Document:

Exhibit 10.13 to Tennant Company Form 10-K for fiscal year ended December 31, 2006

Exhibit 10.13  

 

TENNANT’S

SHORT-TERM

INCENTIVE

PLAN

(STIP)

 

2007

	
            Tennant Company
 	
            Incentive Plan
 

 

 

	
            OBJECTIVE
  	
            To maximize Economic Profit Improvement.

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

 

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

•    leveraging capital investments;

•    tying incentives to the business performance; and

•    successfully meeting annual individual objectives.

 

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

 

1.   maximize returns on investment;

2.   recognize unit performance;

3.   reward teamwork across the organization; and

4.   recognize individual contributions.

 

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

 

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

 

•     Sales

•     Operating Expenses

–     Cost of Sales

–     Selling and Administration Expenses

 

•     Tax Rates

•     Capital Charge on net assets, including:

–     Inventories

–     Receivables

–     Property, Plant and Equipment

 

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

2007 Tennant STIP

	
            Tennant Company
 	
            Incentive Plan
 

 

 

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

 

Minimum EP Performance Factor —  If the combined business unit and corporate EP performance level fall below a 25% payout factor, the EP payout factor will be no more than 25%, the exact amount to be determined in the discretion of the Management  Committee or Compensation Committee, as the case may be, so long as:

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

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

 

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

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

 

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

 

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

 

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

 

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

 
 

 

2007 Tennant STIP

	
            Tennant Company
 	
            Incentive Plan
 

 

 

	
             

STIP Payout Formula
  	
             

STIP Payout Formula = 

 

Base Salary X STIP Award % = Target Award

 

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

+

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

X

Individual Factor

 

Example 1 — An STIP participant has a base salary of $90,000 and a target award of 10% of base. His STIP award is based 100% on TCON EP. The Company achieves 110% of targeted EP and the individual meets 90% of his STIP objectives.

 

Target Incentive:  $90,000 X 10% = $9,000

 

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

X

Individual EP Factor

 

TCON:  $9,000 X 100% X 110% =

Indiv. Factor = 90% achievement = 90% (see Attachment B)

 

$9,900 X 90.0% = $8,910.00

 

Example 2 — A STIP participant has a base salary of $100,000 and a target award of 15% of base. Her STIP award is based 50% on TCON EP and 50% on North American EP. The Company achieves 100% of targeted TCON EP, 150% of targeted North America EP, and the individual meets 105% of her STIP objectives.

 

Target Incentive:  $100,000 X 15% = $15,000

 

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

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

Individual EP Factor

 

TCON:  $15,000 X 50% X 100% = $7,500

North America:  $15,000 X 50% X 150% = $11,250

Individ. Factor = 105% Achievement = 105% (see Attachment B)

 

($7,500 + $11,250) X 105% = $19,687
 

 

2007 Tennant STIP

	
            Tennant Company
 	
            Incentive Plan
 

 

 

	
DEFINITIONS 
 
	 
	
            BASE SALARY
 	
The total base pay of an individual for the calendar year
of the plan year. 
 
	 
	
            OBJECTIVES
 	
Company and individual objectives should be developed
prior to the beginning of the Plan year. Individual objectives will be approved by the respective unit head. Quarterly review and
evaluation of each participant’s objectives will be the responsibility of the STIP participant and his/her
manager.
 
	 
	
            MANAGEMENT  COMMITTEE 
 	
This Committee has the responsibility for administration
of the Plan, reviewing annual objectives, approving any changes in objectives, and resolving any issues around Plan
interpretations. The Management Committee will consist of Tennant’s CEO, VP of HR/Admin, CFO, and the respective SMT
member.
 
	 
	
            MATERIAL CHANGES
 	
In those instances where
there are material changes or strategic investments in the business (e.g., mergers, acquisitions, divestitures, certain designated
significant capital investments or gains), the Management Committee reserves the right, without limitation, to make corresponding
adjustments to any or all aspects of the Plan (i.e., funding schedules, individual objectives, etc.). For changes that affect
the SMT, the Compensation Committee of the Board must approve respective changes.
 
