CHANGE IN CONTROL AGREEMENT
This
Change in Control Agreement ("Agreement") dated as of ________________, _____
is
entered into by and between Black Hills Corporation ("Company") and
________________________ (“Employee”).
|
1.
|
2. DEFINITIONS.
“AFFILIATE”
shall
have the meaning ascribed to such term in Rule 12b-2 of the General Rules and
Regulations of the Exchange Act.
“BENEFICIAL
OWNER”
or
“BENEFICIAL
OWNERSHIP”
shall
have the meaning ascribed to such term in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act”
“CAUSE”
means
those events or conditions described in paragraph 9(a)(1) and (2)
below.
"CHANGE
IN CONTROL"
shall
mean any of the following events:
(a) The
acquisition in a transaction or series of transactions by any Person of
Beneficial Ownership of thirty percent (30%) or more of the combined voting
power of the then outstanding shares of common stock of the Company; provided,
however, that for purposes of this Agreement, the following acquisitions will
not constitute a Change in Control: (A) any acquisition by the Company;
(B) any acquisition of common stock of the Company by an underwriter
holding securities of the Company in connection with a public offering thereof;
and (C) any acquisition by any Person pursuant to a transaction which complies
with subsections (c) (i), (ii) and (iii), below;
(b) Individuals
who, as of December 31, 2004 are members of the Board (the "Incumbent Board"),
cease for any reason to constitute at least a majority 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;
1
(c) Consummation,
following shareholder approval, of a reorganization, merger, or consolidation
of
the Company and/or its subsidiaries, or a sale or other disposition (whether
by
sale, taxable or non-taxable exchange, formation of a joint venture or
otherwise) of fifty percent (50%) or more of the assets of the Company and/or
its subsidiaries (each a “Business Combination”), unless, in each case,
immediately following such Business Combination, (i) all or substantially all
of
the individuals and entities who were beneficial owners of shares of the common
stock of the Company immediately prior to such Business Combination beneficially
own, directly or indirectly, more that fifty percent (50%) of the combined
voting power of the then outstanding shares of the entity resulting from the
Business Combination or any direct or indirect parent corporation thereof
(including, without limitation, an entity which as a result of such transaction
owns the Company or all or substantially all of the Company’s assets either
directly or through one (1) or more subsidiaries)(the “Successor Entity”); (ii)
no Person (excluding any Successor entity or any employee benefit plan or
related trust, of the Company or such Successor Entity) owns, directly or
indirectly, thirty percent (30%) or more of the combined voting power of the
then outstanding shares of common stock of the Successor Entity, except to
the
extent that such ownership existed prior to such Business Combination; and
(iii)
at least a majority of the members of the Board of Directors of the entity
resulting from such Business Combination or any direct or indirect parent
corporation thereof were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board providing for such
Business Combination; or
(d) Approval
by the shareholders of the Company of a complete liquidation or dissolution
of
the Company, except pursuant to a Business Combination that complies with
subsections (c) (i), (ii), and (iii) above.
(e) 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.
2
(f) A
Change
in Control shall not be deemed to occur unless and until all regulatory
approvals required in order to effectuate a Change in Control of the Company
have been obtained and the transaction constituting the Change in Control has
been consummated.
|
"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 Employee is not an employee of the
Company
on the day prior to the Effective
Date.
|
“EXCHANGE
ACT”
means
the Securities Exchange Act of 1934, as amended from time to time, or any
successor act thereto.”
"GOOD
REASON"
means
those events or conditions described in paragraph 9(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 Employee’s
employment under the provisions so indicated. Any purported termination by
the
Company or Employee shall be communicated by written notice of termination
to
the other.
“OMNIBUS
INCENTIVE COMPENSATION PLAN”
shall
mean the incentive compensation plan known as the “Black Hills Corporation
Omnibus Incentive Compensation Plan” as adopted on May 30, 2001, and as amended
or replaced from time to time thereafter prior to the Effective Date.
|
"PENSION
EQUALIZATION PLAN"
is the Company's pension equalization plan as amended and restated
effective January 27, 1995, and as amended or replaced 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.
“PERSON”
shall
have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act
and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in
Section 13(d).
"PROTECTION
PERIOD"
shall
mean the time period beginning on the Effective Date and which shall expire
on
the second anniversary of the Effective Date; provided, that the Protection
Period shall in no event extend beyond the first day of the month following
the
month in which the Employee attains age 65, if Employee is an executive officer
of the Company on the Effective Date.
