CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement ("Agreement") dated as of December 31,
1997, is entered into by and between Black Hills Corporation ("Company") and
Xxxx Xxxxx ("Key Employee").
1. RECITALS.
The Board of Directors of the Company ("Board") has determined that it is in
the best interests of the Company and its shareholders to encourage the Key
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change in Control (as defined below).
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
2. CERTAIN DEFINITIONS.
"CHANGE IN CONTROL" shall mean any of the following events:
(1) An acquisition (other than directly from the Company) of any common
stock of the Company (the "Common Stock") by any "Person" (as the term
person is used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), immediately
after which such Person has "Beneficial Ownership" (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of thirty percent
(30%) or more of the Common Stock of the Company; provided, however,
in determining whether a Change in Control has occurred, Common Stock
which is acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which would cause a
Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust forming a
part thereof) maintained by (A) the Company or (B) any corporation
or other Person of which a majority of its voting power or its
voting equity securities ("Voting Securities") or equity interest
is owned, directly or indirectly, by the Company (for purposes of
this definition, a "Subsidiary"), (ii) the Company or its
Subsidiaries, or (iii) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined);
(2) The individuals who, as of January 30, 1996 are members of the Board
(the "Incumbent Board"), cease for any reason to constitute at least
two-thirds of the members of the Board; provided, however, that if
the election, or nomination for election by the Company's common
shareholders, of any new director was approved by a vote of at least
two-thirds of the Incumbent Board, such new director shall, for
purposes of this Plan, be considered as a member of the Incumbent
Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
(3) Approval by shareholders of the Company of:
(i) A merger, consolidation or reorganization involving the
Company, unless such merger, consolidation or reorganization is
a "Non-Control Transaction." A "Non-Control Transaction" shall
mean a merger, consolidation or reorganization of the Company
where:
(A) the shareholders of the Company, immediately before
such merger, consolidation or reorganization, own directly
or indirectly immediately following such merger,
consolidation or reorganization, at least seventy percent
(70%) of the combined voting power of the outstanding
Voting Securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before
such merger, consolidation or reorganization.
(B) the individuals who were members of the Incumbent
Board immediately prior to the execution of the
agreement providing for such merger, consolidation or
reorganization constitute at least two-thirds of the
members of the board of directors of the Surviving
Corporation, or a corporation beneficially directly or
indirectly owning a majority of the Voting Securities of
the Surviving Corporation, and
(C) no Person other than (i) the Company, (ii) any Subsidiary,
(iii) any employee benefit plan (or any trust forming a part
thereof) maintained by the Company, the Surviving
Corporation, or any Subsidiary, or (iv) any Person who,
immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of thirty percent
(30%) or more of the then outstanding Voting Securities),
has Beneficial Ownership of thirty percent (30%) or more
of the combined voting power of the Surviving
Corporation's then outstanding Voting Securities.
(ii) A complete liquidation or dissolution of the Company; or
(iii) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person other
than (x) a transfer to a Subsidiary or (y) a sale or transfer of a
Subsidiary by the Company except if such sale or transfer would
be a sale or other disposition of all or substantially all of the
assets of the Company.
(4) Notwithstanding the foregoing, (i) a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person")
acquired Beneficial Ownership of more than the permitted amount of the
then outstanding Common Stock as a result of the acquisition of Common
Stock by the Company which, by reducing the number of shares of
Common Stock then outstanding, increases the proportional number of
shares Beneficially Owned by the Subject Persons, provided that if a
Change in Control would occur (but for the operation of this sentence)
as a result of the acquisition of Common Stock by the Company, and
after such stock acquisition by the Company, the Subject Person
becomes the Beneficial Owner of any additional Common Stock which
increases the percentage of the then outstanding Common Stock
Beneficially Owned by the Subject Person, then a Change in Control
shall occur; and (ii) a Change in Control shall not be deemed to occur
unless and until all regulatory approvals required to effect a Change
in Control of the Company have been obtained.
"EFFECTIVE DATE" shall mean the first date on which a Change in Control
occurs. The Effective Date does not occur and no benefits shall be
paid under this Agreement if for any reason the Key Employee is not an
employee of the Company on the day prior to the Effective Date.
