Document:

exv10w1

 

Exhibit 10.1

OTTER TAIL CORPORATION

1999 STOCK INCENTIVE PLAN

2005 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 or one of its Affiliates, 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 1999
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, 2005 through December 31, 2007 (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 as soon as practicable after the
Compensation Committee of the Corporation’s Board of Directors (the
“Committee”) determines, in its discretion after the end of the Performance
Period, 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 Payment. 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:

     (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),

     (b) retirement (normal or early retirement under any retirement plan of
the Corporation or any of its Affiliates that is applicable to you),

 

 

     (c) death,

     (d) your resignation for “Good Reason” (as defined in your Executive
Employment Agreement, dated on or before the Grant Date, between the
Corporation and you), or

     (e) your termination “Without Cause” (as defined in your Executive
Employment Agreement, dated on or before the Grant Date, between the
Corporation and you).

In the event your employment is terminated during the Performance Period for
one of the reasons enumerated in clauses (a) through (e) 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 promptly following the date of such termination. If a payment is made
pursuant to this Section 4, no payment shall be made pursuant to Section 3 of
this Agreement.

     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 Change in
Control Severance Agreement, dated on or before the Grant Date, between the
Corporation and you) 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.

     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.

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     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, 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.

     9. Miscellaneous.

     (a) 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.

     (b) 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.

     (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 you 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.

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     (g) 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.

* * * * * * * *

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OTTER TAIL CORPORATION

1999 STOCK INCENTIVE PLAN

PERFORMANCE AWARD CERTIFICATE

     This certifies the Performance 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 2005 Performance 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:

	 	Performance Award
	Target Number of Common
	 	 
	Shares Subject to Award:
	 	 
	Maximum Number of Common
	 	 
	Shares Subject to Award:
	 	 
	Grant Date:

	 	April 11  ̧ 2005
	Performance Period:

	 	January 1, 2005 — December 31, 2007
	Performance Goals:

	 	Set forth in Exhibit 1 to the
2005 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:  	 	 
	 	 	[Name of Authorized Officer] 	 
	 	 	[Title]

	 
	 	   	 	 
	 	 	[Name of Participant]
 	 
	 

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Exhibit 1

Performance Goals for Three-Year Performance Period

(January 1, 2005 — December 31, 2007)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Threshold	 	 	Target	 	 	Maximum	 
	 	 	Otter Tail TSR	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	performance	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Performance	 	relative to peer	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	75th %ile	 
	Goal	 	group	 	 	<10 %ile	 	 	10 %ile	 	 	25th %ile	 	 	50th %ile	 	 	or greater	 
	Payment Levels
	 	% of target shares	 	 	0	%	 	 	50	%	 	 	50	%	 	 	100	%	 	 	150	%

	 	Amounts payable for performance between the 25th and 75th percentile will be
interpolated.
	 
	 	Total Shareholders Return (TSR) = stock price appreciation plus value of
dividends.
	 
	 	Peer group = Edison Electric Institute Index

6exv10w2

 

Exhibit 10.2

Otter Tail Corporation

Executive Annual Incentive Plan

Effective April 1, 2005

BACKGROUND

Otter Tail Corporation (the “Corporation”) has established the Executive Annual
Incentive Plan (the “Plan”) to reward top Corporate executives (“Participants”)
who are directly involved in ensuring that the Corporation reaches its
performance goals. The key objectives of the Plan are to focus the executive’s
attention on the Corporation’s operating results to ensure that the Corporation
will achieve its desired results currently and in the future.

ELIGIBILITY

Participants include executive officers of the Corporation as named by the
President and Chief Executive Officer and the Compensation Committee of the
Board of Directors. Participants who terminate employment, for reasons other
than death, disability, retirement or transfer to a Corporation subsidiary
before the end of a calendar year will receive payments under this Plan, if
any, under the terms of their Employment Agreements. Prorated bonus payments
will be paid to the estates of Participants who die during a year for which a
Plan payment is made and to Participants who terminate employment due to
disability, retirement or transfer to a subsidiary.

