EXHIBIT 10-B
OTTER TAIL CORPORATION
NONQUALIFIED RETIREMENT SAVINGS PLAN
RESTATED
EFFECTIVE JANUARY 1, 2002
PREPARED BY:
LEONARD, STREET AND DEINARD
PROFESSIONAL ASSOCIATION/AMB
150 S. FIFTH STREET #2300
MINNEAPOLIS, MN 55402
(612) 335-1500
TABLE OF CONTENTS
<Table>
ARTICLE 1. DEFINITIONS, GENDER, AND NUMBER.................................1
Section 1.1. Definitions................................................1
Section 1.2. Gender and Number.........................................10
ARTICLE 2. DEFERRED COMPENSATION ACCOUNTS.................................10
Section 2.1. Establishment of Accounts.................................10
Section 2.2. Property of Company.......................................10
ARTICLE 3. PARTICIPATION..................................................10
Section 3.1. Who May Participate.......................................10
Section 3.2. Time and Conditions of Participation......................10
Section 3.3. Termination of Participation..............................11
Section 3.4. Missing Persons...........................................11
Section 3.5. Relationship to Other Plans...............................12
ARTICLE 4. ENTRIES TO THE ACCOUNT.........................................12
Section 4.1. Deferrals.................................................12
Section 4.2. Company Contributions.....................................14
Section 4.3. Disability................................................15
Section 4.4. Change in Eligibility Status..............................15
Section 4.5. Allocation to Accounts....................................15
Section 4.6. Earnings Crediting........................................16
ARTICLE 5. DISTRIBUTION OF BENEFITS.......................................17
Section 5.1. Election of Benefit Commencement..........................17
Section 5.2. Benefit Commencement......................................18
</Table>
<Table>
Section 5.3. Form of Benefit Payment...................................19
Section 5.4. Death Benefits............................................20
Section 5.5. Minimum Amount and Frequency of Payments..................22
Section 5.6. Section 162(m) of the Code................................22
Section 5.7. Acceleration of Distributions.............................23
Section 5.8. Withdrawals...............................................23
Section 5.9. Distributions on Plan Termination.........................25
Section 5.10. Claims Procedure.........................................25
ARTICLE 6. FUNDING........................................................26
Section 6.1. Source of Benefits........................................26
Section 6.2. No Claim on Specific Assets...............................26
ARTICLE 7 ADMINISTRATION AND FINANCES.....................................27
Section 7.1. Administration............................................27
Section 7.2. Powers of Committee.......................................27
Section 7.3. Actions of the Committee..................................27
Section 7.4. Delegation................................................28
Section 7.5. Reports and Records.......................................28
ARTICLE 8. AMENDMENTS AND TERMINATION.....................................28
Section 8.1. Amendments................................................28
Section 8.2. Termination...............................................29
ARTICLE 9. MISCELLANEOUS..................................................29
Section 9.1. No Guarantee of Employment................................29
Section 9.2. Release...................................................30
Section 9.3. Notices...................................................30
</Table>
ii
<Table>
Section 9.4. Nonalienation.............................................30
Section 9.5. Tax Liability.............................................31
Section 9.6. Parachute Payments........................................31
Section 9.7. Indemnification...........................................31
Section 9.8. Captions..................................................31
Section 9.9. Applicable Law............................................31
</Table>
iii
OTTER TAIL CORPORATION
NONQUALIFIED RETIREMENT SAVINGS PLAN
RESTATED
EFFECTIVE JANUARY 1, 2002
Effective January 1, 2002, Otter Tail Corporation restates its
Nonqualified Retirement Savings Plan for the benefit of certain executive
employees of the Company. The Plan is intended to be an unfunded plan maintained
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees, as described in Sections 201(2),
301(a)(3) and 401(a)(1) of Title I of ERISA.
ARTICLE 1. DEFINITIONS, GENDER, AND NUMBER.
Section 1.1. Definitions. Whenever used in the Plan, the following
words and phrases shall have the meanings set forth below unless the context
plainly requires a different meaning, and when a defined meaning is intended,
the term is capitalized.
1.1.1. "Account" means the bookkeeping account used to measure
and determine the amount of deferred compensation to be paid to a
Participant or Beneficiary under the Plan, consisting of one or both of
the Retirement Account or the Scheduled Withdrawal Account.
1.1.2. "Affiliate," for all purposes other than Section
1.1.13, means any entity affiliated with the Company that joins this
Plan with the consent of the Company.
1.1.3. "Base Salary" of a Participant for any Plan Year means
the total annual salary and wages paid by the Company or an Affiliate
to such individual for such Plan Year, including any amount which would
be included in the definition of Base Salary but for the individual's
election to defer some of the individual's compensation pursuant to
this Plan or any other deferred compensation plan established by the
Company or an Affiliate; but excluding any other remuneration paid by
the Company or an Affiliate, such as bonuses, commissions, overtime,
Incentive Compensation, stock options, distributions of compensation
previously deferred, restricted stock, allowances for expenses
(including moving expenses, travel expenses, and automobile
allowances), and fringe benefits, whether payable in cash or in a form
other than cash. In the case of an individual who is a participant in a
plan sponsored by the Company or an Affiliate which is described in
Section 401(k), 125, or 132(f) of the Code, the term Base Salary shall
include any amount which would be included in the definition of Base
Salary but for the individual's election to reduce the individual's
compensation and have the amount of the reduction contributed to or
used to purchase benefits under such plan.
1.1.4. "Beneficiary" or "Beneficiaries" means the persons or
trusts designated by a Participant in writing pursuant to Section 5.4.1
of the Plan as being entitled to receive any benefit payable under the
Plan by reason of the death of a Participant, or, in the absence of
such designation, the persons specified in Section 5.4.2 of the Plan.
1.1.5. "Board" means the Board of Directors of the Company
as constituted at the relevant time.
