Exhibit 10.1
Exhibit 10.1
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
AGREEMENT by and between MDU Resources Group, Inc., a Delaware corporation
(the "Company") and _____________ (the "Executive"), dated as of the ____ day of
___________, 2008.
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company; and
WHEREAS, the Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations;
and
[WHEREAS, the Executive and the Company are parties to a Change of Control
Employment Agreement dated ____________ (the "Prior Agreement"), and the
Executive and the Company desire to change certain of the terms of the Prior
Agreement to address changes in tax laws and to revise and clarify certain other
terms of the Prior Agreement; and
WHEREAS, the Executive and the Company have agreed that this Agreement
shall supersede and replace the Prior Agreement; and]
WHEREAS, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed as follows:
1. Certain Definitions. (a) The "Effective Date" shall mean the first
date during the Coverage Period (as defined in Section 1(b)) on which a Change
of Control (as defined in Section 2) occurs.
(b) The "Coverage Period" shall mean the period commencing on the date
hereof and ending on the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), unless
previously terminated, the Coverage Period shall be automatically extended so as
to terminate three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the Executive that the
Coverage Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation 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 or more
subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock
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of the corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the Business
Combination and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the 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.
For avoidance of doubt, unless otherwise determined by the Board, the
sale of a subsidiary, operating entity or business unit of the Company shall not
constitute a Change of Control for purposes of this Agreement.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company, in each case subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of such date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 35 miles from
such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the 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 the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable,
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including any base salary which has been earned but deferred, to the Executive
by the Company and its affiliated companies in respect of the twelve-month
period immediately preceding the month in which the Effective Date occurs.
During the Employment Period, the Annual Base Salary shall be reviewed no more
than 12 months after the last salary increase awarded to the Executive prior to
the Effective Date and thereafter at least annually. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced after any such
increase and the term Annual Base Salary as utilized in this Agreement shall
refer to Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by, controlling or
under common control with the Company.
(ii) Annual Incentives. In addition to Annual Base Salary, for each
fiscal year ending during the Employment Period, the Executive shall have the
opportunity to earn an annual incentive award (the "Annual Incentive") in cash
at least equal to the Executive's highest annual incentive award under the
applicable incentive compensation plans maintained by the Company or one of its
affiliated companies, as the case may be, or any comparable annual incentive
award under any predecessor or successor plan, paid in the last three full
fiscal years prior to the Effective Date (annualized in the event that the
Executive was not employed by the Company or one of its affiliated companies for
the whole of such fiscal year) (the "Recent Annual Incentive"). Each such Annual
Incentive shall be paid as soon as practicable (but in all events between
January 1 and March 10) in the year following the year in which the services
giving rise to the Annual Incentive are performed, unless the Executive shall
have elected to defer the receipt of such Annual Incentive.
(iii) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than those provided by the Company and
its affiliated companies for the Executive under such plans, practices, policies
and programs as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer executives
of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the plans, practices, policies
and programs in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
those provided
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generally at any time after the Effective Date to other peer executives of the
Company and its affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, reasonable
vehicle allowances, home office allowances and subsidized annual physical
examinations, in each case in accordance with the plans, practices, programs and
policies of the Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the foregoing provided to the Executive by the Company and its
affiliated companies at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as provided generally
at any time thereafter with respect to other peer executives of the Company and
its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the plans, policies, programs and
practices of the Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment. (a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
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(b) Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its affiliated
companies (other than any such failure resulting from incapacity due to physical
or mental illness), after a written demand for substantial performance is
delivered to the Executive by the Board or the Chief Executive Officer of the
Company which specifically identifies the manner in which the Board or Chief
Executive Officer believes that the Executive has not substantially performed
the Executive's duties or
(ii) the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or omitted to
be done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean any of the following events occurring without the Executive's written
consent:
(i) a material diminution in the Executive's authority, duties or
responsibilities;
(ii) a material change in the geographic location at which the
Executive must perform services; or
(iii) any action or inaction that constitutes a material breach by the
Company of this Agreement, including any failure by the Company to comply with
and satisfy Section 11(c) of this Agreement.
Notwithstanding the foregoing, no event specified in this Section 5(c)
shall constitute Good Reason unless the Executive has given written notice to
the Company, specifying the event relied upon for such termination within 90
days after the occurrence of such event and the Company has not remedied the
event within 30 days of receipt of such notice.
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(d) Other Than for Cause or Good Reason. The Company may terminate the
Executive's employment during the Employment Period other than for Cause and the
Executive's employment may be terminated by the Executive during the Employment
Period other than for Good Reason, in each case, subject to the terms and
conditions of this Agreement.
