Exhibit 10.17
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement (“Agreement”) dated as of November 15, 2022, is entered into by and between Black Hills Corporation (“Company”) and Linden R. Evans (“Employee”).
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 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.
“AFFILIATE” shall have the meaning ascribed to such term in rule 12b-2 of the General Rules and Regulations of the Exchange Act.
“ANNUAL COMPENSATION” shall mean, with respect to any calendar year, all of the following compensation paid or payable, as applicable, to or on behalf of the Employee by the Company during a calendar year including: (a) base salary, targeted annual incentive bonus, targeted long-term incentive grants and awards; and (b) Company Matching Contributions and Company Retirement Contributions or other benefits payable under the Retirement Savings Plan and Supplemental Matching Contributions, Supplemental Retirement Contributions and Supplemental Target Contributions under the Nonqualified Deferred Compensation Plan (as such terms are defined in the applicable plans).
“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 subsection 8(a).
“CHANGE IN CONTROL” shall mean any of the following events:
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“CODE” means the Internal Revenue Code of 1986, as amended from time to time, and applicable regulations and guidance thereunder.
“DISABILITY” means the Employee is eligible for and receiving benefits under the Company sponsored group long-term disability plan in which the Employee participates.
“DISABILITY DATE” means the date subsequent to a Change in Control on which the Employee is determined to have a Disability.
“EFFECTIVE DATE” means 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 immediately prior to the Effective Date.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“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 subsection 8(c) below.
“NONQUALIFIED DEFERRED COMPENSATION PLAN” means the Company’s Nonqualified Deferred Compensation Plan as amended and restated effective January 1, 2011, and as amended or replaced from time to time thereafter prior to the Effective Date and the Company’s Post-2018 Nonqualified Deferred Compensation Plan as effective January 1, 2019, and as amended or replaced from time to time thereafter prior to the Effective Date.
“NOTICE OF TERMINATION” means 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 PLANS” means the incentive compensation plans known as the “Amended and Restated 2015 Omnibus Incentive Plan” as effective April 26, 2022, the “Black Hills Corporation 2015 Omnibus Incentive Compensation Plan” as effective April 28, 2015, and the “Black Hills Corporation 2005 Omnibus Incentive Compensation Plan” as effective May 25, 2005, and as the plans are amended or replaced from time to time thereafter prior to the Effective Date.
“PENSION PLAN” means the Black Hills Retirement Plan as amended and restated effective January 1, 2020, and as amended from time to time thereafter prior to the Effective Date.
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“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” means the time period beginning on the Effective Date and ending on the third annual anniversary of the Effective Date.
“RELATED COMPANY” means any business organization or legal entity that directly or indirectly, controls, is controlled by or is under common control with the Company. For purposes of this definition, the term “control” (including the terms “controlling”, “controlled by”, and “under common control with”) includes the possession, direct or indirect, of the power to vote 50 percent or more of the voting equity securities, membership interest, or other voting interest, or to direct or cause the direction of the management and policies of such business organization or other legal entity, whether through the ownership of voting equity securities, membership interest, by contract, or otherwise.
“RESTORATION PLAN” means the Company’s Restoration Plan as in effect on January 1, 2022 and as amended or replaced from time to time thereafter prior to the Effective Date.
“RETIREE HEALTHCARE PLAN” means the Company’s Retiree Healthcare Plan as amended and restated effective January 1, 2016, and as further amended from time to time thereafter prior to the Effective Date.
“RETIREMENT SAVINGS PLAN” means the Black Hills Corporation 401(k) Retirement Savings Plan (401K) as amended and restated effective January 1, 2022, and as further amended from time to time thereafter prior to the Effective Date.
“SEVERANCE COMPENSATION” means the greater of: Employee’s base salary and annual incentive target on the day immediately prior to the (i) Effective Date; or (ii) Termination Date.