3
“RETIREMENT
SAVINGS PLAN”
shall
mean the Black Hills Corporation Retirement Savings Plan (401K) as amended
and
restated on June 1, 2000, and as further amended from time to time thereafter
prior to the effective date.
|
“SEVERANCE
COMPENSATION”
means the Employee’s base salary and annual incentive payment, together
with discretionary bonuses paid in cash or vested stock, on a
calendar-year basis.
|
|
“SUBSIDIARY”
means any corporation, partnership, limited liability company, joint
venture, or other entity in which the Company has a majority voting
interest.
|
|
"TERMINATION
DATE"
shall mean the date subsequent to a Change in Control that the 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, and the Short-Term Disability Plan, as the
plans
and
the terms and conditions thereof exist on the day prior to the Effective
Date.
The
Term
of this Agreement shall commence on the date of execution and shall continue
in
effect until June 1, 2008. If no Change in Control shall have occurred during
the Term, this Agreement shall expire. If a Change in Control occurs during
the
Term, this Agreement shall remain in effect for full performance according
to
its terms. Upon expiration of this Agreement, the Company, by action of its
Board of Directors, may elect to renew or not renew this Agreement, or may
offer
to renew the Agreement subject to modifications of any term or condition, at
its
discretion. The Board of Directors may, in its discretion, terminate this
Agreement prior to the expiration of the Term, in the event that Employee,
for
any reason, ceases to be employed with the Company in a position as an executive
officer within the meaning of the Exchange Act.
|
4.
|
Subject
to the provisions of this Agreement, during the Protection Period the Company
agrees to continue to employ the Employee and the Employee agrees to remain
in
the employ of the Company. During the Protection Period, the Employee shall
be
employed at a position substantially similar to 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. 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 Protection Period, excluding periods of vacation and sick leave to which
Employee is entitled, Employee agrees to devote full 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 Employee hereunder.
It
is expressly understood and agreed that to the extent that any civic, charitable
or industry-related activities have been conducted by 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 Employee’s
responsibilities to the Company.
4
|
5.
|
During
the Protection Period, the Company agrees to pay or cause to be paid to employee
Annual Compensation at a rate at least equal to the highest rate of the
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 officers and employees. For purposes of this
Agreement, "Annual Compensation" shall mean all of the following compensation
paid to the Employee by the Company during a calendar year: (a) amounts which
are includable in the gross income of the Employee for federal income tax
purposes, including base salary, targeted annual incentive bonus, targeted
long-term incentive grants and awards; and (b) matching contributions or other
benefits payable under the Retirement Savings Plan; but excluding restricted
stock awards, performance units or stock options that become vested or
exercisable pursuant to Article 15 (Change in Control) of the Omnibus Incentive
Compensation Plan, in a calendar year.
During
the Protection Period, the Company shall provide to the Employee the Welfare
Benefits and the Pension Plan, including supplemental medical insurance, travel
accident insurance, short-term disability, long-term disability or life
insurance benefits, 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. In the event
Employee is not a participant in the Welfare Benefits or the Pension Plan prior
to a Change of Control, then Company shall have no obligation to provide the
Welfare Benefits or the Pension Plan or other substantially similar employee
welfare and pension benefits as provided in this paragraph.
During
the Protection Period, the Company shall continue to provide to Employee (if
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.
|
8.
|
(a) Fringe
Benefits, Perquisites, Vacation and Sick Leave.
During
the Protection Period, Employee shall be entitled to all fringe benefits,
perquisites, and paid-time-off generally made available by the Company to its
Employees. Unless otherwise provided herein, the fringe benefits, perquisites,
and paid-time-off provided to 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, or paid-time-off
to Employee at any time within one year preceding the Effective Date, or if
more
favorable, at any time thereafter.
5
(b) Expenses.
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.
(c) Indemnity.
If, at
the time of a Change in Control, the Employee was covered by an Indemnity
Agreement, and/or Directors’ and Officers’ Insurance (D & O) coverage, then
the Indemnity Agreement and D & O coverage shall continue in full force and
effect throughout the Protection Period, and beyond the Protection Period,
with
respect to claims arising out of acts or omissions of the Employee prior to
a
Change in Control. If, following a Change in Control, Company or a Successor
Entity adopts substitute Indemnity Agreements, and/or D & O coverage, for
employees having substantially the same authority, duties, and responsibilities
as Employee, then Employee shall be entitled to receive the benefit of such
protection with respect to claims arising from acts or omissions of Employee
following a Change in Control.
|
9.
|
During
the Protection Period, Employee’s employment hereunder may be terminated under
the following circumstances:
(a) Cause.