1.1.6. "Cause" means the occurrence of one of the following:
(a) a Participant's violation in any material respect of any agreement
or representation set forth in any employment or other agreement, if
any, between the Company or an Affiliate and the Participant; (b) the
occurrence of an event that would constitute "cause" (or any similar
concept) under any employment or other agreement, plan, or program that
governs the Participant or by which the Participant is bound; (c) a
Participant's willful violation of
2
any material rule or policy of the Company or an Affiliate or any theft
or defalcation of property committed against the Company or an
Affiliate; (d) any continual willful or material failure by a
Participant to comply with a reasonable and lawful direction of the
Board or any duly authorized committee of the Board or the chief
executive officer of the Company or an Affiliate, or the willful
misconduct by Participant in the responsibilities reasonably assigned
to the Participant; or (e) conviction of or plea of nolo contendere by
a Participant to a felony or other actions or omissions that reflect
moral turpitude or threaten to materially and adversely reflect on the
Company or an Affiliate in the conduct of its business.
1.1.7. "Change in Control" of the Company means:
(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 Company 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
"beneficial owner" (as defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of securities of
the Company representing 35% or more of the combined voting
power of the Company's then outstanding securities;
(c) The Continuing Directors cease to constitute a
majority of the Company's Board of Directors; provided that
such change is the direct or indirect
3
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 determine
in their sole and absolute discretion that there has been a
change in control of the Company.
1.1.8. "Code" means the Internal Revenue Code of 1986, as
amended from time to time and any ----- successor statute. References
to a Code section shall be deemed to be to that section or to any
successor to that section.
1.1.9. "Committee" means the Committee of one or more persons
appointed by the Company's Board, or any person or entity designated by
the Committee, to administer the Plan pursuant to Section 7.4. In the
absence of an appointed Committee, the Board shall serve as the
Committee. As of the Restated Effective Date, the Pension Committee of
the Company shall be the Committee under this Plan.
1.1.10. "Company" means Otter Tail Corporation, a Minnesota
corporation.
1.1.11. "Company Contribution" means the contribution of the
Company to a Participant's Retirement Account under Section 4.2.
1.1.12. "Compensation" with respect to a Participant for any
period means the sum of such Participant's Base Salary paid and
Incentive Compensation accrued with respect to such period.
1.1.13. "Continuing Director" means any person who is a member
of the Board of Directors of the Company, 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
4
on the Restated Effective Date 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
1.1.13: "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% or more of the shares of common stock of the
Company then outstanding, but shall not include the Company, any
subsidiary of the Company or any employee benefit plan of the Company
or of any subsidiary of the Company or any entity holding shares of
common stock organized, appointed or established for, or pursuant to
the terms of, any such plan; and "Affiliate" (for purposes of this
Section 1.1.13 only) and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the Exchange
Act.
1.1.14. "Crediting Rate" with respect to any Plan Year means
the rate or rates established by the Company in its sole discretion to
determine earnings and losses with respect to an Account. The Company
may select any investment index (i.e., mutual funds, annuities or bank
collective funds) as a Crediting Rate to be applied to amounts credited
to a Participant's Accounts as set forth in Section 4.6. The Company
may change such indices at any time or from time to time and can
restrict or limit at any time and from time to time the Account(s)
eligible for any Crediting Rate. The Company has the discretion to
determine the exact manner in which any Crediting Rate shall be
calculated and applied to an Account.
5
1.1.15. "Disabled" or "Disability" with respect to a
Participant shall have the same definition as in the then existing
group long term disability plan of the Participant's Employer that
covers the Participant; or if there is no group long term disability
plan covering the Participant, but there is one (and only one) such
plan under which the Participant could have elected coverage as an
employee of the Employer, then Disability shall have the same
definition as in such group long term group disability plan. If the
conditions of the previous sentence are not met, then Disability shall
have the same definition as in such group long term group disability
plan as selected by the Company. Disability shall be determined by a
physician selected by the Company. A Participant shall cooperate with
the Company, including making the Participant reasonably available for
examination by physicians at the Company's request and at the Company's
expense to determine whether or not the Participant is Disabled.
"Disabled" or "Disability" with respect to a Participant shall also
mean such impairment as qualifies the Participant for federal Social
Security Disability Income (SSDI) benefits.
1.1.16. "Dividend Rate" means the annual dividend rate for its
life insurance products announced by Northwestern Mutual Life Insurance
Company as of the June 30 preceding the Plan Year, compounded daily.
The Company has the discretion to determine the exact manner in which
the Dividend Rate shall be calculated and applied to an Account.
1.1.17. "Effective Date" means January 1, 1994, the date on
which this Plan originally became effective. The "Restated Effective
Date" shall be January 1, 2002, the date on which this restatement of
the Plan becomes effective.
6
1.1.18. "Eligible Executive" means any employee of the Company
or an Affiliate who is designated by the Committee, in its sole
discretion, as an Eligible Executive. An employee shall cease to be an
Eligible Executive if the Committee, in its sole discretion, determines
not to designate the employee as an Eligible Executive for the year; or
if the Committee, in its sole discretion, determines at any time that
the employee should no longer participate in the Plan. The Committee
shall notify any employee who has been an Eligible Executive and who is
no longer an Eligible Executive.
1.1.19. "Employer" means with respect to a Participant the
Company or Affiliate that employs that Participant.
1.1.20. "Enrollment Period" means the period during each Plan
Year (ending no later than December 31st of the Plan Year) designated
by the Committee during which new Accounts may be opened and deferral
elections may be changed for Compensation accrued with respect to the
immediately succeeding Plan Year. "Enrollment Period" includes the
Enrollment Period that immediately precedes the Restated Effective
Date.
1.1.21. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time and any successor statute.
References to an ERISA section shall be deemed to be to that section or
to any successor to that section.