	 
	
            OBJECTIVES UPDATE
 	
In those instances where
organizational objectives or priorities supersede a participant’s objectives, appropriate adjustments to the
participant’s objectives must be reviewed and approved by the Management Committee.
 
	 
	
            ANNUAL PAYOUT
 	
Annual incentives will be distributed within two and a half months after the year-end (i.e, by March 15). 

Except as set forth below, payouts in excess of 200% of target will be made in restricted stock with a vesting
schedule of 50% per year over the following two years. If the participant announces his or her retirement after any such
restricted stock is issued, the restrictions on such shares shall lapse. Notwithstanding the foregoing, if the participant’s
employment terminates by reason of retirement during the plan year, payout in excess of 200% of target will be made in cash. 
 
	 
	
            TERMINATION
 	
            Should a participant’s employment terminate prior to the end of the Plan year for any reason other than retirement, death, or disability, the participant will not be entitled to an incentive payment for the Plan year.

 
 

 

2007 Tennant STIP

	
            Tennant Company
 	
            Incentive Plan
 

 

 

	
             
 	
If a participant’s employment with the Company
terminates by reason of retirement, death, or disability, a prorated payment will be made within 2-1/2 months following the end of
the performance period, based upon the time the participant served during the performance period. The final award will be based on
the performance over the entire performance period. In the event of termination of the participant’s employment by reason of
retirement, death or disability, any election to receive payout in the form of Deferred Stock Units (DSUs) shall be null and
void.

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

 

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

AT WILL

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

AND

IMPLEMENTATION
 	
            The Company reserves the right, without limitation, to interpret and implement this Plan in accordance with the 1999 Stock Incentive Plan. Interpretations of this Plan are generally made by the Compensation Committee of the Board.
 

 

 

 

	
            Participant Signature
 	
              
	
              
	
              

	
             
 	
             
 	
             
 	
            Date
 
	 
	
            Manager Signature 
 	
              
	
              
	
              

	
             
 	
             
 	
             
 	
            Date
 
	 
	
            SLT Member Signature 
 	
              
	
              
	
              

	
             
 	
             
 	
             
 	
            Date
 

 

2007 Tennant STIPExhibit 10.14 to Tennant Company Form 10-K for fiscal year ended December 31, 2006

Exhibit 10.14  

TENNANT COMPANY

 

1999 STOCK INCENTIVE PLAN

 

Certificate Evidencing Deferred Stock Units

 

 

	
            Name of Holder:  «First_Name_Last_Name»
 
	
            No. of Units: «DSU_Shares»
 	
            Date of Grant:  
 
	
            Payment Date:  
 	
             
 

 

 

This Certificate evidences deferred stock units (“Units”) granted to the individual identified above (the “Holder”) pursuant to the Tennant Company 1999 Stock Incentive Plan (the “Plan”) and is an Agreement between Tennant Company (the “Company”) and the Holder, effective as of the date of grant specified above. 

 

Recitals

 

WHEREAS, the Company maintains the Plan; and  

 

WHEREAS, pursuant to the Plan, the Compensation Committee (“Committee”) of the Board of Directors has the authority to issue Units in payment of awards granted under the Plan; and  

 

WHEREAS, the Committee has determined that the Holder has earned an award under the Plan and that such award should be paid in Units in lieu of cash as authorized by Section 4.4 of the Plan;

 

NOW, THEREFORE, the Company hereby grants Units to the Holder under the terms and conditions as follows:  

 

Terms and Conditions

 

	
            1.
 	
            Grant. The Holder is granted the number of Units specified at the beginning of this Agreement.
 

 

	
            2.
 	
            Fair Market Value of Units. The fair market value of a Unit subject to this Agreement shall at all times be equal to the fair market value of a share of common stock of the Company, par value $.375 per share (“Common Stock”). For purposes of this Agreement, the fair market value of a share of Common Stock at a specified date shall mean the closing sale price of a share of Common Stock on the date immediately preceding such date, or, if no such sale shall have occurred on that date, on the next preceding day on which a sale occurred, on the principal market for the Common Stock.
 

