Exhibit 10-N-1
OTTER TAIL CORPORATION
DEFERRED COMPENSATION PLAN FOR DIRECTORS
As Amended and Restated Effective January 1, 2003
TABLE OF CONTENTS
Page
Number
------
1. PURPOSE 3
2. PLAN PERIODS 3
3. ADMINISTRATION 3
4. PARTICIPATION 3
5. DEFERRED COMPENSATION ACCOUNTS 5
6. PAYMENT 8
7. ASSIGNMENT 12
8. TERMINATION AND AMENDMENT 12
SCHEDULE A
SCHEDULE B
2
OTTER TAIL CORPORATION
DEFERRED COMPENSATION PLAN FOR DIRECTORS
As Amended and Restated Effective January 1, 2003
1. PURPOSE. The Plan is designed to provide a method of deferring payment
to non-employee Directors of all or part of their retainer and/or meeting fees,
as fixed from time to time by the Board of Directors, until termination of their
services on the Board.
2. PLAN PERIODS. The first Plan Period shall commence upon the election of
Directors at the 1984 Annual Stockholders' Meeting and terminate on December 31,
1984. An additional Plan Period will commence on July 1, 2000 and continue
through December 31, 2000 for which a Director may elect to defer all or part of
his or her retainer and/or meeting fees for that period in the form of
restricted stock units, as provided in Section 5 hereof. Subsequent Plan Periods
shall relate to successive calendar years.
3. ADMINISTRATION. The Plan shall be administered by a committee of the
Board of Directors designated by the Board to administer the Plan (the
"Committee"). The Committee shall be composed solely of two or more
"Non-Employee Directors," within the meaning of Rule 16b-3 under Section 16 of
the Securities Exchange Act of 1934. The Committee shall have the power to
interpret the Plan and, subject to its provisions, to make all determinations
necessary or desirable for the Plan's administration.
4. PARTICIPATION.
(a) An individual who serves as Director and is not otherwise employed by
the Corporation or any of its subsidiaries shall be eligible to participate in
the Plan if the Director elects to have payment of his or her retainer and/or
meeting fees in respect of a Plan Period deferred as provided herein.
3
(b) The election to participate shall be made by written notice on
Schedule A to the Plan filed with the Committee prior to the first day of such
Plan Period or, in the case of a Director who first becomes eligible during a
Plan Period, not later than 30 days after the Director first becomes eligible.
(c) At the time a Director elects to participate in the Plan or when the
Director makes an election with respect to a subsequent Plan Period, the
Director may make a concurrent election on Schedule A to have an organization
described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(a "Tax Exempt Organization"), receive all or part of the cash distributions of
the Director's retainer and/or meeting fees, plus accruals thereon, in
accordance with the terms of distribution specified on Schedule A (a "Charitable
Election"). At the time a Director makes a Charitable Election, the Director
shall also recommend on Schedule A a specific Tax Exempt Organization to receive
the distributions, subject to the approval of the Committee. The Committee shall
make the final determination as to the Tax Exempt Organization that will receive
the distributions and the Committee retains the authority to designate a
different Tax Exempt Organization from the one recommended by the Director.
(d) In the case of a Director who first becomes eligible to participate
during a Plan Period, the election to participate shall apply only to
compensation subsequent to making the election. Each such election shall be
irrevocable. An election on Schedule A shall remain in effect until changed or
rescinded. Prior to the beginning of any subsequent Plan Period, a Participant
may irrevocably elect in writing, by completing a new Schedule A, to change an
earlier election with respect to such subsequent Plan Period. Such new election
shall become effective on the first business day of the Plan Period following
receipt by the Committee of the new Schedule A. Notwithstanding the foregoing, a
Participant may elect, prior to July 1, 2000,
4
to convert all or part of his or her Deferred Cash Account into the Deferred
Stock Account, as such Accounts are described in Section 5 below. The number of
whole and fractional restricted stock units (computed to four decimal places)
shall be determined as of July 3, 2000 by dividing the amount of the Deferred
Cash Account to be converted by the average of the high and low sale prices of a
Common Share of Otter Tail Corporation as reported on the NASDAQ National Market
System on July 3, 2000.