(e) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated, (iii) if the
Executive's employment is terminated by the Company for Cause and the Date of
Termination (as defined below) is other than the date of receipt of the Notice
of Termination, specifies the Date of Termination and (iv) if the Executive's
employment is terminated by the Executive for Good Reason, specifies the Date of
Termination. The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(f) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, the date of
receipt of the Notice of Termination or any later date specified therein,
provided such date is not more than 30 days after the giving of such notice,
(ii) if the Executive's employment is terminated by the Executive for Good
Reason, the date specified in the Notice of Termination, which date shall not be
more than 30 days after the expiration of the Company's 30 day cure period
provided in Section 5(c), (iii) if the Executive's employment is terminated by
the Company other than for Cause (and not due to death or Disability), the Date
of Termination shall be the date on which the Company notifies the Executive of
such termination or any later date specified by the Company, (iv) if the
Executive's employment is terminated by the Executive other than for Good Reason
(and not due to death or Disability), the Date of Termination shall be the date
on which the Executive notifies the Company of such termination and (v) if the
Executive's employment is terminated by reason of death or Disability, the Date
of Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Good Reason; Other
Than for Cause. If, during the Employment Period, the Company shall terminate
the Executive's employment other than for Cause (and not due to death or
Disability) or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the Date
of Termination to the extent not theretofore paid, (2) the product of (x) the
higher of (I) the Recent Annual Incentive and (II) the Annual Incentive paid or
payable, including any Annual Incentive
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or portion thereof which has been earned but deferred (and annualized for any
fiscal year consisting of less than twelve full months or during which the
Executive was employed for less than twelve full months), for the most recently
completed fiscal year during the Employment Period, if any (such higher amount
being referred to as the "Highest Annual Incentive") and (y) a fraction, the
numerator of which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365 and (3) any accrued
vacation pay to the extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall be hereinafter referred to as the
"Accrued Obligations"); and
B. the amount equal to the product of (1) three and (2) the sum of (x)
the Executive's Annual Base Salary and (y) the Highest Annual Incentive; and
C. an amount equal to the excess of (1) the actuarial equivalent of
the benefit under the Supplemental Income Security Plan and/or any other excess
or supplemental defined benefit retirement plan in which the Executive
participates that is sponsored by the Company or any of its affiliated companies
(collectively, the "SISP") (utilizing actuarial assumptions no less favorable to
the Executive than those in effect under the Company's qualified defined benefit
retirement plan immediately prior to the Effective Date) that the Executive
would receive if the Executive's employment continued for three years after the
Date of Termination (and the Executive had three additional years of service for
purposes of benefit accrual, if applicable, and three additional years of
vesting credit, if applicable), assuming that the Executive's compensation in
each of the three years is that required by Section 4(b)(i) and Section
4(b)(ii), over (2) the actuarial equivalent of the Executive's actual benefit
(paid or payable), if any, under the SISP as of the Date of Termination;
(ii) for a "limited period of time" (as that term is defined in
Treasury Regulation Section 1.409A-1(b)(9)(v)(E)), the Company shall, at its
sole expense as incurred, provide the Executive with reasonable outplacement
services, the provider of which shall be selected by the Executive; and
(iii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided under any plan or agreement of the Company and
its affiliated companies (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits"), in each case in accordance with the terms
thereof. For avoidance of doubt, nothing in this Section 6(a)(iii) shall be
interpreted as accelerating or deferring or otherwise changing the time or form
of payment of any Other Benefits.
(b) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the benefits provided
by the Company and affiliated companies to the estates and beneficiaries of
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peer executives of the Company and such affiliated companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other peer
executives of the Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to those generally
provided by the Company and its affiliated companies to disabled executives
and/or their families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally with respect to
other peer executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its affiliated
companies and their families.
(d) Cause; Other Than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive his Annual Base Salary through the Date of Termination
and any Other Benefits, in each case to the extent theretofore unpaid. If the
Executive voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than for Accrued Obligations and the
timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be
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obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code");
provided, however, that (a) the payment or reimbursement of a fee or expense,
and any related interest, pursuant to this Section 8 shall be provided not later
than the calendar year following the calendar year in which the fee or expense
was incurred, (b) the amount of fees and expenses eligible for payment or
reimbursement during any calendar year may not affect the amount of fees and
expenses eligible for payment or reimbursement in any other calendar year, (c)
the right to payment or reimbursement under this Section 8 is not subject to
liquidation or exchange for another benefit and (d) the obligation of the
Company under this Section 8 shall survive the termination of this Agreement for
any reason and shall remain in effect until the applicable statute of
limitations has expired with respect to any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement).