 

1

	
            3.
 	
            Payment of Benefits.
 

 

(a)    Generally. Payment of Units subject to this Agreement shall be made by the Company’s delivering shares of Common Stock having a fair market value at the date of payment, equal in the aggregate to the fair market value at such date of such Units; provided, however, that the amount payable in shares of Common Stock shall be reduced by an amount necessary to cover the Company’s tax withholding obligation.

 

(b)   Timing. Units subject to this Agreement shall be paid on the payment date specified at the beginning of this Agreement, unless the Holder’s employment with the Company shall terminate prior to such payment date (whether by reason of death, Disability, Retirement, voluntary termination, or involuntary termination with or without cause), in which event the Units shall be paid on the fifth business day following such termination of employment (or by such later date as the Committee shall determine is reasonable under the circumstances and permissible under the payment timing rules of Section 409A of the Code). Notwithstanding anything to the contrary herein, payment under Section 3 of this Agreement, to the extent such benefit is, in the good faith opinion of the Company,
considered to be deferred compensation under Section 409A of the Code shall not be made prior to separation from service, disability or death as permitted under Section 409A(a)(2)(A)(i), (ii) or (iii) of the Code, subject, in the case of a payment due as a result of a separation from service, to the six month delayed payment requirement of Section 409A(a)(2)(B) (such delay shall be without interest or earnings credit) in the event that Executive is a specified employee within the meaning of such subsection. Further, any such amounts that are deferred compensation may not be accelerated in a manner inconsistent with Section 409A(a)(3) of the Code. The Company and the Holder intend that any deferred compensation amounts payable under the Agreement comply in full with paragraphs (2), (3) and (4) of Section 409A(a) of the Code, and the provisions of the Agreement shall be interpreted consistent with such intent, and the parties each agree that further modifications to the Agreement will
be made if and as necessary to comply in form and substance with Section 409A of the Code.

 

(c)    Effect. Whenever the Company shall become obligated to make payment in respect of a Unit subject to this Agreement, all rights of the Holder with respect to such Unit, other than the right to such payment, shall terminate and be of no further force or effect and such Unit shall be cancelled.

 

(d)   Payments on Death. Any payment due under this Agreement following the death of the Holder shall be paid to the estate of the Holder.

 

	
            4.
 	
Adjustment in
Number of Units Upon Payment of Cash Dividends. In the event the Company shall pay cash dividends on
its Common Stock on or after the date of this Agreement, then the Holder shall be entitled to receive additional Units with
respect to such cash dividends. The number of additional Units shall be determined by multiplying the number of Units credited to
the Holder’s 
 

 

2

account as of the dividend
record date pursuant to this Agreement times the dollar amount of the cash dividend per share of Common Stock, and then divided by
the fair market value of a share of the Common Stock (calculated as set forth in Section 2 of this Agreement) as of the dividend
payment date. The additional Units credited to the Holder’s account upon payment of any cash dividends shall be included in
the total number of Units subject to this Agreement and shall be paid pursuant to this Agreement. In the event a payment is
otherwise due under the terms of Section 3 or 6 of this Agreement after the dividend record date but prior to the dividend payment
date, a subsequent payment shall be made as necessary to account for any additional Units credited as of the dividend payment date
under this Section 4.

 

	
            5.
 	
