was approved
(other than in connection with an actual or threatened
solicitation of proxies or consents by another) by the vote of
at least two-thirds of the directors then still in office who
were directors of the Company at the beginning of such period.
“Good Reason” generally exists (if, after written
notice by the executive to the Company and a thirty
(30) day opportunity by the Company to cure during which
the Company does not cure the condition): (i) The
executive’s most significant duties, responsibilities or
authority are reduced or diminished in other than an immaterial
manner; (ii) Either (A) the executive’s base
salary or target bonus are reduced by the Company, or
(B) the executive’s benefits are denied or modified in
a manner different than changes applicable to other executive
officers, and (C) the aggregate effect of all such
reductions, denials and modifications (including any increases
in compensation, bonuses, or benefits) represents more than an
immaterial reduction to the Executive’s overall
compensation package; (iii) The Company violates the
material terms of the agreement; (iv) The executive is
required to relocate his principal place of employment more than
50 miles from both his principal place of employment and
his principal residence; or (v) There is a liquidation,
dissolution, consolidation or merger of the Company or transfer
or sale of all or a substantially all of its assets, unless a
successor (by merger, consolidation or otherwise) to which all
or substantially all of its assets have been transferred or sold
has assumed all duties and obligations of the Company under the
agreement.
The following table quantifies the payments and benefits that
each named executive officer would receive under the
Company’s compensation programs upon various scenarios for
termination of employment or a
change-in-control
of the Company.
2009
Potential Payments Upon Termination or Change in Control
Table(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
Termination After
|
|
|
|
|
|
|
Retirement
|
|
|
Control, Death
|
|
|
Change in Control($)
|
|
|
Name
|
|
Benefit
|
|
($)
|
|
|
or Disability ($)
|
|
|
(5)
|
|
|
|
|
Thomas D. Malkoski
|
|
Change in Control Amount(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
3,051,096
|
|
|
|
|
Tax Gross Up(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,399,965
|
|
|
|
|
Prorated Target Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
550,000
|
|
|
|
|
Accelerated Vesting of Stock Options(4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
Accelerated Vesting of Stock Awards(6)
|
|
|
—
|
|
|
|
144,900
|
|
|
|
—
|
|
|
|
|
Benefit coverage continuation
|
|
|
—
|
|
|
|
—
|
|
|
|
39,000
|
|
|
|
|
Outplacement services
|
|
|
—
|
|
|
|
—
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
144,900
|
|
|
|
5,065,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven O. Cordier
|
|
Change in Control Amount(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,602,749
|
|
|
|
|
Tax Gross Up(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
727,413
|
|
|
|
|
Prorated Target Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
258,750
|
|
|
|
|
Accelerated Vesting of Stock Options(4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
Accelerated Vesting of Stock Awards(6)
|
|
|
—
|
|
|
|
72,450
|
|
|
|
—
|
|
|
|
|
Benefit coverage continuation
|
|
|
—
|
|
|
|
—
|
|
|
|
39,000
|
|
|
|
|
Outplacement services
|
|
|
—
|
|
|
|
—
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
72,450
|
|
|
|
2,652,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
Termination After
|
|
|
|
|
|
|
Retirement
|
|
|
Control, Death
|
|
|
Change in Control($)
|
|
|
Name
|
|
Benefit
|
|
($)
|
|
|
or Disability ($)
|
|
|
(5)
|
|
|
|
|
Timothy M. Kortemeyer
|
|
Change in Control Amount(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,042,870
|
|
|
|
|
Prorated Target Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
104,000
|
|
|
|
|
Accelerated Vesting of Stock Options(4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
Accelerated Vesting of Stock Awards(6)
|
|
|
—
|
|
|
|
48,300
|
|
|
|
—
|
|
|
|
|
Benefit coverage continuation
|
|
|
—
|
|
|
|
—
|
|
|
|
31,200
|
|
|
|
|
Outplacement services
|
|
|
—
|
|
|
|
—
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
48,300
|
|
|
|
1,193,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John R. Randall
|
|
Change in Control Amount(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
926,594
|
|
|
|
|
Prorated Target Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
102,000
|
|
|
|
|
Accelerated Vesting of Stock Options(4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
Accelerated Vesting of Stock Awards(6)
|
|
|
—
|
|
|
|
41,055
|
|
|
|
—
|
|
|
|
|
Benefit coverage continuation
|
|
|
—
|
|
|
|
—
|
|
|
|
24,980
|
|
|
|
|
Outplacement services
|
|
|
—
|
|
|
|
—
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
41,055
|
|
|
|
1,068,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher L. Lawlor
|
|
Change in Control Amount(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
705,391
|
|
|
|
|
Prorated Target Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
98,000
|
|
|
|
|
Accelerated Vesting of Stock Options(4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
Accelerated Vesting of Stock Awards(6)
|
|
|
—
|
|
|
|
36,225
|
|
|
|
—
|
|
|
|
|
Benefit coverage continuation
|
|
|
—
|
|
|
|
—
|
|
|
|
31,200
|
|
|
|
|
Outplacement services
|
|
|
—
|
|
|
|
—
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
36,225
|
|
|
|
849,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Assumes termination or change of
control occurred on August 31, 2009.
