CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement ("Agreement") dated as of February 1, 1997,
is entered into by and between Black Hills Corporation ("Company") and Xxxxx X.
Xxxxx, Vice President - Fuel Resources ("Executive").
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
Executive'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 Executive 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; provided, however, that
the Employment Term shall in no event extend beyond the first day of
the month following the month in which the Executive attains age
sixty-five (65).
"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 Executive's employment
under the provisions so indicated. Any purported termination by the
Company or Executive 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 Executive'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 Executive and the Executive agrees
to remain in the employ of the Company. During the Employment Term, the
Executive shall be employed as the Vice President - Fuel Resources of the
Company or in such executive capacity as may be mutually agreed to in writing by
the parties. Executive shall perform the duties, undertake the
responsibilities and exercise the authority customarily performed, undertaken
and exercised by persons situated in a similar executive capacity.
During the Employment Term, excluding periods of vacation and sick leave to
which Executive is entitled, Executive 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 Executive
hereunder. It is expressly understood and agreed that to the extent that any
outside activities have been conducted by Executive 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 Executive's
responsibilities to the Company.
4. COMPENSATION.
During the Employment Term, the Company agrees to pay or cause to be paid to
Executive annual compensation at a rate at least equal to the highest rate of
the Executive'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 executives. For purposes of this Agreement, "annual
compensation" shall mean all compensation paid to the Executive by the
Company during a calendar year, which amounts are includable in the gross
income of the Executive 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 Executive 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
Executive 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, Executive shall be entitled to all fringe benefits,
perquisites, vacation and sick leave generally made available by the Company to
its executives. Unless otherwise provided herein, the fringe benefits,
perquisites, vacation and sick leave provided to Executive shall be on the same
basis and terms as other similarly situated executives of the Company, but
in no event shall be less favorable than the most favorable fringe benefits,
perquisites, vacation and sick leave applicable to Executive at any time within
one year preceding the Effective Date, or if more favorable, at any time
thereafter.
(b) Expenses. Executive 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, Executive's employment hereunder may be
terminated under the following circumstances:
(a) Cause. The Company may terminate Executive's employment for
"Cause." A termination of employment is for "Cause" if Executive (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 Executive's employment shall be for
Cause as set forth in clause (2) above until (i) there shall have been
delivered to Executive a copy of a written notice setting forth that Executive
was guilty of the conduct set forth in clause (2) and specifying the particulars
thereof in detail, and (ii) Executive shall have been provided an opportunity to
be heard by the Board (with the assistance of Executive's counsel if Executive
so desires). No act, nor failure to act, on Executive'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
Executive after a Notice of Termination is given by Executive shall constitute
Cause for purposes of this Agreement.
(b) Disability. The Company may terminate Executive's employment after
having established Executive's Disability. For purposes of this Agreement,
"Disability" means a physical or mental infirmity which impairs Executive'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 Executive.
Executive 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 Executive's Disability during which Executive 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 Executive's Disability, Executive shall be entitled
to return to his position with the Company as set forth in this Agreement in
which event no Disability of Executive will be deemed to have occurred.
(c) Good Reason. During the Employment Term, the Executive 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 Executive's status, title, position or
responsibilities (including reporting responsibilities), which, in the
Executive'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 Executive;
(ii) a reduction in the Executive's Annual Compensation as defined in
paragraph 4 or any failure to pay the Executive 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 Executive to be based outside a
50-mile radius from Rapid City, South Dakota, 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 Executive'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 Executive, 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 Executive may voluntarily terminate his
employment hereunder at any time.
9. COMPENSATION UPON TERMINATION.
Upon termination of Executive's employment during the Employment Term,
Executive shall be entitled to the following benefits:
(a) If Executive's employment with the Company shall be terminated (i) by
the Company for Cause or Disability, or (ii) by reason of Executive's death, or
(iii) by Executive without "Good Reason," the Company shall pay Executive 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 Executive on behalf of the
Company during the period ending on the Termination Date, vacation pay and sick
leave (collectively "Accrued Compensation").
(b) If the Executive'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 Executive for Good Reason, Executive shall be entitled to
the following:
(i) The Company shall pay Executive all Accrued Compensation;
(ii) The Company shall pay Executive 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 Executive'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 Executive 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 Executive
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 Executive hereunder so long as the
aggregate coverages and benefits of the combined benefit plans is no
less favorable to Executive than the Welfare Benefits;
(iv) Executive shall be entitled to an amount of credited service for
vesting purposes under the Pension Equalization Plan 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 Executive's employment continued during the Remaining Term at the
compensation level provided for in Section 4 above. In addition, the
Executive shall be entitled to a supplemental Pension Plan benefit,
which shall be the excess, if any, of (x) the amount that Executive
would have been entitled to receive under the Pension Plan as if
(i) Executive received additional credited service under the Pension
Plan for the Remaining Term and (ii) Executive's Annual Compensation as
defined in Section 4 above remained in effect during the Remaining Term
over (y) the amount that Executive will actually receive under the
Pension Plan. This supplemental benefit shall be determined using the
same factors, actuarial or otherwise, as used in determining
Executive'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 Executive receives Pension
Plan benefits.
10. OFFSET.
Executive 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 Executive obtains other employment.
11. TAX EFFECT.
Notwithstanding anything contained in this Agreement to the contrary, if any
payment received or to be received by Executive pursuant to the terms of this
Agreement or otherwise and in connection with, or arising out of, Executive'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 Executive, 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 Executive, 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 Executive'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 Executive subsequent to
the Effective Date as they become due as a result of the Executive 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 of change of address shall be effective only upon receipt.
15. NONEXCLUSIVITY OF RIGHTS.
Nothing in this Agreement shall prevent or limit Executive'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 Executive may
qualify, nor shall anything herein limit or reduce such rights as Executive may
have under any other agreements with the Company or any of its subsidiaries.
Amounts which are vested benefits or which Executive 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
Executive 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.
20. 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.
18. NO GUARANTEED EMPLOYMENT.
Executive and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between Executive and the Company,
the employment of Executive by the Company is "at will" and, prior to the
Effective Date, may be terminated by either Executive or the Company at any
time. Moreover, if prior to the Effective Date, Executive's employment with the
Company terminates, Executive shall have no further rights
under this Agreement.
19. 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_/s/Xxxxx X. Xxxxx
Title:
ATTEST:
/s/ Xxxxxx X. Xxxxxx
Secretary and Treasurer
By /s/ Xxxxxx X. Xxxxxxxx
Executive