1.1.22. "Incentive Compensation" of a Participant for any Plan
Year means the total remuneration paid to such Participant under the
various incentive compensation programs maintained by the Company or an
Affiliate with respect to that Plan Year, including any amount which
would be included in the definition of Incentive Compensation but for
the Participant's election to defer some or all of the Participant's
Incentive Compensation pursuant to this Plan or some other deferred
compensation plan
7
established by the Company or an Affiliate; but excluding any other
remuneration paid by the Company or an Affiliate, such as Base Salary,
overtime, net commissions, stock options, distributions of compensation
previously deferred, restricted stock, allowances for expenses
(including moving expenses, travel expenses, and automobile
allowances), and fringe benefits whether payable in cash or in a form
other than cash. In the case of an individual who is a participant in a
plan sponsored by the Company or an Affiliate which is described in
Section 401(k), 125, or 132(f) of the Code, the term Incentive
Compensation shall include any amount which would be included in the
definition of Incentive Compensation but for the individual's election
to reduce the individual's compensation and have the amount of the
reduction contributed to or used to purchase benefits under such plan.
1.1.23. "Maximum Annual Deferral" with respect to a
Participant for a Plan Year means the sum of (a) 50% of the
Participant's Base Salary for such Plan Year; and (b) 100% of the
Participant's Incentive Compensation for such Plan Year.
1.1.24. "Participant" means an Eligible Executive who has
satisfied the requirements of Article 3.
1.1.25. "Plan" means the Otter Tail Corporation Nonqualified
Retirement Savings Plan, as restated herein and as amended or restated
from time to time.
1.1.26. "Plan Year" means January 1 through December 31.
1.1.27. "Retirement" means a Participant's termination of
employment with the Company on or after age 65; a Participant's
termination of employment with the Company on or after age 55 with at
least 10 Years of
8
Service with the Company; or a Participant's termination of employment
on or after age 55 with less than 10 Years of Service with the
Company's specific written approval of the termination as a Retirement
under the Plan. For purposes of this Section 1.1.27, a Participant
shall be considered to have completed the same number of Years of
Service under this Plan as the Participant has completed for vesting
purposes under the 401(k) plan of the Company or Affiliate in which the
Participant is eligible to participate. Provided, however, that a
Participant will not be considered to have attained "Retirement" if the
Participant is or could have been terminated from employment for Cause.
1.1.28. "Retirement Account" means a bookkeeping account that
a Participant may have established for deferral of Compensation made to
the Plan under Section 4.1.3 and to which may be credited Company
Contributions under Section 4.2. As of the Restated Effective Date, the
"Nonqualified Account" of a Participant under the Plan as in effect
before its restatement shall become the "Retirement Account" of that
Participant under the restated Plan.
1.1.29. "Sale" means the occurrence of an event pursuant to
which the Participant's Employer is sold or transferred to an entity
that is not the Company or an Affiliate.
1.1.30. "Scheduled Withdrawal Account" means a bookkeeping
account that a Participant may have established for deferral of
Compensation made to the Plan under Section 4.1.3. When a Participant
opens a Scheduled Withdrawal Account, the Participant shall specify the
date on which benefits are to commence pursuant to Section 5.1.2. A
Participant may open a Scheduled Withdrawal Account only if a
previously opened Scheduled Withdrawal Account (if any) has a zero
balance.
9
1.1.31. "Specified Date" means the date on which the
Participant wishes to receive distributions from the Scheduled
Withdrawal Account, as specified at the time that the Participant opens
the Account.
1.1.32. "Trust" means the Trust under the Otter Tail
Corporation Nonqualified Retirement Savings Plan as amended from time
to time.
Section 1.2. Gender and Number. Except as otherwise indicated by
context, masculine terminology used herein also includes the feminine and
neuter, and terms used in the singular may also include the plural.
ARTICLE 2. DEFERRED COMPENSATION ACCOUNTS.
Section 2.1. Establishment of Accounts. The Company shall establish one
or two Accounts for each Participant which shall be utilized solely as a device
to measure and determine the amount of deferred compensation to be paid under
the Plan to the Participant or the Participant's Beneficiaries.
Section 2.2. Property of Company. Any amounts set aside for benefits
payable under the Plan are the property of the Company, except, and to the
extent, provided in the Trust.
ARTICLE 3. PARTICIPATION.
Section 3.1. Who May Participate. Participation in the Plan is limited
to those Eligible Executives selected by the Committee for participation in the
Plan.
Section 3.2. Time and Conditions of Participation. An Eligible
Executive shall become a Participant only upon the Eligible Executive's
compliance with such terms and conditions as the Committee may from time to time
establish for the implementation of the Plan, including but not
10
limited to, any condition the Committee may deem necessary or appropriate for
the Company to meet its obligations under the Plan. The Company may, in its sole
discretion, purchase insurance on the lives of each Participant. The Committee
may, in its sole discretion, reject for participation in the Plan Eligible
Executives who fail or refuse to cooperate with the Company in obtaining
insurance on their lives.
Section 3.3. Termination of Participation. Once an individual has
become a Participant in the Plan, participation shall continue until the first
to occur of (a) payment in full of all benefits to which the Participant or the
Participant's Beneficiary is entitled under the Plan, or (b) the occurrence of
the event specified in Section 3.4 which results in loss of benefits. Except as
otherwise specified in the Plan, the Company may not terminate an individual's
participation in the Plan; provided, however, that if the Committee, in its
discretion, determines that it is likely that a Participant would not be
considered for any period to be a member of a select group of management or
highly compensated employees, within the meaning of Sections 201(2), 301(a)(3)
and 401(a)(l) of ERISA, the Committee may require that no contributions be made
to the Plan by or on behalf of such Participant during such period.
Section 3.4. Missing Persons. If the Company is unable to locate the
Participant or the Participant's Beneficiary for purposes of making a
distribution, the amount of a Participant's benefits under the Plan that would
otherwise be considered as nonforfeitable shall be forfeited on the first to
occur of the following dates: (a) effective four years after the last date a
payment of said benefit was made, if at least one such payment was made; (b)
effective four years after the first date a payment of said benefit was directed
to be made by the Company pursuant to the terms of the Plan, if no payments have
been made; or (c) effective on the date of termination of
11
the Plan. If a person is located after the date of such forfeiture, the benefits
for such Participant or Beneficiary shall not be reinstated under the Plan.
Section 3.5. Relationship to Other Plans. Participation in the Plan
shall not preclude participation of the Participant in any other fringe benefit
program or plan sponsored by the Company for which such Participant would
otherwise be eligible.
