Document:

exv10w1

 

Exhibit 10.1

OTTER TAIL CORPORATION

EXECUTIVE SURVIVOR AND SUPPLEMENTAL RETIREMENT PLAN

(2005 Restatement)

 

 

OTTER TAIL CORPORATION

EXECUTIVE SURVIVOR AND SUPPLEMENTAL RETIREMENT PLAN

(2005 Restatement)

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	SECTION 1.	 	INTRODUCTION	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	 
	 	1.1.	 	Plan Established	 	 	 	 
	 
	 	1.2.	 	Amendment and Restatement	 	 	 	 
	 
	 	1.3.	 	Unfunded Obligation	 	 	 	 
	 
	 	1.4.	 	Compliance with Section 409A of the Code	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SECTION 2.	 	DEFINITIONS	 	 	2	 
	 
	 	 	 	 	 	 	 	 
	 
	 	2.1.	 	Actuarial Equivalent	 	 	 	 
	 
	 	2.2.	 	Beneficiary	 	 	 	 
	 
	 	2.3.	 	Board	 	 	 	 
	 
	 	2.4.	 	Cause	 	 	 	 
	 
	 	2.5.	 	Change in Control	 	 	 	 
	 
	 	2.6.	 	Code	 	 	 	 
	 
	 	2.7.	 	Committee	 	 	 	 
	 
	 	2.8.	 	Continuing Director	 	 	 	 
	 
	 	2.9.	 	Disability	 	 	 	 
	 
	 	2.10.	 	Early Retirement Date	 	 	 	 
	 
	 	2.11.	 	Employer	 	 	 	 
	 
	 	2.12.	 	ERISA	 	 	 	 
	 
	 	2.13.	 	Final Annual Salary	 	 	 	 
	 
	 	2.14.	 	Final Average Earnings	 	 	 	 
	 
	 	2.15.	 	Final Average Utility Earnings	 	 	 	 
	 
	 	2.16.	 	Good Reason	 	 	 	 
	 
	 	2.17.	 	Normal Retirement Date	 	 	 	 
	 
	 	2.18.	 	Participant	 	 	 	 
	 
	 	2.19.	 	Participant Agreement	 	 	 	 
	 
	 	2.20.	 	Retirement	 	 	 	 
	 
	 	2.21.	 	Salary	 	 	 	 
	 
	 	2.22.	 	Spouse	 	 	 	 
	 
	 	2.23.	 	Supplemental Retirement Benefit	 	 	 	 
	 
	 	2.24.	 	Target Retirement Percentage	 	 	 	 
	 
	 	2.25.	 	Years of Participation	 	 	 	 

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	SECTION 3.	 	PARTICIPATION AND VESTING	 	 	7	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	3.1.	 	Eligibility and Participation	 	 	 	 
	 	 	3.2.	 	Change in Employment Status	 	 	 	 
	 	 	3.3.	 	Vesting	 	 	 	 
	 	 	3.4.	 	Suicide	 	 	 	 
	 	 	3.5.	 	Misrepresentation	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 4.	 	EXECUTIVE OFFICER’S SURVIVOR BENEFITS	 	 	8	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	4.1.	 	Eligibility	 	 	 	 
	 	 	4.2.	 	Preretirement Survivor Benefit	 	 	 	 
	 	 	4.3.	 	Postretirement Survivor Benefit	 	 	 	 
	 	 	4.4.	 	Posttermination Survivor Benefit	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 5.	 	1994 SUPPLEMENTAL RETIREMENT BENEFITS	 	 	10	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	5.1.	 	Eligibility	 	 	 	 
	 	 	5.2.	 	Normal Retirement Benefit	 	 	 	 
	 	 	5.3.	 	Early Retirement Benefit	 	 	 	 
	 	 	5.4.	 	Termination Benefit	 	 	 	 
	 	 	5.5.	 	Disability Retirement Benefit	 	 	 	 
	 	 	5.6.	 	Payment of Benefits	 	 	 	 
	 	 	5.7.	 	Partially Vested Participants	 	 	 	 
	 	 	5.8.	 	Freeze of Benefits	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 6.	 	2002 SUPPLEMENTAL RETIREMENT BENEFITS	 	 	14	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	6.1.	 	Eligibility	 	 	 	 
	 	 	6.2.	 	Normal Retirement Benefit	 	 	 	 
	 	 	6.3.	 	Early Retirement Benefit	 	 	 	 
	 	 	6.4.	 	Termination Benefit	 	 	 	 
	 	 	6.5.	 	Disability Retirement Benefit	 	 	 	 
	 	 	6.6.	 	Payment of Benefits	 	 	 	 
	 	 	6.7.	 	Freeze of Benefits	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 7.	 	RESTORATION RETIREMENT BENEFITS	 	 	17	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	7.1.	 	Eligibility	 	 	 	 
	 	 	7.2.	 	Benefit for Participants	 	 	 	 
	 
	 	 	 	7.2.1.	 	Entitlement and Amount	 	 	 	 
	 
	 	 	 	7.2.2.	 	Payment of Benefits	 	 	 	 
	 	 	7.3.	 	Benefit for Beneficiaries	 	 	 	 
	 
	 	 	 	7.3.1.	 	Entitlement and Amount	 	 	 	 
	 
	 	 	 	7.3.2.	 	Form of Payment	 	 	 	 
	 	 	7.4.	 	Six-Month Distribution Freeze	 	 	 	 

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	SECTION 8.	 	SUPPLEMENTAL SURVIVOR BENEFIT	 	 	19	 
	 
	 	8.1.	 	Eligibility	 	 	 	 
	 
	 	8.2.	 	Pretermination	 	 	 	 
	 
	 	8.3.	 	Posttermination	 	 	 	 
	 
	 	8.4.	 	After Benefits Commence	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SECTION 9.	 	BENEFICIARY DESIGNATION	 	 	20	 
	 
	 	 	 	 	 	 	 	 
	 
	 	9.1.	 	Beneficiary Designation	 	 	 	 
	 
	 	9.2.	 	Amendments	 	 	 	 
	 
	 	9.3.	 	No Participant Beneficiary Designation	 	 	 	 
	 
	 	9.4.	 	Effect of Payment	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SECTION 10.	 	ADMINISTRATION	 	 	21	 
	 
	 	 	 	 	 	 	 	 
	 
	 	10.1.	 	Committee; Duties	 	 	 	 
	 
	 	10.2.	 	Agents	 	 	 	 
	 
	 	10.3.	 	Binding Effect of Decisions	 	 	 	 
	 
	 	10.4.	 	Indemnity of Committee	 	 	 	 
	 
	 	10.5.	 	Withholding; Payroll Taxes	 	 	 	 
	 
	 	10.6.	 	Payment to Guardian	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SECTION 11.	 	CLAIMS PROCEDURE	 	 	22	 
	 
	 	 	 	 	 	 	 	 
	 
	 	11.1.	 	Initiating Benefits	 	 	 	 
	 
	 	11.2.	 	Original Claim	 	 	 	 
	 
	 	11.3.	 	Claims Review Procedure	 	 	 	 
	 
	 	11.4.	 	General Rules	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SECTION 12.	 	TERMINATION, SUSPENSION OR AMENDMENT	 	 	24	 
	 
	 	 	 	 	 	 	 	 
	SECTION 13.	 	MISCELLANEOUS	 	 	25	 
	 
	 	 	 	 	 	 	 	 
	 
	 	13.1.	 	ERISA Status	 	 	 	 
	 
	 	13.2.	 	Unsecured General Creditor	 	 	 	 
	 
	 	13.3.	 	Trust Fund	 	 	 	 
	 
	 	13.4.	 	Effect on Other Plans	 	 	 	 
	 
	 	13.5.	 	Nonassignability	 	 	 	 
	 
	 	13.6.	 	Disqualification	 	 	 	 
	 
	 	13.7.	 	Not a Contract of Employment	 	 	 	 
	 
	 	13.8.	 	Protective Provisions	 	 	 	 
	 
	 	13.9.	 	Terms	 	 	 	 
	 
	 	13.10.	 	Captions	 	 	 	 
	 
	 	13.11.	 	References to Laws	 	 	 	 
	 
	 	13.12.	 	Choice of Law	 	 	 	 

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	 	13.13.	 	Validity	 	 	 	 
	 
	 	13.14.	 	Notice	 	 	 	 
	 
	 	13.15.	 	Successors	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	APPENDIX A — ADDITIONAL YEARS OF PARTICIPATION	 	 	A-1	 

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OTTER TAIL CORPORATION

EXECUTIVE SURVIVOR AND SUPPLEMENTAL RETIREMENT PLAN

(2005 Restatement)

SECTION 1

INTRODUCTION

1.1. Plan Established. Effective as of November 1, 1983, Otter Tail Corporation, a Minnesota
corporation, (the “Principal Sponsor”) established the “Otter Tail Corporation Executive Survivor
and Supplemental Retirement Plan” (the “Supplemental Plan”) for the purpose of providing survivor
and retirement benefits to certain eligible employees. It is intended that the Supplemental Plan
will aid in securing the good will, loyalty and efficiency of the participating executive officers
and other key management employees, and will attract and retain executive officers and other key
management employees.