5. DEFERRED COMPENSATION ACCOUNTS.
(a) An account shall be established for each eligible, electing Director
(a "Participant") which shall be designated as the Participant's Deferred
Compensation Account. A Participant's Deferred Compensation Account shall
include a Deferred Cash Account, a Charitable Contribution Account, and a
Deferred Stock Account, as applicable. The Deferred Cash Account means the
bookkeeping account of this Plan to which a Participant's deemed cash
allocations are credited pursuant to the Plan. A Charitable Contribution Account
means the bookkeeping account of this Plan to which a Participant's deemed cash
allocations are credited pursuant to a Participant's Charitable Election under
this Plan. The Deferred Stock Account means the bookkeeping account of this Plan
to which a Participant's deemed restricted stock unit allocations are credited
pursuant to this Plan. If a Participant elects to have payment deferred of his
or her retainer and/or meeting fees, the amount of the retainer and/or meeting
fees payable with respect to a Plan Period shall be credited, (i) in monthly
installments as of the last day of each month in the Plan Period to which such
retainer and/or meeting fees relate, for amounts credited to the Participant's
Deferred Cash Account or Charitable Contribution Account and (ii) in quarterly
installments as of the last day of each calendar quarter in the Plan Period to
which such retainer and/or meeting fees relate, for amounts credited to the
Participant's Deferred
5
Stock Account, subject to the provisions of Section 5(d). The Corporation shall
not be required to segregate any amounts credited to the Deferred Compensation
Accounts, which shall be established merely as an accounting convenience.
Amounts credited to the Deferred Compensation Accounts shall at all times remain
solely the property of the Corporation subject to the claims of its general
creditors and available for the Corporation's use for whatever purpose desired.
(b) The amounts credited to a Deferred Cash Account and a Charitable
Contribution Account shall, in order to alleviate the adverse effects of an
inflationary economy, accrue interest each month at an annual rate equal to the
rate charged for prime commercial loans of 90-day maturity (based on actual
numbers of days, 360 days to the year), plus 1% as of the last business day of
the month. Such interest shall be computed on the average daily balance in each
of the Deferred Cash Account and the Charitable Contribution Account during such
month and shall be credited to each such Account and compounded as of the last
day of such month. Interest shall continue to accrue and be compounded on the
unpaid balance in each of the Deferred Cash Account and the Charitable
Contribution Account until such Account is fully distributed.
(c) The amounts credited to a Deferred Stock Account shall be credited in
the form of restricted stock units as of the last day of the calendar quarter.
The number of whole and fractional restricted stock units (computed to four
decimal places) credited to the Account shall be determined by dividing the
amount deferred to the Deferred Stock Account during the quarter by the average
of the high and low sale prices of a Common Share of Otter Tail Corporation as
reported on the NASDAQ National Market System on the last business day of the
quarter. At such times as cash dividends are declared by the Corporation on its
outstanding Common Shares, an amount shall be credited to the Participant's
Deferred Stock Account on the record date for
6
such dividend equal to the amount of dividends that would be paid if the
restricted stock units (including a fractional unit) were outstanding Common
Shares on such date ("Dividend Equivalents"). At the end of the calendar quarter
in which such Dividend Equivalents are credited to the Participant's Deferred
Stock Account, the Dividend Equivalents shall be converted to additional whole
and fractional restricted stock units (computed to four decimal places) in an
amount determined by dividing the amount of the Dividend Equivalents by the
average of the high and low sale prices of a Common Share of the Corporation as
reported on the NASDAQ National Market System on the last business day of the
quarter. In the event of a stock dividend or other distribution,
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of Common
Shares or other securities of the Corporation, issuance of warrants or other
rights to purchase Common Shares or other securities of the Corporation or other
similar corporate transaction or event that affects the Common Shares, the
Committee shall make such adjustments as it deems appropriate in the number of
restricted stock units credited to a Participant's Deferred Stock Account in
order to prevent dilution or enlargement of the Participant's benefits under the
Plan.