"EMPLOYMENT TERM" shall mean a term of employment with the Company
which shall commence on the Effective Date and which shall expire on
the third anniversary of the Effective Date.
"GOOD CAUSE" means those events or conditions described in paragraph
8(c)(i) through (vi) below.
"NOTICE OF TERMINATION" shall mean a notice which indicates the
specific termination provision in this Agreement, if any, relied upon
and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Key Executive's
employment under the provisions so indicated. Any purported
termination by the Company or Key Employee shall be communicated by
written notice of termination to the other.
"PENSION EQUALIZATION PLAN" is the Company's pension equalization
plan as amended and restated effective January 27, 1995, and as
amended from time to time thereafter prior to the Effective Date.
"PENSION PLAN" is the Company's tax qualified defined benefit pension
plan as amended and restated effective October 1, 1989, and as
amended from time to time thereafter prior to the Effective Date.
"REMAINING TERM" shall mean that period of time measured from the
Termination Date through the end of the Employment Term.
"TERMINATION DATE" shall mean the date subsequent to a Change in
Control that the Key Employee's employment with the Company terminates.
"WELFARE BENEFITS" shall mean the Black Hills Corporation Medical and
Dental Plan, the Black Hills Corporation Flexible Benefit Plan, and
the Black Hills Corporation Employee Life and Long-Term Disability Plan
as the plans and the terms and conditions thereof exist on the day
prior to the Effective Date.
3. EMPLOYMENT.
Subject to the provisions of Section 8 hereof, during the Employment Term,
the Company agrees to continue to employ the Key Employee and the Key Employee
agrees to remain in the employ of the Company. During the Employment Term, the
Key Employee shall be employed at a position substantially similar to Key
Employee's position prior to the Change in Control or in such other capacity as
may be mutually agreed to in writing by the parties. Key Employee shall
perform the duties, undertake the responsibilities and exercise the authority
customarily performed, undertaken and exercised by persons situated in a
similar capacity.
During the Employment Term, excluding periods of vacation and sick leave to
which Key Employee is entitled, Key Employee agrees to devote reasonable
attention and time during usual business hours to the business and affairs of
the Company to the extent necessary to discharge the responsibilities assigned
to Key Employee hereunder. It is expressly understood and agreed that to the
extent that any outside activities have been conducted by Key Employee prior to
the Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date
shall not thereafter be deemed to interfere with the performance of Key
Employee's responsibilities to the Company.
4. COMPENSATION.
During the Employment Term, the Company agrees to pay or cause to be paid to
Key Employee annual compensation at a rate at least equal to the highest rate of
the Key Employee's annual compensation as in effect at any time within one year
preceding the Effective Date, and as may be increased from time to time.
Such annual compensation shall be payable in accordance with the Company's
customary practices applicable to its Key Employees. For purposes of this
Agreement, "annual compensation" shall mean all compensation paid to the Key
Employee by the Company during a calendar year, which amounts are includable in
the gross income of the Key Employee for federal income tax purposes,
including, but not limited to, overtime, bonus, commission or incentive
compensation ("Annual Compensation").
5. EMPLOYEE WELFARE AND PENSION BENEFITS.
During the Employment Term, the Company shall provide to the Key Employee
the Welfare Benefits and the Pension Plan or other substantially similar
employee welfare and pension benefits, but in no event on a basis less
favorable in terms of benefit levels and coverage than the Welfare Benefits and
the Pension Plan.
6. PENSION EQUALIZATION PLAN.
During the Employment Term, the Company shall continue to provide to Key
Employee (if Key Employee was a participant prior to the Change in Control)
coverage and participation under the Pension Equalization Plan or a
substantially similar supplemental retirement plan, but in no event on a
basis less favorable in terms of benefit levels and coverage than the Pension
Equalization Plan.
7. OTHER BENEFITS.
(a) Fringe Benefits, Perquisites, Vacation and Sick Leave. During the
Employment Term, Key Employee shall be entitled to all fringe benefits,
perquisites, vacation and sick leave generally made available by the Company to
its employees. Unless otherwise provided herein, the fringe benefits,
perquisites, vacation and sick leave provided to Key Employee shall be on the
same basis and terms as other similarly situated employees of the Company,
but in no event shall be less favorable than the most favorable fringe benefits,
perquisites, vacation and sick leave applicable to Key Employee at any time
within one year preceding the Effective Date, or if more favorable, at any
time thereafter.