1.2. Amendment and Restatement. The Principal Sponsor heretofore established and reserved to
itself the right to amend the Supplemental Plan from time to time. By adoption of this amended and
restated document entitled “Otter Tail Corporation Executive Survivor and Supplemental Retirement
Plan (2005 Restatement),” the Principal Sponsor hereby amends and restates the Supplemental Plan in
its entirety as applied to all persons who are active Participants as of January 1, 2005 and all
persons who become Participants after that date.

1.3. Unfunded Obligation. The obligation of the Principal Sponsor to make payments under this
Supplemental Plan constitutes only the unsecured (but legally enforceable) promise of the Principal
Sponsor to make such payments. The Participant shall have no lien, prior claim or other security
interest in any property of the Principal Sponsor. If a fund is established by the Principal
Sponsor in connection with this Supplemental Plan, the property therein shall remain the sole and
exclusive property of the Principal Sponsor. The Principal Sponsor will pay the cost of this
Supplemental Plan out of its general assets.

1.4. Compliance with Section 409A of the Code. Notwithstanding anything in this Plan Statement to
the contrary, for the 2005 plan year this Plan shall be administrated in accordance with the
guidance issued under section 409A of the Code. This Plan shall be amended prior to December 31,
2005, to comply with the guidance issued under section 409A of the Code.

 

 

SECTION 2

DEFINITIONS

Except as expressly defined in this Supplemental Plan, terms defined in the tax-qualified
defined benefit pension plan known as the “Otter Tail Corporation Pension Plan” (“Pension Plan”)
shall have the same meanings when used in this Supplemental Plan. In addition, the following terms
shall have the following meanings when used in this Supplemental Plan:

2.1. Actuarial Equivalent — a benefit of equal value computed on the basis of the tables, factors
and assumptions set forth in the Pension Plan.

2.2. Beneficiary — a person (other than a Joint Annuitant) designated by a Participant (or
automatically by operation of this Supplemental Plan statement) to receive any Supplemental Plan
benefits payable after a Participant’s death.

2.3. Board — the Board of Directors of Otter Tail Corporation.

2.4. Cause — termination by the Principal Sponsor of Employee’s employment based upon (a) the
willful and continued failure by Employee substantially to perform Employee’s duties and
obligations (other than any such failure resulting from Employee’s incapacity due to physical or
mental illness or any such actual or anticipated failure resulting from Employee’s termination for
Good Reason) or (b) the willful engaging by Employee in misconduct which is materially injurious to
the Principal Sponsor, monetarily or otherwise. For purposes of this Section 2.4, no action or
failure to act on Employee’s part shall be considered “willful” unless done, or omitted to be done,
by Employee in bad faith and without reasonable belief that such action or omission was in the best
interests of the Principal Sponsor.

2.5. Change in Control -

	 	(a)  	a change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or successor
provision thereto, whether or not the Employer is then subject to such reporting
requirement;
	 
	 	(b)  	any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the “beneficiary owner” (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of the
Employer representing 35% or more of the combined voting power of the Employer’s then
outstanding securities;
	 
	 	(c)  	the Continuing Directors (as defined in Section 2.8 hereof) cease to
constitute a majority of the Employer’s Board of Directors; provided that

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	 	   	such change is the direct or indirect result of a proxy fight and contested
election or elections for positions on the Board of Directors; or
	 
	 	(d)  	the majority of the Continuing Directors (as defined in Section 2.8 hereof)
determine in their sole and absolute discretion that there has been a change in
control of the Employer.

2.6. Code — the Internal Revenue Code of 1986, including applicable regulations for the specified
section of the Code. Any reference in this Plan Statement to a section of the Code, including the
applicable regulation, shall be considered also to mean and refer to any subsequent amendment or
replacement of that section or regulation.

2.7. Committee — the Committee established in accordance with Section 10.1 hereof.

2.8. Continuing Director — any person who is a member of the Board of Directors of the Principal
Sponsor, while such person is a member of the Board of Directors, who is not an Acquiring Person
(as hereinafter defined) or an Affiliate or Associate (as hereinafter defined) of an Acquiring
Person, or a representative of an Acquiring Person or of any such Affiliate or Associate, and who
(a) was a member of the Board of Directors on the date of this Agreement as first written above or
(b) subsequently becomes a member of the Board of Directors, if such person’s nomination for
election or initial election to the Board of Directors is recommended or approved by a majority of
the Continuing Directors. For purposes of this Section 2.8, “Acquiring Person” shall mean any
“person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) who or which,
together with all Affiliates and Associates of such person, is the “beneficial owner” (as defined
in Rule 13d-3 promulgated under the Exchange Act) of 20% of more of the shares of Common Stock of
the Principal Sponsor then outstanding, but shall not include the Principal Sponsor, any subsidiary
of the Principal Sponsor or any employee benefit plan of the Principal Sponsor or of any subsidiary
of the Principal Sponsor or any entity holding shares of Common Stock organized, appointed or
established for, or pursuant to the terms of, any such plan; and “Affiliate” and “Associate” shall
have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange
Act.

2.9. Disability — a medically determinable physical or mental impairment for which an employee is
receiving payments under a separate plan of the Employer providing salary or wage continuation in
the event of long-term disability. However, if the Participant is not eligible to participate in
an employer-sponsored salary or wage continuation plan, the Committee may accept, as proof of
Disability, the official written determination that the individual will be eligible for disability
benefits under the federal Social Security Act as now enacted or hereinafter amended (when any
waiting period expires). The Committee shall determine the date on which the Disability shall have
occurred if such determination is necessary. In no event shall a Disability be deemed to occur or
to continue after a Participant’s Normal Retirement Date.

2.10. Early Retirement Date — the date on which a Participant terminates employment with the
Employer if such termination date occurs after the first day of the month coincident with or next
following a Participant’s attainment of age fifty-five (55) and completion of ten (10)

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Years of Vesting Service, but prior to the Participant’s Normal Retirement Date. Notwithstanding
the freeze on the accrual of additional benefits as of December 31, 2010, a Participant may attain
Early Retirement Date after that date (i.e., age and Years of Vesting Services after December 31,
2010, shall be recognized in determining a Participant’s Early Retirement Date).

2.11. Employer — Otter Tail Corporation, a Minnesota corporation (the “Principal Sponsor”), any
business entity affiliated with the Principal Sponsor designated by the Board and any successor
thereof that adopts the Supplemental Plan.

2.12. ERISA — the Employee Retirement Income Security Act of 1974, including applicable regulations
for the specified section of ERISA. Any reference in this Plan Statement to a section of ERISA,
including the applicable regulation, shall be considered also to mean and refer to any subsequent
amendment or replacement of that section or regulation.

2.13. Final Annual Salary — the base Salary and annual incentive bonus paid to a Participant by the
Employer during the twelve (12) months prior to a Participant’s termination or death.

2.14. Final Average Earnings — the average of the Participant’s total cash payments (Salary and
annual incentive bonus) paid to the Participant during the highest consecutive forty-two (42)
months in the ten (10) years prior to the date as of which the Final Average Earnings is
determined. In determining a Participant’s Final Average Earnings, a Participant’s earnings
attributable to Plan Years beginning after December 31, 2010, shall be entirely disregarded (i.e.,
Final Average Earnings determined as of December 31, 2010, shall never thereafter change). This
definition shall apply to Participants who are not employed in an Otter Tail Utility Position, as
defined in the Pension Plan, at the date of determination.

2.15. Final Average Utility Earnings — the average of the Participant’s total cash payments (Salary
and annual incentive bonus) paid to the Participant during the highest consecutive thirty (30)
months in the ten (10) years prior to the date as of which the Final Average Utility Earnings is
determined. In determining a Participant’s Final Average Utility Earnings, a Participant’s
earnings attributable to Plan Years beginning after December 31, 2010, shall be entirely
disregarded (i.e., Final Average Utility Earnings determined as of December 31, 2010, shall never
thereafter change). This definition shall apply to Participants who are employed in an Otter Tail
Utility Position, as defined in the Pension Plan, at the date of determination.

