OTTER TAIL CORPORATION 1999 STOCK INCENTIVE PLAN 2005 NONQUALIFIED STOCK OPTION AGREEMENT
Exhibit 10-N-7
This 2005 Nonqualified Stock Option Agreement between Otter Tail Corporation, a Minnesota
corporation (the “Corporation”), and the person named in the attached Stock Option Award
Certificate who is an employee of the Corporation or one of its Affiliates (the “Optionee”),
effective as of the date of grant set forth in the attached Stock Option Award Certificate (the
“Grant Date”).
WHEREAS, the Corporation desires to provide the Optionee with an opportunity to purchase
shares of the Corporation’s Common Stock, par value $5.00 per share (the “Common Shares”), as
hereinafter provided in order to carry out the purpose of the Corporation’s 1999 Stock Incentive
Plan (the “Plan”).
WHEREAS, this 2005 Nonqualified Stock Option Agreement applies to all options with a Grant
Date of January 2005 and thereafter (the “Effective Date”). No change is intended or made to
Options issued prior to the Effective Date.
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Corporation and the Optionee hereby agree as follows:
1. Grant of Option. The Corporation hereby grants to the Optionee the right and
option (the “Option”) to purchase all or any part of the aggregate number of Common Shares set
forth in the attached Stock Option Award Certificate, on the terms and conditions set forth in this
Agreement and the Plan. The Option granted hereunder shall not be an incentive stock option within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).
2. Exercise Price. The per share purchase price of the Common Shares subject to the
Option shall be the option price per share set forth in the attached Stock Option Award
Certificate.
3. Duration and Exercisability. The term of the Option shall be for a period of ten
years from the Grant Date, terminating at the close of business on the expiration date set forth in
the attached Stock Option Award Certificate (the “Expiration Date”) or such shorter period as is
prescribed in paragraph 6 hereof. The Option becomes exercisable in its entirety on October 11,
2005, subject to the provisions of paragraphs 4 and 6 hereof. Except as provided in paragraph 6
hereof, the Option may not be exercised unless the Optionee shall, at the time of exercise, be an
employee of the Corporation or one of its Affiliates. The Optionee shall not have any of the
rights of a shareholder with respect to any of the Common Shares subject to the Option until such
shares shall be issued to the Optionee upon due exercise of the Option.
4. Change of Control. Notwithstanding the provisions of paragraph 3 hereof, from and
after a Change of Control (as hereinafter defined) the Option shall become immediately exercisable
in full. As used herein, “Change of Control” shall mean any of the following events:
(a) The acquisition by any person, entity or “group,” within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), other than the Corporation or any of its Affiliates, or any employee benefit plan of
the Corporation and/or one or more of its Affiliates, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or more of either the then
outstanding Common Shares or the combined voting power of the Corporation’s then outstanding
voting securities in a transaction or series of transactions not approved in advance by a
vote of at least three-quarters of the Continuing Directors (as hereinafter defined); or
(b) Individuals who, as of the Grant Date, constitute the Board of Directors of the
Corporation (generally the “Directors” and as of the Grant Date the “Continuing Directors”)
cease for any reason to constitute at least a majority thereof, provided that any person
becoming a Director subsequent to the Grant Date whose nomination for election was approved
in advance by a vote of at least three-quarters of the Continuing Directors (other than a
nomination of an individual whose initial assumption of office is in connection with an
actual or threatened solicitation with respect to the election or removal of the Directors
of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) shall be deemed to be a Continuing Director; or
(c) The approval by the shareholders of the Corporation of a reorganization, merger,
consolidation, liquidation or dissolution of the Corporation or of the sale (in one
transaction or a series of related transactions) of all or substantially all of the assets
of the Corporation other than a reorganization, merger, consolidation, liquidation,
dissolution or sale approved in advance by a vote of at least three-quarters of the
Continuing Directors;
(d) The first purchase under any tender offer or exchange offer (other than an offer by
the Corporation or any of its Affiliates) pursuant to which Common Shares are purchased; or
(e) At least a majority of the Continuing Directors determines in their sole discretion
that there has been a change in control of the Corporation.
5. Transferability. The Option shall not be transferable other than by will or the
laws of descent and distribution, and the Option may be exercised during the lifetime of the
Optionee only by the Optionee. More particularly (but without limiting the generality of the
foregoing), the Option may not be assigned, transferred (except as aforesaid), pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation, or other disposition of the Option contrary to the provisions hereof and the levy of
an execution, attachment or similar process upon the Option shall be void. Notwithstanding the
foregoing,
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Optionee may, in the manner established by the Committee, designate a beneficiary or beneficiaries
to exercise the rights of the Optionee with respect to the Option upon the death of the Optionee.