|
|
|
|
(2)
|
|
The Change in Control Amount is the
product of (a) base salary plus the participant’s
Average Target Attainment Bonus (as defined in the agreements)
over a specified period, times (b) 2.5 for the named
executive officers other than Mr. Lawlor and 2.0 for
Mr. Lawlor.
|
|
|
|
(3)
|
|
The Company will make additional
payments to Messrs. Malkoski and Cordier if an excise tax
arises under Section 4999 of the Internal Revenue Code
(“Code”) as a result of the Internal Revenue Service
treating any payment or acceleration right as contingent upon a
change of control pursuant to Section 280G of the Code. The
net result of these payments will be to place the executive in
the same after-tax position as if the excise tax had not been
imposed.
|
|
|
|
(4)
|
|
Vesting for stock options granted
pursuant to the 2006 Long-Term Incentive Plan does not
accelerate upon retirement. Amounts in the
“Retirement” column reflect the acceleration of
vesting for stock options granted pursuant to the 1994 Stock
Option Plan. Amounts in the “Change in Control, Death or
Disability” and “Termination After Change in
Control” column reflect the acceleration of vesting for
stock options granted pursuant to the 1994 Stock Option Plan and
the 2006 Long-Term Incentive Plan. Amounts are computed as the
spread between the option exercise price and the closing market
price of Penford common stock on August 31, 2009 times the
number of unexercisable options at August 31, 2009. Since
the market price of the Company’s common stock on
August 31, 2009 was below the exercise price for all
options granted under the Company’s plans, there is no
amount shown for “Accelerated Vesting of Stock
Options.”
|
|
|
|
(5)
|
|
Amounts in the column
“Termination after Change in Control” reflect amounts
payable to the named executive officers if terminated within two
years after a change in control. Note that the acceleration of
stock options occurs upon a Change in Control regardless of
whether employment is terminated and such acceleration is shown
in the column “Change in Control, Death or Disability.”
|
|
|
|
(6)
|
|
Vesting for stock awards granted
pursuant to the 2006 Long-Term Incentive Plan does not
accelerate upon retirement. Amounts are computed as the closing
market price of Penford common stock on August 31, 2009
times the number of unvested awards at August 31, 2009.
|
25
Director
Compensation
The following table provides compensation information for fiscal
2009 for each of the Company’s non-employee directors.
2009 Director
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
Stock Awards ($)
|
|
|
Compensation
|
|
|
|
|
|
Name
|
|
Paid in Cash ($)(1)(2)
|
|
|
(3)
|
|
|
Earnings ($)(2)
|
|
|
Total ($)
|
|
|
|
|
William E. Buchholz
|
|
|
98,500
|
|
|
|
19,975
|
|
|
|
—
|
|
|
|
118,475
|
|
|
Jeffrey T. Cook
|
|
|
88,500
|
|
|
|
19,975
|
|
|
|
—
|
|
|
|
108,475
|
|
|
R. Randolph Devening
|
|
|
87,000
|
|
|
|
19,975
|
|
|
|
—
|
|
|
|
106,975
|
|
|
Paul H. Hatfield
|
|
|
115,500
|
|
|
|
19,975
|
|
|
|
—
|
|
|
|
135,475
|
|
|
John C. Hunter III
|
|
|
93,500
|
|
|
|
19,975
|
|
|
|
1,347
|
|
|
|
114,822
|
|
|
Sally G. Narodick
|
|
|
92,000
|
|
|
|
19,975
|
|
|
|
8,125
|
|
|
|
120,100
|
|
|
James E. Warjone
|
|
|
88,500
|
|
|
|
19,975
|
|
|
|
—
|
|
|
|
108,475
|
|
|
|
|
|
|
(1)
|
|
Includes retainer fees and meeting
fees.