(d) If, prior to the end of a Plan Period, a Participant becomes an
employee of the Corporation or one of its subsidiaries or dies or ceases for any
reason to be a Director, or if the effective date of participation by a
Participant for any Plan Period shall be other than the first day thereof, the
Participant will be entitled to be credited with that proportion of the annual
retainer for the full Plan Period which the number of days of his or her
participation in the Plan during such Plan Period bears to the total number of
days in such Plan Period.
7
6. PAYMENT.
(a) Following termination of a Participant's service on the Board, the
Corporation shall distribute the entire amount accumulated in the Participant's
Deferred Compensation Account in accordance with the provisions of this Plan.
(b) By written notice on Schedule A to the Plan filed with the Committee,
a Participant may elect to have distribution of his or her Deferred Cash Account
commence either (i) within 30 days after the date the Participant ceases to be a
Director of the Corporation, (ii) 12 months after the Participant ceases to be a
Director of the Corporation, or (iii) 24 months after the Participant ceases to
be a Director of the Corporation. Any such election, or any change in such
election (by such subsequent written notice to the Committee), shall apply only
to future deferrals. In the event no election is made as to the commencement of
a distribution, such distribution shall commence within 30 days after the date
the Participant ceases to be a Director of the Corporation. The actual date that
distribution shall commence shall be a date within the appropriate period
determined by the Committee in its sole discretion.
(c) By written notice on Schedule A to the Plan filed with the Committee,
a Participant may choose to receive the distribution of his or her Deferred Cash
Account in the form of (i) one lump-sum payment or (ii) monthly distributions
over a period selected by the Participant of up to 10 years. In the event a
lump-sum payment is made under the Plan, the amount then standing to the
Participant's credit in his or her Deferred Cash Account, including interest at
the rate provided in Section 5(b) to the date of distribution, shall be paid to
the Participant on the date determined under Section 6(b). In the case of a
distribution over a period of years, the Corporation shall pay to the
Participant, commencing on the date determined under Section 6(b), monthly
installments from the amount then standing to the Participant's credit in his or
her
8
Deferred Cash Account, including interest on the unpaid balance at the rate
provided in Section 5(b) to the date of distribution. The amount of each
installment shall be determined by dividing the then unpaid balance, plus
accrued interest, in the Participant's Deferred Cash Account by the number of
installments remaining to be paid. If a Participant does not make a choice as to
the manner of distribution of his or her Deferred Cash Account, such
distribution shall be made in the form of monthly installments paid over a
five-year period. Notwithstanding the above and subject to approval by the
Committee, a Participant may at any time request, by written notice to the
Committee, to have the monthly payments scheduled to be made to him or her
within a tax year paid to him or her in one installment within such year.
(d) Amounts credited to a Participant's Charitable Contribution Account
that are to be distributed to a Tax Exempt Organization shall be so distributed
as a lump-sum payment within 60 days after the end of the Plan Period for which
the Charitable Election was made; provided, however, that in the event of the
death of a Participant who has made a Charitable Election, amounts credited to
the Participant's Charitable Contribution Account shall be distributed to the
Tax Exempt Organization as a lump-sum payment within 90 days after the
Participant's death.
(e) Distributions from the Deferred Stock Account shall be in Common
Shares of the Corporation. The Common Shares available for issuance under this
Plan shall be issued under, and in accordance with the terms of, the Otter Tail
Corporation 1999 Stock Incentive Plan. Upon distribution, one Common Share shall
be issued for each restricted stock unit, except that no fractional shares shall
be issued, and the Participant shall receive a cash payment in lieu of any
fractional share. By written notice on Schedule A to the Plan filed with the
Committee, a Participant may elect to have a distribution of his or her Deferred
Stock Account commence (i) within 30 days after the date the Participant ceases
to be a Director of the Corporation, (ii) 12
9
months after the Participant ceases to be a Director of the Corporation or (iii)
24 months after the Participant ceases to be a Director of the Corporation. Any
such election, or any change in such election (by subsequent written notice to
the Committee), shall apply only to future deferrals. In the event no election
is made as to the commencement of the distribution, such distribution shall
commence within 30 days after the date the Participant ceases to be a Director
of the Corporation. The actual date that the distribution shall commence shall
be a date within the appropriate period determined by the Committee in its sole
discretion.
