Document:

Exhibit 10.19

 

Black Hills Corporation 

Incentive Compensation Plan

Performance Share Award Agreement

(Effective for Plans beginning on or after January 1, 2009)

Performance Period _________________________

 

 

Perf.ShareAward2008

Contents

 

 

	
            Article 1. Performance Period
 	
            2
 
	
            Article 2. Value of Performance Shares
 	
            2
 
	
            Article 3. Performance Shares and Achievement of Performance Measure
 	
            2
 
	
            Article 4. Termination Provisions
 	
            3
 
	
            Article 5. Change in Control
 	
            3
 
	
            Article 6.  Forfeiture and Repayment
 	
            5
 
	
            Article 7. Dividends
 	
            8
 
	
            Article 8. Form and Timing of Payment of Performance Shares
 	
            8
 
	
            Article 9. Nontransferability
 	
            8
 
	
            Article 10.Administration
 	
            8
 
	
            Article 11.Miscellaneous
 	
            8
 

 

 

Black Hills Corporation

2005 Omnibus Incentive Plan

Performance Share Award Agreement

(Effective for Plans beginning on or after January 1, 2009)

 

Performance Period _______________________________

You have been selected to be a participant in the Black Hills Corporation 2005 Omnibus

Incentive Plan (the “Plan”), as specified below:

 

Participant:  _____________________

 

Target Performance Share Award:  ______ shares

 

Performance Period:  ______________________________

 

Performance Measure: Total Shareholder Return (“TSR”).

 

Peer Index:  

 

	
            AGL Resources Inc.
 	
            ATG
 	
            Otter Tail Corp
 	
            OTTR
 
	
            ALLETE Inc.
 	
            ALE
 	
            PNM Resources, Inc.
 	
            PNM
 
	
            Avista Corp
 	
            AVA
 	
            Portland General Electric Co.
 	
            POR
 
	
            CH Energy Group Inc.
 	
            CHG
 	
            Puget Energy Inc.
 	
            PSD
 
	
            Cleco Corp
 	
            CNL
 	
            NV Energy, Inc.
 	
            NVE
 
	
            DPL Inc.
 	
            DPL
 	
            UIL Holdings Corp
 	
            UIL
 
	
            Great Plains Energy Inc.
 	
            GXP
 	
            UniSource Energy Corp
 	
            UNS
 
	
            IDACORP Inc.
 	
            IDA
 	
            Vectren Corp
 	
            VVC
 
	
            MDU Resources Group Inc.
 	
            MDU
 	
            Westar Energy Inc.
 	
            WR
 
	
            NorthWestern Corp
 	
            NWEC
 	
            WGL Holdings Inc.
 	
            WGL
 

 

THIS AGREEMENT (the “Agreement”) effective _____________, represents the grant of Performance Shares by Black Hills Corporation, a South Dakota corporation (the “Company”), to the Participant named above, pursuant to the provisions of the Plan.

 

The Plan provides a complete description of the terms and conditions governing the Performance Shares. If there is any inconsistency between the terms of this Agreement and the terms of the Plan, the Plan’s terms shall completely supersede and replace the conflicting terms of this Agreement. 

 

All capitalized terms shall have the meanings ascribed to them in the Plan, unless specifically set forth otherwise herein. 

 

	
             
 	
            1
 

The parties hereto agree as follows:

 

Article 1. Performance Period

 

The Performance Period commences on ____________ and ends on _______________.

 

Article 2. Value of Performance Shares

 

Each Performance Share shall represent and have a value equal to one share of common stock of the Company.

 

Notwithstanding anything herein to the contrary, the Performance Shares shall have no value whatsoever if the Ending Stock Price (as defined herein) is not greater than Beginning Stock Price (as defined herein), taking into account any adjustments made pursuant to Paragraph 4.4 of the Plan.

 

Article 3. Performance Shares and Achievement of Performance Measure

 

	
             
 	
            (a)
 	
            The number of Performance Shares to be earned under this Agreement shall be based upon the achievement of pre-established TSR performance goals as set by the Compensation Committee of the Board of Directors (Committee) for the Performance Period, based on the following chart:
 

 

	
            TSR Performance Relative to Companies in Peer Index
 	
            Payout
 (% of Target)
 
	
             
 	
             
 
	
            80th Percentile or Above
 	
            175%
 
	
            70th Percentile
 	
            150%
 
	
            60th Percentile
 	
            125%
 
	
            50th Percentile
 	
            100%
 
	
            40th Percentile
 	
            50%
 
	
            Below the 40th Percentile 
 	
            0%
 

 

Interpolation shall be used to determine the percentile rank in the event the Company’s Percentile Rank does not fall directly on one of the ranks listed in the above chart.