DEFINITIONS

Base Pay is the annualized base amount paid to Participants as of December 31
of the current plan year. Base Pay includes amounts deferred under Section
401(k) of the Internal Revenue Code, salary reduction amounts under Section 125
of the Internal Revenue Code, and amounts deferred under any deferred
compensation program sponsored by Otter Tail Corporation. Base Pay does not
include incentive payments, moving expenses, expense reimbursements, imputed
income or any similar amounts.

Target Bonus is the percentage of Base Pay payable if all applicable
performance goals are achieved at the stated target level. The Target Bonus
levels shall be established by the Compensation Committee.

Corporate Earnings per
Share (EPS) is diluted earnings per share for the
calendar year, as reported in the Corporation’s year-end financial reports,
subject to adjustment for items deemed to be unusual or extraordinary by the
Compensation Committee. The Compensation Committee shall establish threshold,
target and maximum performance standards for EPS for each year.

Corporate Return on
Equity (ROE) is the combined average return, as a
percentage of total outstanding equity for all business operations, as reported
in the Corporation’s annual year-end financial reports, subject to adjustment
for items deemed to be unusual or extraordinary by the

 

 

Compensation Committee. The Compensation Committee shall establish threshold,
target and maximum performance standards for ROE for each year.

Cash Flow from Operations is the net cash provided by operating activities as
reported in the Corporation’s annual year-end financial reports, subject to
adjustment for items deemed to be unusual or extraordinary by the Compensation
Committee. The Compensation Committee shall establish threshold, target, and
maximum performance standards for cash flow from operations for each year.

CASH BONUS

Payment of any cash bonus under the Plan is subject to achievement of the
applicable Otter Tail Corporation annual performance goals. The Participant’s
Target Bonus is based on competitive market practice, internal equity needs and
the Corporation’s philosophy of pay for performance.

Earning the Target Bonus payout is dependent upon achieving the three corporate
performance goals. Each goal accounts for one-third of the Participant’s
Target Bonus and includes a threshold, target and maximum performance level.
No payment is made for performance below the threshold level. For each goal,
25% of the target amount payable is paid if the threshold performance level is
achieved, 100% of the target amount payable is paid if the target performance
level is achieved, and 200% of the target amount payable is paid if the maximum
performance level is achieved. For performance between the threshold and the
target performance levels, the payment amount shall increase at an even rate up
to the target performance level. For performance between the target
performance level and the maximum performance level, the payment amount shall
increase at an even rate up to the maximum performance level.

The treatment of extraordinary gains, write-offs and similar unusual events
will be at the discretion of the Compensation Committee.

ADMINISTRATION

The Plan is not funded and all bonuses will be paid out of the Corporation’s
general assets.
Bonus payments will be paid in cash, through the appropriate payroll system, as
soon as administratively possible after annual performance results are approved
by the Board of Directors. The Corporation will deduct from any Plan payment
and transmit to the proper taxing authority, such amount as it may be required
to withhold under any applicable federal, state or other law.
The Corporation retains sole discretion, authority, and responsibility to
decide all factual and legal questions under the Plan.

MISCELLANEOUS

The terms of this document shall not constitute a term of employment for any
Participant, and the Corporation shall not be obligated to continue the Plan.
The terms of this document shall not give any Participant the right to be
retained in employment with the Corporation.

Payments under this Plan are not considered part of base pay and, except for
contributions to the Corporation’s Retirement Savings Plan, will not be
considered in any Corporation or subsidiary tax-

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qualified Participant benefit plan. Payments under this Plan will be
considered part of Recognized Compensation under the Otter Tail Corporation
Retirement Savings Plan, or its successor, and will, therefore, be included in
determining the Participant’s Retirement Savings Plan contributions.

AMENDMENT AND TERMINATION

The Plan’s performance goals and payment structure will be reviewed annually
and adjusted to reflect current market conditions and Corporation needs. The
Corporation, by action of the Compensation Committee of the Board of Directors,
reserves the right to amend or terminate this Plan at any time.

For the Compensation Committee of the Board of Directors:

	 	 	 	 
	 

Arvid Liebe, Compensation Committee Chair	 	
 

Date
	 
OTTER TAIL
CORPORATION
 
	 	 
	By:	 

John Erickson

Its:  President and CEO	 	
 

Date

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