(f) By written notice on Schedule A to the Plan filed with the Committee,
a Participant may choose to receive the distribution of his or her Deferred
Stock Account in the form of (i) one lump-sum payment or (ii) annual
distributions over a period selected by the Participant of up to 10 years. If a
Participant does not make a choice as to the manner of distribution of his or
her Deferred Stock Account, such distribution shall be made in the form of a
lump-sum payment. In the event a lump-sum payment is made under the Plan, a
certificate representing the Common Shares payable for the whole number of
restricted stock units credited to the Participant's Deferred Stock Account
shall be delivered to the Participant or the Participant's Beneficiary, as the
case may be, along with cash in payment of any fractional share, on the date
determined under Section 6(d). In the case of a distribution over a period of
years, the Corporation shall pay to the Participant, commencing on the date
determined under Section 6(d), annual installments from the number of restricted
stock units then credited to the Participant's Deferred Stock Account, including
additional restricted stock units credited as a result of the deemed
reinvestment of Dividend Equivalents credited to the Participant's account. The
amount of each installment shall be determined by dividing the then unpaid
balance of restricted stock units by the number of installments remaining to be
paid. A certificate representing the whole number of
10
Common Shares payable for such installment shall be delivered to the Participant
or the Participant's Beneficiary, as the case may be, along with cash in payment
of any fractional share. The value of any fractional share shall be based upon
the average of the high and low sale prices of a Common Share of the Corporation
as reported on the NASDAQ National Market System on the business day preceding
the payment date. The Participant or the Participant's Beneficiary, as the case
may be, shall have no rights as a holder of Common Shares unless and until a
certificate for the shares is issued by the Corporation.
(g) In the event of a Participant's death, the balance of a Participant's
Deferred Cash Account or Deferred Stock Account, as the case may be, shall be
distributed to the Participant's Beneficiary(ies) over a period of not more than
five years or in a lump sum, in accordance with the Participant's choice on
Schedule B to the Plan filed with the Committee. Such distribution shall
commence within 30 days after the Participant's death, on a date within such
month to be determined by the Committee in its sole discretion. Additional
annual payments for distributions made over a period of more than one year shall
be made on the yearly anniversaries of such date. In the event of a
Participant's death after distribution of the Deferred Cash Account or Deferred
Stock Account, as the case may be, has commenced, any choice under this Section
6(f) shall not extend time of payment of such Account beyond the time when
distribution would have been completed if the Participant had lived. A
Participant may change Beneficiary designations by filing a subsequent Schedule
B with the Committee. If a Participant does not make a choice as to the manner
of distribution of his or her Deferred Cash Account or Deferred Stock Account,
as the case may be, in the event of death, any such distribution shall be made
as a lump-sum payment to his or her estate within 30 days after the
Participant's death.
11
(h) Notwithstanding any other provision of the Plan, if the Committee
shall determine in its sole discretion that the time of payment of a
Participant's Deferred Compensation Account should be advanced because of
protracted illness or other undue hardship, then the Committee may advance the
time or times of payment (whether before or after the Director's retirement
date) only if the Committee determines that an emergency beyond the control of
the Participant exists and which would cause such Participant severe financial
hardship if the payment of such benefits were not approved. Any such
distribution for hardship shall be limited to the amount needed to meet such
emergency. A Participant who receives a hardship distribution may not reenter
the Plan for 12 months after the date of such distribution. Any distribution for
hardship under this Section 6(h) shall commence or be made within 30 days after
the Committee determines to make such hardship distribution.