|
|
|
|
(2)
|
|
Under the Penford Corporation
Deferred Compensation Plan, non-employee directors may elect to
defer, with interest, all or part of their director
compensation. In fiscal year 2009, none of the directors elected
to defer any portion of their cash compensation. Amounts reflect
above-market interest on the Company’s nonqualified
deferred compensation plan. Interest is credited to a
participant’s account at the monthly equivalent of an
annual yield that is two percentage points higher than the
annual yield of the Moody’s Average Corporate Bond Yield
Index for the preceding month.
|
|
|
|
(3)
|
|
On January 1, 2008 and
January 1, 2009, each non-employee director received an
award of 781 shares and 1,976 shares, respectively, of
restricted stock under the 2006 Long-Term Incentive Plan at the
last reported sale price of the stock on the preceding trading
day. These shares vest on the one-year anniversary of the grant.
Compensation expense for stock awards is recognized ratably over
the vesting period. The amounts in this column reflect the
dollar amount recognized for financial statement reporting
purposes in fiscal 2009 in accordance with ASC Topic 718. At
August 31, 2009, each non-employee director had 1,976
unvested restricted shares of Penford common stock.
|
During fiscal 2009, as in fiscal 2008, compensation payable to
non-employee directors was as follows
Cash
Compensation
|
|
|
|
|
|
|
Base annual retainer as a director
|
|
$
|
72,000
|
|
|
Additional annual retainer for Chairman of the Board of Directors
|
|
|
30,000
|
|
|
Additional annual retainer for Chair of the Audit Committee
|
|
|
10,000
|
|
|
Additional annual retainer for Chair of any other standing
committee, except Executive Committee
|
|
|
5,000
|
|
|
Additional meeting
fee
(1)
|
|
|
1,500
|
|
|
|
|
|
|
|
(1)
|
Additional meetings fee to be paid for each Board of Directors
meeting attended in excess of six meetings per fiscal year and
each Committee meeting attended in excess of six meetings per
fiscal year.
|
Equity
Compensation
An annual restricted stock grant valued at $20,000 on January 1
of each year, based on the last reported sale price of the
Company’s stock on the preceding trading day, in accordance
with the Company’s 2006 Long-Term Incentive Plan.
Restrictions lapse on the first anniversary date of the award.
The independent members of the Board have concluded that there
may be instances where it will be in the best interest of the
Company to ask individual directors to perform Board or Board
committee services which exceed the normal expectation of
service generally expected of directors and committee members.
The Board has concluded that in such instances that it will be
equitable and in the best interests of the Company to compensate
a
26
director at the same per diem rate then payable to directors for
participation in a meeting of the Board of Directors. It is
specifically intended that such compensation shall not represent
any consulting, advisory, or other fee and is only intended as
payment for extraordinary Board service. Accordingly, payments
shall be made for such service only under the following
conditions: (i) the director who is asked to perform such
services does not publicly hold himself out as a consultant or
advisor in the area of service being requested or regularly
perform such services for compensation for entities that he or
she is not affiliated with as an officer, director or owner;
(ii) the special assignment relates to a matter that is
under review by the Board or a committee or if pursued will
require such review; (iii) the special assignment shall not
involve the preparation of financial statements or work directly
related to such preparation other than the review and oversight
normally undertaken by the Audit Committee and the Board of
Directors; (iv) the total fees paid for such services shall
not exceed $60,000 in any fiscal year; and (v) the special
assignment must be approved by a majority of the independent
members of the Board of Directors who shall affirmatively
determine that the assignment will not adversely affect the
director’s independence. Any special assignment shall be
reviewed no less often than annually by the Governance
Committee, provided that any member of that committee shall
recuse himself or herself from any review of a special
assignment in which they are engaged.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Company’s Executive Compensation and
Development Committee is a past or present officer or employee
of the Company or any of its subsidiaries, nor has any member of
the Company’s Executive Compensation and Development
Committee had any relationship requiring disclosure under
Item 404 of
Regulation S-K
as promulgated by the Securities and Exchange Commission.