“SUBSIDIARY” means any corporation, partnership, limited liability company, joint venture, or other entity in which the Company has a majority voting interest.
“SUCCESSOR EMPLOYER” means any Successor Entity (as defined in the definition of “Change in Control” herein) or any other successor in interest or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) of the business and/or assets of the Company.
“TERMINATION DATE” means the date, subsequent to the Effective Date, of the Employee’s separation from service (as defined for purposes of Code Section 409A) with the Company and all Related Companies.
“WELFARE BENEFITS” means the benefits provided under the Group Insurance Plan for the Employees of Black Hills Corporation and the Black Hills Corporation Employee Healthcare Plan, as the plans and the terms and conditions thereof exist on the day immediately prior to the Effective Date. For the avoidance of doubt, the term Welfare Benefits shall not include a “flexible spending arrangement” (within the meaning of Proposed Regulation Section 1.125-5(a) or subsequent authoritative guidance).
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The Term of this Agreement shall commence on the date of execution and shall continue in effect until November 15, 2025. 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 (including during the entire Protection Period) for full performance according to its terms. Upon expiration of the Term prior to a Change in Control, the Company, by action of its Board, 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 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.
During the Protection Period the Company or Successor Employer agrees to continue to employ the Employee and the Employee agrees to remain in the employ of the Company or Successor Employer, subject to the provisions of this Agreement. During the Protection Period, the Employee shall be employed in 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 paid-time-off or another approved leave of absence, Employee agrees to devote Employee’s full attention and time to the business and affairs of the Company to the extent necessary to discharge the responsibilities assigned to Employee hereunder and to comply with all material written policies of the Company. 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. In addition, if Employee serves on a public Board of Directors prior to the Effective Date, the Employee shall retain the right to continue to serve on that particular Board.
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.
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During the Protection Period, the Company shall provide to the Employee the Welfare Benefits (including Retiree Healthcare Plan credits for purposes of this Section 6) and the Pension Plan, or other substantially similar employee welfare and pension benefits, as available from time to time, but in no event on a basis less favorable in the aggregate in terms of benefit levels and coverage than the Welfare Benefits and the Pension Plan. In the event Employee is not a participant in a Welfare Benefits plan or the Pension Plan prior to the Effective Date, then Company shall have no obligation to provide that Welfare Benefits plan or the Pension Plan or other substantially similar employee welfare and pension benefits as provided in this Section 6. For purposes of this Section 6, if the Employee is not entitled to any future benefit accruals in the Pension Plan as of the Effective Date the Employee shall not be treated as a participant in the Pension Plan for purposes of accruing benefits under the Pension Plan.
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During the Protection Period, Employee’s employment hereunder may be terminated under the following circumstances:
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In order to effectuate a termination for Good Reason under this Section 8(c), the Employee shall, within ninety (90) days after the initial existence of the condition, deliver written Notice of Termination to the Company stating the grounds for Good Reason in support of termination and specifying the Termination Date, which shall be (A) not earlier than thirty (30) days after giving the Notice of Termination, and (B) not later than one hundred eighty (180) days after giving the Notice of Termination or the last day of the Protection Period.
The Company may, within thirty (30) days after receipt of such Notice of Termination, remedy the condition, in which case the Good Reason for termination shall be deemed not to have occurred. For purposes of determining the amount of any cash payment payable to the Employee in accordance with Section 9, any reduction in compensation or benefit that would constitute Good Reason hereunder shall be deemed not to have occurred.
(d) Other Terminations. The Company may terminate Employee’s employment without Cause upon written Notice of Termination to Employee. Employee may terminate Employee’s employment without Good Reason upon written Notice of Termination to Employee.
Upon termination of Employee’s employment effective during the Protection Period, Employee shall be entitled to the following compensation and benefits:
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Furthermore, the Employee shall be made 100% vested for purposes of the Restoration Plan, if the Employee is a participant in such plan (for purposes of this subsection) and is not already fully vested.