6. Effect of Termination of Employment.
(a) In the event the Optionee shall cease to be employed by the Corporation or any of its
Affiliates for any reason other than termination for cause, death, disability, termination within
two years following a Change in Control, or retirement after reaching age 55, the Optionee may
exercise the Option at any time within three months after such termination of employment, but not
thereafter; provided, however, that the Option may not be exercised after the Expiration Date and
may be exercised only to the extent of the number of shares the Optionee was entitled to purchase
under the Option on the date of such termination.
(b) In the event the Optionee shall cease to be employed by the Corporation or any of its
Affiliates upon termination for cause, the Option shall be terminated as of the date of such
termination. Termination for cause shall mean termination of Optionee’s employment with the
Corporation or any of its Affiliates for the following acts: dishonesty, fraud, conviction or
confession of a felony or of a crime involving moral turpitude, destruction or theft of the
property of the Corporation or any of its Affiliates, willful malfeasance or gross negligence,
misconduct materially injurious to the Corporation or any of its Affiliates, participation in fraud
against the Corporation or any of its Affiliates, entering into competition against the Corporation
or any of its Affiliates, and/or a material breach or threatened material breach of any other
agreements with the Corporation or any of its Affiliates.
(c) In the event the Optionee shall cease to be employed by the Corporation or any of its
Affiliates within two years following a Change in Control, the Optionee may exercise the Option at
any time after such termination of employment, provided, however, that the Option may not be
exercised after the Expiration Date.
(d) In the event the Optionee terminates employment due to retirement from the Corporation or
any of its Affiliates after reaching age 55, the Option shall remain in full force and effect, and
continue to vest in accordance with paragraph 3 hereof.
(e) In the event that the Optionee shall cease to be employed by the Corporation or any of its
Affiliates as the result of death or disability, or the Optionee shall die within three months
after the termination of the Optionee’s employment other than for cause, the Option may be
exercised by the Optionee or, if applicable, by the Optionee’s personal representative or
administrator or by any person or persons to whom the Option is transferred by will or the
applicable laws of descent and distribution, at any time within a period of one year after the
termination of employment of the Optionee, but not after the Expiration Date, to the full extent of
the Common Shares covered by the Option not previously purchased, whether or not such shares had
become purchasable by the Optionee at the date of the Optionee’s termination of employment. For
purposes of this Agreement, an Optionee shall be deemed to have a disability if such Optionee is
deemed to be disabled under any long-term disability program then
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maintained by the Corporation or any of its Affiliates that is applicable to the Optionee; provided, however,
that if no such long-term plan is then maintained, the determination of disability shall be in the
exclusive and sole discretion of the Corporation.
(f) The Option shall not be affected by any change of the duties or position of the Optionee
(or by a temporary leave of absence approved by the Corporation) so long as the Optionee continues
to be an employee of the Corporation or of an Affiliate.
(g) Nothing herein contained shall confer on the Optionee any right to continue in the employ
of the Corporation or any Affiliate or affect in any way the right of the Corporation or any
Affiliate to terminate the employment of the Optionee at any time.
7. Anti-dilution Adjustments. If any portion of the Option is exercised subsequent to
any stock dividend, split-up, recapitalization, merger, consolidation, combination or exchange of
shares or the like occurring after the Grant Date as a result of which shares of any class shall be
issued in respect of the outstanding Common Shares, or Common Shares shall be changed into the same
or a different number of shares of the same or another class or classes, the person or persons
exercising the Option shall receive for the aggregate price paid upon such exercise the aggregate
number of shares which, if Common Shares (as authorized at the Grant Date) had been purchased at
the Grant Date for the same aggregate price (on the basis of the price per share set forth in
paragraph 2 hereof) and had not been disposed of, such person or persons would be holding at the
time of such exercise as a result of such purchase and any and all such stock dividends, split-ups,
recapitalizations, mergers, consolidations, combinations or exchanges of shares, or the like;
provided, however, that no fractional share shall be issued upon any such exercise,
and the aggregate price paid shall be appropriately reduced on account of any fractional share not
issued.