Likewise, none of the Company’s executive officers has
served on the board of directors or compensation committee (or
other committee serving an equivalent function) of any other
entity, where one of the other entity’s executive officers
served on the Company’s Board or Executive Compensation and
Development Committee.
TRANSACTIONS
WITH RELATED PERSONS
Pursuant to its charter, the Company’s Audit Committee
reviews all transactions with related persons (as defined in
Item 404 of
Regulation S-K
as promulgated by the Securities and Exchange Commission) and
resolves issues of conflict of interest. If any member of the
Audit Committee is also an officer, director or an interested
party of or in a corporation or other entity with which a
conflict arises, that member will not participate in the
deliberations or vote on any matter involving that corporation
or other entity. The Audit Committee reviews each related person
transaction that comes to its attention on a
case-by-case
basis, either in advance or when the Audit Committee becomes
aware of a related person transaction that was not reviewed and
approved in advance.
The Company’s written Code of Business Conduct and Ethics
provides that directors and employees are expected to avoid
situations and relationships that involve actual or potential
conflicts of interest and to fully disclose to the Company those
conflicts of interest that cannot be avoided. The Code of
Business Conduct and Ethics notes that a “conflict of
interest” exists when private interest interferes in any
way with the interests of the Company or makes it difficult for
the director or employee to perform work for the Company
objectively and effectively. Directors and employees are
required to avoid any personal activity, investment or
association with the Company’s competitors, customers,
suppliers and other third parties that could appear to interfere
with the director’s or employee’s judgment concerning
the Company’s best interests and they must never exploit
their position or relationship with the Company for personal
gain.
The Company has not adopted a separate written policy or
procedures governing its approval of transactions with related
persons beyond that which is set forth in the Audit Committee
charter and the Code of Business Conduct and Ethics.
The Company is not aware of any transaction since the beginning
of the Company’s last fiscal year, or any currently
proposed transaction, in which the Company was or is to be a
participant and the amount involved exceeds $120,000, and in
which any of the Company’s officers, directors or nominees
or any holder of 5% of the Company’s common stock or their
immediate family members had or will have a direct or indirect
material interest.
27
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The federal securities laws require the Company’s directors
and executive officers, and persons who own more than ten
percent (10%) of the Company’s common stock, to file with
the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of any securities
of the Company.
Based solely on its review of copies of such reports received by
it and written representations from certain persons that no
other reports were required for those persons, the Company
believes that all filing requirements applicable to its
officers, directors and greater than 10% shareholders were
complied with for the fiscal year ended August 31, 2009.
SHAREHOLDER
PROPOSALS
Shareholder proposals that are (a) intended for inclusion
in next year’s proxy statement, or (b) to be presented
at next year’s Annual Meeting of Shareholders without
inclusion in the Company’s proxy materials, must be
directed to the Corporate Secretary at Penford Corporation, 7094
South Revere Parkway, Centennial, CO 80112, and must be received
by August 22, 2010. Any shareholder proposal for next
year’s Annual Meeting submitted after August 22, 2010
will not be considered filed on a timely basis with the Company.
For proposals that are timely filed, the Company retains
discretion to vote proxies it receives provided (1) the
Company includes in its proxy statement advice on the nature of
the proposal and how it intends to exercise its voting
discretion; and (2) the proponent does not deliver a proxy
statement and form of proxy to the Company’s shareholders
pursuant to the procedures specified under the applicable rules
and regulations.
SOLICITATION
OF PROXIES
The proxy card accompanying this proxy statement is solicited by
the Board of Directors. Proxies may be solicited by officers,
directors, and other employees of the Company, none of whom will
receive any additional compensation for their services.