2.16. Good Reason — the occurrence of any of the following events, except for the occurrence of
such an event in connection with the termination or reassignment of Employee’s employment by the
Employer for Cause (as defined in Section 2.4 hereof), for Disability (as defined in Section 2.9
hereof) or for death:

	 	(a)  	the assignment to Employee of employment responsibilities which are not of
comparable responsibility and status as the employment responsibilities held by
Employee immediately prior to a Change in Control;

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	 	(b)  	a reduction by the Employer in Employee’s base Salary as in effect
immediately prior to a Change in Control;
	 
	 	(c)  	an amendment or modification of the Employer’s incentive compensation
program (except as may be required by applicable law) which affects the terms or
administration of the program in a manner adverse to the interest of Employee as
compared to the terms and administration of such program immediately prior to a
Change in Control;
	 
	 	(d)  	the Employer’s requiring Employee to be based anywhere other than within
100 miles of Employee’s office location immediately prior to a Change in Control,
except for requirements of temporary travel on the Employer’s business to an extent
substantially consistent with Employee’s business travel obligations immediately
prior to a Change in Control;
	 
	 	(e)  	except to the extent otherwise provided by applicable law, the failure by
the Employer to continue in effect any benefit or compensation plan, stock ownership
plan, stock purchase plan, stock incentive plan, bonus plan, life insurance plan,
health-and-accident plan, or disability plan in which Employee is participating
immediately prior to a Change in Control (or plans providing Employee with
substantially similar benefits), the taking of any action by the Employer which would
adversely affect Employee’s participation in, or materially reduce Employee’s
benefits under, any of such plans or deprive Employee of any material fringe benefit
enjoyed by Employee immediately prior to such Change in Control, or the failure by
the Employer to provide Employee with the number of paid vacation days to which
Employee is entitled immediately prior to such Change in Control in accordance with
the Employer’s vacation policy as then in effect; or
	 
	 	(f)  	the failure by the Employer to obtain an assumption of the obligations of
the Employer to perform this Agreement by any successor to the Employer.

2.17. Normal Retirement Date - the first day of the month coincident with or next following the
Participant’s attainment of age sixty-five (65).

2.18. Participant - an employee of the Employer who becomes a Participant in the Supplemental Plan
in accordance with the provisions of Section 3.

2.19. Participant Agreement - an agreement filed by a Participant which acknowledges assent to the
terms of the Supplemental Plan.

2.20. Retirement - a Participant’s separation from employment with the Employer at the
Participant’s Early Retirement Date or Normal Retirement Date.

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2.21. Salary - the salary paid to a Participant, before reduction, for any section 125 benefits,
amounts deferred under section 401(k) of the Code or any other deferred arrangement. Salary does
not include expense reimbursements, any form of noncash compensation or benefits, the Employer’s
contribution to the Pension Plan or the Employer’s contribution to the Otter Tail Corporation
Retirement Savings Plan, or any other payments or benefits other than normal compensation.

2.22. Spouse - a Participant’s wife or husband who is lawfully married to the Participant at the
time of the Participant’s death.

2.23. Supplemental Retirement Benefit - the benefit determined under Section 5, 6 or 7 of this
Supplemental Plan.

2.24. Target Retirement Percentage - sixty-five percent (65%) multiplied by a fraction, the
numerator of which is the Participant’s Years of Participation, not to exceed fifteen (15), and the
denominator of which is fifteen (15). The adjusted Targeted Retirement Percentage shall be rounded
to four (4) decimal places.

2.25. Years of Participation - the number of completed years in which the Participant has
participated in this Supplemental Plan. If a Participant terminates for Good Reason (as defined in
Section 2.16) within twenty-four (24) months of a Change in Control, the Participant shall be
granted three (3) extra years of service. In addition as of January 1, 2005, the Participants
listed in Appendix A shall receive additional Years of Participation as identified in Appendix A.
In determining a Participant’s Years of Participation after December 31, 2010, a Participant’s
service after December 31, 2010, shall be entirely disregarded (i.e., Years of Participation
determined as of December 31, 2010, shall never thereafter change).

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SECTION 3

PARTICIPATION AND
VESTING

3.1. Eligibility and Participation.

	 	(a)  	Eligibility. Eligibility to participate in the Supplemental Plan shall be
limited to certain executive officers and other key management employees of Employer
who are designated by the Committee.
	 
	 	(b)  	Participation. An Employee’s participation in the Supplemental Plan shall
be effective upon the employee’s notification of eligibility to participate, the
Participant’s completion of a Participation Agreement and the Committee’s acceptance
of the Participation Agreement.

3.2. Change in Employment Status. If the Board determines that a Participant’s employment
performance is no longer at a level which deserves reward through participation in this
Supplemental Plan, but does not terminate the Participant’s employment with the Employer,
participation herein and eligibility to receive benefits hereunder shall be limited to the
Participant’s vested interest in such benefits as of the date designated by the Committee.

3.3. Vesting. Participants shall vest in the benefits under this Supplemental Plan for which they
are eligible based on Years of Participation as follows:

	 	 	 
	Vested	 	Years of
	Percentage	 	Participation
	0%
	 	Less than 5 years
	100%
	 	5 or more

Regardless of Years of Participation, after a Change in Control, all Participants shall be one
hundred percent (100%) vested. A Participant shall also be one hundred percent (100%) vested if
the Participant dies while employed by the Employer.

3.4. Suicide. The provisions of Section 4 notwithstanding, no benefit shall be paid to a
Beneficiary if the Participant’s death occurs as a result of suicide during the twenty-four (24)
successive calendar months beginning with the calendar month following the commencement of the
employee’s participation in this Supplemental Plan.

3.5. Misrepresentation. No benefit shall be paid if death occurs within the twenty-four (24)
successive calendar months following commencement of an employee’s participation in the
Supplemental Plan if the Participant has made a material misrepresentation in any form or document
provided by the Participant to or for the benefit of Employer.

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SECTION 4

EXECUTIVE OFFICER’S
SURVIVOR BENEFITS

4.1. Eligibility. Survivor benefits described in Section 4 shall only be due and payable to a
Participant who is or was an Executive Officer at the time such individual became a Participant in
the Supplemental Plan, or who is later promoted to Executive Officer and determined by the
Committee to be eligible for the benefits under Section 4. For purposes of this Section 4, any
Participant designated as an Executive Officer prior to January 1, 2005, shall remain an Executive
Officer. In no event shall any other Participant be eligible for a survivor benefit under this
Section 4.

4.2. Preretirement Survivor Benefit.

	 	(a)  	Amount. If a Participant dies while employed by Employer or during a
period of Disability, Employer shall pay a survivor benefit to the Participant’s
Beneficiary equal to four (4) times the Participant’s Final Annual Salary.
	 
	 	(b)  	Form and Commencement of Benefit Payments. The benefit payable under this
Section shall be paid in monthly installments equal to one-sixth (1/6) of the
Participant’s Final Annual Salary for twenty-four (24) months. Payments shall
commence the first day of the month following the death of the Participant, or as
soon as administratively feasible thereafter, and shall continue the first day of
each month thereafter for the duration of the payment period.

4.3. Postretirement Survivor Benefit.

	 	(a)  	Amount. If a Participant dies following Retirement, Employer shall pay a
survivor benefit to the Participant’s Beneficiary equal to the amount shown on the
following schedule:

	 	 	 
	    Age at Death	 	Benefit
	55 through 64
	 	2 times Final  Annual  Salary
	65 through 69
	 	1-1/2 times Final Annual Salary
	70 through 75
	 	3/4 times Final  Annual Salary
	Over 75
	 	3/8 times Final Annual Salary

	 	(b)  	Form and Commencement of Benefit Payment. The benefit payable under this
Section shall be paid to the Beneficiary in a lump sum form on the first day of the
month following the Participant’s death, or as soon as administratively feasible
thereafter.

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4.4. Posttermination Survivor Benefit.

