Exhibit 10.5
OTTER TAIL CORPORATION
1999 STOCK INCENTIVE PLAN
2006 RESTRICTED STOCK UNIT AWARD AGREEMENT
     This Restricted Stock Unit Award Agreement is between Otter Tail
Corporation, a Minnesota corporation (the “Corporation”), and the person named
in the attached Restricted Stock Unit Award Certificate who is an employee of
the Corporation or one of its Affiliates (the “Participant”), effective as of
the date of grant (the “Grant Date”) set forth in the attached Restricted Stock
Unit Award Certificate.
     WHEREAS, the Corporation, pursuant to the Otter Tail Corporation 1999 Stock
Incentive Plan (the “Plan”), wishes to grant to the Participant the opportunity
and right to receive a number of the Corporation’s Common Shares, par value
$5.00 per share (the “Common Shares”), subject to the terms and conditions
contained in this Agreement and in the attached Restricted Stock Unit Award
Certificate, which is made a part of this Agreement.
     NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Corporation and the Participant
hereby agree as follows:
     1. Restricted Stock Unit Award. The Corporation hereby grants to the
Participant, effective as of the Grant Date, a Restricted Stock Unit Award
representing the right to receive, on the vesting date or dates set forth in the
attached Restricted Stock Unit Award Certificate, a specified number of Common
Shares as set forth in the attached Restricted Stock Unit Award Certificate,
subject to the terms and conditions set forth in this Agreement, the Restricted
Stock Unit Award Certificate and the Plan. This Restricted Stock Unit Award, to
the extent it vests, shall be paid in Common Shares of the Corporation (the
“Shares”).
     2. Rights of the Participant with Respect to the Shares. This Restricted
Stock Unit Award does not represent Common Shares and does not give the
Participant any of the rights and privileges of a holder of Common Shares. With
respect to the Shares, the Participant shall not exercise the rights of a holder
of Common Shares, including the right to vote the Shares and the right to
receive dividends on the Shares, until such time as this Restricted Stock Unit
Award shall vest, and the restrictions with respect to this Restricted Stock
Unit Award shall lapse, in accordance with Section 3, 4 or 5 hereof.
     3. Vesting. Subject to the terms and conditions of this Agreement, this
Restricted Stock Unit Award shall vest, and the restrictions with respect to
this Restricted Stock Unit Award shall lapse, on the date or dates and in the
amount or amounts set forth in the attached Restricted Stock Unit Award
Certificate if the Participant remains continuously employed by the Corporation
or one of its Affiliates until the respective vesting dates.
     4. Change of Control. Notwithstanding the vesting provision contained in
Section 3 above, but subject to the other terms and conditions set forth herein,
upon the occurrence of a Change of Control (as defined below) prior to any
termination of the Participant’s employment, the Participant shall become
immediately and unconditionally vested in this Restricted Stock Unit Award, and
the restrictions with respect to this Restricted Stock Unit Award shall lapse.
As used herein, “Change of Control” shall mean any of the following events:

 