ARTICLE 4. ENTRIES TO THE ACCOUNT.
Section 4.1. Deferrals.
4.1.1. Deferral Elections. Each Participant wishing to defer
Compensation under the Plan shall enter into a deferral election, which
shall specify the amount of Compensation the Participant wishes to have
deducted from the Participant's pay and contributed to the Plan.
Deferral elections with respect to Base Salary must specify the
percentage (stated as an integer) of the Compensation that the
Participant wishes to have deducted from Base Salary. Deferral
elections with respect to Incentive Compensation must specify either
the percentage (stated as an integer) or the dollar amount, or a
combination of percentage and dollar amount, as determined by the
Committee in its discretion, of the Compensation that the Participant
wishes to have deducted from Incentive Compensation.
4.1.2. Timing of Elections. For Eligible Executives who first
become eligible to participate in the Plan as of the Restated Effective
Date, the deferral election shall be entered into before the Restated
Effective Date. For Eligible Executives who first become eligible to
participate in the Plan after the Restated Effective Date, the deferral
election may be entered into during any Enrollment Period, which
election shall then be effective
12
for the Plan Year following the Enrollment Period. A Participant's
deferral election shall remain in effect unless and until changed by
the Participant. A Participant may change a deferral election only
during an Enrollment Period, in which case the change shall be
effective for Compensation earned and accrued during the immediately
following Plan Year. A deferral election will be effective to defer
Compensation earned after the deferral election is entered into, and
not before, except that for Eligible Executives who are eligible to
participate in the Plan as of the Restated Effective Date, the deferral
election with respect to Incentive Compensation may also apply to
Incentive Compensation earned before the date that the Eligible
Executive elects to participate in the Plan but paid after the Restated
Effective Date, but only if the Eligible Executive elects to defer such
payment during the Enrollment Period immediately preceding the Restated
Effective Date. A deferral election shall be suspended during any
period of time that such suspension is required in connection with a
hardship withdrawal under any Plan of the Company or an Affiliate
qualified under Section 401(a) of the Code. The Participant may not
enter into a new deferral election after such suspension until a Plan
Year that begins after the suspension has concluded.
4.1.3. Allocation Between Accounts. At the time a Participant
makes the Participant's initial deferral election, the Participant
shall specify the Account(s) the Participant wishes to open in the
Plan. A Participant with a deferral election shall always have at least
one Account in the Plan and may, at the Participant's election, have up
to two Accounts, specifically, a Retirement Account and a Scheduled
Withdrawal Account. A Participant may open a new Account (up to a total
of the two Accounts) during an Enrollment Period. A Participant shall
specify in the Participant's deferral election the
13
proportions in which the Participant's deferrals are to be allocated
between the Participant's Retirement Account and the Participant's
Scheduled Withdrawal Account. Provided, however, that no deferrals may
be contributed to a Participant's Scheduled Withdrawal Account in the
calendar year in which a distribution is to be made from said Account.
4.1.4. Limitation on Deferral Elections. A Participant may make
a deferral election for any Plan Year provided that: (a) in no event
may the amount deferred by a Participant for a Plan Year under both the
Participant's Accounts exceed the Maximum Annual Deferral; and (b) the
Participant's remaining Compensation, after all deferrals, is
sufficient to enable the Employer to withhold from the Participant's
Compensation (i) any amounts necessary to satisfy withholding
requirements under applicable tax law; (ii) the amount of any
contributions which the Participant may be required to make or may have
elected to make under the various benefit plans of the Company or an
Affiliate; and (iii) any other payroll deduction from Compensation
required by law or authorized by the Participant.
Section 4.2. Company Contributions. For each Plan Year that commences
on or after the Restated Effective Date, the Company may, but shall but not be
obligated to make a contribution to the Plan in such amount as the Company shall
determine in its sole discretion. If a contribution is made for a Plan Year, it
shall be credited as of such day in the Plan Year and to such Participant or
Participants, whether employed by the Company or an Affiliate, as the Company
shall determine in its sole discretion. The contribution on behalf of a
Participant pursuant to this Section 4.2 shall be allocated to the Retirement
Account of that Participant, to be credited to a Company Contributions
subaccount under the Retirement Account. A Participant's
14
Company Contributions subaccount will be credited using such Crediting Rate as
the Company shall determine in its sole discretion for a Plan Year, which rate
is not required to be uniform among all Company Contributions subaccounts.
Distribution of a Participant's Company Contributions subaccount will be made to
a Participant only if the Participant remains employed with the Company or an
Affiliate until death, Disability, Retirement, Sale, or a Change in Control, and
shall thereupon be made in accordance with the applicable provisions of Article
5 in the same manner as the balance of the Participant's Retirement Account. If
the Participant does not remain employed with the Company or an Affiliate until
death, Disability, Retirement, Sale, or a Change in Control, then the amount in
the Company Contributions subaccount shall be forfeited in favor of the Company.
Section 4.3. Disability. If a Participant becomes Disabled, deferrals
and Company Contributions (if any) shall continue to be allocated as described
in Sections 4.1 and 4.2 during the period in which the Participant is entitled
to receive Compensation from the Company or an Affiliate, other than
compensation under a long term disability plan. If a Participant continues to be
Disabled after such period, deferrals and other Plan contributions will cease.
Section 4.4. Change in Eligibility Status. If a Participant in the Plan
ceases to be an Eligible Executive, the Participant's deferrals to the Plan
shall cease. No further Company Contributions under Section 4.2 shall be made to
the Plan unless and until the employee again becomes an Eligible Executive. The
Participant's Account shall continue to be credited with earnings and losses
under Section 4.6 and shall be paid in accordance with Article 5.
Section 4.5. Allocation to Accounts. During each Plan Year, the Company
shall post to the appropriate Account(s) of each Participant the amount of Base
Salary and Incentive Compensation to be deferred under such Account(s) as
designated by the Participant in the
15
Participant's deferral election in effect for that Plan Year. Such allocation
shall occur as of the dates that the Base Salary and Incentive Compensation
would have been paid to the Participant. The Company shall also post to the
Retirement Account amounts to be allocated to the Participant pursuant to
Sections 4.2 and 4.3.