	 	(a)  	Amount. If a vested Participant dies following termination, Employer shall
pay a survivor benefit to the Participant’s Beneficiary equal to the amount shown on
the following schedule times the Participant’s vested percentage:

	 	 	 
	    Age at Death	 	Benefit
	Less than 65
	 	2 times Final  Annual  Salary
	65 through 69
	 	1-1/2 times Final Annual Salary
	70 through 75
	 	3/4 times Final  Annual Salary
	Over 75
	 	3/8 times Final Annual Salary

	 	(b)  	Form and Commencement of Benefit Payment. The benefit payable under this
Section shall be paid to the Beneficiary in a lump sum form on the first day of the
month following the Participant’s death, or as soon as administratively feasible
thereafter.

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SECTION 5

1994 SUPPLEMENTAL RETIREMENT BENEFITS

5.1. Eligibility. Any Participant who was a Participant in the Supplemental Plan on December
31, 2001 and was at least fifty-five (55) years old or was fully (100%) vested in the Supplemental
Plan as of December 31, 2001, shall be eligible for a benefit under Section 5. A Participant was
fully vested as of December 31, 2001, if the Participant had earned five (5) Years of Participation
Service as of December 31, 2001. In addition, any Participant who was partially vested as of
December 31, 2001, shall be entitled to a combined benefit defined in Section 5.7.

5.2. Normal Retirement Benefit If a Participant retires at the Normal Retirement Date, Employer
shall pay to the Participant a monthly Supplemental Retirement Benefit equal to the seventy percent
(70%), multiplied by the Participant’s Final Annual Salary, less:

	 	(a)  	The Participant’s monthly primary Social Security benefit commencing at
Retirement, and
	 
	 	(b)  	The Participant’s Pension Plan benefit in the form of a monthly single-life
annuity commencing at the Participant’s Normal Retirement Date. However, the
calculation of the Participant’s Pension Plan benefit shall be calculated with a
maximum of thirty (30) years of Benefit Accrual Service.

In no event shall the benefit payable to a Participant entitled to a benefit under this Section be
less than the Actuarial Equivalent benefit calculated under Section 7 of this Supplemental Plan.
The benefit determined under Section 7.2 shall be calculated using the additional service awarded
to a Participant in Appendix A.

In determining a Participant’s Social Security benefit in Section 5.2(a) and a Participant’s
benefit under the Pension Plan in Section 5.2(b) after December 31, 2010, the Participant shall be
deemed to have a separation from service on December 31, 2010 (i.e., the Participant’s Social
Security benefit and the Participant’s Pension Plan benefit determined as of December 31, 2010,
shall never thereafter change).

5.3.
Early Retirement Benefit. If a Participant retires at an Early Retirement Date, Employer
shall pay to the Participant the monthly Supplemental Retirement Benefit calculated under Section
5.2 except:

	 	(a)  	The Target Retirement Percentage shall be reduced by the following
percentage based on the Participant’s age at Retirement:

 -10-

 

 

	 	 	 
	Age	 	Reduction
	62 through 65
	 	0%
	61
	 	5%
	60
	 	10%
	59
	 	15%
	58
	 	20%
	57
	 	25%
	56
	 	32%
	55
	 	39%

	 	(b)  	The offset required by 5.2(a) shall be determined at Retirement using the
Social Security Act in effect at Retirement and assuming zero (0) future earnings
from the Participant’s Early Retirement Date to the later of Early Retirement Date or
Participant’s attainment of age sixty-two (62).

In determining a Participant’s Social Security benefit in Section 5.3(b) after December 31, 2010,
the Participant shall be deemed to have a separation from service on December 31, 2010 (i.e., the
Participant’s Social Security benefit determined as of December 31, 2010, shall never thereafter
change).

5.4. Termination Benefit. If a vested Participant terminates, Employer shall pay to the
Participant the monthly Supplemental Retirement Benefit calculated under Section 5.2 multiplied by
the Participant’s vested percentage under Section 3.3 except:

	 	(a)  	The offset required by Section 5.2(a) shall be determined at termination
using the Social Security Act in effect at termination and assuming earnings from the
date of termination to the Participant’s Normal Retirement Date are equal to the
Participant’s Salary at termination; and
	 
	 	(b)  	The offset required by Section 5.2(b) shall be the Participant’s benefit
under the Pension Plan payable at age sixty-five (65).

In determining a Participant’s Social Security benefit in Section 5.4(a) and a Participant’s
benefit under the Pension Plan in Section 5.4(b) after December 31, 2010, the Participant shall be
deemed to have a separation from service on December 31, 2010 (i.e., the Participant’s Social
Security benefit and the Participant’s Pension Plan benefit determined as of December 31, 2010,
shall never thereafter change).

5.5. Disability Retirement Benefit. If a Participant terminates employment prior to the
Participant’s Normal Retirement Date as a result of Disability, the Employer shall pay to the
Participant a Supplemental Retirement Benefit commencing at the later of the Participant’s
sixty-second (62nd) birthday or discontinuance of benefits under the Otter Tail Long-Term
Disability Program, equal to the amount the Participant would have received at such time under the
Early Retirement provision of this Section. For purposes of this calculation, Benefit Accrual

 -11-

 

 

Service and Years of Participation shall continue to accrue during the period of Disability and the
Participant’s Final Average Earnings or the Participant’s Final Average Utility Earnings will be
calculated based on the Participant’s earnings history as of the date of Disability.

5.6. Payment of Benefits.

	 	(a)  	Form of Benefit Payment. The Supplemental Retirement Benefit shall be paid
in the form a monthly single life annuity with a fifteen (15) year certain period.
If a Participant dies prior to completion of the fifteen (15) year payment period,
any remaining payments shall be paid to the Participant’s Beneficiary. For the
Beneficiaries of executive officers, this remaining benefit, if any, shall be paid in
addition to the benefits provided in Section 4.3 or Section 4.4. For Beneficiaries
of other key management employees, this shall be the only benefit payable, if any.
	 
	 	(b)  	Commencement of Benefit Payments. Except as provided in Paragraph (c),
benefits payable to a Participant under Sections 5.2 and 5.3 shall commence as soon
as practicable after the Participant’s termination of employment but not later than
the rules prescribed under section 409A of the Code. Benefits payable to a vested
Participant under Section 5.4 shall commence on the first day of the month following
the Participant’s sixty-fifth (65th) birthday. All payments shall be made as of the
first day of the month.
	 
	 	(c)  	Six-Month Distribution Freeze. Notwithstanding the foregoing Paragraph
(b), if payment is to be made on account of a termination of employment to a key
employee (as defined in section 416(i) of the Code), payment of the portions of that
Participant’s benefit shall not be made under Paragraph (b) above before the date
that is six (6) months after the date of key employee’s separation from service. The
term separation from service shall be construed to have the same meaning consistent
with the term “Separation from Service” as used in section 409A of the Code.

5.7. Partially Vested Participants. Participants, as of December 31, 2001, who were partially
vested as of that date will receive a combined benefit equal to (a) and (b):

	 	(a)  	the benefit calculated under this Section 5 multiplied by the percentage
the Participant was vested on December 31, 2001,
	 
	 	(b)  	the benefit calculated under Section 6 of this Supplemental Plan multiplied
by a percentage equal to (i)-(ii):

	 	(i)  	one (1),
	 
	 	(ii)  	the percentage the Participant was vested on
December 31, 2001.

 -12-

 

 

In addition, for such Participants, the denominator in determining the
Target Retirement Percentage shall be the lesser of fifteen (15) or the
number of years between the date the Participant began participating in this
Supplemental Plan and such Participant’s sixty-second (62nd) birthday.

5.8. Freeze of Benefits. Benefits accruals under this Section 5 shall cease as of December 31,
2010.

 -13-

 

 

SECTION 6

2002 SUPPLEMENTAL RETIREMENT BENEFITS

6.1. Eligibility. Any Participant who became a Participant after December 31, 2001 and prior
to January 1, 2005 shall be eligible for a benefit under Section 6. In addition, any Participant
who was partially vested as of December 31, 2001, shall be entitled to a combined benefit described
in Section 5.7.

6.2. Normal Retirement Benefit If a Participant retires at the Normal Retirement Date, Employer
shall pay to the Participant a monthly Supplemental Retirement Benefit equal to the Target
Retirement Percentage multiplied by the Participant’s Final Average Earnings or the Participant’s
Final Average Utility Earnings, less:

	 	(a)  	The Participant’s monthly primary Social Security benefit commencing at
Retirement, and
	 
	 	(b)  	The Participant’s Pension Plan benefit in the form of a monthly single-life
annuity commencing at the Participant’s Normal Retirement Date. However, the
calculation of the Participant’s Pension Plan benefit shall be calculated with a
maximum of thirty (30) years of Benefit of Accrual Service.