Representatives of Mellon Investor Services LLC also may solicit
proxies as a part of the services they provide for the Company
and the Company is paying approximately $6,000 for these
solicitation services. Solicitations of proxies may be made
personally, or by mail, telephone, telegraph, facsimile, or
messenger. The Company will pay persons holding shares of common
stock in their names or in the names of nominees, but not owning
such shares beneficially, such as brokerage houses, banks and
other fiduciaries, for the expense of forwarding soliciting
materials to their principals. All costs of soliciting proxies
will be paid by the Company.
VOTING
TABULATION
Votes
Required
Under the Washington Business Corporation Act, the
Company’s directors are elected by a plurality of the votes
represented in person or by proxy at the meeting. The candidates
for directors who are elected are those candidates receiving the
largest number of affirmative (for) votes cast by the shares
entitled to vote in the election, up to the number of directors
to be elected. The proposal to ratify the appointment of
Ernst & Young LLP as the Company’s independent
registered public accounting firm will be approved if it
receives the affirmative (for) vote of a majority of the total
votes cast on the proposal. Votes cast by proxy or in person at
the meeting will be tabulated by BNY Mellon Shareowner Services,
the stock transfer agent designated by the Company. A majority
of the shares eligible to vote must be present in person at the
Annual Meeting of Shareholders or represented by proxy to
provide a quorum so that action may be taken.
Effect
of an Abstention and Broker Non-Votes
A shareholder who returns a proxy but abstains from voting on
any or all proposals and broker non-votes (shares held by
brokers or nominees that are represented at a meeting, but with
respect to which the broker or nominee is not empowered to vote
on a particular proposal) will be included in the number of
shareholders present
28
at the meeting for the purpose of determining the presence of a
quorum. Abstentions and broker non-votes will not be counted
either in favor of or against the election of the nominees.
Under the rules of the National Association of Securities
Dealers, brokers holding stock for the accounts of their clients
who have not been given specific voting instructions as to
certain routine matters, such as the ratification of the
selection of the independent registered public accounting firm,
by their clients may vote their client’s shares in their
own discretion. Banks and brokers that have not received voting
instructions from their clients cannot vote on their
clients’ behalf on the election of directors and
non-routine proposals. In the event that a broker, bank,
custodian, nominee or other record holder of Penford Corporation
common stock indicates on a proxy that it does not have
discretionary authority to vote certain shares on a particular
matter, referred to as a “broker non-vote,” then those
shares will not be voted with respect to that matter.
Please note that this year the rules that guide how brokers
may vote a shareholder’s shares have changed. Brokers may
no longer vote a shareholder’s shares on the election of
directors in the absence of specific instructions from the
shareholder as to how to vote. Shareholders are requested to
please vote their proxy so that their vote can be counted.
INTERNET
VOTING
The Company is incorporated under Washington law, which
specifically permits electronically transmitted proxies,
provided that the transmission set forth or be submitted with
information from which it can reasonably be determined that the
transmission was authorized by the shareholder. The electronic
voting procedures provided for the Annual Meeting are designed
to authenticate each shareholder by use of a control number to
allow shareholders to vote their shares and to confirm that
their instructions have been properly recorded
ANNUAL
REPORT ON
FORM 10-K
The Company’s Annual Report on
Form 10-K
filed with the Securities and Exchange Commission for the most
recent fiscal year is included in the Company’s Annual
Report to Shareholders that accompanies this proxy statement.
The Company will furnish without charge, upon the written
request of any person who is a shareholder or a beneficial owner
of shares of common stock, a copy of the Annual Report on
Form 10-K
filed with the Securities and Exchange Commission for its most
recent fiscal year, including financial statement schedules but
not including exhibits. Requests should be directed to the
Corporate Secretary at Penford Corporation, 7094 South Revere
Parkway, Centennial, CO 80112.
HOUSEHOLDING
Intermediaries such as brokers are permitted to satisfy delivery
requirements for proxy materials with respect to multiple
shareholders that share the same last name and address by
delivering a single proxy statement addressed to those
shareholders. This process is known as “householding.”