Section 4.6. Earnings Crediting.
4.6.1 Earnings Credits for Accounts. Each Participant may
request that the Scheduled Withdrawal Account or the Retirement Account
be allocated to one or more investment indices selected by the
Committee and credited or debited, as the case may be, with such
earnings or losses as the Account would have been credited or debited
had it been actually invested in such investment indices. The initial
allocation request may be made at the time of opening of an Account, or
for Nonqualified Accounts in existence immediately prior to the
Restated Effective Date the initial request may be made during the
Enrollment Period preceding the Restated Effective Date, to be
effective as of the Restated Effective Date. The Committee shall in its
discretion determine the Crediting Rate for a Participant who fails to
make an initial allocation for a Plan Year. Once made, an investment
allocation request shall remain in effect for all subsequent
contributions until changed by the Participant. The Participant may
change the investment allocation election by submitting a written
request to the Committee. Participants may change elections no more
than once in any calendar quarter. Such changes shall become effective
as of the first day of the quarter after the Committee receives such
written request. Crediting Rates shall continue to be credited or
debited until the first to occur of (a) the Participant's termination
of employment that is not the result of death, Disability or Retirement
under the Plan; or (b) payment of all amounts owed to the Participant
under
16
all Account(s). Provided, however, that during the Plan Year in which a
final distribution of a Participant's Account is expected to occur, the
Committee may apply to that Account the Dividend Rate for that Plan
Year, rather than the Crediting Rate. Allocation requests shall be
subject to such other requirements as established by the Committee.
4.6.2. No Guarantee of Account Value. The Participant agrees on
behalf of the Participant and any Beneficiary to assume all risk in
connection with any decrease in value of the Accounts resulting from
the Participant's request and selection of any particular investment
index under the Plan.
4.6.3. No Actual Investment. The Company is under no obligation
to make investments or change investments in a manner consistent with
the investment indices available under the Plan. The elections made by
the Participant are for purposes of determining earnings and losses to
be credited to the Accounts and not for the purpose of determining any
actual investment of the assets of the Company or the Trust, if any.
4.6.4. Participant Statements. At least annually, the Company
shall provide each Participant with a statement of the Participant's
Account(s).
ARTICLE 5. DISTRIBUTION OF BENEFITS.
Section 5.1. Election of Benefit Commencement.
5.1.1. Distribution on Change in Control. During a
Participant's first Enrollment Period under this Plan (and for
Participants in the Plan immediately prior to the Restated Effective
Date, during the Enrollment Period preceding the Restated Effective
Date), the Participant may elect to commence distribution of all
Accounts upon a Change in Control, if such a Change in Control should
occur before the Account would otherwise be
17
payable under this Plan. If such election is not made at such time,
then no acceleration of any Account shall occur upon a Change in
Control under the Plan.
5.1.2. Scheduled Withdrawal Account. At the time a Participant
opens a Scheduled Withdrawal Account under the Plan, the Participant
shall establish the Specified Date for that Account. The Specified Date
must be at least two years following the beginning of the Plan Year in
which deferrals under the Scheduled Withdrawal Account commence.
Section 5.2. Benefit Commencement.
5.2.1. Scheduled Withdrawal Account. Distribution of a
Scheduled Withdrawal Account will be made in a lump sum during the
calendar year in which the Specified Date occurs unless any of the
following occurs before the Specified Date: (a) the Participant
terminates employment (other than by reason of death, Disability or
Retirement), in which case distributions will be made in a lump sum
within 90 days following the Participant's termination of employment,
or at the Company's discretion, in annual installments over no more
than three years commencing within 90 days of Participant's termination
of employment; (b) the Participant dies, in which case distributions
will commence in the manner specified in Section 5.4.4; (c) the
Participant terminates employment as a result of Disability or
Retirement, in which case distribution will be made in a lump sum
within 90 days following the Participant's termination of employment;
(d) there occurs a Sale, in which case distribution will be made in a
lump sum within 90 days following the Sale; or (e) there occurs a
Change in Control and the Participant requested distribution to
commence upon the Change in Control (as described
18
in Section 5.1.1), in which case distribution will be made in a lump
sum within 90 days following the Change in Control.
5.2.2. Retirement Account. Distribution of a Retirement Account
will commence in accordance with the following: (a) during January of
the Plan Year following Retirement unless death, Disability, Sale or
termination of employment occurs before such Retirement; (b) if the
Participant dies before Retirement, in the manner specified in Section
5.4.4; (c) if the Participant terminates employment for reasons other
than death, Disability or Retirement, in a lump sum within 90 days
following the Participant's termination of employment, or at the
Company's discretion, in annual installments over no more than three
years commencing within 90 days of the Participant's termination of
employment; (d) if there occurs a Sale before Retirement in a lump sum
within 90 days following the Sale; (e) if there occurs a Change in
Control and the Participant requested distribution to commence upon the
Change in Control (as described in Section 5.1.1), in a lump sum within
90 days following the Change in Control, regardless of whether
distribution had otherwise commenced in accordance with other
provisions of this Plan; or (f) if the Participant is Disabled, within
90 days following the determination of Disability.