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company or any of its affiliated companies to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
excluding any payments required under this Section 9) (a "Payment") is or will
be subject to the excise tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (an "Additional Payment") in an amount
equal to the Excise Tax imposed upon the Payments. For avoidance of doubt, this
Section 9 provides for an Additional Payment on the Payments, but it does not
provide for an Additional Payment on any Additional Payment made pursuant to
this Section 9. Notwithstanding the foregoing provisions of this Section 9(a),
if it shall be determined that the Executive is entitled to an Additional
Payment, but that the Payments do not exceed 110% of the greatest amount (the
"Reduced Amount") that could be paid to the Executive such that the receipt of
Payments would not give rise to any Excise Tax, then no Additional Payment shall
be made to the Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when an
Additional Payment is required and the amount of such Additional Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
such nationally recognized registered public accounting firm as
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may be designated by the Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall appoint
another nationally recognized registered public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Additional Payment, as determined
pursuant to this Section 9, shall be paid by the Company to the Executive within
five days of the receipt of the Accounting Firm's determination; provided,
however, that any such Additional Payment shall be paid no later than the last
day of the calendar year following the calendar year in which the Executive
remits the Excise Tax. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Additional 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 exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax on any
Payments, the Accounting Firm 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 the Executive; provided, however, that any such
Underpayment shall be paid no later than the last day of the calendar year
following the calendar year in which the Executive remits the related Excise
Tax.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Additional Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive 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 the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(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
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(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 the Executive 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 on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive 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 the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis; and further provided that
any extension of the statute of limitations relating to payment of taxes for the
taxable year of the Executive 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 an Additional Payment would be payable hereunder and the Executive shall
be entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority. Notwithstanding
anything contained herein to the contrary, any payment or reimbursement by the
Company of costs and expenses incurred by the Executive in connection with a
contest relating to the Excise Tax, as provided herein, shall be paid promptly,
but in all events no later than the last day of the calendar year following the
calendar year in which the Executive remitted the Excise Tax or if, following
any tax audit or litigation no Excise Tax is paid, the end of the calendar year
following the calendar year in which the audit is completed or there is a final
and nonappealable settlement or other resolution of the litigation. For
avoidance of doubt, nothing in this Section 9(c) shall be interpreted as
requiring the Company to indemnify or otherwise reimburse the Executive for any
Excise Tax, income tax or other tax (including interest and penalties with
respect thereto) imposed upon any Additional Payment under Section 9(a) or any
Underpayment under Section 9(b), whether or not paid in connection with a
contest under this Section 9(c).
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, then, except as provided below in this
Section 9(d), the Executive shall (subject to the Company's complying with the
requirements of Section 9(c)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). It is the Company's and the Executive's intent that the
Executive not incur any additional taxes as a result of the Company's payment of
an advance pursuant to Section 9(c). Consequently, any amount required to be
refunded by the Executive pursuant to this Section 9(d) shall be reduced by an
amount that is equal, on an after tax basis, to any taxes recognized by the
Executive as a result of the Company's prior payment of any refunded advance.
If, after the receipt by the Executive of an amount advanced by the Company
pursuant to Section 9(c), a determination is made that the Executive shall not
be entitled to any refund
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with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall offset, to the
extent thereof, the amount of Additional Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential 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 Executive
during the Executive'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 Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive 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. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly 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
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
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If to the Executive:
------------------------
------------------------
------------------------
If to the Company:
MDU Resources Group, Inc.
1200 West Century Avenue
Mailing Address:
P.O. Box 5650
Bismarck, ND 58506-5650
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c) of this Agreement, shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment may be terminated by either the Executive or the Company
at any time prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement. This Agreement shall supersede [the
Prior Agreement and] any other agreement between the parties with respect to the
subject matter hereof.
(g) The provisions of this Agreement and all payments made pursuant to
this Agreement are intended to comply with, and should be interpreted so that
they are consistent with, the requirements of Section 409A of the Code, and any
related regulations or other applicable guidance promulgated thereunder
(collectively "Section 409A"). It is the intent of the
14
parties hereto that all payments and benefits provided pursuant to this
Agreement upon or following termination of employment qualify as short-term
deferrals, as defined in Treasury Regulation Section 1.409A-1(b)(4), separation
pay due to an involuntary separation from service under Treasury Regulation
Section 1.409A-1(b)(9)(iii), and/or limited payments, as defined in Treasury
Regulation Section 1.409A-1(b)(9)(v)(D) or are otherwise exempt from Section
409A. Anything in this Agreement to the contrary notwithstanding, if it is
determined that any amounts are provided pursuant to this Agreement upon
separation from service (as that term is used in Section 409A) and constitute
deferred compensation for purposes of Section 409A and the Executive is a
"specified employee," as determined under the Company's policy for determining
specified employees, on the date on which the separation from service occurs, no
such amounts shall be provided until the first business day after the date that
is 6 months following the Executive's termination of employment or, if the
Executive dies during such 6 month period, the first business day after the date
of the Executive's death. Any such delayed amounts shall include the cumulative
amount of any amounts that could not be provided during such 6 month period. In
addition, interest will accrue at the Federal short-term rate determined under
Section 1274(d) of the Code (as in effect on the date of the separation from
service or, if such date is not a business day, the first business day prior to
such date) on all delayed amounts and shall be paid with the delayed payment. To
the extent any payments or benefits under the Agreement constitute deferred
compensation under Section 409A and such payments or benefits are provided upon
termination of employment, references to termination of the Executive's
employment shall be interpreted to mean "separation from service," as that term
is used in Section 409A.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
EXECUTIVE
--------------------------------------------
MDU RESOURCES GROUP, INC.
By: ---------------------------------------
Terry D. Hildestad
President and Chief Executive Officer
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