7. ASSIGNMENT. No benefit under the Plan shall in any manner or to any
extent be assigned, alienated, or transferred by any Participant or Beneficiary
or subject to attachment, garnishment, or other legal process.
8. TERMINATION AND AMENDMENT. The Committee may terminate the Plan at any
time so that no further amounts shall be credited to Deferred Compensation
Accounts or may, from time to time, amend the Plan, without the consent of
Participants or Beneficiaries; provided, however, that no such amendment or
termination shall impair any rights which have accrued under the Plan.
12
SCHEDULE A
IRREVOCABLE ELECTION
under the
Otter Tail Corporation
Deferred Compensation Plan for Directors
As Amended and Restated Effective January 1, 2003
THIS IRREVOCABLE ELECTION is being made pursuant to the Otter Tail
Corporation Deferred Compensation Plan for Directors, As Amended and Restated
Effective January 1, 2003 (the "Plan"). Any election under any Section specified
below which changes a prior election under the Plan shall apply only to
subsequent Plan Periods, as defined in the Plan. Terms used herein shall have
the meanings given to them in the Plan.
SECTION 1. DEFERRAL ELECTION.
I hereby irrevocably elect to defer receipt of all or part of my retainer
and/or meeting fees pursuant to the terms of the Plan and this Irrevocable
Election, as indicated below:
______ % of retainer
______ % of meeting fees
SECTION 2. CHARITABLE ELECTION.
I hereby elect to have a Tax Exempt Organization receive ____% of my
deferred retainer and/or meeting fees, plus accruals thereon, to be distributed
as a lump-sum cash payment within 60 days after the end of each Plan Period,
subject to the terms of the Plan. I understand that my Charitable Election will
remain in effect until I change it, subject to the terms of the Plan.
Subject to the Committee's approval, I hereby recommend:
_______________________________________
Name of Tax Exempt Organization
_______________________________________
Address
_______________________________________
Contact
_______________________________________
Telephone Number
13
as the recipient of distributions from my Charitable Contribution Account. I
certify that ______________________ qualifies as an organization described in
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. I understand
that the Committee is not bound by my recommendation and has the authority to
designate an alternate Tax Exempt Organization to receive the distributions.
SECTION 3. FORM OF PAYMENT.
I hereby irrevocably elect to receive payment of the amounts deferred in
accordance with my election in Section 1 above and the terms of the Plan, in the
form indicated below:
______ Cash
______ Common Shares of Otter Tail Corporation. I
understand that no actual shares will be issued in
my name until I receive a distribution from the Plan
and, until such time, my Deferred Stock Account will
be credited with restricted stock units and Dividend
Equivalents, which will be converted into additional
restricted stock units, as described in the Plan.
SECTION 4. TIMING OF DISTRIBUTION.
I hereby irrevocably elect, in accordance with the terms of the Plan, to
have the distribution from my Deferred Cash Account and/or Deferred Stock
Account, excluding any amounts subject to a Charitable Election, to commence or
be made as follows:
______ within 30 days after I cease to be a Director of the
Corporation
______ 12 months after I cease to be a Director of the
Corporation
______ 24 months after I cease to be a Director of the
Corporation
I understand that if no election is made, my distribution will commence or
be made within 30 days after I cease to be a Director of the Corporation.
SECTION 5. NUMBER OF DISTRIBUTIONS FROM DEFERRED CASH ACCOUNT.
I hereby elect, in accordance with the terms of the Plan, to receive my
cash distributions from my Deferred Cash Account under the Plan, excluding any
amounts subject to a Charitable Election, as indicated below:
______ In one lump sum
______ In monthly installments over a period of ______
years (not to exceed 10 years)
14
I understand that if no election is made, my cash distribution will be
made in monthly installments over a period of five years.
SECTION 6. NUMBER OF DISTRIBUTIONS FROM DEFERRED STOCK ACCOUNT.
I hereby elect, in accordance with the terms of the Plan, to receive my
stock distributions from my Deferred Stock Account under the Plan, as indicated
below:
______ In one lump sum
______ In annual installments over a period of ______ years
(not to exceed 10 years)
I understand that if no election is made, my stock distribution will be
made in one lump-sum payment.