Section 5.3. Form of Benefit Payment. At the time a Participant opens a
Retirement Account under the Plan (or during the Enrollment Period immediately
preceding the Restated Effective Date, for a Participant who was a Participant
in the Plan before its restatement), the Participant shall select the period
over which payments from the Account will be made. The Participant may elect to
receive payment in the form of a lump sum or in monthly installments over 10, 15
or 20 years, or in a combination of lump sum and installments except that a
19
distribution upon a Change in Control or Sale, or a distribution upon
termination of employment (other than death, Retirement, or Disability) will be
made as set forth in Section 5.2.2(c). If no election is made, the Participant
shall be deemed to have made an election to receive payments from the Retirement
Account in monthly installments over 15 years. Provided, however, that the
election by a Participant who was a Participant under the Plan before its
restatement of a form of benefit payment other than a lump sum (if made during
the Enrollment Period immediately preceding the Restated Effective Date) shall
not be effective until January 1, 2003, and, anything hereinelsewhere to the
contrary notwithstanding, all distributions made as a result of Disability or
Retirement that would otherwise have occurred during 2002 shall be deferred
until at least January 1, 2003, and shall thereafter be paid in accordance with
the election made during said Enrollment Period. The Participant's selection of
a method of benefit payment may be changed with an election filed with the
Committee at least 13 months in advance of the date that benefit payments
commence to the Participant. A Participant's Account will continue to be
credited during the payment period with earnings and losses as set forth in
Section 4.6, except that earnings and losses shall not be credited after
termination of employment other than by reason of death, Disability, Retirement,
Sale, or Change in Control.
Section 5.4. Death Benefits.
5.4.1. Beneficiary Designation. At the time a Participant
begins participation in the Plan, the Participant may designate primary
and contingent Beneficiaries for death benefits payable under the Plan.
Such Beneficiaries may be individuals or trusts for the benefit of
individuals. If the Participant is married at the time of the
Participant's death, the designation of a primary Beneficiary other
than the Participant's spouse as sole primary Beneficiary shall be
valid only if the Participant's spouse has consented in
20
writing to the naming of such primary Beneficiary and only if the
spouse's consent has been notarized. A Beneficiary designation by a
Participant shall be in writing on a form acceptable to the Committee
and shall only be effective upon delivery to the Committee. A
Beneficiary designation may be revoked by a Participant at any time by
delivering to the Company a new Beneficiary designation form. The
Beneficiary designation form last delivered to the Committee before the
death of a Participant, if valid, shall control.
5.4.2. Failure to Designate. If there is no valid Beneficiary
designation on file with the Company, or if all Beneficiaries
designated by a Participant have predeceased the Participant, the
benefits payable under the Plan by reason of the death of the
Participant shall be paid to the Participant's spouse, if living; if
the Participant does not leave a surviving spouse, to the Participant's
issue by right of representation; or, if there are no such issue then
living, to the Participant's estate. If there are benefits remaining
unpaid at the death of a sole Beneficiary (who died after the
Participant) under the Plan and if no successor Beneficiary has been
designated, the remaining balance of the benefits under the Plan shall
be paid to the deceased Beneficiary's estate, unless the Beneficiary
designation form provides to the contrary. If there are benefits
remaining unpaid at the death of a Beneficiary (who died after the
Participant) who is one of multiple concurrent Beneficiaries, such
remaining benefits shall be paid proportionally to the surviving
Beneficiaries, unless the Beneficiary designation form provides to the
contrary.
21
5.4.3. Death After Benefit Commencement. If a Participant dies
after benefits have commenced pursuant to Section 5.2, the
Participant's Account balance(s), if any, shall be paid to the
Participant's Beneficiary in the same manner that benefits would have
been paid to the Participant had the Participant survived. The
Committee may, at its sole discretion, accelerate the timing of
payments to the Beneficiary. Any Beneficiary may request such
acceleration in writing to the Committee.
5.4.4. Death Before Benefit Commencement. If the Participant
dies before distribution has commenced to the Participant, distribution
to the Beneficiary shall be in the form of a lump sum. Distribution
shall be made as soon as administratively practicable following the
Participant's death.
5.4.5. Marital Deduction. If any benefits are payable under
the Plan to the surviving spouse of a deceased Participant, the estate
of the Participant's spouse shall be entitled to all remaining
benefits, if any, at the spouse's death, unless specifically directed
to the contrary by an effective Beneficiary designation.
Section 5.5. Minimum Amount and Frequency of Payments. Notwithstanding
anything in this Article 5 to the contrary, the Committee may adjust the length
of the distribution period under this Article 5 in order to assure that any
monthly installment is not less than $500. If the value of all Accounts at the
date of initial distribution is less than $30,000, then, notwithstanding any
other provision of the Plan to the contrary, the Committee may pay the Account
in a lump sum.
Section 5.6. Section 162(m) of the Code. Notwithstanding anything to
the contrary in this Plan, a Participant's Employer may defer payment of any
amounts otherwise required to be
22
paid under this Plan in order to preserve the deduction for such payment under
Section 162(m) of the Code.
Section 5.7. Acceleration of Distributions. If the Internal Revenue
Service determines that a Participant or Beneficiary has received an economic
benefit or is in constructive receipt of a benefit under the Plan and has made a
final assessment of an income tax deficiency with respect to such benefit or if
a final judicial determination has been entered that an income tax deficiency
exists, the Committee shall distribute to such Participant an amount equal to
the taxable income recognized.
Section 5.8. Withdrawals.
5.8.1. Hardship Withdrawal. Upon the application of any
Participant, the Committee may permit such Participant to withdraw some
or all of the amount in one or more of the Participant's Accounts. A
Participant must provide the Committee with a written petition of the
intent to withdraw from the Participant's Account at least 60 days (or
such shorter time as permitted by the Committee in its discretion)
before the date of withdrawal. No withdrawal shall be made under the
provisions of this Section except for the purpose of enabling a
Participant to meet immediate needs created by a severe financial
hardship to the Participant or resulting from a sudden and unexpected
illness or accident of the Participant or of a dependent of the
Participant, loss of the Participant's property due to casualty, the
Participant's Disability, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the
control of the Participant. The circumstances that will constitute a
severe financial hardship will depend upon the facts of each case, but,
in any case, payment may not be made to the extent that such hardship
is or may be relieved: (a) through reimbursement or compensation
through
23
insurance or otherwise; (b) by liquidation of the Participant's assets,
to the extent such liquidation would not itself cause a severe
financial hardship; or (c) by cessation of deferrals under the Plan, to
the extent permitted under the terms of the Plan. If a withdrawal is
permitted, the amount of the withdrawal shall be distributed to the
Participant in a lump sum as soon as is administratively practicable
following the requested withdrawal date. In addition, (a) the deferral
election of the Participant for the remainder of the Plan Year shall be
terminated and (b) the Participant may not enter into a new deferral
election until a Plan Year that begins at least twelve months following
the date of the withdrawal.