The
Company may terminate Employee’s employment for "Cause." A termination of
employment is for "Cause" if Employee (1) enters a guilty plea, pleads
nolo
contendre
to, or
is convicted of a felony offense that is demonstrably injurious to the Company;
(2) intentionally engages in other conduct which is demonstrably injurious
to
the Company, monetarily or otherwise; or (3) fails, after reasonable request,
to
cooperate with the Company or governmental authorities in connection with a
civil or criminal regulatory investigation or proceeding, or other civil
litigation involving the Company; provided, however, that no termination of
Employee’s employment shall be for Cause as set forth in clauses (2) or (3),
above, unless (i) there shall have been delivered to Employee a copy of a
written Notice of Termination, at least thirty (30) days in advance of the
Termination Date, setting forth that Employee was guilty of the conduct set
forth in such applicable clause and specifying the particulars thereof in
detail; and (ii) Employee shall have been provided an opportunity to be heard
by
the Board (with the assistance of Employee’s counsel if Employee so desires). No
act, nor failure to act, on 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 Employee after a Notice of Termination is
given to the Employee shall constitute Cause for purposes of this
Agreement.
6
(b) Disability.
The
Company may terminate Employee’s employment after having established Employee’s
Disability. For purposes of this Agreement, "Disability" means a physical or
mental infirmity because of which Employee is receiving benefits under the
Company sponsored long-term disability plan in which the Employee participates.
Employee shall be entitled to the compensation and benefits provided for under
this Agreement for any period during Protection Period and prior to the
establishment of Employee’s Disability, during which Employee is unable to work
due to a physical or mental infirmity, and up to the date long-term disability
benefits are actually paid. Notwithstanding anything contained in this Agreement
to the contrary, and subject to applicable law and the provisions of the
Company’s long-term disability policy, until the Termination Date specified in a
Notice of Termination relating to Employee’s Disability, Employee shall be
entitled to return to his position with the Company as set forth in this
Agreement in which event no Disability of Employee will be deemed to have
occurred.
(c) Good
Reason.
During
the Protection Period, the 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
material reduction of the Employee’s authority, duties, or responsibilities from
those in effect prior to the Effective Date, other than an insubstantial or
inadvertent reduction that is remedied by the Company promptly after receipt
of
notice thereof given by Employee; provided that, any reduction in the foregoing
resulting merely from the acquisition of the Company, or any Business
Combination, by reason of which the Company thereafter exists as a subsidiary
or
division of another entity, shall not constitute Good Reason;
(ii) A
reduction in the Employee’s Annual Compensation as defined in Section 5, or any
failure to pay the 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 Sections 6 and
7
above;
(iv) The
Company's requiring the Employee to be based outside a 50-mile radius from
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 Employee’s employment for Cause by the Company
which does not comply with the terms of Section 9(a) above; or
7
(vi) The
failure of the Company to obtain an agreement, satisfactory to the Employee,
from any successor or assign of the Company to assume and agree to perform
this
Agreement, as contemplated in Section 14 hereof.
In
order
to effectuate a termination under this Section 9(c), the Employee shall promptly
deliver written notice to the Company upon the occurrence of, and stating the
grounds for Good Reason in support of termination. For purposes of determining
the amount of any cash payment payable to the Employee in accordance with
Section 10, any reduction in compensation or benefits that would constitute
Good
Reason hereunder shall be deemed not to have occurred.
Upon
termination of Employee's employment, prior to the end of the Protection Period,
Employee shall be entitled to the following benefits:
(a) If
Employee’s employment with the Company shall be terminated (i) by the
Company for Cause or Disability, or (ii) by reason of Employee’s death, or
(iii) by Employee without "Good Reason," the Company shall pay 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 Employee on behalf of the Company
during the period ending on the Termination Date, together with accrued vacation
pay, and paid time off (collectively "Accrued Compensation"). In addition to
the
foregoing, if the Employee’s employment is terminated by the Company for
Disability or by reason of the Employee’s death, the Company shall pay to the
Employee or his beneficiaries an amount equal to the "Pro Rata Bonus" (as
hereinafter defined). For purposes of this Agreement, "Pro Rata Bonus" shall
mean an amount equal to 100% of the target bonus that the Employee would have
been eligible to receive for the Company's fiscal year in which the Employee's
employment terminates, multiplied by a fraction, the numerator of which is
the
number of days in such fiscal year through the Termination Date and the
denominator of which is 365.
(b) If
the
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 Employee for Good Reason, Employee shall be entitled to the
following:
(i) The
Company shall pay Employee all Accrued Compensation and a Pro Rata Bonus;
(ii) The
Company shall pay Employee, in lieu of any further compensation for periods
subsequent to the Termination Date, a lump sum severance payment, in cash,
in an
amount equal to (w) two (2) times (x) the Employee’s average Severance
Compensation for the most recent five taxable years ending prior to the Change
in Control. Notwithstanding the foregoing, if the Employee is an executive
officer who has attained the age of 63 on the Termination Date, the severance
payment to be paid under this subsection shall be the amount described above
multiplied by a fraction, the numerator of which shall be the number of days
remaining until the Employee’s 65th
birthday, and the denominator of which shall be 730.