            Adjustment in Number of Units Upon Early Termination of Employment. The Units initially subject to this Agreement have a fair market value, as of the date of grant, equal to 120% of the cash bonus in lieu of which such Units were granted. If, prior to the payment date specified at the beginning of this Agreement (or, if earlier, the occurrence of a Change in Control), the employment of the Holder with the Company is terminated for any reason other than death, Disability or Retirement, then the number of Units subject to this Agreement shall be reduced so that the number of Units subject to this Agreement is equal to that number of Units (the “Base Number”) that would have resulted had there originally been granted to the Holder Units having a fair market value, as of the date of grant, equal to 100% of such cash
bonus. If, prior to the payment date specified at the beginning of this Agreement (or, if earlier, the occurrence of a Change in Control), the employment of the Holder with the Company is terminated by reason of death, Disability or Retirement, then the number of Units subject to this Agreement shall be reduced so that the number of Units subject to this Agreement is equal to the sum of (i) the Base Number, plus (ii) a pro rata portion of the difference between the number of Units subject to this Agreement immediately prior to such reduction and the Base Number (such proration being based on the number of days occurring prior to such termination of employment in the three-year period beginning on January 1 of the year in which the date of grant occurred and ending on the payment date specified at the beginning of this Agreement). As used in this Agreement, Disability means a medical condition that the Committee has determined renders the Holder unable to perform the normal
duties of the Holder’s position with the Company. The Committee may, in its sole discretion, obtain a medical opinion from a physician selected by the Committee before any determination of Disability is made. As used in this Agreement, Retirement means termination of employment at or after age 55, provided that the Holder has given the Company at least six months’ prior written notice of such termination, or as otherwise determined by the Committee. As used in this Agreement, Change in Control shall have the meaning ascribed thereto in the Company’s 1999 Stock Incentive Plan.
 

	
            6.
 	
            Change in Control. Notwithstanding anything to the contrary stated herein, upon the occurrence of a Change in Control, all of the Units subject to this Agreement shall be paid in full immediately. Notwithstanding anything in this Agreement to the contrary, no Change in Control shall be deemed to occur 
 

 

3

	
             
 	
unless it would be
deemed to constitute a change in ownership or effective control, or a change in the ownership of a substantial portion of the
assets, of a business under Section 409A of the Code.
 

	
            7.
 	
            Adjustments in Character and Number of Units Upon Certain Corporate Events. In the event of any stock split, stock dividend, spin-off, reclassification, recapitalization, reorganization, merger, consolidation, combination, exchange or the like that changes the character or amount of the Common Stock of the Company, the Committee, or the board of directors of any surviving or resulting corporation, shall make such adjustments in the character and number of Units subject to this Agreement and may take such other actions as shall, in the reasonable judgment of the Committee or such board of directors, be equitable and appropriate in order to make the Units equivalent, after such change, as nearly as may be practicable, to the Units immediately prior to such change.
 

 

	
            8.
 	
            No Transfer. The Units may not be pledged, assigned or transferred.
 

 

	
            9.
 	
            No Shareholder Rights. The Holder shall not have any of the rights of a shareholder of the Company.
 

 

	
            10.
 	
            No Right to Employment. This Agreement shall not give the Holder a right to continued employment with the Company or any parent or subsidiary of the Company, and the Company or any such parent or subsidiary employing the Holder may terminate the Holder’s employment and otherwise deal with the Holder without regard to this Agreement.
 

 

	
            11.
 	
            Tax Withholding. As a condition precedent to making a payment hereunder, the Company may require the Holder to pay an amount equal to the amount of any required tax withholdings. 
 

 

	
            12.
 	
            Binding Effect. This Agreement shall be binding in all respects on the heirs, representatives, successors and assigns of the Holder.
 

 

	
            13.
 	
            Choice of Law. This Agreement is entered into under the laws of the State of Minnesota and shall be construed and interpreted thereunder (without regard to its conflict of law principles).
 

 

IN WITNESS WHEREOF, the Holder and the Company have executed this Agreement effective as of the date of grant specified above. 

 

	
             
  	
            HOLDER
  
	 
	
             
 	
            «First_Name_Last_Name»
 

 

 

	
             
  	
            TENNANT COMPANY
  
	 
	
             
 	
            By  
 	
               
 
	
             
 	
             
 	
            Thomas J. Dybsky 
 
	 
	
             
 	
            Its   
 	
            Vice President
 

P1232

4

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