8. Manner of Exercise. The Option may be exercised by written notice to Xxxxx Fargo
Investment, LLC as prescribed by the Corporation. The notice shall state the number of shares with
respect to which the Option is being exercised. The notice shall be accompanied by payment of the
full purchase price and the Corporation or its agent shall issue and deliver a certificate
representing such shares as soon as practicable after the notice is received. Payment of the
purchase price shall, unless otherwise consented to by the Corporation, be made by delivery of
cash, check (bank check, certified check or personal check) or money order payable to the order of
the Corporation Certificates for the shares purchased shall be registered in the name of the person
exercising the Option (or if the Option shall be exercised by the Optionee and if the Optionee
shall so request in the notice exercising the Option, shall be registered in the name of the
Optionee and another person as joint tenants) and shall be delivered to the person exercising the
Option. In the event the Option shall be exercised pursuant to paragraph 6(d) hereof by any person
other than the Optionee, the notice shall be accompanied by appropriate proof of such person’s
right to exercise the Option. All shares issued upon the exercise of the Option shall be fully
paid and non-assessable.
9. Taxes. The Optionee acknowledges that the Optionee will consult with the
Optionee’s personal tax advisor regarding the income tax consequences of exercising the Option
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or any other matters related to this Agreement. In order to provide the Corporation with the
opportunity to claim the benefit of any income tax deduction which may be available to it upon
exercise of the Option, and in order to comply with all applicable income tax laws or regulations,
the Corporation may take such action as it deems appropriate to insure that, if necessary, all
applicable federal or state payroll, withholding, income or other taxes are withheld or collected
from the Optionee. In accordance with the terms of the Plan, and such rules as may be adopted by
the Committee under the Plan, the Optionee may elect to satisfy the Optionee’s federal and state
income tax withholding obligations upon exercise of the Option by (a) delivering cash, check (bank
check, certified check or personal check) or money order payable to the order of the Corporation,
or (b) having the Corporation withhold a portion of the Common Shares otherwise to be delivered
upon exercise of the Option having a Fair Market Value equal to the amount of federal and state
income tax required to be withheld upon such exercise, in accordance with such rules as the
Corporation may from time to time establish.
10. Miscellaneous.
(a) The Corporation shall reserve and keep available such number of Common Shares as will be
sufficient to satisfy the requirements of this Agreement.
(b) If any of the shares covered by this Agreement are not registered under the Securities Act
of 1933 at the time of their issuance hereunder, the Optionee represents and agrees that all such
shares purchased under the Option will be acquired for investment and not for resale.
(c) As used in this Agreement, the term “Common Shares” shall mean the Common Shares of the
Corporation as authorized at the Grant Date, and the terms “Affiliate,” “Committee” and “Fair
Market Value” shall have the meanings ascribed to them in the Plan.
(d) This Option is granted pursuant to the Plan and is subject to all the terms and conditions
contained therein. A copy of the Plan is available to the Optionee upon request.
(e) This Agreement shall be governed by and construed in accordance with the laws of the State
of Minnesota.
(f) Headings in this Agreement are for convenience of reference only and shall not be deemed
in any way to be material or relevant to the construction or interpretation of this Agreement or
any provision hereof.
(g) THIS 2005 NONQUALIFIED STOCK OPTION AGREEMENT IS ATTACHED TO AND MADE A PART OF A STOCK
OPTION AWARD CERTIFICATE AND SHALL HAVE NO FORCE OR EFFECT UNLESS SUCH STOCK OPTION AWARD
CERTIFICATE IS DULY EXECUTED AND DELIVERED BY THE CORPORATION AND THE OPTIONEE.
* * * * * * * *
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[Name and address of Optionee]
[Social Security Number of Optionee]
You have been granted options to purchase shares of Otter Tail Corporation Common Stock as
follows:
| Grant Type: | Nonqualified Stock Option | |||||
| Grant Date: | April 11, 2005 | |||||
| Stock Option Plan: | 1999 Stock Incentive Plan | |||||
| Option Price Per Share: | $
|
|||||
| Total Number of Shares Granted: | ||||||
| Expiration Date: | April 11, 2015 |
By the Corporation’s and your signature below, it is agreed that these options are granted
under and governed by the terms and conditions of the 2005 Nonqualified Stock Option Agreement, a
copy of which is attached and made a part of this document, and the Corporation’s 1999 Stock
Incentive Plan, a copy of which is enclosed.
OTTER TAIL CORPORATION
| OTTER TAIL CORPORATION | ||||
| By: | ||||
| Xxxx Xxxxxxxx | ||||
| Its: President & Chief Executive Officer | ||||
| [Name of Optionee] | ||||
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