8
(iii) Within
ten (10) business days after the Termination Date, and as a condition of
receiving payments provided in Section 10 (b) (ii), Employee shall execute
and
deliver to Company the Waiver and Release Agreement (“Release”) attached hereto
as Exhibit A. The severance payment shall not be paid unless the Employee has
executed and delivered the Release, and the Release has become irrevocable
as
provided therein. Prior to the Effective Date, the Company may revise the
Release to conform to applicable law, so long as the Release does not increase
the obligations of Employee thereunder;
(iv) If
Employee, prior to the Termination Date, was a participant in any Welfare
Benefits, the Company shall at its expense continue on behalf of Employee and
his dependents and beneficiaries, for a period of two (2) years following the
Termination Date, the Welfare Benefits or similar benefits no less favorable
than the benefit levels and coverage provided to Employee prior to the
Termination Date. Employee shall pay the employee portion of applicable premiums
required to be paid by active employees of the Company. At its election, the
Company may provide Employee and his dependents with equivalent benefits outside
the Welfare Benefit plans or by providing Employee a cash payment sufficient
for
Employee to purchase equivalent benefits, so long as the net after-tax benefit
is the same as if the Employee had remained an employee of the Company, and
the
benefits made available to Employee provide no loss or discontinuation of
benefits, and full waiver of any preexisting condition of the Employee and
any
of the Employee’s eligible dependents. The Company's obligation with respect to
the foregoing benefits shall be discontinued in the event that Employee becomes
covered under the health insurance coverage of a subsequent employer which
does
not contain any exclusion or limitation with respect to any preexisting
condition of the Employee or the Employee’s eligible dependents. For purposes of
this provision, Employee shall have a duty to inform Company as to the terms
and
conditions of any subsequent employment and the corresponding benefits earned
from such employment.
(v) Following
the two (2) year period described in Section 10(b)(iv), above, Employee may
elect to receive coverage under employee welfare plans of the Successor Entity
at his then-current level of benefits (or reduced coverage at Employee’s
election) by paying the premiums charged to regular full-time employees for
such
coverage. Such coverage shall provide benefits no less favorable than the
benefits and coverage provided in the Welfare Benefits, with no loss or
discontinuation of benefits, and full waiver of any preexisting condition of
the
Employee and any of the Employee’s eligible dependents. In the event of this
election, Employee shall be eligible to receive such coverage, through the
date
of his retirement, and subsequently shall be eligible to continue coverage
under
the Successor Entity’s retiree health insurance coverage.
9
(vi) Employee
shall be entitled to an amount of credited service for benefit accrual and
vesting purposes under the Pension Equalization Plan (if Employee was a
participant therein prior to a Change in Control) equal to a period of two
(2)
years following the Termination Date, and it shall be assumed for purposes
of
determining benefits under the Pension Equalization Plan, that Employee’s
employment continued during such time period at the compensation level provided
for in Section 5 above. In addition (if Employee was a participant in the
Pension Plan prior to a Change in Control), the Employee shall be entitled
to a
supplemental Pension Plan benefit, which shall be the excess, if any, of
(x) the amount that Employee would have been entitled to receive under
the
Pension Plan as if (i) Employee received additional credited service
under
the Pension Plan for an additional two (2) years, and (ii) Employee’s
Annual Compensation as defined in Section 5 above remained in effect during
such
time period over (y) the amount that 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 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
Employee receives Pension Plan benefits.
(vii) The
Company shall, to the extent necessary and only to the extent necessary, modify
the timing of delivery of Severance Compensation if it is determined that the
timing would subject the Severance Compensation to the additional tax and/or
interest assessed under Code Section 409A. In such event, such payments shall
occur as soon as practicable without causing such payments to trigger tax
penalty under Code Section 409A.
|
11.
|
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 10(b)(iv), such payments shall not be reduced whether or not Employee
obtains other employment.
|
12.