(b) Expenses. Key Employee shall be entitled to receive prompt
reimbursement of all expenses reasonably incurred by him in connection with the
performance of his duties hereunder or for promoting, pursuing or otherwise
furthering the business or interests of the Company.
8. TERMINATION.
During the Employment Term, Key Employee's employment hereunder may be
terminated under the following circumstances:
(a) Cause. The Company may terminate Key Employee's employment for
"Cause." A termination of employment is for "Cause" if Key Employee (1) has
been convicted of a felony or (2) intentionally engaged in conduct which is
demonstrably and materially injurious to the Company, monetarily or otherwise;
provided, however, that no termination of Key Employee's employment shall be for
Cause as set forth in clause (2) above until (i) there all have been delivered
to Key Employee a copy of a written notice setting forth that Key Employee
was guilty of the conduct set forth in clause (2) and specifying the particulars
thereof in detail, and (ii) Key Employee shall have been provided an opportunity
to be heard by the Board (with the assistance of Key Employee's counsel if Key
Employee so desires). No act, nor failure to act, on Key Employee's part
shall be considered "intentional" unless he has acted, or failed to act, with
an absence of good faith and without a reasonable belief that his action or
failure to act was in the best interest of the Company. Notwithstanding
anything contained in this Agreement to the contrary, no failure to perform
by Key Employee after a Notice of Termination is given by Key Employee shall
constitute Cause for purposes of this Agreement.
(b)Disability. The Company may terminate Key Employee's employment
after having established Key Employee's Disability. For purposes of this
Agreement, "Disability" means a physical or mental infirmity which impairs Key
Employee's ability to substantially perform his duties under this Agreement
which continues for a period of at least one hundred eighty (180)
consecutive days to be determined by a physician selected by Company and
acceptable to Key Employee. Key Employee shall be entitled to the
compensation and benefits provided for under this Agreement for any period
during Employment Term and prior to the establishment of Key Employee's
Disability during which Key Employee is unable to work due to a physical or
mental infirmity. Notwithstanding anything contained in this Agreement to the
contrary, until the Termination Date specified in a Notice of Termination
relating to Key Employee's Disability, Key Employee shall be entitled to
return to his position with the Company as set forth in this Agreement in
which event no Disability of Key Employee will be deemed to have occurred.
(c)Good Reason. During the Employment Term, the Key Employee may
terminate his employment for "Good Reason." For purposes of this Agreement,
"Good Reason" shall mean the occurrence after the Effective Date of any of the
events or conditions described below:
(i)a change in the Key Employee's status, title, position or
responsibilities (including reporting responsibilities), which, in the
Key Employee's reasonable judgment, represent an adverse change from
his status, title, position or responsibilities as in effect prior to
the Effective Date or any other action by the Company which results in
a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, unsubstantial and
inadvertent action not taken in bad faith and which is remedied
by the Company promptly after receipt of notice thereof by Key
Employee;
(ii)a reduction in the Key Employee's Annual Compensation as
defined in paragraph 4 or any failure to pay the Key Employee any
compensation or benefits to which he is entitled within seven (7)
days of the date due;
(iii)any material breach by the Company of any provision of this
Agreement, including, but not limited to, the Company's failure to
provide the Employee Welfare and Pension Benefits and Pension
Equalization Plan as set forth in paragraphs 5 and 6 above;
(iv)The Company's requiring the Key Employee to be based outside
a 50-mile radius from Key Employee's usual and normal place of work
prior to the Change in Control, except for reasonably required
travel on the Company's business which is not substantially greater
than such travel requirements prior to the Effective Date;
(v)Any purported termination of the Key Employee's employment
for Cause by the Company which does not comply with the terms of
Section 8(a) above; or
(vi)The failure of the Company to obtain an agreement, satisfactory
to the Key Employee, from any successor or assign of the Company to
assume and agree to perform this Agreement, as contemplated in
Section 12 hereof.