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For purposes of this subsection 9(b)(vii), the additional contributions under the Nonqualified Deferred Compensation Plan (Supplemental Matching Contributions, Supplemental Retirement Contributions, and Supplemental Target Contributions) shall be determined without regard to any offsets from the Retirement Savings Plan. (This has the same effect as if the Supplemental Matching Contributions and Supplemental Retirement Contributions were determined on total pay rather than only on pay over IRS pay limits.) Notwithstanding any provision herein to the contrary, if the Employee is a “specified employee” (as defined for purposes of Code Section 409A), no payment of any amount under this Section 9 that constitutes deferred compensation subject to Code Section 409A shall be made before the date which is six (6) months after the date of the Employee’s Termination Date, or such earlier date upon which such amount can be paid or provided under Code Section 409A without being subject to additional taxes thereunder. To the extent that the Agreement provides for such nonqualified deferred compensation, it is intended to be compliant with Code Section 409A, and shall be interpreted and administered accordingly.
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)(iv), such payments shall not be reduced whether or not Employee obtains other employment.
No additional payments shall be made to the Employee to account for any excise taxes, income taxes, interest or penalties the employee may incur due to receipt of any Severance Compensation or other payment, benefit, or distribution of any type by the Company pursuant to this Agreement.
Notwithstanding anything in this Agreement or any written or unwritten policy of the Company to the contrary, if it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, any other agreement between the Company and the Employee or otherwise (a “Payment” or “Payments”), would constitute a parachute payment (“Parachute Payment”) within the meaning of Section 280G of the Code and would, but for this Section 11, be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Payments, a calculation shall be made comparing (i) the Net Benefit (as defined below) to the Employee of the Payments after payment of the Excise Tax to (ii) the Net Benefit to the Employee if the Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Payments be reduced to the minimum extent necessary to ensure that no portion of the Payments is subject to the Excise Tax. “Net Benefit” shall mean the present value of the Payments net of all federal, state, local, foreign income, employment and excise taxes. The Payments shall be reduced in a manner that maximizes the Employee’s economic position. In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code, and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero. Any determination required under this Section 11, including whether any payments or benefits are parachute payments, shall be made by an independent third party expert retained by the Company. The Employee shall provide the Company with such information and documents as the Company may reasonably request in order to make a determination under this Section 11. The Company’s determination shall be final and binding on the Employee. The parties acknowledge that the Employee is solely responsible for the payment of any
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Excise Tax that is assessed based upon a payment made pursuant to this Agreement or any other payment made by the Company pursuant to any other plan or obligation.
As a result of the uncertainty in the application of Sections 280G and 4999 of the Code at the time of the initial determination by the independent third party expert, however, it is possible that amounts will have been paid or distributed to or for the benefit of Employee which should not have been so paid or distributed (an “Overpayment”) or that additional amounts which shall not have been paid or distributed to or for the benefit of Employee should have been so paid or distributed (an “Underpayment”), in each case, consistent with the calculation of the amount. If the independent third party expert, based either upon the assertion of a deficiency by the Internal Revenue Service against the Company or Employee which the independent third party expert believes has a high probability of success or controlling precedent or other substantial authority, determines that an Overpayment has been made, any such Overpayment must be treated (if permitted by applicable law) for all purposes as a loan ab initio for which Employee must repay the Company together with interest at the applicable federal rate under Section 7872(f)(2) of the Code; provided, however, that no such loan may be deemed to have been made and no amount shall be payable by Employee to the Company if and to the extent that such deemed loan and payment would not either reduce the amount on which Employee is subject to tax under Section 4999 of the Code or generate a refund of such taxes. If the independent third party expert, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, the independent third party expert must promptly notify the Company of the amount of the Underpayment and such amount, together with interest at the applicable federal rate under Section 7872(f)(2) of the Code, must be paid to Employee.