|
(a) Gross-Up
Payment. In the event it shall be determined that any Severance Compensation
payment or distribution of any type by the Company, or by any Affiliate of
the
Company, or by any Person who acquires ownership or effective control of the
Company or ownership of a substantial portion of the Company's assets (within
the meaning of Section
280G of the Internal Revenue Code of 1986,
as
amended (the "Code"), and the regulations thereunder) or any Affiliate of such
Person, to or for the benefit of the Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Total Payments") (including but not limited to distribution
of
stock or options which vest upon a Change in Control pursuant to the Omnibus
Incentive Compensation Plan), is or will be subject to the excise tax imposed
by
Section 4999 of the Code or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest and penalties,
are
collectively referred to as the "Excise Tax"), then the Company shall pay an
additional amount (the "Gross-Up Payment") such that the net amount retained
by
the Employee after deduction of any Excise Tax upon the Total Payments and
any
federal, state, and local income tax, penalties, interest and Excise Tax upon
the Gross-Up Payment, shall be equal to the Total Payments. The Gross-Up Payment
shall not include applicable payroll taxes, state or federal income taxes on
the
Total Payments, however. The Gross-Up Payment shall be made by the Company
to
the Department of the Treasury, Internal Revenue Service (IRS), or other
appropriate taxing agency.
10
Notwithstanding
the foregoing, in the event that the amount of the Total Payments does not
exceed 110% of the largest amount that would result in no portion of the Total
Payments being subject to the Excise Tax (the “Safe Harbor Amount”), then the
Employee’s Total Payments shall be reduced to an amount equal to the Safe Harbor
Amount. In applying any reduction required herein, Employee may elect whether
the noncash severance benefits or the cash severance benefits shall first be
reduced.
(b) For
purposes of determining the Gross-Up Payment, Employee shall be deemed to pay
federal, state, and local income taxes at the highest applicable marginal rate
for the calendar year in which the Gross-Up Payment is to be made net of the
maximum reduction in federal income taxes that could be obtained from the
deduction of state and local taxes. All determinations required to be made
under
this Section 12 shall be made by the Company in reliance upon any advice it
deems appropriate, including but not limited to decisions regarding whether
and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment,
whether and in what manner any Payments are to be reduced, and the assumptions
to be used in arriving at such determinations. The decision of the Company
shall
be binding on the Employee, except to the extent the IRS or a court of competent
jurisdiction makes a final and binding determination inconsistent therewith.
The
Company shall provide detailed supporting calculations to the Employee within
15
business days after receiving notice from Employee that there has been a
Payment, or such earlier time as is requested by the Company. Any Gross-Up
Payment that becomes due pursuant to this Section 12 shall be paid promptly
by
the Company to Employee, but not later than five business days prior to the
due
date for the payment of the Excise Tax. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Company, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder. In the event that the Company
determines that there has been an Underpayment or exhausts its remedies pursuant
to Section 12 (c), and Employee thereafter is required to make a payment of
any
Excise Tax, the Company shall determine the amount of the Underpayment that
has
occurred and any such Underpayment shall be promptly paid by the Company to
or
for the benefit of Employee.
(c) Employee
shall notify the Company in writing of any claim by the IRS that, if successful,
would require the payment by the Company of a Gross-Up Payment (or an additional
Gross-Up Payment). Such notification shall be given as soon as practicable,
but
no later than ten business days after Employee is informed in writing of such
claim. Employee shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. Employee shall not pay such
claim prior to the expiration of the 30-day period following the date on which
it gives such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the Company
notifies Employee in writing prior to the expiration of such period that it
desires to contest such claim, Employee shall:
11
(i) give
the
Company any information reasonably requested by the Company relating to such
claim,
(ii) Take
such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including,
without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company,
|
(iii)
|
Cooperate
with the Company in good faith in order effectively to contest such
claim,
and
|
(iv) Permit
the Company to participate in any proceedings relating to such
claim;
provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold Employee harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs and
expenses. Without limitation of the foregoing provisions of this Section 12(c),
the Company shall control all proceedings taken in connection with such contest
and, in its sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, in its sole discretion, either direct Employee
to
pay the tax claimed and ▇▇▇ for a refund or contest the claim in any permissible
manner, and Employee agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one
or
more appellate courts, as the Company shall determine; provided, however, that
if the Company directs Employee to pay such claim and ▇▇▇ for a refund, the
Company shall indemnify and hold Employee harmless, on an after-tax basis,
from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such payment; and further provided that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of Employee with respect to which such contested amount is claimed
to be due is limited solely to such contested amount. Furthermore, the Company’s
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder. Employee shall be entitled to
settle or contest, as the case may be, any other issue raised by the IRS or
any
other taxing authority.
(d) If,
at
any time after receiving a Gross-Up Payment, Employee receives any refund of
the
associated Excise Tax, Employee shall (subject to the Company’s having complied
with the requirements of Section 12(c), if applicable) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon net of all applicable taxes.
12
The
Company shall, at its expense, permit the Employee to participate in
outplacement assistance services, as determined by the Company, which are:
(a)
as to executive officers, at a level appropriate for senior management of a
public company; and (b) not more than six (6) months in duration. Outplacement
services shall be provided in kind; cash shall not be paid in lieu thereof,
nor
will cash compensation be increased if Employee declines or does not use
outplacement services.
