Document:

Exhibit
10.1

 

TENNANT’S

LONG-TERM

INCENTIVE

PLAN

(LTIP)

 

2005

 

 

	
  Tennant Company

  	
  Long Term Incentive Plan

  

 

OBJECTIVE

 

To maximize Economic Profit Improvement.

 

LTIP DESIGN

 

It is essential for the management team to focus on common goals and
objectives and to work towards the organization’s long-term success.  One vehicle to help facilitate this is a
Long-Term Incentive Plan (LTIP).  Tennant’s
LTIP has been designed to reward:

 

1.  Achievement of long-term
financial objectives

 

2.  Improvement in Tennant stock
price

 

ECONOMIC PROFIT (EP)

 

For the
2005 LTIP, Tennant will be utilizing Economic Profit (EP) improvement as the
primary driver of our business.  As a
result, objectives are tied directly to EP improvement over the three-year
performance period (2005-2007).

 

The primary elements of EP are:

 

•                  Sales

•                  Operating
Expenses

•                  Cost
of Sales

•                  Selling
and Administration Expenses

 

•                  Tax
Rates

•                  Capital
Charge on net assets, including:

•                  Inventories

•                  Receivables

•                  Property,
Plant and Equipment

 

Payout
under the EP element is a function of how well the Company performs vs. target
performance (i.e., actual three-year aggregate EP improvement vs. target EP
improvement).

 

LTIP
Payout Formula

 

LTIP
Payout Formula =

 

Base
Salary X LTIP Award % = Target Award

 

The target
award is then converted into a target stock award (70% of the target award) and
a target cash award (30% of the target award. 
Actual Awards will be based actual EP change over the three-year
performance period vs. target change over the three-year performance period
with a maximum payout of 2X the target cash and shares.

 

 

DEFINITIONS

 

BASE SALARY

 

The total base salary of an individual on March 31st of
the first year of the LTI plan performance period.

 

OBJECTIVES

 

Company goals will be developed, approved, and communicated prior to
the first quarter of the Plan Performance Period.

 

MANAGEMENT 
COMMITTEE

 

This Committee has the responsibility for administration of the Plan,
approving any changes in objectives, and resolving any issues around Plan interpretations.  The Management Committee will consist of
Tennant’s CEO, VP of HR, CFO, and the respective SMT member.  The Board Executive Compensation Committee
must approve changes that affect the Senior Management Team.

 

PERFORMANCE PERIOD

 

The Performance Period is the three-year period over which the Actual
and Goal EP Growth are measured.

 

MATERIAL CHANGES

 

In those instances where there are material changes in the business
(e.g., mergers, acquisitions, divestitures), the Management Committee reserves
the right, without limitation, to make corresponding adjustments to any or all
aspects of the Plan (i.e., funding schedules, individual objectives,
etc.).  The Board Executive Compensation
Committee must approve changes that affect the Senior Management Team.

 

AWARD DISTRIBUTION

 

Normally, payouts will occur near mid-March, following the end of the
performance period.

 

TERMINATION

 

Should a participant’s employment terminate prior to the end of the
Plan Performance Period for any reason other than retirement, death, or
disability, the participant will not be entitled to an incentive payment.

 

If a participant’s employment with the Company terminates by reason of
retirement, death, or disability, a prorated payment will be made within 90
days following the end of the performance period, based upon the time the
participant served during the performance period.  The final award will be based on the
performance over the entire performance period.

 

 

CHANGE IN JOB WITHIN THE COMPANY

 

A participant who changes jobs but is not eligible for this Plan in the
future retains the right to payment under this Plan for any performance periods
that have already begun.

 

EMPLOYMENT AT WILL

 

Participation in the Incentive Plan does not constitute a guarantee of
continued employment to individuals in the Plan.  Employment with the Company remains “at will,”
which means that all aspects of the job, including employment by the Company,
may be changed or terminated by the Company at any time with or without
cause.  Likewise, the individual may
terminate employment with Tennant.

 

PLAN INTERRUPTION AND IMPLEMENTATION

 

The Company reserves the right, without limitation, to interpret and
implement this Plan in accordance with the 1995 Stock Incentive Plan or any
successor plan.  Interpretations of this
Plan are generally made by the Management Committee.

 

 

	
  Participant Signature

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Manager Signature

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SLT Member Signature

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date

  

 

 

Tennant Long Term Incentive Plan (LTIP) Description

 

LTIP Financial Goal
(EP)

 

•                  Each
year, a three-year Corporate Economic Profit (EP) target will be set for the
following three-year period.  The result
will be over-lapping, three year measurement periods.  See LTIP Attachment A for the payout period
and payment schedule.