In no event shall the benefit payable to a Participant entitled to a benefit under this Section be
less than the Actuarial Equivalent benefit calculated under Section 7 of this Supplemental Plan.
This net amount shall be multiplied by the Participant’s vested percentage under Section 3.3. The
benefit determined under Section 7.2 shall be calculated using the additional service awarded to a
Participant in Appendix A

In determining a Participant’s Social Security benefit in Section 6.2(a) and a Participant’s
benefit under the Pension Plan in Section 6.2(b) after December 31, 2010, the Participant shall be
deemed to have a separation from service on December 31, 2010 (i.e., the Participant’s Social
Security benefit and the Participant’s Pension Plan benefit determined as of December 31, 2010,
shall never thereafter change).

6.3. Early Retirement Benefit. If a Participant retires at an Early Retirement Date, Employer
shall pay to the Participant the monthly Supplemental Retirement Benefit calculated under Section
6.2 except:

	 	(a)  	The Target Retirement Percentage shall be reduced by the following
percentage based on the Participant’s age at Retirement:

 -14-

 

 

	 	 	 
	Age	 	Reduction
	62 through 65
	 	0%
	61
	 	5%
	60
	 	10%
	59
	 	15%
	58
	 	20%
	57
	 	25%
	56
	 	32%
	55
	 	39%

	 	(b)  	The offset required by 6.2(a) shall be determined at Retirement using the
Social Security Act in effect at Retirement and assuming zero (0) future earnings
from the Participant’s Early Retirement Date to the later of Early Retirement Date or
Participant’s attainment of age sixty-two (62).

In determining a Participant’s Social Security benefit in Section 6.3(b) after December 31, 2010,
the Participant shall be deemed to have a separation from service on December 31, 2010 (i.e., the
Participant’s Social Security benefit determined as of December 31, 2010, shall never thereafter
change).

6.4. Termination Benefit. If a vested Participant terminates, Employer shall pay to the
Participant the monthly Supplemental Retirement Benefit calculated under Section 6.2 multiplied by
the Participant’s vested percentage under Section 3.3 except:

	 	(a)  	The offset required by Section 6.2(a) shall be determined at termination
using the Social Security Act in effect at termination and assuming earnings from the
date of termination to the Participant’s Normal Retirement Date are equal to the
Participant’s Salary at termination; and
	 
	 	(b)  	The offset required by Section 6.2(b) shall be the Participant’s benefit
under the Pension Plan payable at age sixty-five (65).

In determining a Participant’s Social Security benefit in Section 6.4(a) and a Participant’s
benefit under the Pension Plan in Section 6.4(b) after December 31, 2010, the Participant shall be
deemed to have a separation from service on December 31, 2010 (i.e., the Participant’s Social
Security benefit and the Participant’s Pension Plan benefit determined as of December 31, 2010,
shall never thereafter change).

6.5. Disability Retirement Benefit. If a Participant terminates employment prior to the
Participant’s Normal Retirement Date as a result of Disability, the Employer shall pay to the
Participant a Supplemental Retirement Benefit commencing at the later of the Participant’s
sixty-second (62nd) birthday or discontinuance of benefits under the Otter Tail Long-Term
Disability Program, equal to the amount the Participant would have received at such time under the
Early Retirement provision of this Section. For purposes of this calculation, Benefit Accrual

 -15-

 

 

Service and Years of Participation shall continue to accrue during the period of Disability and the
Participant’s Final Average Earnings or the Participant’s Final Average Utility Earnings will be
calculated based on the Participant’s earnings history as of the date of Disability.

6.6.Payment of Benefits.

	 	(a)  	Form of Benefit Payment. The Supplemental Retirement Benefit shall be paid
in the form a monthly single life annuity with a fifteen (15) year certain period.
If a Participant dies prior to completion of the fifteen (15) year payment period,
any remaining payments shall be paid to the Participant’s Beneficiary. For the
Beneficiaries of executive officers, this remaining benefit, if any, shall be paid in
addition to the benefits provided in Section 4.3 or Section 4.4. For Beneficiaries
of other key management employees, this shall be the only benefit payable, if any.
	 
	 	(b)  	Commencement of Benefit Payments. Except as provided in Paragraph (c),
benefits payable to a Participant under Sections 6.2 and 6.3 shall commence as soon
as practicable after the Participant’s termination of employment but not later than
the rules prescribed under section 409A of the Code. Benefits payable to a vested
Participant under Section 6.4 shall commence on the first day of the month following
the Participant’s sixty-fifth (65th) birthday. All payments shall be made as of the
first day of the month.
	 
	 	(c)  	Six-Month Distribution Freeze. Notwithstanding the foregoing Paragraph
(b), if payment is to be made on account of a termination of employment to a key
employee (as defined in section 416(i) of the Code), payment of the portions of that
Participant’s benefit shall not be made under Paragraph (b) above before the date
that is six (6) months after the date of key employee’s separation from service. The
term separation from service shall be construed to have the same meaning consistent
with the term “Separation from Service” as used in section 409A of the Code.

6.7. Freeze of Benefits. Benefits accruals under this Section 6 shall cease as of December 31,
2010.

 -16-

 

 

SECTION 7

RESTORATION RETIREMENT BENEFITS

7.1. Eligibility. Any Participant who becomes a Participant on or after January 1, 2005 shall
be eligible for a benefit under this Section 7.

7.2. Benefit for Participants.

     7.2.1. Entitlement and Amount. This Supplemental Plan shall pay to any Participant described
in Section 7.1 above the excess, if any, of:

	 	(a)  	the amount that would have been payable under the Pension Plan if the
benefit payable to the Participant had been determined (i) without regard to the
benefit limitations under section 415 of the Code, (ii) without regard to the
compensation limitation of section 401(a)(17) of the Code, and (iii) including
individual incentive payments in Recognized Compensation; over
	 
	 	(b)  	the amount payable from the Pension Plan after taking into account (i) the
benefit limitations under section 415 of the Code, (ii) the compensation limitation
of section 401(a)(17) of the Code, and (iii) excluding individual incentive payments
from Recognized Compensation.

     7.2.2. Payment of Benefits. Except as provided in Section 7.4, this benefit (minus the
withholding, payroll and other taxes which must be deducted therefrom) shall be paid to the
Participant directly from the general assets of Otter Tail Corporation in the same manner, at the
same time, for the same duration and in the same form as if such benefit had been paid directly
from the Pension Plan. All elections and optional forms of settlement in effect and all other
rules governing the payment of benefits under the Pension Plan shall, to the extent practicable, be
given effect under this Supplemental Plan so that the Participant will receive from a combination
of the Pension Plan and this Supplemental Plan the same benefit (minus the withholding, payroll and
other taxes which must be deducted therefrom) which would have been received under the Pension Plan
if the limitation on benefits under section 415 of the Code and the compensation limitation of
section 401(a)(17) of the Code had not been in effect.

7.3. Benefit for Beneficiaries.

     7.3.1. Entitlement and Amount. This Supplemental Plan shall pay to the surviving spouse or
other joint or contingent annuitant or beneficiary of a Participant the excess, if any, of:

	 	(a)  	the amount which would have been payable to such person under the Pension
Plan if the benefit payable to the Participant had been determined (i) without regard
to the benefit limitations of section 415 of the Code, and

-17-

 

	 	  	(ii) without regard to the compensation limitation of section 401(a)(17) of the Code, over
	 
	 	(b)  	the amount payable from the Pension Plan after taking into account (i) the
benefit limitations under section 415 of the Code, and (ii) the compensation
limitation of section 401(a)(17) of the Code.

     7.3.2. Form of Payment. This benefit (minus the withholding, payroll and other taxes which
must be deducted therefrom) shall be paid to such person directly from the general assets of Otter
Tail Corporation in the same manner, at the same time, for the same duration and in the same form
as if such benefit had been paid directly from the Pension Plan. All elections and optional forms
of settlement in effect and all other rules governing the payment of benefits under the Pension
Plan shall, to the extent practicable, be given effect under this Supplemental Plan so that such
person will receive from a combination of the Pension Plan and this Supplemental Plan the same
benefit (minus the withholding, payroll and other taxes which must be deducted therefrom) which
would have been received under the Pension Plan if the limitation on benefits under section 415 of
the Code and the compensation limitation of section 401(a)(17) of the Code had not been in effect.

7.4. Six-Month Distribution Freeze. Notwithstanding the foregoing Section 7.2.2, if payment is to
be made on account of a termination of employment to a key employee (as defined in section 416(i)
of the Code), payment of the portions of that Participant’s benefit shall not be made under Section
7.2.2 above before the date that is six (6) months after the date of key employee’s separation from
service. The term separation from service shall be construed to have the same meaning consistent
with the term “Separation from Service” as used in section 409A of the Code.

-18-

 

SECTION 8

SUPPLEMENTAL SURVIVOR BENEFIT

8.1. Eligibility. Benefits payable under this Section 8 shall be applicable to all
Participants entitled to benefits under either Section 5 or 6 and shall be in addition to any
benefits payable under Section 4.

8.2. Pretermination. If a Participant dies while employed by the Employer, the Participant’s
Beneficiary shall receive the Actuarial Equivalent of the Participant’s benefit in fifteen (15)
annual installments.

8.3. Posttermination. If a Participant has terminated employment with the Employer but benefits
have not commenced under this Supplemental Plan, the Participant’s Beneficiary shall receive the
Actuarial Equivalent of the Participant’s benefit in fifteen (15) annual installments.

8.4. After Benefits Commence. If a Participant dies after the commencement of benefits under this
Supplemental Plan, the Beneficiary shall receive benefits consistent with either Section 5.6(a) or
6.6(a).

-19-

 

SECTION 9

BENEFICIARY DESIGNATION

9.1. Beneficiary Designation. Each Participant, except a Participant who receives a benefit
other than a benefit under Section 7, shall have the right, at any time, to designate any person or
persons as Beneficiary (both primary as well as secondary) to whom benefits under this Supplemental
Plan shall be paid as a result of the Participant’s death prior to complete distribution to
Participant of the benefits due under the Supplemental Plan. Each Beneficiary designation shall be
in a written form prescribed by the Committee, and will be effective only when filed with the
Committee during the Participant’s lifetime.

9.2. Amendments. Any Beneficiary designation may be changed by a Participant without the consent
of any designated Beneficiary by the filing of a new Beneficiary designation with the Committee.
The filing of a new Beneficiary designation form will cancel all Beneficiary designations
previously filed. If a Participant’s Salary is community property, any Beneficiary designation
shall be valid or effective only as permitted under applicable law.

9.3. No Participant Beneficiary Designation. In the absence of an effective Beneficiary
designation, or if all designated Beneficiaries predecease the Participant or die prior to complete
distribution of the Participant’s benefits, then Participant’s designated Beneficiary shall be
deemed to be the person or persons surviving the Participant in the first of the following classes
in which there is a survivor, share and share alike:

	 	(a)  	The surviving Spouse;
	 
	 	(b)  	The Participant’s children, except that if any of the children predecease
the Participant but leave issue surviving, then such issue shall take by right of
representation the share their parent would have taken if living;
	 
	 	(c)  	The Participant’s estate.

9.4. Effect of Payment. The payment to the deemed Beneficiary shall completely discharge
Employer’s obligations under this Supplemental Plan.

-20-

 

SECTION 10

ADMINISTRATION

10.1. Committee; Duties. This Supplemental Plan shall be supervised by the Committee. The
Committee shall consist of at least three (3) individuals appointed by the Board. The Committee
shall have the authority to make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Supplemental Plan and decide or resolve any and all
questions, including interpretations of this Supplemental Plan, as may arise in connection with the
Supplemental Plan. A majority vote of the Committee members shall control any decision. Members
of the Committee may be Participants under this Supplemental Plan.

10.2. Agents. The Committee may, from time to time, employ other agents and delegate to them such
administrative duties as it sees fit, and may from time to time consult with counsel who may be
counsel to the Principal Sponsor.

10.3. Binding Effect of Decisions. The decision or action of the Committee in respect of any
question arising out of or in connection with the administration, interpretation and application of
the Supplemental Plan and the rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the Supplemental Plan.

10.4. Indemnity of Committee. The Principal Sponsor shall indemnify and hold harmless the members
of the Committee against any and all claims, loss, damage, expense or liability arising from any
action or failure to act with respect to this Supplemental Plan, except in the case of gross
negligence or willful misconduct.

10.5. Withholding; Payroll Taxes. Employer shall withhold from payments made hereunder any taxes
required to be withheld from a Participant’s wages for the federal or any state or local
government. However, a Beneficiary may elect not to have withholding for federal income tax
purposes pursuant to Section 3405(a)(2) of the Code, or any successor provision.

10.6. Payment to Guardian. If a Plan benefit is payable to a minor or a person declared
incompetent or to a person incapable of handling the disposition of his property, the Committee may
direct payment of such Plan benefit to the guardian, legal representative or person having the care
and custody of such minor, incompetent or person. The Committee may require proof of incompetency,
minority, incapacity or guardianship as it may deem appropriate prior to distribution of the
Supplemental Plan benefit. Such distribution shall completely discharge the Committee and the
Employer from all liability with respect to such benefit.

-21-

 

SECTION 11

CLAIMS PROCEDURE

11.1. Initiating Benefits. The Committee, upon learning of the Termination of Employment or
death of a Participant shall on its own initiative commence the procedures to make distribution.
If two or more persons are claiming the same benefit, the Committee may withhold payment until the
identity of the person entitled to the payment is established. The Committee may require of the
Participant or Beneficiary information that it reasonably determines is required for it to perform
its obligations hereunder. At the earliest time that a Participant may be entitled to receive
benefits under this Supplemental Plan, the Committee shall notify the Participant of that
entitlement and of the procedures for paying benefits hereunder. Without regard to the foregoing,
a Participant may request payment of benefits under this Supplemental Plan. The Committee shall,
upon receipt of such request expeditiously process the payment of benefits hereunder.

11.2. Original Claim. Any person may file with the Committee a written claim for benefits under
the Supplemental Plan. Within thirty (30) days after the filing of such a claim, the Committee
shall notify the claimant in writing whether his or her claim is upheld or denied in whole or in
part or shall furnish the claimant a written notice describing specific special circumstances
requiring a specified amount of additional time (but not more than sixty days from the date the
claim was filed) to reach a decision on the claim. If the claim is denied in whole or in part, the
Committee shall state in writing:

	 	(a)  	the specific reasons for the denial;
	 
	 	(b)  	the specific references to the pertinent provisions of this Supplemental
Plan on which the denial is based;
	 
	 	(c)  	a description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or information
is necessary; and
	 
	 	(d)  	an explanation of the claims review procedure set forth in this section.

11.3. Claims Review Procedure. Within sixty (60) days after receipt of notice that his or her
claim has been denied in whole or in part, the claimant may file with the Committee a written
request for a review and may, in conjunction therewith, submit written issues and comments. Within
thirty (30) days after the filing of such a request for review, the Committee shall notify the
claimant in writing whether, upon review, the claim was upheld or denied in whole or in part or
shall furnish the claimant a written notice describing specific special circumstances requiring a
specified amount of additional time (but not more than sixty days from the date the request for
review was filed) to reach a decision on the request for review.

11.4. General Rules.

-22-

 

	 	(a)  	No inquiry or question shall be deemed to be a claim or a request for a
review of a denied claim unless made in accordance with the claims procedure. The
Committee may require that any claim for benefits and any request for a review of a
denied claim be filed on forms to be furnished by the Committee upon request.
	 
	 	(b)  	All decisions on claims and on requests for a review of denied claims shall
be made by the Committee.
	 
	 	(c)  	The Committee may, in its discretion, hold one or more hearings on a claim
or a request for a review of a denied claim.
	 
	 	(d)  	Claimants may be represented by a lawyer or other representative (at their
own expense). A claimant’s representative shall be entitled to receive copies of
notices sent to the claimant.
	 
	 	(e)  	The decision of the Committee on a claim and on a request for a review of a
denied claim shall be served on the claimant in writing. If a decision or notice is
not received by a claimant within the time specified, the claim or request for a
review of a denied claim shall be deemed to have been denied.
	 
	 	(f)  	Prior to filing a claim or a request for a review of a denied claim, the
claimant or his or her representative shall have a reasonable opportunity to review a
copy of this Supplemental Plan and all other pertinent documents in the possession of
the Committee.
	 
	 	(g)  	The Committee may permanently or temporarily delegate all or a portion of
its authority and responsibility under this Section 11 to a committee or individual.
	 
	 	(h)  	The procedures and remedies herein are not exclusive. However, a claimant
shall be required to exhaust these administrative remedies before commencing
litigation to recover benefits. If there is litigation regarding the benefits payable
to or with respect to a Participant, determinations by the Committee shall not be
afforded any deference and the matter shall be heard de novo.

-23-

 

SECTION 12

TERMINATION, SUSPENSION OR AMENDMENT

The Board may, in its sole discretion, terminate or suspend this Supplemental Plan at any time
or from time to time, in whole or in part. The Board may amend this Supplemental Plan at any time
or from time to time. Any amendment may provide different benefits or amounts of benefits from
those herein set forth. However, no such termination, suspension or amendment shall adversely
affect the benefits of Participants which have accrued prior to such action or the benefits of any
Beneficiary of a Participant who has previously died.

-24-

 

SECTION 13

MISCELLANEOUS

13.1. ERISA Status. This Supplemental Plan is adopted with the understanding that it is an
unfunded plan maintained primarily for the purpose of providing deferred compensation for a select
group of management or highly compensated employees as provided in section 201(2), section 301(3)
and section 401(a)(1) of ERISA. Each provision shall be interpreted and administered accordingly.

13.2. Unsecured General Creditor. In the event of Employer’s insolvency, Participants and their
Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interest or
claims in any property or assets of Employer, nor shall they be Beneficiaries of, or have any
rights, claims or interests in any life insurance policies, annuity contracts or the proceeds
therefrom owned or which may be acquired by Employer. In that event, any and all of Employer’s
assets and policies shall be, and remain, the general, unpledged, unrestricted assets of Employer.
Employer’s obligation under the Supplemental Plan shall be that of an unfounded and unsecured
promise of Employer to pay money in the future.

13.3. Trust Fund. Employer shall be responsible for the payment of all benefits provided under the
Supplemental Plan. At its discretion, Employer may establish one or more trusts, with such
trustees as the Board may approve, for the purpose of providing for the payment of such benefits.
Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of
Employer’s creditors. To the extent any benefits provided under the Supplemental Plan are actually
paid from any such trust, Employer shall have no further obligation with respect thereto, but to
the extent not so paid, such benefits shall remain the obligation of, and shall be paid by,
Employer.

13.4. Effect on Other Plans. This Supplemental Plan shall not alter, enlarge or diminish any
person’s employment rights or obligations or rights or obligations under the Pension Plan, the
Supplemental Plan or any other plan. It is specifically contemplated that the Pension Plan and
Supplemental Plan could, from time to time, be amended and possibly terminated. This Supplemental
Plan shall not preclude any such amendments or terminations. Although the Principal Sponsor is
generally free to amend and terminate the Pension Plan and the Supplemental Plan, no amendment or
termination of the Pension Plan or the Supplemental Plan shall be effective as to a Participant to
the extent the amendment or termination would have the effect of diminishing the benefits payable
to or with respect to the Participant under this Supplemental Plan unless the Participant has
affirmatively agreed in writing to such amendment or termination.

13.5. Nonassignability. Neither a Participant nor any other person shall have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer,
hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any
part thereof, which are, and all rights to which are, expressly declared to be unassignable and
nontransferable. No part of the amounts payable shall, prior to actual payment, be subject to

-25-

 

seizure or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other person, nor be transferable by
operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.

13.6. Disqualification. Notwithstanding any other provision of this Supplemental Plan document or
any election or designation made under the Supplemental Plan, any individual who feloniously and
intentionally kills a Participant shall be deemed for all purposes of this Supplemental Plan and
all elections and designations made under this Supplemental Plan to have died before such
Participant. A final judgment of conviction of felonious and intentional killing is conclusive for
this purpose. In the absence of a conviction of felonious and intentional killing, the Principal
Sponsor shall determine whether the killing was felonious and intentional for this purpose.

13.7. Not a Contract of Employment. The terms and conditions of this Supplemental Plan shall not
be deemed to constitute a contract of employment between Employer and the Participant, and the
Participant (or the Participant’s Beneficiary) shall have no rights against Employer except as may
otherwise be specifically provided herein. Moreover, nothing in this Supplemental Plan shall be
deemed to give a Participant the right to be retained in the service of Employer or to interfere
with the right of Employer to discipline or discharge the Participant at any time.

13.8. Protective Provisions. A Participant will cooperate with Employer by furnishing any and all
information requested by Employer, in order to facilitate the payment of benefits hereunder, and by
taking such physical examinations as Employer may deem necessary and taking such other action as
may be requested by Employer.

13.9. Terms. Wherever any words are used herein in the singular or in the plural, they shall be
construed as though they were used in the plural or the singular, as the case may be, in all cases
where they would so apply.

13.10. Captions. The captions of the articles, sections and paragraphs of this Supplemental Plan
are for convenience only and shall not control or affect the meaning or construction of any of its
provisions.

13.11. References to Laws. Any reference in this Supplemental Plan document to a statute or
regulation shall be considered also to mean and refer to any subsequent amendment or replacement of
that statute or regulation.

13.12. Choice of Law. This Supplemental Plan document has been executed and delivered in the State
of Minnesota and shall, except to the extent that federal law is controlling, be construed and
enforced in accordance with the laws of the State of Minnesota.

13.13. Validity. In case any provision of this Supplemental Plan shall be held illegal or invalid
for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this
Supplemental Plan shall be construed and enforced as if such illegal and invalid provision had
never been inserted herein.

-26-

 

13.14. Notice. Any notice or filing required or permitted to be given to the Committee under the
Supplemental Plan shall be sufficient if in writing and hand delivered, or sent by registered or
certified mail to any member of the Committee or the Secretary of the Employer. Such notice shall
be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on
the postmark on the receipt for registration or certification.

13.15. Successors. The provisions of this Supplemental Plan shall bind and inure to the benefit of
Otter Tail Corporation and its successors and assigns. The term successors as used herein shall
include any corporate or other business entity which shall, whether by merger, consolidation,
purchase or otherwise acquire all or substantially all of the business and assets of Otter Tail
Corporation, and successors of any such corporation or other business entity.

     IN WITNESS WHEREOF, and pursuant to resolution of the Board of Directors of Otter Tail
Corporation, such corporation has caused this instrument to be executed by its duly authorized
officers effective as of January 31, 2005.

	 	 	 	 	 
	 	 	OTTER TAIL CORPORATION
	 
	 	 	 	 
	

	 	By:
	 	/s/ John D. Erickson
	

	 	 	 	

	

	 	Its
	 	President and Chief Executive Officer

-27-

 

APPENDIX A

ADDITIONAL YEARS OF PARTICIPATION

     This service is granted in lieu of any service granted under a prior Plan Statement or
agreement.

	 	 	 
	 	 	Additional Years
	Participant	 	of Participation
	George Koeck
	 	3.6

	Lauris Molbert
	 	6.5

	Kevin Moug
	 	5

	Charles Hoge
	 	5

	Mark Helland
	 	10

A-1<PAGE>
                                                                    Exhibit 10.1

                                THERMA-WAVE, INC.

                         DIRECTOR STOCK OPTION AGREEMENT
                           (Nonqualified Stock Option)

            THIS DIRECTOR STOCK OPTION AGREEMENT (this "Agreement") is made and
entered into as of _____________________, 20__ by and between Therma-Wave, Inc.,
a Delaware corporation (the "Company"), and the director of the Company listed
on the signature page hereto ("Optionee").

            Pursuant to the Company's 2000 Equity Incentive Plan (the "Plan"),
the Company and the Optionee desire to enter into an agreement to evidence the
grant by the Company to the Optionee of an option (the "Option") to acquire that
number of shares of the Company's common stock, par value $0.01 per share (the
"Common Stock") listed on the signature page hereto (the "Option Shares").
Capitalized terms used herein and not otherwise defined are defined in Section 6
hereof.

            The parties hereto agree as follows:

            1. Option Grant. The Company hereby grants to the Optionee, pursuant
to the Plan, an Option to purchase the Option Shares at a price per share equal
to that amount listed on the signature page hereto (the "Exercise Price"). The
Exercise Price and the number of Option Shares will be equitably adjusted for
any stock split, stock dividend, reclassification or recapitalization of the
Company which occurs subsequent to the date of this Agreement. The Option is not
intended to be an "incentive stock option" within the meaning of Section 422A of
the Code.

            2. Exercise of Option.

            (1) Normal Vesting. The Option granted hereunder may be exercised
only to the extent it has become vested. The Option shall vest and become
exercisable with respect to the following number of Option Shares (set forth on
a cumulative basis): (i) 25% of the Option Shares on the first year anniversary
of the Grant Date; (ii) 2.083% of the Option Shares each month on the thirteenth
(13th) through the forty eighth (48th) monthly anniversary of the Grant Date
(each a "Vesting Date"), if and only if the Optionee is, and has been,
continuously serving as a director of the Company from the Grant Date through
the applicable Vesting Date.

            (2) No Vesting After Termination Date. The Option shall cease to
vest after the Termination Date. Any portion of the Option which has vested and
become exercisable prior to the Termination Date shall remain exercisable for
the period set forth in Section 3.

<PAGE>

            (3) Procedure for Exercise. At any time prior to the Expiration
Date, Optionee may exercise all or a portion of the Option (to the extent
vested), which has not expired pursuant to subsection 3(b) below by delivering
written notice of exercise to the Company, together with (i) a written
acknowledgment that Optionee has read and has been afforded an opportunity to
ask questions of members of the Company's management regarding all financial and
other information provided to Optionee regarding the Company and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of payment in cash, check, other shares of capital stock of
the Company or any combination of the foregoing. As a condition to any exercise
of the Option, Optionee will permit the Company to deliver to him all financial
and other information regarding the Company and its Subsidiaries which it
believes necessary to enable Optionee to make an informed investment decision.
Shares issued upon exercise of an Option shall be issued in the name of the
Optionee or, if requested by the Optionee, in the name of the Optionee and his
or her spouse.

            3. Expiration of Option.

            (1) Normal Expiration. In no event shall any part of the Option be
exercisable after the Expiration Date.

            (2) Expiration Upon Termination Date. Any portion of the Option that
was not vested and exercisable on the Termination Date shall expire on such date
and may not be exercised thereafter under any circumstance. Any portion of the
Option that was vested and exercisable on the Termination Date shall expire on
the earlier of (i) three months after the Termination Date (or 12 months after
the Termination Date if the termination was caused by Optionee's death,
disability or retirement) and (ii) the Expiration Date and may not be exercised
thereafter under any circumstance.

            (3) Non-Transferability of Option. The Option is personal to
Optionee and is not transferable by Optionee except pursuant to the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.

            4. Adjustments upon Dissolution, Merger or Asset Sale.

            (1) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify each Optionee
as soon as practicable prior to the effective date of such proposed transaction.
To the extent it has not been previously exercised, an Option will terminate
immediately prior to the consummation of such proposed action.

            (2) Change in Control. In the event of a Change in Control any
Option awarded under this Agreement not previously vested shall become fully
vested and fully exercisable immediately upon the Change in Control.

            5. Definition of Option Shares. For all purposes of this Agreement,
Option Shares will continue to be Option Shares in the hands of any holder other
than Optionee (except

<PAGE>

for the Company, purchasers pursuant to an offering registered under the 1933
Act and subsequent transferees), and each such other holder of Option Shares
will succeed to all rights and obligations attributable to Optionee as a holder
of Option Shares hereunder. Option Shares will also include shares of the
Company's capital stock issued with respect to Option Shares by way of a stock
split, stock dividend or other recapitalization.

            6. Definitions. The following terms are defined as follows:

            "1933 Act" means the Securities Act of 1933, as amended from time to
time.

            "Affiliate" means, with respect to any Person, any other Person who
is controlling, controlled by, or under common control with such Person and, in
the case of a Person which is a partnership, any partner of such Person.

            "Board" means the Company's Board of Directors.

            "Change in Control" means the occurrence of any of the following:

            (1)   When any "person" as defined in Section 3(a)(9) of the
                  Securities Exchange Act of 1934, as amended (the "Exchange
                  Act") and as used in Sections 13(d) and 14(d) thereof,
                  including a "group" as defined in Section 13(d) of the
                  Exchange Act but excluding the Company and any Subsidiary and
                  any employee benefit plan sponsored or maintained by the
                  Company or any Subsidiary (including any trustee of such plan
                  acting as trustee), directly or indirectly, becomes the
                  "beneficial owner" (as defined in Rule 13d-3 under the
                  Exchange Act, as amended from time to time), after the
                  effective date of the Plan, of securities of the Company
                  representing 50 percent or more of the combined voting power
                  of the Company's then outstanding securities;

            (2)   When, during any period of 24 consecutive months during the
                  existence of the Plan, the individuals who, at the beginning
                  of such period, constitute the Board (the "Incumbent
                  Directors") cease for any reason other than death to
                  constitute at least a majority thereof, provided, however,
                  that a director who was not a director at the beginning of
                  such 24-month period shall be deemed to have satisfied such
                  24-month requirement (and be an Incumbent Director) if such
                  director was elected by, or on the recommendation of or with
                  the approval of, at least two-thirds of the directors who then
                  qualified as Incumbent Directors either actually (because they
                  were directors at the beginning of such 24-month period) or by
                  prior operation of this provision; or

            (3)   The consummation of a transaction involving the acquisition of
                  the Company by an entity other than the Company or a
                  Subsidiary through purchase of assets, by merger, or
                  otherwise.

<PAGE>

            "Code" means the Internal Revenue Code of 1986, as amended from time
to time.

            "Common Stock" means, collectively, the Company's common stock, par
value $0.01 per share.

            "Expiration Date" means, with respect to any Option, the date which
is the tenth anniversary of the date hereof.

            "Grant Date" means the date the Board approves the grant by the
Company to the Optionee of the Option governed by this Agreement.

            "Option Shares" means (i) all shares of Common Stock purchased
pursuant to the Options granted pursuant to this Agreement and (ii) all shares
of Common Stock issued with respect to Common Stock referred to in clause (i) by
way of stock dividend or stock split or in connection with a recapitalization or
other reorganization affecting the Common Stock.

            "Person" means an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.

            "Plan" has the meaning set forth in the preamble.

            "Subsidiary" means any corporation of which shares of stock having a
majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.

            "Termination Date" means the date that Optionee ceases to serve as a
director of the Company for any reason.

            7. Notices. Any notice provided for in this Agreement must be in
writing and must be personally delivered, received by certified mail, return
receipt requested, or sent by guaranteed overnight delivery service, to the
Optionee at the address appearing on the signature page hereto and to the other
recipients at the address indicated below:

      To the Company:

            Therma-Wave, Inc.
            1250 Reliance Way
            Fremont, California 94539
            Attn:  President

      and

            Kirkland & Ellis
            777 South Figueroa Street
            Los Angeles, CA  90017
            Attn:   Eva Davis

<PAGE>

or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.

            8. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.

            9. Complete Agreement. This Agreement and the Plan embody the
complete agreement and understanding among the parties and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way. Without limiting the foregoing, all existing stock option agreements
between the Company and/or the Company's existing stockholders and Optionee are
hereby cancelled and terminated.

            10. Counterparts. This Agreement may be executed in separate
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.

            11. Successors and Assigns; Transfer. This Agreement is intended to
bind and inure to the benefit of and be enforceable by Optionee, the Company,
and their respective successors and assigns, provided that Optionee may not
assign any of his or her rights or obligations, except as expressly provided by
the terms of this Agreement.

            12. Governing Law. The corporate law of the State of Delaware will
govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the State of California, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of California or
any other jurisdiction) that would cause the application of the law of any
jurisdiction other than the State of California.

            13. Remedies. The parties hereto acknowledge and agree that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.

<PAGE>

            14. Effect of Transfers in Violation of Agreement. The Company will
not be required (a) to transfer on its books any Option Shares which have been
sold or transferred in violation of any of the provisions set forth in this
Agreement or (b) to treat as owner of such Option Shares, to accord the right to
vote as such owner or to pay dividends to any transferee to whom such Option
Shares have been transferred in violation of this Agreement.

            15. Amendments and Waivers. The Board may at any time amend, alter,
suspend or terminate the Plan without the consent of any Optionee; provided,
however, that no amendment, alteration, suspension or termination of the Plan
shall impair the rights of any Optionee.

            16. Therma-Wave, Inc. 2000 Equity Incentive Plan. The grant of any
Option hereunder is pursuant to and subject to all of the terms and conditions
of the Plan.

<PAGE>

            IN WITNESS WHEREOF, the parties have executed this Director Stock
Option Agreement on the day and year first above written.

                                    THERMA-WAVE, INC.

                                    -----------------------------------
                                    By: L. RAY CHRISTIE
                                    Its:  Vice President Finance & CFO

                                    OPTIONEE:

                                    -----------------------------------
                                    Name:

                                    Address (please print):

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

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

                                    Number of Option Shares:  ______________

                                    Exercise Price:  $___________

                                    [insert closing price on trading date
                                    immediately preceding date of Board
                                    authorization of this agreement]

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