Following a Termination without Cause or resignation for Good Reason during the Protection Period, 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. All outplacement services shall be provided by the last day of the second calendar year beginning after the Employee’s Termination Date.
This Agreement shall be fully binding upon any Successor Employer or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to 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 as 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 all the obligations of the Company and each Successor Employer under this Agreement, in the same manner and to the same extent that the Company and each Successor Employer would be required to perform it if no such succession or assignment had taken place. Any failure to obtain such assumption and continuation of this Agreement shall constitute a material breach hereof. Reference to the Company in this Agreement shall, following the Effective Date, include any Successor Employer.
Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Employee, Employee’s 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.
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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 the Employee seeking to obtain or enforce any right or benefit provided by this Agreement.
For purposes of this Section 14, 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, Employee has failed to prevail on at least one material issue in dispute. The amount of expenses eligible for reimbursement hereunder during any given calendar year shall not affect the expenses eligible for reimbursement in any other calendar year. Employee shall submit verification of expenses to the Company within sixty (60) days from the date the expense was incurred, and the Company shall reimburse eligible expenses within thirty (30) days thereafter, but in any case no later than the last day of the calendar year following the calendar year in which the expense was incurred. The right to reimbursement of legal fees and expenses hereunder may not be exchanged for cash or any other benefit.
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 last known address of Employee or in the case of the Company, to the principal executive office to the attention of the Board of the Company. All notices and communications shall be deemed to have been received on the date of delivery thereof if personally delivered, 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 or Affiliates 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 or Affiliates; provided however that in the event that Employee becomes eligible for any cash severance benefits under a Company severance program, plan or policy as a result of a termination during the Protection Period, then the Severance Compensation payable to Employee under this Agreement shall be reduced by any such cash severance benefits. 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 or Affiliates 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.
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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.
This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of South Dakota.
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 may be terminated by either Employee or the Company at any time, subject to the rights and obligations under this Agreement. Moreover, if prior to the Effective Date, Employee’s employment with the Company terminates for any reason, Employee shall have no further rights under this Agreement.
In the event that subsequent to the date of this Agreement the Employee becomes an employee of a Subsidiary or Affiliate of the Company, or in the event that any Employee is an employee of a Subsidiary or Affiliate of the Company, the references to “Company” in this Agreement shall be deemed to be a reference to the subsidiary or Affiliate which may employ the Employee to the full extent necessary or appropriate to preserve the intent of this Agreement; provided, however, nothing herein shall mean or suggest that any benefits are applicable hereunder upon a change in control of a Subsidiary or Affiliate rather than the Company.
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 15th day of November, 2022.
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BLACK HILLS CORPORATION
By:
Brian G. Iverson
Senior Vice President and General Counsel
EMPLOYEE
By:
Linden R. Evans
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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 Linden R. Evans (“Employee”) this ___ day of _________________, 202_.
Employee further understands and agrees that, subject to the exceptions in
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subparagraphs a., b. and c. above, Employee is knowingly relinquishing, waiving and forever releasing any and all remedies arising out of the aforesaid employment relationship or the termination thereof, including, without limitation, claims for back pay, front pay, liquidated damages, compensatory damages, general damages, special damages, punitive damage, exemplary damages, costs, expenses and attorneys’ fees.
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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. Employee agrees 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. Notwithstanding any other language in this Waiver and Release to the contrary, Employee understands that Employee may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney if such disclosure is made solely for the purpose of reporting or investigating a suspected violation of the law or for pursuing an anti-retaliation lawsuit; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal and Employee does not disclose the trade secret except pursuant to a court order.
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Please read this document carefully, as it includes a release of claims.
IN WITNESS WHEREOF, the undersigned acknowledges that Employee has read this Waiver and Release Agreement and sets Employee’s hand and seal this __ day of _____________, 202_.
EMPLOYEE
Linden R. Evans
BLACK HILLS CORPORATION
By:
Title:
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