 

•                  Corporate
EP performance will be reviewed regularly to ensure we are on track and to
ensure actions are planned and taken as necessary.

 

•                  At
the measurement period’s end, within 30 days of YE close, Corporate EP
performance will be determined and payout levels approved.

 

LTIP Target and Payout Calculation

 

The formula for LTIP target is based on a
percentage of base salary as of March 31st of the first year in
the measurement period.  The percentage
of base salary will be set based on competitive data and communicated to
participants during the first quarter of each measurement period.  The LTIP Target will then be divided into
shares (70%) and cash (30%) based on the stock price at the beginning of the measurement
period.

 

Example:  An LTIP participant has a base salary of
$100,000 and a targeted LTIP payout of 10% of base.  The stock price at the beginning of the
measurement period is $35.00.  The LTIP
Target Compensation is:

 

200
Shares (70% of $10,000/$35.00)

$3,000
(30% of $10,000)

 

Payouts for performance in excess or below
plan will be based on schedules approved by the Board of Directors Compensation
Committee and communicated to plan participants annually.  See Attachment B for the payout schedule for
2005. The maximum payout for any award is 200% of the targeted cash and share
compensation.

 

Taxes

 

Employees will be taxed on the value of the award at the end of the
measurement period based on the value of the cash and the shares awarded at the
end of the measurement period.  If the
tax obligation for the entire award exceeds that of the cash component of the
award, employees will need to make arrangements to cover the difference prior
to payment.

 

 

Termination
Provisions

 

Should a participant’s employment terminate
prior to the end of the measurement period for any reason other than
retirement, death, or disability as defined in the 1995 Stock Incentive Plan
(or successor plan), the participant will not be entitled to an incentive
payment for the measurement period.

 

If a participant’s employment with the company terminates by reason of
retirement, death, or disability, a prorated payment will be made within 90
days following the measurement period’s close, based upon the time the
participant served in the eligible job during the measurement period.  The final award will be based on the overall
measurement period performance.Exhibit 10.2

 

TENNANT’S

SHORT-TERM

INCENTIVE

PLAN

(STIP)

 

2005

 

 

	
  Tennant Company

  	
   

  	
  Incentive Plan

  

 

OBJECTIVE

 

To maximize Economic
Profit Improvement.

 

STIP
DESIGN

 

It is essential for the
management team to focus on common goals and objectives and to work towards the
organization’s long-term success.  One
vehicle to help facilitate this is a Short-Term Incentive Plan (STIP).  Through the STIP, Tennant can reinforce the
following:

 

•                 making decisions based on the overall
organization’s long-term success;

•                 leveraging capital investments;

•                 tying incentives to the business
performance; and

•                 successfully meeting annual individual
objectives.

 

Given the above, Tennant’s
STIP has been designed to include four basic elements:

 

1.              maximize
returns on investment;

2.              recognize
unit performance;

3.              reward
teamwork across the organization; and

4.              recognize
individual contributions.

 

ECONOMIC
PROFIT (EP)

 

As an
organization, Tennant will be utilizing Economic Profit (EP) improvement as the
primary driver of our business.  As a
result, objectives at two levels (Corporate and Business Unit) are tied
directly to EP improvement.

 

Corporate
EP — At the Corporate/TCON level, our EP improvement
target is set forth on Attachment A. 
Each STIP participant will have a minimum of 50% of his/her STIP award
tied to the TCON EP improvement target. 
The primary elements of EP are:

 

•                  Sales

•                  Operating Expenses

•                  Cost of Sales

•                  Selling and Administration Expenses

 

•                  Tax Rates

•                  Capital Charge on net assets,
including:

•                  Inventories

•                  Receivables

•                  Property, Plant and Equipment

 

Payout
under the TCON EP element is a function of how well the Company performs (i.e.,
actual EP improvement, year over year vs. target improvement).

 

 

Business
Unit EP — Unit EP improvement has the same characteristics
as TCON EP, except it is computed at the business unit level.  Each of the business units will have an EP
improvement target (see Attachment A).

 

Minimum
EP Performance Factor —  If the combined business unit
and corporate EP performance level fall below a 25% payout factor, the EP
payout factor will equal 25% so long as:

 

•                  The payout does not equal more than
25% of the actual net operating profit before taxes of TCON or the Business
Unit

•                  The individual objectives score (see
Attachment B) is equal to or greater than .90, meaning the individual met or
exceeded expectations.

 

In such situations, the
maximum payout will equal 25% of target.