This
Agreement shall be binding upon any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, in the same
manner and to the same extent that the Company would be obligated under this
Agreement if no succession had taken place. In the case of any transaction
in
which a successor or assign would not by the foregoing provision or by operation
of law be bound by this Agreement, the Company shall require such successor
or
assign to expressly and unconditionally assume and agree to perform the
obligations of the Company and each Employer under this Agreement, in the same
manner and to the same extent that the Company and each Employer would be
required to perform it if no such succession or assignment had taken place.
Neither
this Agreement nor any right or interest hereunder shall be assignable or
transferable by the 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 Employee’s legal personal
representative.
|
15.
|
The
Company shall pay all legal fees and related expenses (including the costs
of
experts, evidence and counsel) reasonably and in good faith incurred by the
Employee as they become due as a result of (a) the Employee’s termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment), (b) the Employee seeking
to
obtain or enforce any right or benefit provided by this Agreement or by any
other plan or arrangement maintained by the Company under which the Employee
is
or may be entitled to receive benefits; provided, however, that the
circumstances set forth in clauses (a) and (b) of this Section (other than
as a
result of the Employee’s termination of employment at the expiration of the
Protection Period) occurred on or after a Change in Control. For purposes of
this Section, the Employee will not be deemed to have incurred legal fees or
expenses reasonably or in good faith if, following resolution of a dispute
under
this Agreement, he has failed to prevail on at least one material issue in
dispute.
13
|
16.
|
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.
Except
as
expressly provided herein, nothing in this Agreement shall prevent or limit
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 Employee may qualify, nor shall anything herein limit or reduce such
rights as Employee may have under any other agreements with the Company or
any
of its subsidiaries. Amounts which are vested benefits or which 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; provided, however, and
notwithstanding anything contained in this Agreement, in the event that Employee
is not a participant in or eligible to participate in any Welfare Benefits
or
the Pension Plan, then nothing contained in this Agreement shall be deemed
to
provide for or suggest the right in Employee to be a participant in or be
eligible to participate in the Welfare Benefits or the Pension
Plan.
The
Employee shall hold in a fiduciary capacity for the benefit of the Company
all
material proprietary information, knowledge or data relating to the Company
or
any of its affiliated companies, and their respective businesses, which shall
have been obtained by the Employee during the Employee’s employment by the
Company or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Employee or representatives of
the
Employee in violation of this Agreement). After termination of the Employee’s
employment with the Company, the Employee shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it.
|
19.
|
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 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.
14
|
20.
|
This
Agreement shall be governed by and construed and enforced in accordance with
the
laws of the state of South Dakota.
|
21.
|
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.
Employee
and the Company acknowledge that, except as may otherwise be provided under
any
other written agreement between Employee and the Company, the employment of
Employee by the Company is "at will" and, prior to the Effective Date, may
be
terminated by either Employee or the Company at any time. Moreover, if prior
to
the Effective Date, Employee’s employment with the Company terminates, Employee
shall have no further rights under this Agreement.
|
23.
|
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.
In
the
event that subsequent to the date of this Agreement the Employee becomes an
employee of a Subsidiary of the Company, or in the event that any Employee
is an
employee of a Subsidiary of the Company, the references to “Company” in this
Agreement shall be deemed to be a reference to the Subsidiary which may employ
the 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.
15
|
25.
|
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
this ____ day of _______________, _____.
BLACK
HILLS CORPORATION
By:_________________________________
Title:
EMPLOYEE
___________________________________
16
EXHIBIT
A
WAIVER
AND RELEASE AGREEMENT
This
Waiver
and Release Agreement
(the
"Waiver and Release") is entered into by and among Black Hills Corporation
("Company") and ____________________ ("Employee") this ____ day of
_______________, _____.
1. General
Waiver and Release. For
and
in consideration of the agreement of Company to provide Employee the severance
benefits described in that certain Change in Control Agreement, dated as of
June
____, 2005, between Employee and the Company (the "Agreement"), Employee, with
the intention of binding himself and all of his heirs, executors, administrators
and assigns, does hereby release, remise, acquit and forever discharge the
Company, and all of their respective past and present officers, directors,
stockholders, employees, agents, parent corporations, predecessors,
subsidiaries, affiliates, estates, successors, assigns and attorneys
(hereinafter collectively referred to as "Released Parties") from any and all
claims, charges, actions, causes of action, sums of money due, suits, debts,
covenants, contracts, agreements, rights, damages, promises, demands or
liabilities (hereinafter collectively referred to as "Claims") whatsoever,
in
law or in equity, whether known or unknown, suspected or unsuspected, which
Employee, individually or as a member of any class, now has, owns or holds
or
has at any time heretofore ever had, owned or held against the Released Parties,
which arise out of or are in any way connected with Employee's employment with
the Company or any of the Released Parties or the termination of any such
employment relationship, including, but not by way of limitation, Claims
pursuant to federal, state or local statute, regulation, ordinance or common-law
for (i) employment discrimination; (ii) wrongful discharge; (iii) breach of
contract; (iv) tort actions of any type, including those for intentional or
negligent infliction of emotional harm; and (v) unpaid benefits, wages,
compensation, commissions, bonuses or incentive payments of any type, except
as
follows:
|
a.