(d)Voluntary Termination. The Key Employee may voluntarily terminate his
employment hereunder at any time.
9. COMPENSATION UPON TERMINATION.
Upon termination of Key Employee's employment during the Employment Term,
Key Employee shall be entitled to the following benefits:
(a)If Key Employee's employment with the Company shall be terminated
(i) by the Company for Cause or Disability, or (ii) by reason of Key
Employee's death, or (iii) by Key Employee without "Good Reason," the Company
shall pay Key Employee all amounts earned or accrued through the Termination
Date but not paid as of the Termination Date,including all Annual
Compensation, reimbursement for reasonable and necessary expenses incurred
by Key Employee on behalf of the Company during the period ending on the
Termination Date, vacation pay and sick leave (collectively "Accrued
Compensation").
(b)If the Key Employee's employment with the Company shall be terminated
(other than by reason of death) (i) by the Company other than for Cause or
Disability, or (ii) by Key Employee for Good Reason, Key Employee shall be
entitled to the following:
(i)The Company shall pay Key Employee all Accrued
Compensation;
(ii)The Company shall pay Key Employee as severance pay and in
lieu of any further compensation for periods subsequent to the
Termination Date an amount in cash equal to (w) 2.99 times (x) the
Key Employee's average Annual Compensation for the most recent five
taxable years ending prior to the Change in Control times (y) a
ratio, the numerator of which shall be the number of months in the
Remaining Term (a partial month being considered a full month) and
the denominator of which shall be the number of months in the
Employment Term times (z) a ratio, the numerator of which shall
be the number of months in the Employment Term and the denominator
of which shall be 36 months;
(iii)During the "Remaining Term," the Company shall at its expense
continue on behalf of Key Employee and his dependents and beneficiaries
the Welfare Benefits or similar benefits no less favorable than the
benefit levels and coverages provided in the Welfare Benefits;
provided, however, that the Company's obligation with respect to the
foregoing benefits shall be limited to the extent that Key Employee
obtains any such benefits pursuant to a subsequent employer's benefit
plans, in which case the Company may reduce the coverage of
any benefits it is required to provide Key Employee hereunder so long
as the aggregate coverages and benefits of the combined benefit plans
is no less favorable to Key Employee than the Welfare Benefits;
(iv)Key Employee shall be entitled to an amount of credited service
for vesting purposes under the Pension Equalization Plan (if Key
Employee is a participant therein) equal to the period of time in
the Remaining Term, and it shall be assumed for purposes of
determining benefits under the Pension Equalization Plan, that Key
Employee's employment continued during the Remaining Term at
the compensation level provided for in Section 4 above. In
addition, the Key Employee shall be entitled to a supplemental
Pension Plan benefit, which shall be the excess, if any, of (x) the
amount that Key Employee would have been entitled to receive under
the Pension Plan as if (i) Key Employee received additional credited
service under the Pension Plan for the Remaining Term and (ii) Key
Employee's Annual Compensation as defined in Section 4 above
remained in effect during the Remaining Term over (y) the amount that
Key Employee will actually receive under the Pension Plan. This
supplemental benefit shall be determined using the same factors,
actuarial or otherwise, as used in determining Key Employee's
Pension Plan benefit and shall be payable at like terms and in
like manner as the Pension Plan benefit. This supplemental benefit is
not payable unless and until the Key Employee receives Pension Plan
benefits.
10. OFFSET.
Key Employee shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, and
except as provided in Section 9(b)(iii), such payments shall not be reduced
whether or not Key Employee obtains other employment.
11. TAX EFFECT.
Notwithstanding anything contained in this Agreement to the contrary, if
any payment received or to be received by Key Employee pursuant to the terms
of this Agreement or otherwise and in connection with, or arising out of,
Key Employee's employment with the Company or a Change in Control ("Total
Payments"), would not be deductible by the Company (in whole or in part) as
the result of Section 280G of the Internal Revenue Code (the "Code"), the
amount determined under Section 9(b)(ii) shall be reduced until no portion of
the Total Payments is not nondeductible.
