Exhibit 10.1

 

OTTER TAIL CORPORATION
2014 STOCK INCENTIVE PLAN
2018 EXECUTIVE PERFORMANCE AWARD AGREEMENT

 

This Performance Award Agreement is between Otter Tail Corporation, a Minnesota
corporation (the “Corporation”), and you, as an employee of the Corporation,
effective as of the date of grant (the “Grant Date”) set forth in the attached
Performance Award Certificate.

 

WHEREAS, the Corporation, pursuant to the Otter Tail Corporation 2014 Stock
Incentive Plan (the “Plan”), wishes to grant to you 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 Performance 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 you hereby agree as follows:

 

1.     Performance Award. The Corporation hereby grants to you, effective as of
the Grant Date, a Performance Award representing the right to receive a
specified number of Common Shares, as set forth in the attached Performance
Award Certificate and subject to the terms and conditions set forth in this
Agreement, the Performance Award Certificate and the Plan. The Performance
Award, to the extent it becomes payable, shall be paid in Common Shares of the
Corporation (the “Shares”).

 

2.     Performance Period and Performance Goals. The performance period for
purposes of determining whether the Performance Award will be paid shall be
January 1, 2018 through December 31, 2020 (the “Performance Period”). The
performance goals for purposes of determining whether, and the extent to which,
the Performance Award will be paid are set forth in Exhibit 1 to this Agreement,
which Exhibit is made a part of this Agreement.

 

3.     Payment. Subject to the provisions of Sections 4 and 5 of this Agreement,
the Performance Award shall be paid within 59 days after the January 15
following the end of the Performance Period after the Compensation Committee of
the Corporation’s Board of Directors (the “Committee”) determines, in its
discretion, whether and to what extent the performance goals have been achieved
in accordance with the terms set forth in Exhibit 1 to this Agreement.

 

4.     Forfeiture; Early Vesting. Notwithstanding the provisions of Section 3 of
this Agreement, in the event your employment is terminated during the
Performance Period, the Performance Award and your right to receive any Shares
shall be immediately and irrevocably forfeited, unless such termination is by
reason of your:

 

(a)     disability (as determined under any long-term disability program then
maintained by the Corporation or any of its Affiliates that is applicable to
you);

 

1

--------------------------------------------------------------------------------

 

 

(b)     death;

 

(c)     retirement (voluntary resignation at or after the earlier of (i) age 62
or (ii) your qualifying for normal or early retirement under any retirement plan
of the Corporation that is applicable to you); or

 

(d)     resignation for good reason or involuntary termination without cause
that qualifies you for severance benefits under an employment agreement or
severance plan applicable to you.

 

In the event your employment is terminated during the Performance Period for one
of the reasons enumerated in clauses (a) or (b) above, then you or your estate
shall be entitled to receive a payment of the Performance Award based on, and
assuming that, the performance goal would be achieved at the Target level, as
set forth in Exhibit 1 to this Agreement. Such payment shall be made as soon as
administratively feasible following your separation from service (subject to any
required delay under Section 9(a)). If a payment is made pursuant to this
paragraph, no payment shall be made pursuant to Section 3 of this Agreement.

 

In the event you retire during the Performance Period under clause (c) above,
then your rights under the Performance Award shall remain outstanding as if you
had remained employed for the duration of the Performance Period. You shall be
entitled to receive payment of the Performance Award, if any, that becomes
payable under Section 3 of this Agreement following the end of the Performance
Period, prorated as follows. If you retire on or before June 30 of the calendar
year that includes the Grant Date, the Performance Award shall be prorated by
multiplying the Performance Award by a fraction, the numerator of which shall be
the number of full calendar months during the Performance Period you were so
employed, and the denominator of which shall be twelve (12). If you retire after
June 30 of the calendar year that includes the Grant Date, any Performance Award
that becomes payable under Section 3 shall not be prorated.

 

In the event your employment is terminated during the Performance Period for one
of the reasons enumerated in clause (d) above, then your rights under the
Performance Award shall remain outstanding as if you had remained employed for
the duration of the Performance Period. You shall be entitled to receive payment
of the Performance Award, if any, that becomes payable under Section 3 of this
Agreement following the end of the Performance Period, prorated as follows. The
Performance Award shall be prorated by multiplying the Performance Award by a
fraction, the numerator of which shall be the number of full calendar months
during the Performance Period you were so employed, and the denominator of which
shall be thirty-six (36).