|
Those
obligations of the Company and its affiliates under the Agreement,
pursuant to which this Waiver and Release is being executed and delivered;
|
|
b.
|
Claims,
if any, for Employee's accrued or vested benefits under the retirement
plans, savings plans, investment plans and employee welfare benefit
plans,
if any, of the Released Parties (within the meaning of Section 3(1)
of the
Employee Retirement Income Security Act of 1974 ("ERISA")), as amended;
provided, however, that nothing herein is intended to or shall be
construed to require the Released Parties to institute or continue
in
effect any particular plan or benefit sponsored by the Released Parties
and the Company and all other Released Parties hereby reserve the
right to
amend or terminate any such plan or benefit at any time; and
|
|
c.
|
Any
rights to indemnification or advancement of expenses to which Employee
may
otherwise be entitled pursuant to the Articles of Incorporation or
Bylaws
of any of the Released Parties, or by contract or applicable law,
as a
result of Employee's service as an officer or director of any of
the
Released Parties.
|
A-1
Employee
further understands and agrees that he has knowingly relinquished, waived and
forever released any and all remedies arising out of the aforesaid employment
relationship or the termination thereof, including, without limitation, claims
for backpay, front pay, liquidated damages, compensatory damages, general
damages, special damages, punitive damages, exemplary damages, costs, expenses
and attorneys' fees.
2. Waiver
and Release of ADEA Claims. Without
limiting the generality of the foregoing, and also for and in consideration
of
the Company's agreement to provide Employee severance payments and benefits
as
described in the Agreement, Employee specifically acknowledges and agrees that
he does hereby knowingly and voluntarily release the Company and all other
Released Parties from any and all claims arising under the Age Discrimination
in
Employment Act, 29 U.S.C. §§ 621, et seq. ("ADEA"), which Employee ever had or
now has from the beginning of time up to the date this Waiver and Release is
executed, including, but not by way of limitation, those ADEA Claims which
are
in any way connected with any employment relationship or the termination of
any
employment relationship which existed between the Company or any other Released
Parties and Employee. Employee also acknowledges that he has been provided
with
a notice, as required by the Older Workers Benefit Protection Act of 1990,
that
contains (i) information about the individuals covered under the Agreement,
(ii)
the eligibility factors for participation in the Agreement, (iii) the time
limits applicable to the Agreement, (iv) the job titles and ages of the
employees designated to participate in the Agreement, (v) and the ages of the
employees in the same job classification who have not been designated to
participate in the Agreement. Employee further acknowledges and agrees that
he
has been advised to consult with an attorney prior to executing this Waiver
and
Release and that he has been given forty-five (45) days to consider this Waiver
and Release prior to its execution. Employee agrees that in the event that
he
executes this Waiver and Release prior to the expiration of the forty-five
(45)
day period, he shall waive the balance of said period. Employee also understands
that he may revoke this Waiver and Release of ADEA Claims at any time within
seven (7) days following its execution and that, if Employee revokes this Waiver
and Release of ADEA Claims within such seven (7) day period, it shall not be
effective or enforceable and he will not receive the above-described
consideration or any payments provided for in the Agreement that have not been
paid.
3. Covenant
Not to ▇▇▇. Employee
acknowledges and agrees that this Waiver and Release may not be revoked at
any
time after the expiration of the seven (7) day revocation period and that he
will not institute any suit, action, or proceeding, whether at law or equity,
challenging the enforceability of this Waiver and Release. Should Employee
ever
attempt to challenge the terms of this Waiver and Release, attempt to obtain
an
order declaring this Waiver and Release to be null and void, or institute
litigation against any of the Released Parties based upon a Claim other than
an
ADEA Claim which is covered by the terms of this Waiver and Release, Employee
will as a condition precedent to such action repay all monies paid to him under
the terms of this Waiver and Release. Furthermore, if Employee does not prevail
in an action to challenge this Waiver and Release, to obtain an order declaring
this Waiver and Release to be null and void, or in any action against any of
the
Released Parties based upon a Claim other than an ADEA Claim which is covered
by
the Waiver and Release set forth herein, Employee shall pay to the Company
and/or the appropriate Released Parties all their costs and attorneys' fees
incurred in their defense of Employee's action.