5.8.2. Early Distribution. Upon the application of any
Participant made after the Participant's Retirement, the Committee
shall permit such Participant to receive a distribution of some or all
of the amounts in an Account before the time otherwise specified in the
Plan for reasons other than financial hardship. Provided, however, that
a request for a distribution of 75% or more of an Account shall be
deemed to be and shall be treated as a request for a distribution of
100% of the Account. A Participant must give a written petition of the
Participant's intent to receive such a distribution at least 60 days
(or such shorter time as permitted by the Committee in its discretion)
before the date of the distribution. Such a request may be made no more
than once during any Plan Year. If a Participant elects to receive such
a distribution a penalty shall be imposed such that the amount of the
requested distribution shall be reduced by 10% (5% if the request is
made within the 24-month period following a Change in Control), which
reduction shall be permanently forfeited by the Participant to the
Company.
24
Section 5.9. Distributions on Plan Termination. Notwithstanding
anything in Article 5 to the contrary, if the Plan is terminated, distributions
shall be made in accordance with Section 8.2.
Section 5.10. Claims Procedure.
5.10.1. Initial Claim for Benefits. The following shall apply
with respect to claims of Participants for benefits under the Plan. The
Committee shall give notice to a Participant within 90 days of the
Participant's written application for benefits of the Participant's
eligibility or noneligibility for benefits under the Plan. If the
Committee determines that a Participant is not eligible for benefits or
full benefits, the notice shall set forth (i) the specific reasons for
such denial, (ii) a specific reference to the provision of the Plan on
which the denial is based, (iii) a description of any additional
information or material necessary for the claimant to perfect the
claim, and a description of why it is needed, and (iv) an explanation
of the Plan's claims review procedure and other appropriate information
as to the steps to be taken if the Participant wishes to have the claim
reviewed. If the Committee determines that there are special
circumstances requiring additional time to make a decision, the
Committee shall give notice to the Participant of the special
circumstances and the date by which a decision is expected to be made,
and may extend the time for up to an additional 90-day period.
5.10.2. Appeal of Claim Denial. If a Participant is determined
by the Committee to be not eligible for benefits, or if the Participant
believes that the Participant is entitled to greater or different
benefits, the Participant shall have the opportunity to have the claim
reviewed by filing a petition for review within 60 days after the
Participant has been given the notice issued by the Committee. If there
is no Trust in place with respect to the Participant's benefit, or if
there is a Trust, but the Trustee has not agreed to determine
25
appeals from denials of claims for benefits under the Plan, then the
petition shall be filed with the Committee. If there is a Trust in
place with respect to the Participant's benefit and if the Trustee has
agreed to determine appeals from denials of claims for benefits under
the Plan, then the petition shall be filed with the Trustee of the
Trust. A petition shall state the specific reasons the Participant
believes that the Participant is entitled to benefits or greater or
different benefits. Within 60 days after the petition has been filed,
the Committee or the Trustee, as the case may be, shall afford the
Participant an opportunity to present the Participant's position to the
Committee or the Trustee, as the case may be, in writing, and the
Participant shall have the right to review pertinent documents. The
Committee or the Trustee, as the case may be, shall give notice to the
Participant of its decision in writing within said 60-day period,
stating specifically the basis of the decision written in a manner
calculated to be understood by the Participant and the specific
provisions of the Plan on which the decision is based. If because of
special circumstances, the 60-day period is not sufficient, the
decision may be deferred for up to another 60-day period at the
election of the Committee or the Trustee, as the case may be, but
notice of this deferral shall be given to the Participant.
ARTICLE 6. FUNDING
Section 6.1. Source of Benefits. All benefits under the Plan shall be
paid when due by the Company out of its assets or from the Trust.
Section 6.2. No Claim on Specific Assets. No Participant shall be
deemed to have, by virtue of being a Participant in the Plan, any claim on any
specific assets of the Company such that the Participant would be subject to
income taxation on the Participant's benefits under the
26
Plan before distribution. The rights of Participants and Beneficiaries to
benefits to which they are otherwise entitled under the Plan shall be those of
an unsecured general creditor of the Company.
ARTICLE 7. ADMINISTRATION AND FINANCES
Section 7.1. Administration. The Plan shall be administered by the
Committee. The Company shall bear all administrative costs of the Plan other
than those specifically charged to a Participant or Beneficiary.
Section 7.2. Powers of Committee. In addition to the other powers
granted under the Plan, the Committee shall have all powers necessary to
administer the Plan, including, without limitation, powers (i) to interpret the
provisions of the Plan; (ii) to establish and revise the method of accounting
for the Plan; (iii) to maintain the Accounts; (iv) to determine Crediting Rates
for the Accounts; (v) to establish rules for the administration of the Plan; and
(vi) to prescribe any forms required to administer the Plan.
Section 7.3. Actions of the Committee. Except as modified by the Board,
the Committee (including any person or entity to whom the Committee has
delegated duties, responsibilities or authority, to the extent of such
delegation) has total and complete discretionary authority to determine
conclusively for all parties all questions arising in the administration of the
Plan, to interpret and construe the terms of the Plan, and to determine all
questions of eligibility and status of employees, Participants and Beneficiaries
under the Plan and their respective interests. Subject to the claims procedures
of Section 5.10, all determinations, interpretations, rules and decisions of the
Committee (including those made or established by any person or entity to whom
the Committee has delegated duties, responsibilities or authority, if made or
established pursuant to such delegation) are conclusive and binding upon all
persons having or claiming to
27
have any interest or right under the Plan. A Participant or Beneficiary is
entitled to benefits under this Plan only if the Committee in its discretion has
determined the Participant or Beneficiary to be so entitled.
Section 7.4. Delegation. The Committee, or any officer designated by
the Committee, shall have the power to delegate specific duties and
responsibilities to officers or other employees of the Company or other
individuals or entities. Any delegation may be rescinded by the Committee at any
time. Each person or entity to whom a duty or responsibility has been delegated
shall be responsible for the exercise of such duty or responsibility and shall
not be responsible for any act or failure to act of any other person or entity.