 

5.     Change in Control. Notwithstanding the provisions of Section 3 of this
Agreement, in the event of a Change in Control (as defined in the Plan) during
the Performance Period that occurs prior to your termination of employment, you
shall be entitled to receive a payment of the Performance Award based on, and
assuming that, the performance goal would have been achieved at the Target
level, as set forth in Exhibit 1 to this Agreement. Such payment shall be made
promptly following the date of the Change in Control. If a payment is made
pursuant to this Section 5, no payment shall be made pursuant to Section 3 of
this Agreement. Notwithstanding the foregoing, if any payment due under Section
5 is deferred compensation subject to Section 409A of the Code, and if the
Change in Control is not a “change in control event” that serves as a
permissible payment event under Treasury Regulation § 1.409A-3(i)(5) or such
other regulation or guidance issued under Section 409A of the Code, then the
Performance Award shall vest upon the Change in Control as provided above but
payment under this Section 5 shall be delayed until the earlier of (i) January
15 following the end of the Performance Period or (ii) the Executive’s
separation from service (subject to any additional required delay under Section
9(a)).

 

2

--------------------------------------------------------------------------------

 

 

6.     Restriction on Transfer. The Performance 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 the Performance 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 the Performance Award or the Shares. No transfer by will or the
applicable laws of descent and distribution of the Performance 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 the Performance Award becomes payable pursuant
to Section 3, 4 or 5 hereof, and following payment of the applicable withholding
taxes pursuant to Section 8 hereof, the Corporation shall promptly cause to be
issued a certificate or certificates, registered in your name or in the name of
your 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 you or your
legal representatives, beneficiaries or heirs, as the case may be.

 

8.     Income Tax Matters.

 

(a)     You acknowledge that you will consult with your personal tax advisor
regarding the income tax consequences of the grant of the Performance Award, the
receipt of Shares upon any payment of the Performance 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 your sole and absolute responsibility, are withheld or
collected from you.

 

(b)     In accordance with the terms of the Plan, and such rules as may be
adopted by the Committee under the Plan, you may elect to satisfy your 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, (ii) having the
Corporation withhold a portion of the Shares otherwise to be delivered having a
Fair Market Value equal to the amount of such taxes, provided it does not exceed
the employee’s maximum statutory withholding requirements, or (iii) delivering
to the Corporation Common Shares having a Fair Market Value equal to the amount
of such taxes. The Corporation will not deliver any fractional Share but will
pay, in lieu thereof, the Fair Market Value of such fractional Share. Your
election must be made on or before the date that the amount of tax to be
withheld is determined.

 

3

--------------------------------------------------------------------------------

 

 

9.     Miscellaneous.

 

(a)     Notwithstanding the foregoing, to the extent that any payment due
hereunder is (i) deferred compensation subject to Section 409A of the Code
(“Section 409A”), and (ii) is payable to a specified employee (as that term is
defined in Section 409A), and (iii) is payable on account of the specified
employee’s separation from service (as that term is defined in Section 409A),
payment of any part of such amount that would have been made during the six (6)
months following the separation from service shall not then be paid but shall
rather be paid on the first day of the seventh (7th) month following the
separation from service.

 

(i)     For this purpose, specified employees shall be identified by the
Corporation on a basis consistent with regulations issued under Section 409A,
and consistently applied to all plans, programs, contracts, etc. maintained by
the Corporation that are subject to Section 409A.

 

(ii)     For this purpose “termination of employment” shall be defined as
“separation from service” as that term is defined under Section 409A.

 

(iii)     To the extent that Section 409A is applicable to this Agreement, this
Agreement shall be construed and administered to comply with the rules of
Section 409A. Neither the Corporation nor any of its officers, directors, agents
or affiliates shall be obligated, directly or indirectly, to any participant or
any other person for any taxes, penalties, interest or like amounts that may be
imposed on the participant or other person on account of any amounts under this
Plan or on account of any failure to comply with any Code section.

 

(b)     Nothing contained in this Agreement or the Plan shall confer on you 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 your
employment at any time.

 

(c)     You shall not have any rights of a holder of Common Shares unless and
until Shares are actually issued to you after the end of the Performance Period
as provided in this Agreement.

 

(d)     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.