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     (a) The acquisition by any person, entity or “group,” within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), other than the Corporation or any of its Affiliates, or
any employee benefit plan of the Corporation and/or one or more of its
Affiliates, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 15% or more of either the then
outstanding Common Shares or the combined voting power of the Corporation’s then
outstanding voting securities in a transaction or series of transactions not
approved in advance by a vote of at least three-quarters of the Continuing
Directors (as hereinafter defined); or
     (b) Individuals who, as of the Grant Date, constitute the Board of
Directors of the Corporation (generally the “Directors” and as of the Grant Date
the “Continuing Directors”) cease for any reason to constitute at least a
majority thereof, provided that any person becoming a Director subsequent to the
Grant Date whose nomination for election was approved in advance by a vote of at
least three-quarters of the Continuing Directors (other than a nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened solicitation with respect to the election or removal of the Directors
of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act) shall be deemed to be a Continuing Director; or
     (c) The approval by the shareholders of the Corporation of a
reorganization, merger, consolidation, liquidation or dissolution of the
Corporation or of the sale (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Corporation other
than a reorganization, merger, consolidation, liquidation, dissolution or sale
approved in advance by a vote of at least three-quarters of the Continuing
Directors;
     (d) The first purchase under any tender offer or exchange offer (other than
an offer by the Corporation or any of its Affiliates) pursuant to which Common
Shares are purchased; or
     (e) Notwithstanding the foregoing, none of the foregoing events shall
constitute a Change of Control unless such event constitutes a Change in Control
as defined in Section 409A of the Code and any regulations and other guidance in
effect from time to time thereunder, including without limitation, Notice
2005-1.
     5. Additional Vesting Rules; Forfeiture.
     (a) Notwithstanding the vesting provision contained in Section 3 above, but
subject to the other terms and conditions set forth herein, if the Participant
ceases to be employed by the Corporation or any of its Affiliates by reason of
disability (as determined under any long-term disability program then maintained
by the Corporation or any of its Affiliates that is applicable to the
Participant), retirement (normal or early retirement under any retirement plan
of the Corporation or any of its Affiliates that is applicable to the
Participant) or death prior to the vesting of this Restricted Stock Unit Award
pursuant to Section 3 or 4 hereof, this Restricted Stock Unit Award shall
continue to vest, and the restrictions with respect to this Restricted Stock
Unit Award shall lapse, on the date or dates and in the amount or amounts set
forth in the attached Restricted Stock Unit Award Certificate for the benefit of
the Participant or the Participant’s legal representatives, beneficiaries or
heirs, as the case may be. No transfer by will

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or the applicable laws of descent and distribution of this Restricted Stock Unit
Award by reason of the Participant’s death shall be effective to bind the
Corporation unless the Committee shall have been furnished with written notice
of such transfer and a copy of the will or such other evidence as the Committee
may deem necessary to establish the validity of the transfer.
     (b) If the employment relationship of the Participant with the Corporation
or any of its Affiliates is terminated other than for the reasons set forth in
Section 5(a) hereof, the Participant’s rights to the unvested portion of this
Restricted Stock Unit Award shall be immediately and irrevocably forfeited,
unless the Participant is expressly entitled to retain the unvested portion of
this Restricted Stock Unit Award or its value pursuant to an employment or
severance agreement entered into on or before the Grant Date.
     6. Restriction on Transfer. This Restricted Stock Unit Award, and the right
to receive Shares, may not be sold, assigned, transferred, pledged, hypothecated
or otherwise disposed of or encumbered, other than by will or the laws of
descent and distribution, and no attempt to transfer this Restricted Stock Unit
Award, and the right to receive the Shares, whether voluntary or involuntary, by
operation of law or otherwise, shall vest the transferee with any interest or
right in or with respect to this Restricted Stock Unit Award or the Shares. No
transfer by will or the applicable laws of descent and distribution of this
Restricted Stock Unit Award shall be effective to bind the Corporation unless
the Committee shall have been furnished with written notice of such transfer and
a copy of the will or such other evidence as the Committee may deem necessary to
establish the validity of the transfer.
     7. Issuance of Shares. After this Restricted Stock Unit Award has vested
pursuant to Section 3, 4 or 5 hereof, and following payment of the applicable
withholding taxes pursuant to Section 9 hereof, the Corporation shall promptly
cause to be issued a certificate or certificates, registered in the
Participant’s name or in the name of the Participant’s legal representatives,
beneficiaries or heirs, as the case may be, representing the Shares (less any
Shares withheld to pay withholding taxes) and shall cause such certificate or
certificates to be delivered to the Participant or the Participant’s legal
representatives, beneficiaries or heirs, as the case may be.
     8. Adjustments. If any portion of this Restricted Stock Unit Award vests
subsequent to any change in the number or character of the Common Shares
(through recapitalization, stock split, stock dividend, reorganization, merger,
consolidation or otherwise), the Participant shall then receive upon such
vesting the number and type of securities or other consideration which the
Participant would have received if such portion of this Restricted Stock Unit
Award had vested prior to the event changing the number or character of the
outstanding Common Shares.
     9. Income Tax Matters.
     (a) The Participant acknowledges that the Participant will consult with the
Participant’s personal tax advisor regarding the income tax consequences of the
grant of this Restricted Stock Unit Award, the receipt of Shares upon any
vesting of this Restricted Stock Unit Award, the subsequent disposition of the
Shares and any other matters related to this Agreement. In order to comply with
all applicable federal or state income tax laws or regulations, the Corporation
may take such action as it deems appropriate to ensure that all applicable
federal or state payroll, withholding, income or other taxes, which are the
Participant’s sole and absolute responsibility, are withheld or collected from
the Participant.