I further understand that payment from my Deferred Stock Account will be
in the form of Common Shares of the Corporation.
SECTION 7. SIGNATURE.
I understand that the above elections are subject to the terms of the
Plan. I acknowledge receipt of a copy of the Plan. I certify that my elections
are not being made in reliance upon any financial or tax advice given by the
Corporation. I understand that I should consult my own tax advisor as to the tax
consequences of my elections.
__________________________ __________________________________
Witness Participant's Signature
__________________________________
Date
15
SCHEDULE B
BENEFICIARY DESIGNATION FORM
under the
Otter Tail Corporation
Deferred Compensation Plan for Directors
As Amended and Restated Effective January 1, 2003
SECTION 1. METHOD OF DISTRIBUTION IN CASE OF DEATH.
In case of my death, I hereby elect, in accordance with the terms of the
Plan, to have the distribution of my Deferred Compensation Account paid to my
Beneficiary(ies) designated in Section 2 hereof as indicated below:
____ In one lump sum
____ In annual installments over a period of ___ years (not to exceed
five years)
I understand that if no election is made, a lump-sum payment will be made
to my Beneficiary(ies) or estate within 30 days of my death. I further
understand that payments from my Deferred Stock Account, if any, will be in the
form of Common Shares of Otter Tail Corporation.
I UNDERSTAND THAT IF I HAVE MADE A CHARITABLE ELECTION UNDER THE PLAN, AMOUNTS
THAT ARE TO BE DISTRIBUTED TO THE TAX EXEMPT ORGANIZATION WILL BE PAID TO THE
TAX EXEMPT ORGANIZATION IN THE EVENT OF MY DEATH, IN ACCORDANCE WITH THE TERMS
OF THE PLAN.
SECTION 2. DESIGNATION OF BENEFICIARY(IES).
In the event of my death, I hereby designate the following individuals,
fiduciaries or other entities, either in their own right or in their
representative capacity, in the proportions and in the priority of interest
designated, to be the beneficiaries of any benefits owing to me, under the Plan.
PRIMARY BENEFICIARIES - The following beneficiary(ies) shall receive all
benefits payable under the Plan in the event of my death in the proportions
designated hereunder. If any one or more of the primary beneficiaries designated
hereunder shall predecease me, such beneficiary's share(s) shall be divided
equally among the remaining primary beneficiaries.
16
PROPORTIONATE
NAME AND PRESENT ADDRESS INTEREST OF PRIMARY RELATIONSHIP TO
OF PRIMARY BENEFICIARY(IES) BENEFICIARY(IES) EMPLOYEE
___________________________ ___________________% _________________
___________________________ ___________________% _________________
___________________________ ___________________% _________________
___________________________ ___________________% _________________
___________________________ ___________________% _________________
___________________________ ___________________% _________________
___________________________ ___________________% _________________
_______________________ ___________________________
Date Participant's Initials
SECONDARY BENEFICIARIES - The following beneficiary(ies) shall receive all
benefits payable under the Plan in the event of my death in the proportions
designated hereunder only if all of my Primary Beneficiaries have predeceased
me. If all Primary Beneficiaries have predeceased me and if any one or more of
the Secondary Beneficiaries designated hereunder shall predecease me, such
Secondary Beneficiary's share(s) shall be divided equally among the Secondary
Beneficiaries.
PROPORTIONATE
NAME AND PRESENT ADDRESS INTEREST OF
OF SECONDARY SECONDARY RELATIONSHIP
BENEFICIARY(IES) BENEFICIARY(IES) TO EMPLOYEE
___________________________ ___________________% _________________
___________________________ ___________________% _________________
___________________________ ___________________% _________________
ESTATE - In the event I have declined to designate a Beneficiary hereunder
or if all of the Beneficiaries that I have designated predecease me, then all
benefits payable under the Plan shall be payable to my Estate.
_______________________________ ____________________________________
Witness Participant's Signature
____________________________________
Date
17