Section 7.5. Reports and Records. The Committee, and those to whom the
Committee has delegated duties under the Plan, shall keep records of all their
proceedings and actions and shall maintain books of account, records, and other
data as shall be necessary for the proper administration of the Plan and for
compliance with applicable law.
ARTICLE 8. AMENDMENTS AND TERMINATION.
Section 8.1. Amendments. The Company, by action of the Board, or the
Committee to the extent authorized by the Board, may amend the Plan, in whole or
in part, at any time and from time to time. Provided, however, that for a period
of 24 months following a Change in Control, no amendment shall be effective
without the approval of a majority of the Participants in the Plan. Any
amendment shall be filed with the Plan documents. No amendment, however, may be
effective to eliminate or reduce any Account balance, determined as of the date
of such amendment, of any Participant or of any Beneficiary then eligible for
benefits, without such Participant's or Beneficiary's consent.
28
Section 8.2. Termination. The Company reserves the right to terminate
the Plan at any time by action of the Board. Provided, however, that for a
period of 24 months following a Change in Control, no termination shall be
effective without the approval of a majority of the Participants in the Plan.
Upon termination of the Plan, all deferrals and Company Contributions will cease
and no future deferrals or Company Contributions will be made. Termination of
the Plan shall not operate to eliminate or reduce any Account balance,
determined as of the date of such termination, of any Participant or of any
Beneficiary then eligible for benefits, without such Participant's or
Beneficiary's consent. If the Plan is terminated, payments from the Accounts of
all Participants and Beneficiaries shall be made as soon as administratively
practicable following the termination in a lump sum or, in the discretion of the
Company, in installments over a period of no more than three years, commencing
within 90 days of the date of termination of the Plan. Provided, however, that
if the termination occurs within 24 months following a Change in Control,
distribution must be made in a lump sum as soon as administratively practicable
(but in no event longer than 90 days) following the termination. Accounts shall
be credited with earnings during the payment period in accordance with Section
4.6 and 5.3.
ARTICLE 9. MISCELLANEOUS
Section 9.1. No Guarantee of Employment. Neither the adoption and
maintenance of the Plan nor the execution by the Company of a deferral or
Account election with any Participant shall be deemed to be a contract of
employment between the Company or any Affiliate and any Participant. Nothing
contained herein shall give any Participant the right to be retained in the
employ of the Company or any Affiliate or to interfere with the right of the
Company or any Affiliate to discharge any Participant at any time, nor shall it
give the Company or any Affiliate
29
the right to require any Participant to remain in its employ or to interfere
with the Participant's right to terminate the Participant's employment at any
time.
Section 9.2. Release. Any payment of benefits to or for the benefit of
a Participant or a Participant's Beneficiaries that is made in good faith by the
Company in accordance with the Company's interpretation of its obligations
hereunder shall be in full satisfaction of all claims against the Company or an
Affiliate for benefits under this Plan to the extent of such payment.
Section 9.3. Notices. Any notice or communication permitted or required
under the Plan shall be in writing and shall be delivered personally, or sent by
registered or certified mail, return receipt requested, postage prepaid, or sent
by nationally recognized overnight carrier, postage prepaid, or sent by
facsimile transmission to the principal office of the Company, if to the
Company, or to the address last shown on the records of the Company or an
Affiliate, if to a Participant or Beneficiary. Such notice or communication
shall be deemed given (a) when delivered if personally delivered; (b) five
mailing days after having been placed in the mail, if delivered by registered or
certified mail; (c) the business day after having been placed with a nationally
recognized overnight carrier, if delivered by nationally recognized overnight
carrier, and (d) the business day after transmittal when transmitted with
electronic confirmation of receipt, if transmitted by facsimile. Any party may
change the address or facsimile number to which notices or communications are to
be sent to it by giving notice of such change in the manner herein provided for
giving notice.
Section 9.4. Nonalienation. No benefit payable at any time under this
Plan shall be subject in any manner to alienation, sale, transfer, assignment,
pledge, levy, attachment, or encumbrance of any kind by any Participant or
Beneficiary.
30
Section 9.5. Tax Liability. The Company may withhold or direct the
trustee of the Trust to withhold from any payment of benefits (or from any other
amounts to be paid to the Participant or Beneficiaries) such amounts as the
Company determines are reasonably necessary to pay any taxes (and interest
thereon) required to be withheld or for which the trustee of the Trust may
become liable under applicable law. The Company may also forward or direct the
trustee of the Trust to forward to the appropriate taxing authority any amounts
required to be paid by the Company or the Trust under the preceding sentence.
Section 9.6. Parachute Payments. No gross up or other recalculations of
amounts owed under this Plan shall be made to avoid excess parachute payments
under Section 280G of the Code or excise tax liability under Section 4999 of the
Code.
Section 9.7. Indemnification. The Company shall indemnify and defend to
the fullest extent permitted by law any employee or former employee serving or
formerly serving as a member of the Committee against all liabilities, damages,
costs and expenses (including attorneys' fees and amounts paid in settlement of
any claims approved by the Company) occasioned by any act or omission to act in
connection with the Plan, if such act or omission is in good faith.
Section 9.8. Captions. Article and section headings and captions are
provided for purposes of reference and convenience only and shall not be relied
upon to construe, define, modify, limit, or extend the scope of any provision of
the Plan.
Section 9.9. Applicable Law. The Plan and all rights hereunder shall be
governed by and construed according to the laws of the State of Minnesota,
except to the extent such laws are preempted by the laws of the United States of
America. The Plan shall be interpreted in a manner consistent with all
applicable laws, including the Americans with Disabilities Act.
31
IN WITNESS WHEREOF, Otter Tail Corporation has caused this Plan to be
executed by its duly authorized officers this 6th day of December, 2001.
OTTER TAIL CORPORATION
By /s/ John MacFarlane
----------------------------
Its Chief Executive Officer
----------------------------
32