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     (b) In accordance with the terms of the Plan, and such rules as may be
adopted by the Committee under the Plan, the Participant may elect to satisfy
the Participant’s federal and state income tax withholding obligations arising
from the receipt of the Shares by (i) delivering cash, check (bank check,
certified check or personal check) or money order payable to the order of the
Corporation or (ii) having the Corporation withhold a portion of the Shares
otherwise to be delivered having a Fair Market Value equal to the amount of the
employer’s minimum statutory withholding requirements. The Corporation will not
deliver any fractional Share but will pay, in lieu thereof, the Fair Market
Value of such fractional Share. The Participant’s election must be made on or
before the date that the amount of tax to be withheld is determined.
     10. Miscellaneous.
     (a) Nothing contained in this Agreement or the Plan shall confer on the
Participant any right to continue in the employ of the Corporation or any
Affiliate or affect in any way the right of the Corporation or any Affiliate to
terminate the Participant’s employment at any time.
     (b) The Participant shall not have any rights of a holder of Common Shares
unless and until Shares are actually issued to the Participant as provided in
this Agreement.
     (c) The Corporation shall not be required to deliver any Shares until the
requirements of any federal or state securities laws, rules or regulations or
other laws or rules (including the rules of any securities exchange) as may be
determined by the Corporation to be applicable are satisfied.
     (d) This Agreement is subject to the terms of the Plan. Terms used in this
Agreement which are not defined herein shall have the respective meanings given
to such terms in the Plan. A copy of the Plan is available to the Participant
upon request.
     (e) This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Minnesota, without giving effect to the
conflicts of laws principles thereof.
     (f) Headings in this Agreement are for convenience of reference only and
shall not be deemed in any way to be material or relevant to the construction or
interpretation of this Agreement or any provision hereof.
     (g) THIS RESTRICTED STOCK UNIT AWARD AGREEMENT IS ATTACHED TO AND MADE A
PART OF A RESTRICTED STOCK UNIT AWARD CERTIFICATE AND SHALL HAVE NO FORCE OR
EFFECT UNLESS SUCH RESTRICTED STOCK UNIT AWARD CERTIFICATE IS DULY EXECUTED AND
DELIVERED BY THE CORPORATION AND THE PARTICIPANT.
* * * * * * * *

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OTTER TAIL CORPORATION
1999 STOCK INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD CERTIFICATE
          This certifies the Restricted Stock Unit Award, as specified below,
has been granted under the Otter Tail Corporation 1999 Stock Incentive Plan (the
“Plan”), the terms and conditions of which are incorporated by reference herein
and made a part hereof. In addition, the award shown in this Certificate is
nontransferable and is subject to the terms and conditions set forth in the
attached Restricted Stock Unit Award Agreement of which this Certificate is a
part.
[Name and Address of the Participant]
[Social Security Number of the Participant]
You have been granted the following Award:

         
 
  Grant Type:   Restricted Stock Unit Award  
 
  Number of Common Shares Subject to Award:      
 
  Grant Date:   April 10, 2006  
 
  Vesting Date:   [April 8, 2010]

          By the Corporation’s and your signature below, it is agreed that this
Restricted Stock Unit Award is governed by the terms and conditions of the
Restricted Stock Unit Award Agreement, a copy of which is attached and made a
part of this document, and the Plan, a copy of which is enclosed.

                  OTTER TAIL CORPORATION    
 
           
 
  By:        
 
     
 
[Name of Authorized Officer]    
 
      [Title]    
 
                          [Name of Participant]