 

For this purpose, Total Shareholder Return shall be determined as follows:

 

	
            Total Shareholder
 Return
 	
            =
 	
            Change in Stock Price + Dividends Paid

Beginning Stock Price
 

 

 

	
             
 	
            2
 

Beginning Stock Price shall mean the average closing price on the applicable stock exchange of one share of stock for the twenty (20) trading days immediately prior to the first day of the Performance Period; Ending Stock Price shall mean the average closing price on the applicable stock exchange of one share of stock for the twenty (20) trading days immediately prior to the last day of the Performance Period; Change in Stock Price shall mean the difference between the Beginning Stock Price and the Ending Stock Price; and Dividends Paid shall mean the total of all dividends paid on one (1) share of stock during the Performance Period. 

 

Following the Total Shareholder Return determination, the Company’s Percentile Rank shall be determined as follows:

 

Percentile Rank shall be determined by listing from highest Total Shareholder Return to lowest Total Shareholder Return each company in the Peer Index (excluding the Company). The top company would have a one hundred percentile (100%) rank and the bottom company would have a zero percentile (0.0%) rank. Each company in between would be one hundred divided by n minus one (100/(n-1)) above the company below it, where “n” is the total number of companies in the Peer Index. The Company percentile rank would then be interpolated based on the Company TSR. The Companies in the Peer Index shall remain constant throughout the entire Performance Period. 

 

Article 4. Termination Provisions

 

Except as provided below in this Article 4 and in Article 5, a Participant shall be eligible for payment of awarded Performance Shares, as determined in Article 3, only if the Participant’s employment with the Company continues through the end of the Performance Period.

 

If participant retires, suffers a Disability, or dies during the Performance Period, the Participant (or the Participant’s estate) shall be entitled to that proportion of the number of Performance Shares as such Participant is entitled to under Article 3 for such Performance Period that the number of full months of participation during the Performance Period bears to the total number of months in the Performance Period. The form and timing of the payment of such Performance Shares shall be as set forth in Article 8.

 

“Separation from service” (as defined in Treasury Regulation Section 1.409A-1(h)) during the Performance Period other than (i) due to Retirement, Disability, or death, or (ii) following a Change in Control shall require forfeiture of this entire award, with no payment to the Participant.

 

Article 5. Change in Control

 

Notwithstanding anything herein to the contrary, in the event of a Change in Control, the Participant shall be entitled to that proportion of the number of Performance Shares as such Participant is entitled to under Article 3 for such Performance Period that the number of full months of participation during the Performance Period (as of the effective date of the Change in Control) bears to the total number of months in the Performance Period. When there is a Change in Control, the TSR shall be calculated as set forth in Article 3, except that the Ending Stock Price shall mean the average closing price on the applicable stock exchange of one share of stock for the twenty (20) trading days immediately prior to the Change in Control. Performance Shares shall be paid out to the Participant in cash within thirty (30) days of the effective date of the Change in Control.

 

	
             
 	
            3
 

"Change in Control" of the Company shall be deemed to have occurred (as of a particular day, as specified by the Board) upon the occurrence of any of the following events:

 

	
             
 	
            (a)
 	
            The acquisition in a transaction or series of transactions within a 12 month period 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, 2007 are members of the Board (the "Incumbent Board"), cease for any reason to constitute at least a majority of the members of the Board within a 12 month period; 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;
 

 

	
             
 	
            (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
 

 

	
             
 	
            4
 

	
             
 	
            (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.
 

 

	
             
 	
            (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.
 

 

Notwithstanding the above provisions of this definition, to the extent that any payment under the Agreement due to a Change in Control is subject to Code Section 409A for deferred compensation, then the term “Change in Control” shall be construed in a manner that is consistent with Code Section 409A(a)(2)(A)(v), but only to the extent inconsistent with the above provisions as determined by the Board.

 

Article 6.  Forfeiture and Repayment.

 

	
             
 	
            (a)
 	
            In the event the Participant incurs a separation from service for a reason other than those described in Article 4 herein during the Performance Period this entire award will be forfeited, unless the separation from service follows a Change in Control. 
 

	
             
 	
            (b)
 	
            Without limiting the generality of Article 6(a), the Company reserves the right to cancel all Performance Shares awarded hereunder, whether or not vested, and require the Participant to repay all income or gains previously realized in respect of such Performance Shares, in the event of the occurrence of any of the following events:
 

	
             
 	
            (i)
 	
            termination of Participant’s employment for Cause;
 

	
             
 	
            (ii)
 	
            within one year following any termination of Participant’s employment, the Board determines that the Participant engaged in conduct before the Participant’s termination date that would have constituted the basis for a termination of employment for Cause;
 

	
             
 	
            (iii)
 	
            at any time during the Participant’s employment or the twelve month period immediately following any termination of employment, Participant:
 

 

	
             
 	
            5
 

	
             
 	
            (x)
 	
            publicly disparages the Company, any of its affiliates or any of its or their officers, directors or senior executive employees or otherwise makes any public statement that is materially detrimental to the interests or reputation of the Company, any of its affiliates or such individuals; or
 

	
             
 	
            (y)
 	
            violates in any material respect any policy or any code of ethics or standard of behavior or conduct generally applicable to Participant, including the Code of Conduct; or
 

	
             
 	
            (iv)
 	
            Participant engages in any fraudulent, illegal or other misconduct involving the Company or any of its affiliates, including but not limited to any breach of fiduciary duty, breach of a duty of loyalty, or interference with contract or business expectancy.
 

	
             
 	
            (c)
 	
            If the Board determines that the Participant’s conduct, activities or circumstances constitute events described in Article 6(b), in addition to any other remedies the Company has available to it, the Company may in its sole discretion:
 

	
             
 	
            (i)
 	
            cancel any Performance Shares awarded hereby, whether or not issued; and/or
 

	
             
 	
            (ii)
 	
            require the Participant to repay an amount equal to all income or gain realized in respect of all such Performance Shares.  The amount of repayment shall include, without limitation, amounts received in connection with the delivery or sale of Shares of such Performance Shares or cash paid in respect of any Performance Shares.  
 

There shall be no forfeiture or repayment under Article 6(b) following a Change-in-Control.  

	
             
 	
            (d)
 	
            The Board, in its discretion, shall determine whether a Participant’s conduct, activities or circumstances constitute events described in Article 6(b) and whether and to what extent the Performance Shares awarded hereby shall be forfeited by Participant and/or a Participant shall be required to repay an amount pursuant to Article 6(c).  The Board shall have the authority to suspend the payment, delivery or settlement of all or any portion of such Participant’s outstanding Performance Shares pending an investigation of a bona fide dispute regarding Participant’s eligibility to receive a payment under the terms of this Agreement as determined by the Board in good faith.
 

	
             
 	
            (e)
 	
            For purposes of applying this provision:
 

	
             
 	
            (i)
 	
            “Cause” means any of the following:
 

 

	
             
 	
            6
 

	
             
 	
            (u)
 	
            a Participant’s violation of his or her material duties to the Company or any of its affiliates, which continues after written notice from the Company or any affiliate to cure such violation;
 

	
             
 	
            (v)
 	
            Participant’s willful failure to follow the lawful written directives of the Board in any material respect;
 

	
             
 	
            (w)
 	
            Participant’s willful misconduct in connection with the performance of any of his or her duties, including but not limited to falsifying or attempting to falsify documents, books or records of the Company or any of its affiliates, making or delivering a false representation, statement or certification of compliance to the Company, misappropriating or attempting to misappropriate funds or other property of the Company or any of its affiliates, or securing or attempting to secure any personal profit in connection with any transaction entered into on behalf of the Company or any of its affiliates;
 

	
             
 	
            (x)
 	
            Participant’s breach of any material provisions of this Agreement or any other non-competition, non-interference, non-disclosure, confidentiality or other similar agreement executed by Participant with the Company or any of its affiliates;
 

	
             
 	
            (y)
 	
            conviction (or plea of nolo contendere) of the Participant of any felony, or a misdemeanor involving false statement, in connection with conduct involving the Company or any of its subsidiaries or affiliates; or
 

	
             
 	
            (z)
 	
            intentional engagement in any activity which would constitute or cause a breach of duty of loyalty, or any fiduciary duty to the Company or any of its subsidiaries or affiliates.
 

	
             
 	
            (ii)
 	
            “Code of Conduct” means any code of ethics or code of conduct now or hereafter adopted by the Company or any of its affiliates, including to the extent applicable the Company’s Employee Conduct and Disclosure Policy dated November 22, 1999, as amended or supplemented from time to time, and the Company’s or subsidiary Risk Management Policies and Procedures, as amended, supplemented or replaced from time to time.
 

	
             
 	
            (f)
 	
            Participant agrees that the provisions of this Article 6 are entered into in consideration of, and as a material inducement to, the agreements by the Company herein as well as an inducement for the Company to enter into this Agreement, and that, but for Participant’s agreement to the provisions of this Article 6, the Company would not have entered into this Agreement. 
 

 

	
             
 	
            7
 

Article 7. Dividends

 

During the Performance Period, all dividends and other distributions paid with respect to the shares of Common Stock shall accrue for the benefit of the Participant to be paid out to the Participant pursuant to Article 8.

 

Article 8. Form and Timing of Payment of Performance Shares

 

Payment of the Performance Shares, including accrued dividends, shall be made fifty percent (50%) in cash and fifty percent (50%) in shares of Company stock. 

 

Payment of Performance Shares shall be made within sixty (60) calendar days following the close of the Performance Period, subject to the following:

 

	
             
 	
            (a)
 	
            The Participant shall have no right with respect to any Award or a portion there of, until such award shall be paid to such Participant.
 

 

	
             
 	
            (b)
 	
            If the Committee determines, in its sole discretion, that a Participant at any time has willfully engaged in any activity that the Committee determines was or is harmful to the Company, any unpaid pending Award will be forfeited by such Participant.
 

 

	
             
 	
            (c)
 	
            All appropriate taxes will be withheld from the cash portion of the award.
 

 

Article 9. Nontransferability

 

Performance Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement, a Participant’s rights under the Plan shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s legal representative. 

 

Article 10. Administration

 

This Agreement and the rights of the Participant hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time by the Board of Directors, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Agreement, in its sole discretion, all of which shall be binding upon the Participant. 

 

Any inconsistency between the Agreement and the Plan shall be resolved in favor of the Plan.

 

Article 11. Miscellaneous

 

	
             
 	
            (a)
 	
            The selection of any employee for participation in the Plan shall not give such Participant any right to be retained in the employ of the Company. The right and power of the Company to dismiss or discharge any Participant at-will, is specifically reserved. Such Participant or any person claiming under or through the Participant shall not have any 
 

 

	
             
 	
            8
 

right or interest in the Plan or any Award thereunder, unless and until all terms, conditions, and provisions of the Plan that affect such Participant have been complied with as specified herein. 

 

	
             
 	
            (b)
 	
            With the approval of the Board, the Committee may terminate, amend, or modify the Plan; provided, however, that no such termination, amendment, or modification of the Plan may in any way adversely affect the Participant’s rights under this Agreement without the Participant’s written consent, except as required by law. 
 

 

	
             
 	
            (c)
 	
            Participant shall not have voting rights with respect to the Performance Shares. Participant shall obtain voting rights upon the settlement of Performance Shares and distribution into shares of common stock of the Company.
 

 

	
             
 	
            (d)
 	
            The Participant may defer such Participant’s receipt of the payment of cash and the delivery of shares of common stock, that would otherwise be due to such Participant by virtue of the satisfaction of the performance goals with respect to the Performance Shares, pursuant to the rules of the Black Hills Corporation Nonqualified Deferred Compensation Plan and the procedures set forth by the Compensation Committee. If the Participant elects to defer the receipt of the award, the Participant will be required to pay any necessary taxes from their own funds.  They will not be allowed to have their deferred award reduced for tax withholding.
 

 

	
             
 	
            (e)
 	
            This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 
 

 

	
             
 	
            (f)
 	
            To the extent not preempted by federal law, this Agreement shall be governed by, and construed in accordance with, the laws of the State of South Dakota.
 

 

	
             
 	
            (g)
 	
            Any awards received by Participant are subject to the provisions of the Stock Ownership Guidelines approved by the Board of Directors.
 

 

The following parties have caused this Agreement to be executed effective as of ________________.

 

	
             
 	
            Black Hills Corporation
 

 

 

	
             
 	
            By: _______________________
 

 

 

 

	
             
 	
            ___________________________
 

	
             
 	
            Participant
 

 

 

	
             
 	
            9Exhibit 10.23

 

THE OUTSIDE DIRECTORS

STOCK BASED COMPENSATION PLAN

(As amended and restated effective January 1, 2009)

The Outside Directors Stock Based Compensation Plan (“Plan”) is hereby amended and restated by Black Hills Corporation (“Company”) effective the 1st day of January, 2009, except as otherwise noted herein.  [NOTE:  provision permitting reelections in 2008 is effective before January 1, 2009.]

	
             
 	
            1.
 	
            RECITALS.
 

This document is an amendment and restatement of the Plan which was adopted by the Company effective the 1st day of January, 1997.  The Plan was established to provide to Participants certain benefits in order to attract and retain competent and hardworking outside directors whose abilities, experience and judgment can contribute to the well-being of the Company and its shareholders and to further align the long-term interests of the outside directors with those of the shareholders by providing benefits based on Company common stock equivalents.  

Under Section 11 of the Plan, the Company reserved the right to amend, modify, or discontinue the Plan provided only that any modification does not reduce accrued and unpaid benefits.  

The purpose of this amendment and restatement is to incorporate Plan amendments adopted since 1997 and to bring the Plan into compliance with the requirements of Section 409A of the Internal Revenue Code and the final regulations thereunder effective January 1, 2009.  The Plan has been operated in good faith compliance with the requirements of Section 409A of the Internal Revenue Code and the interim guidance issued thereunder during the period beginning January 1, 2005 and ending December 31, 2008.  The Company does not intend to “grandfather” any benefits earned and vested under the Plan as of December 31, 2004.  The amendment and restatement does not reduce any accrued and unpaid benefits.

	
             
 	
            2.
 	
            PARTICIPANTS.
 

Each Outside Director of the Company shall become a Participant in the Plan on the date he or she becomes an Outside Director and shall remain a Participant until his or her entire Account has been distributed.  Notwithstanding the foregoing, no Company common stock equivalents shall be added to the Participant’s Account with respect to any Quarter Period beginning after the Participant ceases to be an Outside Director of the Company.  

 

 

	
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            1
 

	
             
 	
            3.
 	
            ESTABLISHMENT OF ACCOUNTS..
 

The Company shall establish an Account for each Participant.  As of the last day of each Quarter Period ending after the Participant enters the Plan and on or before the Participant’s Benefit Payment Date, the Participant’s Account shall be credited with the Participant’s share of Company common stock equivalents, including fractional equivalents, for the Quarter Period, as determined in accordance with Section 4.  If the Participant’s Benefit Payment Date occurs on a date other than the last day of a Quarter Period, the Participant’s Account shall be credited with the appropriate amount of Company common stock equivalents, if any, for the Quarter Period in which the Benefit Payment Date occurs.  In addition, the Participant’s Account shall be adjusted, as appropriate, to reflect stock splits, cash dividends, stock dividends, merger, consolidation and
similar circumstances affecting the Company common stock. Cash dividends will be added in the form of common stock equivalents.

	
             
 	
            4.
 	
            ADDITIONS TO ACCOUNTS.
 

a.         Additions to Accounts for periods prior to December 1, 2007 are under the Plan as in effect prior to January 1, 2009.

b.         For the Quarter Period December 1, 2007 through February 29, 2008, each Participant shall be entitled to a quarterly addition to their Account in the amount determined by dividing the sum of $11,333.33 by the market price of the Company common stock on February 29, 2008.  For the Quarter Period beginning March 1, 2008, and for the remainder of the Plan year, and for each Plan year thereafter, each Participant shall be entitled to a quarterly addition to his or her Account in the amount of the number of Company common stock equivalents determined by dividing the sum of $12,500 by the market price of the Company common stock on the last day of the Quarter Period for each Quarter Period of the Plan Year that the Participant is eligible for benefits.  If a Participant is not an Outside Director for the entire Quarter
Period, then the Participant’s addition for the quarter should be prorated for the number of days that the Participant served as Outside Director.

	
             
 	
            5.
 	
            TIME AND MANNER OF BENEFIT PAYMENTS.
 

a.         Each Participant who entered the Plan before 2009 and whose Benefit Payment Date is after December 31, 2008 may elect a new Benefit Payment Date on an election form to be filed with the Committee. Such Benefit Payment Date shall be the first day of the month beginning after the later of (1) the date the Participant Separates from Service and (2) the date the Participant attains a specified age, provided that such age is at least 60 and no greater than 70.  The election must be made in writing no later than December 31, 2008 in accordance with procedures established by the Committee, and shall in no case cause payment to occur in the year in which such election is made. If such Participant fails to make an election by December 31, 2008, his prior election shall remain in effect, provided that such prior election is
not inconsistent with the provisions of the Plan as in effect on January 1, 2009.  If there is no prior election, or if the prior 

 

 

	
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            2
 

election is inconsistent with the terms of the Plan as in effect on January 1, 2009, the “default” provisions of this Section shall apply.  

Participants entering the Plan for the first time after December 31, 2008 may also elect a Benefit Payment Date. Such Benefit Payment Date shall be the first day of the month beginning after the later of (1) the date the Participant Separates from Service and (2) the date the Participant attains a specified age, provided that such age is at least 60 and no greater than 70.  Any election must be made in writing no later than 30 days after the Participant enters the Plan in accordance with procedures established by the Committee, and shall in no case cause payment to occur in the year in which such election is made..  Such election will apply exclusively to quarterly additions made to the Participant’s Account after the election date and the benefit calculation in Section 4(b) will be prorated as if the Participant became an Outside Director on the date of election. 

The Benefit Payment Date of a Participant who fails to elect a Benefit Payment Date in accordance with the above shall be the first day of the month beginning after the later of (1) the date the Participant Separates from Service and (2) the date the Participant attains age 60.  

b.         At the same time and on the same election form described in Section 5a above, the Participant may elect to receive payment of the benefits represented in the Participant’s Account from the following choices:

	
             
 	
            (1)
 	
            A lump sum payment in cash or shares of common stock of the Company in an amount equal to the Participant’s Account as of the Benefit Payment Date; or
 

	
             
 	
            (2)
 	
            Payment in monthly installments of cash over a period of not more than 15 years.  The first installment is due on the Benefit Payment Date.  Subsequent installments shall be paid on the first day of each month thereafter.  The installment pay out period shall be specified in the election.  The amount of each installment shall equal the balance of the Participant’s Account immediately prior to the installment divided by the number of installments remaining to be paid.  After the first installment has been paid, the unpaid Account balance shall accrue interest at an annual rate equal to the United States Treasury Bond yield determined as of the Benefit Payment Date.
 

A Participant who fails to elect a form of payment in accordance with the above shall receive payment in the form of a cash lump sum in accordance with subsection b(1).  

c.         The Benefit Payment Date and the payment method, once elected, may only be changed by the Participant’s giving written notice to the Committee of the Participant’s election to change the Benefit Payment Date and payment method and filing such election to change with the Committee; provided, however, that such request shall be made at least one year before the Benefit Payment Date then in effect, shall not 

 

 

	
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become effective for at least one year after the date the request is made, and shall specify a new Benefit Payment Date that is at least five years after the Benefit Payment Date then in effect; and provided further still, that once payments have begun, the form of payment election shall be irrevocable.  

A Participant who has elected to receive a lump sum may elect to receive payment in cash or in Company common stock.  Such election shall be made in writing prior to the date payment is made in accordance with procedures established by the Committee.  In the absence of an election, payment shall be made in cash.

d.         Notwithstanding any provision of this Plan to the contrary, if payment of a Key Employee’s Account is to be made on account of the Key Employee’s Separation from Service, payment to such Key Employee shall begin on the later of (1) the Benefit Payment Date or (2) the first day of the seventh month beginning after the Key Employee’s Separation from Service.  If payment to a Key Employee is delayed beyond the Benefit Payment Date on account of the provisions of this paragraph, and if payment of the Account is to be made in installments, the first payment shall include a lump sum equal to the sum of the monthly installment payments that would have been made if payment had begun on the Benefit Payment Date. 

	
             
 	
            6.
 	
            UNFORESEEABLE EMERGENCY.
 

If a Participant suffers an unforeseeable emergency, as defined herein, the Committee, in its sole discretion, may pay to the Participant that portion of his or her Account which the Committee determines is necessary to satisfy the emergency need, including any amounts necessary to pay any federal, state or local income taxes reasonably anticipated to result from the distribution. A Participant requesting an emergency payment shall apply for the payment in writing on a form approved by the Committee and shall provide such additional information as the Committee may require. For purposes of this Section, “unforeseeable emergency” means a severe financial hardship to the Participant resulting from any of the following:

a.         An accident or illness of the Participant or the Participant’s spouse, beneficiary or dependent (as defined in Section 152 of the Internal Revenue Code without regard to Section 152(b)(1), (b)(2) or (d)(1)(B) of the Internal Revenue Code);

b.         Loss of the Participant’s property due to casualty, including the need to rebuild a home following damage not otherwise covered by insurance; 

c.         Any other similar extraordinary and unforeseeable circumstance that is determined by the Committee, in its sole discretion, to constitute an unforeseen emergency which is not relieved by compensation through insurance or otherwise, and which cannot reasonably be relieved by the liquidation of the Participant’s other assets without causing severe financial hardship. 

 

 

	
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            7.
 	
            PAYMENTS UPON DEATH.
 

If the Participant dies after payment has begun but before his or her entire Account has been distributed, payment of the remaining Account shall be made to the beneficiary or beneficiaries he or she has designated under Section 9 in the form elected by the Participant.  If the Participant dies before payment begins, payment of the Account shall be made to the beneficiary or beneficiaries he or she has designated under Section 9 in a lump sum.  The Benefit Payment Date of a lump sum shall be the first day of the month beginning after the Participant’s death.  Each beneficiary to whom a lump sum is payable may elect to receive payment in cash or in Company common stock. If a lump sum is payable to the Participant’s estate, payment shall be in cash or Company common stock, as elected by the personal representative of the Participant’s estate. Such election shall be prior to
the date payment is made in accordance with procedures prescribed by the Committee. 

	
             
 	
            8.
 	
            LOSS OF BENEFITS.
 

Notwithstanding any other provision of the Plan, if a Participant is removed as an Outside Director of the Company because of misconduct or dishonesty, the Participant shall forfeit all right to any benefits payable under this Plan, including vested benefits.

	
             
 	
            9.
 	
            DESIGNATION OF BENEFICIARY.
 

A Participant may designate a beneficiary or beneficiaries to receive benefits after the death of the Participant.  The designation shall be effective upon filing written notice with the Committee on the form provided for that purpose.  If more than one beneficiary designation has been filed, the beneficiary or beneficiaries designated in the notice bearing the most recent date will be deemed to be the valid beneficiary or beneficiaries.  The Participant shall have the right, without the requirement of approval from any person, to revoke and change beneficiary designations.  If no valid beneficiary designation has been made, or if all beneficiaries die before a Participant’s entire Account has been distributed, payment of the remaining Account will be made to the Participant’s estate.  

	
             
 	
            10.
 	
            PLAN TO BE UNFUNDED.
 

All benefit payments under the Plan will be made from the general assets of the Company and Participants and their beneficiaries are to be unsecured general creditors of the Company. No special or separate fund is to be established nor other segregation of assets made to create Plan assets or cause the Plan to be a funded plan. Notwithstanding the foregoing, however, the Company may, in its sole discretion, place assets in a trust that may be used to meet Company’s obligations under the Plan and any right of a Participant to any benefit payment under the Plan shall be reduced by any payment received by the Participant from the trustee under such a trust. In the event such a trust is established, the assets of such trust shall be available to the general creditors of the Company in the event of the insolvency or bankruptcy of the Company (a “Rabbi trust”).

 

 

	
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            11.
 	
            PLAN MAY BE MODIFIED OR DISCONTINUED.
 

The Company reserves the right to amend, modify or discontinue the Plan. Any modification or discontinuance of benefits shall not reduce accrued and unpaid benefits.  In addition, any amendment, modification or discontinuance of the Plan shall be consistent with the requirements of Section 409A of the Internal Revenue Code. 

	
             
 	
            12.
 	
            CHANGE IN CONTROL.
 

In the event of a Change in Control, as hereafter defined, the Company shall, as soon as possible, but in no event longer than 30 days following the Change of Control, make an irrevocable contribution to the Rabbi trust referred to in Section 10 above, or in the event the Rabbi trust has not been created, shall create such a trust, and make an irrevocable contribution to the trust, in an amount that is sufficient to pay each Participant or beneficiary the benefits to which the Participants or their beneficiaries would be entitled pursuant to the terms of this Plan as of the date of the Change in Control. 

For the purposes of this section, the term “Change in Control” shall mean any of the following events: 

	
             
 	
            (1)
 	
            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 Plan, 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); 
 

	
             
 	
            (2)
 	
            Individuals who, as of December 31, 2007 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; or
 

	
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            (3)
 	
            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 than 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
 

	
             
 	
            (4)
 	
            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.
 

	
             
 	
            (5)
 	
            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 Person, 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.
 

 

 

	
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            (6)
 	
            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.
 

	
             
 	
            13.
 	
            WITHHOLDING.
 

There shall be deducted from all benefits paid under this Plan the amount of any taxes required to be withheld by any federal, state or local government.  The Participants and their beneficiaries, distributes and personal representatives, as applicable, will bear any an all federal, foreign, state, local or other income or other taxes imposed on amounts paid under this Plan.

	
             
 	
            14.
 	
            ASSIGNABILITY.
 

No right to receive payments under this Plan shall be subject to voluntary or involuntary alienation, assignment or transfer, sale, bankruptcy, pledge, attachment, charge lien or encumbrance of any kind.

	
             
 	
            15.
 	
            ADMINISTRATION OF THE PLAN.
 

The Plan shall be administered by the Committee. The Committee shall conclusively interpret the provisions of the Plan, decide all claims and shall make all determinations under the Plan. The Committee shall act by vote or written consent of the majority of its members.  The Committee may delegate any or all of its duties and authority hereunder to any person.

	
             
 	
            16.
 	
            GOVERNING LAW.
 

This Plan shall be governed by and construed in accordance with the laws of the State of South Dakota.

	
             
 	
            17.
 	
            NO CONTRACT.
 

Neither the action of the Company in establishing the Plan nor any action taken by it or by the Committee under the provisions hereof or any provisions of the Plan shall be construed as giving any Participant the right to be retained as a Director or Employee of the Company.

	
             
 	
            18.
 	
            NO TAX-QUALIFIED OR ERISA PLAN.
 

It is not intended that this Plan be a tax-qualified plan under the Internal Revenue Code nor is it intended that this Plan be an employee benefit plan subject to ERISA because none of the Participants are covered as Employees of the Company.  The Participants’ rights under the Plan, if any, are contractual.

 

 

	
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            19.
 	
            DEFINITIONS.
 

For purposes of the Plan,

“Account” shall mean the individual bookkeeping account established to track the Company common stock equivalents allocated the Participant and adjustments thereto.

“Affiliate” shall mean 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.

“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.

“Benefit Payment Date” shall mean the date on which benefit payments due hereunder are to be paid.  All payments hereunder shall actually commence on or within 60 days after the Benefit Payment Date. 

“Board of Directors” or “Board” shall mean the Board of Directors of the Company. 

“Committee” shall mean the Compensation Committee of the Board of Directors of the Company.

“Director” shall mean a member of the Board of Directors of the Company.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.

“Key Employee” shall mean a Participant who is a specified employee, as defined as in Section 409A of the Internal Revenue Code and the regulations and other official guidance issued thereunder, and as determined in accordance with procedures established by the Committee.

“Outside Director” shall mean a Director who is not a full-time employee of the Company.  

“Participant” shall mean an Outside Director who is participating in the Plan under Section 2. 

“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).

 

 

	
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“Plan Year” shall mean the 12 consecutive month period beginning each January 1 and ending each December 31.

"Quarter Period" shall mean June 1 through August 31, September 1 through November 30, December 1 through February 28 or 29 and March 1 through May 31. 

“Separation from Service” shall mean separation from service (including service as a Director, an employee or an independent contractor) with the Company and all Affiliates, as defined for purposes of Code Section 409A and the regulations thereunder.

 

Dated this 29th day of October, 2008.

	
             
 	
            BLACK HILLS CORPORATION
 

 

	
             
 	
            By /s/ David R. Emery
 

	
             
 	
            David R. Emery
 

	
             
 	
            Chairman, President
 

	
             
 	
            and Chief Executive Officer
 

 

 

ATTEST:

/s/ Roxann R. Basham

 (CORPORATE SEAL)

 

 

 

	
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