BLACK HILLS CORPORATION
625 Ninth Street
Rapid City, South Dakota 57701
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1996
To the Shareholders of
Black Hills Corporation
NOTICE IS HEREBY GIVEN that the Annual Meeting of the holders of Common
Stock of BLACK HILLS CORPORATION (herein called the Company) will be held at
the Holiday Inn Rushmore Plaza Hotel, 505 North Fifth Street, Rapid City, South
Dakota, on Tuesday, May 21, 1996, commencing at 9:30 A.M., for the following
purposes:
1. To elect three Class I Directors to serve until the Annual Meeting of
Shareholders in 1999;
2. To consider and act on a proposal authorizing the Black Hills
Corporation 1996 Stock Option Plan;
3. To ratify the appointment of Arthur Andersen LLP to serve as independent
auditors of the Company for the year 1996;
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on March 8, 1996, are
entitled to notice of and to vote at the meeting or any adjournment thereof.
All shareholders are cordially invited to attend the meeting. Please
complete, date, sign, and return the accompanying form of proxy. A return
envelope is enclosed which requires no postage if mailed in the United States.
We appreciate your giving this matter your prompt attention.
By Order of the Board of Directors
ROXANN R. BASHAM
Corporate Secretary
Dated: March 22, 1996
<PAGE>
BLACK HILLS CORPORATION
625 NINTH STREET
RAPID CITY, SOUTH DAKOTA 57701
PROXY STATEMENT
A proxy in the accompanying form is solicited by the Board of Directors of
Black Hills Corporation, a South Dakota corporation (the Company), to be voted
at the Annual Meeting of Shareholders of the Company to be held Tuesday, May
21, 1996, and at any adjournment thereof.
The enclosed form of proxy, when executed and returned, will be voted as set
forth therein. Any shareholder signing a proxy has the power to revoke the
same in writing, addressed to the Secretary of the Company, or in person at the
meeting at any time before the proxy is exercised.
All shares represented by valid, unrevoked proxies will be voted at the
Annual Meeting. Shares voted as abstentions on any matter (or as "withhold
authority" as to Directors) will be counted as shares that are present and
entitled to vote for purposes of determining the presence of a quorum at the
meeting and as unvoted, although present and entitled to vote, for purposes of
determining the approval of each matter as to which the shareholder has
abstained. If a broker submits a proxy which indicates that the broker does
not have discretionary authority as to certain shares to vote on one or more
matters, those shares will be counted as shares that are present and entitled
to vote for purposes of determining the presence of a quorum at the meeting,
but will not be considered as present and entitled to vote with respect to such
matters.
The Company will bear all costs of the solicitation. In addition to
solicitation by mail, officers and employees of the Company may solicit proxies
by telephone, telegraph, or in person. Kissel-Blake Inc. has been retained by
the Company to assist in the solicitation of proxies at an anticipated cost of
$2,500 plus out-of-pocket expenses. Also, the Company will, upon request,
reimburse brokers or other persons holding stock in their names or in the names
of their nominees for reasonable expenses in forwarding proxies and proxy
material to the beneficial owners of stock.
This Proxy Statement and the accompanying form of proxy are to be first
mailed on March 22, 1996. The Company's Annual Report to Shareholders and Form
10-K for the year 1995 is being mailed to shareholders with this proxy
statement.
VOTING RIGHTS AND PRINCIPAL HOLDERS
Only shareholders of record at the close of business on March 8, 1996, will
be entitled to vote at the meeting. The outstanding voting stock of the
Company as of such record date consisted of 14,433,821 shares of Common Stock.
Each outstanding share of Common Stock is entitled to one vote. Cumulative
voting is permitted in the election of directors. Each share is entitled to
three votes, one each for the election of three directors, and the three votes
may be cast for a single person or may be distributed among two or three
persons.
The Company is not aware of any person or group who is the beneficial owner
of more than five percent of the Company's Common Stock.
<PAGE>
ITEM I
ELECTION OF DIRECTORS
In accordance with the Bylaws and Article Fifth of the Restated Articles of
Incorporation, the Company's directors are elected to three classes of
staggered terms consisting of three years each. At this Annual Meeting of
Shareholders, three directors will be elected to Class I of the Board of
Directors to hold office for a term of three years until the Annual Meeting of
Shareholders in 1999 and until their respective successors shall be duly
elected and qualified.
Each of the nominees for director is presently a member of the Board of
Directors of the Company. The proxy attorneys will vote your stock for the
election of the three nominees for director listed below, unless otherwise
instructed. If, at the time of the meeting, any of such nominees shall be
unable to serve in the capacity for which they are nominated or for good cause
will not serve, an event which the Board of Directors does not anticipate, it
is the intention of the persons designated as Proxy Attorneys to vote, at their
discretion, for nominees to replace those who are unable to serve. The
affirmative vote of a majority of the common shares present and entitled to
vote with respect to the election of directors is required for the election of
the nominees to the Board of Directors.
The following information, including principal occupation or employment for
the past five or more years, is furnished with respect to each of the following
persons who are nominated as Class I directors, each to serve for a term of
three years to expire in 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE FOLLOWING
NOMINEES:
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION UNTIL
1999 ANNUAL MEETING - CLASS I
NAME, AGE, PRINCIPAL OCCUPATION FOR DIRECTOR
LAST FIVE YEARS AND OTHER DIRECTORSHIPS SINCE
<S> <C>
GLENN C. BARBER, 62 1984
President and General Manager, Glenn
C. Barber & Associates Inc. (a general
construction company)
BRUCE B. BRUNDAGE, 60 1986
President and Director, Brundage &
Company (a firm specializing in corporate
financing), Englewood, Colorado; Director,
Vicorp Restaurants, Inc., Denver, Colorado
KAY S. JORGENSEN, 44 1992
South Dakota Legislative Representative,
Lawrence County, South Dakota;
Business Consultant, Spearfish, South Dakota
</TABLE>
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS EXPIRE AT
1997 ANNUAL MEETING - CLASS II
NAME, AGE, PRINCIPAL OCCUPATION FOR DIRECTOR
LAST FIVE YEARS AND OTHER DIRECTORSHIPS SINCE
<S> <C>
DANIEL P. LANDGUTH, 49 1989
Chairman, President, and Chief Executive
Officer of the Company since January 1,
1991
DALE E. CLEMENT, 62 1979
Senior Vice President-Finance of the Company
and subsidiaries
JOHN R. HOWARD, 55 1977
President, Industrial Products, Inc. (an
industrial parts distributor) since
March 2, 1992; General Manager of Black
Hills Packing Co. (a meat processing
concern), Rapid City, South Dakota, from
December 1978 to June 1, 1991; Director,
Norwest Bank South Dakota, N.A.
</TABLE>
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS EXPIRE AT
1998 ANNUAL MEETING - CLASS III
NAME, AGE, PRINCIPAL OCCUPATION FOR DIRECTOR
LAST FIVE YEARS AND OTHER DIRECTORSHIPS SINCE
<S> <C>
KIRK E. Dean, 48 1995
President and District Manager,
Rapid City Market, Norwest Bank
South Dakota, N.A. Rapid City, South Dakota
MICHAEL B. ENZI, 52 1992
Accounting Manager, Dunbar Well Service,
Inc. (an oil well servicing company),
Gillette, Wyoming; Wyoming State Senator,
Campbell County, Wyoming; President of NZ
Shoes, Inc. (retail shoe store), Gillette,
Wyoming
EVERETT E. HOYT, 56 1991
President and Chief Operating Officer of
Black Hills Power and Light Company
</TABLE>
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
As of February 29, 1996, the following table sets forth the beneficial
ownership of Common Stock of the Company for each Director, each executive
officer named in the Summary Compensation table herein, and all Directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES AND NATURE
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP (1)
<S> <C>
Glenn C. Barber 3,309
Bruce B. Brundage 3,615(2)
Dale E. Clement 11,660(4)
Kirk E. Dean 352
Michael B. Enzi 1,679(3)
John R. Howard 11,242
Everett E. Hoyt 5,071(4)
Kay S. Jorgensen 542
Daniel P. Landguth 9,163(4)
All Directors and executive
officers as a group 53,985(4)
</TABLE>
(1)Represents outstanding Common Stock beneficially owned both directly
and indirectly as of February 29, 1996. The Common Stock interest of each
named person and all Directors and executive officers as a group represents
less than one percent of the aggregate amount of Common Stock issued and
outstanding. Except as indicated by footnote below, the beneficial owner
possesses sole voting and investment powers with respect to the shares shown.
(2)Includes 3,600 shares owned by Brundage & Co. Pension Plan and Trust of
which Mr. Brundage is the Trustee with sole voting and investment authority.
(3)Includes 100 shares owned jointly with Mr. Enzi's son as to which he
shares voting and investment authority and 112 shares for which Mr. Enzi is
custodian of his minor daughter.
(4)Includes Common Stock held by the Trustee of the Company's Retirement
Savings Plan (401K) of which the Trustee has sole voting and investment
authority as follows: Mr. Clement 1,041 shares, Mr. Hoyt 4,172 shares,
Mr. Landguth 3,037 shares, and all Directors and executive officers as a group
11,680 shares.
Based solely upon a review of Company records and copies of reports on Form
3, 4 and 5 furnished to the Company, the Company believes that during 1995 all
persons subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended, filed the required reports on a
timely basis.
THE BOARD AND COMMITTEES
The Executive Committee is comprised of Glenn C. Barber, Kirk E. Dean,
Michael B. Enzi, John R. Howard, and Daniel P. Landguth, with Mr. Landguth
serving as Chairman. The Committee exercises the authority of the Board of
Directors in the interval between meetings of the Board, recommends to the
Board of Directors persons to be elected as officers, and recommends persons to
be appointed to Board Committees. The Executive Committee held two meetings
during 1995.
The Compensation Committee is comprised of Glenn C. Barber, Bruce B.
Brundage, Kirk E. Dean, Michael B. Enzi, John R. Howard, and Kay S. Jorgensen,
with Ms. Jorgensen serving as Chairman. The Committee performs functions
required by the Board of Directors in the administration of all federal and
state statutes relating to employment and compensation, recommends to the Board
of Directors compensation for officers, and considers and approves the
Company's compensation program including benefits and stock ownership plans.
The Committee will be the administrator of the Company's 1996 Stock Option Plan
submitted for approval at this meeting. The Compensation Committee held three
meetings in 1995.
The Audit Committee is comprised of Glenn C. Barber, Bruce B. Brundage,
Michael B. Enzi, and Kay S. Jorgensen, with Mr. Enzi serving as Chairman. The
Committee annually recommends to the Board of Directors an independent
accounting firm to be appointed by the Board for ratification by the
shareholders, reviews the scope and results of the annual audit including
reports and recommendations of the firm, reviews the Company's internal audit
function, and periodically confers with the internal audit group, management of
the Company, and its independent accountants. The Audit Committee held two
meetings in 1995.
The Nominating Committee is comprised of Bruce B. Brundage, Kirk E. Dean,
John R. Howard, Kay S. Jorgensen, and Daniel P. Landguth, with Mr. Howard
serving as Chairman. The Committee recommends to the Board of Directors
persons to be nominated as directors or to be elected to fill vacancies on the
Board. The Bylaws require that an outside director serve as Chairman of the
Committee. The Nominating Committee held two meetings in 1995.
Pursuant to the Company's Bylaws, nominations from shareholders for Board
membership will be considered by the Nominating Committee. Shareholders who
wish to submit names for future consideration for Board membership should do so
in writing prior to November 22, 1996, addressed to Nominating Committee,
c/o Corporate Secretary, Black Hills Corporation, P.O. Box 1400, Rapid City,
South Dakota 57709.
Members of the Committees referred to herein are designated by the Board of
Directors upon recommendation of the Executive Committee each year at a meeting
held following the Annual Meeting of Shareholders.
The Board of Directors held eleven meetings during 1995. Each director
attended no less than 85 percent of the aggregate of the total number of Board
meetings and Committee meetings on which the director served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is solely comprised of the following outside
directors, Glenn C. Barber, Bruce B. Brundage, Kirk E. Dean, Michael B. Enzi,
John R. Howard, and Kay S. Jorgensen.
Mr. Howard is also a director of Norwest Bank South Dakota, N.A. Mr. Dean
is President of the Rapid City Market - Norwest Bank South Dakota, N.A., of
which the Company has a $10 million line of credit. During 1995, Norwest Bank
South Dakota, N.A. participated in short-term loans to the Company of up to
$4.3 million at an interest rate of 1/8 percent less than the prime rate.
Total interest charges for the year were approximately $31,000.
Norwest Bank Minnesota, N.A. is the Trustee and Paying Agent for the
Company's Pollution Control and Industrial Development Revenue Bonds. The
Company paid approximately $24,000 for this service in 1995. The Company
recently engaged Norwest Bank Minnesota as their Transfer Agent, Registrar, and
Dividend Disbursing Agent for its Common Stock effective February 16, 1996.
The Company estimates the fee for this service will be less than $50,000
annually plus out of pocket expenses.
Norwest Bank South Dakota and Norwest Bank Minnesota are subsidiaries of
Norwest Corp. Neither Mr. Howard nor Mr. Dean have a direct relationship with
Norwest Minnesota. Based on proposals from other banks to serve as Transfer
Agent, Registrar, and Dividend Disbursing Agent, the Company is of the opinion
that the terms of the above transactions were no less favorable to the Company
than those available from other banks.
DIRECTORS' FEES
Directors who are not officers of the Company receive an annual fee of
$12,000 plus a fee of $600 for each board meeting and committee meeting
attended providing such committee meetings are substantive in nature and
content.
The Board of Directors approved an amendment to the Bylaws at its January
30, 1996, meeting requiring the Directors to beneficially own 100 shares of
Common Stock when they are initially elected a Director and requiring each
Director to apply at least 50 percent of his or her retainer toward the
purchase of additional shares until the Director has cumulated at least 2,000
shares of Common Stock.
DIRECTORS' RETIREMENT PLAN
The Company has a Retirement Plan for those directors who are not otherwise
employed by the Company (outside directors). The monthly benefit is $1,000
payable for the number of months the outside director served or for 120 months,
whichever is less. The monthly benefits commence at the earliest of (1) the
first full complete month the outside director is 60 years of age or more and
is no longer a director of the Company or (2) the first full month after the
death of the outside director or former outside director. The Board of
Directors may withdraw retirement benefits for any outside director dismissed
for cause. The monthly benefit is paid to the participating director, or if
deceased, the director's designated beneficiary, and if none, his or her
estate.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
developing and making recommendations to the Board on executive compensation.
The components of the Company's executive compensation program consists of a
base salary, an incentive gainsharing bonus, and results compensation. The mix
of base salary, incentive bonus, and results compensation reflects the
Company's goals of attracting and retaining highly qualified and motivated
managers, recognizing and rewarding outstanding performance, fostering a
cohesive management team, and having a portion of compensation contingent upon
the performance of the Company.
The Committee makes annual recommendations to the Board concerning the base
salary, incentive gainsharing bonus, and results compensation for the Chief
Executive Officer and each of the other executive officers of the Company.
Recognizing a market based compensation structure, the Committee strives to
ensure that competitive salary ranges and base salaries are being maintained.
In 1995 the Committee reviewed several data sources including data from the
Edison Electric Institute, the trade association of investor-owned electric
utilities, in determining market base compensation for the executive officers.
The salaries were not only based upon comparable market salary information but
also on the accomplishments of individual performance objectives.
The Company's position is to establish a market salary level for each salary
range that is at or near the median (50th percentile) of the range of salaries
of comparable companies surveyed. A performance matrix system is used in
determining the percentage of salary increase taking into account the
performance rating for the individual officer and the relationship of the
officers current salary to market. An outstanding performance rating is given
when there is extraordinary and exceptional accomplishment, results are far in
excess of requirements, and demanding objectives are attained. A superior
performance rating indicates results are well above the expected level and the
individual was successful in accomplishing challenging objectives. Competent
performance ratings are given when all position requirements are met, the
individual consistently performs the job in a satisfactory manner, and
realistic objectives are obtained. Base salary increases in 1995 for the
Company's officers ranged from 2 percent to 5 percent.
In April 1995, the Compensation Committee granted the Chief Executive
Officer a superior rating based on efforts made in construction of Neil Simpson
Unit #2, a new power plant, the increase in dividends, and maintenance of
earnings during a heavy construction and financing period for the Company. The
Compensation Committee approved a 5 percent base salary increase in the amount
of $9,635 for the Chief Executive Officer. The increase to the base salary
brings the Chief Executive Officer's base salary to 103 percent of market as
determined by wage surveys. Consolidated earnings per share in 1994 was $1.66,
unchanged from 1993 with 3.8 percent more average shares outstanding.
Dividends increased 3.1 percent over 1993.
The Company currently maintains a variety of employee benefit plans and
programs in which its executive officers may participate, including the
gainsharing program, the results compensation program, the retirement savings
(401k) plan, the pension plan, and the pension equalization plan. With the
exception of the Pension Equalization Plan (PEP), these benefit plans and
programs are generally available to all employees within the Company.
The Executive Gainsharing Program is one of three sections of a Company wide
program. The goals of the Executive Gainsharing Program support the interests
of the customer and shareholder. This is accomplished through increased cost
containment and operating efficiencies which in the end result reduce costs and
increase earnings. The program for 1995 consisted of a safety goal, a
reduction in budgeted operating expenses, and a goal related to successful
rates cases. The program paid a 1.58 percent gainshare award in 1996 based on
1995's program.
The Results Compensation Program was designed to recognize and reward the
contribution that group performance makes to corporate success. All regular
full-time and regular part-time non-union employees are eligible to participate
in the program. The local union IBEW, 1250, elected not to participate in the
Results Compensation Program. The program has two key financial goals, a
business unit goal and a corporate goal. The business unit goal is based upon
the percentage of operating income for the respective business unit which
exceeds budgeted amounts. The corporate goal is based upon the percentage of
consolidated earnings per share which exceeds budgeted amounts. Each goal is
weighted 50 percent and must exceed 5 percent of budgeted amounts before a
bonus is paid. The maximum bonus which can be paid is 8 percent. The
executive officers earned a results compensation bonus in 1995 which was paid
in 1996 that ranged from 1.50 percent to 3.40 percent. Company wide bonuses
ranged from 0.95 percent to 3.40 percent.
It is the objective of the Company to pay its executives a fair salary,
based on the comparable pay of similar types of companies in relation to
achieving corporate, business unit, and individual performance objectives.
Furthermore, officers are not permitted to serve on the Board of Directors of
any other corporation operating for profit. The intent of the latter is that
if the executives are paid fairly, the Company and its shareholders should
demand their full attention and, therefore, their efforts are totally directed
toward the Company and not interrupted by the obligations of serving as a
director for other for profit corporations.
FUTURE PLANS
The Committee recently retained an executive compensation consultant to
review the Company's Executive Officer compensation practices. The Committee's
efforts focused on reviewing the competitiveness of the current compensation
package and the appropriateness of implementing a long-term incentive
compensation program.
The Committee has recommended implementation of the Black Hills Corporation
1996 Stock Option Plan as a long-term incentive for employees of the Company.
The Committee's objective in adopting the Plan and a summary of the Plan is
discussed as Item II. The Plan is fully set forth at Addendum A.
COMPENSATION COMMITTEE
Kay S. Jorgensen, Chairman Glenn C. Barber Bruce B. Brundage
Kirk E. Dean Michael B. Enzi John R. Howard
The following table is furnished for the fiscal year ended December 31,
1995, with respect to the Chief Executive Officer of the Company and the
executive officers whose salary and bonus compensation for 1995 exceeded
$100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
<S> <C> <C> <C>
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1)
Daniel P. Landguth 1995 $197,516 $ 6,397
Chairman, President, and 1994 188,110 10,180
Chief Executive 1993 178,466 10,761
Officer of the Company
and subsidiaries
Everett E. Hoyt 1995 $132,845 $6,962
President and Chief 1994 128,365 6,945
Operating Officer of 1993 123,566 3,906
Black Hills Power and
Light Company
Dale E. Clement 1995 $129,910 $4,173
Senior Vice President - 1994 127,363 5,582
Finance of the Company 1993 124,266 3,966
and Subsidiaries
</TABLE>
(1)Bonus amounts for 1995 and 1994 include amounts earned under the
Results Compensation Program and the Incentive Gainshare Program, cash bonus
programs for Company employees based on the attainment of predetermined
profitability measures. Bonus amounts for 1993 include amounts earned under
the Incentive Gainshare Program. Mr. Landguth's bonus in 1993 also includes a
one-time performance bonus of $4,900.
RETIREMENT PLANS
The Company has a defined benefit retirement plan (Pension Plan) for its
employees. The Pension Plan provides benefits at retirement based on length of
employment service and average monthly pay in the five consecutive calendar
years of highest earnings out of the last ten years. Employees do not
contribute to the Pension Plan. The amount of annual contribution by the
employers to the Pension Plan is based on an actuarial determination. Accrued
benefits become 100 percent vested after an employee completes five years of
service.
The Company also has a Pension Equalization Plan (the PEP), a nonqualified
(benefits are not tax deductible until paid) supplemental plan, which is
designed to provide the higher paid executive employee a retirement benefit
which, when added to social security benefits and the pension to be received
from the Pension Plan, will approximate retirement benefits being paid by other
employers to its employees with like executive positions. The employee's
pension from the qualified pension plan is limited under the current law to not
exceed $120,000 annually and the compensation taken into account in determining
contributions and benefits cannot exceed $150,000. The amounts of deferred
compensation paid under nonqualified plans such as the PEP are not subject to
the limits. A participant under the PEP does not qualify for benefits until
the benefits become vested under a vesting schedule - 20 percent after three
years of employment under the plan increasing up to 100 percent vesting after
eight years of employment under the plan. No credit for past service is
granted under the PEP. The annual benefit is 25 percent of the employee's
average earnings (if salary was less than two times the Social Security Wage
Base) or 30 percent (if salary was more than two times the Social Security Wage
Base) times the vesting percentage. Average earnings are normally an employees
average earnings for the five highest consecutive full years of employment
during the ten full years of employment immediately preceding the year of
calculation. The annual PEP benefit is paid on a monthly basis for 15 years to
each participating employee and if deceased to the employee's designated
beneficiary or estate, commencing at the earliest of death or when the employee
is both retired and 62 years of age or more.
In the event that at the time of a Participant's retirement from the Company
the Participant's salary level exceeds the qualified pension plan annual
compensation limitation of $150,000, then the Participant shall receive an
additional benefit which is measured by the difference between the monthly
benefit which would have been provided to the participant under the Company's
Pension Plan as if there were no annual compensation limitation and the monthly
benefit to be provided to the Participant under the Pension Plan.
Participants in the PEP are designated by the Board of Directors upon
recommendation of the Chief Executive Officer. Selection is based on key
employees as determined by management and consideration of performance rather
than salary based only. The minimum salary component applied in the selection
process is the maximum annual Social Security taxable wage base which is
presently at $62,700.
RETIREMENT BENEFITS
The following table illustrates estimated annual benefits payable under the
Pension Plan and the PEP to employees who retire at the normal retirement date.
Years of Service
<TABLE>
<CAPTION>
Annual Pay 15 20 25 30 35
Years Years Years Years Years
<S> <C> <C> <C> <C> <C>
$ 60,000 $ 27,941 $ 32,255 $ 36,569 $ 40,883 $ 45,196
75,000 35,291 40,805 46,319 51,833 57,346
90,000 42,641 49,355 56,069 62,783 69,496
110,000 52,441 60,755 69,069 77,383 85,696
125,000 59,791 69,305 78,819 88,333 97,846
150,000 79,541 91,055 102,569 114,083 125,596
175,000 93,041 106,555 120,069 133,583 147,096
200,000 106,541 122,055 137,569 153,083 168,596
225,000 120,041 137,555 155,069 172,583 190,096
</TABLE>
Estimated annual benefits payable to officers named below at age 65 from all
sources are as follows: Daniel P. Landguth, 35 yrs. - $165,806; Dale E.
Clement, 33 yrs. - $82,011(1); Everett E. Hoyt, 31 yrs. - $75,157(1).
The benefits in the foregoing table were calculated as a straight life
annuity. Amounts shown are exclusive of Social Security benefits and include
benefits from both the Pension Plan and from the PEP assuming a 100 percent
vested interest in the PEP.
(1) Such amounts are adjusted for benefits applicable to service for prior
employment.
EMPLOYEES' STOCK PURCHASE PLAN
Employees of the Company and its subsidiaries are eligible to participate in
the Employees' Stock Purchase Plan, as approved by the shareholders at the 1987
Annual Meeting under which offerings of the Company's Common Stock, at the
discretion of the Board, are made to employees at a price equal to 90 percent
of the closing sale price on the New York Stock Exchange on the date of the
offering. An offering was extended to employees in 1995 and officers
subscribed to 1,880 shares at a price of $20.25 per share. Shares are held in
nominee name until subscriptions are paid for in full.
RETIREMENT SAVINGS PLAN
The Company has a Retirement Savings Plan under Section 401(k) of the
Internal Revenue Code of 1954, as amended, which permits employees of the
Company and its subsidiaries, including officers, to elect to invest up to 15
percent of their eligible earnings on a pre-tax basis into an investment fund
subject to limitations imposed by the Internal Revenue Code. The Company makes
no contributions to the Plan.
Distribution from the fund will be made to employees at termination of
employment, retirement, death, or in case of hardship. No amounts were paid or
distributed pursuant to the Retirement Savings Plan to the individuals named
herein nor to the officers as a group.
The Trustee for the Retirement Savings Plan (401(k) Plan) has voting power
with respect to shares held in the name of the Trustee of the Plan.
SEVERANCE AGREEMENTS
The Company has entered into change of control severance agreements
("Severance Agreements") with each of its executive officers. The Severance
Agreements provide for certain payments and other benefits to be payable upon a
Change in Control and a subsequent termination of employment, either
involuntary or for a Good Reason.
A Change in Control is defined as: (i) an acquisition of 30 percent or more
of the common stock of the Company (except for certain defined acquisitions,
such as acquisition by employee benefit plans, the Company itself, or any
subsidiary); or (ii) members of the Incumbent Board at the time the agreements
were executed cease to constitute at least two-thirds of the members of the
Board, with an Incumbent Board being defined at those individuals consisting of
the Board on the date the Agreement was executed and any other directors
elected subsequently whose election was approved by the Incumbent Board; or
(iii) approval by the shareholders of the Company of a merger, consolidation,
or reorganization; liquidation or dissolution; or agreement for sale or other
disposition of all or substantially all of the assets of the Company (with
exceptions for transactions which do not involve an effective change in control
of voting securities or Board membership, and transfers to subsidiaries or sale
of subsidiaries); and (iv) all regulatory approvals required to effect a Change
in Control have been obtained.
A Good Reason for termination which would trigger payment of benefits is
defined to include (i) a change in the Executive's status, title, position or
responsibilities, (ii) a reduction in the Executive's annual compensation or
any failure to pay the Executive any compensation or benefits to which he is
entitled within 7 days of the date due, (iii) any material breach by the
Company of any provisions of the Severance Agreement, (iv) requiring the
Executive to be based outside a 50-mile radius from Rapid City, South Dakota;
or (v) failure of the Company to obtain an agreement from any successor company
to assume and agree to perform the Severance Agreement. The Severance
Agreement with the Chief Executive Officer ("CEO") also contains an optional
Window Period, defined as a 30-day period of time beginning on the one-year
anniversary after the Change in Control, during which time the CEO may
terminate for any reason and receive the payments and benefits.
Upon a Change in Control, the Executive will have an employment contract for
three-year period (but not beyond age 65), denominated the "Employment Term."
During the Employment Term, the Executive shall receive annual compensation at
least equal to the highest rate in effect at any time during the one-year
period preceding the Change in Control and shall also receive employment
welfare benefits, pension benefits, and supplemental retirement benefits on a
basis no less favorable than those received prior to the Change in Control.
If the Executive's employment with the Company is terminated during the
Employment Term, involuntarily or for a Good Reason (or by the CEO for any
reason during a Window Period), then the Executive is entitled to the following
benefits: (i) severance pay equal to 2.99 times Executive's five-year average
taxable compensation; provided that the foregoing payment is subject to
proportionate reduction based upon when termination takes place during the
Employment Term and based upon a ratio of Executive's Employment Term to 36
months; and (ii) continuation of employee welfare benefits for the remainder of
the Employment Term (with an offset for similar benefits received) along with
additional credited service under the Pension Equalization Plan and Pension
Plan equal to the remainder of the Employment Term.
The Severance Agreement contain a "cap" provision which reduces any amounts
payable to an amount which would prevent any payments from being nondeductible
under the Internal Revenue Code. The Severance Agreements provide for
reimbursement of legal fees and expenses of the Executive incurred after the
Change in Control by the Executive in seeking to obtain or enforce any benefits
provided by the Severance Agreement. The Executive is not required to mitigate
the amount of any payment or benefit by seeking other employment or otherwise,
and the payments or benefits are not reduced whether or not the Executive
obtains other employment and/or benefits (except for employee welfare
benefits).
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative shareholder return on the Company's
Common Shares for the last five fiscal years with the cumulative total return
of the S&P 500 Index and the Edison Electric Institute Electric Index, (EEI
Electric Index) over the same period (assuming the investment of $100 on
December 31, 1990, and the reinvestment of all dividends).
<PAGE>
(INSERT CAMERA READY GRAPH)
1991 1992 1993 1994 1995
Black Hills Corporation $143 $149 $130 $130 $160
S&P 500 $130 $140 $155 $157 $215
EEI ELectric $129 $139 $154 $136 $179
ITEM II
PROPOSAL TO APPROVE THE BLACK HILLS CORPORATION 1996 STOCK OPTION PLAN
BACKGROUND
The Board of Directors adopted, subject to shareholder approval, the Black
Hills Corporation 1996 Stock Option Plan (the "Plan"). A full copy of the Plan
is attached as Addendum A. The purpose of the Plan is to enable the Company to
offer certain officers and other key employees of the Company and its
subsidiaries options to acquire shares of the unissued and authorized Common
Stock of the Company, thereby attracting, retaining and rewarding such
employees and strengthening the mutuality of interest between such employees
and the Company's shareholders. In addition, the Board of Directors believes
that the Plan will provide the participants therein with an incentive for
excellence in individual performance and will promote teamwork among the
participants.
DURATION
The Plan shall commence on May 21, 1996 and shall remain in effect, subject
to the right of the Board of Directors to amend or terminate the Plan at any
time, until all shares subject to it shall have been purchased or acquired, but
in no event shall any awards be granted on or after May 21, 2006.
SHARES AVAILABLE
The Board of Directors has reserved an aggregate of 200,000 shares
("Shares") of the Company's authorized but unissued Common Stock for issuance
under the Plan. All of the Shares may, but need not, be issued pursuant to the
exercise of "Incentive Stock Options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). If there is a lapse,
expiration, termination or cancellation of any option prior to the issuance of
Shares thereunder, those Shares may again be used for new awards under the
Plan.
ADMINISTRATION
The Plan provides for administration by a committee (the "Committee"), to be
comprised of either the Compensation Committee of the Board or another
committee designated by the Board. Initially, the Company's Compensation
Committee, composed of all outside (nonemployee) Directors, will administer the
Plan. Among the Committee's powers are the authority to interpret the Plan,
establish rules and regulations for its operation, select officers and other
key employees of the Company and its subsidiaries to receive awards, and
consistent with the Plan determine the form, amount and other terms and
conditions of each of the awards. The Committee also has the power to make
adjustments in the terms and conditions of any of the awards in recognition of
unusual or nonrecurring events whenever the Committee determines that such
adjustments are appropriate in order to prevent dilution or enlargement of the
benefits or potential intended to be made available under the Plan.
ELIGIBILITY FOR PARTICIPATION
Officers and other full-time employees of the Company or any of its
subsidiaries, including subsidiaries of subsidiaries, are eligible to
participate in the Plan. The selection of participants from eligible employees
is within the discretion of the Committee. Members of the Board of Directors
who are not employees of the Company and part-time employees of the Company are
not eligible to participate under the Plan.
STOCK OPTIONS
Under the Plan, the Committee is authorized to award two types of options,
(i) Incentive Stock Options ("ISO") and (ii) Nonqualified Stock Options
("NQSO"). The difference in these two types of options is explained in the
following paragraph. The Option Price for every award issued for either an ISO
or an NQSO shall be equal to 100 percent of the Fair Market Value (the closing
price on the New York Stock Exchange) on the date the award is made, or the
Committee may set a higher Option Price. Each such option shall expire at the
time the Committee shall determine but in no event shall be exercisable later
than the tenth anniversary date of its grant. Payment to exercise for any of
said options shall be in cash or, if permitted by the award, by tendering
previously acquired shares having an aggregate Fair Market Value at the time of
exercise to total the Option Price and which shares have been held by the
participant for at least six months, or a combination of cash and shares. The
Plan does not authorize the Company to make employees loans with which to
exercise options.
FEDERAL TAX TREATMENT
Under current law, the following are the United States federal income tax
consequences generally arising with respect to awards under the Plan.
A participant who is granted an ISO within the meaning of Section 422 of the
Code does not recognize any taxable income at the time of the grant or at the
time of exercise. Similarly, the Company is not entitled to any deduction at
the time of grant or at the time of exercise. If the participant makes no
disposition of the Shares acquired pursuant to an ISO before the later of two
years from the date of grant and one year from the date of exercise, any gain
or loss realized on a subsequent disposition of the Shares shall be treated as
a long-term capital gain or loss. Under such circumstances, the Company will
not be entitled to any deduction for federal income tax purposes.
A participant who is granted a NQSO will not have taxable income at the time
of the grant but will have taxable income at the time of exercise equal to the
difference between the exercised price of the Shares and the market value of
the shares on the date of exercise. The Company will be entitled to a tax
deduction at that time for the same amount.
REGULATORY APPROVAL
The Plan is subject to the approval of the South Dakota Public Utilities
Commission and the Wyoming Public Service Commission. Until such approvals are
received, the Committee will make no awards under the Plan.
VOTE REQUIRED
An affirmative vote of the holders of the majority of all issued and
outstanding shares of Common Stock is required to approve the Plan.
The Board of Directors recommends the adoption of the following
resolution:
RESOLVED, that the shareholders of the Company do hereby
approve the Black Hills Corporation 1996 Stock Option Plan.
A vote FOR is a vote in favor of adopting the resolution and the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE PLAN.
ITEM III
APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Arthur Andersen LLP, independent public accountants, conducted
the audit of the Company and its subsidiaries for 1995. Representatives of
Arthur Andersen LLP will be present at the Annual Meeting and will have the
opportunity to make a statement, if they desire to do so, and to respond to
appropriate questions.
Audit services performed by Arthur Andersen LLP during 1995 included
audits of the financial statements of the Company and its subsidiaries and
analysis of interim financial information.
The Board of Directors, on recommendation of the Audit Committee and
subject to ratification by shareholders, has appointed Arthur Andersen LLP to
perform an audit of the consolidated financial statements of the Company and
its subsidiaries for the year 1996 and to render their opinion thereon.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP TO SERVE AS
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR 1996
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1997 Annual Meeting
of Shareholders must be received by the Secretary of the Company in writing at
its home office at 625 Ninth Street, P.O. Box 1400, Rapid City, South Dakota
57709, prior to November 22, 1996. Any proposal submitted must be in
compliance with Rule 14a-8 of Regulation 14A of the Securities and Exchange
Commission.
ITEM V
TRANSACTION OF OTHER BUSINESS
The Board of Directors does not intend to present any business for action
by the shareholders at the meeting except the matters referred to in this Proxy
Statement. If any other matters should be properly presented at the meeting,
it is the intention of the persons named in the accompanying form of proxy to
vote thereon in accordance with the recommendations of the Board of Directors.
Please complete and sign the accompanying form of proxy whether or not you
expect to be present at the meeting and promptly return it in the enclosed
postage paid envelope.
By Order of the Board of Directors
ROXANN R. BASHAM
Corporate Secretary
Dated: March 22, 1996
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The information required by Item 13, Financial and Other Information, of
Regulation 14-A is provided in the Company's Annual Report to Shareholders and
Form 10-K for the year ended December 31, 1995, which is incorporated by
reference into this Proxy Statement.
The Company's 1995 Annual Report to Shareholders and Form 10-K is being
mailed to Shareholders with this Proxy Statement.
PLEASE COMPLETE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY SO THAT
YOUR STOCK MAY BE REPRESENTED AND VOTED AT THE ANNUAL MEETING.
<PAGE>
BLACK HILLS CORPORATION Addendum 1
1996 STOCK OPTION PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Black Hills Corporation (hereinafter referred
to as the "Company"), hereby establishes an incentive compensation plan to be
known as the "Black Hills Corporation 1996 Stock Option Plan" (hereinafter
referred to as the "Plan"), as set forth in this document. The Plan permits the
grant of Nonqualified Stock Options and Incentive Stock Options.
Subject to approval by the Company's shareholders, the Plan shall become
effective as of May 21, 1996 (the "Effective Date") and shall remain in effect
as provided in Section 1.3 hereof.
1.2 OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize the
profitability and growth of the Company through incentives which are consistent
with the Company's objectives and which link the interests of Participants to
those of the Company's shareholders; to provide Participants with an incentive
for excellence in individual performance; and to promote teamwork among
Participants.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants who make
significant contributions to the Company's success and to allow Participants to
share in the success of the Company.
1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 11 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Award be granted under the Plan on or after May 21, 2006.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1 "AWARD" means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options or Incentive Stock Options.
2.2 "AWARD AGREEMENT" means an agreement entered into by the Company and each
Participant setting forth the terms and provisions applicable to Awards granted
under this Plan.
2.3 "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.
2.4 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
2.5 "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
event described in this Section 2.5 as constituting a Change in Control.
(a) An acquisition (other than directly from the Company) of any Shares of
the Company by any Person immediately after which such Person has
Beneficial Ownership of thirty percent (30%) or more of the Shares of the
Company; provided, however, in determining whether a Change in Control has
occurred, Shares which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which would cause
a Change in Control. A "Non-Control Acquisition" shall mean an acquisition
by (i) an employee benefit plan (or a trust forming a part thereof)
maintained by (A) the Company; or (B) a Subsidiary; (ii) the Company or
its Subsidiaries; or (iii) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined);
(b) The individuals who, as of the Effective Date hereof, are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at least
two-thirds (2/3) 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 (2/3) 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
(c) Approval by shareholders of the Company of:
(i) A merger, consolidation, or reorganization involving the Company, unless
such merger, consolidation, or reorganization is a "Non-Control
Transaction". A "Non-Control Transaction" shall mean a merger,
consolidation, or reorganization of the Company where:
(A) the shareholders of the Company, immediately before such merger,
consolidation, or reorganization, own directly or indirectly,
immediately following such merger, consolidation, or reorganization,
at least seventy percent (70%) of the combined voting power of the
outstanding Voting Securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such merger,
consolidation, or reorganization;
(B) the individuals who were members of the Incumbent Board immediately
prior to the execution of the agreement providing for such merger,
consolidation, or reorganization constitute at least two-thirds (2/3)
of the members of the board of directors of the Surviving Corporation,
or a corporation beneficially directly or indirectly owning a majority
of the Voting Securities of the Surviving Corporation; and
(C) no Person other than (i) the Company; (ii) any Subsidiary; (iii) any
employee benefit plan (or any trust forming a part thereof) maintained
by the Company, the Surviving Corporation, or any Subsidiary; or (iv)
any Person who, immediately prior to such merger, consolidation, or
reorganization had Beneficial Ownership of thirty percent (30%) or
more of the then outstanding Voting Securities, has Beneficial
Ownership of thirty percent (30%) or more of the combined voting
power of the Surviving Corporation's then outstanding Voting
Securities.
(ii) A complete liquidation or dissolution of the Company; or
(iii) An agreement for the sale or other disposition of all or substantially
all of the assets of the Company to any Person other than (x) a transfer
to a Subsidiary; or (y) a sale or transfer of a Subsidiary by the Company
except if such sale or transfer would be a sale or other disposition of
all or substantially all of the assets of the Company.
(d) Notwithstanding the foregoing, (i) a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the then
outstanding Common Stock as a result of the acquisition of Shares by the
Company which, by reducing the number of Shares 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
Shares by the Company, and after such stock acquisition by the Company,
the Subject Person becomes the Beneficial Owner of any additional Shares
which increases the percentage of the then outstanding Shares beneficially
owned by the Subject Person, then a Change in Control shall occur; and
(ii) a Change in Control shall not be deemed to occur unless and until all
regulatory approvals required to effect a Change in Control of the Company
have been obtained.
2.6 "CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
2.7 "COMMITTEE" means the Compensation Committee of the Board, as specified
in Article 3 herein, or such other Committee appointed by the Board to
administer the Plan with respect to grants of Awards.
2.8 "COMPANY" means Black Hills Corporation, together with any and all
Subsidiaries, and any successor thereto as provided in Article 14 herein.
2.9 "DIRECTOR" means any individual who is a member of the Board of Directors
of the Company.
2.10 "DISABILITY" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan.
2.11 "EFFECTIVE DATE" shall have the meaning ascribed to such term in Section
1.1 hereof.
2.12 "EMPLOYEE" means any full-time, active employee of the Company.
Directors who are not employed by the Company shall not be considered Employees
under this Plan.
2.13 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.14 "FAIR MARKET VALUE" shall be determined on the basis of the closing sale
price on the principal securities exchange on which the Shares are traded or,
if there is no such sale on the relevant date, then on the last previous day on
which a sale was reported.
2.15 "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
2.16 "INSIDER" shall mean an individual who is, on the relevant date, an
officer, director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.17 "NONEMPLOYEE DIRECTOR" means an individual who is a member of the Board
of Directors of the Company but who is not an Employee of the Company.
2.18 "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase Shares
granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
2.19 "OPTION" means an Incentive Stock Option or a Nonqualified Stock Option,
as described in Article 6 herein.
2.20 "OPTION PRICE" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
2.21 "PARTICIPANT" means an Employee who has outstanding an Award granted
under the Plan. The term "Participant" shall not include Nonemployee Directors.
2.22 "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) thereof.
2.23 "RETIREMENT" shall have the meaning ascribed to such term in the
Company's tax-qualified defined benefit retirement plan.
2.24 "SHARES" means the shares of Common Stock of the Company.
2.25 "SUBSIDIARY" means any corporation or other Person of which a majority
of its voting power or its voting equity securities ("Voting Securities") or
equity interest is owned, directly or indirectly, by the Company.
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the Board, which
Committee shall satisfy the "disinterested administration" rules of Rule 16b-3
under the Exchange Act, or any successor provision. The members of the
Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board of Directors.
3.2 AUTHORITY OF THE COMMITTEE. Subject to the provisions herein, the
Committee shall have full power to select Employees who shall participate in
the Plan; determine the sizes and types of Awards; determine the terms and
conditions of Awards in a manner consistent with the Plan; construe and
interpret the Plan and any agreement or instrument entered into under the Plan
as they apply to Employees; establish, amend, or waive rules and regulations
for the Plan's administration as they apply to Employees; and (subject to the
provisions of Article 11 herein) amend the terms and conditions of any
outstanding Award to the extent such terms and conditions are within the
discretion of the Committee as provided in the Plan. Further, the Committee
shall make all other determinations which may be necessary or advisable for the
administration of the Plan, as the Plan applies to Employees. As permitted by
law, the Committee may delegate its authority as identified herein.
3.3 DECISIONS BINDING. All determinations and decisions made by the Committee
pursuant to the provisions of the Plan and all related orders and resolutions
of the Board shall be final, conclusive and binding on all persons, including
the Company, its shareholders, Employees, Participants, and their estates and
beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as provided
in Section 4.3 herein, the number of Shares hereby reserved for issuance to
Participants under the Plan shall be two hundred thousand (200,000).
4.2 LAPSED AWARDS. If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason any Shares subject to such Award
again shall be available for the grant of an Award under the Plan.
4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in corporate
capitalization, such as a stock split, or a corporate transaction, such as any
merger, consolidation, separation, including a spin-off, or other distribution
of stock or property of the Company, any reorganization (whether or not such
reorganization comes within the definition of such term in Code Section 368) or
any partial or complete liquidation of the Company, such adjustment shall be
made in the number and class of Shares which may be delivered under Section
4.1, in the number and class of and/or price of Shares subject to outstanding
Awards granted under the Plan, as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in this Plan include all
Employees of the Company, including Employees who are members of the Board.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee.
6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Code Section 422, or an
NQSO whose grant is intended not to fall under the provisions of Code
Section 422.
6.3 OPTION PRICE. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted or a higher amount.
6.4 DURATION OF OPTIONS. Each Option granted to an Employee shall expire at
such time as the Committee shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.
6.5 EXERCISE OF OPTIONS. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
6.6 PAYMENT. Options granted under this Article 6 shall be exercised by the
delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the Company
in full either: (a) in cash or its equivalent, or (b) if permitted in the
governing Award Agreement, by tendering previously acquired Shares having an
aggregate Fair Market Value at the time of exercise equal to the total Option
Price (provided that the Shares which are tendered must have been held by the
Participant for at least six (6) months prior to their tender to satisfy the
Option Price), or (c) if permitted in the governing Award Agreement, by a
combination of (a) and (b).
As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).
6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable Federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws
applicable to such Shares.
6.8 TERMINATION OF EMPLOYMENT. Each Participant's Option Award Agreement
shall set forth the extent to which the Participant shall have the right to
exercise the Option following termination of the Participant's employment with
the Company. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Participant, need not be uniform among all Options issued pursuant to this
Article 6, and may reflect distinctions based on the reasons for termination of
employment.
6.9 NONTRANSFERABILITY OF OPTIONS.
(a) INCENTIVE STOCK OPTIONS. No ISO granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further,
all ISOs granted to a Participant under the Plan shall be exercisable
during his or her lifetime only by such Participant.
(b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6 may 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, all NQSOs granted to a Participant under this Article 6
shall be exercisable during his or her lifetime only by such Participant.
ARTICLE 7. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Participant, shall be in a form prescribed by
the Company, and will be effective only when filed by the Participant in
writing with the Company during the Participant's lifetime. In the absence of
any such designation, benefits remaining unpaid at the Participant's death
shall be paid to the Participant's estate.
ARTICLE 8. DEFERRALS
The Committee may permit or require a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise
be due to such Participant by virtue of the exercise of an Option. If any such
deferral election is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures for such payment deferrals.
ARTICLE 9. RIGHTS OF EMPLOYEES
9.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way
the right of the Company to terminate any Participant's employment at any time,
nor confer upon any Participant any right to continue in the employ of the
Company.
9.2 PARTICIPATION. No Employee shall have the right to be selected to receive
an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
ARTICLE 10. CHANGE IN CONTROL
10.1 TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges, any and all Options granted hereunder shall become
immediately exercisable, and shall remain exercisable throughout their entire
term.
10.2 TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL
PROVISIONS. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 10 may not be terminated,
amended, or modified on or after the date of a Change in Control to affect
adversely any Award theretofore granted under the Plan without the prior
written consent of the Participant with respect to said Participant's
outstanding Awards.
ARTICLE 11. AMENDMENT, MODIFICATION, AND TERMINATION
11.1 AMENDMENT, MODIFICATION, AND TERMINATION. Subject to Section 10.2
herein, the Board may at any time and from time to time, alter, amend, suspend
or terminate the Plan in whole or in part; provided, however, that no amendment
which requires shareholder approval in order for the Plan to continue to comply
with Rule 16b-3 under the Exchange Act, including any successor to such Rule,
shall be effective unless such amendment shall be approved by the requisite
vote of shareholders of the Company entitled to vote thereon.
The Committee shall not have the authority to cancel outstanding Awards and
issue substitute Awards in replacement thereof.
11.2 ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual
or nonrecurring events (including, without limitation, the events described in
Section 4.3 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.
11.3 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or modification of
the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award.
ARTICLE 12. WITHHOLDING
12.1 TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan.
12.2 SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options, Participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by
having the Company withhold Shares having a Fair Market Value on the date the
tax is to be determined equal to the minimum statutory total tax which could be
withheld on the transaction. All such elections shall be irrevocable, made in
writing, signed by the Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate.
ARTICLE 13. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgement in any such action, suit, or proceeding against him or her, provided
he or she shall give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and defend it on his
or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or Bylaws, as a matter
of law, or otherwise, or any power that the Company may have to indemnify them
or hold them harmless.
ARTICLE 14. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase, of
all or substantially all of the business and/or assets of the Company, or a
merger, consolidation, or otherwise.
ARTICLE 15. LEGAL CONSTRUCTION
15.1 GENDER AND NUMBER. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
15.2 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
15.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares
under the Plan 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.
15.4 SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions under
this Plan are intended to comply with all applicable conditions of Rule 16b-3
or its successors under the Exchange Act. To the extent any provision of the
plan or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.
15.5 GOVERNING LAW. To the extent not preempted by Federal law, the Plan, and
all agreements hereunder, shall be construed in accordance with and governed by
the laws of the state of South Dakota.
6
<PAGE>
PROXY CARD
THIS PROXY, SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WILL BE VOTED AS
DIRECTED. IF NO DIRECTION TO THE CONTRARY IS INDICATED IT WILL BE VOTED IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
Dated:_________________________________________
______________________________________________
(Signature)
______________________________________________
(Signature)
Please sign exactly as name(s) appear to the left. When signing in
fiduciary or representative capacity, please add your full title. If shares
are registered in more than one name, all holders must sign. If the
signature is for a corporation, the handwritten signature and title of an
authorized officer are required, together with the full corporate name.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POSTAGE PAID ENVELOPE.
<PAGE>
BLACK HILLS CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 21, 1996 at 9:30 A.M.
The undersigned hereby appoints Daniel P. Landguth, Dale E. Clement and David
E. Morrill, and any one or more of them, proxy attorneys, with full
substitution and revocation in each, to vote all shares of Common Stock of the
undersigned at the Annual Meeting of Shareholders of Black Hills Corporation to
be held on Tuesday, May 21, 1996 at 9:30 A.M., or at any adjournment thereof,
as follows:
1. Election of Class I Directors
Glenn C. Barber, Bruce B. Brundage, WITHHELD
Kay S. Jorgensen ___ FOR ___ AUTHORITY
(To withhold authority to vote for any individual nominee, write the
nominee's name in the space provided below. To cumulate votes so indicate.)
_____________________________________________________________________________
2. Approve the Black Hills Corporation
1996 Stock Option Plan ___ FOR ___ AGAINST ___ ABSTAIN
3. Ratify the appointment of Arthur
Andersen LLP to serve as the
Company's independent auditors
in 1996 ___ FOR ___ AGAINST ___ ABSTAIN
If any other business is brought before the Meeting or any adjournment(s)
thereof, this Proxy will be voted in the discretion of the Appointed Proxies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTING EACH OF THE DIRECTORS AND
FOR PROPOSALS 2 AND 3.
8