For purposes of determining whether any of the Total Payments would not be
deductible by the Company (1) Total Payments will be treated as "Parachute
Payments" within the meaning of Section 280G(b)(2) of the Code and all
Parachute Payments in excess of the base amount within the meaning of Section
280G(b)(3) will be treated as nondeductible unless, in the opinion of tax
counsel selected by the Company's independent auditors and acceptable to Key
Employee, such Total Payments (in whole or in part) are not Parachute Payments,
or such Parachute Payments in excess of the base amount (in whole or in part)
are otherwise not nondeductible and (2) the value of any noncash benefits or
any deferred payment or benefit will be determined by the Company's
independent auditors in accordance with Section 280G(d)(3) and (4) of the Code.
12. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and shall inure to the benefit of the
Company, its successors and assigns and the Company shall require any successor
or assign to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession or assignment had taken place. The term "Company" as used
herein shall include such successors and assigns. The term "successors and
assigns" as used herein shall mean a corporation or other entity acquiring all
or substantially all the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.
Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Key Employee, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the Key
Employee's legal personal representative.
13. FEES AND EXPENSES.
The Company shall pay all legal fees and related expenses (including the
costs of experts, evidence and counsel) incurred by the Key Employee subsequent
to the Effective Date as they become due as a result of the Key Employee seeking
to obtain or enforce any right or benefit provided by this Agreement.
14. NOTICE.
For the purposes of this Agreement, notices and all other communications
provided for in the Agreement (including the Notice of Termination) shall be in
writing and shall be deemed to have been duly given when personally delivered or
sent by certified mail, return receipt requested, postage prepaid, addressed
to the respective addresses last given by each party to the other. All
notices and communications shall be deemed to have been received on the date of
delivery thereof or on the third business day after the mailing thereof, except
that notice ofchange of address shall be effective only upon receipt.
15. NONEXCLUSIVITY OF RIGHTS.
Nothing in this Agreement shall prevent or limit Key Employee's continuing
or future participation in any benefit, bonus, incentive or other plan or
program provided by the Company or any of its subsidiaries and for which Key
Employee may qualify, nor shall anything herein limit or reduce such rights
as Key Employee may have under any other agreements with the Company or any
of its subsidiaries. Amounts which are vested benefits or which Key Employee
is otherwise entitled to receive under any plan or program of the Company or
any of its subsidiaries shall be payable in accordance with such plan or
program, except as explicitly modified by this Agreement.
16. MISCELLANEOUS.
No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by Key Employee and the Company. No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreement or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth
in this Agreement.
17. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the state of South Dakota.
18. SEVERABILITY.
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity
or enforceability of the other provisions hereof.
19. NO GUARANTEED EMPLOYMENT.
Key Employee and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between Key Employee and the
Company, the employment of Key Employee by the Company is "at will" and,
prior to the Effective Date, may be terminated by either Key Employee or
the Company at any time. Moreover, if prior to the Effective Date, Key
Employee's employment with the Company terminates, Key Employee shall have
no further rights under this Agreement.
20. NO ADMINISTRATION.
The parties hereto understand and agree that this Agreement shall not be
subject to a separate ongoing administrative scheme to administer the benefits
of this Agreement in that the benefits provided hereunder are capable of
simple or mechanical determination upon the happening of a required event or
events.
21. SUBSIDIARY DEEMED TO BE COMPANY FOR PORTIONS OF AGREEMENT.
In the event that subsequent to the date of this Agreement the Key Employee
becomes an employee of a Subsidiary of the Company, or in the event that any
Key Employee is an employee of a Subsidiary of the Company, the references
to "Company" in Sections 3 through 8 and in Section 19 shall be deemed to be a
reference to the Subsidiary which may employ the Key Employee to the extent
necessary to preserve the intent of this Agreement; provided, that nothing
herein shall mean or suggest that any benefits are applicable hereunder upon
a Change in Control of a Subsidiary rather than the Company.
22. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements, if any, understandings and
arrangements, oral or written, between the parties hereto with respect to the
subject matter hereof.
Dated the day and year first above written.
BLACK HILLS CORPORATION
By______________________________
Title:
ATTEST:
_________________________
Secretary and Treasurer
By______________________________
Key Employee