 

(e)     This Agreement is subject to the terms of the Plan, including, without
limitation, the provision for adjustments in Section 4(c) 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 you
upon request.

 

4

--------------------------------------------------------------------------------

 

 

(f)     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.

 

(g)     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.

 

(h)     THIS PERFORMANCE AWARD AGREEMENT IS ATTACHED TO AND MADE A PART OF A
PERFORMANCE AWARD CERTIFICATE AND SHALL HAVE NO FORCE OR EFFECT UNLESS SUCH
PERFORMANCE AWARD CERTIFICATE IS DULY EXECUTED AND DELIVERED BY THE CORPORATION
AND YOU.

 

* * * * * * * *

 

5

--------------------------------------------------------------------------------

 

 

OTTER TAIL CORPORATION
2014 STOCK INCENTIVE PLAN

PERFORMANCE AWARD CERTIFICATE

 

This certifies the Performance Award, as specified below, has been granted under
the Otter Tail Corporation 2014 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 2018 Performance
Award Agreement of which this Certificate is a part.

 

«First» «M» «Last»

«Address»

«City». «State» «Zip»

 

«SS»  

 

You have been granted the following Award:

 

Grant Type:

 

Performance Award

Target Number of Common Shares Subject to Award:

  «Target»

Maximum Number of Common Shares Subject to Award:

  «Max»

Grant Date:

 

February 5, 2018

Performance Period:

 

January 1, 2018 – December 31, 2020

Performance Goals:

 

Set forth in Exhibit 1 to the
2018 Executive Performance Award Agreement

 

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

 

 

OTTER TAIL CORPORATION

 

 

 

 

 

 

By:

 

 

 

 

Charles S. MacFarlane
Its: President & CEO

 

 

 

 

 

          «First» «Last»  

 

6

--------------------------------------------------------------------------------

 

 

Exhibit 1

 

Performance Goals for Three-Year Performance Period
(January 1, 2018 – December 31, 2020)

 

   

Threshold

Target

Maximum

Performance Goal

Otter Tail TSR performance relative to peer group

 

<25th %ile

 

25th %ile

 

50th %ile

 

75th %ile or greater

Payment Levels

% of target shares

0%

25%

50%

75%

 

●

Amounts payable for performance will be treated linearly from threshold to
target and from target to maximum.

●

Total Shareholders Return (TSR) (for both Otter Tail and peer group
determination) = stock price appreciation (measured as of the average closing
price for the 20 trading days immediately following January 1, 2018 and as of
the average closing price for the 20 trading days immediately preceding January
1, 2021), plus value of dividends.

●

Peer group = Edison Electric Institute Index as of 12/31/2020.

●

Award capped at Target if there is negative TSR.

 

   

Threshold

Target

Maximum

Performance Goal

Adjusted 3-Year ROE

<8.0%

8.25%

9.75%

10.75%

Payment Levels

% of target shares

0%

25%

50%

75%

 

●

Amounts payable for performance will be treated linearly from threshold to
target and from target to maximum.

●

Adjusted 3-Year Return on Equity (ROE) is equal to the average of Adjusted
Return on Equity for each of the three years in the Performance Period.

●

Adjusted Return on Equity is equal to the Corporation’s Adjusted Earnings
divided by the 13-month average of Total Outstanding Common Equity using the 13
months ending at the end of the fiscal year.

●

Adjusted Earnings is equal to the earnings available for Common Shares as
reported in the Corporation’s annual year-end financial report, as adjusted to
reflect (1) unusual, extraordinary or nonrecurring events; (2) changes in
applicable accounting rules or principles or in the Company’s methods of
accounting; (3) results of discontinued operations; (4) asset write-downs; (5)
litigation or claim judgments or settlements; (6) changes in tax law affecting
reported results; (7) severance, contract termination and other costs related to
exiting business activities; (8) acquisitions; (9) gains or losses from the
disposition of businesses or assets; (10) gains or losses from the early
extinguishment of debt; and (11) other publicly identified one-time items
(collectively, the “Adjustment Items”).

●

Total Outstanding Common Equity is equal to the month end common equity balance.

●

The Committee may exercise discretion to not make adjustment for one or more
Adjustment Items when determining Adjusted Earnings.

 

The number of Common Shares payable is determined by taking the sum of the
percentages earned in each of the tables.

 

 

7