 

Individual
Contribution — The focus here is on meeting individual
objectives.  Each STIP participant will have
annual objectives set prior to the start of the calendar year (see Attachment
C).  These objectives will typically be
critical to helping Tennant achieve its immediate profit and/or long-term
strategic goals.

 

At the end of the year,
managers will submit their individual factor recommendations to the Management
Committee, who will review the objectives to ensure that there is a consistent
calibration across departments.

 

A factor will then be
determined based on the individual’s performance.  See attachment B for clarification.

 

Many individual factors
will have some inherent level of subjectivity. 
To help drive a level of rating consistency across the organization, a
recommended distribution of individual scores is provided in attachment B.

 

The Management
Committee (CEO, VP of HR, CFO, and respective SMT member) will be responsible
for reviewing and approving year-end performance and corresponding STIP payout
awards.  As these relate to
executive officers, the Board Executive Compensation Committee must approve
respective changes.

 

 

STIP
Payout Formula

 

STIP
Payout Formula =

 

Base
Salary X STIP Award % = Target Award

 

	
  [(Target Award X Corp. EP Weighting X Corp. EP Factor)

  	
   

  
	
  +

  	
   

  
	
  (Target Award X Unit EP Weighting X Unit EP Factor)]

  	
   

  
	
  X

  	
   

  
	
  Individual Factor

  	
   

  

 

 

DEFINITIONS

 

BASE SALARY

 

The total base pay of an individual for the calendar
year of the plan year.

 

OBJECTIVES

 

Company and individual objectives should be developed
prior to the beginning of the Plan year. 
Individual objectives will be approved by the respective unit head.  Quarterly review and evaluation of each
participant’s objectives will be the responsibility of the STIP participant and
his/her manager.

 

MANAGEMENT COMMITTEE

 

This Committee has the responsibility for
administration of the Plan, reviewing annual objectives, approving any changes
in objectives, and resolving any issues around Plan interpretations.  The Management Committee will consist of
Tennant’s CEO, VP of HR, CFO, and the respective SMT member.

 

MATERIAL CHANGES

 

In those instances where there are material changes in
the business (e.g., mergers, acquisitions, divestitures), the Management
Committee reserves the right, without limitation, to make corresponding
adjustments to any or all aspects of the Plan (i.e., funding schedules,
individual objectives, etc.).  For
changes that affect the SMT, the Board Executive Compensation Committee must
approve respective changes.

 

OBJECTIVES
UPDATE

 

In those instances where organizational objectives or
priorities supersede a participant’s objectives, appropriate adjustments to the
participant’s objectives must be reviewed and approved by the Management
Committee.

 

ANNUAL
PAYOUT

 

Annual
incentives will be distributed within ninety days of the year-end.  Normally, payouts will occur near mid-March,
following the plan year.

 

Payouts in excess of 200% of target will be made in
restricted stock with a vesting schedule of 50% per year over the
following two years.

 

TERMINATION

 

Should
a participant’s employment terminate prior to the end of the Plan year for any
reason other than retirement, death, or disability, the participant will not be
entitled to an incentive payment for the Plan year.

 

If a participant’s employment with the Company
terminates by reason of retirement, death, or disability, a prorated payment
will be made within 90 days following year-end close, based upon the time the
participant served in the eligible job during the Plan year.  The final award will be based on year-end
performance.

 

 

CHANGE IN
JOB WITHIN THE COMPANY

 

A participant who is promoted or demoted from a STIP-eligible job to
another STIP-eligible job with a different STIP Target Award Percent will have
a prorated payment based upon the time served in each job during the Plan year,
provided at least three months was served in each job.  If a participant is in an eligible job for
less than three months during the Plan year, the payment is based on the target
award percent of the job served in the longest.

 

A participant who changes jobs but is not eligible for
this Plan retains the right to a prorated payment under this Plan based on the
length of time in the eligible job provided at least three months was served in
the STIP-eligible job.

 

EMPLOYMENT
AT WILL

 

Participation in the Incentive Plan does not
constitute a guarantee of continued employment to individuals in the Plan.  Employment with the Company remains “at will,”
which means that all aspects of the job, including employment by the Company,
may be changed or terminated by the Company at any time with or without
cause.  Likewise, the individual may
terminate employment with Tennant.

 

PLAN
INTERRUPTION AND IMPLEMENTATION

 

The Company reserves the
right, without limitation, to interpret and implement this Plan in accordance
with the 1998 Management Incentive Plan. 
Interpretations of this Plan are generally made by the Management
Committee.

 

 

	
  Participant Signature

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date

  	
   

  
	
   

  
	
   

  
	
  Manager Signature

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SLT Member Signature

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date

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