Shareholders who do not wish to participate in householding and
would prefer to receive separate proxy material, or shareholders
who receive multiple copies of the proxy material and wish to
receive only one, should notify their broker. The Company does
not household proxy material for shareholders of record. If a
shareholder of record wishes to participate in householding,
contact Investor Relations, Penford Corporation,
7094 S. Revere Parkway, Centennial, CO 80112.
OTHER
MATTERS
The Company is not aware of any other business to be acted upon
at the meeting. If other business requiring a vote of the
shareholders should come before the meeting, the holders of the
proxies will vote in accordance with their best judgment.
December 21, 2009
29
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting.
Both are available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to the shareholder
meeting date.
|
|
|
|
|
|
|
|
|
PENFORD CORPORATION
|
|
INTERNET
http://www.proxyvoting.com/penx
Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OR
|
|
|
|
|
|
|
|
TELEPHONE
|
|
|
|
1-866-540-5760
|
|
|
|
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.
|
|
|
|
|
|
|
|
If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.
|
|
|
|
|
|
|
|
To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.
|
|
|
|
|
|
|
|
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.
|
62751
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED “FOR” ALL NOMINEES LISTED IN ITEM 1
AND “FOR” ITEM 2.
|
|
|
|
|
|
|
|
|
Please mark your votes as
indicated in this example
|
|
x
|
Item 1.
ELECTION OF DIRECTORS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
|
|
WITHHOLD
|
|
*EXCEPTIONS
|
|
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
|
Nominees
|
|
ALL
|
|
FOR ALL
|
|
|
|
2.
Proposal to ratify the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm.
|
|
o
|
|
o
|
|
o
|
|
01 Jeffrey T. Cook
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
02 Thomas D. Malkoski
|
|
|
|
|
|
|
|
|
03 Sally G. Narodick
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The undersigned acknowledges receipt of the Notice of said Annual Meeting and the accompanying Proxy Statement and Annual Report.
|
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box
above and write that nominee’s name in the space provided below.)
*Exceptions
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Mark Here for
Address Change
or Comments
SEE REVERSE
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o
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Signature
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Signature
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Date
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, 2009
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NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
You can now access your Penford Corporation account online.
Access your Penford Corporation account online via Investor ServiceDirect® (ISD).
BNY Mellon Shareowner Services, the transfer agent for Penford Corporation, now makes it easy and
convenient to get current information on your shareholder account.
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•
View account status
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View payment history for dividends
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View certificate history
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Make address changes
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View book-entry information
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Obtain a duplicate 1099 tax form
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Visit us on the web at http://www.bnymellon.com/shareowner/isd
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect
®
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-800-370-1163
Choose
MLink
SM
for fast, easy and secure 24/7 online access to your future
proxy materials, investment plan statements, tax documents and more. Simply
log on to
Investor ServiceDirect
®
at
www.bnymellon.com/shareowner/isd
where step-by-step instructions will prompt you through enrollment.
Important notice regarding the Internet availability of proxy materials for the Annual Meeting to
be
held on January 26, 2010.
The Proxy Statement and the 2009 Annual Report are available at:
http://www.penx.com/investor/annualreport.asp
PROXY
PENFORD CORPORATION
Annual Meeting of Shareholders – January 26, 2010
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints Thomas D. Malkoski, Steven O. Cordier and Christopher L.
Lawlor, and each of them, with power to act without the other and with power of substitution, as
proxies
and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other
side, all the shares of Penford Corporation Common Stock which the undersigned is entitled to vote,
and, in their discretion, to vote upon such other business as may properly come before the Annual
Meeting of Shareholders of the Company to be held January 26, 2010, or any adjournment thereof,
with all powers which the undersigned would possess if present at the Meeting.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTIONS ARE INDICATED, WILL BE VOTED “FOR”
THE PROPOSALS.
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Address Change/Comments
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BNY MELLON SHAREOWNER SERVICES
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(Mark the corresponding box on the reverse side)
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P.O. BOX 3550
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SOUTH HACKENSACK, NJ 07606-9250
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(Continued and to be marked, dated and signed, on the other side)
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62751
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