A-2
Provided,
however, that it is understood and agreed by the parties that Employee shall
not
be required to repay the monies paid to him under the terms of this Waiver
and
Release or pay the Company and/or the appropriate Released Parties all their
costs and attorneys' fees incurred in their defense of Employee's action (except
those attorneys' fees or costs specifically authorized under federal law) in
the
event that Employee seeks to challenge his Waiver and Release of Claims under
the ADEA.
4. Denial
of Liability.
Employee
acknowledges and agrees that neither the payment of severance payments or
benefits under the Agreement nor this Waiver and Release is to be construed
in
any way as an admission of any liability whatsoever by Company or any of the
other Released Parties, by whom liability is expressly denied.
5. Agreement
Not to Seek Further Relief. Employee
acknowledges and agrees that he has not, with respect to any transaction or
state of facts existing prior to the date of execution of this Waiver and
Release, filed any complaints, charges or lawsuits against any of the Released
Parties with any governmental agency or any court or tribunal, and that he
will
not do so at any time hereafter. Employee further acknowledges and agrees that
he hereby waives any right to accept any relief or recovery, including costs
and
attorneys' fees that may arise from any charge or complaint before any federal,
state or local court or administrative agency against the Released
Parties.
6. Company
Property. Employee
agrees that he will not retain or destroy, and will immediately return to the
Company, any and all property of the Company in his possession or subject to
his
control, including, but not limited to, keys, credit and identification cards,
personal items or equipment provided for his use, customer files and
information, all other files and documents relating to the Company and its
business, together with all written or recorded materials, documents, computer
disks, plans, records or notes or other papers belonging to the Company.
Employee further agrees not to make, distribute or retain copies of any such
information or property.
7. Confidentiality
Agreement. Employee
acknowledges that the terms of this Waiver and Release must be kept
confidential. Accordingly, Employee agrees not to disclose or publish to any
person or entity, except as required by law or as necessary to prepare tax
returns, the terms and conditions or sums being paid in connection with this
Waiver and Release.
A-3
8. Cooperation.
Employee
agrees to cooperate with the Company and its attorneys in connection with all
lawsuits, claims, investigations, or similar proceedings, including the
provision of testimony as my reasonably be required, arising out of or in any
way related to Employee’s employment by the Company or any of its
Subsidiaries.
9. Acknowledgment.
Employee
acknowledges that he has carefully read and fully understands the terms of
this
Waiver and Release and the Agreement and that this Waiver and Release is
executed by Employee voluntarily and is not based upon any representations
or
statements of any kind made by the Company or any or the other Released Parties
as to the merits, legal liabilities or value of his claims. Employee further
acknowledges that he has had a full and reasonable opportunity to consider
this
Waiver Release and that he has not been pressured or in any way coerced into
executing this Waiver and Release.
10. Choice
of Laws. This
Waiver and Release and the rights and obligations of the parties hereto shall
be
governed and construed in accordance with the laws of the State of South
Dakota.
11. Severability.
With
the
exception of the waiver and releases contained in Sections 1 and 2 above, if
any
provision of this Waiver and Release is unenforceable or is held to be
unenforceable, such provision shall be fully severable, and this Waiver and
Release and its terms shall be construed and enforced as if such unenforceable
provision had never comprised a part hereof, the remaining provisions hereof
shall remain in full force and effect, and the court construing the provisions
shall add as a part hereof a provision as similar in terms and effect to such
unenforceable provision as may be enforceable, in lieu of the unenforceable
provision. In the event that both of the releases contained in Sections 1 and
2
above are unenforceable or are held to be unenforceable, the parties understand
and agree that the remaining provisions of this Waiver and Release shall be
rendered null and void and that neither party shall have any further obligation
under any provision of this Waiver and Release.
12. Entire
Agreement. This
document contains all terms of the Waiver and Release and supersedes and
invalidates any previous agreements or contracts regarding the same subject
matter. No representations, inducements, promises or agreements, oral or
otherwise, which are not embodied herein shall be of any force or
effect.
A-4
IN
WITNESS WHEREOF,
the
undersigned acknowledges that he has read this Waiver and Release Agreement
and
sets his hand and seal this ____ day of _______________, _____.
EMPLOYEE
____________________________________
BLACK
HILLS CORPORATION
By:__________________________________
Title:
Subscribed
and sworn to and subscribed before me this _____ day of _______________,
_____.
____________________________________
Notary
Public
My
Commission Expires: