UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
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ýDefinitive Proxy Statement
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¨ Soliciting Material under §240.14a-12
MDU Resources Group, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
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Fellow Stockholders:
I invite you to join me, our boardBoard of directors,Directors and members of our senior management team atfor our Annual Meeting of Stockholdersannual meeting at 11 a.m., Central Daylight Saving Time, on CDT May 9, 2017,7, 2019, at 909 Airport Road in Bismarck, North Dakota.
At the meeting, stockholders will vote on the items outlined in this proxy statement, including election of our Board of Directors, approval of our independent auditors, and approval of the amended certificates of incorporation for MDU Resources Group and Montana-Dakota Utilities.
Our director slate up for election includes three candidates who have not previously been on the ballot: Edward A. Ryan, David M. Sparby and Chenxi Wang. Edward and David were appointed to the board during 2018. Chenxi has been put forward as a candidate by our Nominating and Governance Committee because of her expertise in technology and cybersecurity. These three new candidates will help ensure a smooth leadership transition as Bart Holaday did not stand for re-election in 2018 and Harry Pearce and Bill McCracken will not stand for re-election this year. Our corporate bylaws state that directors are not eligible for election to the board after their 76th birthday. We deeply appreciate the diligent and faithful service that Harry, Bart and Bill have provided to MDU Resources’ stockholders. Harry, especially, has served you well in his 22 years as a director, including five years as independent lead director and the past 14 years as chair of the board.
Also before stockholders for a vote are resolutions to amend the certificates of incorporation for MDU Resources and Montana-Dakota Utilities. These amendments follow the reorganization of our corporate structure at the start of 2019. The reorganization was undertaken to further delineate the separation between our utility companies and our other businesses. Montana-Dakota Utilities Co. and Great Plains Natural Gas Co. were originally structured as divisions of MDU Resources, as required by the Public Utility Holding Company Act of 1935. The Energy Policy Act of 2005 repealed the PUHCA and allowed us to restructure these companies as a subsidiary. Montana-Dakota Utilities is now a subsidiary of MDU Resources and Great Plains Natural Gas is a division of Montana-Dakota Utilities. This reorganization simplifies our corporate structure and provides greater flexibility in our financing options.
In addition to the business that willitems to be conducted at the annual meeting, I will explain some of the significant, positive changes we made at MDU Resources Group in 2016. During the year, we streamlined our operations into two lines of business: regulated energy delivery and construction materials and services. We reduced our exposure to commodity price volatility by completing the saleprovide an overview of our oilstrong 2018 financial results and natural gas explorationthe acquisitions and production assetsother growth projects we accomplished. We started 2019 with strong momentum, and by selling our interests in a diesel refinery and in a natural gas processing plant both located in North Dakota.
With a business presence in 48 states,I will tell you more about the record backlog of work we remain committed to Building a Strong America.® Our continuing businesses performed well in 2016, providing a 32 percent increase in earnings per share. We delivered a total stockholder return of 62 percent for the year, including increasing our dividend for the 26th consecutive year.
Another positive change we made this year is to our proxy statement. We simplified the proxy statement to what we believe is an easier-to-read format, while still adhering to regulations that outline what information we must provide to stockholders. Our goal is to make it easier for you to understand MDU Resources Group’s governance and how we tie the company’s results to executive compensation. We also hope the proxy statement more clearly describes the business we will conducthave at our annual meeting.
We have streamlined our annual reportconstruction operations and proxy statement delivery processthe additional growth projects we expect to complete this year as well, moving to a notice-and-access model of providing the report. You likely received notice in the mail that you can vote your shares and view our annual report and proxy statement online, along with instructions on how to request a printed copy if you would like one.year.
I look forward to seeing you joining usMay 7. Details on May 9. Even if you are not ablehow to receive an admission ticket to attend our annual meeting are included in the Notice of Annual Meeting of Stockholders as well as on page 67 of this Proxy Statement.
If you cannot attend the annual stockholder meeting, your vote is still important to us. PleaseI ask that you please promptly follow the instructions on your notice or proxy card to vote and make sure your shares are represented.vote.
We appreciate your continued investment in MDU Resources Group.and remain committed to providing the long-term value you expect.
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| | Sincerely, yours, |
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| | David L. Goodin |
| | President and Chief Executive Officer |
MDU Resources Group, Inc. Proxy Statement
MDU RESOURCES GROUP, INC.
1200 West Century Avenue
Mailing Address:
P.O. Box 5650
Bismarck, North Dakota 58506-5650
(701) 530-1000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 9, 2017
Important Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on May 9, 2017
The 2017 Notice of Annual Meeting and Proxy Statement and 2016 Annual Report
to Stockholders are available at www.mdu.com/proxymaterials.
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| March 24, 2017NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 7, 2019 |
March 22, 2019
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of MDU Resources Group, Inc. will be held at 909 Airport Road, Bismarck, North Dakota 58504, on Tuesday, May 9, 2017,7, 2019, at 11:00 a.m., Central Daylight Saving Time, for the following purposes:
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(1)Items of Business | 1. | Election of directors; |
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(2) | Advisory vote to approve the frequency of the vote to approve the compensation paid to the company’s named executive officers; |
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(3)2. | Advisory vote to approve the compensation paid to the company’s named executive officers; |
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(4)3. | Ratification of the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm for 2017; |
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(5) | Advisory vote4. | Approval of an Amendment to approve an amendmentMontana-Dakota Utilities Co.’s Restated Certificate of Incorporation; |
| 5. | Approval of Amendments to Update and Modernize the company’s bylaws to adopt an exclusive forum for internal corporate claims;Company’s Amended and Restated Certificate of Incorporation; and |
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(6)6. | Transaction of any other business that may properly come before the meeting or any adjournment(s) thereof. |
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| Record Date | The board of directors has set the close of business on March 8, 2019, as the record date for the determination of common stockholders who will be entitled to notice of, and to vote at, the meeting and any adjournment(s) thereof. |
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| Meeting Attendance | All stockholders as of the record date of March 8, 2019, are cordially invited and urged to attend the annual meeting. You must request an admission ticket to attend. If you are a stockholder of record and plan to attend the meeting, please contact MDU Resources Group, Inc. by email at CorporateSecretary@mduresources.com or by telephone at 701-530-1010 to request an admission ticket. A ticket will be sent to you by mail. If your shares are held beneficially in the name of a bank, broker, or other holder of record, and you plan to attend the annual meeting, you will need to submit a written request for an admission ticket by mail to: Investor Relations, MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506 or by email at CorporateSecretary@mduresources.com. The request must include proof of stock ownership as of March 8, 2019, such as a bank or brokerage firm account statement or a legal proxy from the bank, broker, or other holder of record confirming ownership. A ticket will be sent to you by mail. Requests for admission tickets must be received no later than May 1, 2019. You must present your admission ticket and state-issued photo identification, such as a driver’s license, to gain admittance to the meeting. |
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Proxy Materials | Notice of Availability of Proxy Materials will be sent on or about March 22, 2019. The Notice contains basic information about the annual meeting and instructions on how to view our proxy materials and vote electronically on the Internet. Stockholders who do not receive the Notice will receive a paper copy of our proxy materials, which will be sent on or about March 28, 2019. |
The board of directors has set the close of business on March 10, 2017, as the record date for the determination of common stockholders who will be entitled to notice of, and to vote at, the meeting and any adjournment(s) thereof. We expect to begin mailing the Notice of Availability of Proxy Materials (Notice) on or about March 24, 2017. The Notice will contain basic information about the annual meeting and instructions on how to view our proxy materials, and vote electronically, on the Internet. Stockholders who do not receive the Notice will receive a paper copy of our proxy materials, which will be sent on or about March 30, 2017.
All stockholders as of the record date of March 10, 2017, are cordially invited and urged to attend the meeting in person. Registered stockholders who receive a full set of proxy materials will receive a request for admission ticket(s) with their proxy card that can be completed and returned to us postage-free. Registered stockholders who receive a notice regarding the availability of proxy materials and stockholders whose shares are held in the name of a bank or broker will not receive a request for admission ticket(s). They should, instead: (1) call (701) 530-1000 to request an admission ticket(s); (2) if shares are held in the name of a bank or broker, obtain a statement from their bank or broker showing proof of stock ownership as of March 10, 2017; and (3) present their admission ticket(s), the stock ownership statement, and photo identification, such as a driver’s license, at the annual meeting.
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| | By order of the Board of Directors, |
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| | | Daniel S. Kuntz
Secretary |
| | Secretary | |
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on May 7, 2019. The 2019 Notice of Annual Meeting and Proxy Statement and 2018 Annual Report to Stockholders are available at www.mdu.com/proxymaterials. |
MDU Resources Group, Inc. Proxy Statement
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| TABLE OF CONTENTS |
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| | | | | | EXECUTIVE COMPENSATION (continued) | | |
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| TABLE OF CONTENTS |
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| | | | | | EXECUTIVE COMPENSATION (continued) | | |
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MDU Resources Group, Inc. Proxy Statement
To assist you in reviewing the company’s 20162018 performance and voting your shares, we call your attention to key elements of our 20172019 Proxy Statement and our 2016 Annual Report to Stockholders.Statement. The following is only a summary and does not contain all of the information you should consider. You should read the entire Proxy Statement carefully before voting. For more complete information about these topics, please review the completefull Proxy Statement and our 20162018 Annual Report to Stockholders.
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| Meeting Information | | Summary of Stockholder Voting Matters | | |
| | | | | | | | | Board Vote Recommendation | |
| Time and Date: | | | Voting Matters | | See Page |
11:00 a.m. Central Daylight Saving Time (CDT) Tuesday, May 9, 20177, 2019 | | Item 1 - 1. | Election of Directors | FOR each nomineeEach Nominee | |
| | Item 2 - | Advisory Vote to Approve the Frequency of the Vote to Approve the Compensation Paid to the Company’s Named Executive Officers | FOR ONE YEAR | |
Place: | | Item 3 -
2. | Advisory Vote to Approve the Compensation Paid to the Company’s Named Executive Officers | FOR | |
MDU Service Center
909 Airport Road
Bismarck, ND
Place: | |
| Item 4 - 3. | Ratification of the Appointment of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm for 20172019 | FOR | |
MDU Service Center 909 Airport Road Bismarck, ND 58504 | |
| Item 4. | Approval of an Amendment to Montana-Dakota Utilities Co.’s Restated Certificate of Incorporation | FOR | |
| | | | | Item 5 -5. | Advisory VoteApproval of Amendments to Approve an Amendment toUpdate and Modernize the Company’s Bylaws to Adopt an Exclusive Forum for Internal Corporate ClaimsAmended and Restated Certificate of Incorporation | FOR | |
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| Corporate Governance Highlights | | | | |
MDU Resources Group, Inc. is committed to strong corporate governance practices. The following highlights our corporate governance practices and policies. See the sections entitled “Corporate Governance” and “Executive Compensation” for more information on the following: |
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| ü | Annual Election of All Directors
| | ü | All Three Standing Committees Consist Entirely of Independent Directors |
| ü | Majority Voting for Directors | | ü | Active Investor Outreach Program |
| ü | Separate ChairmanSuccession Planning and CEOImplementation Process | | ü | Stock Ownership Requirements for Directors and ExecutivesExecutive Officers |
| ü | Separate Board Chair and CEO | | ü | Anti-Hedging and Anti-Pledging Policies for Directors and Executive Officers |
| ü | Executive Sessions of Independent Directors at Every Regularly Scheduled Board Meeting | | ü | Anti-Hedging and Anti-Pledging PoliciesNo Related Party Transactions by Our Directors or Executive Officers |
| ü | Annual Board and Committee Self-Evaluations | | ü | Compensation Recovery/Clawback Policy |
| ü | Risk Oversight by Full Board and Committees | | ü | Code of Business Conduct and Ethics for Directors, Officers, and EmployeesAnnual Advisory Approval on Executive Compensation |
| ü | All Directors are Independent Other Than ourOur CEO | | ü | Annual Advisory ApprovalMandatory Retirement for Directors at Age 76 |
| ü | “Proxy Access” Allowing Stockholders to Nominate Directors in Accordance With the Terms of Our Bylaws | | ü | Directors May Not Serve on Executive CompensationMore Than Three Public Boards Including the Company’s Board |
MDU Resources Group, Inc. Proxy Statement 1
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| Business Performance Highlights | | | |
Our overall performance in 20162018 was consistent with our long-term strategy as we executedfocused on priorities to reduce our risk to oil and natural gas commodity price fluctuations and focus ongrowing our regulated energy delivery and construction materials and services business segments. In 2016, we accomplished:addition to our 2018 financial performance highlighted on the next page: |
●■ | The sale of Dakota Prairie Refining, LLC in June,Our electric distribution segment completed the completionpurchase of the saleThunder Spirit Wind Farm expansion in southwest North Dakota. The purchase boosts the production capacity of our oilthe wind farm from 107.5 megawatts to 155 megawatts of renewable energy. This increases the segment’s renewable generation capacity from 22% to 27% of its total generation capacity. Construction continued in 2018 on the 345-kilovolt transmission line project from Ellendale, North Dakota, to Big Stone City, South Dakota, and gas exploration and production business assetswas completed in April, and the sale of our interest in the Pronghorn natural gas processing plant in January 2017 reduced the company’s risk by decreasing its exposure to commodity price fluctuations.February 2019. |
●■ | Our construction materials &and contracting segment achieved record earnings, and its backlog at December 31, 2016, was $538 million compared to $491 million a year earlier.completed the following four acquisitions during 2018: |
● | Earnings from our construction services segment were up 43%, to $33.9 million, on 16% revenue growth.o | Sweetman Const. Co. located in Sioux Falls, South Dakota; |
● | We acquired the Thunder Spirit wind farm providing an additional 107.5 megawatts of renewable generation. We also signed an agreemento | Teevin & Fischer Quarry, LLC located in 2016 to purchase power from an expansion of the Thunder Spirit wind farm which includes an option to buy the expansion at the completion of construction. This will bring the total capacity of the Thunder Spirit wind farm to 150 megawatts which will increase the company’s nameplate electric renewable generation portfolio to 27%.northern Oregon; |
● | Our electric &o | Tri-City Paving, Inc. located in Little Falls, Minnesota; and |
| o | Molalla Redi-Mix and Rock Products, Inc. located south of Portland, Oregon. |
| ■ | The pipeline and midstream segment in 2018 had record transportation volumes for the second consecutive year. The segment expanded Line Section 27 of its natural gas distribution segment achieved regulatory relief of an additional $32.7 milliontransportation system in final implemented rates in 2016 through February 2017. |
● | We, along with a partner, begannorthwestern North Dakota. The project involved construction of approximately 160-miles13 miles of 345 kilovolt electricpipeline and associated facilities. The expansion provides Line Section 27 with capacity to transport over 600,000 dekatherms per day. The segment also completed construction of its 38-mile Valley Expansion Project transmission line which will facilitate delivery of renewable wind energy from North Dakota to eastern markets. |
● | Our pipeline & midstream segment secured sufficient capacity commitments and started survey work on a 38-mile transmission pipeline that will deliver natural gas supply toin eastern North Dakota and far western Minnesota. Following receiptThe segment is proceeding with construction planning on its Demicks Lake Project in McKenzie County, North Dakota, and Line Section 22 Project near Billings, Montana. Both of necessary permits and regulatory approvals, construction isthese projects are expected to startbe completed in early 2018 and be complete late that year. This segment also signed agreements for and completed construction of other natural gas transmission pipeline projects.2019. |
●■ | Our construction services segment constructed and sold a large scale solar project in Nevada. This segment alsoOn January 1, 2019, we completed a 135-mile 345-kilovolt electric transmission line project which washolding company reorganization to provide additional financing flexibility and further separation between the largest transmission construction project ever completed bycompany’s utility and other business segments. As a result of the construction services segment.reorganization, all of the company’s utility operations will be conducted through wholly-owned subsidiaries. |
● | Our pipeline & midstream segment experienced a 59% increase in natural gas storage levels. | | | | | |
WithIncluding our accomplishments in 2016,2018, we are optimistic about the company’s future financial performance. The chartschart below showshows our progress over the last five years. |
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*MDU Resources Group, Inc. reported 2017 earnings from continuing operations of $1.45 per share which included a non-recurring benefit of 20 cents per share attributable to the federal Tax Cuts and Jobs Act that was signed into law on December 22, 2017. |
2 MDU Resources Group, Inc. Proxy Statement
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20162018 Financial Performance Highlights | |
●■ | Strong year-over-year performance from continuing operations at both our regulated energy segments and our construction materials and services segments resulted in an increase in earnings per share from continuing operations to $1.19of $1.38 per share compared to $0.90$1.45 per share in 2015, an increase2017, which included a benefit of 32%20 cents per share attributable to the federal Tax Cuts and Jobs Act. Including discontinued operations, 2018 earnings were $272.3 million, or $1.39 per share, compared to $280.4 million, or $1.43 cents per share, in 2017. |
| ○ | Electric & natural gas distribution segment earnings increased by 16% | |
| ○ | Pipeline & midstream segment earnings increased by 77% | |
| ○ | Construction materials & contracting segment earnings increased by 15% | |
| ○ | Construction services segment earnings increased by 43% | |
●■ | Return of stockholder value through the dividenddividends: |
| | ○¨ | Increased dividend for 26th28th straight yearyear; and | |
| | ○¨ | Paid uninterrupted dividend for 79th81 straight yearyears. | |
●■ | ImprovedMaintained BBB+ stable credit rating outlook from Standard & Poor’s (S&P) from negativeand Fitch rating agencies. 1 |
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| 28 Years | | Dividends Paid | | 81 Years |
| of Consecutive | | $739 Million | | of Uninterrupted |
| Dividend Increases | | Over the Last 5 Years | | Dividend Payments |
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| Compensation Highlights |
The company’s executive compensation is focused on paying for performance. Our compensation program is structured to stablestrongly align compensation with the company’s financial performance as a substantial portion of our executive compensation is based upon performance incentive awards. |
| ■ | Over 75% of our chief executive officer’s target compensation and over 58% of our other named executive officers’ target compensation is performance based. |
| ■ | 100% of our chief executive officer’s annual and long-term incentive compensation is tied to performance against pre-established, specific, measurable financial goals. |
| ■ | We require our executive officers to own a significant amount of company stock based upon a multiple of their base salary. |
2018 Named Executive Officer Target Pay Mix
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| | ○ | BBB+ credit ratings with stable outlooks from both S&P and Fitch Ratings | |
● | Stock price increased from $18.32 per share on December 31, 2015, to $28.77 per share on December 31, 2016, reflecting appreciation of 57% |
● | One year total stockholder return of 62% including our dividends*Includes time-vesting restricted stock units for certain named executive officers. |
* The calculation of Total Annual Stockholder Return assumes the reinvestment of dividends in additional shares of common stock. |
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| A securities rating is not a recommendation to buy, sell, or hold securities, and it may be revised or withdrawn at any time by the rating agency. |
MDU Resources Group, Inc. Proxy Statement 3
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26 Years | | Dividends Paid | | 79 Years |
| $692 Million | |
of Consecutive | | | of Uninterrupted |
Dividend Increases | | Over the Last 5 Years | | Dividend Payments |
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Compensation Highlights |
Executive compensation at the company is focused on performance. Our compensation program is structured to strongly align compensation with the company’s performance with a substantial portion of our executive compensation based upon performance incentive awards. |
● | Over 76% of our chief executive officer’s target compensation and 61% of our other named executive officers’ target compensation is performance based. |
● | 100% of annual incentive compensation and 100% of long-term incentive compensation are tied to performance against pre-established, specific, measurable financial and operational goals. |
● | We require all executive officers to own a significant amount of company stock based upon a multiple of their base salary. |
2016 Named Executive Officer Target Pay Mix
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● | With the exception of the president of our construction materials & contracting segment, which achieved record earnings in 2015, base salaries for our named executive officers were frozen in 2016 following a challenging year in 2015 as a result of impairments at our exploration & production segment, which has since been sold. |
● | Annual incentive award payout to our CEO for 2016, which was based upon the strong performance at all four of our business units, was 139.8% of his annual incentive target. |
● | Long-term incentive award payouts in 2017 for the 2014-2016 performance cycle were at 68% of target based upon total stockholder return at the 40th percentile of our peers over the performance cycle reflecting a challenging operating environment in 2014 and 2015. |
4 MDU Resources Group, Inc. Proxy Statement
Key Features of ourOur Executive Compensation Program
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| What We Do |
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| þ | Pay for Performance - All annualAnnual and long-term award incentives are performance-based and tied to performance measures set by the compensation committee.committee comprise the largest portion of executive compensation. |
| þ | Independent Compensation Committee- All members of the compensation committee meet the independence standards under the New York Stock Exchange listing standards and the Securities and Exchange Commission rules. |
| þ | Independent Compensation Consultant - The compensation committee retains an independent compensation consultant to evaluate executive compensation plans and practices. |
| þ | Competitive Compensation - Executive compensation reflects the executive’sexecutive performance, experience, relative value compared to other positions within the company, relationship to competitive market value compensation, business segment economic environment, and the economic environmentactual performance of the executive’soverall company and the business segment.segments. |
| þ | Annual Cash Incentive - Payment of annual cash incentive awards are based on business segment and overall company performance against pre-established financial measures. |
| þ | Long-Term Equity Incentive - The long-term performance-based equity incentive in the form of performance shares represents approximately 56% of our CEO’s and approximately 37% of our other named executive officers’ 2018 target compensation, which may only be earned based on achievement of established performance measures at the end of a three-year period. |
| þ | Annual Compensation Risk Analysis - We regularly analyze the risks related to our compensation programs and conduct aan annual broad risk assessment annually.assessment. |
| þ | Stock Ownership &and Retention Requirements - Executive officers are required to own, within five years of appointment or promotion, company common stock equal to a multiple of their base salary. The executive officers also must retain at least 50% of the net after taxafter-tax shares of stock vested through the long-term incentive plan for the earlier ofat least two years or until termination of employment. |
| þ | Clawback Policy- If the company’s audited financial statements are restated, the compensation committee may, or shall if required, demand repayment of some or all incentives paid to companyour executive officers within the last three years. |
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What We Don’tDo Not Do |
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| ý | Stock Options - The company does not use stock options as a form of incentive compensation. |
| ý | Employment Agreements - Executives do not have employment agreements entitling them to specific payments upon termination or a change of control of the company. |
| ý | Perquisites - Executives do not receive perquisites whichthat materially differ from those available to employees in general. |
| ý | Tax Gross-upsHedge Stock - Executive officers do not receive tax gross-ups on any compensation.
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ý | Hedge or Pledge Stock - Executives and directors are not allowed to hedge or pledge company securities.
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| ý | Pledge Stock-Executives and directors are not allowed to pledge company securities in margin accounts or as collateral for loans. |
| ý | No Time Based Awards Dividends or Dividend Equivalents on Unvested Shares- All long-term incentives are performance-based and vest only upon the achievementWe do not provide for payment of specific performance measures.dividends or dividend equivalents on unvested share awards. |
4 MDU Resources Group, Inc. Proxy Statement
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| Corporate Responsibility, Environmental, and Sustainability |
MDU Resources Group, Inc. is Building a Strong America® by providing essential products and services to our customers with a long-term view toward sustainable operations. To ensure we can continue to provide these products and services in the communities where we do business, we recognize that we must preserve the trust our communities place in us to be a good corporate citizen. We remain committed to pursuing responsible corporate governance and environmental practices and to maintaining the health and safety of the public and our employees. Learn about our sustainability efforts in our Sustainability Report, which is available at www.mdu.com/sustainability. To better serve our investors and other stakeholders, in 2019 we will begin reporting environmental, social, governance, and sustainability (ESG/sustainability) metrics relevant and important to our operations in frameworks that will provide our stakeholders more uniform and transparent data and information, allowing for comparison with our peers and other companies operating in our industries. For our electric and natural gas distribution segments, as well as our pipeline and midstream segment, we intend to report ESG/sustainability metrics using the reporting templates developed by the Edison Electric Institute and the American Gas Association. For our other business segments, we intend to report ESG/sustainability information under the framework developed by the Sustainability Accounting Standards Board (SASB) for our applicable industries. The use of the metrics developed by these organizations provides for ESG/sustainability reporting tailored to our industries. These are some highlights of our recent efforts regarding sustainability: |
| ■ | As our renewable generation resource capacity has increased, the carbon dioxide (CO2) emission intensity of our electric generation resource fleet has been reduced by approximately 24% since 2003. We expect it to continue to decline in future years. |
| ■ | Renewable resources comprised approximately 27% of our electric generation resource nameplate capacity at December 31, 2018. |
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| ■ | Approximately 21% of the electricity delivered to our customers from company-owned generation in 2018 was from renewable resources. |
| ■ | We invested approximately $133 million in environmental emission control equipment and other environmental improvements at our coal-fired electric generation plants since 2013. The investments have resulted in substantial reductions in mercury, sulfur dioxide, nitrogen oxide, and filterable particulate emissions from our coal-fired electric generation resources. |
| ■ | Montana-Dakota Utilities Co. produces renewable natural gas (RNG) from the Billings Regional Landfill in Montana. The project came online at the end of 2010 and has produced approximately 1.1 million dekatherm of RNG through year-end 2018. The RNG is supplied to the vehicle fuel market generating renewable identification numbers (RINS) and low carbon fuel standard (LCFS) credits in California and Oregon. In calendar year 2018, the Billings Landfill Plant produced approximately 1.86 million RINs and 3,250 LCFS credits. |
| ■ | Our utility companies received high scores in customer satisfaction. Cascade Natural Gas Corporation ranked first, Intermountain Gas Company second, and Montana-Dakota Utilities Co. third among West Region mid-sized natural gas utilities in the 2018 J.D. Power Gas Utility Residential Customer Satisfaction Survey. |
| ■ | We were recognized on the Thomson Reuters 2017 Top 25 Global Multiline Utilities list. The list recognizes companies that have demonstrated a commitment to energy leadership in these areas: financial, management and investor confidence, risk and resilience, legal compliance, innovation, people and social sustainability, environmental impact, and reputation. |
MDU Resources Group, Inc. Proxy Statement 5
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| ■ | Knife River Corporation produces and places warm-mix asphalt in applications where warm-mix asphalt is allowed. Warm-mix asphalt is produced at cooler temperatures than traditional hot-mix asphalt methods, which reduces the amount of fuel needed in the production process and thereby reduces emissions and fumes. |
| ■ | Knife River Corporation continued its practice of recycling and reusing building materials. This conserves natural resources, uses less energy, alleviates waste disposal problems in local landfills, and ultimately costs less for the consumer. |
| ■ | Our subsidiary, Bombard Renewable Energy, was ranked No. 13 on Solar Power World’s 2018 Top 500 Solar Contractors List. The list ranks companies according to their influence in the U.S. solar industry based on how many kilowatts of solar generation they installed in 2017. |
| ■ | The MDU Resources Foundation awarded grants of $1.68 million to educational and nonprofit institutions in 2018. Since its incorporation in 1983, the foundation has contributed more than $34 million to worthwhile causes in categories of education, civic and community activities, culture and arts, environmental stewardship, and health and human services. |
| ■ | We encourage and support community volunteerism by our employees. The MDU Resources Foundation contributes a $500 grant to an eligible nonprofit organization after an employee volunteers a minimum of 25 hours to the organization during non-company hours during a calendar year. In 2018, the foundation granted $40,500 under this program, matching over 4,850 employee volunteer hours. |
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| 21% | | Grants Awarded | | 24% |
| of 2018 Electricity Generated | | $1.68 Million | | Reduction in CO2 Intensity |
| From Renewable Resources | | in 2018 | | Since 2003 |
6 MDU Resources Group, Inc. Proxy Statement
ITEM 1. ELECTION OF DIRECTORS
The nominatingboard currently consists of eleven directors, all of whom, except Harry J. Pearce and governance committee of the board, reflecting the criteriaWilliam E. McCracken, are standing for election to the board identifiesat the 2019 Annual Meeting of Stockholders to hold office until the 2020 annual meeting and reviews possible candidates foruntil their successors are duly elected and qualified. Mr. Pearce and Mr. McCracken will be retiring following the annual meeting in accordance with our retirement age limits. In February 2019, the board of directors determined to reduce the number of directors to ten effective with the 2019 annual meeting and recommends the nomineeshas nominated Chenxi Wang as a new director nominee to stand for directorselection to the board at the annual meeting.
The board has affirmatively determined that all the director nominees, other than David L. Goodin, our president and chief executive officer, are independent in accordance with New York Stock Exchange (NYSE) rules, our governance guidelines, and our bylaws.
Each of the director nominees has consented to be named in this proxy statement and evaluates suggestions from many sources, including stockholders, regarding possible candidatesto serve as a director, if elected. We do not know of any reason why any nominee would be unable or unwilling to serve as a director, if elected. If, however, a nominee becomes unable to serve or will not serve, proxies may be voted for directors. Additional information on ourthe election of such other person nominated by the board composition andas a substitute or the board may further reduce the number of directors.
AllThe shares represented by the proxies received will be voted for the election of each of the ten nominees fornamed below, unless you indicate in the proxy that your vote should be cast against any or all the director are nominated to serve one-year termsnominees or that you abstain from voting. Each nominee elected as a director will continue in office until the annual meeting of stockholders in 2018 and their respective successors arehis or her successor has been duly elected and qualified or until their earlierthe earliest of his or her resignation, removal from office,retirement, or death.
We have provided information below about ourThe ten nominees all of whom are incumbent directors, including their ages, years of service as directors, business experience, and service on other boards of directors, including any other directorships on boards of public companies. We have also included information about each nominee’s specific experience, qualifications, attributes, or skills that ledfor election to the board to conclude that he or she should serve as a directorat the 2019 annual meeting, all proposed by the board, are listed below with brief biographies.
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The board of directors recommends that the stockholders vote FOR the election of each nominee. |
MDU Resources Group, Inc. at the time we file our Proxy Statement in light of our business and structure. Unless we specifically note below, no corporation or organization referred to below is a subsidiary or other affiliate of MDU Resources Group, Inc.7
Director Nominees
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| Thomas Everist Age 6769 | Independent Director Since 1995 Compensation Committee | Other Current Public Boards: --Raven Industries, Inc. |
Mr. Everist has more than 4344 years of business experience in the construction materials and aggregate mining industry. He has business leadership and management experience serving as president and chairmanchair of his companies for over 2931 years. Mr. Everist also has experience serving as a director and chairmanchair of another public company, which enhances his contributions to our board. |
| Career Highlights |
| • | President and chairmanchair of The Everist Company, Sioux Falls, South Dakota, an investment and land development company, since April 2002. Prior to January 2017, The Everist Company was engaged in aggregate, concrete, and asphalt production. |
| • | Managing member of South Maryland Creek Ranch, LLC, a land development company; president of SMCR, Inc., an investment company, since June 2006; and managing member of MCR Builders, LLC, which provides residential building services to South Maryland Creek Ranch, LLC, since November 2014. |
| • | Director and chairmanchair of the board of Everist Health, Inc., Ann Arbor, Michigan, which provides solutions for personalized medicines, since 2002, and chief executive officer from August 2012 to December 2012. |
| • | President and chairmanchair of L.G. Everist, Inc., Sioux Falls, South Dakota, an aggregate production company, from 1987 to April 2002. |
| Other Leadership Experience |
| • | Director of publicly traded Raven Industries, Inc., Sioux Falls, South Dakota, a general manufacturer of electronics, flow controls, and engineered films, since 1996, and chairman of the board sincechair from April 2009.2009 to May 2017. |
| • | Director of Showplace Wood Products, Inc., Sioux Falls, South Dakota, a custom cabinets manufacturer, since January 2000. |
| • | Director of Bell, Inc., Sioux Falls, South Dakota, a manufacturer of folding cartons and packages, since April 2011. |
| • | Director of Angiologix Inc., Mountain View, California, a medical diagnostic device company, from July 2010 through October 2011 when it was acquired by Everist Genomics, Inc. |
| • | Member of the South Dakota Investment Council, the state agency responsible for prudently investing state funds, from July 2001 to June 2006. |
| Education |
| • | Bachelor’s degree in mechanical engineering and a master’s degree in construction management from Stanford University. |
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68 MDU Resources Group, Inc. Proxy Statement
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| Karen B. Fagg Age 63
65
| Independent Director Since 2005 Compensation Committee Nominating and Governance Committee |
Ms. Fagg brings experience to our board in construction and engineering, energy, and the responsible development of natural resources, which are all important aspects of our business. In addition to her industry experience, Ms. Fagg has over 20 years of business leadership and management experience, including over eight years as president, chief executive officer, and chairmanchair of her own company, as well as knowledge and experience acquired through her service on a number of Montana state and community boards. |
| Career Highlights |
| • | Vice president of DOWL LLC, d/b/adba DOWL HKM, an engineering and design firm, from April 2008 until her retirement onin December 31, 2011. |
| • | President of HKM Engineering, Inc., Billings, Montana, an engineering and physical science services firm, from April 1, 1995 to June 2000, and chairman,chair, chief executive officer, and majority owner from June 2000 through March 2008. HKM Engineering, Inc. merged with DOWL LLC on April 1, 2008. |
| • | Employed with MSE, Inc., Butte, Montana, an energy research and development company, from 1976 through 1988, and vice president of operations and corporate development director from 1993 to April 1995. |
| • | Director of the Montana Department of Natural Resources and Conservation, Helena, Montana, the state agency charged with promoting stewardship of Montana’s water, soil, energy, and rangeland resources; regulating oil and gas exploration and production; and administering several grant and loan programs, for a four-year term from 1989 through 1992. |
| Other Leadership Experience |
| • | Director of the Billings Catholic Schools Board memberfrom December 2011 through December 2018, including a term as chair; and director of St. Vincent’s Healthcare since January 2016 and previouslyBoard from October 2003 untilto October 2009 and from January 2016 to present, including a term as chair. |
| • | Former member of several state and community boards, including the First Interstate BancSystem Foundation, from June 2013 to 2016; the Montana Justice Foundation, whose mission is to achieve equal access to justice for all Montanans through effective funding and leadership, from 2013 into 2015; Board of Trustees of Carroll College from 2005 through 2010; Montana Board of Investments, the state agency responsible for prudently investing state funds, from 2002 through 2006; Montana State University’s Advanced Technology Park from 2001 to 2005; and Deaconess Billings Clinic Health System from 1994 to 2002. |
| Education |
| • | Bachelor’s degree in mathematics from Carroll College in Helena, Montana. |
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| David L. Goodin Age 5557 | Director Since 2013 President and Chief Executive Officer |
As chief executive officer of MDU Resources Group, Inc., Mr. Goodin is the only officer of the company that serves on our board. With over 3335 years of significant, hands-on experience at our company, Mr. Goodin’s long history and deep knowledge and understanding of MDU Resources Group, Inc., its operating companies, and its lines of business bring continuity to the board. In addition, Mr. Goodin provides the board with valuable insight into management’s views and perspectives, as well as the day-to-day operations of the company. |
| Career Highlights |
| • | President and chief executive officer and a director of the company since January 4, 2013. |
| • | Prior to January 4, 2013, served as chief executive officer and president of Intermountain Gas Company, Cascade Natural Gas Corporation, Montana-Dakota Utilities Co., and Great Plains Natural Gas Co. |
| • | Began his career in 1983 at Montana-Dakota Utilities Co. as a division electrical engineer and served in positions of increasing responsibility until 2007 when he was named president of Cascade Natural Gas Corporation; positions included division electric superintendent, electric systems manager, vice president-operations, and executive vice president-operations and acquisitions. |
| Other Leadership Experience |
| • | Member of the U.S. Bancorp Western North Dakota Advisory Board since January 2013. |
| • | Director of Sanford Bismarck, an integrated health system dedicated to the work of health and healing, and Sanford Living Center, since January 2011. |
| • | Former board member of several industry associations, including the American Gas Association, the Edison Electric Institute, the North Central Electric Association, the Midwest ENERGY Association, and the North Dakota Lignite Energy Council. |
| Education and Professional |
| • | Bachelor of science degree in electrical and electronics engineering from North Dakota State University. |
• | MastersUniversity and a master’s degree in business administration from the University of North Dakota. |
| • | The Advanced Management Program at Harvard School of Business. |
| • | Registered professional engineer in North Dakota. |
MDU Resources Group, Inc. Proxy Statement 79
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| Mark A. Hellerstein
Age 6466 | Independent Director Since 2013 Audit Committee |
Mr. Hellerstein has extensive business experience in the energy industry as a result of his 17 years of senior management experience and service as board chairmanchair of St. Mary Land & Exploration Company (now SM Energy Company). As a certified public accountant, on inactive status, with extensive financial experience as a result of his employment as chief financial officer with several companies, including public companies, Mr. Hellerstein contributes significant finance and accounting knowledge to our board and audit committee. |
| Career Highlights |
| • | Chief executive officer of St. Mary Land & Exploration Company (now SM Energy Company), an energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids, from 1995 until February 2007; president from 1992 until June 2006; and executive vice president and chief financial officer from 1991 until 1992. He was first elected to the board of St. Mary in 1992 and served as chairman of the boardchair from 2002 until May 2009. |
| • | Several positions prior to joining St. Mary in 1991, including chief financial officer of CoCa Mines Inc., which mined and extracted minerals from lands previously held by the public through the Bureau of Land Management; American Golf Corporation, which manages and owns golf courses in the United States; and Worldwide Energy Corporation, an oil and gas acquisition, exploration, development, and production company with operations in the United States and Canada. |
| Other Leadership Experience |
| • | Director of Transocean Inc., a leading provider of offshore drilling services for oil and gas wells, from December 2006 to November 2007. |
| • | Director of the Denver Children’s Advocacy Center, whose mission is to provide a continuum of care for traumatized children and their families, from August 2006 until December 2011, including chairmanchair for the last three years. |
| Education and Professional |
| • | Bachelor’s degree in accounting from the University of Colorado. |
| • | Certified public accountant, on inactive status. |
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| A. Bart Holaday
Age 74
| Independent Director Since 2008
Audit Committee
Nominating and Governance Committee
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Mr. Holaday has extensive business knowledge and experience in the energy and financial management industries. Mr. Holaday brings to the board extensive finance and investment experience, as well as business development skills, through his senior management experience with investment funds and energy companies. Mr. Holaday is also a chartered financial analyst. |
Career Highlights |
• | President and owner of Dakota Renewable Energy Fund, LLC, which invests in small companies in North Dakota, since August 2007. |
• | Head of the Private Markets Group of UBS Asset Management and its predecessor entities, managing more than $19 billion in investments, from December 1985 until retirement in 2001. |
• | Vice president and principal of the InnoVen Venture Capital Group, a venture capital investment firm, from 1983 through 1985. |
• | Founder and president of Tenax Oil and Gas Corporation, an onshore Gulf Coast exploration and production company, from 1980 through 1982. |
• | Four years of senior management experience with Gulf Oil Corporation, a global energy and petrochemical company. |
• | Eight years of senior management experience with the federal government, including the Department of Defense, Department of the Interior, and the Federal Energy Administration. |
Other Leadership Experience |
• | Member of the investment advisory board of Commons Capital LLC, a venture capital firm, since 1999. |
• | Director of Hull Investments, LLC, a private entity firm that combines nonprofit activities and investments, since August 2011; Alerus Financial, a financial services company, since September 2007; and Adams Street Partners, LLC, a private equity investment firm, from January 2001 to March 2017. |
• | Former member of the U.S. Securities and Exchange Commission advisory committee on the regulation of capital markets. |
Education and Professional |
• | Bachelor’s degree in engineering sciences from the U.S. Air Force Academy. |
• | Rhodes Scholar, earning a bachelor’s degree and a master’s degree in politics, philosophy, and economics from Oxford University. |
• | Law degree from George Washington Law School. |
• | Honorary Doctor of Letters from the University of North Dakota. |
• | Chartered Financial Analyst. |
8 MDU Resources Group, Inc. Proxy Statement
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| Dennis W. Johnson
Age 6769 | Independent Director Since 2001 Vice Chair of the Board Audit Committee Nominating and Governance Committee |
Mr. Johnson brings to our board over 4244 years of experience in business management, manufacturing, and finance, holding positions as chairman,chair, president, and chief executive officer of TMI Corporation for 3437 years, as well as through his prior service as a director of the Federal Reserve Bank of Minneapolis. As a result of his service on a number of state and local organizations in North Dakota, Mr. Johnson has significant knowledge of local, state, and regional issues involving North Dakota, a state where we have significant operations and assets. |
| Career Highlights |
| • | Chairman,Vice chair of the board of the company effective February 15, 2018. |
| • | Chair, president, and chief executive officer of TMI Corporation, and chairmanchair and chief executive officer of TMI Transport Corporation, (as well as TMI Systems Design Corporation and TMI Storage Systems Corporation before they merged into TMI Corporation the end of 2015), manufacturers of casework and architectural woodwork in Dickinson, North Dakota; employed since 1974 and serving as president or chief executive officer since 1982. |
| Other Leadership Experience |
| • | Member of the Bank of North Dakota Advisory Board of Directors since August 2017. |
| • | President of the Dickinson City Commission from July 2000 through October 2015. |
| • | Director of the Federal Reserve Bank of Minneapolis for six years from 1993 through 1998. |
| • | Served on numerous industry, state, and community boards, including the North Dakota Workforce Development Council (chair); the Decorative Laminate Products Association; the North Dakota Technology Corporation; and the business advisory council of the Steffes Corporation, a metal manufacturing and engineering firm. |
| • | Served on North Dakota Governor Sinner’s Education Action Commission; the North Dakota Job Service Advisory Council; the North Dakota State University President’s Advisory Council; North Dakota Governor Schafer’s Transition Team; and chaired North Dakota Governor Hoeven’s Transition Team. |
| Education |
| • | Bachelor of science in electrical and electronics engineering and master of science in industrial engineering from North Dakota State University. |
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| William E. McCracken
Age 74
| Independent Director Since 2013
Compensation Committee
Nominating and Governance Committee
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Mr. McCracken is experienced in information technology and cybersecurity through his tenure at CA, Inc. and International Business Machines Corporation (IBM). This experience coupled with his service as the chair or a member of the board of other public companies and the National Association of Corporate Directors (NACD) enables him to provide insight into the operations, challenges, and complex issues our company is facing in today’s environment and to make significant contributions to the board’s oversight of operational risk management functions and corporate governance. |
Career Highlights |
• | President of Executive Consulting Group, LLC, a general business consulting firm, from 2002 to present. |
• | Chief executive officer of CA, Inc., one of the world’s largest information technology management software companies, from January 2010 until January 7, 2013, after which he served as executive adviser to the new chief executive officer until March 31, 2013, and as a consultant to the company until December 31, 2013; also as director of CA, Inc. from May 2005 until January 7, 2013, serving as non-executive chairman of the board from June 2007 to September 2009, interim executive chairman from September 2009 to January 2010, and executive chairman from January 2010 to May 2010. |
• | Several executive positions during his 36-year career with IBM, including serving on its Chairman’s Worldwide Management Council, a group of the top 30 executives at IBM, from 1995 to 2001. |
Other Leadership Experience |
• | Director of the NACD, a nonprofit membership organization for corporate board members, since 2010, and named by the NACD as one of the top 100 most influential people in the boardroom in 2009; served on that organization’s 2009 blue ribbon commission on risk governance, co-chaired its blue ribbon commission on board diversity in 2012, and co-chaired its blue ribbon commission on the board and long-term value creation in 2015. |
• | Director of IKON Office Solutions, Inc., a provider of document management systems and services, from 2003 to 2008, where he served on its audit committee, compensation committee, and strategy committee. |
• | Chair of the advisory board of the Millstein Center for Global Markets and Corporate Ownership at Columbia University and member since 2013, and the New York chairman of the Chairmen’s Forum since 2011. |
Education |
• | Bachelor of science in physics and mathematics from Shippensburg University. |
10 MDU Resources Group, Inc. Proxy Statement9
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| Patricia L. Moss
Age 6365
| Independent Director Since 2003 Compensation Committee
Nominating and Governance Committee | Other Current Public Boards: --Cascade Bancorp--First Interstate BancSystem, Inc.
--Aquila Tax Free TrustGroup of Oregon
Funds
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Ms. Moss has business experience and knowledge of the Pacific Northwest economy and state, local, and regionregional issues where a significant portion of our operations are located. Ms. Moss provides our board with experience in finance and banking, as well as experience in business development through her work at Cascade Bancorp and Bank of the Cascades, and on the Oregon Investment Fund Advisory Council, the Oregon Business Council, and the Oregon Growth Board. Ms. Moss also has experience as a certified senior professional in human resources. |
| Career Highlights | |
| • | President and chief executive officer of Cascade Bancorp, a financial holding company, Bend, Oregon, from 1998 to January 3, 2012; chief executive officer of Cascade Bancorp’s principal subsidiary, Bank of the Cascades, from 1998 to January 3, 2012, serving also as president from 1998 to 2003; and chief operating officer, chief financial officer and secretary of Cascade Bancorp from 1987 to 1998. |
| Other Leadership Experience | |
| • | Member of the Oregon Investment Council, which oversees the investment and allocation of all state of Oregon trust funds, since December 2018. |
| • | Director of First Interstate BancSystem, Inc., since May 30, 2017. |
| • | Director of Cascade Bancorp and Bank of the Cascades sincefrom 1993, and vice chair of both boards sincefrom January 3, 2012.2012 until May 30, 2017 when Cascade Bancorp merged into First Interstate BancSystem, Inc., and became First Interstate Bank. |
| • | Chair of the Bank of the Cascades Foundation Inc. since 2014;from 2014 to July 31, 2018; co-chair of the Oregon Growth Board, a state board created to improve access to capital and create private-public partnerships, sincefrom May 2012;2012 through December 2018; and a member of the Board of Trustees for the Aquila Tax Free TrustGroup of Oregon, aFunds, whose core business is mutual fund created especially for the benefitmanagement and provision of Oregon residents, since June 2015 andinvestment strategies to fund shareholders, from January 2002 to May 2005.2005 (one fund) and from June 2015 to present (currently three funds). |
| • | Former director of the Oregon Investment Fund Advisory Council, a state-sponsored program to encourage the growth of small businesses in Oregon; the Oregon Business Council, with a mission to mobilize business leaders to contribute to Oregon’s quality of life and economic prosperity; the North Pacific Group, Inc., a wholesale distributor of building materials, industrial, and hardwood products; Clear Choice Health Plans Inc., a multi-state insurance company; and City of Bend’s Juniper Ridge management advisory board. |
| Education | |
| • | Bachelor of science in business administration from Linfield College in Oregon and master’s studies at Portland State University. |
| • | Commercial banking school certification at the ABA Commercial Banking School at the University of Oklahoma. |
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| Harry J. Pearce
Edward A. Ryan
Age 7465 | Independent Director Since 19972018
Chairman of the BoardAudit Committee
Nominating and Governance Committee |
Mr. Pearce provides our board with public company leadership with his multinational business management experience and proven leadership skillsRyan, through his position as executive vice chairmanpresident and general counsel at General Motors Corporation, as well as through his extensive service on the boards of large public companies, including Marriott International, Inc., Hughes Electronics Corporation, where he was chairman, and Nortel Networks Corporation, where he also was chairman. He also brings extensive experience to our board his longin acquisitions, contracts, compliance, legal matters, SEC reporting, and labor relations. Mr. Ryan’s experience as a practicing attorney. In addition, Mr. Pearce has focused onsignificantly contributes to the board’s oversight of compliance and corporate governance issues and was the founding chair of Yale University’s Chairmen’s Forum, an organization comprised of non-executive chairmen of publicly traded companies.governance. |
| Career Highlights |
| • | ChairmanAdvisor to the chief executive officer and president of the board of the company effective August 17, 2006; lead directorMarriott International from February 15, 2001 until August 17, 2006; and vice chairman of the board from November 16, 2000 until February 15, 2001.December 2017 to December 31, 2018. |
| • | Vice chairmanExecutive vice president and directorgeneral counsel of General Motors CorporationMarriott International from January 1, 1996December 2006 to May 31, 2001;December 2017; senior vice president and associate general counsel from 19871999 to 1994.November 2006; assumed responsibility for all corporate transactions and corporate governance in 2005; and joined Marriott International as assistant general counsel in May 1996. |
| • | Senior partner in the Pearce & DurickPrivate law firm in Bismarck, North Dakota, priorpractice from 1979 to joining General Motors in 1987.1996. |
| Other Leadership Experience |
| • | Director of Hughes Electronics Corporation, a General Motors Corporation subsidiary and providerGoodwill of digital television entertainment, broadband satellite network, and global video and data broadcasting, from 1992 to December 2003, and retiring as chairman in 2003. |
• | Director of Marriott International, Inc.Greater Washington, D.C., a major hotel chain, from 1995non-profit organization whose mission is to Maytransform lives and communities through education and employment, since January 2015, and served on the audit, finance, compensation, and excellence committees. |
• | Director of Nortel Networks Corporation, a global telecommunications company, fromas well as vice chair since January 2005 to August 2009, also served as chairman of the board from June 2005. |
• | Fellow of the American College of Trial Lawyers,2019 and a member of the International Society of Barristers. |
• | Founding chair of the Yale University’s Chairmen’s Forum; former member of the President’s Council on Sustainable Development, and co-chair of the President’s Commission on the United States Postal Service.finance committee since January 2018. |
| Education |
• | Bachelor’s degree in engineering sciences from the U.S. Air Force Academy. |
| • | Juris doctor degree from Northwestern University’sthe University of Pennsylvania Law School. |
| • | Bachelor’s degree in economics and international relations from the University of Pennsylvania. |
MDU Resources Group, Inc. Proxy Statement 11
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| David M. Sparby Age 64 | Independent Director Since 2018
Audit Committee |
| Mr. Sparby has over 32 years of broad public utility experience through his positions as senior vice president and group president, revenue, of Xcel Energy Inc., president and chief executive officer of its subsidiary, Northern States Power-Minnesota (NSP‑Minnesota), and chief financial officer of Xcel Energy. Mr. Sparby’s public utility and renewable energy expertise contributes to the board’s knowledge of the public utility and natural gas pipeline industries. |
| Career Highlights |
| • | Senior vice president and group president, revenue, of Xcel Energy and president and chief executive officer of its subsidiary, NSP-Minnesota, from May 2013 until his retirement in December 2014; senior vice president and group president, from September 2011 to May 2013; chief financial officer from March 2009 to September 2011; and president and chief executive officer of NSP-Minnesota from 2008 to March 2009. He joined Xcel Energy, or its predecessor Northern States Power Company, as an attorney in 1982 and held positions of increasing responsibility. |
| • | Attorney with the State of Minnesota, Office of Attorney General, from 1980 to 1982, during which period his responsibilities included representation of the Department of Public Service and the Minnesota Public Utilities Commission. |
| Other Leadership Experience |
| • | Board of Trustees of Mitchell Hamline School of Law since July 2011, including executive committee and committee chair positions. |
| • | Board of Trustees of the College of St. Scholastica since July 2012, including vice chair and executive committee positions. |
| Education |
| • | Juris doctor degree from William Mitchell College of Law. |
| • | Bachelor’s degree in history from College of St. Scholastica and a master’s degree in business administration from University of St. Thomas. |
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| Chenxi Wang Age 49 | Independent Director Nominee
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| Ms. Wang has extensive technology and cybersecurity expertise through her experience, including founder and managing general partner of Rain Capital Fund, L.P., chief strategy officer at Twistlock, vice president, cloud security & strategy at Ciphercloud, and vice president, strategy and market intelligence at Intel Security. She is a sought-after public speaker on issues of technology and cybersecurity. |
| Career Highlights |
| • | Founder and managing general partner of Rain Capital Fund, L.P., a cybersecurity-focused venture fund aiming to fund early-stage, transformative technology innovations in the security market with a goal of supporting women and minority entrepreneurs, since December 2017. |
| • | Chief strategy officer at Twistlock, an automated and scalable cloud native cybersecurity platform, from August 2015 to February 2017. |
| • | Vice president, cloud security & strategy of CipherCloud, a cloud security software company, from January 2015 to August 2015. |
| • | Vice president of strategy of Intel Security, a company focused on developing proactive, proven security solutions and services that protect systems, networks, and mobile devices, from April 2013 to January 2015. |
| • | Principal analyst and vice president of research at Forrester Research, a market research company that provides advice on existing and potential impact of technology, from January 2007 to April 2013. |
| • | Assistant research professor and associate professor of computer engineering at Carnegie Mellon University from September 2001 through August 2007. |
| Other Leadership Experience |
| • | Board of directors of OWASP Global Foundation, a nonprofit global community that drives visibility and evolution in the safety and security of the world’s software, since January 2018 and vice chair from January 2018 to December 2018. |
| • | Board of advisors of Keyp GmbH, a Munich-based software company with a mission to provide enterprises convenient access to the digital identity ecosystem, since December 2017. |
| • | Program co-chair (security and privacy track) for the Grace Hopper Conference 2016 and 2017, the world’s largest gathering of women in computing. |
| Education |
| • | Doctor of Philosophy (Ph.D.) in computer science from University of Virginia. |
| • | Bachelor’s degree in computer science from Lock Haven University of Pennsylvania. |
1012 MDU Resources Group, Inc. Proxy Statement
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| John K. Wilson Age 6264 | Independent Director Since 2003 Audit Committee |
| Mr. Wilson has an extensive background in finance and accounting, as well as experience with mergers and acquisitions, through his education and work experience at a major accounting firm and his later public utility experience in his positions as controller and vice president of Great Plains Natural Gas Co., president of Great Plains Energy Corp., and president, chief financial officer, and treasurer for Durham Resources, LLC, and all Durham Resources entities. Mr. Wilson contributes business management and public utility knowledge to our board. |
| Career Highlights |
| • | President of Durham Resources, LLC, a privately held financial management company, in Omaha, Nebraska, from 1994 to December 31, 2008; president of Great Plains Energy Corp., a public utility holding company and an affiliate of Durham Resources, LLC, from 1994 to July 1, 2000; and vice president of Great Plains Natural Gas Co., an affiliate company of Durham Resources, LLC, until July 1, 2000. |
| • | Executive director of the Robert B. Daugherty Foundation in Omaha, Nebraska, since January 2010. |
| • | Held positions of audit manager at Peat, Marwick, Mitchell (now known as KPMG), controller for Great Plains Natural Gas Co., and chief financial officer and treasurer for all Durham Resources entities. |
| Other Leadership Experience |
| • | Director of HDR, Inc., an international architecture and engineering firm, since December 2008,2008; and director of Tetrad Corporation, a privately held investment company, since April 2010, both located in Omaha, Nebraska. |
| • | Former director of Bridges Investment Fund, Inc., a mutual fund, from April 2003 to April 2008; director of the Greater Omaha Chamber of Commerce from January 2001 through December 2008; member of the advisory board of U.S. Bank NA Omaha from January 2000 to July 2010; and the advisory board of Duncan Aviation, an aircraft service provider, headquartered in Lincoln, Nebraska, from January 2010 to February 2016. |
| Education and Professional |
| • | Bachelor’s degree in business administration, cum laude, from the University of Nebraska – Omaha. |
| • | Certified public accountant, on inactive status. |
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The board of directors recommends a vote “for” each nominee. |
Additional Information - Majority VotingA majority of votes cast is required to elect a director in an uncontested election. A majority of votes cast means the number of votes cast “for” a director’s election must exceed the number of votes cast “against” the director’s election. “Abstentions” and “broker non-votes” do not count as votes cast “for” or “against” the director’s election. In a contested election, which is an election in which the number of nominees for director exceeds the number of directors to be elected and which we do not anticipate, directors will be elected by a plurality of the votes cast.
Unless you specify otherwise when you submit your proxy, the proxies will vote your shares of common stock “for” all directors nominated by the board of directors. If a nominee becomes unavailable for any reason or if a vacancy should occur before the election, which we do not anticipate, the proxies will vote your shares in their discretion for another person nominated by the board.
Our policy on majority voting for directors contained in our corporate governance guidelines requires any proposed nominee for re-election as a director to tender to the board, prior to nomination, his or her irrevocable resignation from the board that will be effective, in an uncontested election of directors only, upon:
receipt of a greater number of votes “against” than votes “for” election at our annual meeting of stockholders; and
acceptance of such resignation by the board of directors.
Following certification of the stockholder vote, the nominating and governance committee will promptly recommend to the board whether or not to accept the tendered resignation. The board will act on the nominating and governance committee’s recommendation no later than 90 days following the date of the annual meeting.
Brokers may not vote your shares on the election of directors if you have not given your broker specific instructions on how to vote. Please be sure to give specific voting instructions to your broker so your vote can be counted.
MDU Resources Group, Inc. Proxy Statement 13
Board Evaluations and Process for Selecting Directors
In the annual board evaluation process, the nominating and governance committee evaluates our directors considering the current needs of the board and the company. In addition, during the year, the committee discusses board succession and reviews potential candidates. The committee may also retain a third party to assist in identifying potential nominees; none were retained in 2018.
Our annual board evaluation process involves assessments at the board and board committee levels. These annual evaluations are conducted by the chair of the nominating and governance committee and periodically by an independent third party.
Our governance guidelines provide that directors are not eligible to be nominated or appointed to the board if they are 76 years or older at the time of the election or appointment. Term limits on directors’ service have not been instituted.
Director Qualifications, Skills, and Experience
Director nominees are chosen to serve on the board based on their qualifications, skills, and experience, as discussed in their biographies, and how those characteristics supplement the resources and talent on the board and serve the current needs of the board and the company.
In making its nominations, the nominating and governance committee also assesses each director nominee by a number of key characteristics, including character, success in a chosen field of endeavor, background in publicly traded companies, independence, and willingness to commit the time needed to satisfy the requirements of board and committee membership. Although the committee has no formal policy regarding diversity, the committee also considers diversity in gender, ethnic background, geographic area of residence, skills, and professional experience in recommending director nominees.
14 MDU Resources Group, Inc. Proxy Statement
The following shows core specialized competencies and other characteristics of the director nominees.
MDU Resources Group, Inc. Proxy Statement 15
Board Composition and Refreshment
The nominating and governance committee is focused on ensuring that the board reflects a diversity of experience, skills, and backgrounds. Each of the current directors, other than Harry J. Pearce and William E. McCracken, has been nominated for election to the board of directors upon recommendation by the nominating and governance committee and each has decided to stand for election. Messrs. Pearce and McCracken were not eligible for re-election under the company’s age limit policy that provides no individual is eligible for election to the board of directors after his or her 76th birthday.
With the retirement of former board member A. Bart Holaday at the annual meeting in May 2018 and Harry J. Pearce and William E. McCracken reaching our board retirement age limit and retiring from the board at our 2019 annual meeting, the committee identified qualified diverse director candidates with commensurate experience and background as replacement board members.
In evaluating the board retirements and current needs of the board and the company, the nominating and governance committee focused on identifying board candidates that would add gender diversity to the board as well as background and core competencies in the fields of regulated energy delivery, technology and cybersecurity, and public company governance. Potential director nominees were brought to the attention of the nominating and governance committee by board members, management, organizations, and database searches.
In 2018, the nominating and governance committee identified a need for additional expertise in the operation of electric and natural gas utilities and natural gas transmission pipelines. At December 31, 2018, approximately 66% of our capital was invested in these business segments which generated approximately 28% of our 2018 revenues. After serving in several positions during his 32-year career with Xcel Energy, including chief financial officer, and most recently as senior vice president, revenue group, and chief executive officer of its subsidiary, Northern States Power-Minnesota, David M. Sparby brings a vast amount of experience related to the electric and natural gas distribution and pipeline industries. Mr. Sparby was appointed to the board of directors on August 16, 2018.
With the anticipated retirement of Harry J. Pearce, the nominating and governance committee identified a director nominee with extensive risk management and public company governance experience. Prior to his retirement in 2017, Edward A. Ryan served as executive vice president and general counsel for Marriott International, Inc. where his responsibilities included chair of the company’s legal and ethical steering and enterprise crisis management committees. Mr. Ryan was appointed to the board of directors on November 15, 2018.
With the anticipated retirement of William E. McCracken, the nominating and governance committee identified a director nominee that would bring diversity as well as technology and cybersecurity expertise to the board. Chenxi Wang has held positions with various organizations related to technology and security software and is a frequent speaker on issues of technology and cybersecurity. She is currently the founder and general partner of Rain Capital Fund, L.P., an early stage venture capital firm focused on cybersecurity innovation and artificial intelligence for its clients and the promotion of women entrepreneurs. Ms. Wang also provides gender, ethnic, age, and geographic diversity to the board.
By tenure, if the nominees are elected, the board will comprise of three directors who have served from 0-4 years, two directors who have served from 5-10 years, and five directors who have served over 11 years. This mix provides a balance of experience and institutional knowledge with fresh perspectives.
16 MDU Resources Group, Inc. Proxy Statement
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| CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS |
Director Independence
The board of directors has adopted guidelines on director independence that are included in our corporate governance guidelines. Our guidelines require that a substantial majority of the board consists of independent directors. In general, the guidelines require that an independent director must have no material relationship with the company directly or indirectly, except as a director. The board determines independence on the basis of directorsthe standards specified by the New York Stock Exchange (NYSE), the additional standards referenced in our corporate governance guidelines, and other facts and circumstances the board considers relevant. Based on its review, the board has determined that all directors and director nominees, except for our chief executive officer Mr. Goodin, all current directors have no material relationship with us and are independent in accordance with our corporate governance guidelines and the New York Stock Exchange listing standards.independent.
In determining director independence, the board of directors reviewed and considered information about any transactions, relationships, and arrangements between the non-employee directors and director nominees and their immediate family members and affiliated entities on the one hand, and the company and its affiliates on the other, and in particular the following transactions, relationships, and arrangements:
Charitable contributions by the MDU Resources Foundation (Foundation) to the following nonprofit organizations where a director, a director nominee, or a director’stheir spouse, serves or has served as a director, chair, or vice chair of the board of trustees, trustee or member of the organization or related entity: Charitable contributions by the Foundation to Sanford Health Foundation, Billings Catholic Schools Foundation, Community Resources Inc., the University of North Dakota Foundation, and the University of Jamestown and its foundation.four nonprofit organizations that collectively amounted to $27,500 in 2018. None of the contributions made to any of thesethe nonprofit entities during the last three fiscal years exceeded in any single year the greater of $1 million or 2% of the relevant entity’s consolidated gross revenues.
Business relationships with entities with which a director or director nominee is affiliated: Mr. Wilson is a member of the board of directors of HDR, Inc., an architectural, engineering, environmental, and consulting firm. The company paid HDR, Inc. or its affiliates approximately $1 million in 2018 directly or through a third party for services which were provided in the ordinary course of business and on substantially the same terms prevailing for comparable services from other consulting firms. Mr. Wilson had no role in securing or promoting the HDR, Inc. services.
The board has also determined that all members of the audit, compensation, and nominating and governance committees of the board are independent in accordance with our guidelines and applicable NYSE and Securities Exchange Act of 1934 rules.
Stockholder Engagement
The company has an active stockholder outreach program. We believe in providing transparent and timely information to our investors. Each year we routinely engage directly or indirectly with our stockholders, including our top institutional stockholders. During 2016,2018, the company held meetings, conference calls, and webcasts with a diverse mix of stockholders. Throughout the year, we held meetings or telephone conferences with nineeleven of the actively managed institutional investors included in our year-end top 30 stockholders. We engage periodically with our index fund investors, however, no direct meetings were held with this investor class in 2016. In our meetings or conferences, we discussed a variety of topics with stockholders including longer-term company strategy and our capital expenditure forecast,forecast; shorter-term operational and financial updates,updates; environmental, social, and corporate governance; and previously announced strategic initiatives. The company also metheld telephone conferences with a proxy advisory firmsfirm to discuss corporate governance, and executive compensation practices.practices, and other topics.
Board Leadership Structure
The board separated the positions of chairmanchair of the board and chief executive officer in 2006, and our bylaws and corporate governance guidelines currently require that our chairmanchair be independent. The board believes this structure provides balance and is currently in the best interest of the company and its stockholders. Separating these positions allows the chief executive officer to focus on the full-time job of running our business, while allowing the chairmanchair of the board to lead the board in its fundamental role of providing advice to and independent oversight of management. The chairmanchair meets regularly between board meetings with the chief executive officer and consults with the chief executive officer regarding the board meeting agendas, the quality and flow of information provided to the board, and the effectiveness of the board meeting process. The board believes this split structure recognizes the time, effort, and energy the chief executive officer is required to devote to the position in the current business environment, as well as the commitment required to serve as the chairman,chair, particularly as the board’s oversight responsibilities continue to grow and demand more time and attention. The fundamental role of the board of directors is to provide oversight of the management of the company in good faith and in the best interests of the company and its stockholders. Having an independent chairmanchair is a means to ensure the chief executive officer is accountable for managing the company in close alignment with the interests of stockholders, including with respect to risk management as discussed below. An independent chairmanchair is in a position to encourage frank and lively discussions, including during regularly scheduled executive sessions consisting of only
MDU Resources Group, Inc. Proxy Statement 17
independent directors, and to assure that the company has adequately assessed all appropriate business risks before adopting its final business plans and strategies. The board believes that having separate positions and having an independent outside director serve as chairmanchair is the appropriate leadership structure for the company at this time and demonstrates our commitment to good corporate governance. With the retirement of Mr. Pearce at the annual meeting, the board will elect a new independent chair at its May board meeting.
12 MDU Resources Group, Inc. Proxy Statement
Board’s Role in Risk Oversight
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including economic risks, operational risks, environmental and regulatory risks, the impact of competition, climate and weather conditions, limitations on our ability to pay dividends, pension plan obligations, cyberattacks or acts of terrorism, and third party liabilities. Management is responsible for identifying material risks, implementing appropriate risk management strategies, and providing information regarding material risks and risk management to the day-to-day management of risks the company faces, while theboard. The board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate for identifying, assessing, and functioning as designed.managing risk.
The board believes establishing the right “tone at the top” and full and open communication between management and the board of directors are essential for effective risk management and oversight. Our chairmanchair meets regularly with our president and chief executive officer and other senior officers to discuss strategy and risks facing the company. Senior management attends the quarterly board meetings and is available to address any questions or concerns raised by the board on risk management-related and any other matters. Each quarter, the board of directors receives presentations from senior management on strategic matters involving our operations. Senior management annually presents an assessment to the board of critical enterprise risks that threaten the company’s strategy and business model, including risks inherent in the key assumptions underlying the company’s business strategy for value creation. Periodically, the board receives presentations from external experts on matters of strategic importance to the board. In 2018, the board heard presentations from external experts regarding climate change and its risks and opportunities, oil and natural gas exploration in the Bakken geological formation in North Dakota, and projected natural gas processing and transportation needs in North Dakota. At least annually, the board holds strategic planning sessions with senior management to discuss strategies, key challenges, and risks and opportunities for the company.
The company has also developed a robust compliance program to promote a culture of compliance, consistent with the right tone at the top, to mitigate risk. The program includes training and adherence to our code of conduct and legal compliance guide. We further mitigate risk through our internal audit and legal departments.
While the board is ultimately responsible for risk oversight at our company, our three standing board committees assist the board in fulfilling its oversight responsibilities in certain areas of risk.
The audit committee assists the board in fulfilling its oversight responsibilities with respect to risk management in a general manner and specifically in the areas of financial reporting, internal controls, cybersecurity, and compliance with legal and regulatory requirements, and, in accordance with New York Stock ExchangeNYSE requirements, discusses with the board policies with respect to risk assessment and risk management and their adequacy and effectiveness. The audit committee receives regular reports on the company’s compliance program, including reports received through our anonymous reporting hot line. It also receives reports and regularly meets with the company’s external and internal auditors. During each of its quarterly meetings in 2018, the audit committee received presentations from management on cybersecurity and the company’s mitigation of cybersecurity risks. The entire board was present for these presentations. Risk assessment and mitigation reports are regularly provided by management to the audit committee or the full board. This opens the opportunity for discussions about areas where the company may have material risk exposure, steps taken to manage such exposure, and the company’s risk tolerance in relation to company strategy. The audit committee reports regularly to the board of directors on the company’s management of risks in the audit committee’s areas of responsibility.
The compensation committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs.
The nominating and governance committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks associated with board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance.
Board Meetings and Committees
During 2016,2018, the board of directors held four regular meetings and threetwo special meetings. Each director attended at least 75% of the combined total meetings of the board and the committees on which the director served during 2016. Director attendance at2018 (held during the period he or she has been a director). Directors are encouraged to attend our annual meeting of stockholders is encouraged.stockholders. All directors attended our 20162018 Annual Meeting of Stockholders.
Harry J. Pearce was elected
18 MDU Resources Group, Inc. Proxy Statement
The non-employee chairmandirectors meet in executive session at each regularly scheduled quarterly board of directors meeting. The chair of the board on August 17, 2006, and previously served as lead director from February 15, 2001 to August 17, 2006. He presides at the executive session of the non-employee directors held in connection with each regularly scheduled quarterly board of directors meeting. The non-employee directors also meet in executive session both with and without the chief executive officer at each regularly scheduled quarterly board of directors meeting. All of our non-employee directors are independent, as defined in our corporate governance guidelines and New York Stock Exchange listing standards.
The board has a standing audit, committee, compensation, committee, and nominating and governance committee. Thesecommittees. The table below provides current committee membership.
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| Name | Audit Committee | Compensation Committee | Nominating and Governance Committee |
| Thomas Everist | | C | |
| Karen B. Fagg | | ● | C |
| Mark A. Hellerstein | ● | | |
| Dennis W. Johnson | C | | ● |
| William E. McCracken | | ● | ● |
| Patricia L. Moss | | ● | ● |
| Edward A. Ryan | ● | | ● |
| David M. Sparby | ● | | |
| John K. Wilson | ● | | |
C - Chair | | | | |
| ● - Member | | | | |
Below is a description of each standing committee of the board. The board has affirmatively determined that each of these standing committees are composedconsists entirely of independent directors.directors pursuant to rules established by the NYSE, rules promulgated under the Securities and Exchange Commission (SEC), and the director independence standards established by the board. The board has also determined that each member of the audit committee and the compensation committee is independent under the criteria established by the NYSE and the SEC for audit committee and compensation committee members, as applicable.
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| Nominating and Governance Committee | Met Six Times in 2018 |
The nominating and governance committee met foursix times during 2016.2018. The committee members are Karen B. Fagg, chair, A. Bart Holaday,Dennis W. Johnson, William E. McCracken, and Patricia L. Moss.Moss, and Edward A. Ryan.
The nominating and governance committee provides recommendations to the board with respect to:
board organization, membership, and function;
committee structure and membership;
succession planning for our executive management and directors; and
our corporate governance guidelines.
MDU Resources Group, Inc. Proxy Statement 13
The nominating and governance committee assists the board in overseeing the management of risks in the committee’s areas of responsibility.
The committee identifies individuals qualified to become directors and recommends to the board the nominees for director for the next annual meeting of stockholders. The committee also identifies and recommends to the board individuals qualified to become our principal officers and the nominees for membership on each board committee. The committee oversees the evaluation of the board and management.
In identifying nominees for director, the committee consults with board members, our management, consultants, and other individuals likely to possess an understanding of our business and knowledge concerning suitable director candidates.
Our corporate governance guidelines include our policy on consideration of director candidates recommended to us. We will consider candidates that our stockholders recommend in the same manner we consider other nominees. Stockholders who wish to recommend a director candidate may submit recommendations, along with the information set forth in the guidelines, to the nominating and governance committee chair in care of the secretary at MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650.
MDU Resources Group, Inc. Proxy Statement 19
In evaluating director candidates, the committee, in accordance with our corporate governance guidelines, considers an individual’s:
background, character, and experience, including experience relative to our company’s lines of business;
skills and experience which complement the skills and experience of current board members;
success in the individual’s chosen field of endeavor;
skill in the areas of accounting and financial management, banking, business management, human resources, marketing, operations, public affairs, law, technology, risk management, governance, and operations abroad;
background in publicly traded companies including service on other public company boards of directors;
geographic area of residence;
diversity of business and professional experience, skills, gender, and ethnic background, as appropriate in light of the current composition and needs of the board;
independence, including any affiliation or relationship with other groups, organizations, or entities; and
compliance with applicable law and applicable corporate governance, code of conduct and ethics, conflict of interest, corporate opportunities, confidentiality, stock ownership and trading policies, and our other policies and guidelines of the company.
In addition, our bylaws contain requirements that a person must meet to qualify for service as a director.
The nominating and governance committee assesses the effectiveness of this policy annually in connection with the nomination of directors for election at the annual meeting of stockholders. The composition of the current board and the board nominees reflects diversity in business and professional experience, skills, ethnicity, gender, and gender.geography.
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| Audit Committee | Met Eight Times in 2018 |
The audit committee is a separately-designated committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
The audit committee met eight times during 2016.2018. The audit committee members are Dennis W. Johnson, chair, Mark A. Hellerstein, Edward A. Bart Holaday,Ryan, David M. Sparby, and John K. Wilson. The board of directors has determined that Messrs. Johnson, Hellerstein, Holaday,Sparby, and Wilson are “audit committee financial experts” as defined by SecuritiesSEC rules and Exchange Commission rules andall audit committee members are financially literate within the meaning of the listing standards of the New York Stock Exchange. TheyNYSE. All members also meet the independence standard for audit committee members under our director independence guidelines, the New York Stock ExchangeNYSE listing standards, and Securities and Exchange CommissionSEC rules.
14 MDU Resources Group, Inc. Proxy Statement
The audit committee assists the board of directors in fulfilling its oversight responsibilities to the stockholders and serves as a communication link among the board, management, the independent registered public accounting firm, and the internal auditors. The audit committee:
assists the board’s oversight of
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| ◦ | the integrity of our financial statements and system of internal controls; |
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| ◦ | the company’s compliance with legal and regulatory requirements;requirements and the code of conduct; |
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| ◦ | the independent registered public accounting firm’s qualifications and independence; |
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| ◦ | the performance of our internal audit function and independent registered public accounting firm; and |
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| ◦ | management of risk in the audit committee’s areas of responsibility; and |
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| • | arranges for the preparation of and approves the report that Securities and Exchange CommissionSEC rules require we include in our annual proxy statement. See the section entitled “Audit Committee Report” for further information. |
20 MDU Resources Group, Inc. Proxy Statement
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| Compensation Committee | Met Four Times in 2018 |
During 2016,2018, the compensation committee met fivefour times. The compensation committee consists entirely of independent directors within the meaning of the company’s corporate governance guidelines and the New York Stock ExchangeNYSE listing standards and who meet the definitions of outside or non-employee directors for purposes of Section 162(m) of the Internal Revenue Code and Rule 16-b under the Exchange Act. Members of the compensation committee are Thomas Everist, chair, Karen B. Fagg, William E. McCracken, and Patricia L. Moss.
The compensation committee assists the board of directors in fulfilling its responsibilities relating to the company’s compensation policy and programs. It has the direct responsibility for determining compensation for our Section 16 officers and for overseeing the company’s management of risk in its areas of responsibility. In addition, the compensation committee reviews and recommends any changes to director compensation policies to the board of directors. The authority and responsibility of the compensation committee is outlined in the compensation committee’s charter.
The compensation committee uses the analysis and recommendations from outside consultants, the chief executive officer, and the human resources department in making its compensation decisions. The chief executive officer, the vice president-human resources, and the general counsel regularly attend compensation committee meetings. The committee meets in executive session as needed. The processes and procedures for consideration and determination of compensation of the Section 16 officers, as well as the role of our executive officers, are discussed in the “Compensation Discussion and Analysis.Analysis.” The compensation committee has sole authority to retain compensation consultants, legal counsel, or other advisers to assist in consideration of the compensation of the chief executive officer, the other Section 16 officers, and the board of directors, and the committee is directly responsible for the appointment, compensation, and oversight of the work of such advisers. The compensation committee’s practice has been to retain a compensation consultant every other year to conduct a competitive analysis on executive compensation. The competitive analysis is conducted internally by the human resources department in the other years. In 2018, the compensation committee retained a compensation consultant, Meridian Compensation Partners, LLC, to conduct a competitive analysis on executive compensation for 2019. Prior to retaining an adviser, the compensation committee will considerconsiders all factors relevant to ensure the adviser’s independence from management. Annually the compensation committee conducts a potential conflicts of interest assessment raised by the work of any compensation consultant and how such conflicts, if any, should be addressed. The compensation committee requested and received information from its compensation consultant, Willis Towers Watson,Meridian Compensation Partners, LLC to assist in its potential conflicts of interest assessment. Based on its review and analysis, the compensation committee did not identify any conflicts of interest with respect to Willis Towers Watson.determined in 2018 that Meridian Compensation Partners, LLC was independent from management.
The board of directors determines compensation for our non-employee directors based upon recommendations from the compensation committee. The compensation committee’s practice has been to retain a compensation consultant every other year to conduct a competitive analysis on director compensation. The compensation committee employed a compensation consultant for anIn 2018, the analysis of non-employee director compensation in 2015 but not in 2016 as the study was performed by the human resources department. Meridian Compensation Partners, LLC will conduct the analysis in 2019.
MDU Resources Group, Inc. Proxy Statement 15
Narrative Disclosure of our Compensation Policies and Practices as They Relate to Risk Management
The human resources department has conducted an assessment of the risks arising from our compensation policies and practices for all employees and concluded that none of these risks is reasonably likely to have a material adverse effect on the company. Based on the human resources department’s assessment and taking into account information received from the risk identification process, senior management and our management policy committee concluded that risks arising from our compensation policies and practices for all employees are not reasonably likely to have a material adverse effect on the company. After review and discussion with senior management, the compensation committee concurred with this assessment.
As part of its assessment of the risks arising from our compensation policies and practices, for all employees, the human resources department identified the principal areas of risk faced by the company that may be affected by our compensation policies and practices, for all employees, including any risks resulting from our operating businesses’ compensation policies and practices. In assessing the risks arising from our compensation policies and practices, the human resources department identified the following practices designed to prevent excessive risk taking:
Business management and governance practices:
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| ◦ | risk management is a specific performance competency included in the annual performance assessment of Section 16 officers; |
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| ◦ | board oversight on capital expenditure and operating plans that promotes careful consideration of financial assumptions; |
MDU Resources Group, Inc. Proxy Statement 21
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| ◦ | limitation on business acquisitions without board approval; |
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| ◦ | employee integrity training programs and anonymous reporting systems; |
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| ◦ | quarterly risk assessment reports at audit committee meetings; and |
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| ◦ | prohibitions on holding company stock in an account that is subject to a margin call, pledging company stock as collateral for a loan, and hedging of company stock by Section 16 officers and directors. |
Executive compensation practices:
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| ◦ | active compensation committee review of executive compensation, including comparisonportions of executive compensation tobased upon the company’s total stockholder return ratioin relation to the ratio forthat of the company’s peer group; |
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| ◦ | the initial determination of a position’s salary grade to be at or near the 50th percentile of base salaries paid to similar positions at peer group companies and/or relevant industry companies; |
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| ◦ | consideration of peer group and/or relevant industry practices to establish appropriate compensation target amounts; |
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| ◦ | a balanced compensation mix of fixed salary and annual and long-term incentives tied primarily to the company’s financial and stock performance; |
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| ◦ | use of interpolation for annual and long-term incentive awards to avoid payout cliffs; |
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| ◦ | negative discretion to adjust any annual or long-term incentive award payment downward; |
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| ◦ | use of caps on annual incentive awards (maximum of 250% of target)200% for regulated segments and 240% for construction materials and services segments) and long-term incentive stock grant awards (200% of target); |
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| ◦ | ability to clawback availability on incentive payments in the event of a financial restatement; |
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| ◦ | use of performance shares and restricted stock units, rather than stock options or stock appreciation rights, as thean equity component of incentive compensation; |
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| ◦ | use of performance shares for long-term incentive awards with a relative total stockholder return, earnings before interest, taxes, depreciation, and amortization (EBITDA) growth, and earnings growth performance measure and mandatory reduction in award if total stockholder return over the performance period is negative;components; |
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| ◦ | use of three-year performance periods for long-term incentive awards to discourage short-term risk-taking; |
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| ◦ | substantive annual incentive goals measured primarily by return on invested capital, earnings, EBITDA, and earnings per share criteria, which encourage balanced performance and are important to stockholders; |
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| ◦ | use of financial performance metrics that are readily monitored and reviewed; |
16 MDU Resources Group, Inc. Proxy Statement
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| ◦ | regular review of the appropriateness of the companies in the peer group; |
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| ◦ | stock ownership requirements for the board and for executives receiving long-term incentive awards under the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan;awards; |
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| ◦ | mandatory holding periods for 50% of any net after-tax shares earned under long-term incentive awards; and |
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| ◦ | use of independent consultants to assist in establishing pay targets and compensation structure at least biennially. |
Stockholder Communications with the Board
Stockholders and other interested parties who wish to contact the board of directors or any individual director, including our non-employee chairmanchair or non-employee directors as a group, should address a communication in care of the secretary at MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650. The secretary will forward all communications.
22 MDU Resources Group, Inc. Proxy Statement
Additional Governance Features
Board and Committee Evaluations
Our corporate governance guidelines provide that the board of directors, in coordination with the nominating and governance committee, will annually review and evaluate the performance and functioning of the board and its committees. The self-evaluations are intended to facilitate a candid assessment and discussion by the board and each committee of its effectiveness as a group in fulfilling its responsibilities, its performance as measured against the corporate governance guidelines, and areas for improvement. The board and committee members are provided with a questionnaire to facilitate discussion. The results of the evaluations are reviewed and discussed in executive sessions of the committees and the board of directors.
Director Resignation Upon Change of Job Responsibility
Our corporate governance guidelines require a director to tender his or her resignation after a material change in job responsibility. In 2017, Mr. Everist2018, no directors or director nominees submitted his resignation in connection with the sale by The Everist Company of its aggregate, concrete, and asphalt production interests. After considering his background, experience on the board, skills and character, and contribution to the company in light of the company’s business and structure, the board determined Mr. Everist’s resignation should not be accepted.resignations under this requirement.
Majority Voting in Uncontested Director Elections
Our corporate governance guidelines require that in uncontested elections (those where the number of nominees does not exceed the number of directors to be elected), director nominees must receive the affirmative vote of a majority of the votes cast to be elected to our board of directors. Contested director elections (those where the number of director nominees exceeds the number of directors to be elected) are governed by a plurality of the vote of shares present in person or represented by proxy at the meeting.
The board has adopted a director resignation policy for incumbent directors in uncontested elections. Any proposed nominee for re-election as a director shall, before he or she is nominated to serve on the board, tender to the board his or her irrevocable resignation that will be effective, in an uncontested election of directors only, upon (i) such nominee’s receipt of a greater number of votes “against” election than votes “for” election at our annual meeting of stockholders; and (ii) acceptance of such resignation by the board of directors.
Director Overboarding Policy
Our bylaws and corporate governance guidelines state that a director may not serve on more than three public company boards, including the company’s board. Currently, all of our directors are in compliance of this policy.
Board Refreshment
The company regularly evaluates the need for board refreshment. The nominating and governance committee and the board are focused on identifying individuals whose skills and experiences will enable them to make meaningful contributions to shaping the company’s business strategy. As part of its consideration of director succession, the nominating and governance committee from time to time reviews, including when considering potential candidates, the appropriate skills and characteristics required of board members. The board believes it is important to consider diversity of skills, expertise, race, ethnicity, gender, age, education, geography, cultural background, and professional experiences in evaluating board candidates for expected contributions to an effective board. Independent directors may not serve on the board beyond the next annual meeting of stockholders after attaining the age of 76. We believe the mandatory retirement age allows us to benefit from experienced directors, with industry expertise, company institutional knowledge and historical perspective, stability, and comfort with challenging company management, while maintaining our ability to refresh the board through the addition of new members. In connection with our mandatory retirement for directors, threeHarry J. Pearce and William E. McCracken will retire as directors at the completion of ourtheir current directors are expected to retire withinterm following the next two years.
MDU Resources Group, Inc. Proxy Statement 17
2019 annual meeting.
Prohibitions on Hedging/Pledging Company Stock
The director compensation policy prohibits directors from hedging their ownership of common stock, pledging company stock as collateral for a loan, or holding company stock in an account that is subject to a margin call.
Code of Conduct
We have a code of conduct and ethics, which we refer to as the Leading With Integrity Guide. It applies to all directors, officers, and employees.
We intend to satisfy our disclosure obligations regarding amendments to, or waivers of, any provision of the code of conduct that applies to our principal executive officer, principal financial officer, and principal accounting officer and that relates to any element of the code of ethics definition in Regulation S-K, Item 406(b), and waivers of the code of conduct for our directors or executive officers, as required by New York Stock ExchangeNYSE listing standards, by posting such information on our website.
MDU Resources Group, Inc. Proxy Statement 23
Proxy Access
In February 2018, the board of directors amended our bylaws to implement proxy access with the following parameters:
|
| |
| Ownership Threshold: | 3% of outstanding shares of our common stock |
| Nominating Group Size: | Up to 20 stockholders may combine to reach the 3% ownership threshold |
| Holding Period: | Continuously for three years |
| Number of Nominees: | The greater of two nominees or 20% of our board |
Corporate Governance Materials
Stockholders can see our bylaws, corporate governance guidelines, board committee charters, and Leading With Integrity Guide on our website.
• Audit, compensation, and nominating and governance committees’ charters are available at http://www.mdu.com/integrity/governance/board-charters-and-committees.• Bylaws and corporate governance guidelines are available at http://www.mdu.com/integrity/governance/guidelines-and-bylaws.
• Leading With Integrity Guide is available at http://www.mdu.com/docs/default-source/governance/leadingwithintegrity.pdf. |
| | |
| Corporate Governance Materials | Website |
| • | Bylaws | http://www.mdu.com/governance |
| • | Corporate Governance Guidelines | http://www.mdu.com/governance |
| • | Board Committee Charters for the Audit, Compensation, and Nominating and Governance Committees | http://www.mdu.com/governance |
| • | Leading With Integrity Guide | http://www.mdu.com/commitmenttointegrity |
Related Person Transaction Disclosure
The board of directors’ policy for the review of related person transactions is contained in our corporate governance guidelines. The policy provides thatrequires the audit committee to review any transaction, arrangement or relationship, or series thereof:
in which we arethe company was or will be a participant;
the amount involved exceeds $120,000; and
a related person hashad or will have a direct or indirect material interest.
The purpose of this review is to determine whether this transaction is in the best interests of the company.
Related persons are directors, director nominees, executive officers, holders of 5% or more of our voting stock, and their immediate family members. Related persons are required promptly to report to our general counsel all proposed or existing related person transactions in which they are involved.
If our general counsel determines that the transaction is required to be disclosed under the Securities and Exchange Commission’sSEC rules, the general counsel furnishes the information to the chairmanchair of the audit committee. After its review, the committee makes a determination or a recommendation to the board and officers of the company with respect to the related person transaction. Upon receipt of the committee’s recommendation, the board of directors or officers, as the case may be, take such action as they deem appropriate in light of their responsibilities under applicable laws and regulations.
We had no related person transactions in 2016.2018.
1824 MDU Resources Group, Inc. Proxy Statement
|
| | |
| COMPENSATION OF NON-EMPLOYEE DIRECTORS |
Director Compensation for 20162018
MDU Resources’ non-employee directors are compensated for their service according to the MDU Resources Group Inc. Director Compensation Policy. Only one company employee, David L. Goodin, the company’s president and chief executive officer, serves as a director. Mr. Goodin receives no additional compensation for his service on the board. Director compensation is reviewed annually by the compensation committee with analysis provided by an independent consultant in odd numbered years and analysis prepared by the company’s human resources department in even numbered years. The company’s human resources department provided the director compensation analysis for 2018. The analysis included research on market trends in director compensation as well as a review of director compensation practices of our peer group companies. Based on the analysis, the compensation committee recommended and the board concurred that no changes would be made to board member compensation for 2018. The following table outlines the compensation paid to our non-employee directors for 2018.
| | | Name | Name | | Fees Earned or Paid in Cash ($) |
| | Stock Awards ($)1 |
| | All Other
Compensation
($)2 | | Total
($) |
| Name | | Fees Earned or Paid in Cash ($) |
| | Stock Awards ($)1 |
| | All Other
Compensation
($)2 | | Total
($) |
|
| Thomas Everist | Thomas Everist | | 75,000 |
| | 110,000 |
| | 83 | | 185,083 |
| Thomas Everist | | 80,000 |
| | 110,000 |
| | 83 | | 190,083 |
|
| Karen B. Fagg | Karen B. Fagg | | 75,000 |
| | 110,000 |
| | 83 | | 185,083 |
| Karen B. Fagg | | 80,000 |
| | 110,000 |
| | 583 | | 190,583 |
|
| Mark A. Hellerstein | Mark A. Hellerstein | | 65,000 |
| | 110,000 |
| | 83 | | 175,083 |
| Mark A. Hellerstein | | 70,000 |
| | 110,000 |
| | 83 | | 180,083 |
|
| A. Bart Holaday | A. Bart Holaday | | 65,000 |
| | 110,000 |
| | 83 | | 175,083 |
| A. Bart Holaday | | 29,167 |
| | 45,833 |
| | 35 | | 75,035 |
|
| Dennis W. Johnson | Dennis W. Johnson | | 80,000 |
| | 110,000 |
| | 83 | | 190,083 |
| Dennis W. Johnson | | 85,000 |
| | 110,000 |
| | 83 | | 195,083 |
|
| William E. McCracken | William E. McCracken | | 65,000 |
| | 110,000 |
| | 83 | | 175,083 |
| William E. McCracken | | 70,000 |
| | 110,000 |
| | 83 | | 180,083 |
|
| Patricia L. Moss | Patricia L. Moss | | 65,000 |
| | 110,000 |
| | 83 | | 175,083 |
| Patricia L. Moss | | 70,000 |
| | 110,000 |
| | 83 | | 180,083 |
|
| Harry J. Pearce | Harry J. Pearce | | 155,000 |
| | 110,000 |
| | 83 | | 265,083 |
| Harry J. Pearce | | 160,000 |
| | 145,000 |
| | 83 | | 305,083 |
|
| Edward A. Ryan | | Edward A. Ryan | | 11,667 |
| | 18,333 |
| | 7 | | 30,007 |
|
| David M. Sparby | | David M. Sparby | | 29,167 |
| | 45,833 |
| | 28 | | 75,028 |
|
| John K. Wilson | John K. Wilson | | 65,000 |
| 3 | 110,000 |
| | 83 | | 175,083 |
| John K. Wilson | | 70,000 |
| | 110,000 |
| | 83 | | 180,083 |
|
| | | |
| |
1 | TheDirectors receive an annual retainerpayment of $110,000 in company common stock, is awarded pursuant toexcept the non-executive chair who receives $145,000 in company common stock, under the MDU Resources Group, Inc. Non-Employee Director StockLong-Term Incentive Compensation Plan. The amount shown for each director representsDirectors serving less than a full year receive a prorated stock payment based on the aggregate grant date fair valuenumber of 3,886 shares of MDU Resources Group, Inc. commonmonths served. All stock payments are measured in accordance with Financial Accounting Standards Board (FASB) generally accepted accounting principles for stock-based compensation in FASB Accounting Standards Codification Topic 718. The grant date fair value is based on the purchase price of our common stock on the grant date of November 21, 2016,20, 2018, which was $28.30$26.55 per share. The $10.66amount paid in cash paid to each director in lieu offor fractional shares is included in the amount reported in the stock awards column to this table. As of December 31, 2016,2018, there are no outstanding stock awards or options associated with the Non-Employee Director StockLong-Term Incentive Compensation Plan. |
| |
2 | GroupIncludes group life insurance premium. |
| |
3
| Mr. Wilson elected to receive sharespremiums and charitable donations made on behalf of our common stock in lieuthe director as applicable. Amounts for life insurance premiums reflect prorated amounts for directors serving less than a full year based on the number of his cash retainer pursuant to the Non-Employee Director Stock Compensation Plan. The amount shown includes 2,244 shares of our common stock purchased on December 7, 2016, at $28.96 per share.months served. |
MDU Resources Group, Inc. Proxy Statement 25
The following table shows the annual cash and stock retainers payable to our non-employee directors.
| | | Base Retainer | | $ | 65,000 |
| |
| Additional Retainers: | | | |
| Base Cash Retainer | | Base Cash Retainer | | $ | 70,000 |
|
| Additional Cash Retainers: | | Additional Cash Retainers: | | |
| Non-Executive Chair | Non-Executive Chair | | 90,000 |
| Non-Executive Chair | | 90,000 |
|
| Lead Director, if any | | 33,000 |
| |
| Audit Committee Chair | Audit Committee Chair | | 15,000 |
| Audit Committee Chair | | 15,000 |
|
| Compensation Committee Chair | Compensation Committee Chair | | 10,000 |
| Compensation Committee Chair | | 10,000 |
|
| Nominating and Governance Committee Chair | Nominating and Governance Committee Chair | | 10,000 |
| Nominating and Governance Committee Chair | | 10,000 |
|
Annual Stock Grant1 | | 110,000 |
| |
Annual Stock Grant1 - Directors (other than Non-Executive Chair) | | Annual Stock Grant1 - Directors (other than Non-Executive Chair) | 110,000 |
|
Annual Stock Grant2 - Non-Executive Chair | | Annual Stock Grant2 - Non-Executive Chair | 145,000 |
|
| | | |
1 | The annual stock grant is a grant of shares equal in value to $110,000. | The annual stock grant is a grant of shares of company common stock equal in value to $110,000. |
2 | | The annual stock grant is a grant of shares of company common stock equal in value to $145,000. |
There are no meeting fees paid to directors.
Other Compensation
In addition to liability insurance, we maintain group life insurance in the amount of $100,000 on each non-employee director for the benefit of each director’stheir beneficiaries during the time each director servesthey serve on the board. The annual cost per director is $82.80. Directors who contribute to the company’s Good Government Fund may designate up to two charities to receive a matching donation from the MDU Resources Foundation based on their contributions to the fund. Directors are reimbursed for all reasonable travel expenses, including spousal expenses in connection with attendance at meetings of the board and its committees. Perquisites, if any, were below the disclosure threshold in 2018.
Deferral of Compensation
Directors may defer all or any portion of the annual cash retainer and any other cash compensation paid for service as a director pursuant to the Deferred Compensation Plan for Directors. Deferred amounts are held as phantom stock with dividend accruals and are paid out in cash over a five-year period after the director leaves the board.
Directors are reimbursed for all reasonable travel expenses, including spousal expenses in connection with attendance at meetings of the board and its committees. All reimbursable expense amounts, together with any other perquisites, were below the disclosure threshold for 2016.
MDU Resources Group, Inc. Proxy Statement 19
Post-Retirement
Our post-retirement income plan for directors was terminated in May 2001 for current and future directors. The net present value of each director’s benefit was calculated and converted into phantom stock. Payment is deferred pursuant to the Deferred Compensation Plan for Directors and will be made in cash over a five-year period after the director’s retirement from the board.
Stock Ownership Policy
Our director stock ownership policy contained in our corporate governance guidelines requires each director to own our common stock equal in value to five times the director’s annual cash base retainer. Shares acquired through purchases on the open market and participation inreceived through our director stock plansNon-Employee Director Long-Term Incentive Plan are considered in ownership calculations as is ownership of our common stock by a spouse. A director is allowed five years commencing January 1 of the year following the year of thatthe director’s initial election to the board to meet the requirements. The level of common stock ownership is monitored with an annual report made to the compensation committee of the board. All directors are in compliance with the stock ownership policy.policy or are within the first five years of their election to the board. For further details on our director’s stock ownership, see the section below.entitled “Security Ownership.”
26 MDU Resources Group, Inc. Proxy Statement
Security Ownership Table
The table below sets forth the number of shares of our capitalcommon stock that each director and each nominee for director, each current named executive officer, and all directors and executive officers as a group owned beneficially as of February 28, 2017.2019. Unless otherwise indicated, each person has sole investment and voting power (or share such power with his or her spouse) of the shares noted.
| | | Name | Common Shares Beneficially Owned |
| | Percent of Class |
| | Deferred Director Fees Held as Phantom Stock1 |
| |
| | | |
| | | |
| | | |
| | | |
Name1 | | Name1 | Shares of Common Stock Beneficially Owned |
| | Percent of Class |
|
| |
| |
| |
| |
| David C. Barney | David C. Barney | 12,055 |
| 2,3 | * |
| |
| David C. Barney | 44,313 |
| 2,3 | * |
|
| Thomas Everist | Thomas Everist | 853,458 |
| | * |
| | 32,977 |
| Thomas Everist | 861,692 |
| | * |
|
| Karen B. Fagg | Karen B. Fagg | 61,164 |
| | * |
| |
|
| Karen B. Fagg | 73,314 |
| | * |
|
| Martin A. Fritz | — |
| | * |
| |
| |
| David L. Goodin | David L. Goodin | 101,788 |
| 2 | * |
| |
| David L. Goodin | 264,925 |
| 2 | * |
|
| Mark A. Hellerstein | Mark A. Hellerstein | 15,766 |
| | * |
| | 8,637 |
| Mark A. Hellerstein | 24,000 |
| | * |
|
| A. Bart Holaday | 60,911 |
| | * |
| | 8,637 |
| |
| Dennis W. Johnson | Dennis W. Johnson | 80,330 |
| 4 | * |
| |
| Dennis W. Johnson | 92,352 |
| 4 | * |
|
| Nicole A. Kivisto | | Nicole A. Kivisto | 59,635 |
| 2,5 | * |
|
| William E. McCracken | William E. McCracken | 15,766 |
| | * |
| |
| William E. McCracken | 24,000 |
| | * |
|
| Patricia L. Moss | Patricia L. Moss | 75,418 |
| | * |
| |
| Patricia L. Moss | 76,328 |
| | * |
|
| Harry J. Pearce | Harry J. Pearce | 235,885 |
| | * |
| | 54,221 |
| Harry J. Pearce | 246,740 |
| | * |
|
| Doran N. Schwartz | 54,897 |
| 2,5 | * |
| |
|
| |
| Edward A. Ryan | | Edward A. Ryan | 10,690 |
| | * |
|
| David M. Sparby | | David M. Sparby | 1,726 |
| | * |
|
| Jeffrey S. Thiede | Jeffrey S. Thiede | 7,149 |
| 2 | * |
| |
| Jeffrey S. Thiede | 43,540 |
| 2 | * |
|
| Jason L. Vollmer | | Jason L. Vollmer | 11,374 |
| 2 | * |
|
| Chenxi Wang | | Chenxi Wang | — |
| | * |
|
| John K. Wilson | John K. Wilson | 118,916 |
| | * |
| |
| John K. Wilson | 129,601 |
| | * |
|
| All directors and executive officers as a group (20 in number) | All directors and executive officers as a group (20 in number) | 1,853,142 |
| | 0.95 | % | | 104,472 |
| All directors and executive officers as a group (20 in number) | 2,069,126 |
| 2,6 | 1.05 | % |
| | | | |
* |
| Less than one percent of the class. Percent of class is calculated based on 195,304,376 outstanding shares as of February 28, 2017. | Less than one percent of the class. Percent of class is calculated based on 196,338,488 outstanding shares as of February 28, 2019. |
1 |
| These shares are not included in the “Common Shares Beneficially Owned” column. Directors may defer all or a portion of their cash compensation pursuant to the Deferred Compensation Plan for Directors. Deferred amounts are held as phantom stock with dividend accruals and are paid out in cash over a five-year period after the director leaves the board. | The table includes the ownership of all current directors, director nominees, current named executive officers, and other executive officers of the company without naming them. |
2 |
| Includes full shares allocated to the officer’s account in our 401(k) retirement plan. | Includes full shares allocated to the officer’s account in our 401(k) retirement plan. |
3 |
| The total includes 687 shares owned by Mr. Barney’s spouse. | The total includes 687 shares owned by Mr. Barney’s spouse. |
4 |
| Mr. Johnson disclaims all beneficial ownership of the 163 shares owned by his spouse. | Mr. Johnson disclaims all beneficial ownership of the 163 shares owned by his spouse. |
5 |
| The total includes 1,300 shares owned by Mr. Schwartz’s spouse. | The total includes 531 shares owned by Ms. Kivisto’s spouse. |
6 | | Includes shares owned by a director’s or executive’s spouse regardless of whether the director or executive claims beneficial ownership. |
Hedging Policy
The company’s Director Compensation Policy and its Executive Compensation Policy prohibit our directors and executive officersexecutives from hedging their ownership of company common stock. They mayThe Director Compensation Policy applies to all directors who are not enter intofull-time employees of the company. The Executive Compensation Policy applies to the executives of the company designated as an officer for purposes of Section 16 of the Securities Exchange Act of 1934 as well as all other executives of the company and its subsidiaries who participate in its Long-Term Performance-Based Incentive Plan and its Executive Incentive Compensation Plan. Under the policies, directors and executives are prohibited from engaging in transactions that allow them to benefit from devaluation of our stock or otherwise own stock technically but without the full benefits and risks of such ownership.ownership, including, but not limited to, zero-cost collars, equity swaps, straddles, prepaid variable forward contracts, security futures contracts, exchange funds, forward sale contracts, and other financial transactions that allow the director or executive to benefit from the devaluation of the company’s stock.
20 MDU Resources Group, Inc. Proxy Statement27
Directors, executive officers,The company policies also prohibit directors, executives, and related persons are prohibited from holding our commoncompany stock in a margin account, with certain exceptions, or pledging company securities as collateral for a loan. Company common stock may be held in a margin brokerage account only if the stock is explicitly excluded from any margin, pledge, or security provisions of the customer agreement. Company common stock may be held in a cash account, which is a brokerage account that does not allow any extension of credit on securities. “Related person” means an executive officer’s or director’s spouse, minor child, and any person (other than a tenant or domestic employee) sharing the household of a director or executive officer, as well as any entities over which a director or executive officer exercises control.
Greater Than 5% Beneficial Owners
Based solely on filings with the SEC, the table below sets forthshows information with respect to any person we know to beregarding the beneficial ownerownership of more than five percent of any classthe outstanding shares of our voting securities.common stock.
| | | Title of Class | Title of Class | | Name and Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership |
| | Percent of Class | | Title of Class | | Name and Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership |
| | Percent of Class | |
| | | | |
| Common Stock | Common Stock | | BlackRock, Inc. | | 15,934,262 |
| 1 | 8.20 | % | Common Stock | | The Vanguard Group | | 21,436,898 |
| 1 | 10.93 | % |
| | | 55 East 52nd Street | | | | | |
| | | New York, NY 10055 | | | | | |
| | | | | | |
| Common Stock | | State Street Corporation | | 13,420,759 |
| 2 | 6.87 | % | |
| | | State Street Financial Center | | | | | |
| | | | One Lincoln Street | | | | | | | 100 Vanguard Blvd. | | | | |
| | | | Boston, MA 02111 | | | | | | | Malvern, PA 19355 | | | | |
| | | | | | | | | | | |
| Common Stock | Common Stock | | The Vanguard Group | | 20,142,541 |
| 3 | 10.31 | % | Common Stock | | BlackRock, Inc. | | 18,376,417 |
| 2 | 9.40 | % |
| | | | 100 Vanguard Blvd. | | | | | | | 55 East 52nd Street | | | | |
| | | | Malvern, PA 19355 | | | | | | | New York, NY 10055 | | | | |
| | | | | | | | | | | |
| Common Stock | Common Stock | | Parnassus Investments | | 13,875,527 |
| 4 | 7.10 | % | Common Stock | | State Street Corporation | | 12,377,612 |
| 3 | 6.30 | % |
| | | | 1 Market Street, Suite 1600 | | | | | | | State Street Financial Center | | | | |
| | | | San Francisco, CA 94105 | | | | | | | One Lincoln Street | | | | |
| | | | | | | | | Boston, MA 02111 | | | | |
| | | |
1 | Based solely on the Schedule 13G, Amendment No. 7, filed on January 25, 2017, BlackRock, Inc. reported sole voting power with respect to 15,053,491 shares and sole dispositive power with respect to 15,934,262 shares as the parent holding company or control person of BlackRock (Luxembourg) S.A., BlackRock (Netherlands) B.V., BlackRock Advisors (UK) Limited, BlackRock Advisors, LLC, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Asset Management North Asia Limited, BlackRock Asset Management Schweiz AG, BlackRock Capital Management, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Fund Managers Ltd, BlackRock Institutional Trust Company, N.A., BlackRock Investment Management (Australia) Limited, BlackRock Investment Management (UK) Ltd, BlackRock Investment Management, LLC, and BlackRock Life Limited. | Based solely on the Schedule 13G, Amendment No. 7, filed on February 11, 2019, The Vanguard Group reported sole dispositive power with respect to 21,336,371 shares, shared dispositive power with respect to 100,527 shares, sole voting power with respect to 94,745 shares, and shared voting power with respect to 22,519 shares. These shares include 74,426 shares beneficially owned by Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., as a result of its serving as investment manager of collective trust accounts, and 42,838 shares beneficially owned by Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., as a result of its serving as investment manager of Australian investment offerings. |
2 | Based solely on the Schedule 13G, filed on February 9, 2017, State Street Corporation reported shared voting and dispositive power with respect to all shares as the parent holding company or control person of State Street Bank and Trust Company, SSGA Funds Management, Inc., State Street Global Advisors, Ltd, State Street Global Advisors, Australia, Limited, State Street Global Advisors (Asia) Limited, and State Street Global Advisors France, S.A. | Based solely on the Schedule 13G, Amendment No. 9, filed on February 6, 2019, BlackRock, Inc. reported sole voting power with respect to 17,339,702 shares and sole dispositive power with respect to 18,376,417 shares as the parent holding company or control person of BlackRock Life Limited, BlackRock International Limited, BlackRock Advisors, LLC, BlackRock (Netherlands) B.V., BlackRock Fund Advisors, BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland Limited, BlackRock Financial Management, Inc., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock (Luxembourg) S.A., BlackRock Investment Management (Australia) Limited, BlackRock Advisors (UK) Limited, BlackRock Asset Management North Asia Limited, and BlackRock Fund Managers Ltd. |
3 | Based solely on the Schedule 13G, Amendment No. 5, filed on February 10, 2017, The Vanguard Group reported sole dispositive power with respect to 20,014,996 shares, shared dispositive power with respect to 127,545 shares, sole voting power with respect to 115,860 shares, and shared voting power with respect to 21,119 shares. These shares includes 106,426 shares beneficially owned by Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., as a result of its serving as investment manager of collective trust accounts, and 30,553 shares beneficially owned by Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., as a result of its serving as investment manager of Australian investment offerings. | Based solely on the Schedule 13G, filed on February 14, 2019, State Street Corporation reported shared voting and dispositive power with respect to 12,377,612 shares as the parent holding company or control person of SSGA Funds Management, Inc., State Street Global Advisors Limited (UK), State Street Global Advisors LTD (Canada), State Street Global Advisors, Australia Limited, State Street Global Advisors Asia LTD, State Street Global Advisors Singapore LTD, State Street Global Advisors GmbH, State Street Global Advisors Ireland Limited, and State Street Global Advisors Trust Company. |
4 | Based solely on the Schedule 13G, Amendment No. 2, filed on February 14, 2017, Parnassus Investments reported sole voting and dispositive power with respect to all shares. | |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16 of the Securities Exchange Act of 1934, as amended, requires that officers, directors, and holders of more than 10% of our common stock to file reports of their trading in our equity securities with the Securities and Exchange Commission.SEC. Based solely on a review of Forms 3, 4, and 5, and any amendments to these forms furnished to us during and with respect to 20162018, or written representations that no Forms 5 were required, we believe that all such reports were timely filed, except that in May 2016, Mr. Daniel S. Kuntz filed an amended Form 3 to report beneficial ownership of 631 additional shares that were omitted from his original Form 3 filed in January 2016. Mr. Kuntz disclaims beneficial ownership of these additional shares.filed.
MDU Resources Group, Inc. Proxy Statement 2128
ITEM 2. ADVISORY VOTE TO APPROVE THE FREQUENCY OF THE VOTE TO APPROVE THE COMPENSATION PAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS
In accordance with Section 14A of the Securities Exchange Act of 1934 and Rule 14a-21(b), we are asking our stockholders to indicate, on an advisory basis, whether future advisory votes to approve the compensation paid to our named executive officers should be held every year, every two years, or every three years.
Our board of directors has determined that our stockholders should have the opportunity to vote on the compensation of our named executive officers every year. The board of directors believes that giving our stockholders the right to cast an advisory vote every year on the compensation of our named executive officers is a good corporate governance practice and is in the best interests of our stockholders. Annual advisory votes provide the highest level of accountability and direct communication with our stockholders.
By voting on this Item 2, stockholders are not approving or disapproving the board of directors’ recommendation, but rather are indicating whether they prefer an advisory vote on named executive officer compensation be held every year, every two years, or every three years. Stockholders may also abstain from voting.
Although the board of directors intends to carefully consider the voting results of this proposal, it is an advisory vote and the results will not be binding on the board of directors or the company, and the board of directors may decide that it is in the best interests of our stockholders and the company to hold an advisory vote on executive compensation more or less frequently than the option selected by our stockholders. We will provide our stockholders with the opportunity to vote on the frequency of advisory votes on our named executive officer compensation at our annual meetings at least once every six calendar years.
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| | | | |
The board of directors recommends that an advisory vote
on compensation paid to our named executive officers be held every year.
|
The frequency of every year, every two years, or every three years that receives the most votes of our common stock present in person or represented by proxy at the meeting and entitled to vote on the proposal will be the frequency for the advisory vote on executive compensation that has been recommended by our stockholders. Abstentions will not count as votes for or against any frequency. Broker non-votes are not counted as voting power present and, therefore, are not counted in the vote.
22 MDU Resources Group, Inc. Proxy Statement
ITEM 3.2. ADVISORY VOTE TO APPROVE THE COMPENSATION PAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS
In accordance with Section 14A of the Securities Exchange Act of 1934 and Rule 14a-21(a), we are asking our stockholders to approve, in a separatean advisory vote, the compensation of our named executive officers as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K. As discussed in the Compensation Discussion and Analysis, ourthe compensation committee and board of directors believe that ourthe current executive compensation program directly links compensation of ourthe named executive officers to our financial performance and aligns the interests of ourthe named executive officers with those of our stockholders. OurThe compensation committee and board of directors also believe that ourthe executive compensation program provides ourthe named executive officers with a balanced compensation package that includes an appropriate base salary along with competitive annual and long-term incentive compensation targets. These incentive programs are designed to reward ourthe named executive officers on both an annual and long-term basis if they attain specified goals.
Our overall compensation program and philosophy isfor 2018 was built on a foundation of these guiding principles:
we pay for performance, with over 60% of our 20162018 total target direct compensation for ourthe named executive officers in the form of performance-based incentive compensation;
we review competitive compensation data for ourthe named executive officers, to the extent available, and incorporate internal equity in the final determination of target compensation levels;
we align executive compensation and performance by using annual performance incentives based on criteria that are important to stockholder value, including earnings, earnings per share, and return on invested capital;earnings before interest, taxes, depreciation, and amortization (EBITDA); and
we align executive compensation and performance by using long-term performance incentives based on total stockholder return relative to our peer group.group and financial measures important to company growth.
We are asking our stockholders to indicate their approval of our named executive officer compensation as disclosed in this Proxy Statement, including the Compensation Discussion and Analysis, the executive compensation tables, and narrative discussion. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers for 2016.2018. Accordingly, the following resolution is submitted for stockholder vote at the 20172019 annual meeting:
“RESOLVED, that the compensation paid to the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion of this proxy statement,Proxy Statement, is hereby approved.”
As this is an advisory vote, the results will not be binding on the company, the board of directors, or the compensation committee and will not require us to take any action. The final decision on the compensation of ourthe named executive officers remains with ourthe compensation committee and ourthe board of directors, although ourthe board and compensation committee will consider the outcome of this vote when making future compensation decisions. In a separateWe intend to hold this advisory vote we are also providing our stockholders withevery year until at least the opportunity tonext stockholder advisory vote on an advisory basis, on whether the vote on our named executive officer compensation should occur every year, every two years, or every three years.frequency of this vote.
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| | | | |
The board of directors recommends a vote “for” the approval, on a non-binding advisory basis, of the compensation of the company’s named executive officers, as disclosed in this Proxy Statement. |
Approval of the compensation of ourthe named executive officers requires the affirmative vote of a majority of ourthe common stock present in person or represented by proxy at the meeting and entitled to vote on the proposal. Abstentions will count as votes against this proposal. Broker non-vote shares are not entitled to vote on this proposal and, therefore, are not counted in the vote.
MDU Resources Group, Inc. Proxy Statement 2329
INFORMATION CONCERNING EXECUTIVE OFFICERS
At the first annual meeting of the board after the annual meeting of stockholders, our board of directors elects our executive officers, who serve until their successors are chosen and qualify. A majority of our board of directors may remove any executive officer at any time. Information concerning ourthe executive officers, including their ages as of December 31, 2016,2018, present corporate positions, and business experience during the past five years, is as follows:
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| | | | | | |
| | Name | | Age | | Present Corporate Position and Business Experience | |
| | David L. Goodin | | 5557 | | Mr. Goodin was elected president and chief executive officer of the company and a director effective January 4, 2013. For more information about Mr. Goodin, see the section entitled “Item 1. Election of Directors.” | |
| | David C. Barney | | 6163 | | Mr. Barney was elected president and chief executive officer of Knife River Corporation effective April 30, 2013, and president effective January 1, 2012. | |
| | Martin A. FritzTrevor J. Hastings | | 5245 | | Mr. FritzHastings was elected president and chief executive officer of WBI Holdings, Inc. effective July 20, 2015. Prior to joining WBI Holdings, Inc., he had his own energy consulting firm, Fritz Consulting, from February 2014 to July 2015, where he provided strategy, operations, business development, and business brokerage services. Prior to that, Mr. Fritz was employed by EQT Corporation, a petroleum and natural gas exploration and pipeline company, in positions of increasing responsibility, most recently serving as its executive vice president midstream operations, land and construction from 2013 through January 2014 and vice president EQT and president EQT midstream operations from 2008 to 2013. | |
| Dennis L. Haider | | 64 | | Mr. Haider was elected executive vice president-business development effective June 1, 2013.October 16, 2017. Prior to that, he was executive vice president-business development and gas supplyoperations support of Montana-Dakota Utilities Co., Great Plains Natural Gas Co., Cascade Natural GasKnife River Corporation and Intermountain Gas Company fromeffective January 1, 2012 to May 31, 2013.11, 2012. | |
| | Anne M. Jones | | 5355 | | Ms. Jones was elected vice president-human resources effective January 1, 2016. Prior to that, she was vice president-human resources, customer service, and safety at Montana-Dakota Utilities Co., Great Plains Natural Gas Co., Cascade Natural Gas Corporation, and Intermountain Gas Company effective July 1, 2013, and director of human resources for Montana-Dakota Utilities Co. and Great Plains Natural Gas Co. effective June 2008. | |
| | Nicole A. Kivisto | | 4345 | | Ms. Kivisto was elected president and chief executive officer of Montana-Dakota Utilities Co., Great Plains Natural Gas Co., Cascade Natural Gas Corporation, and Intermountain Gas Company effective January 9, 2015. Prior to that, she was vice president of operations for Montana-Dakota Utilities Co. and Great Plains Natural Gas Co. effective January 3, 2014, and vice president, controller and chief accounting officer for the company effective February 17, 2010. | |
| | Daniel S. Kuntz | | 6365 | | Mr. Kuntz was elected vice president, general counsel and secretary effective January 1, 2017. Prior to that, he was general counsel and secretary effective January 9, 2016, associate general counsel effective April 1, 2007, and assistant secretary effective August 17, 2007. | |
| | Margaret (Peggy) A. Link | | 5052 | | Ms. Link was elected vice president and chief information officer effective December 1, 2017. Prior to that, she was chief information officer effective January 1, 2016. Prior to that, she was2016, assistant vice president-technology and cybersecurity officer effective January 1, 2015, and director shared IT services effective June 2, 2009. | |
| | Doran N. Schwartz | | 47 | | Mr. Schwartz was elected vice president and chief financial officer effective February 17, 2010. | |
| Jeffrey S. Thiede | | 5456 | | Mr. Thiede was elected president and chief executive officer of MDU Construction Services Group, Inc. effective April 30, 2013, and president effective January 1, 2012. | |
| | Jason L. Vollmer | | 3941 | | Mr. Vollmer was elected vice president, chief financial officer and treasurer effective September 30, 2017. Prior to that, he was vice president, chief accounting officer and treasurer effective March 19, 2016. Prior to that, he was2016, treasurer and director of cash and risk management effective November 29, 2014, assistant treasurer of Centennial Energy Holdings, Inc. and manager of treasury services and risk management effective June 30, 2014, and manager of treasury services, cash and risk management effective April 11, 2011. | |
2430 MDU Resources Group, Inc. Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Discussion and Analysis describes how our named executive officers were compensated for 20162018 and how their 20162018 compensation aligns with our pay for performance philosophy. It also describes the oversight of the compensation committee and the rationale and processes used to determine the 20162018 compensation of our named executive officers including the objectives and specific elements of our compensation program.
The Compensation Discussion and Analysis may contain statements regarding corporate performance targets and goals. The targets and goals are disclosed in the limited context of our compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. We specifically caution investors not to apply these statements to other contexts.
Our Named Executive Officers for 20162018 were:
|
| |
| David L. Goodin | President and Chief Executive Officer (CEO) |
Doran N. SchwartzJason L. Vollmer | Vice President, and Chief Financial Officer (CFO) and Treasurer |
| David C. Barney | President and Chief Executive Officer - Construction Materials &and Contracting Segment |
| Jeffrey S. Thiede | President and Chief Executive Officer - Construction Services Segment |
MartinNicole A. FritzKivisto | President and Chief Executive Officer - Pipeline & Midstream SegmentElectric and Natural Gas Distribution Segments |
Executive Summary
Pay for Performance
To ensure management’s interests are aligned with those of our stockholders and the performance of the company, over 76%the majority of the CEO’s target compensation and 61% of the other named executive officers’ target compensation is dependent on the achievement of company performance targets. The charts below show the target pay mix for the CEO and average target pay mix of the other named executive officers, including base salary and the annual and long-term at-risk performance incentives.
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| |
| *Includes time-vesting restricted stock units for certain named executive officers. |
Annual Base Salary
We provide our executive officers with base salary at a sufficient level to attract, recruit, and retain executives with the knowledge, skills, and abilities necessary to successfully execute their job responsibilities. Consistent with our compensation philosophy of linking pay to performance, our executives receive a relatively smaller percentage of their overall target compensation in the form of base salary. In establishing base salaries, the compensation committee considers each executive’s individual performance, the scope and complexities of their responsibilities, internal equity, and whether the base salary is competitive as measured against the base salaries of similarly situated executives in our peer group and market compensation data.
MDU Resources Group, Inc. Proxy Statement 31
Annual Cash Incentive Awards
Annual cash incentive opportunitiesawards for our executive officers are linked to performance by tying them to therewarding achievement of financial goals and ensuring our executive officers are focused and accountable for our growth and profitability. The design of the annual cash incentive award opportunities for 2018 was the same as the design used in 2017. Each executive is assigned a target annual incentive award based on a percentage of the executive’s base salary. The actual annual cash incentive realized is determined by multiplying the target award by the payout percentage associated with achievement of the executive’s performance measures.
The compensation committee selected specific business andsegment financial goals. The 2016 annual incentive opportunitiesperformance measures for the business segment executives arewhich represented 80% of their annual award opportunity. The other 20% of the business segment executives’ annual award opportunity was based on the achievement of specific performanceoverall company earnings per share (EPS). These measures selected by the compensation committee. The performance measures included targets specific to the business segment and one performance measure tied to the success of the company as a whole. This incentivizedincentivize our business segment executives to focus on the success and performance of their business segment while keeping the overall success of the company in mind.
ForThe annual cash incentive award for corporate executives (including our CEO and CFO), annual incentive opportunities are is based on the business segments’ achievement of theirthe performance measures. Themeasures for each business segment performance measures are thenexecutive and weighted by its averageeach business segment’s invested capital relative to the company’s total invested capital. The corporate executives’ target awards are multiplied by the sum of the weighted achievement percentage for each business unit achieved performance measures results insegment executive to derive the corporate executives’ realized annual incentive payout for corporate executives.awards. This incentivizes the corporate executives to assist the business segments in their success while still emphasizing overall company performance. See the “Annual Incentives” section within this Compensation Discussion and performance.
MDU Resources Group, Inc. Proxy Statement 25
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| | | | | | |
Construction Materials & Contracting Segment | | Construction Services Segment | | Pipeline & Midstream Segment | | Electric & Natural Gas Distribution Segment |
ê | | ê | | ê | | ê |
Business Segment Targets | | Business Segment Targets | | Business Segment Targets | | Business Segment Targets |
Company Target | | Company Target | | Company Target | | Company Target |
ê | | ê | | ê | | ê |
MDU Resources Corporate Executives (including our CEO and CFO)
Achievement of Business Segment Measures x Business Segment Average Invested Capital
|
Analysis for further details on our company’s annual cash incentive program.
The following chart shows the percentage payout of the annual incentive payout of target realized by our CEO with a comparison to earnings per share from continuing operations for the last five years andyears. The chart demonstrates the alignment between our financial performance and realized annual cash incentive compensation.
See “Annual Incentives” in this section for further details on our company’s annual incentive program.Vesting of long-term incentives is based on our company’s total stockholder return in comparison to that of our peers measured over a three year period. The following chart depicts the actual vesting percentage for the last five performance cycles and demonstrates the alignment between total return to our stockholders and our realized long-term incentive compensation.
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*MDU Resources Group, Inc. reported 2017 earnings from continuing operations of $1.45 per share which included a non-recurring benefit of 20 cents per share attributable to the federal Tax Cuts and Jobs Act that was signed into law on December 22, 2017. |
2632 MDU Resources Group, Inc. Proxy Statement
Long-Term Equity-Based Incentive Awards
In their February 2018 meeting, the compensation committee and the board approved off-cycle awards to Messrs. Barney and Thiede of time-vesting restricted stock units which will vest on December 31, 2020, if the executives remain employed through the vesting date. The compensation committee believed the restricted stock unit awards incentivize Messrs. Barney and Thiede to continue their employment for the next three years and grow their respective business segments during that time.
See the “Long-Term Incentives” insection within this sectionCompensation Discussion and Analysis for further details on the company’s long-term incentive program.
With the majority of our executive officer’s compensation dependent on the achievement of performance measures set by the compensation committee, we believe there is substantial alignment between executive pay and the company’s performance.
Stockholder Advisory Vote (“Say on Pay”)
At our 20162018 Annual Meeting of Stockholders, 85.2%95.9% of the votes cast on the “Say on Pay” proposal approved the compensation of our named executive officers. Although theThe compensation committee viewed the 20162018 vote as a strongan expression of the stockholders general satisfaction with the company’s executive compensation programs, the 85.2% approval is lower than the results of our 88.2% “Say on Pay” vote at the 2015 Annual Meeting of Stockholders. The compensation committee believes the lower approval vote was largely attributable to a negative recommendation of a proxy advisor largely caused by comparative analysis to a peer group that was not reflective of the company’s business mix and an analysis that gave inadequate recognition to the distinction between target incentive award opportunities and realized incentive compensation.programs. The compensation committee reviewed and considered the 20162018 vote on “Say on Pay” in setting compensation for 2017.2019 by continuing to link performance-based annual and long-term incentives to company financial performance and stockholder value.
Total Realized Pay
Total Realized Pay reflects the compensation actually paid to our executive officers based on performance, which can differ substantially from compensation as presented in the Summary Compensation Table. For example, total compensation presented in the Summary Compensation Table contains estimated values of performance share grants based on multiple assumptions which may or may not be achieved and can only be realized at the end of a three-year performance period. In addition, the Summary Compensation Table may show an increase in pension value based on valuation assumptions and discount rates used to calculate present value; however, any change in the pension value is not realized until the future period when the executive actually retires. We believe presenting information on Total Realized Pay provides additional perspective on the renumeration actually received by an executive in a given year. We define 2016 Total Realized Pay to include:
Base salary for 2016;
Annual incentive earned for 2016;
Performance shares (long-term incentive) plus dividend equivalents vesting as of December 31, 2016 and paid in 2017; and
Other compensation which includes company contributions to the 401(k) plan and company paid life insurance premiums.
MDU Resources Group, Inc. Proxy Statement 2733
|
| | | | | | | | | | | | | |
| Name | 2016 Base Salary ($) |
| 2016 Annual Incentive Earned ($) |
| Vested and Paid Performance Shares1 ($) |
| 2016 Other Compensation ($) |
| 2016 Total Realized Pay ($) |
| Summary Compensation Table Total Compensation ($) |
|
| David L. Goodin | 755,000 |
| 1,055,490 |
| 654,368 |
| 40,246 |
| 2,505,104 |
| 3,510,991 |
|
| Doran N. Schwartz | 380,000 |
| 351,481 |
| 171,936 |
| 35,772 |
| 939,189 |
| 1,134,629 |
|
| David C. Barney | 406,800 |
| 593,114 |
| 145,190 |
| 22,905 |
| 1,168,009 |
| 1,376,616 |
|
| Jeffrey S. Thiede | 425,000 |
| 489,600 |
| 152,848 |
| 22,708 |
| 1,090,156 |
| 1,325,906 |
|
| Martin A. Fritz | 400,000 |
| 416,000 |
| — |
| 21,670 |
| 837,670 |
| 1,243,248 |
|
1 | Performance shares and dividend equivalents for the 2014-2016 performance cycle vested on December 31, 2016 and were approved in February 2017. The performance share value is based on our stock price on February 16, 2017, which was $26.37 per share. |
Compensation Practices
Our practices and policies ensure alignment between the interests of our stockholders and our executives as well as effective compensation governance.
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| What We Do |
| | |
| þ | Pay for Performance - All annualAnnual and long-term award incentives are performance-based and tied to performance measures set by the compensation committee.committee comprise the largest portion of executive compensation. |
| þ | Independent Compensation Committee- All members of the compensation committee meet the independence standards under the New York Stock Exchange listing standards and the Securities and Exchange Commission rules. |
| þ | Independent Compensation Consultant - The compensation committee retains an independent compensation consultant to evaluate executive compensation plans and practices. |
| þ | Competitive Compensation - Executive compensation reflects the executive’sexecutive performance, experience, relative value compared to other positions within the company, relationship to competitive market value compensation, business segment economic environment, and the economic environmentactual performance of the executive’soverall company and the business segment.segments. |
| þ | Annual Cash Incentive - Payment of annual cash incentive awards are based on business segment and overall company performance against pre-established financial measures. |
| þ | Long-Term Equity Incentive - The long-term performance-based equity incentive in the form of performance shares represents approximately 56% of our CEO’s and approximately 37% of our other named executive officers’ 2018 target compensation, which may only be earned based on achievement of established performance measures at the end of a three-year period. |
| þ | Annual Compensation Risk Analysis - We regularly analyze the risks related to our compensation programs and conduct aan annual broad risk assessment annually.assessment. |
| þ | Stock Ownership &and Retention Requirements - Executive officers are required to own, within five years of appointment or promotion, company common stock equal to a multiple of their base salary. The executive officers also must retain at least 50% of the net after taxafter-tax shares of stock vested through the long-term incentive plan for the earlier ofat least two years or until termination of employment. |
| þ | Clawback Policy- If the company’s audited financial statements are restated, the compensation committee may, or shall if required, demand repayment of some or all incentives paid to companyour executive officers within the last three years. |
| | |
What We Don’tDo Not Do |
| | |
| ý | Stock Options - The company does not use stock options as a form of incentive compensation. |
| ý | Employment Agreements - Executives do not have employment agreements entitling them to specific payments upon termination or a change of control of the company. |
| ý | Perquisites - Executives do not receive perquisites whichthat materially differ from those available to employees in general. |
| ý | Tax Gross-upsHedge Stock - Executive officers do not receive tax gross-ups on any compensation.
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ý | Hedge or Pledge Stock - Executives and directors are not allowed to hedge or pledge company securities.
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| ý | Pledge Stock-Executives and directors are not allowed to pledge company securities in margin accounts or as collateral for loans. |
| ý | No Time Based Awards Dividends or Dividend Equivalents on Unvested Shares- All long-term incentives are performance-based and vest only upon the achievementWe do not provide for payment of specific performance measures.dividends or dividend equivalents on unvested share awards. |
28 MDU Resources Group, Inc. Proxy Statement
20162018 Compensation Framework
Objectives of our Compensation Program
We have a written executive compensation policy for our executive officers, including all ourthe named executive officers. Our policy’s stated objectives are to:
recruit, motivate, reward, and retain high performing executive talent required to create superior long-term total stockholder return in comparison to our peer group;
reward executives for short-term performance, as well as for growth in enterprise value over the long-term;
34 MDU Resources Group, Inc. Proxy Statement
provide a competitive compensation package relative to industry-specific and general industry comparisons and internal equity;
ensure effective utilization and development of talent by working in concert with other management processes - for example, performance appraisal, succession planning, and management development; and
ensure that compensation programs do not encourage or reward excessive or imprudent risk taking.
Compensation Decision Process for 20162018
For 2016,2018, the compensation committee made recommendations to the board of directors regarding compensation of all executive officers, and the board of directors then approved the recommendations. The CEO’s role in the process includes the assessment of executive officer performance and recommending base salaries for the executive officers other than himself. The CEO attended all the compensation committee meetings but was not present during discussions of his compensation. The compensation committee established and approved base salaries and performance measures for the annual and long-term incentive compensation for 2016.2018. They also certified the achievement of performance measures in 2017 associated with annual and long-term incentive compensation.
At least every two years, the compensation committee hires an independent consulting firm to assess and recommend competitive pay levels, including base salaries and incentive compensation, associated with executive officer positions. Typically the consulting firm conducts its analysis in even numbered years. In odd numbered years, the assessment is performed by the company’s human resources department using a variety of industry specific sources. In 2015,August 2017, the company’s human resources department prepared the analysis of and provided recommendations for 2016 compensation.the 2018 compensation structure.
Components of Compensation
The components of our executive officer’s compensation are selected to drive financial and operational results as well as align the executive officer’s interests with those of our stockholders. The components of our executive compensation include:
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| Component | Payments | Purpose | | How Determined | | How it Links to Performance |
| Base Salary | Assured | Provides executives with sufficient, regularly paid income to recruit and retain executives with the knowledge, skills, and abilities necessary to successfully execute their job responsibilities. | | Compared toBased on recommendation from the CEO for executives other than himself and analysis of peer company and industry compensation information. | | Base salary is a means to attract and retain talented executives capable of driving success and performance. |
| Annual Cash Incentive | Performance Based
At Risk | Provides an opportunity to earn annual incentive compensation to ensure focus on annual financial results and to be competitive from a total renumeration standpoint and to ensure focus on annual financial and operating results.standpoint. | | Annual cash incentives are calculated as a percentage of base salary with payout based on the achievement of performance measures established in advance by the compensation committee. | | Annual incentive performance measures are tied to the achievement of financial and operational goals aimed to drive the success of the company.company and the individual business segments. |
| Performance Shares | Performance Based
At Risk | Provides an opportunity to earn long-term compensation to ensure focus on stockholder return and to be competitive from a total renumeration standpoint and to ensure focus on stockholder return.standpoint. | | Performance share award opportunities are calculated as a percentage of base salary and pay out iswith vesting based on the company’s achievement of financial measures established by the compensation committee as well as total stockholder return over a three-year period in comparison to the company’s peer group.group over a three-year performance cycle. | | Fosters ownership in company stock and aligns the executive’s interests with those of stockholders in increasing stockholder value. |
| Restricted Stock Units | Time Vested | Provides an opportunity to earn long-term compensation to promote retention of executive talent, focus on long-term business segment growth, and to be competitive from a total renumeration standpoint. | | Restricted stock unit awards are determined by the compensation committee and vest at the end of a three-year period if the executive remains employed by the company. | | Fosters ownership in company stock and incentivizes executives to remain employed with the company while aligning the executive’s interests with those of the stockholder in increasing stockholder value. |
Allocation of Total Target Compensation for 2016
Total target compensation consists of base salary plus target annual and long-term incentive compensation. Performance-based compensation accounts for over 76% of our CEO’s and on average approximately 61% of our other named executive officers’ total target
MDU Resources Group, Inc. Proxy Statement 2935
Allocation of Total Target Compensation for 2018
Total target compensation consists of base salary plus target annual and long-term incentive compensation. IncentivePerformance-based incentive compensation, which consists of annual cash incentive and three-year performance share award opportunities, comprises the largest portion of our named executive officers’ total target compensation because:
our named executive officers are in positions to drive, and therefore bear high levels of responsibility for, our corporate performance;
incentive compensation is dependent upon our performance;
incentive compensation helps ensure focus on performance measures that are aligned with our overall strategy; and
the interests of the named executive officers are aligned with those of stockholders by making a significant portion of their target compensation contingent upon results beneficial to stockholders.
To foster and reward long-term growth, the compensation committee generally allocates a higher percentage of total target compensation to the target long-term incentive than to the target annual incentive for our higher level executives because they are in a better position to influence our long-term performance. The long-term incentive awards, if earned by achieving performanceestablished measures, are paid in company common stock. These awards, combined with our stock retention requirements and our stock ownership policy, promote ownership of our stock by the executive officers. The compensation committee believes as stockholders, the executive officers, as stockholders, will be motivated to deliver financial results that build value for all stockholders over the long term.
Peer Group
The compensation committee evaluates the company’s compensation plan and its performance relative to a group of peer companies in determining compensation and the vesting of long-term incentive compensation. The companies included in our peer group are evaluated every year and are selected to be representativeas representatives of the industries in which we operate. During 2015, as we decided to exit the oil and gas exploration and production business, we re-evaluated ourThe 2018 peer group and removed the remaining exploration and productionincludes twelve companies which were Bill Barrett Corporation and SM Energy Company from the peer group. To more closely reflect ourin regulated energy delivery businesses, and eight companies in the construction materials andor construction services businesses,businesses. In determining the 2018 peer group, we added IDACORP, Inc., NorthWesternremoved five companies, namely Avista Corporation, U.S. Concrete, Inc.,National Fuel Gas Company, IES Holdings, Inc., Quanta Services, Inc., and MYR Group,Sterling Construction Company, Inc., due to oursize, industry focus, or pending merger. Companies added to the 2018 peer group. MarkWest Energy Partners L.P.group were Otter Tail Corporation, Portland General Electric Company, Southwest Gas Holdings, Inc., which was added as a peer company in 2015, merged with another companySpire, Inc., MasTec, Inc., and was removed from our 2015 peer group. Likewise, Questar Corporation merged with another company in 2016Summit Materials, Inc. due to their industry focus, relative size, and was removed from our 2016 peer group.geographic location. The following chart depicts the companies included in our 20162018 peer group.
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20162018 Peer Companies |
| ê | | | | ê | |
| Regulated Energy Delivery | | Construction Materials and Services |
ê | | ê | | ê | | ê |
Utility | | Pipeline | | Construction Materials & Contracting | | Construction Services |
| ALLETE, Inc. | | Atmos Energy Corporation | | Granite Construction Incorporated | | EMCOR Group, Inc. |
| Alliant Energy Corporation | Granite Construction Incorporated |
National Fuel Gas Company | Atmos Energy Corporation | Martin Marietta Materials, Inc. | | Quanta Services, Inc. |
Avista Corporation | | | | Sterling Construction Company, Inc. | | IES Holdings, Inc. |
| Black Hills Corporation | MasTec, Inc. |
| | Vulcan Materials Company | IDACORP, Inc. | MYR Group, Inc. |
| Northwest Natural Gas Company | Summit Materials, Inc. |
| NorthWestern Corporation | U.S. Concrete, Inc. |
| Otter Tail Corporation | Vulcan Materials Company |
| Portland General Electric Company | |
| Southwest Gas Holdings, Inc. | |
| Spire Inc. | |
| Vectren Corporation | | | | | | |
IDACORP, Inc. | | | | | | |
NorthWestern Corporation | | | | | | |
20162018 Compensation for Our Named Executive Officers
20162018 Base Salary and Incentive Targets
For 2016, Mr. Goodin consideredAt its November 2017 meeting, the 2015 financial results as well as the economic challenges facing the company and recommended acompensation committee approved 2018 base salary freezesalaries for the named executive officersofficers. Mr. Goodin was not present during 2016, with the exception of Mr. Barney where he recommended a 3% increase based on the outstanding performanceportion of the construction materials & contracting segment in achieving record earningsmeeting where the compensation committee discussed and exceedingapproved the president and CEO base salary for 2018. At its risk adjusted capital cost in 2015. TheFebruary 2018 meeting, the compensation committee approved the salary recommendations oftarget annual and long-term incentive opportunities for our named executive officers. In determining base salaries, target cash annual incentives, target long-term incentives, and total direct compensation for our named executive officers, the CEO. The compensation committee reviewedreceived and determined to freeze Mr. Goodin’s base salary for 2016 consistent with the freeze of other named executive officers.considered company and individual
3036 MDU Resources Group, Inc. Proxy Statement
performance, market and peer data, responsibilities, experience, tenure in position, internal equity, and input and recommendations from the CEO and human resources department. The following is information relatedrelates to each named executive officer’s base salary, target cash annual incentive, target long-term incentive, and total direct compensation:
|
| | | | | |
| David L. Goodin | 2016 ($) | % Increase from Prior Year | Compensation Component
as a % of Base Salary |
| |
| Base Salary | 755,000 | 0% | n/a |
| |
| Target Annual Incentive Opportunity | 755,000 | 0% | 100 | % | |
| Target Long-Term Incentive Opportunity | 1,698,750 | 0% | 225 | % | |
| Target Total Potential Direct Compensation | 3,208,750 | 0% | 425 | % | |
| | | Doran N. Schwartz | 2016
($) | % Increase from Prior Year | Compensation Component as a % of Base Salary |
| | |
| David L. Goodin | | 2018
($) | Compensation Component
as a % of Base Salary |
| |
| Base Salary | 380,000 | 0% | n/a |
| | 824,460 | | |
| Target Annual Incentive Opportunity | 247,000 | 0% | 65 | % | | 824,460 | 100 | % | |
| Target Long-Term Incentive Opportunity | 342,000 | 0% | 90 | % | | |
| Target Long-Term Performance Share Incentive Opportunity | | 2,061,150 | 250 | % | |
| Target Total Potential Direct Compensation | 969,000 | 0% | 255 | % | | 3,710,070 |
|
| |
| The compensation committee considered information provided in the 2016 and 2017 compensation studies showing Mr. Goodin's base salary, total cash compensation, and long-term incentives were below market levels and increased Mr. Goodin’s base salary by 4% and long-term incentive target from 225% to 250% for 2018. No changes were made to Mr. Goodin’s annual incentive target as a percentage of base salary. | | The compensation committee considered information provided in the 2016 and 2017 compensation studies showing Mr. Goodin's base salary, total cash compensation, and long-term incentives were below market levels and increased Mr. Goodin’s base salary by 4% and long-term incentive target from 225% to 250% for 2018. No changes were made to Mr. Goodin’s annual incentive target as a percentage of base salary. | |
| | | David C. Barney | 2016
($) | % Increase from Prior Year |
| Compensation Component
as a % of Base Salary |
| | |
| Jason L. Vollmer | | 2018
($) | Compensation Component as a % of Base Salary |
| |
| Base Salary | 406,800 | 3 | % | n/a |
| | 350,000 | | |
| Target Annual Incentive Opportunity | 305,100 | (3 | )% | 75 | % | | 227,500 | 65 | % | |
| Target Long-Term Incentive Opportunity | 325,440 | 18 | % | 80 | % | | |
| Target Long-Term Performance Share Incentive Opportunity | | 420,000 | 120 | % | |
| Target Total Potential Direct Compensation | 1,037,340 | 5 | % | 255 | % | | 997,500 |
|
| |
| Mr. Barney continues to transition from an all annual incentive target to a combination of annual and long-term incentive targets in connection with his promotion in 2013. Mr. Barney’s annual incentive target as a percent of base salary decreased from 80% in 2015 to 75% for 2016, while his long-term incentive target as a percent of base salary increased from 70% in 2015 to 80% for 2016. | | |
| For 2018, Mr. Vollmer's base salary remained at $350,000, which was set when he was promoted to CFO effective September 30, 2017. His annual and long-term incentive targets were set at 65% and 120% of his base salary, respectively. | | For 2018, Mr. Vollmer's base salary remained at $350,000, which was set when he was promoted to CFO effective September 30, 2017. His annual and long-term incentive targets were set at 65% and 120% of his base salary, respectively. | |
| | | Jeffrey S. Thiede | 2016
($) | % Increase from Prior Year |
| Compensation Component
as a % of Base Salary |
| | |
| David C. Barney | | 2018 ($) | Compensation Component
as a % of Base Salary |
| |
| Base Salary | 425,000 | 0 | % | n/a |
| | 455,000 | | |
| Target Annual Incentive Opportunity | 318,750 | (6 | )% | 75 | % | | 341,250 | 75 | % | |
| Target Long-Term Incentive Opportunity | 340,000 | 14 | % | 80 | % | | |
| Target Long-Term Performance Share Incentive Opportunity | | 546,000 | 120 | % | |
| Target Restricted Stock Units Opportunity | | 300,000 | 66 | % | |
| Target Total Potential Direct Compensation | 1,083,750 | 2 | % | 255 | % | | 1,642,250 |
|
| |
| Mr. Thiede continues to transition from an all annual incentive target to a combination of annual and long-term incentive targets in connection with his promotion in 2013. Mr. Thiede’s annual incentive target as a percent of base salary decreased from 80% in 2015 to 75% for 2016, while his long-term incentive target as a percent of base salary increased from 70% in 2015 to 80% for 2016. | | |
| Mr. Barney received a 6.5% increase in base salary for 2018. For 2018, the compensation committee maintained Mr. Barney’s target annual incentive opportunity at 75% of his base salary but increased his long-term incentive opportunity from 90% to 120%. Mr. Barney also received a grant of 11,419 restricted stock units which vest on December 31, 2020, if he remains employed by the company. | | Mr. Barney received a 6.5% increase in base salary for 2018. For 2018, the compensation committee maintained Mr. Barney’s target annual incentive opportunity at 75% of his base salary but increased his long-term incentive opportunity from 90% to 120%. Mr. Barney also received a grant of 11,419 restricted stock units which vest on December 31, 2020, if he remains employed by the company. | |
| | | Martin A. Fritz | 2016
($) | % Increase from Prior Year |
| Compensation Component
as a % of Base Salary |
| | |
| Jeffrey S. Thiede | | 2018
($) | Compensation Component
as a % of Base Salary |
| |
| Base Salary | 400,000 | 0 | % | n/a |
| | 455,000 | | |
| Target Annual Incentive Opportunity | 260,000 | 0 | % | 65 | % | | 341,250 | 75 | % | |
| Target Long-Term Incentive Opportunity | 360,000 | 0 | % | 90 | % | | |
| Target Long-Term Performance Share Incentive Opportunity | | 546,000 | 120 | % | |
| Target Restricted Stock Units Opportunity | | 300,000 | 66 | % | |
| Target Total Potential Direct Compensation | 1,020,000 | 0 | % | 255 | % | | 1,642,250 |
|
| |
| Mr. Thiede received a 3.9% increase in his base salary for 2018. For 2018, the compensation committee maintained Mr. Thiede’s target annual incentive opportunity at 75% of base salary but increased his long-term incentive opportunity from 90% to 120%. Mr. Thiede also received a grant of 11,419 restricted stock units which vest on December 31, 2020, if he remains employed by the company. | | Mr. Thiede received a 3.9% increase in his base salary for 2018. For 2018, the compensation committee maintained Mr. Thiede’s target annual incentive opportunity at 75% of base salary but increased his long-term incentive opportunity from 90% to 120%. Mr. Thiede also received a grant of 11,419 restricted stock units which vest on December 31, 2020, if he remains employed by the company. | |
MDU Resources Group, Inc. Proxy Statement 37
|
| | | | |
| Nicole A. Kivisto | 2018
($) | Compensation Component
as a % of Base Salary |
| |
| Base Salary | 430,000 | | |
| Target Annual Incentive Opportunity | 279,500 | 65 | % | |
| Target Long-Term Performance Share Incentive Opportunity | 516,000 | 120 | % | |
| Target Total Potential Direct Compensation | 1,225,500 |
|
| |
| Ms. Kivisto received a base salary increase of 13.8% for 2018. The compensation committee maintained her target annual incentive opportunity at 65% of base salary but increased her long-term incentive opportunity from 90% to 120% of base salary for 2018. | |
Annual Incentives
Annual incentive opportunitiesawards are determined for business segment executives by the achievement of specific performance measures selected by the compensation committee.committee including financial performance measures specific to each business segment and a performance measure tied to overall company earnings per share. For corporate executives, annual incentive opportunitiesawards are determined as the sum of a weighted percentage award payout of each business segment based upon achievement of its performance measures. Percentage award payouts for the business segments are weighted by the average ofbusiness segment’s invested capital relative to the business segments’ achievement of their performance measures weighted by its averagecompany’s total invested capital. Through this, our business segment executives are incentivized to primarily focus on the success and performance of their business segment while keeping the overall financial success of the company in mind, whereas our corporate executives focus onare incentivized to assist in the success and performance of all lines of business.
MDU Resources Group, Inc. Proxy Statement 31
The compensation committee developedconsidered and reviewedselected objective financial and other corporate performance measures to ensure that compensation to the executives reflectreflects the success of their respective business segments and the company as well as the value provided to our stockholders. Each business segment’ssegment president’s annual incentive performance measures are weighted withinclude a corporate earnings per share performance measure representing 20% of the target award opportunity and thea business segment specificfinancial performance measuresmeasure representing 80% of the target award opportunity. The following annual incentive plan performance measures for 20162018 were establishedadopted by the compensation committee for the business segment presidents (exclusive of the MDU Resources Group, Inc. corporate executive officers) at theits February 20162018 meeting:
|
| | | | | | |
| Measure | Applies to | Purpose | Measurement | Target | Weight | Why Measure Selected |
| MDU Resources Diluted Adjusted Earnings per Share (EPS) | All the business segments | EPS is a generally accepted accounting principle (GAAP) measurement and is a key driver of stockholder return. This goal applies to the presidents of all business segments to engage them in the earnings of the company as a whole. | GAAP EPS less discontinued operations (as reported as discontinued on or prior to December 31, 2015) and adjusted to exclude: - effects of intersegment eliminations, - noncash gains/losses resulting from hedge accounting, - losses on asset sales/dispositions approved by the board, and - assessed withdrawal liabilities relating to multiemployer pension plans. | $1.02 | 20% | Reflects anticipated EPS performance within the range of EPS guidance for 2016. |
| Return on Invested Capital (ROIC) | Electric & Natural Gas Distribution Segment | Provides a measure of how effective the business segment uses its capital and generates a return from its capital. These segments are primarily regulated entities requiring significant capital investment. ROIC is important in providing a return to our stockholders. | Business segment earnings, without regard to after tax interest expense and preferred stock dividends divided by the business segment’s average capitalization for the calendar year.
| 4.4% | 40% | Reflects anticipated returns considering additional capital investments made in 2015. |
| Pipeline & Midstream Segment | 5.9% | 28% | Reflects anticipated returns considering additional capital investments made in 2015. |
| Business Segment Earnings | Electric & Natural Gas Distribution Segment | Provides a measure of financial performance. | GAAP business segment earnings adjusted to exclude: - effects of intersegment eliminations, - noncash gains/losses resulting from hedge accounting, - losses on asset sales/dispositions approved by the board, and - assessed withdrawal liabilities relating to multiemployer pension plans.
| $68.0 million | 40% | Reflects anticipated earnings associated with the business segment. |
| Pipeline & Midstream Segment | $18.5 million | 28% | Reflects anticipated earnings associated with the business segment. |
| Construction Materials & Contracting Segment | $62.8 million | 80% | Reflects earnings necessary to meet or exceed the business segment’s risk adjusted capital cost. |
| Construction Services Segment | $26.4 million | 80% | Reflects earnings necessary to meet or exceed the business segment’s risk adjusted capital cost. |
| Optimum Refining Production | Refining Segment | Promotes the achievement of plant reliability based on optimum production. | Barrels of diesel produced in 2016. | 5,865 bbls | 24% | Reflects plant production based on the plant design with consideration for planned maintenance outages. |
Actual performance results are compared to the target performance measure to arrive at a percent of target achieved. The percent of target achieved is then translated into a payout percentage of the target award opportunity. Generally, to receive a payout requires achievement of 85% of the target performance measure which results in a payout of 25% of the award opportunity. Maximum payouts vary by business segment. For the regulated energy delivery companies, maximum payout of 200% of the award opportunity is received if the percent of target achieved is 115% or greater. For the construction materials and services companies, maximum payout is 250% of the award opportunity if the percent of target achieved is 167.2% of target for the construction materials & contracting segment and 210% of target for the construction services segment. Results achieved between the threshold, target, and maximum levels are calculated using linear interpolation. The following tables show the 2016 performance measure results and the relative award opportunity payout:
3238 MDU Resources Group, Inc. Proxy Statement
|
| | | | | | | | | | | |
| Business Segment | Performance Measure | Result |
| Percent of Performance Measure Achieved |
| Percent of Award Opportunity Payout |
| Weight |
| Weighted Award Opportunity Payout % |
|
| All Business Segments | Earnings per Share | $1.08 | 105.9 | % | 139.2 | % | 20 | % | 27.8 | % |
| Electric & Natural Gas Distribution Segment | Earnings | $69.3 million | 101.9 | % | 112.7 | % | 40 | % | 45.1 | % |
| ROIC | 4.5 | % | 102.3 | % | 115.1 | % | 40 | % | 46.0 | % |
| Pipeline & Midstream and Refining Segments | Earnings | $24.9 million | 134.6 | % | 200.0 | % | 28 | % | 56.0 | % |
| ROIC | 7.5 | % | 127.1 | % | 200.0 | % | 28 | % | 56.0 | % |
Optimum Refining Production 1 | 2,796 bbls | 82.9 | % | 84.0 | % | 24 | % | 20.2 | % |
| Construction Materials & Contracting Segment | Earnings | $96.0 million | 152.9 | % | 208.3 | % | 80 | % | 166.6 | % |
| Construction Services Segment | Earnings | $33.9 million | 128.6 | % | 157.2 | % | 80 | % | 125.8 | % |
| |
1
| The compensation committee determined the economic conditions that led to the sale of Dakota Prairie Refining, LLC in June 2016, as well as the sale itself, were unforeseen changes and significant factors beyond the control of management that substantially affected the ability of the refining segment to achieve the specified annual production performance measure at Dakota Prairie Refining, LLC. Due to these unforeseen circumstances, the compensation committee determined the annual production performance measure at the refining segment was achieved for Mr. Fritz at the same percentage as the annual production rate at Dakota Prairie Refining, LLC was being achieved during 2016 prior to the sale. |
|
| | | | | | |
| Measure | Applies to | Purpose | Measurement | Target | Weight | How Target was Selected |
| MDU Resources Diluted Adjusted Earnings per Share (EPS) | All Business Segment Presidents | EPS is a generally accepted accounting principle (GAAP) measurement and is a key driver of stockholder return. This goal applies to the presidents of all business segments to engage them as members of the company’s management policy committee in the overall success of the company. | GAAP EPS (diluted) before discontinued operations plus earnings/losses from any operations discontinued after December 31, 2017, and adjusted to remove: - the effect on earnings at the company level of intersegment earnings eliminations; - the effect on earnings from losses on asset sales/dispositions approved by the board; - the effect on earnings from withdrawal liabilities relating to multiemployer pension plans; and - the effect on earnings from transaction costs for completed acquisitions or mergers. | $1.35 | 20% | Target reflects EPS performance within the range of guidance for 2018 while also being higher than 2017 target. The target reflects an aggregation of the 2018 business unit financial goals and is higher than 2017 actual results minus the effect of the federal Tax Cuts and Jobs Act on 2017 results. |
| Business Segment Earnings | Electric and Natural Gas Distribution Segments President | Provides a measure of financial performance and an incentive to drive business results. | GAAP business segment earnings before discontinued operations plus earnings/losses from any operations discontinued after December 31, 2017, and adjusted to remove: - the effect on earnings from losses on asset sales/dispositions approved by the board; and - the effect on earnings from transaction costs for completed acquisitions or mergers. | $89.1 million | 80% | Target reflects the 2018 financial goal for the business segment and exceeds the segments’ 2017 target and actual results. |
Pipeline and Midstream Segment President | $22.2 million | 80% | Target reflects the 2018 financial goal of the business segment and exceeds the segment’s 2017 target and actual results. |
| Business Segment Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) | Construction Materials and Contracting Segment President | Provides a measure of financial performance common to the industries in which these segments operate. | EBITDA from continuing operations adjusted to remove: - the effect on earnings from losses on asset sales/dispositions approved by the board; - the effect on earnings from withdrawal liabilities relating to multiemployer plans; and - the effect on earnings from transaction costs for completed acquisitions or mergers. | $197.5 million | 80% | Target reflects the 2018 financial goal of the business segment, sufficient to exceed the segment’s risk adjusted capital costs, incentivize growth of the business segment, and exceed 2017 actual results adjusted to remove the effect of the federal Tax Cuts and Jobs Act. |
Construction Services Segment President | $100.1 million | 80% | Target reflects the 2018 financial goal of the business segment, sufficient to exceed the segment’s risk adjusted capital costs, incentivize growth of the business segment, and exceed 2017 actual results. |
For the MDU Resources Group, Inc. corporate named executive officers, namely Messrs. Goodin and Schwartz, the compensation committee continuedActual performance results are compared to base the paymenttarget performance measures to arrive at a percent of target achieved. The percent of target achieved is translated into a payout percentage of the target award opportunity. Achievement of 100% of the performance target corresponds to a payout equal to the target annual incentive on theaward opportunity. Receipt of a payout requires threshold achievement of performance measures at the business segments weighted by each business segment’s weighted average invested capital. The compensation committee’s rationale for this approach was to provide alignment between the MDU Resources Group, Inc. executives and business segment performance. The compensation committee determined achievement of the optimum refining productiona performance measure for Mr. Schwartz’s award opportunity payout inwhich varies by business segment. Achievement below the same manner as it determined the achievementthreshold level of the performance measure for Mr. Fritz. The compensation committee did not modify Mr. Goodin’s award opportunityresults in no payout for the effects of the optimum refining production performance measure. As a result, Messrs. Goodin’s and Schwartz’s 2016 annual incentives were earned at 139.8% and 142.3% of the target award opportunity attributable to the measure. For the company EPS performance measure, threshold payout requires achievement of 85% of the target performance measure which results in a payout of 25% of the award opportunity attributable to the company EPS performance measure. For the electric and natural gas distribution segments, the pipeline and midstream segment, the construction materials and contracting segment, and the construction services business segment’s performance measures, threshold payout requires achievement of 90%, 85%, 75%, and 65% of the target performance measures, respectively, based on the following weighted average of annualresulting in business segment incentives achieved:
|
| | | | | | | | | | | | |
| | Business Segment | Column A
Business Segment Award Opportunity Payout | Column B
Percentage of Average Invested Capital |
| | Column A x Column B |
| |
| |
| | Mr. Goodin |
| Mr. Schwartz |
| | Mr. Goodin |
| Mr. Schwartz |
|
| | Construction Materials & Contracting Segment 1 | 187.8 | % | 187.8 | % | 22.2 | % | | 41.7 | % | 41.7 | % |
| | Construction Services Segment | 153.6 | % | 153.6 | % | 8.8 | % | | 13.5 | % | 13.5 | % |
| | Pipeline & Midstream and Refining Segments | 139.8 | % | 160.0 | % | 12.4 | % | | 17.3 | % | 19.8 | % |
| | Electric & Natural Gas Distribution Segment | 118.9 | % | 118.9 | % | 56.6 | % | | 67.3 | % | 67.3 | % |
| | Total Payout Percentage | | 139.8 | % | 142.3 | % |
| |
1
| For purposes of calculating the incentive award opportunities for Messrs. Goodin and Schwartz, the award opportunitytarget award payouts of 50%, 25%, 25%, and 25%, respectively. Maximum payouts also vary by business segment. For the company EPS performance measure, as well as the electric and natural gas distribution segments and the pipeline and midstream segment, maximum payout associated with the earnings performance measure for the construction materials & contracting segment was limited to 200%, which resulted in a weighted construction materials & contracting segment award opportunity payout percentage of 187.8% versus the 194.4% for the business segment. |
Based on the achievement of the performance targets, the named executive officers received the following annual incentive compensation:
|
| | | | |
| 2016 Annual Incentives Earned |
| Name | Target Annual Incentive ($) | | Annual Incentive Earned |
| | Payout (%) | Amount ($) |
| David L. Goodin | 755,000 | | 139.8 | 1,055,490 |
| Doran N. Schwartz | 247,000 | | 142.3 | 351,481 |
| David C. Barney | 305,100 | | 194.4 | 593,114 |
| Jeffrey S. Thiede | 318,750 | | 153.6 | 489,600 |
| Martin A. Fritz | 260,000 | | 160.0 | 416,000 |
MDU Resources Group, Inc. Proxy Statement 3339
Long-Term Incentivesbusiness segment award opportunity is 200%, and for the construction materials and contracting segment and the construction services segment, payout of 250% of the business segment award opportunity is received if the percent of target performance achieved is 115% or greater. Results achieved between payout levels are calculated using linear interpolation.
We use2018 Annual Incentive Results
The 2018 performance measure results, percent of target achieved based on those results, and the Long-Term Performance-Based Incentive Plan, which has been approved byassociated payout percentages are presented below:
|
| | | | | | | | | | |
| Business Segment | Performance Measure | Result | Percent of Performance Measure Achieved |
| Percent of Award Opportunity Payout |
| Weight |
| Weighted Award Opportunity Payout % |
|
| All Business Segments | Earnings per Share | $1.35 | 100.0 | % | 100.0 | % | 20 | % | 20.0 | % |
| Electric and Natural Gas Distribution | Earnings | $84.7 million | 95.1 | % | 75.7 | % | 80 | % | 60.6 | % |
| Pipeline and Midstream | Earnings | $24.0 million | 108.1 | % | 154.1 | % | 80 | % | 123.3 | % |
| Construction Materials and Contracting | EBITDA | $200.6 million | 101.6 | % | 115.9 | % | 80 | % | 92.7 | % |
| Construction Services | EBITDA | $103.6 million | 103.5 | % | 135.1 | % | 80 | % | 108.1 | % |
For our stockholders, for long-term incentive compensation. As in the past,corporate named executive officers, namely Messrs. Goodin and Vollmer, the compensation committee usedcontinued to base the payout of the annual cash incentives on the achievement of performance shares asmeasures at the formbusiness segments weighted by each business segment’s average invested capital relative to the company’s total invested capital. The compensation committee believes this approach provides alignment between our corporate executives and business segment performance. Messrs. Goodin’s and Vollmer’s 2018 annual cash incentives were earned at 98.0% of the target award opportunity based on the following proportional weighted sum of the annual business segment payouts:
|
| | | | | | | | |
| | Business Segment | Column A
Business Segment Award Opportunity Payout |
| Column B
Percentage of Average Invested Capital |
| | Column A x Column B |
| |
| |
| | Electric and Natural Gas Distribution | 80.6 | % | 58.5 | % | | 47.2 | % |
| | Pipeline and Midstream | 143.3 | % | 8.7 | % | | 12.5 | % |
| | Construction Materials and Contracting | 112.7 | % | 23.9 | % | | 26.9 | % |
| | Construction Services | 128.1 | % | 8.9 | % | | 11.4 | % |
| | Total Payout Percentage | | 98.0 | % |
Based on the achievement of the performance targets, the named executive officers received the following 2018 annual incentive compensation:
|
| | | | |
| Name | Target Annual Incentive ($) | | Annual Incentive Earned |
| | Payout as a % of Target (%) | Amount ($) |
| David L. Goodin | 824,460 | | 98.0 | 807,971 |
| Jason L. Vollmer | 227,500 | | 98.0 | 222,950 |
| David C. Barney | 341,250 | | 112.7 | 384,589 |
| Jeffrey S. Thiede | 341,250 | | 128.1 | 437,141 |
| Nicole A. Kivisto | 279,500 | | 80.6 | 225,277 |
Long-Term Incentives
Long-term incentive compensation comprises approximately 56% of the CEO’s 2018 total target direct compensation and 48% of the average of the other named executive officer’s target total direct compensation. Stock earned under long-term incentive compensation for 2016 and establishedis subject to our stock retention requirements. If the company’s total stockholder return in comparison to the total stockholder return for the peer group companies over a three-year period as the performance measure for vesting of long-term incentive compensation.
Total stockholder returnexecutive’s employment is the percentage change in the value of an investment in the common stock of a company from the closing price on the last trading day in the calendar year preceding the beginning ofterminated during the performance period throughfor cause at any time, or for any reason other than cause before the last trading day in the final yearexecutive has reached age 55 and completed ten years of the performance period. It is assumed that dividends are reinvested in additional shares of common stock at the frequency paid during the performance period. The compensation committee selected total stockholder return as the performance measure because long-term executive incentive compensation should align with our long-term performance in stockholder return as compared to other public companies in our industries.
Depending on our total three-year stockholder return compared to the total three-year stockholder returns of our peer group companies, performance share award opportunities for our named executive officers may or may not vest. Vesting ofservice, all performance shares can range from 0% to 200% of the target award. Vesting of the performance share opportunities will be a function of our rank over the performance period against our peer group companies as delineated in the following table:
|
| |
The Company’s
Peer TSR Percentile Rank | Vesting Percentage of
Award Target
|
75th or higher | 200% |
50th | 100% |
25th | 20% |
Less than 25th | 0% |
Vesting for percentile ranks falling between the intervals will be interpolated. If our total stockholder return is negative, the shares and dividend equivalents otherwise earned based on the payout percentages above, if any, will be reduced in accordance with the following table:
|
| |
Total Stockholder Return | Reduction in Vesting |
0% through -5% | 50% |
-5.01% through -10% | 60% |
-10.01% through -15% | 70% |
-15.01% through -20% | 80% |
-20.01% through -25% | 90% |
-25.01% or below | 100% |
Dividend equivalents are paid in cash based on the number of shares actually vested for the performance period. Norelated dividend equivalents are paid on unvested performance shares.
Actual vestingforfeited. Restricted stock units are forfeited or canceled if the executive ceases to be an employee of performance share awards under the plan have varied over the last five years as shown below:
|
| |
Performance Period | Vesting Percentage |
2014-2016 | 68% |
2013-2015 | 31% |
2012-2014 | 0% |
2011-2013 | 193% |
2010-2012 | 0% |
company or an affiliate except for employment termination due to death, disability, or change of control.
3440 MDU Resources Group, Inc. Proxy Statement
ResultsGrant of 2014-20162018-2020 Long-Term Performance PeriodShare Awards
We awardedFor 2018, the compensation committee approved performance share opportunitiesawards which may vest at the end of a three-year period between 0% and 200% based on the achievement of three performance measures:
Total stockholder return relative to that of the peer group companies represents 50% of the award and was selected to align the award with the company's performance relative to our named executive officerspeers;
Compound annual growth rate in earnings from continuing operations before interest, taxes, depreciation, depletion, and amortization (EBITDA) represents 25% of the award which encourages strategic growth and focuses on February 14, 2014 forcontrollable costs; and
Compound annual growth rate in earnings from continuing operations represents 25% of the 2014-2016 performance period. Ouraward which encourages quality earnings and continued growth of the company.
For the awards made in 2018, the compensation committee added the EBITDA and earnings growth measures to incentivize participants to focus on company growth in addition to total stockholder return during the performance period. Earnings used to calculate EBITDA growth and earnings growth will be adjusted for (i) the three-year performance period was 1.15% which correspondedeffect on earnings from losses on asset sales/dispositions approved by the board; (ii) the effect on earnings from withdrawal liabilities relating to a percentile ranking of 40% with our 2014 peer group companies,multiemployer pension plans; and resulted in 68% vesting of performance shares and dividend equivalents. The named executive officers received(iii) the followingeffect on earnings from transaction costs for the 2014-2016 performance period:
|
| | | | | | | | |
| Name | Target Performance Shares (#) |
| Performance Shares Vested (#) |
| Dividend Equivalents ($) |
| Value of Vested Shares and Dividend Equivalents at 2/16/17 ($)1 |
|
| David L. Goodin | 33,677 |
| 22,900 |
| 50,495 |
| 654,368 |
|
| Doran N. Schwartz | 8,849 |
| 6,017 |
| 13,267 |
| 171,936 |
|
| David C. Barney | 7,472 |
| 5,081 |
| 11,204 |
| 145,190 |
|
| Jeffrey S. Thiede | 7,866 |
| 5,349 |
| 11,795 |
| 152,848 |
|
| Martin A. Fritz | None 2 |
| — |
| — |
| — |
|
| |
1
| Closing share price at February 16, 2017 was $26.37.
|
| |
2
| Mr. Fritz joined the company in 2015, therefore was not eligible for award for the 2014-2016 performance period. |
2016-2018 Performance Periodcompleted acquisitions or mergers.
On February 11, 2016,15, 2018, for the 2016-20182018-2020 performance period, the compensation committee determined the target number of performance shares for each named executive officer by multiplying the named executive officer’s 2018 base salary by hisa target long-term incentive percentage and then dividing by the average of the closing prices of our stock from January 1 through January 22, 2016,2018, which was $17.20$26.27 per share. Based on this price, the board of directors, upon recommendation of the compensation committee, awarded the following target performance share opportunities to the named executive officers:
| | | Name | Base Salary to Determine Target ($) | Target Long-Term Incentive % (%) | Long-Term Incentive Target ($) | Resulting Number of Performance Share Opportunities (#) |
| Base Salary to Determine Target ($) | Target Long-Term
Performance Share
Incentive % of Base Salary
(%) | Long-Term Performance
Share Incentive Target
($) | Performance Share Opportunities (#) |
|
| David L. Goodin | 755,000 | 225 | 1,698,750 | 98,764 |
| 824,460 | 250 | 2,061,150 | 78,460 |
|
| Doran N. Schwartz | 380,000 | 90 | 342,000 | 19,883 |
| |
| Jason L. Vollmer | | 350,000 | 120 | 420,000 | 15,987 |
|
| David C. Barney | 406,800 | 80 | 325,440 | 18,920 |
| 455,000 | 120 | 546,000 | 20,784 |
|
| Jeffrey S. Thiede | 425,000 | 80 | 340,000 | 19,767 |
| 455,000 | 120 | 546,000 | 20,784 |
|
| Martin A. Fritz | 400,000 | 90 | 360,000 | 20,930 |
| |
| Nicole A. Kivisto | | 430,000 | 120 | 516,000 | 19,642 |
|
Restricted Stock Units Subject to Service Based Vesting
For 2018, the compensation committee also awarded 11,419 restricted stock units to each of Messrs. Barney and Thiede, which will vest on December 31, 2020, provided they remain employed until that date. The restricted stock unit awards represent $300,000 divided by the average closing stock price from January 1 through January 22, 2018 of $26.27 per share. The compensation committee believes the off-cycle restricted stock awards further incentivize both Messrs. Barney and Thiede to continue their employment with the company for the next three years while the company emphasizes the growth of their respective business segments. Dividend equivalents are credited to each restricted stock unit during the vesting period to the same extent that dividends are paid on shares of our common stock, but such dividend equivalents are paid only to the extent the underlying restricted stock unit vests based on the satisfaction of the service requirement. Dividend equivalents are paid at the time of settlement in cash.
Vesting of 2016-2018 Performance Share Awards
For the 2016-2018 performance period, the long-term incentive program consisted solely of performance shares. The performance criteria used for the 2016-2018 performance period was total stockholder return as a percentile of the total stockholder return for our peer companies. Our total stockholder return ranking over the performance period was at the 60th percentile which resulted in vesting at 140% of the target performance shares and dividend equivalents. The named executive officers received the following long-term compensation for the 2016-2018 performance period:
MDU Resources Group, Inc. Proxy Statement 41
|
| | | | | | |
| Name | Target Performance Shares (#) |
| Performance Shares Vested (#) |
| Dividend Equivalents ($) |
|
| David L. Goodin | 98,764 |
| 138,269 |
| 321,475 |
|
| Jason L. Vollmer | 4,767 |
| 6,673 |
| 15,515 |
|
| David C. Barney | 18,920 |
| 26,488 |
| 61,585 |
|
| Jeffrey S. Thiede | 19,767 |
| 27,673 |
| 64,340 |
|
| Nicole A. Kivisto | 16,744 |
| 23,441 |
| 54,500 |
|
Stock Retention Requirement
The named executive officers must retain 50% of the net after-tax performance shares vested pursuant to the long-term incentive award until the earlier ofawards for at least two years from the date the vested shares are issued or the executive’s termination of employment. The compensation committee may also require the executive officer to retain performance sharesshare awards net of taxes if the executive has not met the stock ownership requirements under the company’s stock ownership policy for executives.
Other Benefits
The company provides post employment benefit plans and programs in which our named executive officers may be participants. We believe it is important to provide post-employment benefits which approximate retirement benefits paid by other employers to executives in similar positions. The compensation committee periodically reviews the benefits provided to maintain a market basedmarket-based benefits package. Our named executive officers participated in the following plans during 20162018 which are described below:
|
| | | | | |
| Plans | David L. Goodin | Doran N. SchwartzJason L. Vollmer | David C. Barney | Jeffrey S. Thiede | MartinNicole A. FritzKivisto |
| 401(k) Retirement Plan | Yes | Yes | Yes | Yes | Yes |
| Pension Plans | Yes | Yes | No | No | NoYes |
| Supplemental Income Security Plan | Yes | YesNo | Yes | No | NoYes |
Non-QualifiedNonqualified Defined Contribution Plan | No | No | NoYes | Yes | Yes |
MDU Resources Group, Inc. Proxy Statement 35
401(k) Retirement Plan
The named executive officers as well as all employees working a minimum of 1,000 hours per year are eligible to participate in the 401(k) Planplan and defer annual income up to the IRS limit. The company provides a match up to 3% ofdepending on the employee’s elected deferral rate. Contributions and the company match are invested in various funds based on the employee’s election including company common stock.
In 2010, the company began offering increased company contributions to our 401(k) plan in lieu of pension plan contributions. For non-bargaining unit employees hired after 2006 or employees who were not previously participants in the pension plan, the added retirement contribution is 5% of plan eligible compensation. For participantsnon-bargaining unit employees hired prior to 2006 who were participants in the pension plan, the added retirement contributions are based on the participant’semployee’s age as of December 31, 2009. The retirement contribution is 11.5% for Mr. Goodin, 10.5%9.0% for Ms. Kivisto, 7.0% for Mr. Schwartz,Vollmer, and 5%5.0% for Messrs. Barney Thiede, and Fritz.Thiede. These amounts may be reduced in accordance with the provisions of the 401(k) plan to meetensure compliance with IRS limits.
Pension Plans
Effective in 2006, the defined benefit pension plans were closed to new non-bargaining unit employees and as of December 31, 2009, the defined benefit plans were frozen. For further details regarding the company’s pension plans, please refer to the section entitled “Pension Benefits for 20162018.” Supplemental Income Security Plan
We offeroffered certain key managers and executives benefits under a nonqualified retirement plan, referred to as the Supplemental Income Security Plan (SISP). The SISP provides participants with additional retirement income and death benefits. Effective February 11, 2016, the SISP was amended so noto exclude new participants will be added to the plan and freeze current benefit levels are frozen for existing participants. For further details regarding the company’s SISP, please refer to the section entitled “Pension Benefits for 20162018.” Named executive officers participating in the SISP are Messrs. Goodin, Schwartz,Barney, and Barney.Ms. Kivisto.
42 MDU Resources Group, Inc. Proxy Statement
The following table reflects our named executive officers’ SISP benefits as of December 31, 2016:2018:
| | | Name | | SISP Benefits | | SISP Benefits |
| | Annual Death Benefit ($) |
| Annual Retirement Benefit ($) |
| | Annual Death Benefit ($) |
| Annual Retirement Benefit ($) |
|
| David L. Goodin | | 552,960 | 276,480 | | 552,960 | 276,480 |
| Doran N. Schwartz | | 262,464 | 131,232 | |
| Jason L. Vollmer | | | n/a |
| n/a |
|
| David C. Barney | | 262,464 | 131,232 | | 262,464 | 131,232 |
| Jeffrey S. Thiede | | — |
| — |
| | n/a |
| n/a |
|
| Martin A. Fritz | | — |
| — |
| |
| Nicole A. Kivisto | | | 96,000 |
| 48,000 |
|
Nonqualified Defined Contribution Plan
The company adopted the Nonqualified Defined Contribution Plan (NQDCP) effective January 1, 2012, to provide retirement and deferred compensation for a select group of management orand other highly compensated employees. The compensation committee, upon recommendation from the CEO, determines which employees will participate in the NQDCP and the amount of contributions for any year. After satisfying a vesting requirement for each contribution, distributions will be made to the executive in accordance with the terms of the plan commencing upon the later of separation from service or age 65.plan. For further details regarding the company’s NQDCP, please refer to the section entitled “Nonqualified Deferred Compensation for 20162018.” For 2016,2018, the compensation committee selected and approved contributions of $100,000 each$35,000 to Mr. ThiedeVollmer, $150,000 to Mr. Barney, and $100,000 to Mr. Fritz.Thiede. The contributioncontributions awarded to Mr.Messrs. Vollmer, Barney, and Thiede represents 23.5%represent 10.00%, 32.97%, and 21.98% of histheir base salary at December 31, 2015salaries, respectively.
Employment and recognized his strong leadership atSeverance Agreements
Compensation Governance
Impact of Tax and Accounting Treatment
The compensation committee may consider the impact of tax and/or accounting treatment in determining compensation.
Section 162(m) of the Internal Revenue Code limits the deductibility of certain compensation to $1 million paid to certain officers as a business expense in any tax year unlessyear. The federal Tax Cuts and Jobs Act (Tax Reform), signed into law in December 2017, expanded the number of individuals covered by the Section 162(m) deductibility limit and repealed the exception for performance-based compensation, effective for taxable years beginning after December 31, 2017. Incentive compensation approved by the compensation qualifies as performance-based compensation under Section 162(m). Generally,
36 MDU Resources Group, Inc. Proxy Statement
long-term incentive compensation and annual incentive awardscommittee prior to Tax Reform for our CEO and those executive officers whose overall compensation iswas likely to exceed $1 million arewas generally structured to be deductiblemeet the requirements for the performance-based exception for deductibility for purposes of Section 162(m). All incentiveAs a result of Tax Reform, compensation paid to our covered executive officers in excess of $1 million paidwill not be deductible, unless it qualifies for transition relief applicable to our named executive officerscertain arrangements in 2016 satisfied the requirements for deductibility.place as of November 2, 2017.
The compensation committee also considers the accounting and cash flow implications of various forms of executive compensation. We expense salaries and annual incentive compensation as earned. For our equity awards, we record the accounting expense in accordance with Financial Accounting Standards Board 718, which is generally expensed over the vesting period.
MDU Resources Group, Inc. Proxy Statement 43
Stock Ownership Requirements
Executives participating in our Long-Term Performance-Based Incentive Plan are required within five years of appointment or promotion into an executive level to own our common stock equal to a multiple of their base salary as outlined in the stock ownership policy. Stock owned through our 401(k) plan or by a spouse is considered in ownership calculations. Unvested performance shares are not considered in ownership calculations. The level of stock ownership compared to the ownership requirementsrequirement is determined based on the closing sale price of our stock on the last trading day of the year and base salary at December 31 of the same year. The table shows the named executive officers’ holdings as a multiple of their base salary as of December 31, 2016:
|
| | | | |
| Name | Ownership Policy Multiple of Base Salary within 5 Years | Actual Holdings as a Multiple of Base Salary as of 12/31/20161 |
| Ownership requirement must be met by: |
| David L. Goodin | 4X | 3.267.7 |
| 1/1/2018 |
Doran N. SchwartzJason L. Vollmer | 3X | 3.810.8 |
| Ownership requirement met1/1/2023 |
| David C. Barney | 3X | 0.612.3 |
| 1/1/2019 |
| Jeffrey S. Thiede | 3X | 0.202.3 |
| 1/1/2019 |
MartinNicole A. FritzKivisto | 3X | —3.3 |
| 1/1/2020 |
1 Includes stock awards earned net of taxes for the 2016-2018 performance period. |
The compensation committee determined that Messrs. Barney and Thiede, who have not met the stock ownership requirement within the required time frame, are required to retain all stock vesting through the Long-Term Performance-Based Incentive Plan, net of taxes, until the stock ownership requirement is met.
Deferral of Annual Incentive Compensation
We provide executives the opportunity to defer receipt of earned annual incentives. If an executive chooses to defer all or part of an annual incentive, we credit the deferral with interest at a rate determined by the compensation committee. For 2016,2018, the compensation committee chose to use an interest rate of 4.5%4.28% based on an average of the Moody’s U.S. Long-Term Corporate Bond Yield Average for “A” and “Baa” rated companies. The compensation committee’s reasons for using this interest rate recognized incentive deferrals are a low-cost source of capital for the company and are unsecured obligations and, therefore, carry a higher risk to the executives.
Clawback
In February 2016, we amended our Long-Term Performance-Based Incentive Plan and Executive Incentive Compensation Plan sections regarding the repayment of incentive compensation due to accounting restatements, commonly referred to as a clawback policy. The compensation committee may, or shall if required, take action to recover incentive-based compensation from specific executives in the event the company is required to restate its financial statements due to material noncompliance with any financial reporting requirements under the securities laws.
Policy Regarding Hedging Stock Ownership
Our executive compensation policy prohibits executive officers, which includes our named executive officers, from hedging their ownership of company common stock. Executives may not enter into transactions that allow the executive to benefit from devaluation of our stock or otherwise own stock technically but without the full benefits and risks of such ownership. See the section entitled “Security Ownership” for our policy on margin accounts and pledging of our stock. COMPENSATION COMMITTEE REPORT
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Regulation S-K,
Item 402(b), with management. Based on the review and discussions referred to in the preceding sentence, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in our Proxy Statement on Schedule 14A.
Thomas Everist, ChairmanChair
Karen B. Fagg
William E. McCracken
Patricia L. Moss
44 MDU Resources Group, Inc. Proxy Statement37
EXECUTIVE COMPENSATION TABLES
Summary Compensation Table for 20162018
| | Name and
Principal Position
(a) | Name and
Principal Position
(a) | Year (b) | Salary
($)
(c) |
| Bonus
($)
(d)1 |
| | Stock
Awards
($)
(e)2 |
| | Option
Awards
($)
(f) |
| | Non-Equity
Incentive Plan
Compensation
($)
(g) |
| | Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(h) |
| | All Other
Compensation
($)
(i) |
| | Total
($)
(j) |
| Name and
Principal Position
(a) | Year (b) | Salary
($)
(c) |
| | Stock
Awards
($)
(e)1 |
| | Non-Equity
Incentive Plan
Compensation
($)
(g) |
| | Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(h)2 |
| | All Other
Compensation
($)
(i)3 |
| | Total
($)
(j) |
|
| | | | | | | | | | | | | | | | |
| David L. Goodin | David L. Goodin | 2016 | 755,000 |
| — |
| | 1,441,954 |
| | — |
| | 1,055,490 |
| | 218,301 |
| 3 | 40,246 |
| 4 | 3,510,991 |
| David L. Goodin | 2018 | 824,460 |
| | 2,433,437 |
| | 807,971 |
| | 16,503 |
| | 41,696 |
| | 4,124,067 |
|
| President and CEO | President and CEO | 2015 | 755,000 |
| — |
| | 1,386,992 |
| | — |
| | 376,745 |
| | — |
| | 39,411 |
| | 2,558,148 |
| President and CEO | 2017 | 792,750 |
| | 1,504,546 |
| | 1,377,007 |
| | 342,727 |
| | 40,971 |
| | 4,058,001 |
|
| | | 2014 | 685,000 |
| — |
| | 1,385,135 |
| | — |
| | 830,915 |
| | 631,901 |
| | 38,686 |
| | 3,571,637 |
| | 2016 | 755,000 |
| | 1,441,954 |
| | 1,055,490 |
| | 218,301 |
| | 40,246 |
| | 3,510,991 |
|
| | | | | | | | | |
|
| | | | | |
|
| | | | | | | | | | | | | |
| Doran N. Schwartz | 2016 | 380,000 |
| 6,175 |
| | 290,292 |
| | — |
| | 345,306 |
| | 77,084 |
| 3 | 35,772 |
| 4 | 1,134,629 |
| |
| Vice President | 2015 | 380,000 |
| — |
| | 279,228 |
| | — |
| | 123,253 |
| | — |
| | 35,571 |
| | 818,052 |
| |
| and CFO | 2014 | 360,000 |
| — |
| | 363,959 |
| | — |
| | 163,080 |
| | 273,974 |
| | 34,956 |
| | 1,195,969 |
| |
Jason L. Vollmer4 | | Jason L. Vollmer4 | 2018 | 350,000 |
| | 495,840 |
| | 222,950 |
| | — |
| | 63,235 |
| | 1,132,025 |
|
| Vice President, CFO and | | Vice President, CFO and | 2017 | 256,625 |
| | 95,101 |
| | 230,988 |
| | 3,681 |
| | 48,156 |
| | 634,551 |
|
| Treasurer | | Treasurer | | | | | | | | | |
| | |
| | | | | | | | | | | | | | | | |
| David C. Barney | David C. Barney | 2016 | 406,800 |
| — |
| | 276,232 |
| | — |
| | 593,114 |
| | 77,565 |
| 3 | 22,905 |
| 4 | 1,376,616 |
| David C. Barney | 2018 | 455,000 |
| | 958,410 |
| | 384,589 |
| | — |
| | 233,915 |
| | 2,031,914 |
|
| President and CEO of | President and CEO of | 2015 | 395,000 |
| — |
| | 225,739 |
| | — |
| | 637,588 |
| | 9,530 |
| | 22,556 |
| | 1,290,413 |
| President and CEO of | 2017 | 427,140 |
| | 324,247 |
| | 483,736 |
| | 93,786 |
| | 173,331 |
| | 1,502,240 |
|
| Knife River | 2014 | — |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
| Corporation | | | | | | | | | | | | | | | |
| Knife River Corporation | | Knife River Corporation | 2016 | 406,800 |
| | 276,232 |
| | 593,114 |
| | 77,565 |
| | 22,905 |
| | 1,376,616 |
|
| | | | | | | | | | | | | | | | |
| Jeffrey S. Thiede | Jeffrey S. Thiede | 2016 | 425,000 |
| — |
| | 288,598 |
| | — |
| | 489,600 |
| | — |
| | 122,708 |
| 4 | 1,325,906 |
| Jeffrey S. Thiede | 2018 | 455,000 |
| | 958,410 |
| | 437,141 |
| | — |
| | 123,585 |
| | 1,974,136 |
|
| President and CEO of | President and CEO of | 2015 | 425,000 |
| — |
| | 242,902 |
| | — |
| | 161,857 |
| | — |
| | 172,506 |
| | 1,002,265 |
| President and CEO of | 2017 | 437,750 |
| | 332,318 |
| | 743,629 |
| | — |
| | 123,163 |
| | 1,636,860 |
|
| MDU Construction | MDU Construction | 2014 | 400,000 |
| — |
| | 323,529 |
| | — |
| | 730,150 |
| | — |
| | 96,481 |
| | 1,550,160 |
| MDU Construction | 2016 | 425,000 |
| | 288,598 |
| | 489,600 |
| | — |
| | 122,708 |
| | 1,325,906 |
|
| Services Group, Inc. | Services Group, Inc. | | | | | | | | | | | | | | | Services Group, Inc. | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Martin A. Fritz | 2016 | 400,000 |
| 52,520 |
| | 305,578 |
| | — |
| | 363,480 |
| | — |
| | 121,670 |
| 4 | 1,243,248 |
| |
Nicole A. Kivisto5 | | Nicole A. Kivisto5 | 2018 | 430,000 |
| | 609,197 |
| | 225,277 |
| | 210 |
| | 34,494 |
| | 1,299,178 |
|
| President and CEO of | President and CEO of | 2015 | — |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| President and CEO of | 2017 | 378,000 |
| | 286,955 |
| | 433,906 |
| | 96,931 |
| | 33,049 |
| | 1,228,841 |
|
| WBI Energy, Inc. | 2014 | — |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
| Montana-Dakota Utilities Co. | | Montana-Dakota Utilities Co. | | | | | | | | | |
| | |
| | | | | | | | | | | | | | | |
| |
1 | Amounts shown represent the incentive compensation determined by the compensation committee for the optimum refining production performance measure for 2016 due to the unforeseen economic conditions which lead to the sale of Dakota Prairie Refining, LLC. See “Annual Incentives” in the section entitled “Compensation Discussion and Analysis” for further information. |
| |
2
| Amounts in this column represent the aggregate grant date fair value of performance share award opportunities at target calculated in accordance with Financial Accounting Standards Board (FASB) generally accepted accounting principles for stock-based compensation in FASB Accounting Standards Codification Topic 718. This column was prepared assuming none of the awards were or will be forfeited. The amounts were calculated using the Monte Carlo simulation, as described in Note 1012 of our audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016.2018. For 2016,2018, the total aggregate grant date fair value of performance share award opportunities assuming the highest level of payout would be as follows: |
|
| | | |
| Name | | Aggregate grant date fair value at highest payout ($) |
|
| David L. Goodin | | 2,883,9094,866,874 |
|
Doran N. SchwartzJason L. Vollmer | | 580,584991,681 |
|
| David C. Barney | | 552,4641,603,026 |
|
| Jeffrey S. Thiede | | 577,1961,603,026 |
|
MartinNicole A. FritzKivisto | | 611,1561,218,393 |
|
MDU Resources Group, Inc. Proxy Statement 45
| |
32
| Amounts shown for 20162018 represent the change in the actuarial present value for the named executive officers’ accumulated benefits under the pension plan, SISP, and Excess SISP, collectively referred to as the “accumulated pension change,” plus above-market earnings on deferred annual incentives as of December 31, 2016.2018. |
|
| | | | | | |
| Name | | Accumulated Pension Change ($) |
| | Above Market Interest ($) |
|
| David L. Goodin | | 215,917 |
| | 2,384 |
| Doran N. Schwartz | | 77,084 |
| | — |
|
| David C. Barney | | 77,565 |
| | — |
|
|
| | | | | | |
| Name | | Accumulated Pension Change ($) |
| | Above Market Interest ($) |
|
| David L. Goodin | | (230,602 | ) | | 16,503 |
| Jason L. Vollmer | | (3,594 | ) | | — |
|
| David C. Barney | | (28,196 | ) | | — |
|
| Jeffrey S. Thiede | | — |
| | — |
|
| Nicole A. Kivisto | | (98,726 | ) | | 210 |
|
3All Other Compensation is comprised of: |
| | | | | | | | | | | | | | |
| Name | 401(k)
($)a |
| Nonqualified Defined Contribution Plan ($) |
| Life Insurance Premium
($) |
| Matching Charitable Contributions ($) |
| Moving Stipend ($)b |
| Total
($) |
|
| David L. Goodin | 39,875 |
| — |
| 621 |
| 1,200 |
| — |
| 41,696 |
|
| Jason L. Vollmer | 27,500 |
| 35,000 |
| 435 |
| 300 |
| — |
| 63,235 |
|
| David C. Barney | 22,000 |
| 150,000 |
| 565 |
| 1,200 |
| 60,150 |
| 233,915 |
|
| Jeffrey S. Thiede | 22,000 |
| 100,000 |
| 565 |
| 1,020 |
| — |
| 123,585 |
|
| Nicole A. Kivisto | 33,000 |
| — |
| 534 |
| 960 |
| — |
| 34,494 |
|
a | Represents company contributions to the 401(k) plan, which includes matching contributions and retirement contributions made after the pension plans were frozen at December 31, 2009. |
b | Represents stipend for moving household goods as approved in Mr. Barney’s 2012 relocation proposal. |
| |
4 | Mr. Vollmer was promoted to vice president, chief financial officer and treasurer effective September 30, 2017. He appeared as a named executive officer for the first time in 2017. |
| |
5 | Ms. Kivisto was promoted to president and chief executive officer of the electric and natural gas distribution segments effective January 9, 2015. She appeared as a named executive officer for the first time in 2017. |
3846 MDU Resources Group, Inc. Proxy Statement
4All Other Compensation is comprised of: |
| | | | | | | | | | | | |
| Name | 401(k)
($)a |
| Life Insurance Premium
($) |
| Matching Charitable Contributions ($) |
| Nonqualified Defined Contribution Plan ($) |
| Total
($) |
|
| David L. Goodin | 38,425 |
| 621 |
| 1,200 |
| — |
| 40,246 |
|
| Doran N. Schwartz | 35,000 |
| 472 |
| 300 |
| — |
| 35,772 |
|
| David C. Barney | 21,200 |
| 505 |
| 1,200 |
| — |
| 22,905 |
|
| Jeffrey S. Thiede | 21,200 |
| 528 |
| 980 |
| 100,000 |
| 122,708 |
|
| Martin A. Fritz | 21,173 |
| 497 |
| — |
| 100,000 |
| 121,670 |
|
a | Represents company contributions to the 401(k) plan, which includes matching contributions and retirement contributions made after the pension plans were frozen at December 31, 2009. |
Grants of Plan-Based Awards in 20162018
| | | | | Estimated Future
Payouts Under Non-Equity
Incentive Plan Awards | | Estimated Future
Payouts Under Equity
Incentive Plan Awards | | Grant Date Fair Value of Stock and Option Awards
($)
(l) |
| | Estimated Future
Payouts Under Non-Equity
Incentive Plan Awards | | Estimated Future
Payouts Under Equity
Incentive Plan Awards | All other stock awards: Number of shares of stock or units # (i) |
| | Grant Date Fair Value of Stock and Option Awards
($)
(l) |
|
Name
(a) | Name
(a) | Grant Date
(b) | | Threshold
($)
(c) |
| | Target
($)
(d) |
| | Maximum
($)
(e) |
| | Threshold
(#)
(f) |
| | Target
(#)
(g) |
| | Maximum
(#)
(h) |
| | Name
(a) | Grant Date
(b) | | Threshold
($)
(c) |
| | Target
($)
(d) |
| | Maximum
($)
(e) |
| | Threshold
(#)
(f) |
| | Target
(#)
(g) |
| | Maximum
(#)
(h) |
| |
| David L. Goodin | David L. Goodin | 2/11/2016 | 1 | 188,750 |
| | 755,000 |
| | 1,510,000 |
| | — |
| | — |
| | — |
| | — |
| David L. Goodin | 2/15/2018 | 1 | 303,707 |
| | 824,460 |
| | 1,648,920 |
| | | | | | | | | |
| | | 2/11/2016 | 2 | — |
| | — |
| | — |
| | 19,753 |
| | 98,764 |
| | 197,528 |
| | 1,441,954 |
| | 2/15/2018 | 2 | | | | | | | 15,692 |
| | 78,460 |
| | 156,920 |
| | | 2,433,437 |
|
| Doran N. Schwartz | 2/11/2016 | 3 | 61,750 |
| | 247,000 |
| | 494,000 |
| | — |
| | — |
| | — |
| | — |
| |
| Jason L. Vollmer | | Jason L. Vollmer | 2/15/2018 | 1 | 83,804 |
| | 227,500 |
| | 455,000 |
| | | | | | | | |
| | | 2/11/2016 | 2 | — |
| | — |
| | — |
| | 3,977 |
| | 19,883 |
| | 39,766 |
| | 290,292 |
| | 2/15/2018 | 2 | | | | | | | 3,197 |
| | 15,987 |
| | 31,974 |
| | | 495,840 |
|
| David C. Barney | David C. Barney | 2/11/2016 | 1 | 76,275 |
| | 305,100 |
| | 732,240 |
| | — |
| | — |
| | — |
| | — |
| David C. Barney | 2/15/2018 | 1 | 85,313 |
| | 341,250 |
| | 819,000 |
| | | | | | | | |
| | | 2/11/2016 | 2 | — |
| | — |
| | — |
| | 3,784 |
| | 18,920 |
| | 37,840 |
| | 276,232 |
| | 2/15/2018 | 2 | | | | | | | 4,156 |
| | 20,784 |
| | 41,568 |
| | | 644,616 |
|
| | | | 2/15/2018 | 3 | | | | | | | | | | | | 11,419 |
| | 313,794 |
|
| Jeffrey S. Thiede | Jeffrey S. Thiede | 2/11/2016 | 1 | 79,688 |
| | 318,750 |
| | 765,000 |
| | — |
| | — |
| | — |
| | — |
| Jeffrey S. Thiede | 2/15/2018 | 1 | 85,313 |
| | 341,250 |
| | 819,000 |
| | | | | | | | |
| | | 2/11/2016 | 2 | — |
| | — |
| | — |
| | 3,953 |
| | 19,767 |
| | 39,534 |
| | 288,598 |
| | 2/15/2018 | 2 | | | | | | | 4,156 |
| | 20,784 |
| | 41,568 |
| | | 644,616 |
|
| Martin A. Fritz | 2/11/2016 | 3 | 65,000 |
| | 260,000 |
| | 520,000 |
| | — |
| | — |
| | — |
| | — |
| |
| | | 2/11/2016 | 2 | — |
| | — |
| | — |
| | 4,186 |
| | 20,930 |
| | 41,860 |
| | 305,578 |
| | 2/15/2018 | 3 | | | | | | | | | | | | 11,419 |
| | 313,794 |
|
| Nicole A. Kivisto | | Nicole A. Kivisto | 2/15/2018 | 1 | 125,775 |
| | 279,500 |
| | 559,000 |
| | | | | | | | |
| | | | 2/15/2018 | 2 | | | | | | | 3,928 |
| | 19,642 |
| | 39,284 |
| | | 609,197 |
|
| |
1 | Annual incentive for 20162018 granted pursuant to the MDU Resources Group, Inc. Long-Term Performance-BasedExecutive Incentive Compensation Plan. |
| |
2 | Performance shares for the 2016-20182018-2020 performance period granted pursuant to the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan. |
| |
3 | Annual incentive for 2016Time-vesting restricted stock units granted pursuant to the MDU Resources Group, Inc. ExecutiveLong-Term Performance-Based Incentive Compensation Plan. |
Narrative Discussion Relating to the Summary Compensation Table
and Grants of Plan-Based Awards Table
Annual Incentive
The compensation committee recommended the 20162018 annual incentive award opportunities for our named executive officers and the board approved these opportunities at its meeting on February 11, 2016.15, 2018. The award opportunities at threshold, target, and maximum are reflected in columns (c), (d), and (e), respectively, of the Grants of Plan-Based Awards table.Table. The actual amount paid with respect to 20162018 performance is reflected in column (g) of the Summary Compensation Table.
As described in the “Annual Incentives” insection of the section entitled “Compensation Discussion and Analysis,” payment of annual award opportunities is dependent upon achievement of performance measures; actual payout may range from 0% to 200% of the target except for the construction materials &and contracting and construction services segments which may range from 0% to 250% for achievement of certain performance measures.240%.
MDU Resources Group, Inc. Proxy Statement 39
Messrs. Goodin, Barney, and Thiede received their 2016 annual incentive award opportunities pursuant to the Long-Term Performance-Based Incentive Plan. To be eligible to receive a payment, they must remain employed by the company through December 31, 2016. The performance measures associated with their annual incentive may not be adjusted if the adjustment would increase their annual incentive award payment, unless the compensation committee determined and established the adjustment in writing within 90 days of the beginning of the performance period. The compensation committee may at its sole discretion use negative discretion based on subjective or objective measures and adjust any annual incentive award payment downward.
Messrs. Schwartz and FritzAll our named executive officers were awarded their annual incentive opportunities pursuant to the MDU Resources Group, Inc. Executive Incentive Compensation Plan. Under the Executive Incentive Compensation Plan, executives who retire during the year at or after age 65 remain eligible to receive an award, but executives who terminate employment for other reasons are not eligible for an award. The compensation committee generally does not modify the performance measures; however, if major unforeseen changes in economic and environmental conditions or other significant factors beyond the control of management substantially affected management’s ability to achieve the specified performance measures, the compensation committee, in consultation with the CEO, may modify the performance measures. The compensation committee has full discretion to determine the extent to which goals have been achieved, the payment level, and whether to adjust payment of awards downward based upon individual performance. For further discussion of the specific 20162018 incentive plan performance measures and results, see the “Annual Incentives” section in the section entitled “Compensation Discussion and Analysis.”Long-Term Incentive
The compensation committee recommended long-term incentive award opportunities for the named executive officers in the form of performance shares, and the board approved the award opportunities at its meeting on February 11, 2016.15, 2018. The long-term incentive opportunities are presented as the number of performance shares at threshold, target, and maximum in columns (f), (g), and (h) of the
MDU Resources Group, Inc. Proxy Statement 47
Grants of Plan-Based Awards table.Table. The value of the long-term performance-based incentive opportunities is based on the aggregate grant date fair value and is reflected in column (e) of the Summary Compensation Table and column (l) of the Grant of Plan-Based Awards table.Table.
Depending on the achievement of the performance measures associated with our 2016-2018 total stockholder return compared to the total three-year stockholder returns of our peer group companies,2018-2020 performance period, executives will receive from 0% to 200% of the target awards in February 2019.2021. We also will pay dividend equivalents in cash on the number of shares actually vested for the performance period. The dividend equivalents will be paid in 20192021 at the same time as the performance share awards vest. are issued.
InThe compensation committee also awarded Messrs. Barney and Thiede each 11,419 restricted stock units on February 15, 2018, which will vest on December 31, 2020 if the event the company’s 2016-2018 total stockholder return is negative,officers remain employees of the numbercompany through the vesting date as reflected in column (i) of shares that would otherwise vestthe Grants of Plan-Based Awards Table. The compensation committee believes the restricted stock unit awards will incentivize Messrs. Barney and Thiede to continue their employment with the company for the performance period will be reduced from 50% to 100%.next three years and grow their respective business segments during that time. For further discussion of the specific long-term incentive plan, see the “Long-Term Incentives” section in the section entitled “Compensation Discussion and Analysis.”Nonqualified Defined Contribution Plan
The compensation committee selectsCEO recommends participants and approves contributionscontribution amounts to the Nonqualified Defined Contribution Plan based on recommendations fromwhich are approved by the CEO.compensation committee of the board of directors. The purpose of the plan is to recognize outstanding performance coupled with enhanced retention as the Nonqualified Defined Contribution Plan requires a vesting period. The amount shown in column (i) - All Other Compensation of the Summary Compensation Table includes contributions of $35,000 to Mr. Vollmer, $150,000 to Mr. Barney, and $100,000 each for Messrs. Thiede and Fritz.to Mr. Thiede. For further information, see the section entitled “Nonqualified Deferred Compensation for 20162018.” Salary and Bonus in Proportion to Total Compensation
The following table shows the proportion of salary and bonus to total compensation:
| | | Name | | Salary
($) | | Bonus
($) | | | Total
Compensation
($) | | Salary and Bonus
as a % of
Total Compensation | | | Salary
($) | | Bonus
($) | | | Total
Compensation
($) | | | Salary and Bonus
as a % of
Total Compensation | |
| David L. Goodin | | 755,000 | | — |
| | 3,510,991 | | 21.5 | % | | 824,460 | | — |
| | 4,124,067 |
| | 20.0 | % |
| Doran N. Schwartz | | 380,000 | | 6,175 |
| | 1,134,629 | | 34.0 | % | |
| Jason L. Vollmer | | | 350,000 | | — |
| | 1,132,025 |
| | 30.9 | % |
| David C. Barney | | 406,800 | | — |
| | 1,376,616 | | 29.6 | % | | 455,000 | | — |
| | 2,031,914 |
| | 22.4 | % |
| Jeffrey S. Thiede | | 425,000 | | — |
| | 1,325,906 | | 32.1 | % | | 455,000 | | — |
| | 1,974,136 |
| | 23.0 | % |
| Martin A. Fritz | | 400,000 | | 52,520 |
| | 1,243,248 | | 36.4 | % | |
| Nicole A. Kivisto | | | 430,000 | | — |
| | 1,299,178 |
| | 33.1 | % |
4048 MDU Resources Group, Inc. Proxy Statement
Outstanding Equity Awards at Fiscal Year-End 20162018
| | | | | Stock Awards | | Stock Awards |
Name
(a) | | Number of Shares or Units of Stock That Have Not Vested (#) (g) |
| | Market Value of Shares or Units of Stock That Have Not Vested
($)
(h) |
| | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
(i)1 |
| | Equity Incentive Plan Awards:
Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
(j)2 |
| | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
(i)1 |
| | Equity Incentive Plan Awards:
Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
(j)2 |
|
| David L. Goodin | | — |
| | — |
| | 375,533 |
| | 10,804,084 |
| | 337,878 |
| | 8,055,012 |
|
| Doran N. Schwartz | | — |
| | — |
| | 77,671 |
| | 2,234,595 |
| |
| Jason L. Vollmer | | | 29,433 |
| | 701,683 |
|
| David C. Barney | | — |
| | — |
| | 68,802 |
| | 1,979,434 |
| | 83,381 |
| | 1,987,803 |
|
| Jeffrey S. Thiede | | — |
| | — |
| | 72,676 |
| | 2,090,889 |
| | 85,407 |
| | 2,036,103 |
|
| Martin A. Fritz | | — |
| | — |
| | 70,742 |
| | 2,035,247 |
| |
| Nicole A. Kivisto | | | 64,934 |
| | 1,548,027 |
|
1Below is a breakdown by year of the outstanding performance share plan awards: | |
1 | Below is a breakdown by year of the outstanding performance share plan awards: |
| |
| 2014 Award |
| 2015 Award |
| 2016 Award |
| Total |
| 2016 Award |
| 2017 Award |
| 2018 Award |
| Total |
|
| Performance Period End | 12/31/2016 |
| 12/31/2017 |
| 12/31/2018 |
| 12/31/2018 |
| 12/31/2019 |
| 12/31/2020 |
|
| David L. Goodin | 33,677 |
| 144,328 |
| 197,528 |
| 375,533 |
| 197,528 |
| 61,890 |
| 78,460 |
| 337,878 |
|
| Doran N. Schwartz | 8,849 |
| 29,056 |
| 39,766 |
| 77,671 |
| |
| Jason L. Vollmer | | 9,534 |
| 3,912 |
| 15,987 |
| 29,433 |
|
| David C. Barney | 7,472 |
| 23,490 |
| 37,840 |
| 68,802 |
| 37,840 |
| 13,338 |
| 32,203 |
| 83,381 |
|
| Jeffrey S. Thiede | 7,866 |
| 25,276 |
| 39,534 |
| 72,676 |
| 39,534 |
| 13,670 |
| 32,203 |
| 85,407 |
|
| Martin A. Fritz | — |
| 28,882 |
| 41,860 |
| 70,742 |
| |
| Nicole A. Kivisto | | 33,488 |
| 11,804 |
| 19,642 |
| 64,934 |
|
Shares for the 2014 award are shown at the target level (100%) based on results for the 2014-2016 performance cycle between threshold and target.
Shares for the 2015 award are shown at the maximum level (200%) based on results for the first two years of the 2015-2017 performance cycle above target.
Shares for the 2016 award are shown at the maximum level (200%) based on results for the first year of the 2016-2018 performance cycle above target.
2ValueShares for the 2017 award are shown at the target level (100%) based on results for the first two years of the 2017-2019 performance cycle between threshold and target.
Shares for the 2018 award are shown at the target level (100%) based on results for the first year of the 2018-2020 performance cycle between threshold and target. The number of performance shares reflected in column (i) multiplied by $28.77,under the year-end per share closing2018 award also includes 11,419 time-vesting restricted stock price for 2016.units granted to Messrs. Barney and Thiede.
| |
2 | Value based on the number of performance shares and restricted stock units reflected in column (i) multiplied by $23.84, the year-end per share closing stock price for 2018. |
While for purposes of the Outstanding Equity Awards at Fiscal Year End 2016 table,Year-End 2018 Table, the number of shares and value shown for the 2014-20162016-2018 performance cycle is at 100%200% of target, the actual results for the performance period certified by the compensation committee and approved by the board of directorssettled on February 16, 2017 resulted in vesting at 68%14, 2019, was 140% of target. For further information, see the “Long-Term Incentives” insection of the section entitled “Compensation Discussion and Analysis.” Option Exercises and Stock Vested During 2016
|
| | | | | | | |
| | | Stock Awards | |
Name (a) | Number of Shares Acquired on Vesting (#) (d)1 |
| | Value Realized on Vesting ($) (e)2 |
| |
| David L. Goodin | 13,264 |
| | 244,787 |
| |
| Doran N. Schwartz | 3,661 |
| | 67,564 |
| |
| David C. Barney | — |
| | — |
| |
| Jeffrey S. Thiede | — |
| | — |
| |
| Martin A. Fritz | — |
| | — |
| |
1 | Reflects performance shares for the 2013-2015 performance period that vested on December 31, 2015, and were approved February 11, 2016. | |
2 | Reflects the value of vested performance shares based on the closing stock price of $16.31 per share on February 11, 2016, and the dividend equivalents paid on the vested shares. | |
MDU Resources Group, Inc. Proxy Statement 4149
Pension Benefits for 2016Option Exercises and Stock Vested During 2018
| | | | | | | | | | | | | | Stock Awards | |
Name
(a) | Name
(a) | | Plan Name
(b) | | Number of
Years Credited
Service
(#)
(c)1 |
| | Present Value of Accumulated
Benefit
($)
(d) |
| | Payments
During Last
Fiscal Year
($)
(e) |
| | Name (a) | Number of Shares Acquired on Vesting (#) (d)1 |
| | Value Realized on Vesting ($) (e)2 |
| |
| David L. Goodin | David L. Goodin | | Pension | | 26 |
| | 1,107,307 |
| | — |
| | David L. Goodin | 103,916 |
| | 3,090,981 |
| |
| | Basic SISP 2 | | 10 |
| | 2,285,113 |
| | — |
| | |
| | Excess SISP 3 | | 26 |
| | 36,888 |
| | — |
| | |
| |
| |
|
| |
|
| |
|
| | |
| Doran N. Schwartz | | Pension | | 4 |
| | 110,012 |
| | — |
| | |
| | Basic SISP 2 | | 9 |
| | 821,142 |
| | — |
| | |
| | Excess SISP 3 | | n/a |
| | — |
| | — |
| | |
| |
| |
|
| |
|
| |
|
| | |
| Jason L. Vollmer | | Jason L. Vollmer | 2,751 |
| | 81,829 |
| |
| David C. Barney | David C. Barney | | Pension 3 | | n/a |
| | — |
| | — |
| | David C. Barney | 16,912 |
| | 503,047 |
| |
| | Basic SISP 2 | | 10 |
| | 1,383,697 |
| | — |
| | |
| | Excess SISP 3 | | n/a |
| | — |
| | — |
| | |
| |
| |
|
| |
|
| |
|
| | |
| Jeffrey S. Thiede | Jeffrey S. Thiede | | Pension 3 | | n/a |
| | — |
| | — |
| | Jeffrey S. Thiede | 18,198 |
| | 541,300 |
| |
| | Basic SISP 3 | | n/a |
| | — |
| | — |
| | |
| | Excess SISP 3 | | n/a |
| | — |
| | — |
| | |
| |
| |
|
| |
|
| |
|
| | |
| Martin A. Fritz | | Pension 3 | | n/a |
| | — |
| | — |
| | |
| | Basic SISP 3 | | n/a |
| | — |
| | — |
| | |
| | Excess SISP 3 | | n/a |
| | — |
| | — |
| | |
| | | | |
| Nicole A. Kivisto | | Nicole A. Kivisto | 17,616 |
| | 523,988 |
| |
1 | Years of credited service related to the pension plan reflects the years of participation in the plan as of December 31, 2009, when the pension plan was frozen. Years of credited service related to the Basic SISP reflects the years toward full vesting of the benefit which is 10 years. Years of credited service related to Excess SISP reflects the same number of credited years of services as the pension plan. | | Reflects performance shares for the 2015-2017 performance period ended December 31, 2017, which were settled February 15, 2018. | |
| | | | |
2 | The present value of accumulated benefits for the Basic SISP assumes the named executive officer would be fully vested in the benefit on the benefit commencement date; therefore, no reduction was made to reflect actual vesting levels. | | Reflects the value of vested performance shares based on the closing stock price of $27.48 per share on February 15, 2018, and the dividend equivalents paid on the vested shares. | |
| | | | |
3 | Messrs. Barney, Thiede, and Fritz are not eligible to participate in the pension plans. Messrs. Thiede and Fritz do not participate in the SISP. Mr. Goodin is the only named executive officer eligible to participate in the Excess SISP | | |
| | | | | | | | | |
Pension Benefits for 2018
|
| | | | | | | | | | |
Name
(a) | | Plan Name
(b) | | Number of Years Credited Service (#)
(c)1 |
| | Present Value of Accumulated
Benefit
($)
(d) |
| |
| David L. Goodin | | Pension | | 26 |
| | 1,146,362 |
| |
| | | Basic SISP 2 | | 10 |
| | 2,343,866 |
| |
| | | Excess SISP 3 | | 26 |
| | 38,870 |
| |
| Jason L. Vollmer | | Pension | | 4 |
| | 20,857 |
| |
| | | Basic SISP 3 | | n/a |
| | — |
| |
| | | Excess SISP 3 | | n/a |
| | — |
| |
| David C. Barney | | Pension 3 | | n/a |
| | — |
| |
| | | Basic SISP 2 | | 10 |
| | 1,449,287 |
| |
| | | Excess SISP 3 | | n/a |
| | — |
| |
| Jeffrey S. Thiede | | Pension 3 | | n/a |
| | — |
| |
| | | Basic SISP 3 | | n/a |
| | — |
| |
| | | Excess SISP 3 | | n/a |
| | — |
| |
| Nicole A. Kivisto | | Pension | | 14 |
| | 220,945 |
| |
| | | Basic SISP 2 | | 8 |
| | 424,883 |
| |
| | | Excess SISP 3 | | n/a |
| | — |
| |
| | |
1 | Years of credited service related to the pension plan reflects the years of participation in the plan as of December 31, 2009, when the pension plan was frozen. Years of credited service related to the Basic SISP reflects the years toward full vesting of the benefit which is 10 years. Years of credited service related to Excess SISP reflects the same number of credited years of services as the pension plan. |
| | |
2 | The present value of accumulated benefits for the Basic SISP assumes the named executive officer would be fully vested in the benefit on the benefit commencement date; therefore, no reduction was made to reflect actual vesting levels. |
| | |
3 | Messrs. Barney and Thiede are not eligible to participate in the pension plans. Messrs. Vollmer and Thiede do not participate in the SISP. Mr. Goodin is the only named executive officer eligible to participate in the Excess SISP. |
| | | | | | | | | |
The amounts shown for the pension plan, Basic SISP, and Excess SISP represent the actuarial present values of the executives’ accumulated benefits accrued as of December 31, 2016,2018, calculated using:
a 3.54%3.85% discount rate for the Basic SISP and Excess SISP;
a 3.80%4.01% discount rate for the pension plan;
the Society of Actuaries RP-2014 Adjusted to 2006 Total Dataset Mortality Table with Scale MP-2016scale MP-2018 for post-retirement mortality; and
no recognition of future salary increases or pre-retirement mortality.
50 MDU Resources Group, Inc. Proxy Statement
The actuary assumed a retirement age of 60 for the pension, Basic SISP, and Excess SISP benefits and assumed retirement benefits commence at age 60 for the pension and Excess SISP and age 65 for Basic and Excess SISP benefits.
Pension Plan
The MDU Resources Group, Inc. Pension Plan for Non-Bargaining Unit Employees (pension plan) applies to employees hired before 2006 and was amended to cease benefit accruals as of December 31, 2009. The benefits under the pension plan are based on a participant’s average annual salary over the 60 consecutive month period where the participant received the highest annual salary between 1999 and 2009. Benefits are paid as straight life annuities for single participants and as actuarially reduced annuities with a survivor benefit for married participants unless they choose otherwise.
Supplemental Income Security Plan
The Supplemental Income Security Plan (SISP), a defined benefit nonqualified retirement plan, is offered to select key managers and executives. SISP benefits are determined by reference to levels defined within the plan. Our compensation committee, after receiving recommendations from our CEO, determined each participant’s level within the plan. On February 11, 2016, the SISP plan was amended so noto exclude new participants would be added to the plan and freeze current benefit levels were frozen for existing participants.
42 MDU Resources Group, Inc. Proxy Statement
Basic SISP Benefits
Basic SISP is a supplemental retirement benefit intended to augment the retirement income provided under the pension plans. The Basic SISP benefits are subject to the following ten-year vesting schedule:
0% vesting for less than three years of participation;
20% vesting for three years of participation;
40% vesting for four years of participation; and
an additional 10% vesting for each additional year of participation up to 100% vesting for ten years of participation.
Participants can elect to receive the Basic SISP as:
monthly retirement benefits only;
monthly death benefits paid to a beneficiary only; or
a combination of retirement and death benefits, where each benefit is reduced proportionately.
Regardless of the election, if the participant dies before the SISP retirement benefit commences, only the SISP death benefit is provided.
Basic SISP benefits vested as of December 31, 2004, are grandfathered under Section 409A of the Internal Revenue Code (Section 409A) and are subject to the SISP provisions then in effect. Typically, the grandfathered Section 409A SISP benefits are paid over 15 years, with benefits commencing when the participant attains age 65 or when the participant retires if they work beyond age 65. Basic SISP benefits vesting after December 31, 2004 are governed by amended provisions in the plan intended to comply with Section 409A. The SISP benefits for key employees as defined by Section 409A commence six months after the participant attains age 65 or when the participant retires if they work beyond age 65. The benefits are paid over a 173 month period where the first payment includes the equivalent of six-months of payments plus interest equal to one-half of the annual prime interest rate on the participant’s last date of employment.
The following are Messrs. Goodin and Barney’s benefits under the grandfathered provision and those subject to Section 409A.
|
| | | | | | |
| | Grandfathered ($) |
| Subject to §409A
($) |
| Total ($) |
|
| David L. Goodin | 247,951 |
| 2,037,162 |
| 2,285,113 |
|
| David C. Barney | 339,092 |
| 1,044,605 |
| 1,383,697 |
|
Excess SISP Benefits
Excess SISP is an excessadditional retirement benefit relating to Internal Revenue Code limitations on retirement benefits provided under the pension plans. Excess SISP benefits are equal to the difference between the monthly retirement benefits that would have been payable to the participant under the pension plans absent the limitations under the Internal Revenue Code and the actual benefits payable to the participant under the pension plans. Participants are only eligible for the Excess SISP benefits if the participant is fully vested under the pension plan, their employment terminates prior to age 65, and benefits under the pension plan are reduced due to limitations under the Internal Revenue Code on plan compensation.
In 2009, the SISP was amended to limit eligibility for the Excess SISP benefit. Mr. Goodin is the only named executive officer eligible for the Excess SISP benefit and must remain employed with the company until age 60 in order to receive the benefit. Benefits generally commence six months after the participant’s employment terminates and continue to age 65 or until the death of the participant, if prior to age 65.
Both Basic and Excess SISP benefits are forfeited if the participant’s employment is terminated for cause.
MDU Resources Group, Inc. Proxy Statement 43
Nonqualified Deferred Compensation for 20162018
Deferred Annual Incentive Compensation
Executives participating in the annual incentive compensation plans may elect to defer up to 100% of their annual incentive awards. Deferred amounts accrue interest at a rate determined annually by the compensation committee. The interest rate in effect for 20162018 was 4.5%4.28% based on an average of the Moody’s U.S. Long-Term Corporate Bond Yield Average for “A” and “Baa” rated companies. The deferred amount will be paid in accordance with the participant’s election, following termination of employment or beginning in the fifth year following the year the award was earned. The amounts are paid in accordance with the participant’s election in either a lump sum or in
MDU Resources Group, Inc. Proxy Statement 51
monthly installments not to exceed 120 months. In the event of a change of control, all amounts deferred would immediately become payable. For purposes of deferred annual incentive compensation, a change of control is defined as:
an acquisition during ana 12-month period of 30% or more of the total voting power of our stock;
an acquisition of our stock that, together with stock already held by the acquirer, constitutes more than 50% of the total fair market value or total voting power of our stock;
replacement of a majority of the members of our board of directors during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of our board of directors; or
acquisition of our assets having a gross fair market value at least equal to 40% of the gross fair market value of all of our assets.
Nonqualified Defined Contribution Plan
The company adopted the Nonqualified Defined Contribution Plan, effective January 1, 2012, to provide deferred compensation for a select group of employees. The compensation committee determinesapproves the amount of employer contributions under the Nonqualified Defined Contribution Plan and the obligations under the plan constitute an unsecured promise of the company to make such payments. The company credits contributions to plan accounts which capture the hypothetical investment experience based on the participant’s elections which individuallyelections. Contributions made prior to 2017 vest four years after each contribution in accordance with the terms of the plan. Contributions made in 2017 vest rateably over a three-year period with 1/3 vesting after the first year, an additional 1/3 after the second year, and the final 1/3 after the third year. Amounts shown as aggregate earnings in the table below for Messrs. ThiedeVollmer, Barney, and FritzThiede reflect the change in investment value at market rates.rates for the hypothetical investments selected by the participants. Participants may elect to receive their vested contributions and investment earnings either in a lump sum upon separation from service with the company or in annual installments over a period of years upon the later of (i) separation from service and (ii) age 65. Plan benefits become fully vested if the participant dies while actively employed. Benefits are forfeited if the participant’s employment is terminated for cause.
The table below includes individual contributions from deferrals of annual incentive compensation and company contributions under the Nonqualified Defined Contribution Plan:
| | Name (a) | Name (a) | | Executive Contributions in Last FY ($) (b) |
| | Registrant Contributions in Last FY ($) (c) |
| | Aggregate Earnings in Last FY ($) (d) |
| | Aggregate Withdrawals/ Distributions ($) (e) |
| | Aggregate Balance at Last FYE ($) (f) |
| | Name (a) | | Executive Contributions in Last FY ($) (b) |
| | Registrant Contributions in Last FY ($) (c) |
| | Aggregate Earnings in Last FY ($) (d) |
| | Aggregate Withdrawals/ Distributions ($) (e) |
| | Aggregate Balance at Last FYE ($) (f) |
| |
| | | | |
| | | | |
| | | | | | |
| David L. Goodin | David L. Goodin | | 188,373 |
| | — |
| | 7,305 |
| | — |
| | 195,677 |
| 1 | David L. Goodin | | 688,504 |
| | — |
| | 58,102 |
| | — |
| | 1,498,658 |
| 1 |
| Doran N. Schwartz | | — |
| | — |
| | — |
| | — |
| | — |
| | |
| Jason L. Vollmer | | Jason L. Vollmer | | — |
| | 35,000 |
| | (6,425 | ) | | — |
| | 56,250 |
| 2 |
| David C. Barney | David C. Barney | | — |
| | — |
| | — |
| | — |
| | — |
| | David C. Barney | | — |
| | 150,000 |
| | (19,556 | ) | | — |
| | 303,785 |
| 3 |
| Jeffrey S. Thiede | Jeffrey S. Thiede | | — |
| | 100,000 |
| | 28,044 |
| | — |
| | 396,929 |
| 2 | Jeffrey S. Thiede | | — |
| | 100,000 |
| | (52,812 | ) | | — |
| | 627,169 |
| 4 |
| Martin A. Fritz | | — |
| | 100,000 |
| | 13,936 |
| | — |
| | 211,748 |
| 2 | |
| | | | |
| Nicole A. Kivisto | | Nicole A. Kivisto | | — |
| | — |
| | 740 |
| | — |
| | 17,685 |
| |
1 | Mr. Goodin deferred 50% of his 2015 annual incentive compensation which was $376,745 as reported in the Summary Compensation Table for 2015. | Mr. Goodin deferred 50% of his 2017 annual incentive compensation which was $1,377,007 as reported in the Summary Compensation Table for 2017. |
2 | Messrs. Thiede and Fritz each received $100,000 under the Nonqualified Defined Contribution Plan for 2016. Mr. Thiede’s balance also includes contributions of $150,000 for 2015, $75,000 for 2014, and $33,000 for 2013. Mr. Fritz’s balance includes contributions of $100,000 for 2015. Each of these amounts is reported in column (i) of the Summary Compensation Table in the Proxy Statement for its respective year, where applicable. | Mr. Vollmer received $35,000 under the Nonqualified Defined Contribution Plan for 2018. Mr. Vollmer’s balance also includes a contribution of $22,550 for 2017. Each of these amounts are reported in column (i) of the Summary Compensation Table for its respective year, where applicable. |
3 | | Mr. Barney received $150,000 under the Nonqualified Defined Contribution Plan for 2018. Mr. Barney’s balance also includes a contribution of $150,000 for 2017. Each of these amounts are reported in column (i) of the Summary Compensation Table for its respective year. |
4 | | Mr. Thiede received $100,000 under the Nonqualified Defined Contribution Plan for 2018. Mr. Thiede’s balance also includes contributions of $100,000 for 2017, $100,000 for 2016, $150,000 for 2015, $75,000 for 2014, and $33,000 for 2013. Each of these amounts is reported in column (i) of the Summary Compensation Table in the Proxy Statement for its respective year, where applicable. |
44 MDU Resources Group, Inc. Proxy Statement
Potential Payments upon Termination or Change of Control
The Potential Payments upon Termination or Change of Control tableTable shows the payments and benefits our named executive officers would receive in connection with a variety of employment termination scenarios or upon a change of control. The scenarios include:
Voluntary Termination
Not for Cause Termination
Death
Disability
Change of Control with Termination
Change of Control without Termination.
52 MDU Resources Group, Inc. Proxy Statement
For the named executive officers, the information assumes the terminations or the change of control occurred on December 31, 2016.2018.
The table excludes compensation and benefits that our named executive officers would have already earnedearn during their employment with us whether or not a termination or change of control event had occurred or providedoccurred. The tables also do not include benefits under plans or arrangements generally available to all salaried employees and that do not discriminate in favor of the named executive officers, and that are generally available to all salaried employees, such as benefits under our qualified defined benefit pension plan (for employees hired before 2006), accrued vacation pay, continuation of health care benefits, and life insurance benefits. The tables also do not include nonqualified defined contributionNonqualified Defined Contribution Plan or deferred annual compensation amounts which are shown and explained in the Nonqualified Deferred Compensation for 2016 table.2018 Table.
Compensation
Upon aNone of our named executive officers have employment or severance agreements entitling them to their base salary, some multiple of base salary or severance upon termination or change of control, annual incentives granted under our Long-Term Performance-Based Incentive Plan (LTIP) would vest at target and be paid in cash. Messrs. Goodin, Barney, and Thiede were awarded their annual incentives for 2016 under the LTIP and would receive the value of their annual incentivecontrol. Our compensation at the target amount under the change of control scenarios. Nocommittee generally considers providing severance benefits on a case-by-case basis. Because severance payments are discretionary, no amounts are shown for annual incentivespresented in the tables for Messrs. Goodin, Barney, and Thiede under termination scenarios, as they would be eligible to receive their annual incentives at the level of performance measures were achieved for the performance period regardless of termination scenarios occurring on December 31, 2016.tables.
Messrs. Schwartz and FritzAll our named executive officers were granted their 2018 annual incentive awardsaward under the Executive Incentive Compensation Plan (EICP) which has no change of control provision in regards to annual incentive compensation other than for deferred compensation andcompensation. The EICP requires participants to remain employed with the company through the service year to be eligible for a payout. Nopayout unless otherwise determined by the compensation committee for named executive officers, or employment termination after age 65. As all our scenarios assume a termination or change in control event on December 31st, the named executives officers would be considered employed for the entire performance period; therefore, no amounts are shown for annual incentives in the tables for Messrs. Schwartz and Fritz,our named executive officers, as they would be eligible to receive their annual incentive ataward based on the level that performance measures were achieved for the performance period regardless of termination or change of control scenarios occurring on December 31, 2016.2018.
All named executive officers received their performance share awards under the Long-Term Performance-Based Incentive Plan (LTIP). Upon a change of control (with or without termination), performance share awards under the LTIP would be deemed fully earned and vest at their target levels for allthe named executive officers. For this purpose, the term “change of control” is defined in the LTIP as:
the acquisition by an individual, entity, or group of 20% or more of our outstanding common stock;
a majority of our board of directors whose election or nomination was not approved by a majority of the incumbent board members;
consummation of a merger or similar transaction or sale of all or substantially all of our assets, unless our stockholders immediately prior to the transaction beneficially own more than 60% of the outstanding common stock and voting power of the resulting corporation in substantially the same proportions as before the merger, no person owns 20% or more of the resulting corporation’s outstanding common stock or voting power except for any such ownership that existed before the merger and at least a majority of the board of the resulting corporation is comprised of our directors; or
stockholder approval of our liquidation or dissolution.
For termination scenarios other than a change of control, our award agreements provide that performance share awards are forfeited if the participant’s employment terminates for any reason before the participant has reached age 55 and completed 10 years of service. If a participant’s employment is terminated other than for cause after reaching age 55 and completing 10 years of service, performance shares are prorated as follows:
termination of employment during the first year of the performance period = shares are forfeited;
termination of employment during the second year of the performance period = performance shares earned are prorated based on the number of months employed during the performance period; and
termination of employment during the third year of the performance period = full amount of any performance shares earned are received.
Under the termination scenarios, Messrs. Goodin, Barney, and Thiede would receive performance shares as they have each reached age 55 and have 10 or more years of service. The number of performance shares received would be based on the following:
2016-2018 performance shares would vest based on the achievement of the performance measure for the period ended December 31, 2018, which was 140%;
2017-2019 performance shares would be prorated at 24 out of 36 months (2/3) of the performance period and vest based on the achievement of the performance measure for the period ended December 31, 2019. For purposes of the Potential Payments upon Termination or Change of Control Table, the vesting is shown at 100%; and
2018-2020 performance shares would be forfeited.
MDU Resources Group, Inc. Proxy Statement 4553
Based on the above criteria, the named executive officers would earn performance shares upon termination or a change of control as follows:
|
| | | | | |
| David L. Goodin | Doran N. Schwartz | David C. Barney | Jeffrey S. Thiede | Martin A. Fritz |
As of December 31, 2016, has the participant reached age 55 and have 10 years of service? | Yes | No | Yes | No | No |
Performance Share Cycle 2014-2016 | Fully Earned | Forfeited | Fully Earned | Forfeited | Forfeited |
Performance Share Cycle 2015-2017 | Prorated | Forfeited | Prorated | Forfeited | Forfeited |
Performance Share Cycle 2016-2018 | Forfeited | Forfeited | Forfeited | Forfeited | Forfeited |
For purposes of calculating the performance share value shown in the Potential Payments upon Termination or Change of Control Table, the number of vesting shares was multiplied by the closingaverage of the high and low stock price for the last market day of the year, which was December 30, 2016.31, 2018. Dividend equivalents based on the number of vesting shares are also included in the amounts presented.
Neither Ms. Kivisto nor Mr. Vollmer have reached age 55; therefore, they are not eligible for vesting of performance shares in the event of their termination.
Messrs. Barney and Thiede were granted 11,419 restricted stock units in February 2018. The restricted stock units will vest on December 31, 2020 provided that Messrs. Barney and Thiede remain continuously employed by the company through December 31, 2020, except for termination due to death or disability or a change in control as defined in the LTIP. In the case of a voluntary or not for cause termination on December 31, 2018, Messrs Barney and Thiede would forfeit the restricted stock units. In the case of death or disability, the restricted stock units would vest based on the number of full months of employment completed during the grant period to the date of death or disability divided by the total number of months in the grant period. In the case of death or disability occurring on December 31, 2018, one-third of Messrs. Barney and Thiede’s restricted stock units plus dividend equivalents would vest. In the case of a change of control (with or without termination) occurring on December 31, 2018, the restricted stock units plus dividend equivalents would fully vest.
Benefits and Perquisites
Basic SISP benefits presentedSupplemental Income Security Plan
As described in the table represent“Pension Benefits for 2018” section, the present valueBasis SISP provides a benefit of vested Basic SISP as of December 31, 2016payments commencing at age 65 and payable for 15 years. OnlyOf the named executive officers, only Messrs. Goodin, Schwartz,Barney, and Ms. Kivisto participate in the Basic SISP benefits. While Messrs. Goodin and Barney are eligible100% vested in their SISP benefit, Ms. Kivisto entered the plan in 2011 and is only 80% vested in her SISP benefit at December 31, 2018. Ms. Kivisto received a benefit level upgrade in 2014, which cliff vests on January 1, 2021. This means that if her employment terminates for Basic SISP benefits. Presentany reason other than death before January 1, 2021, her benefit upgrade is forfeited.
Under all scenarios except death and change of control without termination, the payment represents the present value was determined using a 3.54% discount rate. The terms of the vested Basic SISP benefit are described followingas of December 31, 2018 using the Pension Benefits for 2016 table.monthly retirement benefit shown in the table below and a discount rate of 3.85%. In the event of death, Messrs. Goodin, Schwartz,Barney, and Barney’sMs. Kivisto’s beneficiaries would receive monthly death benefit payments for 15 years.
The monthly SISP retirement and death benefits used inPotential Payments upon Termination or Change of Control Table shows the present value calculations were:of the monthly death benefit using the 3.85% discount rate.
| | | | Monthly SISP Retirement Payment ($) |
| Monthly SISP Death Payment ($) |
| | Monthly SISP Retirement Payment ($) |
| | Monthly SISP Death Payment ($) |
| |
| David L. Goodin | 23,040 |
| 46,080 |
| David L. Goodin | 23,040 |
| | 46,080 |
| |
| Doran N. Schwartz | 8,744 |
| 21,872 |
| |
| David C. Barney | 9,125 |
| 21,872 |
| David C. Barney | 10,936 |
| | 21,872 |
| |
| Nicole A. Kivisto | | Nicole A. Kivisto | 5,000 |
| * | 10,000 |
| * |
| * | | Ms. Kivisto’s calculations are based on 80% of the value shown above for voluntary, not for cause and change of control with termination scenarios. The disability scenario allows for two additional years of vesting and is calculated using 100% of the value shown above. Ms. Kivisto’s death benefit scenario is calculated using her 2014 benefit upgrade level with a monthly death benefit of $13,144. |
The Basic SISP amounts underBecause the plan requires a disability scenario as shownparticipant to be no longer actively employed by the company in order to be eligible for Messrs. Schwartz and Barney reflect creditpayments, we do not show benefits for an additional yearthe change of vesting of their 2014 SISP upgrades which would result in full vesting of the upgrade.control without termination scenario.
Disability
We provide disability benefits to some of our salaried employees equal to 60% of their base salary, subject to a salary limit of $200,000 for officers and $100,000 for other salaried employees when calculating benefits. For all eligible employees, disability payments continue until age 65 if disability occurs at or before age 60 and for five years if disability occurs between the ages of 60 and 65. Disability benefits are reduced for amounts paid as retirement benefits. The disability amountspayments in the tablePotential Payments upon Termination or Change of Control Table reflect the present value of the disability benefits attributable to the additional $100,000 of base salary recognized for executives under our disability program, subject to the 60% limitation, after reduction for amounts that would be paid as retirement benefits. For Messrs. Goodin and Schwartz,Vollmer and Ms. Kivisto, who participate in the pension plan, the amount represents the present value of the disability benefit after reduction for retirement benefits using a discount rate of 3.8%4.01%. Because Mr. Goodin’s retirement benefit is greater than the disability benefit, the amount shown is zero. For Messrs. Barney Thiede, and Fritz,Thiede, who do not participate in the pension plan, the amount represents the present value of the disability benefit without reduction for retirement benefits using the discount rate of 3.54% which is associated with the SISP plan3.85%, which is considered a reasonable rate for purposes of the calculation.
Severance
The compensation committee generally considers providing severance benefits on a case-by-case basis. Because severance payments are at the discretion of the compensation committee, no amounts are presented in the tables with the exception of Mr. Fritz. Mr. Fritz’s offer letter provided for a lump sum payment if his employment terminates during the two years after his date of hire as a result of: (1) a change of control of the company; (2) the company divests WBI Holdings, Inc. or a significant portion of its assets; (3) a material diminution of his authority or job duties and/or a change to whom he reports; or (4) a reduction in his base salary other than a reduction in base salary imposed on all senior officers.
4654 MDU Resources Group, Inc. Proxy Statement
Potential Payments upon Termination or Change of Control Table
| | | Executive Benefits and Payments Upon Termination or Change of Control | | Voluntary
Termination
($) |
| Not for
Cause
Termination
($) |
| Death
($) |
| Disability
($) |
| Change of
Control (With Termination)
($) |
| Change of Control (Without Termination)
($) |
| |
| Executive Benefits and Payments upon Termination or Change of Control | | Executive Benefits and Payments upon Termination or Change of Control | | Voluntary
Termination
($) |
| Not for
Cause
Termination
($) |
| Death
($) |
| Disability
($) |
| Change of
Control (With Termination)
($) |
| Change of Control (Without Termination)
($) |
|
| David L. Goodin | David L. Goodin | | | David L. Goodin | | |
| | Compensation: | | | Compensation: | | |
| | | Annual Incentive | | — |
| — |
| — |
| — |
| 755,000 |
| 755,000 |
| | Performance Shares | | 4,615,957 |
| 4,615,957 |
| 4,615,957 |
| 4,615,957 |
| 6,067,414 |
| 6,067,414 |
|
| | | Performance Shares | | 2,498,923 |
| 2,498,923 |
| 2,498,923 |
| 2,498,923 |
| 6,142,835 |
| 6,142,835 |
| Benefits and Perquisites: | | |
| | Benefits and Perquisites: | | | | Basic SISP | | 2,343,541 |
| 2,343,541 |
| — |
| 2,343,541 |
| 2,343,541 |
| — |
|
| | | Basic SISP | | 2,283,801 |
| 2,283,801 |
| — |
| 2,283,801 |
| 2,283,801 |
| — |
| | SISP Death Benefits | | — |
| — |
| 6,313,609 |
| — |
| — |
| — |
|
| | | SISP Death Benefits | | — |
| — |
| 6,447,100 |
| — |
| — |
| — |
| | Disability Benefits | | — |
| — |
| — |
| — |
| — |
| — |
|
| | | Disability Benefits | | — |
| — |
| — |
| — |
| — |
| — |
| Total | | 6,959,498 |
| 6,959,498 |
| 10,929,566 |
| 6,959,498 |
| 8,410,955 |
| 6,067,414 |
|
| | Total | | 4,782,724 |
| 4,782,724 |
| 8,946,023 |
| 4,782,724 |
| 9,181,636 |
| 6,897,835 |
| |
| Doran N. Schwartz | | | |
| | Compensation: | | | |
| | | Annual Incentive | | — |
| — |
| — |
| — |
| — |
| — |
| |
| | | Performance Shares | | — |
| — |
| — |
| — |
| 1,300,761 |
| 1,300,761 |
| |
| Jason L. Vollmer | | Jason L. Vollmer | | |
| | Benefits and Perquisites: | | | Compensation: | | |
| | | Basic SISP | | 659,072 |
| 659,072 |
| — |
| 824,254 |
| 659,072 |
| — |
| | Performance Shares | | — |
| — |
| — |
| — |
| 611,066 |
| 611,066 |
|
| | | SISP Death Benefits | | — |
| — |
| 3,060,134 |
| — |
| — |
| — |
| Benefits and Perquisites: | | |
| | | Disability Benefits | | — |
| — |
| — |
| 713,381 |
| — |
| — |
| | Disability Benefits | | — |
| — |
| — |
| 893,360 |
| — |
| — |
|
| | Total | | 659,072 |
| 659,072 |
| 3,060,134 |
| 1,537,635 |
| 1,959,833 |
| 1,300,761 |
| Total | | — |
| — |
| — |
| 893,360 |
| 611,066 |
| 611,066 |
|
| David C. Barney | David C. Barney | | | David C. Barney | | |
| | Compensation: | | | Compensation: | | |
| | | Annual Incentive | | — |
| — |
| — |
| — |
| 305,100 |
| 305,100 |
| | Performance Shares | | 909,098 |
| 909,098 |
| 909,098 |
| 909,098 |
| 1,333,967 |
| 1,333,967 |
|
| | | Performance Shares | | 468,381 |
| 468,381 |
| 468,381 |
| 468,381 |
| 1,145,462 |
| 1,145,462 |
| | Restricted Stock Units | | — |
| — |
| 92,695 |
| 92,695 |
| 278,110 |
| 278,110 |
|
| | Benefits and Perquisites: | | | Benefits and Perquisites: | | |
| | | Basic SISP | | 1,141,490 |
| 1,141,490 |
| — |
| 1,368,036 |
| 1,141,490 |
| — |
| | Basic SISP | | 1,432,676 |
| 1,432,676 |
| — |
| 1,432,676 |
| 1,432,676 |
| — |
|
| | | SISP Death Benefits | | — |
| — |
| 3,060,134 |
| — |
| — |
| — |
| | SISP Death Benefits | | — |
| — |
| 2,996,772 |
| — |
| — |
| — |
|
| | | Disability Benefits | | — |
| — |
| — |
| 275,389 |
| — |
| — |
| | Disability Benefits | | — |
| — |
| — |
| 273,370 |
| — |
| — |
|
| | Total | | 1,609,871 |
| 1,609,871 |
| 3,528,515 |
| 2,111,806 |
| 2,592,052 |
| 1,450,562 |
| Total | | 2,341,774 |
| 2,341,774 |
| 3,998,565 |
| 2,707,839 |
| 3,044,753 |
| 1,612,077 |
|
| Jeffrey S. Thiede | Jeffrey S. Thiede | | | Jeffrey S. Thiede | | |
| | Compensation: | | | Compensation: | | |
| | | Annual Incentive | | — |
| — |
| — |
| — |
| 318,750 |
| 318,750 |
| | Performance Shares | | 945,326 |
| 945,326 |
| 945,326 |
| 945,326 |
| 1,361,390 |
| 1,361,390 |
|
| | | Performance Shares | | — |
| — |
| — |
| — |
| 1,209,696 |
| 1,209,696 |
| | Restricted Stock Units | | — |
| — |
| 92,695 |
| 92,695 |
| 278,110 |
| 278,110 |
|
| | Benefits and Perquisites: | | | Benefits and Perquisites: | | |
| | | Disability Benefits | | — |
| — |
| — |
| 506,165 |
| — |
| — |
| | Disability Benefits | | — |
| — |
| — |
| 413,878 |
| — |
| — |
|
| | Total | | — |
| — |
| — |
| 506,165 |
| 1,528,446 |
| 1,528,446 |
| Total | | 945,326 |
| 945,326 |
| 1,038,021 |
| 1,451,899 |
| 1,639,500 |
| 1,639,500 |
|
| Martin A. Fritz | | | |
| Nicole A. Kivisto | | Nicole A. Kivisto | | |
| | Compensation: | | | Compensation: | | |
| | | Annual Incentive | | — |
| — |
| — |
| — |
| — |
| — |
| | Performance Shares | | — |
| — |
| — |
| — |
| 1,209,958 |
| 1,209,958 |
|
| | | Performance Shares | | — |
| — |
| — |
| — |
| 1,054,943 |
| 1,054,943 |
| Benefits and Perquisites: | | |
| | Benefits and Perquisites: | | | | Basic SISP | | 258,172 |
| 258,172 |
| — |
| 322,715 |
| 258,172 |
| — |
|
| | | Disability Benefits | | — |
| — |
| — |
| 600,673 |
| — |
| — |
| | SISP Death Benefits | | — |
| — |
| 1,800,913 |
| — |
| — |
| — |
|
| | Severance | | — |
| 500,000 |
| — |
| — |
| 500,000 |
| — |
| | Disability Benefits | | — |
| — |
| — |
| 708,366 |
| — |
| — |
|
| | Total | | — |
| 500,000 |
| — |
| 600,673 |
| 1,554,943 |
| 1,054,943 |
| | Total | | 258,172 |
| 258,172 |
| 1,800,913 |
| 1,031,081 |
| 1,468,130 |
| 1,209,958 |
|
| | | | |
MDU Resources Group, Inc. Proxy Statement 4755
CEO Pay Ratio Disclosure
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing information regarding the relationship of the annual total compensation of David L. Goodin, our president and chief executive officer, to the annual total compensation of our median employee.
Our employee workforce fluctuates during the year largely depending on the seasonality, number, and size of construction project activity conducted by our businesses. Approximately 49.6% of our employee workforce is employed under union bargained labor contracts which define compensation and benefits for participants which may include payments made by the company associated with employee participation in union benefit and pension plans.
We identified the median employee by examining the 2018 taxable wage information for all individuals on the company’s payroll records as of December 31, 2018, excluding Mr. Goodin and the employees of Sweetman Construction Company which was acquired by our Construction Materials and Contracting segment during the fourth quarter. Because of the timing of this acquisition and its integration, payroll records were not available to include in the pay ratio analysis. Sweetman Construction Company reported 232 employees which represents less than 2% of the company’s employee population. All of the company’s employees are located in the United States. We made no adjustments to annualize compensation for individuals employed for only part of the year. We selected taxable wages as reported to the Internal Revenue Service on Form W-2 for 2018 to identify the median employee as it includes substantially all of the compensation for our median employee and provided a reasonably efficient and economic manner for the identification of the median employee. Our median employee works for our corporate office with annual compensation consisting of wages, annual incentive and company matching, retirement replacement and profit sharing 401(k) contributions. Our median employee does not participate in the company’s pension plan since our median employee joined the company in 2017, after the plan was frozen. Our median employee receives an additional 5% company match to his 401(k) plan in lieu of pension contributions.
Once identified, we categorized the median employee’s compensation to correspond to the compensation components as reported in the Summary Compensation Table. For 2018, the total annual compensation of Mr. Goodin as reported in the Summary Compensation Table included in this Proxy Statement was $4,124,067, and the total annual compensation of our median employee was $77,268. Based on this information, the 2018 ratio of annual total compensation of Mr. Goodin to the median employee was 53 to 1.
56 MDU Resources Group, Inc. Proxy Statement
ITEM 4:3: RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 20172019
The audit committee at its February 20172019 meeting appointed Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2017.2019. The board of directors concurred with the audit committee’s decision. Deloitte & Touche LLP has served as our independent registered public accounting firm since fiscal year 2002.
Although your ratification vote will not affect the appointment or retention of Deloitte & Touche LLP for 2017,2019, the audit committee will consider your vote in determining its appointment of our independent registered public accounting firm for the next fiscal year. The audit committee, in appointing our independent registered public accounting firm, reserves the right, in its sole discretion, to change an appointment at any time during a fiscal year if it determines that such a change would be in our best interests.
A representative of Deloitte & Touche LLP will be present at the annual meeting and will be available to respond to appropriate questions. We do not anticipate that the representative will make a prepared statement at the annual meeting; however, he or she will be free to do so if he or she chooses.
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The board of directors recommends a vote “for” the ratification of the appointment of
Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2017.2019. |
Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 20172019 requires the affirmative vote of a majority of our common stock present in person or represented by proxy at the annual meeting and entitled to vote on the proposal. Abstentions will count as votes against this proposal.
Annual Evaluation and Selection of Deloitte & Touche LLP
The audit committee annually evaluates the performance of its independent registered public accounting firm, including the senior audit engagement team, and determines whether to re-engage the current independent accounting firm or consider other firms. Factors considered by the audit committee in deciding whether to retain the current independent accounting firm include:
Deloitte & Touche LLP’s capabilities considering the complexity of our business and the resulting demands placed on Deloitte & Touche LLP in terms of technical expertise and knowledge of our industry and business;
the quality and candor of Deloitte & Touche LLP’s communications with the audit committee and management;
Deloitte & Touche LLP’s independence;
the quality and efficiency of the services provided by Deloitte & Touche LLP, including input from management on Deloitte & Touche LLP’s performance and how effectively Deloitte & Touche LLP demonstrated its independent judgment, objectivity, and professional skepticism;
external data on audit quality and performance, including recent Public Company Accounting Oversight Board reports on Deloitte & Touche LLP and its peer firms; and
the appropriateness of Deloitte & Touche LLP’s fees, tenure as our independent auditor, including the benefits of a longer tenure, and the controls and processes in place that help ensure Deloitte & Touche LLP’s continued independence.
Based on this evaluation, the audit committee and the board believe that retaining Deloitte & Touche LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2017,2019, is in the best interests of our company and its stockholders.
In accordance with rules applicable to mandatory partner rotation, Deloitte & Touche LLP’s lead engagement partner for our audit was changed in 2017. The audit committee also oversees the process for, and ultimately approves, the selection of our independent registered public accounting firm’s lead engagement partner at the five-year mandatory rotation period. Prior to the mandatory rotation period in 2017, at the audit committee’s instruction, Deloitte & Touche LLP selected candidates to be considered for the lead engagement partner role, who were then interviewed by members of our company’s senior management. After considering the candidates recommended by Deloitte & Touche LLP,partner.
48 MDU Resources Group, Inc. Proxy Statement57
senior management made a recommendation to the audit committee regarding the new engagement partner. After discussing the qualifications of the proposed lead engagement partner with the current lead engagement partner, the audit committee chair interviewed the leading candidate, and the audit committee then considered the appointment and voted as an audit committee on the selection. The change in lead engagement partner after the current five-year rotation period occurred in February 2017.
Audit Fees and Non-Audit Fees
The following table summarizes the aggregate fees that our independent registered public accounting firm, Deloitte & Touche LLP, billed or is expected to bill us for professional services rendered for 20162018 and 2015:2017:
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| | | | | | | | |
| | | 2016 |
| | | 2015 | |
Audit Fees a | $ | 2,526,900 | | $ | 2,755,400 | |
Audit-Related Fees b | | 16,710 | | | 437,979 | |
Tax Fees c | | — |
| | | 36,400 | |
All Other Fees d | | 3,087 |
| | | 47,569 | |
Total Fees e | $ | 2,546,697 | | $ | 3,277,348 | |
| Ratio of Tax and All Other Fees to Audit and Audit-Related Fees | | 0.1 |
| % | | 2.6 | % |
|
| | | | | | | | | |
| | | 2018 |
| | | 2017 |
| |
Audit Fees 1 | $ | 2,657,405 | | $ | 2,327,450 | |
Audit-Related Fees 2 | | — |
| | | 46,790 | |
Tax Fees 3 | | — |
| | | 17,483 |
| |
All Other Fees 4 | | 3,150 |
| | | — |
| |
Total Fees 5 | $ | 2,660,555 | | $ | 2,391,723 | |
| Ratio of Tax and All Other Fees to Audit and Audit-Related Fees | | 0.1 |
| % | | 0.7 |
| % |
| |
a1
| Audit fees for 20162018 and 20152017 consisted of fees for services rendered for the annual audit of our annualconsolidated financial statements and internal control over financial reporting, statutory and regulatory audits, reviews of quarterly financial statements, subsidiary, statutory and regulatory audits, filing a Form S-8 Registration Statement (2016), and discontinued operations for Dakota Prairie Refining, LLC (DPR) (2016).other filings with the SEC. |
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b2
| Audit-related fees for 2016 and 20152017 are associated with accounting research assistance, Intermountain Gas Company public utilityInvestment Tax Credit procedures and supplemental schedule review (2016), agreed upon procedures associated report for Knife River Corporation’s JTL Group, Inc. (Wyoming) (2015), and due diligence work associated with a potential acquisition (2015).Corporation's Northwest Region. |
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c3
| Tax fees for 2015 include the preparation2017 consisted of federal and statefees for tax returnstraining for DPR. The fees associated with DPR were paid by DPR, but are included in this table because DPR was considered a variable interest entity with respect to MDU Resources Group, Inc. and is consolidated in its financial statements.regulated operations. |
| |
d4
| All other fees for 2016 are associated with a pollution control project at Big Stone electric generating facility. All other fees for 2015 are associated with a cost segregation study and research on R&D credits, in each case for DPR. The fees associated with DPR were paid by DPR, but are included in this table because DPR was considered a variable interest entity with respectrelate to MDU Resources Group, Inc. and consolidated in its financial statements.training. |
| |
e5
| TotalTotal fees reported above include out-of-pocket expenses related to the services provided of $350,000$330,000 for 20162018 and $382,965$282,483 for 2015.2017. |
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of the Independent Registered Public Accounting Firm
The audit committee pre-approved all services Deloitte & Touche LLP performed in 20162018 in accordance with the pre-approval policy and procedures the audit committee adopted in 2003. This policy is designed to achieve the continued independence of Deloitte & Touche LLP and to assist in our compliance with Sections 201 and 202 of the Sarbanes-Oxley Act of 2002 and related rules of the Securities and Exchange Commission.SEC.
The policy defines the permitted services in each of the audit, audit-related, tax, and all other services categories, as well as prohibited services. The pre-approval policy requires management to submit annually for approval to the audit committee a service plan describing the scope of work and anticipated cost associated with each category of service. At each regular audit committee meeting, management reports on services performed by Deloitte & Touche LLP and the fees paid or accrued through the end of the quarter preceding the meeting. Management may submit requests for additional permitted services before the next scheduled audit committee meeting to the designated member of the audit committee, Dennis W. Johnson, for approval. The designated member updates the audit committee at the next regularly scheduled meeting regarding any services approved during the interim period. At each regular audit committee meeting, management may submit to the audit committee for approval a supplement to the service plan containing any request for additional permitted services.
In addition, prior to approving any request for audit-related, tax, or all other services of more than $50,000, Deloitte & Touche LLP will provide a statement setting forth the reasons why rendering of the proposed services does not compromise Deloitte & Touche LLP’s independence. This description and statement by Deloitte & Touche LLP may be incorporated into the service plan or included as an exhibit thereto or may be delivered in a separate written statement.
58 MDU Resources Group, Inc. Proxy Statement49
AUDIT COMMITTEE REPORT
In connection with our financial statements for the year ended December 31, 2016,2018, the audit committee has (1) reviewed and discussed the audited financial statements with management; (2) discussed with the independent registered public accounting firm (the “Auditors”)Auditors) the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 1301, Communications with Audit Committees; and (3) received the written disclosures and the letter from the Auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the Auditors’ communications with the audit committee concerning independence, and has discussed with the Auditors their independence.
Based on the review and discussions referred to above, the audit committee recommended to the board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2016,2018, for filing with the Securities and Exchange Commission.SEC.
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Dennis W. Johnson, ChairmanChair |
| Mark A. Hellerstein |
Edward A. Bart HoladayRyan |
| David M. Sparby |
| John K. Wilson |
50 MDU Resources Group, Inc. Proxy Statement59
ITEM 5. ADVISORY VOTE TO APPROVE4. APPROVAL OF AN AMENDMENT TO THE COMPANY’S BYLAWS TO ADOPT AN EXCLUSIVE FORUM FOR INTERNAL CORPORATE CLAIMSMONTANA-DAKOTA UTILITIES CO.’S RESTATED CERTIFICATE OF INCORPORATION
Description of the AmendmentGeneral
On November 17, 2016, the board approved an amendment (the “Amendment”)January 1, 2019, we completed a holding company reorganization pursuant to the company’s bylaws adding a new Section 7.09 which provides that Internal Corporate Claims (as defined in the Amendment) may only be brought in Delaware courts. Stockholder ratification251(g) of the Amendment is not required under Delaware law, our bylaws, or otherwise. The board believes, however, that a stockholder vote on this matter is appropriate because of the importance of this issue. For the reasons described below, the board recommends that stockholders vote in favor of the proposal to ratify the Amendment. Broker non-vote shares are not entitled to vote on this item and, therefore, are not counted in the vote. The full text of the Amendment is set forth below and on Exhibit A to this Proxy Statement.
7.09 Forum Selection.
(a) Forum Selection. Unless the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, all Internal Corporate Claims shall be brought solely and exclusively in the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, another state court located within the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the United States District Court for the District of Delaware). “Internal Corporate Claims” means claims, including claims in the right of the Corporation, (i) that are based upon a violation of a duty by a current or former director or officer or stockholder in such capacity or (ii) as to which the General Corporation Law of the State of Delaware confers jurisdiction upon the Court of Chancery(the “DGCL”) to provide additional financing flexibility and further separation between our utility companies and other businesses (the “Reorganization”). As a result of the StateReorganization, Montana-Dakota Utilities Co., formerly known as MDU Resources Group, Inc. (“Montana-Dakota”), became a wholly-owned subsidiary of Delaware.a new public holding company (the “Company”).
(b) Personal Jurisdiction. IfAs required by Section 251(g) of the DGCL, Montana-Dakota’s Restated Certificate of Incorporation, as amended in connection with the Reorganization (the “Montana-Dakota Charter”), provides that any actionact or transaction involving Montana-Dakota, other than the subject matterelection or removal of whichdirectors, that requires for its adoption under the DGCL or the Montana-Dakota Charter the approval of the stockholders of Montana-Dakota will also require the approval of the Company’s stockholders by the same vote as is withinrequired by the scopeDGCL and the Montana-Dakota Charter (the “Pass-Through Provision”). Absent a provision like the Pass-Through Provision, there is no general requirement under Delaware law that stockholders of a parent entity vote on transactions involving the parent entity’s wholly-owned subsidiaries.
Accordingly, the Pass-Through Provision permits stockholders of the Company, the public holding company, to have direct voting rights as to matters affecting the Company’s wholly-owned subsidiary, Montana-Dakota, that would otherwise only require the approval of Montana-Dakota’s sole stockholder. This is highly unusual for a public holding company and restricts the Company’s flexibility to realize the desired effects of the Reorganization.
For example, the Pass-Through Provision would require Montana-Dakota to obtain approval from the Company’s stockholders, in addition to obtaining the approval of Montana-Dakota’s sole stockholder, prior to making amendments to the Montana-Dakota Charter. As was required by Section 7.09(a)251(g) of the DGCL, the Montana-Dakota Charter is filedsubstantially identical to the Company’s amended and restated certificate of incorporation, as currently in effect, with the exception of the Pass-Through Provision and certain amendments that are permissible and/or required under Section 251(g) of the DGCL. However, now that the Company is the public holding company, certain amendments to the Montana-Dakota Charter are desired in order to eliminate duplicative and unnecessary provisions in the Montana-Dakota Charter, including many provisions that are not typical or relevant for a wholly-owned subsidiary.
The deletion of the Pass-Through Provision will put the Company in the same position as substantially all other public holding companies that operate through multiple subsidiaries. It is uncommon in business organizations that operate in a courtholding company structure for the stockholders of the holding company to have direct voting rights as to matters that affect only subsidiaries of the holding company. Obtaining consent from a public corporation’s stockholders for such internal matters would add significant expense and delay and prevent the Company from achieving the flexibility and efficiency it sought to achieve by implementing the holding company structure. By removing this requirement, the Company will gain the flexibility and efficiency currently realized by nearly all other companies who operate under the same, or similar, holding company and subsidiary structure. Specifically, the removal of the Pass-Through Provision will allow Montana-Dakota to implement further amendments to the Montana-Dakota Charter to eliminate duplicative and inapplicable charter provisions that are no longer reflective of our current holding company structure. The removal of the Pass-Through Provision would also allow Montana-Dakota’s sole stockholder, without a special vote of the Company’s stockholders for each amendment, to adopt amendments to the Montana-Dakota Charter such as those more typically found in the charters of wholly-owned subsidiaries whose shares are not listed for trading on any stock exchange.
The board believes that the deletion of the Pass-Through Provision will provide the Company with the flexibility to manage its organization under the holding company structure more efficiently and effectively. Our board therefore seeks approval from the Company’s stockholders to amend the Montana-Dakota Charter in order to remove the Pass-Through Provision.
The Pass-Through Provision that would be eliminated by the proposed amendment reads as follows:
Any act or transaction by or involving the Corporation, other than a court located within the Stateelection or removal of directors of the Corporation, that requires for its adoption under the General Corporation Law of Delaware (a “Foreign Action”)or this Restated Certificate of Incorporation the approval of the stockholders of the Corporation shall, in accordance with Section 251(g) of the General Corporation Law of Delaware, require, in addition, the approval of the stockholders of MDU Resources Group, Inc. (or any successor thereto by merger), by the same vote as is required by the General Corporation Law of Delaware and/or inthis Restated Certificate of Incorporation.
60 MDU Resources Group, Inc. Proxy Statement
Impact on Stockholder Rights
Removing the name of any stockholder (including inPass-Through Provision from the Montana-Dakota Charter would have no effect on the right of the Corporation), such stockholder shall be deemed to have consented to (i) the personal jurisdictionstockholders of the stateCompany to vote on matters relating to the Company, such as elections of directors, a merger or consolidation of the Company, a sale of all or substantially all of the Company’s assets, amendments to the Company’s amended and federal courts located withinrestated certificate of incorporation, or any other acts or transactions requiring the Stateapproval of Delawarethe Company stockholders under applicable law. If the proposed amendment is approved by the Company’s stockholders and effected, then the pass-through voting requirement at Montana-Dakota would be eliminated, and the Company would no longer be required to obtain the additional approval of the Company’s stockholders for acts or transactions by or involving Montana-Dakota in connectionthe manner currently required by the Pass-Through Provision.
Required Vote
Approval requires the affirmative vote of a majority of outstanding shares of our common stock. Abstentions and broker non-votes will count as votes against this proposal.
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| The board of directors recommends a vote “for” the approval of the adoption of amendment of the Montana-Dakota charter to remove the pass-through provision. |
ITEM 5. APPROVAL OF AMENDMENTS TO UPDATE AND MODERNIZE THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, INCLUDING REMOVING THE REQUIREMENT OF ACTION BY A TWO-THIRDS VOTE OF CONTINUING DIRECTORS FOR CERTAIN BOARD ACTIONS
The company’s predecessor was incorporated in 1924, and its certificate of incorporation has been amended numerous times during the company’s long corporate existence. The board believes the current amended and restated certificate of incorporation (the “current certificate”) contains many outdated provisions and references that are no longer necessary or consistent with any action brought in any such court to enforce Section 7.09(a) and (ii) having servicethe company’s present situation or modern certificates of process made upon such stockholder in any suchincorporation generally, including language requiring action by service upon such stockholder’s counseltwo-thirds of the company’s “continuing directors” for certain board actions.
The board of directors has determined that it is in the Foreign Action as agent for such stockholder.
Purposesbest interests of the Amendmentcompany and its stockholders to amend and restate the current certificate to update and modernize certain of its provisions, including as follows (with further discussion below):
The Amendment’s requirement to bring internal litigation claims in Delaware avoids the wasteRemoving Requirement of corporate assets that would arise from litigationAction by a Two-Thirds Vote of Continuing Directors for Certain Board Actions. Revise language requiring action by two-thirds of the same claims in multiple jurisdictions.company’s continuing directors for certain board actions and instead require action by a simple majority of the board for those actions.
Public companies, particularly if involved in mergerUpdating Capital Stock Provisions, Including “Blank Check” Preferred Stock. Update the company’s capital stock provisions, including those relating to the preferred and acquisition transactions,preference stock, to a more standard structure and formulation for “blank check” preferred stock; and remove references to certain classes and previous series of preferred and preference stock which are often targeted in litigation brought purportedly on behalfno longer relevant to the company.
Modernizing Corporate Purpose and Director Powers and Duties Language. Modernize provisions relating to the corporate purpose of stockholders in multiple jurisdictions with respect to similar, if not identical, corporate claims. The company has historically entered into a number of merger and acquisition transactions to foster growth at its business segments. Although the company has not yet faced internal corporate claims arising from these transactions, a forum selection bylaw would avoid such multi-jurisdiction litigation and the wastepowers and duties of corporate assets and diversionthe company’s board of management time that results from litigating essentially duplicative cases in multiple jurisdictions. By requiring internal corporate claimsdirectors to be brought in a single jurisdiction, a forum selection bylaw serves the interestsmore customary and consistent with Delaware law.
Housekeeping Revisions. Make other immaterial, non-substantive and ministerial changes, including reorganizing and renumbering certain provisions; correcting various references to statutes, names and dates; and deleting, consolidating and updating provisions to be consistent with Delaware law.
The board of stockholders in resolving claims efficientlydirectors has approved, and without the waste of financial and other resources that are better devoted torecommends the company’s business.
The Delaware Courts designatedstockholders approve, these proposed amendments to and restatement of the current certificate (as amended and restated, the “revised certificate”). A copy of the revised certificate reflecting these proposed amendments is attached as Appendix A to this Proxy Statement. Additions to and reorganization of text of our current certificate are indicated by the Amendment can provide the most authoritativeunderlining, and efficient resolutiondeletions of internal corporate claims.Because the company, like many public companies, is incorporated in Delaware, the law applicable to any internal corporate claims would be the Delaware General Corporation Law. By requiring corporate claims to be brought in Delaware courts, a forum selection bylaw avoids the risk that Delaware General Corporation Law will be misappliedtext from our current certificate are indicated by a court in another jurisdiction, a risk that would be compounded if internal corporate claims were pending in multiple jurisdictions outside Delaware which could reach inconsistent interpretations. Additionally, Delaware offers a system of specialized chancery courts to deal with corporate law questions, with streamlined procedures and processes that help provide relatively quick decisions. This serves the interests of all stockholders in limiting the time, cost, and uncertainty of protracted litigation.strike-outs.
MDU Resources Group, Inc. Proxy Statement 5161
ApprovalThe descriptions of these proposed amendments are summaries and are qualified in their entirety by reference to the revised certificate. If approved by our stockholders, the proposed amendments will become effective upon the filing of a revised certificate incorporating these amendments with the Secretary of State of the Amendment at this time will discourage potentially harmful litigation practicesState of Delaware, which filing would be made promptly after the annual meeting; provided that the board may abandon such proposed filing without further action by the stockholders if the board deems it to be in the future.best interests of stockholders.
Removing Requirement of Action by a Two-Thirds Vote of Continuing Directors for Certain Board Actions
In 2010, the board and the company’s stockholders voted to repeal certain supermajority voting provisions in the company’s certificate of incorporation relating to business combinations and make other related amendments to the certificate of incorporation. At that time, the then board had reviewed the advantages and disadvantages of such supermajority requirements and had determined their removal was in line with furthering the company’s goal of ensuring the company’s corporate governance policies, among other things, enhanced accountability to stockholders.
Pursuant to similar considerations, the current board has determined that removing the language requiring action by two-thirds of the company’s “continuing directors” for certain board actions and related language (the “continuing director supermajority provisions”), to be advisable. The board believes that removing the continuing director supermajority provisions for the board actions further described below and instead having the full board take action by majority vote provides for more equitable board decision-making and makes each director more accountable to the company and its stockholders. These changes are also consistent with current practice and preferences of many other companies, investors, and corporate governance advisors.
The board believes it is indesirable to amend the best interestscontinuing director supermajority provisions of the company’s stockholders to approvecurrent certificate as follows:
Setting the amendment at this time. Following a series of Delaware court decisions upholding similar corporate provisions, the Delaware legislature in June 2015 enacted a law explicitly authorizing Delaware corporations to adopt bylaw provisions designating Delaware courts as the exclusive forum for resolving internal corporate claims. By adopting the forum selection bylaw at this time as authorized by the Delaware courts and the 2015 legislation, and subject to an advisory voteBoard Size. Article THIRTEENTH, section (a) of the stockholders atcurrent certificate provides that the 2017 annual meeting, the company can discourage future litigation that is brought in a particular jurisdiction on the basisnumber of tactical maneuvering rather than efficiency and predictable and authoritative outcomes.
For the foregoing reasons,directors constituting the board shall be not less than six nor more than fifteen persons, with the exact number of directors believes the Amendment is in the best interestsfixed by board resolution adopted by two-thirds of the company and its stockholders and recommends that stockholders vote in favorcontinuing directors. Article VI, section 2 of the proposal to ratifyrevised certificate provides that the Amendment.
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The board of directors recommends a vote “for” the advisory vote to approve an amendment to
the company’s bylaws to adopt an exclusive forum for internal corporate claims.
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If ratificationnumber of directors constituting the bylaws isboard shall be not approvedless than six nor more than fifteen, with the exact number of directors fixed by board resolution adopted by a majority of the board. The board believes the revised language provides a more equitable method of setting the size of the board and makes each member more accountable to the company and its stockholders.
Filling Board Vacancies and Newly Created Directorships. Article THIRTEENTH, section (b) of the current certificate provides that vacancies of the board and newly created directorships resulting from an increase in the authorized number of directors shall be filled by a two-thirds vote of the continuing directors. Article VI, section 5 of the revised certificate provides that vacancies of the board and newly created directorships resulting from an increase in the authorized number of directors shall be filled by a majority vote of the directors. The board believes the revised language provides a more equitable method for filling vacancies and newly created directorships of the board and makes each member more accountable to the company and its stockholders.
Calling Special Meetings of Stockholders. Article SIXTEENTH of the current certificate provides, among other things, that a special meeting of stockholders of the company shall be called by the chairman, president, or the secretary of the company upon the written request of two-thirds of the continuing directors. Article VII of the revised certificate provides that a special meeting of stockholders of the company shall be called by the chairman, president, or the secretary of the company upon the written request of a majority of the board. The board believes that the revised language provides a more equitable method for the board to determine whether to request a special meeting of stockholders and makes each member more accountable to the company and its stockholders.
Related Changes. Article THIRTEENTH, sections (e) and (f) of the current certificate are removed in their entirety in the revised certificate, as they are related exclusively to defining the term “continuing director,” which would no longer be used in the revised certificate.
Updating Capital Stock Provisions, Including “Blank Check” Preferred Stock
Article FOURTH of the current certificate provides for four classes of stock: common stock, preferred stock, preferred stock A, and preference stock. The company is authorized to issue a total of 502,000,000 shares of stock, which includes: 500,000,000 shares of common stock, represented atpar value $1.00 per share; 500,000 shares of preferred stock, par value $100.00 per share; 1,000,000 shares of preferred stock A, without par value; and 500,000 shares of preference stock, without par value. Article FOURTH also provides that preferred stock may be issued as either 4.50% series preferred stock or pursuant to blank check preferred stock provisions, and preferred stock A and preference stock may be issued pursuant to blank check preferred stock A or preference stock provisions, as the annual meeting and entitled to vote on this item, the board intends to rescind the Amendment. Abstentions will count as votes against the Amendment.case may be. The current
5262 MDU Resources Group, Inc. Proxy Statement
certificate’s concept of “blank check” for preferred, preferred A and preference stock refers to authorized and unissued stock of a class, where the rights, preferences, powers and limitations of a series may be expressly determined by the board consistent with the provisions of Article FOURTH. In other words, the board is empowered to provide the specific terms and conditions of such series within the requirements of Article FOURTH.
In order to shorten and simplify the company’s capital stock structure in the revised certificate, the board wishes to remove provisions in the current certificate relating to all prior series of preferred stock (including 4.50% series, 4.70% series and 5.10% series), the entire class of preferred stock A and the entire class and prior series (including series B preference) of preference stock. This proposed amendment removes classes and series of stock (and the related language) that are no longer relevant to the company or its capital stock structure, as the company currently has no shares (in any series) of preferred stock, preferred A stock or preference stock outstanding, having redeemed the last outstanding shares of its preferred stock in April 2017.
In the revised certificate, Article IV continues to provide the company authority to issue a total of 502,000,000 shares of stock, but instead of four classes of stock (i.e., common stock, preferred stock, preferred A stock, and preference stock), the company has two classes of stock: 500,000,000 shares of common stock, par value $1.00 per share, and 2,000,000 shares of preferred stock, par value $100.00 per share. Article IV also updates the “blank check” preferred stock provision to a more customary formulation for modern certificates of incorporation and to be more consistent with the language of the DGCL. These proposed amendments included in Article IV do not substantively change the board’s current rights to issue preferred stock, including its ability to set the relative rights, preferences, powers, and limitations of a series.
Under the updated capital stock provisions provided in the revised certificate, the board maintains its flexibility to seek future financing needs through equity (including customized preferred stock) financing as conditions may require without the delay, uncertainty and expense of obtaining stockholder approval for such transactions.
Modernizing Corporate Purpose and Director Powers and Duties Language
Corporate Purpose. Article III of the revised certificate amends Article THIRD of the current certificate by retaining only its first sentence, which provides that the company’s purpose is to engage in any lawful act or activity in accordance with Delaware law, and by removing the second sentence of Article THIRD, which lists non-exclusive examples of activities within the company’s corporate purpose. The board believes that the revised language is a more customary formulation for modern certificates of incorporation and that it is preferable to simply state that the company may engage in any lawful act or activity, without including a specific list of its non-exclusive business activities.
Director Powers. Article NINTH of the current certificate provides a non-exclusive list of various powers conferred on the board. Article VI of the revised certificate removes such non-exclusive list and simply provides that the business and affairs of the company shall be managed by the board and that the board is empowered to exercise all such powers and do all such things (in addition to those conferred by the company’s certificate of incorporation and bylaws and by statute) as may be exercised and done by the company, unless prohibited by statute or by the company’s certificate of incorporation. Pursuant to similar considerations regarding the proposed amendment to the corporate purpose provision, the board believes that the revised language is a more customary formulation for modern certificates of incorporation and that it is preferable to have broad and general language regarding the powers conferred on the board, without including a specific list of non-exclusive board powers.
Director Duties. Article FOURTEENTH of the current certificate provides a non-exclusive list of factors that the board may consider when, in exercising its judgment as to what is in the best interests of the company and its stockholders, it evaluates a proposal by a party to make a tender or exchange offer for securities of the company; effect a merger, consolidation or other business combination with the company; or effect any other transaction having similar effects upon the properties, operations, or control of the company. This non-exclusive list includes “the projected social, legal and economic effects of the proposed action or transaction upon the Corporation or its Subsidiaries, its employees, suppliers, customers and others having similar relationships with the Corporation, and the communities in which the Corporation and its Subsidiaries do business.” The language of Article FOURTEENTH of the current certificate is removed entirely in the revised certificate. Under Delaware law, it is the board’s obligation for those transactions referenced in Article FOURTEENTH of the current certificate to act, exercising its appropriate judgment, in the best interests of the company and its stockholders. The board believes that removal of Article FOURTEENTH is preferable because the non-exclusive list includes reference to consideration of constituencies other than the company’s stockholders, whose interests may conflict with, detract from, or otherwise not be in the best interests of the company and its stockholders. By eliminating Article FOURTEENTH, the board’s obligations in connection with a transaction will simply be governed by Delaware law rather than any express language in the revised certificate as is the case with most every other publicly traded company.
MDU Resources Group, Inc. Proxy Statement 63
Housekeeping Revisions
In furtherance of the board’s goal of updating and modernizing the current certificate, the revised certificate includes the following housekeeping revisions:
Removing the language of Article SEVENTH of the current certificate, which provides that the company is to have perpetual existence, as perpetual existence is already the default under Delaware law;
Removing the language of Article EIGHTH of the current certificate, which provides that the private property of company stockholders shall not be subject to the payment of corporate debts, as such protection is already provided under Delaware law without such provision;
Adding Article IX of the revised certificate, which consolidates into one provision the rights of the company to amend, alter, change, or repeal any provision of the company’s certificate of incorporation and the rights relating to the board’s and the stockholders’ powers to adopt, amend, or repeal the company bylaws (including through adding language consistent with Delaware law and the board and stockholder approval standards which currently apply to the company);
Reorganizing and renumbering certain provisions, including deleting Articles in the current certificate that had been “[RESERVED]” and reorganizing and renumbering provisions in the revised certificate under headings titled Articles I-IX (with numbered subsections thereunder); and
Updating references to statutes, names, and dates, including correcting certain Delaware statutory references, revising language to be more gender inclusive and updating names and dates to reflect current circumstances.
Approval requires the affirmative vote of a majority of the outstanding shares of common stock. Abstentions and broker non-votes will count as votes against this proposal.
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| The board recommends a vote “for” this proposal for approval of the amendments to update and modernize the company’s amended and restated certificate of incorporation, including removing the requirement of action by a two-thirds vote of continuing directors for certain board actions. |
64 MDU Resources Group, Inc. Proxy Statement
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| INFORMATION ABOUT THE ANNUAL MEETING |
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| | Who can Vote? | Stockholders of record at the close of business on March 10, 2017,8, 2019, are entitled to vote each share they owned on that date on each matter presented at the meeting and any adjournment(s) thereof. As of March 10, 2017,8, 2019, we had 195,304,376196,564,951 shares of common stock outstanding entitled to one vote per share. |
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| | Distribution of our Proxy Materials using Notice and Access
| We distributed proxy materials to certain of our stockholders via the Internet under the Securities and Exchange Commission’sSEC’s “Notice and Access” rules to reduce our costs and decrease the environmental impact of our proxy materials. Using this method of distribution, on or about March 24, 2017,22, 2019, we mailed a Notice Regarding the Availability of Proxy Materials (Notice) that contains basic information about our 20172019 annual meeting and instructions on how to view all proxy materials, and vote electronically, on the Internet. If you received the Notice and prefer to receive a paper copy of the proxy materials, follow the instructions in the Notice for making this request and the materials will be sent promptly to you via the preferred method. Stockholders who do not receive the Notice will receive a paper copy of our proxy materials, which will be sent on or about March 30, 2017.28, 2019. |
| | How to Vote | You are encouraged to vote in advance of the meeting using one of the following voting methods, even if you are planning to attend the 20172019 Annual Meeting of Stockholders. |
| | | Registered Stockholders: Stockholders of record who hold their shares directly with our stock registrar can vote any one of four ways: |
| | | Via the Internet: Go to www.proxypush.com/mduthe website shown on the Notice or Proxy Card, if you received one, and follow the instructions on the website.instructions. |
| | | By Telephone: Call 877-536-3553the telephone number shown on the Notice or Proxy Card, if you received one, and follow the instructions given by the voice prompts. |
| | | Voting via the Internet or by telephone authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated, and returned a Proxy Card by mail. Your voting instructions may be transmitted up until 11:59 p.m. CDTEastern Time on May 8, 2017.6, 2019. |
| | | By Mail: If you received paper copies of the Proxy Statement, Annual Report, and Proxy Card, mark, sign, date, and return the Proxy Card in the postage-paid envelope provided. |
| | | In Person: Attend the annual meeting, or send a personal representative with an appropriate proxy, to vote by ballot at the meeting. (See “Notice of Annual Meeting” and “Annual Meeting Admission.”) |
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| | Beneficial Stockholders: Stockholders whose shares are held beneficially in the name of a bank, broker, or other holder of record (sometimes referred to as holding shares “in street name”), will receive voting instructions from said bank, broker, or other holder of record. If you wish to vote in person at the meeting, you must obtain a legal proxy from your bank, broker, or other holder of record of your shares and present it at the meeting. |
| | | See discussion below inregarding the MDU Resources Group, Inc. 401(k) Plan for voting instructions for shares held under our 401(k) plans.plan. |
| | Revoking Your Proxy or Changing Your Vote | You may change your vote at any time before the proxy is exercised. |
| | Registered Stockholders: |
| | ● | If you voted by mail:mail: you may revoke your proxy by executing and delivering a timely and valid later dated proxy, by voting by ballot at the meeting, or by giving written notice of revocation to the corporate secretary. |
| | ● | If you voted via the Internet or by telephone:telephone: you may change your vote with a timely and valid later Internet or telephone vote, as the case may be, or by voting by ballot at the meeting. |
| | | ● | Attendance at the meeting will not have the effect of revoking a proxy unless (1) you give proper written notice of revocation to the corporate secretary before the proxy is exercised, or (2) you vote by ballot at the meeting. |
| | | Beneficial Stockholders: Follow the specific directions provided by your bank, broker, or other holder of record to change or revoke any voting instructions you have already provided. Alternatively, you may vote your shares by ballot at the meeting if you obtain a legal proxy from your bank, broker, or other holder of record and present it at the meeting. |
MDU Resources Group, Inc. Proxy Statement 5365
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Discretionary Voting Authority
| If you complete and submit your proxy voting instructions, the individuals named as proxies will follow your instructions. If you are a stockholder of record and you submit proxy voting instructions but do not direct how to vote on each item, the individuals named as proxies will vote as the board recommends on each proposal. The individuals named as proxies will vote on any other matters properly presented at the annual meeting in accordance with their discretion. Our bylaws set forth requirements for advance notice of any nominations or agenda items to be brought up for voting at the annual meeting, and we have not received timely notice of any such matters, other than the items from the board of directors described in this Proxy Statement. |
| Voting Standards | A majority of outstanding shares of stock entitled to vote must be present in person or represented by proxy to hold the meeting. Abstentions and broker non-votes are counted for purposes of determining whether a quorum is present at the annual meeting. |
A majority of votes cast is required to elect a director in an uncontested election. A majority of votes cast means the number of votes cast “for” a director’s election must exceed the number of votes cast “against” the director’s election. “Abstentions” and “broker non-votes” do not count as votes cast “for” or “against” the director’s election. In a contested election, which is an election in which the number of nominees for director exceeds the number of directors to be elected, directors will be elected by a plurality of the votes cast. |
Approval of each of the other matters on the agenda, other than Item 2, requires the affirmative vote of a majority of the shares of common stock present or represented by proxy during the meeting. For each of these proposals, abstentions have the same effect as “against” votes. For Item 2, the frequency that receives the most votes will be the frequency deemed recommended by our stockholders. Abstentions have no effect on Item 2. If you are a beneficial holder and do not provide specific voting instruction to your broker, the organization that holds your shares will not be authorized to vote your shares, which would result in “brokerbroker non-votes,” on proposals other than the ratification of the selection of our independent registered public accounting firm for 2017. Abstentions and broker non-votes are counted for purposes of determining whether a quorum is present at the annual meeting.2019. |
| The following chart describes the proposals to be considered at the annual meeting, the vote required to elect directors and to adopt each other proposal, and the manner in which votes will be counted: |
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| | Item No. | Proposal | Voting Options | Vote Required to Adopt the Proposal | Effect of Abstentions | Effect of “Broker Non-Votes” |
| | 1 | Election of Directors | For, against, or abstain on each nominee | A nominee for director will be elected if the votes cast for such nominee exceed the votes cast against such nomineenominee. | No effect | No effect |
| | 2 | Advisory Vote To Approve the Frequency of the Vote to Approve the Compensation Paid to the Company’s Named Executive Officers | One year,
two years, three years,
or abstain
| The frequency that receives the most votes will be deemed the frequency recommended by our stockholders
| No effect | No effect |
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| 3 | Advisory Vote to Approve the Compensation Paid to the Company’s Named Executive Officers | For, against, or abstain | The affirmative vote of a majority of the shares of common stock represented at the annual meeting and entitled to vote thereon | Same effect as votes against | No effect |
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| | 43 | Ratification of the Appointment of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm for 20172018 | For, against, or abstain | The affirmative vote of a majority of the shares of common stock represented at the annual meeting and entitled to vote thereon | Same effect as votes against | Brokers have discretion to vote |
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| | 54 | Advisory Vote to ApproveApproval of an Amendment to the Company’s Bylaws to Adopt an Exclusive Forum for Internal Corporate ClaimsMontana-Dakota Utilities Co.’s Restated Certificate of Incorporation | For, against, or abstain | The affirmative vote of a majority of the outstanding shares of common stock represented at the annual meeting and entitled to vote thereon | Same effect as votes against | NoSame effect |
| as votes against |
| | 5 | Approval of Amendments to Update and Modernize the Company’s Amended and Restated Certificate of Incorporation | For, against, or abstain | The affirmative vote of a majority of the outstanding shares of common stock | Same effect as votes against | Same effect as votes against |
54 MDU Resources Group, Inc. Proxy Statement
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| Proxy Solicitation | The board of directors is furnishing proxy materials to solicit proxies for use at the Annual Meeting of Stockholders on May 9, 20177, 2019, and any adjournment(s) thereof. Proxies are solicited principally by mail, but directors, officers, and employees of MDU Resources Group, Inc. or its subsidiaries may solicit proxies personally, by telephone, or by electronic media, without compensation other than their regular compensation. Okapi Partners, LLC additionally will solicit proxies for approximately $8,000$8,500 plus out-of-pocket expenses. We will pay the cost of soliciting proxies and will reimburse brokers and others for forwarding proxy materials to stockholders. |
66 MDU Resources Group, Inc. Proxy Statement
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Electronic Delivery of Proxy Statement and Annual Report Documents | For stockholders receiving proxy materials by mail, you can elect to receive an email in the future that will provide electronic links to these documents. Opting to receive your proxy materials online will save the company the cost of producing and mailing documents to your home or business and will also give you an electronic link to the proxy voting site. |
| ● | Registered Stockholders: If you vote on the Internet, at www.proxypush.com/mdu, simply follow the prompts for enrolling in the electronic proxy delivery service. You may also enroll in the electronic proxy delivery service at any time in the future by going directly to www.shareowneronline.com or by calling Wells Fargo Stockholder Services at 877-536-3553http://enroll.icsdelivery.com/mdu to request electronic delivery. You may also revoke an electronic delivery election at this site at any time. |
| ● | Beneficial Stockholders: If you hold your shares in a brokerage account, you may also have the opportunity to receive copies of the proxy materials electronically. PleaseYou may enroll in the electronic proxy delivery service at any time by going directly to http://enroll.icsdelivery.com/mdu to request electronic delivery. You may also revoke an electronic delivery election at this site at any time. In addition, you may also check the information provided in the proxy materials mailed to you by your bank or broker regarding the availability of this service or contact your bank or broker to request electronic delivery. |
| Householding of Proxy Materials | In accordance with a Notice sent to eligible stockholders who share a single address, we are sending only one Annual Report to Stockholders and one Proxy Statement to that address unless we received instructions to the contrary from any stockholder at that address. This practice, known as “householding,” is designed to reduce our printing and postage costs. However, if a stockholder of record wishes to receive a separate Annual Report to Stockholders and Proxy Statement in the future, he or she may contact the Office of the Treasurer at MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650, Telephone Number: (701) 530-1000. Eligible stockholders of record who receive multiple copies of our Annual Report to Stockholders and Proxy Statement can request householding by contacting us in the same manner. Stockholders who own shares through a bank, broker, or other nominee can request householding by contacting the nominee. |
| We will promptly deliver, upon written or oral request, a separate copy of the Annual Report to Stockholders and Proxy Statement to a stockholder at a shared address to which a single copy of the document was delivered. |
| MDU Resources Group, Inc. 401(k) Plan | This Proxy Statement is being used to solicit voting instructions from participants in the MDU Resources Group, Inc. 401(k) Plan with respect to shares of our common stock that are held by the trustee of the plan for the benefit of plan participants. If you are a plan participant and also own other shares as a registered stockholder or beneficial owner, you will separately receive a Notice or proxy materials to vote those other shares you hold outside of the MDU Resources Group, Inc. 401(k) Plan. If you are a plan participant, you must instruct the plan trustee to vote your shares by utilizing one of the methods described on the voting instruction form that you receive in connection with shares held in the plan. If you do not give voting instructions, the trustee generally will vote the shares allocated to your personal account in accordance with the recommendations of the board of directors. Your voting instructions may be transmitted up until 11:59 p.m. Eastern Time on May 2, 2019. |
| Annual Meeting Admission and Guidelines | Admission: All stockholders as of the record date of March 10, 2017,8, 2019, are cordially invited and urged to attend the annual meeting. You must request an admission ticket to attend. If you are a stockholder of record and plan to attend the meeting, in person. Registered stockholders who receive a full set of proxy materialsplease contact MDU Resources by email at CorporateSecretary@mduresources.com or by telephone at 701-530-1010 to request an admission ticket. A ticket will receive a request for admission ticket(s) with their proxy card that can be completed and returnedsent to us postage-free. Registered stockholders who receive a Notice and stockholders whoseyou by mail. If your shares are held beneficially in the name of a bank, broker, or brokerother holder of record, and you plan to attend the annual meeting, you will not receiveneed to submit a written request for admission ticket(s). They should instead: (1) call (701) 530-1000 to request an admission ticket(s)ticket by mail to: Investor Relations, MDU Resources Group, Inc., (2) if shares are held in the name of a bankP.O. Box 5650, Bismarck, ND 58506 or broker, obtain a statement from their bank or broker showingemail at CorporateSecretary@mduresources.com. The request must include proof of stock ownership as of March 10, 2017,8, 2019, such as a bank or brokerage firm account statement or a legal proxy from the bank, broker, or other holder of record confirming ownership. A ticket will be sent to you by mail. Requests for admission tickets must be received no later than May 1, 2019. You must present your admission ticket and (3) present their admission tickets(s), the stock ownership statement, andstate-issued photo identification, such as a driver’s license, to gain admittance to the meeting. Guidelines: The business of the meeting will follow as set forth in the agenda which you will receive at the annualmeeting entrance. The use of cameras or sound recording equipment is prohibited, except by the media or those employed by the company to provide a record of the proceedings. The use of cell phones and other personal communication devices is also prohibited during the meeting. All devices must be turned off or muted. No firearms or weapons, banners, packages, or signs will be allowed in the meeting room. MDU Resources Group, Inc. reserves the right to inspect all items, including handbags and briefcases, that enter the meeting room. |
MDU Resources Group, Inc. Proxy Statement 5567
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| Conduct of the Meeting | Neither the board of directors nor management intends to bring before the meeting any business other than the matters referred to in the Notice of Annual Meeting and this Proxy Statement. We have not been informed that any other matter will be presented at the meeting by others. However, if any other matters are properly brought before the annual meeting, or any adjournment(s) thereof, your proxies include discretionary authority for the persons named in the proxy to vote or act on such matters in their discretion. |
Stockholder Proposals, Director Nominations, and Other Items of Business for 20182020 Annual Meeting | Stockholder Proposals for Inclusion in Next Year’s Proxy Statement. To be included in the proxy materials for our 20182020 annual meeting, a stockholder proposal must be received by the corporate secretary no later than November 24, 2017,23, 2019, unless the date of the 2020 annual meeting is more than 30 days before or after May 7, 2020, in which case the proposal must be received a reasonable time before we begin to print and mail our proxy materials. The proposal must also comply with all applicable requirements of Rule 14a-18 under the Securities and Exchange Act of 1934. |
Director Nominations From Stockholders for Inclusion in Next Year’s Proxy Statement. If a stockholder or group of stockholders wishes to nominate one or more director candidates to be included in our proxy statement for the 2020 annual meeting through our proxy access bylaw provision, we must receive proper written notice of the nomination not later than 120 or earlier than 150 days before the anniversary date that the definitive proxy statement was first released to stockholders in connection with the annual meeting, or between October 24, 2019 and November 23, 2019. In the event that the 2020 annual meeting is more than 30 days before or after May 7, 2020, the notice must be delivered no earlier than the 150th day prior to such meeting and no later than the 120th day prior to such meeting or the 10th day following the date on which public announcement of the meeting date is first made. In addition, the nomination must otherwise comply with the requirements in our bylaws. The requirements of such notice can be found in our bylaws, a copy of which is on our website, at www.mdu.com/governance. |
Director Nominations and Other Stockholder Proposals Raised From the Floor at the 20182020 Annual Meeting of Stockholders. Under our bylaws, if a stockholder intends to nominate a person as a director, or present other items of business at an annual meeting, the stockholder must provide written notice of the director nomination or stockholder proposal at leastwithin 90 to 120 days prior to the anniversary of the most recent annual meeting. Notice of director nominations or stockholder proposals for our 20182020 annual meeting must be received bybetween January 8, 2020 and February 9, 2018,7, 2020, and meet all the requirements and contain all the information, including the completed questionnaire for director nominations, provided by our bylaws. The requirements for such notice can be found in our bylaws, a copy of which is on our website, at http://www.mdu.com/integrity/governance/guidelines-and-bylaws.governance. |
We will make available to our stockholders to whom we furnish this Proxy Statement a copy of our Annual Report on Form 10-K, excluding exhibits, for the year ended December 31, 2016,2018, which is required to be filed with the Securities and Exchange Commission.SEC. You may obtain a copy, without charge, upon written or oral request to the Office of the Treasurer of MDU Resources Group, Inc., 1200 West Century Avenue, Mailing Address: P.O. Box 5650, Bismarck, NDNorth Dakota 58506-5650, Telephone Number: (701) 530-1000. You may also access our Annual Report on Form 10-K through our website at www.mdu.com.
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| | By order of the Board of Directors, |
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| | Daniel S. Kuntz |
| | Secretary |
| | March 24, 201722, 2019 |
5668 MDU Resources Group, Inc. Proxy Statement
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
MDUR NEWCOMDU RESOURCES GROUP, INC.
AMENDMENT TO THE BYLAWS
OF
MDUR NEWCOMDU RESOURCES GROUP, INC.
7.09 Forum Selection.
(a) Forum Selection. Unless, a corporation organized and existing under the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, all Internal Corporate Claims shall be brought solely and exclusively in the Court of Chancerylaws of the State of Delaware, (or, ifhereby certifies as follows:
1.The original certificate of incorporation ofpresent name of the Courtcorporation is MDU RESOURCES GROUP, INC. (the “Corporation”).
2.The Corporation was incorporated under the name “MDUR Newco, Inc. was filed” by the filing of Chanceryits original Certificate of Incorporation with the Office of the Secretary of State of the State of Delaware does not have jurisdiction, another state court located withinon September 21, 2018 (2018, which was amended by the filing of its Amended and Restated Certificate of Incorporation with the Office of the Secretary of State of the State of Delaware or, if no state court located withineffective as of January 1, 2019 (as amended, the State“Original Certificate of Delaware has jurisdiction,Incorporation”).
2. MDUR Newco, Inc.3. The Corporation is filing this aAmended and rRestated cCertificate of iIncorporation (the “Certificate of Incorporation”), which restates, integrates and further amends the United States District Court for the District of Delaware). “Internal Corporate Claims” means claims, including claims in the rightprovisions of the Corporation, (i) that are based upon a violationOriginal Certificate of a duty by a current or former director or officer orIncorporation, and which was duly adopted in accordance with Sections 242, 245 and 228 (by written consent of the sole stockholder in such capacity or (ii) as to whichof MDUR Newco, Inc.)228, 242 and 245 of the General Corporation Law of the State of Delaware.
3.4. The text of the Original Certificate of Incorporation is hereby amended and restated in its entirety by this Certificate of Incorporation, effective as of 12:02[______][a/p].m. Eastern Standard Time on January 1,[______], 2019, as to read in full as follows:
ARTICLE I
NAME
FIRST. The name of this Corporation is MDU RESOURCES GROUP, INC. (the “Corporation”).
ARTICLE II
REGISTERED OFFICE AND AGENT
SECOND. The registered office of the Corporation in the State of Delaware confers jurisdiction upon the Courtis located at 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of Chanceryits registered agent at such address is The Corporation Trust Company.
ARTICLE III
CORPORATE PURPOSE
THIRD. The purpose of the StateCorporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
(b) Personal Jurisdiction. If any action the subject matter of which is within the scope of Section 7.09(a) is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) by or in Delaware. Included within this purpose, without limiting the name of any stockholder (including in the rightgenerality of the Corporation), such stockholder shall be deemedforegoing sentence is (1) to have consentedown and operateelectric and gas public utility systems and (2) to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce Section 7.09(a) and (ii) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Actiontransact business as agent for such stockholder.a multidimensional natural resource company
MDU Resources Group, Inc. Proxy Statement A-1
MDU RESOURCES GROUP, INC.ARTICLE IV
CAPITAL STOCK
ANNUAL MEETING OF STOCKHOLDERS(1) Authorized Shares.
Tuesday, May 9, 2017The Corporation shall have and exercise all the powers conferred upon corporations by the GeneralCorporation Law of Delaware.
11:00 a.m. Central Daylight Saving TimeFOURTH. The total number of shares of stock which the Corporation shall have authority to issue is Five Hundred Two Million (502,000,000) divided into fourtwo classes, namely, Preferred Stock, Preferred Stock A, Preference Stock, and Common Stock. The total number of shares of such Preferred Stock authorized is Five Hundred Thousand (500,000Two Million (2,000,000) shares of the par value of One Hundred Dollars ($100) per share (hereinafter called the “Preferred Stock”) amounting in theaggregate to Fifty Million Dollars ($50,000,000). The total number of shares of such Preferred Stock A authorized isOne Million (1,000,000) shares without par value (hereinafter called the “Preferred Stock A”). The total number ofshares of such Preference Stock authorized is Five Hundred Thousand (500,000) shares without par value (hereinafter called the “Preference Stock”). The total number of shares of such Common Stock authorized is Five Hundred Million (500,000,000) of the par value of One and no/100 Dollars ($1.00) per share (hereinafter called the “Common Stock”), amounting in the aggregate to Five Hundred Million Dollars ($500,000,000).
909 Airport RoadThe Preferred Stock and the Preferred Stock A shall rank equally with no preference or priority ofthe Preferred Stock over the Preferred Stock A or of the Preferred Stock A over the Preferred Stock with respect toearnings, and assets upon liquidation, dissolution or winding up of the Corporation, and the Preferred Stock and thePreferred Stock A shall be senior to the Preference Stock with respect to earnings, and assets upon liquidation,dissolution or winding up of the Corporation, and the Preference Stock in turn shall be senior to the Common Stockwith respect thereto.
Bismarck, ND
The description of such classes of stock, and the designations and the powers, preferences and rightsand the qualifications, limitations or restrictions thereof are as follows:
1.(2) Preferred Stock. The Preferred Stock may be issued from time to time either (a) as Preferred Stock of a series to be designated 4.50% Series Preferred Stock, or (b) if so determined from time to time by resolution or resolutions adopted by the Board of Directors either in whole or in part as one or more other series, each series to be appropriately designated by distinguishing number, letter or title prior to the issue of any shares thereof. One Hundred Thousand (100,000) shares of the Preferred Stock are hereby designated as 4.50% Series Preferred Stock. The number of shares of the Preferred Stock so designated as 4.50% SeriesPreferred Stock may be increased (but not above the number of shares then authorized) or decreased (but not below the number of shares thereof then outstanding) by aThe description and terms of the Preferred Stock of any series shall be fixed and determined by the Board of Directors at the time of the authorization of the issue of the original shares of each such series, including such voting powers, full or limited, or no voting powers, and such designations, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors in the same manner as the Board may by resolution create other series of theproviding for the issuance of such shares and as may be permitted by the General Corporation Law of the State of Delaware. The Board of Directors is also expressly authorized to increase or decrease the number of shares of any series of Preferred Stock subsequent to the issuance of shares of that series of Preferred Stock, but not below the number of shares of such series of Preferred Stock then outstanding. In case the number of shares of any series of Preferred Stock shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution
A-2 MDU Resources Group, Inc. Proxy Statement
originally fixing the number of shares of such series of Preferred Stock. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of the Corporation’s outstanding capital stock entitled to vote thereon, without a separate vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any certificate of designation filed with respect to any series of Preferred Stock.
2.The Preferred Stock of all series shall be of the same class and of equal rank and shall be identical in all respects except that
(3) Common Stock. The preferences, limitations, voting powers and relative rights of the Common Stock (subject to the preferences and rights of the Preferred Stock as determined by the Board of Directors pursuant to Paragraph (2) of this Article IV) are as follows:
(a)the maximum dividend rate of the 4.50% Series Preferred Stock shall be four and fifty hundredths per cent (4.50%) per annum, and the maximum dividend rate of the Preferred Stock of each other series shall be such rate as shall have been fixed and determined by the Board of Directors to accrue in respect of the shares of stock of each such other series from a date to be determined as hereinafter provided;Voting Rights. Except as otherwise expressly provided in this Certificate of Incorporation or required by applicable law, each holder of Common Stock shall be entitled to one vote for each share of Common Stock held as of the applicable record date on any matter that is submitted to a vote of the stockholders of this Corporation (including, without limitation, any matter voted on at a stockholders’ meeting).
(b)the amount per share which the Preferred Stock shall be entitled to receive as a premium in case of the redemption thereof shall be Five Dollars ($5.00) per share in the case of the 4.50% Series Preferred Stock, and in the case of each other series of the Preferred Stock shall be such amount, if any, as shall have been fixed and determined by the Board of Directors;
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| (d) | the shares of each series of the Preferred Stock, other than the 4.50% Series PreferredStock, may be made convertible into, or exchangeable for, shares of any other class or classes, or of any other series of the same or of any other class or classes, of stock of the Corporation, at such price or prices, or at such rates of exchange and with such adjustments as shall have been fixed and determined by the Board of Directors in respect of the shares of stock of each such series; and |
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| (e) | the shares of each series of the Preferred Stock, other than the 4.50% Series Preferred Stock, shall possess such voting power, in addition to that provided for in paragraph 13, as shall have been fixed and determined by the Board of Directors in respect of the shares of stock of each such series. |
MDU Resources Group, Inc. Proxy Statement A-3
The description and terms of the Preferred Stock of each series in the foregoing particulars (exceptas in this section fixed and determined in respect of the 4.50% Series Preferred Stock) shall be fixed anddetermined by the Board of Directors at the time of the authorization of the issue of the original shares of eachsuch other series. All shares of each series shall be alike in every particular.
3.The Preferred Stock A may be issued from time to time by resolution or resolutions adopted by the Board of Directors, either in whole or in part as one or more series, each series to be appropriately designated by distinguishing number, letter or title prior to the issue of any shares thereof.
4.The Preferred Stock A of all series shall be of the same class and of equal rank and shall be identical in all respects except that
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| (a) | the maximum dividend rate of the Preferred Stock A of each series shall be such rate as shall have been fixed and determined by the Board of Directors to accrue in respect of the shares of stock of each such series from a date to be determined as hereinafter provided; |
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| (b) | the terms and conditions on which the shares of each series may be redeemed and in theamount or amounts per share which the Preferred Stock A of each series shall be entitled to receive in case of the redemption thereof shall be such as shall have been fixed and determined by the Board of Directors for each such series; |
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| (c) | the amount per share which the Preferred Stock A of each series shall be entitled to receive in the event of any liquidation, dissolution or winding up of this Corporation, whether voluntary or involuntary, shall be such amount as shall have been fixed and determined by the Board of Directors for such purpose for each such series; |
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| (d) | a sinking fund or other retirement obligation may be provided for any or all series of the Preferred Stock A, at such rate and on such terms as shall have been fixed and determined by the Board of Directors in respect of the shares of stock of each such series; |
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| (e) | the shares of any or all series of the Preferred Stock A may be made convertible into, or exchangeable for, shares of any other class or classes, or of any other series of the same or of any other class or classes, of stock of the Corporation, at such price or prices, or at such rates of exchange and with such adjustments as shall have been fixed and determined by the Board of Directors in respect of the shares of stock of each such series; and |
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| (f) | the shares of each series of the Preferred Stock A shall possess such voting power, in addition to that provided for in paragraph 13, as shall have been fixed and determined by the Board of Directors in respect of the shares of stock of each such series. |
The description and terms of the Preferred Stock A of each series in the foregoing particulars and the number of shares constituting each series shall be fixed and determined by the Board of Directors at the time of the authorization of the issue of the original shares of each such series. All shares of each series shall be alike in every particular.
5.The Preference Stock may be issued from time to time by resolution or resolutions adopted by the Board of Directors, either in whole or in part as one or more series, each series to be appropriately designated by distinguishing number, letter or title prior to the issue of any shares thereof.
A-4 MDU Resources Group, Inc. Proxy Statement
6.The Preference Stock of all series shall be of the same class and of equal rank and shall be identical in all respects except that
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| (a) | the maximum dividend rate of the Preference Stock of each series shall be such rate as shall have been fixed and determined by the Board of Directors to accrue in respect of the shares of stock of each such series from a date to be determined as hereinafter provided; |
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| (b) | the terms and conditions on which the shares of each series may be redeemed and the and the amount or amounts per share which the Preference Stock of each series shall be entitled to receive in case of the redemption thereof shall be such as shall have been fixed and determined by the Board of Directors for each such series; |
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| (c) | the amount per share which the Preference Stock of each series shall be entitled to receive in the event of any liquidation, dissolution or winding up of this Corporation, whether voluntary or involuntary, shall be such amount as shall have been fixed and determined by the Board of Directors for such purpose for each such series; |
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| (d) | a sinking fund or other retirement obligation may be provided for any or all series of the Preference Stock, at such rate and on such terms as shall have been fixed and determined by the Board of Directors in respect of the shares of stock of each such series; and |
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| (e) | the shares of any or all series of the Preference Stock may be made convertible into, or exchangeable for, shares of the Common Stock, at such price or prices, or at such rates of exchange and with such adjustments as shall have been fixed and determined by the Board of Directors in respect of the shares of stock of each such series. |
The description and terms of the Preference Stock of each series in the foregoing particulars and the number of shares constituting each series shall be fixed and determined by the Board of Directors at the time of the authorization of the issue of the original shares of each such series. All shares of each series shall be alike in every particular.
7.In preference to the Preference Stock and the Common Stock, out of the surplus or net profits of this Corporation, as and when declared by the Board of Directors, the holders of the 4.50% Series Preferred Stock shall be entitled to receive dividends at but not exceeding the maximum dividend rate herein fixed and determined, and the holders of the other series of Preferred Stock and all series of the Preferred Stock A shall be entitled to receive dividends, in preference to the Preference Stock and the Common Stock, out of the surplus or net profits of this Corporation, as and when declared by the Board of Directors, at but not exceeding the maximum dividend rates fixed and determined by the Board of Directors and expressed in the certificates therefor, payable quarterly on January 1st, April 1st, July 1st, and October 1st in each year, before any dividends shall be declared or paid upon or set apart for the Preference Stock or the Common Stock and before any sum shall be paid or set apart for the purchase or redemption of any series of the Preferred Stock, the Preferred Stock A or the Preference Stock, or the Common Stock. Such dividends on the Preferred Stock shall be cumulative from such date or dates as the Board of Directors shall fix at the time of issue thereof, or if no such date or dates shall be fixed, then from the respective dates of issue thereof, so that if in any dividend period or periods full cumulative dividends, at the maximum rates fixed and determined therefor, accrued on all outstanding shares of Preferred Stock and Preferred Stock A for all past dividend periods and for the then current dividend period, shall not have been paid, the
MDU Resources Group, Inc. Proxy Statement A-5
deficiency shall be declared and paid or set apart for payment before any dividends shall be declared or paid upon or set apart for the Preference Stock or for the Common Stock and before any sum shall be paid or set apart for the purchase or redemption of any series of the Preferred Stock, the Preferred Stock A or the Preference Stock, or the Common Stock.
If at any time Preferred Stock or Preferred Stock A of more than one series shall be outstanding, any dividends paid upon the Preferred Stock or the Preferred Stock A in an amount less than full cumulative dividends accrued or in arrears upon all the Preferred Stock and the Preferred Stock A outstanding shall be divided among the outstanding series of the Preferred Stock and the Preferred Stock A in proportion to the aggregate amounts which would be distributable to each series of the Preferred Stock and the Preferred Stock A if full cumulative dividends were at said time to be declared and paid thereon.
8.Subject to the prior rights and preferences of the Preferred Stock and the Preferred Stock A hereinbefore set forth, out of the surplus or net profits of this Corporation remaining after full cumulative dividends as aforesaid upon all series of the Preferred Stock and the Preferred Stock A then outstanding have been paid for all past dividend periods and after full cumulative dividends upon all series of the Preferred Stock and the Preferred Stock A for the current dividend period have been declared and paid or set apart for payment, then, as and when declared by the Board of Directors, the holders of the Preference Stock of all series shall be entitled to receive dividends at but not exceeding the maximum dividend rates fixed and determined by the Board of Directors and expressed in the resolution or resolutions authorizing the creation and issuance of each such series, payable quarterly on January 1st, April 1st, July 1st, and October 1st in each year, before any dividends shall be declared or paid upon or set apart for the Common Stock and before any sum shall be paid or set apart for the purchase or redemption of the Preference Stock of any series or the Common Stock. Such dividends on the Preference Stock shall be cumulative from such date or dates as the Board of Directors shall fix at the time of issue thereof, or if no such date or dates shall be fixed, then from the respective dates of issue thereof, so that if in any dividend period or periods full cumulative dividends, at the maximum rates fixed and determined therefor, accrued on all outstanding shares of Preference Stock for all past dividend periods and for the then current dividend period, shall not have been paid, the deficiency shall be declared and paid or set apart for payment before any dividends shall be declared or paid upon or set apart for the Common Stock and before any sum shall be paid or set apart for the purchase or redemption of the Preference Stock of any series or the Common Stock.
If at any time the Preference Stock of more than one series shall be outstanding, any dividends paidupon the Preference Stock in an amount less than full cumulative dividends accrued or in arrears upon all thePreference Stock outstanding shall be divided among the outstanding series of Preference Stock in proportionto the aggregate amounts which would be distributable to the Preference Stock of each series if fullcumulative dividends were at said time to be declared and paid thereon.
9.Subject to the prior rights and preferences of the Preferred Stock, the Preferred Stock A and the Preference Stock hereinbefore set forth, out of any surplus or net profits of this Corporation remaining after full cumulative dividends as aforesaid upon all series of the Preferred Stock, the Preferred Stock A and the Preference Stock then outstanding have been paid for all past dividend periods and after full cumulative dividends upon all series of the Preferred Stock, the Preferred Stock A and the Preference Stock for the current dividend period have been declared and paid or set apart for payment and after making such provision, if any, as the Board of Directors may deem necessary for working capital, then and not otherwise, dividends may be declared and paid upon the Common Stock, to the exclusion of the holders of the Preferred Stock, the Preferred Stock A and the Preference Stock, and no holder of any series of the Preferred Stock, the Preferred Stock A or the Preference Stock shall be entitled to receive or shall receive dividends in excess of the maximum dividend rates herein set forth or fixed in the certificates therefor or in the resolution
A-6 MDU Resources Group, Inc. Proxy Statement
or resolutions authorizing the creation and issuance of each such series.
The right to receive any dividends which may be declared payable in stock of any class is vested in the holders of the Common Stock exclusively, but no such dividends shall be declared in any dividend period unless full cumulative dividends upon all series of the Preferred Stock, the Preferred Stock A and the Preference Stock then outstanding shall have been paid for all past dividend periods and shall have been declared and paid or set apart for payment for the current dividend period.
10.All series of the Preferred Stock and the Preferred Stock A shall be preferred as to both earnings, and assets, and in the event of any liquidation, dissolution or winding up of this Corporation, whether voluntary or involuntary, before any assets of the Corporation shall be distributed among or paid over to the holders of the Preference Stock or the Common Stock, the holders of the Preferred Stock of each series shall be entitled to be paid One Hundred Dollars ($100.00) per share, and the holders of the Preferred Stock A of each series shall be entitled to be paid that amount which shall have been fixed and determined for such purpose by the Board of Directors in the resolution or resolutions authorizing the creation and issuance of each such series, in each case together with a sum of money equivalent in the case of each share of stock to all cumulative dividends on the Preferred Stock or the Preferred Stock A, as the case may be, accrued and in arrears thereon, before any distribution of the assets shall be made to the holders of the Preference Stock or the Common Stock, but the holders of the Preferred Stock and the Preferred Stock A shall not be entitled to any further participation in such distribution, and the holders of the Common Stock, subject to the prior rights and preferences of the Preference Stock, shall be entitled, to the exclusion of the holders of the Preferred Stock, the Preferred Stock A and the Preference Stock, to share ratably in all the assets of this Corporation remaining after payment to the holders of the Preferred Stock, and the Preferred Stock A and the Preference Stock of their full preferential amounts. If upon any such liquidation, dissolution or winding up of this Corporation, the assets distributable among the holders of the Preferred Stock and the Preferred Stock A shall be insufficient to permit the payment in full to such holders of the preferential amounts aforesaid, then the entire assets of this Corporation to be distributed shall be distributed among the holders of the Preferred Stock and the Preferred Stock A then outstanding ratably in proportion to the full preferential amounts to which they are respectively entitled.
11.As hereinbefore set forth, the Preference Stock of all series shall rank junior to all series of the Preferred Stock and the Preferred Stock A with respect to both earnings, and assets, and in the event of any liquidation, dissolution or winding up of this Corporation, whether voluntary or involuntary, after payment to the holders of the Preferred Stock and the Preferred Stock A of all amounts payable to them in such event and before any assets of the Corporation shall be distributed among or paid over to the holders of the Common Stock, the holders of the Preference Stock of each series shall be entitled to be paid that amount which shall have been fixed and determined for such purpose by the Board of Directors in the resolution or resolutions authorizing the creation and issuance of each such series, in each case together with a sum of money equivalent in the case of each share of stock to all cumulative dividends on the Preference Stock, accrued and in arrears thereon, before any distribution of the assets shall be made to the holders of the Common Stock, but the holders of the Preference Stock shall not be entitled to any further participation in such distribution, and the holders of the Common Stock shall be entitled, to the exclusion of the holders of the Preferred Stock, the Preferred Stock A and the Preference Stock, to share ratably in all the assets of this Corporation remaining after payment to the holders of the Preferred Stock, the Preferred Stock A and the Preference Stock of their full preferential amounts aforesaid. If upon any such liquidation, dissolution or winding up of this Corporation, the assets distributable among the holders of the Preference Stock shall be insufficient to permit the payment in full to such holders of the preferential amounts aforesaid, then the entire assets of this Corporation to be distributed, after payment to the holders of the Preferred Stock and the Preferred Stock A of all amounts payable to them in such event, shall be distributed among the holders
MDU Resources Group, Inc. Proxy Statement A-7
of the Preference Stock then outstanding ratably in proportion to the full preferential amounts to which they are entitled.
Nothing in paragraph 10 or this paragraph 11 shall be deemed to prevent the purchase or redemptionof any series of the Preferred Stock, the Preferred Stock A or the Preference Stock, in any manner permittedby paragraph 12. A consolidation or merger of this Corporation with any other corporation or corporationsshall not be regarded as a liquidation, dissolution or winding up of this Corporation within the meaning ofparagraph 10 or this paragraph 11, but no such consolidation or merger shall in any manner impair the rightsor preferences of any of the Preferred Stock, the Preferred Stock A or the Preference Stock.
12.This Corporation may at the option of the Board of Directors from time to time on any dividend payment date redeem the whole or any part of any series of the Preferred Stock, the Preferred Stock A or the Preference Stock; with respect to the Preferred Stock, by paying One Hundred Dollars ($100.00) per share for each share thereof so redeemed, plus a premium of such additional amount per share as herein fixed and determined for the 4.50% Series Preferred Stock, and in the case of any other series of the Preferred Stock, such premium, if any, as shall have been fixed and determined by the Board of Directors, together in each case with the amount of any dividends accrued and in arrears thereon; with respect to the Preferred Stock A and the Preference Stock, by paying the appropriate amount per share which shall have been fixed and determined by the Board of Directors in the resolution or resolutions authorizing the creation and issuance of each such series of the Preferred Stock A or the Preference Stock, together in each case with the amount of any dividends accrued and in arrears thereon. Notice of such election to redeem shall, not less than thirty days prior to the dividend date upon which the stock is to be redeemed, be mailed to each holder of stock so to be redeemed at his address as it appears on the books of the Corporation. In case less than all of the outstanding Preferred Stock, the Preferred Stock A or the Preference Stock of any series is to be redeemed, the amount to be redeemed may be determined by the Board of Directors; the method of effecting such redemption, whether by lot or pro rata or otherwise, is to be determined by the Board of Directors at the time of issuance. If, on or before the redemption date named in such notice, the funds necessary for such redemption shall have been set aside by the Corporation so as to be available for payment on demand to the holders of the stock so called for redemption, then, notwithstanding that any certificate of stock so called for redemption shall not have been surrendered for cancellation, the dividends thereon shall cease to accrue from and after the date of redemption so designated, and all rights with respect to such stock so called for redemption, including any right to vote or otherwise participate in the determination of any proposed corporate action, shall forthwith after such redemption date cease and determine, except only the right of the holder to receive the redemption price therefor but without interest.
13.Except as otherwise required by the laws of Delaware and except as may be otherwise provided herein and by the Board of Directors in accordance with paragraphs 2(e) and 4(f), the holders of the Common Stock shall exclusively possess all voting power for the election of directors and for all other purposes, and the holders of the Preferred Stock, the Preferred Stock A and the Preference Stock shall have no voting power, and no owner or holder thereof shall vote thereon or be entitled to receive notice of any meeting of the stockholders; provided that if at any time and whenever cumulative dividends on the Preferred Stock or on the Preferred Stock A shall be in default and unpaid, in whole or in part, for a period of one year, the holders of the Preferred Stock and the Preferred Stock A shall have the same voting powers as the holders of the Common Stock, to-wit: one vote for each share of stock; and further provided that if at any time and whenever cumulative dividends on the Preference Stock shall be in default and unpaid, in whole or in part, for a period of one year, the holders of the Preference Stock shall have the same voting powers as the holders of the Common Stock, to-wit: one vote for each share of stock, and the holders of the Preferred Stock and the Preferred Stock A or the Preference Stock, as the case may be, shall be entitled to
A-8 MDU Resources Group, Inc. Proxy Statement
receive notices of meetings of stockholders, and such voting power shall so continue to vest in the holders of the Preferred Stock and the Preferred Stock A or the Preference Stock, as the case may be, until all arrears in the payment of cumulative dividends on the Preferred Stock and the Preferred Stock A or on the Preference Stock, as the case may be, shall have been paid and the dividends thereon for the current dividend period shall have been declared and the funds for the payment thereof set aside, on the condition, however, that as often as thereafter defaulted dividends shall have been paid in full and provision made for the current dividend as herein provided (and such payment shall be made as promptly as shall be consistent with the best interests of the Corporation), the holders of the Preferred Stock and the Preferred Stock A or of the Preference Stock, as the case may be, shall be divested of such voting power and the voting power shall revest exclusively in the holders of the Common Stock, subject always to the same provisions for the vesting of voting power in the holders of the Preferred Stock and the Preferred Stock A or of the Preference Stock, as the case may be, in case of any similar default or defaults in the payment of cumulative dividends either on the Preferred Stock or the Preferred Stock A or on the Preference Stock, as the case may be, for one year and the revesting of such entire voting power in the holders of the Common Stock, in the event that such default or defaults shall be cured as above provided.
Dividends and Distributions. Subject to the preferences applicable to any series of Preferred Stock, if any, outstanding at any time, shares of Common Stock shall be entitled to receive dividends, if any, as may be declared from time to time by the Board of Directors out of legally available funds. Subject to the preferences applicable to any series of Preferred Stock, if any, outstanding at any time, the shares of Common Stock are entitled to the net assets of this corporation upon dissolution in accordance with the General Corporation Law of the State of Delaware.
14.The vote or consent of the holders of a majority of the Preference Stock at the time outstanding, voting as a class, shall be required for any amendment of the Certificate of Incorporation altering materially any existing provision of the Preference Stock, for the creation, or an increase in the authorized amount, of any class of stock ranking, as to earnings, and assets, prior to, or on a parity with, the Preference Stock, or for an increase in the authorized amount of the Preference Stock; provided, however, that if any amendment ofthe Certificate of Incorporation shall affect adversely the rights or preferences of one or more, but not all, ofthe series of the Preference Stock at the time outstanding or shall unequally adversely affect the rights orpreferences of different series of the Preference Stock at the time outstanding, the vote or consent of theholders of a majority of such shares of each such series so adversely or unequally adversely affected shall berequired in lieu of or (if such vote or consent is required by law) in addition to the vote or consent of theholders of a majority of the outstanding shares of the Preference Stock, voting as a class.
15. (4) No Pre-emptive Rights. No holder of stock of this Corporation of any class shall have any pre-emptive or preferential rights of subscription to any shares of any class of stock of this Corporation, whether now or hereafter authorized, or to any obligations convertible into stock of the Corporation, issued or sold, nor any right of subscription to any thereof other than such, if any, as the Board of Directors in its discretion may from time to time determine, and at such price as the Board of Directors may from time to time fix and determine pursuant to the authority conferred by this Certificate; and any shares of stock or convertible obligations which the Board of Directors may determine to offer for subscription to the holders of stock may, as said Board shall determine, be offeredexclusively to holders of the Preferred Stock, to holders of the Preferred Stock A, to holders of the Preference Stock orto holders of the Common Stock, or partly to the holders of the Preferred Stock, partly to the holders of the PreferredStock A, partly to the holders of the Preference Stock and partly to the holders of the Common Stock, and in such casein such proportions as among said classes of stock as the Board of Directors in its discretion may determineof Incorporation.
16. 4.70% Series Preferred Stock
MDU Resources Group, Inc. Proxy Statement A-9
1.The designation of the Series shall be “4.70% Series Preferred Stock” (Cumulative) (hereinafter called the “4.70% Series”) and the number of shares which shall constitute said Series shall be 50,000; and such number shall not be increased.
2.The annual dividend rate of the 4.70% Series shall be four and seventy hundredths per cent. (4.70%) of the par value of said shares, and no more, and the date from which dividends shall accrue in respect of all shares of the 4.70% Series shall be the date of issue thereof.
3.The price at which the shares of the 4.70% Series may be redeemed shall be as specified in Paragraph 6 of Article FOURTH of the Certificate of Incorporation, as amended, plus a premium of $2 per share, together with the amount of any dividends accrued and in arrears thereon.
4.So long as any of the shares of the 4.70% Series are outstanding, in addition to any other vote or consent of stockholders required in the Certificate of Incorporation, as amended, or by law, the vote or consent of the holders of at least sixty-six and two-thirds per cent. (66-2/3%) of the shares of the 4.70% Series at the time outstanding, given in person or by proxy, either in writing without a meeting (if permitted by law) or at any meeting called for the purpose, shall be necessary to effect or validate:
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| (a) | any amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation, as amended, or By-Laws of the Corporation, which affects adversely the voting powers, rights or preferences of the holders of the 4.70% Series; |
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| (b) | the authorization or creation of, or the increase in the authorized amount of, any stock of any class or any security convertible into stock of any class ranking prior to the Preferred Stock; |
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| (c) | the voluntary dissolution, liquidation or winding up of the affairs of the Corporation, or the sale, lease or conveyance by the Corporation of all or substantially all its property or assets; |
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| (d) | the merger or consolidation of the Corporation with or into any other corporation, unless the Corporation resulting from such merger or consolidation will have after such merger or consolidation no class of stock and no other securities convertible into stock of any class either authorized or outstanding which stock shall rank prior to the Preferred Stock, except the same number of shares of such stock and the same amount of such other securities with the same rights and preferences as such stock and securities of the Corporation respectively authorized and outstanding immediately preceding such merger or consolidation, and each holder of Preferred Stock immediately preceding such merger or consolidation shall receive the same number of shares, with the same rights and preferences, of the resulting corporation; or |
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| (e) | the purchase or redemption (for sinking fund purposes or otherwise) of less than all of the Preferred Stock at the time outstanding unless the full dividend on all shares of Preferred Stock of all series then outstanding shall have been paid or declared and a sum sufficient for payment thereof set apart; provided, however, that the amendment of the provisions of the Certificate of Incorporation, as amended, so as to authorize or create or to increase the authorized amount (a) of the Common Stock and any other class of stock of the Corporation hereafter authorized over which the Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation or (b) of stock of any class ranking on a parity with the |
A-10 MDU Resources Group, Inc. Proxy Statement
Preferred Stock, shall not be deemed to affect adversely the voting powers, rights or preferences of the holders of the 4.70% Series; and provided further, that no such consent of the holders of the 4.70% Series shall be required, if at or prior to the time when such amendment, alteration or repeal is to take effect or when the authorization, creation or increase of any such prior stock or convertible security is to be made, or when such consolidation or merger, voluntary liquidation, dissolution or winding up, sale, lease, conveyance, purchase or redemption is to take effect, as the case may be, either (I) the consent of the holders of at least sixty-six and two-thirds per cent. (66-2/3%) of the shares of the Preferred Stock at the time outstanding shall have been so given to any such action except an amendment, alteration or repeal affecting the shares of the 4.70% Series differently from other series of Preferred Stock, or (II) provision is to be made for the redemption of all shares of the 4.70% Series at the time outstanding.
5.So long as any shares of the 4.70% Series are outstanding, in addition to any other vote or consent of stockholders required in the Certificate of Incorporation, as amended, or by law, the vote or consent of the holders of a majority of the shares of the 4.70% Series at the time outstanding, given in person or by proxy, either in writing without a meeting (if permitted by law) or at any meeting called for the purpose, shall be necessary to effect or validate any increase in the authorized amount of the Preferred Stock, or the authorization or creation of, or the increase in the authorized amount of, any stock of any class or any security convertible into stock of any class ranking on a parity with the Preferred Stock including any such action taken in connection with the merger or consolidation of the Corporation with or into any other corporation by either party thereto; provided, however, that no such consent of the holders of the 4.70% Series shall be required if, at or prior to the time the authorization or increase of any such parity stock or convertible security or any such additional shares of Preferred Stock is to be made, as the case may be, either (I) the consent of the holders of a majority of the shares of the Preferred Stock at the time outstanding shall have been so given to any such action, or (II) provision is to be made for the redemption of all shares of the 4.70% Series at the time outstanding.
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| 6. | No sinking fund or other retirement obligation shall be provided for the shares of the 4.70% |
Series.
17. 5.10% Series Preferred Stock
1.The designation of the Series shall be “5.10% Series Preferred Stock” (Cumulative) (hereinafter called the “5.10% Series”) and the number of shares which shall constitute said Series shall be 50,000; such number shall not be increased and shall be decreased by the number of shares of said Series at any timeretired by the Company.
2.The annual dividend rate of the 5.10% Series shall be five and ten hundredths per cent (5.10%) of the par value of said shares, and no more, and the date from which dividends shall accrue in respect of all shares of the 5.10% Series shall be the date of issue thereof.
3.The price at which the shares of the 5.10% Series may be redeemed shall be as specified in paragraph 6 of Article FOURTH of the Certificate of Incorporation, as amended, plus a premium of $2.00 per share, together with the amount of any dividends accrued and in arrears thereon.
4.So long as any of the shares of the 5.10% Series are outstanding, in addition to any other vote or consent of stockholders required in the Certificate of Incorporation, as amended, or by law, the vote or consent of the holders of at least sixty-six and two-thirds per cent. (66 2/3%) of the shares of the 5.10%
MDU Resources Group, Inc. Proxy Statement A-11
Series at the time outstanding, given in person or by proxy, either in writing without a meeting (if permitted by law) or at any meeting called for the purpose, shall be necessary to effect or validate:
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| (a) | any amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation, as amended, or By-Laws of the Corporation, which affects adversely the voting powers, rights or preferences of the holders of the 5.10% Series; |
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| (b) | the authorization or creation of, or the increase in the authorized amount of, any stock of any class or any security convertible into stock of any class ranking prior to the Preferred Stock; |
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| (c) | the voluntary dissolution, liquidation or winding up of the affairs of the Corporation, or the sale, lease or conveyance by the Corporation of all or substantially all its property or assets; |
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| (d) | the merger or consolidation of the Corporation with or into any other corporation, unless the corporation resulting from such merger or consolidation will have after such merger or consolidation no class of stock and no other securities convertible into stock of any class either authorized or outstanding which stock shall rank prior to the Preferred Stock, except the same number of shares of such stock and the same amount of such other securities with the same rights and preferences as such stock and securities of the Corporation respectively authorized and outstanding immediately preceding such merger or consolidation, and each holder of Preferred Stock immediately preceding such merger or consolidation shall receive the same number of shares, with the same rights and preferences, of the resulting corporation; or |
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| (e) | the purchase or redemption (for sinking fund purposes or otherwise) of less than all of the Preferred Stock at the time outstanding unless the full dividend on all shares of Preferred Stock of all series then outstanding shall have been paid or declared and a sum sufficient for payment thereof set apart; |
provided, however, that the amendment of the provisions of the Certificate of Incorporation, as amended, soas to authorize or create or to increase the authorized amount (a) of the Common Stock and any other class ofstock of the Corporation hereafter authorized over which the Preferred Stock has preference or priority in thepayment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of theCorporation or (b) of any class ranking on a parity with the Preferred Stock, shall not be deemed to affectadversely the voting powers, rights or preferences of the holders of the 5.10% Series; and provided further,that no such consent of the holders of the 5.10% Series shall be required, if at or prior to the time when suchamendment, alteration or repeal is to take effect or when the authorization, creation or increase of any suchprior stock or convertible security is to be made, or when such consolidation or merger, voluntary liquidation,dissolution or winding up, sale, lease, conveyance, purchase or redemption is to take effect, as the case maybe, either (i) the consent of the holders of at least sixty-six and two-thirds per cent. (66 2/3%) of the shares ofthe Preferred Stock at the time outstanding shall have been so given to any such action except an amendment,alteration or repeal affecting the shares of the 5.10% Series differently from other series of Preferred Stock,or (ii) provision is to be made for the redemption of all shares of the 5.10% Series at the time outstanding.
5.So long as any shares of the 5.10% Series are outstanding, in addition to any other vote or consent of stockholders required in the Certificate of Incorporation, as amended, or by law, the vote or consent of the holders of a majority of the shares of the 5.10% Series at the time outstanding, given in person or by proxy, either in writing without a meeting (if permitted by law) or at any meeting called for the
A-12 MDU Resources Group, Inc. Proxy Statement
purpose, shall be necessary to effect or validate any increase in the authorized amount of the Preferred Stock, or the authorization or creation of, or the increase in the authorized amount of, any stock of any class or any security convertible into stock of any class ranking on a parity with the preferred Stock including any such action taken in connection with the merger or consolidation of the Corporation with or into any other corporation by either party thereto; provided, however, that no such consent of the holders of the 5.10% Series shall be required if, at or prior to the time the authorization or increase of any such parity stock or convertible security or any such additional shares of Preferred Stock so to be made, as the case may be, either (i) the consent of the holders of a majority of the shares of the Preferred Stock at the time outstanding shall have been so given to any such action, or (ii) provision is to be made for the redemption of all shares of the 5.10% Series at the time outstanding.
6.As a sinking fund for the retirement of the shares of the 5.10% Series, the Company agrees to purchase (out of any funds of the Company legally available therefor after full dividends on the Preferred Stock of all Series then outstanding for all past dividend periods and for the current period have been paid or declared and a sum sufficient for the payment thereof set apart) 1,000 shares of the 5.10% Series in each year, at the price of $100 per share together with the amount of any dividends accrued and unpaid thereon; provided that no shares of the 5.10% Series shall be purchased pursuant to this paragraph unless tendered by the holders thereof as hereinafter provided; and provided further that the purchase obligation of the Company under this paragraph shall not be cumulative from year to year even though less than 1,000 shares of said Series may be purchased in any year if in such year the Company shall have duly called for tenders and purchased shares duly tendered as hereinafter provided. Shares of the 5.10% Series purchased pursuant to this paragraph shall be cancelled and retired. The Company will, at least 40 and not more than 50 days before each January 1, mail a letter to all holders of record of shares of the 5.10% Series, stating that it is calling for tenders of 1,000 shares of said Series for purchase and retirement under the sinking fund on the following January 1, at $100 per share and accrued and unpaid dividends; the letter shall ask each holder of shares of the 5.10% Series to indicate, by return letter to be received by the Company at a date fixed at least 20 and not more than 25 days before such January 1, the number of shares, if any, which such holder tenders for sale; if more than 1,000 shares are duly tendered by all holders of record, the Company shall first purchase from each holder tendering shares the number of shares tendered up to a number of shares (rounding to the nearest 10 shares) equal as nearly as practicable to 2% of the sum of (i) the number of shares of the 5.10% Series then of record in the name of such holder, and (ii) the number of shares of said Series previously retired that were of record in the name of such holder at the time of their redemption or purchase for retirement, and thereafter purchases shall be made pro rata (as nearly as practicable and rounding to the nearest 10 shares) on the basis of the shares of said Series duly tendered for sale or, in the case of holders duly tendering 1,000 shares, held of record; within three days after the date on which tenders are to be received, the Company shall by letter notify all holders of record of shares of the 5.10% Series of the number of shares tendered and the number of shares held by each holder to be retired; and the Company shall make payment for shares purchased pursuant to this paragraph upon surrender of stock certificates to the Transfer Agent on or after the January 1 retirement date.
18. Series B Preference Stock
Section 1. Designation and Amount. The shares of such series shall be designated as “Series BPreference Stock” (the “Series B Preference Stock”) and the number of shares constituting the Series B PreferenceStock shall be 125,000. Such number of shares may be increased or decreased by resolution of the Board of Directors;provided, that no decrease shall reduce the number of shares of Series B Preference Stock to a number less than thenumber of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstandingoptions, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertibleinto Series B Preference Stock.
MDU Resources Group, Inc. Proxy Statement A-13
Section 2. Dividends and Distributions.
(A)Subject to the rights of the holders of any shares of any series of Preferred Stock or Preferred Stock A (or any similar stock) ranking prior and superior to the Series B Preference Stock with respect to dividends, the holders of shares of Series B Preference Stock, equally with holders of all other series of Preference Stock and in preference to the holders of Common Stock, par value $1.00 per share (the “Common Stock”), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of January, April, July, and October in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series B Preference Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount ofall cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or otherdistributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares ofCommon Stock (by reclassification or otherwise), declared on the Common Stock since the immediately precedingQuarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the firstissuance of any share or fraction of a share of Series B Preference Stock. In the event the Corporation shall at any timedeclare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision orcombination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than bypayment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then ineach such case the amount to which holders of shares of Series B Preference Stock were entitled immediately prior tosuch event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, thenumerator of which is the number of shares of Common Stock outstanding immediately after such event and thedenominator of which is the number of shares of Common Stock that were outstanding immediately prior to suchevent.
(B)The Corporation shall declare a dividend or distribution on the Series B Preference Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series B Preference Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(C)Dividends shall begin to accrue and be cumulative on outstanding shares of Series B Preference Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series B Preference Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series B Preference Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series B Preference Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series B Preference Stock shall have no votingrights except as otherwise provided by law or as set forth in the Corporation’s Certificate of Incorporation.
A-14 MDU Resources Group, Inc. Proxy Statement
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions payable on the Series B Preference Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series B Preference Stock outstanding shall have been paid in full, the Corporation shall not:distributions, whether or not declared, on shares of Series B Preference Stock outstanding shall have been paid in full,the Corporation shall not:
(i)declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution, or winding up) to the Series B Preference Stock;
(ii)declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution, or winding up) with the Series B Preference Stock, except dividends paid ratably on the Series B Preference Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii)redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution, or winding up) to the Series B Preference Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series B Preference Stock; or
(iv)redeem or purchase or otherwise acquire for consideration any shares of Series B Preference Stock, or any shares of stock ranking on a parity with the Series B Preference Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or
otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Preference Stock purchased or otherwiseacquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisitionthereof. All such shares shall upon their cancellation become authorized but unissued shares of Preference Stock andmay be reissued as part of a new series of Preference Stock subject to the conditions and restrictions on issuance setforth herein, in the Certificate of Incorporation, or in any other Certificate of Designations creating a series ofPreference Stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution, or Winding Up. Upon any liquidation, dissolution, or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution, or winding up) to the Series B Preference Stock unless, prior thereto, the holders of shares of Series B Preference Stock shall have received $1,000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment,
MDU Resources Group, Inc. Proxy Statement A-15
provided that the holders of shares of Series B Preference Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution, or winding up) with the Series B Preference Stock, except distributions made ratably on the Series B Preference Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution, or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series B Preference Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination, or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series B Preference Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series B Preference Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series B Preference Stock shall not be redeemable.
Section 9. Rank. The Series B Preference Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any class of the Corporation’s Preferred Stock and Preferred Stock A, shall rank equally with all other series of the Corporation’s Preference Stock, and shall rank superior to the Common Stock and any other class or series of junior stock.
Section 10. Amendment. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences, or special rights of the Series B Preference Stock so as to affect them adversely without the affirmative vote of the holders of at least a majority of the outstanding shares of Series B Preference Stock, voting together as a single class.
FIFTH. [RESERVED]
SIXTH. [RESERVED]
SEVENTH. The Corporation is to have perpetual existence.
A-16 MDU Resources Group, Inc. Proxy Statement
EIGHTH. The private property of the stockholders of the Corporation shall not be subject to thepayment of corporate debts to any extent whatever.
NINTH. In furtherance, and not in limitation of the powers conferred by statute, the Board ofDirectors is expressly authorized:
Except as otherwise set forth therein, to make, alter or repeal the By-Laws of the Corporation.
To authorize and cause to be executed mortgages and liens upon the real and personal property ofthe Corporation.
To set apart out of any of the funds of the Corporation available for dividends a reserve or reservesfor any proper purpose or to abolish any such reserve in the manner in which it was created.
By resolution or resolutions, passed by a majority of the whole Board to designate one or morecommittees, each committee to consist of two or more of the directors of the Corporation, which, to the extentprovided in said resolution or resolutions or in the By-Laws of the Corporation, shall have and may exercisethe powers of the Board of Directors in the management of the business and affairs of the Corporation, andmay have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in the By-Laws of theCorporation or as may be determined from time to time by resolution adopted by the Board of Directors.
When and as authorized by the affirmative vote of the holders of a majority of the stock issued andoutstanding having voting power given at a stockholders’ meeting duly called for that purpose, or whenauthorized by the written consent of the holders of a majority of the voting stock issued and outstanding, tosell, lease or exchange all of the property and assets of the Corporation, including its good will and itscorporate franchises, upon such terms and conditions and for such consideration, which may be whole or inpart shares of stock in, and/or other securities of, any other corporation or corporations, as its Board ofDirectors shall deem expedient and for the best interests of the Corporation.
The Corporation may in its By-Laws confer powers upon its Board of Directors in addition to theforegoing, and in addition to the powers and authorities expressly conferred upon it by statute.
Both stockholders and directors shall have power, if the By-Laws so provide, to hold their meetings,and to have one or more offices within or without the State of Delaware, and to keep the books of thesurviving Corporation (subject to the provisions of the statutes), outside of the State of Delaware at suchplaces as may be from time to time designated by the Board of Directors.
TENTH. This Corporation reserves the right to amend, alter, change or repeal any provisioncontained in this Certificate of Incorporation in the manner now or hereafter prescribed bystatute, and all rightsconferred upon stockholders herein are granted subject to this reservation.
ELEVENTH. Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholderthereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 3883 of the Revised Code of 1915 of said State, or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the
MDU Resources Group, Inc. Proxy Statement A-17
provisions of Section 43 of the General Corporation Law of the State of Delaware, order a meeting of the creditors or class of creditors, and/or of stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said Court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the Court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.
TWELFTH. [RESERVED]
THIRTEENTH.
ARTICLE V
MATTERS RELATING TO DIRECTORS
(1) Director Powers. The business and affairs of the Corporation shall be managed by the Board of Directors. In addition to the powers and authority expressly conferred upon the Board of Directors by statute or by this Certificate of Incorporation or the Corporation’s Bylaws, the Board of Directors is hereby empowered to exercise all such powers and do all such things as may be exercised or done by the Corporation unless specifically prohibited by statute or by the Certificate of Incorporation.
(a) The business and affairs of the Corporation shall be managed by the Board of Directors consisting of not less than six nor more than fifteen persons. The exact number of directors within the limitations specified in the preceding sentence2) Board Size. The total number of authorized directors constituting the Board of Directors shall be not less than six nor more than fifteen persons, with the exact number of directors fixed from time to time by the Board of Directors pursuant to a resolution adopted by two-thirdsa majority of the ContinuingBoard of Directors.
(3) Vote by Ballot. The directors need not be elected by ballot unless required by the By-LawsBylaws of the Corporation.
(4) Term. At each annual meeting of stockholders, the directors shall be elected for terms expiring at the next annual meeting of stockholders. Each director shall hold office for the term for which he or she is elected or appointed and until his or her successor shall be elected and qualified or until his or her earlier resignation, removal from office or death. In the event of any increase or decrease in the authorized number of directors, each director then serving as such shall nevertheless continue as director until the expiration of his or her current term, or until his or her earlier resignation, removal from office or death.
(b) 5) Vacancies and Newly Created Directorships. Newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a two-thirdsmajority vote of the Continuing Directorsdirectors then in office, or a sole remaining director, although less than a quorum, and directors so chosen shall hold office for a term expiring at the next annual meeting of stockholders. If one or more directors shall resign from the Board of Directors effective as of a future date, such vacancy or vacancies shall be filled pursuant to the provisions hereof, and such new directorship(s) shall become effective when such resignation or resignations shall become effective, and each director so chosen shall hold office for a term expiring at the next annual meeting of stockholders.
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(c) [RESERVED]
(d) Any directors elected pursuant to special voting rights of one or more series of Preferred Stock, voting as a class, shall be excluded from, and for no purpose be counted in, the scope and operation of the foregoing provisions, unless expressly stated.
(e) For purposes of this Article THIRTEENTH, the following terms shall have the meanings hereinafter set forth:
(i) “Affiliate” or “Associate” shall have the respective meanings ascribed to such terms in the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect on January 1, 1985.
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| (ii) | A person shall be a “Beneficial Owner” of any Voting Stock: |
(A)which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or
(B)which such person or any of its Affiliates or Associates has (1) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (2) the right to vote pursuant to any agreement, arrangement or understanding; or
(C)which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock.
(iii) “Continuing Director” shall mean any member of the Board of Directors of the Corporation who is unaffiliated with, and not a nominee of, any Interested Stockholder and was a member of the Board of Directors prior to the time that any Interested Stockholder became an Interested Stockholder and any successor of a Continuing Director who is unaffiliated with, and not a nominee of, any Interested Stockholder and is designated to succeed a Continuing Director by two-thirds of the Continuing Directors then on the Board of Directors.
(iv)“Interested Stockholder” shall mean any person (other than the Corporation or any Subsidiary) who or which:
(A)is the Beneficial Owner, directly or indirectly, of more than 10 percent of the voting power of the then outstanding Voting Stock; or
(B)is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question, became the Beneficial Owner, directly or indirectly, of more than 10 percent of the voting power of the then outstanding Voting Stock; or
MDU Resources Group, Inc. Proxy Statement A-19
(C)is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933.
For the purpose of determining whether a person is an Interested Stockholder pursuant tothis Article THIRTEENTH, Section (e)(iv), the number of shares of Voting Stock deemedto be outstanding shall include shares deemed owned through application of Section (e)(ii)of this Article THIRTEENTH but shall not include any other shares of Voting Stock whichmay be issuable pursuant to any agreement, arrangement or understanding, or uponexercise of conversion rights, warrants or options, or otherwise.
(v)A “person” shall mean any individual, firm, partnership, trust, corporation or other entity.
(vi)“Subsidiary” means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in Section (e)(iv) of this Article THIRTEENTH, the term “Subsidiary” shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation.
(vii)“Voting Stock” shall mean each share of stock of the Corporation generally entitled to vote in elections of directors.
The Continuing Directors of the Corporation shall have the power and duty to determine, on thebasis of information known to them after reasonable inquiry, all facts necessary to determine theapplicability of the various provisions of this Article THIRTEENTH, including (A) whether aperson is an Interested Stockholder, (B) the number of shares of Voting Stock beneficially owned byany person, and (C) whether a person is an Affiliate or Associate of another. Any suchdetermination made in good faith shall be binding and conclusive on all parties.
(f) Capitalized terms used and not defined in Article FOURTEENTH or in Article SIXTEENTH of the Certificate of Incorporation which are defined in Section (e) of this Article THIRTEENTH shall have the meanings, for purposes of Article FOURTEENTH and Article SIXTEENTH of the Certificate of Incorporation, ascribed to such terms in Section (e) of this Article THIRTEENTH.
FOURTEENTH. The Board of Directors, in evaluating any proposal by another party to (a) make atender or exchange offer for any securities of the Corporation, (b) effect a merger, consolidation or other businesscombination of the Corporation or (c) effect any other transaction having an effect upon the properties, operations orcontrol of the Corporation similar to a tender or exchange offer for any securities of the Corporation or a merger,consolidation or other business combination of the Corporation, as the case may be,whether by an InterestedStockholder or otherwise, may, in connection with the exercise of its judgment as to what is in the best interests of theCorporation and its stockholders, give due consideration to the following:
(i) the consideration to be received by the Corporation or its stockholders in connection with such transaction in relation not only to the then current market price for the outstanding capital stock of the Corporation, but also to the market price for the capital stock of the Corporation over a period of years, the estimated price that might be achieved in a negotiated sale of the Corporation as a whole or in part
A-20 MDU Resources Group, Inc. Proxy Statement
through orderly liquidation, the premiums over market price for the securities of other corporations in similar transactions, current political, economic and other factors bearing on securities prices and the Corporation’s financial condition, future prospects and future value as an independent Corporation;
(ii) the character, integrity and business philosophy of the other party or parties to the transaction and the management of such party or parties;
(iii) the business and financial conditions and earnings prospects of the other party or parties to the transaction, including, but not limited to, debt service and other existing or likely financial obligations of such party or parties, the intention of the other party or parties to the transaction regarding the use of the assets of the Corporation to finance the acquisition, and the possible effect of such conditions upon the Corporation and its Subsidiaries and the other elements of the communities in which the Corporation and its Subsidiaries operate or are located;
(iv) the projected social, legal and economic effects of the proposed action or transaction upon the Corporation or its Subsidiaries, its employees, suppliers, customers and others having similar relationships with the Corporation, and the communities in which the Corporation and its Subsidiaries do business;
(v) the general desirability of the continuance of the Corporation as an independent entity; and
(vi) such other factors as the Continuing Directors may deem relevant.
FIFTEENTH. [RESERVED]
ARTICLE VI
STOCKHOLDER ACTIONS
SIXTEENTH. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Special meetings of stockholders of the Corporation may be called only by the Chairman or President and shall be called by the Chairman, President or the Secretary upon the written request of two-thirdsamajority of the ContinuingBoard of Directors. Stockholders of the Corporation shall not be entitled to request a special meeting of stockholders.
ARTICLE VII
DIRECTOR LIABILITY
SEVENTEENTH. No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (a) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the Delaware General Corporation Law, or (d) for any transaction from which the director derived an improper personal benefit.
MDU Resources Group, Inc. Proxy Statement A-21
ARTICLE VIII
CREDITOR COMPROMISES
Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this Corporation under Section 291 of Title 8 of the Delaware Code, or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said Court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the Court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
Except as otherwise expressly provided by this Certificate of Incorporation, the Corporation reserves the right to amend, alter, change or repeal any provision of this Certificate of Incorporation in the manner now or hereafter prescribed by law, and all the provisions of this Certificate of Incorporation and all rights conferred on stockholders, directors, officers and other persons in this Certificate of Incorporation are subject to this reserved power. Except as otherwise expressly provided by this Certificate of Incorporation, the Board of Directors shall have the power to adopt, amend or repeal the Corporation’s Bylaws. Any adoption, amendment or repeal of the Corporation’s Bylaws by the Board of Directors shall require the approval of a majority of the Board of Directors. The stockholders of theCorporation shall have the power to adopt, amend or repeal the Corporation’s Bylaws.
[Signature Page Follows]
A-22 MDU Resources Group, Inc. Proxy Statement
IN WITNESS WHEREOF, MDUR Newco, Inc.the Corporation has caused its corporate seal to be hereunto affixed, and this Amended and Restated Certificate of Incorporation to be signed by David L. Goodin, its President and Chief Executive Officer, and Daniel S. Kuntz, its Secretary, on December 31, 2018.on [_______], 2019.
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| | | |
| | MDUR NEWCOMDU RESOURCES GROUP, INC. |
| ATTEST: | | |
| | 1200 West Century Avenue | |
| Mailing Address:
P. O. Box 5650
Bismarck, ND 58506-5650
(701) 530-1000
| |
| proxy |
| |
| | | |
| /s/ Daniel S. Kuntz | | By: | /s/ David L. Goodin |
| Daniel S. Kuntz | | | David L. Goodin |
| Secretary | | | President and Chief Executive Officer |
This proxy is solicited on behalf
[Signature Page to Certificate of the Board of Directors for the
Annual Meeting of Stockholders on May 9, 2017.Incorporation]
This proxy will also be used to provide voting instructions to John Hancock Trust Company LLC, as Trustee of the
MDU Resources Group, Inc. 401(k) Retirement Plan, for any shares of Company common stock held in the plan.
The undersigned hereby appoints Harry J. Pearce and Daniel S. Kuntz and each of them, proxies, with full power of substitution, to vote all Common Stock of the undersigned at the Annual Meeting of Stockholders to be held at 11:00 a.m., Central Daylight Saving Time, May 9, 2017, at the MDU Service Center, 909 Airport Road, Bismarck, ND, and at any adjournment(s) thereof, upon all subjects that may properly come before the meeting, including the matters described in the Proxy Statement furnished herewith, subject to any directions indicated on the reverse side. Your vote is important! Ensure that your shares are represented at the meeting.A-23 Either (1) submit your proxy by touch-tone telephone, (2) submit your proxy by Internet, or (3) mark, date, sign, and return this proxy card in the envelope provided (no postage is necessary if mailed in the United States). If no directions are given, the proxies will vote in accordance with the Directors’ recommendation on all matters listed on this proxy, and at their discretion on any other matters that may properly come before the meeting.
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| | | VIEW MATERIALS & VOTE | | | |
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Vote by1200 WEST CENTURY AVENUE
P.O. BOX 5650 BISMARCK, ND 58506-5650 | | | | | VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet Telephone,to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or Mail
24 Hours a Day, 7 Days a Week
meeting date. Follow the instructions to obtain your records and to create an electronic voting instruction form.
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| | | | YourVOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. | |
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| | | | | | VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. | |
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| | | | | | If you vote by Internet vote authorizesor Phone, you do not need to mail the named proxiesProxy Card. |
| | | | | | ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote your sharesusing the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in thefuture years. | |
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same manner as if |
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| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | | | | | | | | |
| KEEP THIS PORTION FOR YOUR RECORDS |
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| | | | | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
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| MDU RESOURCES GROUP, INC. | | | | | | | | | | | | | | | | | | | | |
| | The Board of Directors recommends you marked, signed,vote FOR the following: | | | | | | | | | | | | | | | | | |
| 1. | Election of Directors: | | | | | | | | | | | | | | | | | | | | | |
| | Nominees: | | | | | For | | Against | | Abstain | | | | | | | | | | | | |
| | 1a. | Thomas Everist | | | | | ☐ | | ☐ | | ☐ | | The Board of Directors recommends you vote FOR Items 2, 3, 4 and returned your proxy card.5. | | For | | Against | | Abstain | |
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| INTERNET/MOBILE | | TELEPHONE | | MAIL | |
| www.proxypush.com/mdu | | 1-877-536-3553 | | Mark, sign, and date your
proxy card and return it in the
postage-paid envelope provided,
or return it to MDU Resources
Group, Inc., c/o Shareowner
Services, P.O. Box 64873,
St. Paul, MN 55164-0873.
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| Use the Internet to vote your proxy
until 11:59 p.m. (CDT) on
Monday, May 8, 2017.
| | Use a touch-tone telephone to
vote your proxy until 11:59 p.m. (CDT)
on Monday, May 8, 2017.
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| | If you vote by telephone or internet, please do not mail your Proxy Card.
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| Shareowner Services
P.O. Box 64945
St. Paul, MN 55164-0945
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| | | 1b. | Karen B. Fagg | | | | | ☐ | | ☐ | | ☐ | | 2. | Advisory Vote to Approve the Compensation Paid to the Company's Named Executive Officers. | | ☐ | | ☐ | | ☐ | |
Address Change? Mark box, sign, and indicate changes below: ☐
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| | 1c. | David L. Goodin | | | | | ☐ | | ☐ | | ☐ | | 3. | Ratification of the Appointment of Deloitte & Touche LLP as the Company's Independent Registered Public Accounting Firm for 2019. | | ☐ | | ☐ | | ☐ | |
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| | 1d. | Mark A. Hellerstein | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | |
| | | | | | TO VOTE BY INTERNET OR
TELEPHONE SEE REVERSE
SIDE OF THIS PROXY CARD.
| | | | | | | | | 4. | Approval of an Amendment to Montana-Dakota Utilities Co.'s Restated Certificate of Incorporation. | | ☐ | �� | ☐ | | ☐ | |
| | | 1e. | Dennis W. Johnson | | | | | ☐ | | ☐ | | ☐ | | | | | |
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| | 1f. | Patricia L. Moss | | | | | ☐ | | ☐ | | ☐ | | 5. | Approval of Amendments to Update and Modernize the Company's Amended and Restated Certificate of Incorporation, Including Removing the Requirement of Action by a Two-Thirds Vote of Continuing Directors for Certain Board Actions. | | ☐ | | ☐ | | ☐ | |
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| | 1g. | Edward A. Ryan | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | |
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| | 1h. | David M. Sparby | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | |
| | | | | | | | | | | | | | NOTE: Such other business as may properly come before the meeting or any adjournment thereof. | | | | | | | |
| | 1i. | Chenxi Wang | | | | | ☐ | | ☐ | | ☐ | | | | | | | | |
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| | 1j. | John K. Wilson | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | |
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| For address changes and/or comments, please check this box and write them on the back where indicated. | | | | | ☐ | | | | | | | | | | | | |
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| Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | |
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| Signature [PLEASE SIGN WITHIN BOX] | Date | | | | Signature (Joint Owners) | Date | | | | | | | |
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| Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: |
| The Combined Proxy Statement and Annual Report are available at www.proxyvote.com. |
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| Admission to the Annual Meeting: |
| Stockholders of record must request an admission ticket to attend the annual meeting. To request an admission |
| ticket, contact MDU Resources by email at CorporateSecretary@mduresources.com or by telephone at |
| 701-530-1010. A ticket will be mailed to you. Requests must be received no later than May 1, 2019. |
The Board of Directors Recommends a Vote “FOR” All Nominees.
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| 1. | Election of Directors: | FOR | AGAINST | ABSTAIN | | | | FOR | AGAINST | ABSTAIN |
| | 01 | Thomas Everist | ☐ | ☐ | ☐ | | 06 | Dennis W. Johnson | ☐ | ☐ | ☐ |
| | 02 | Karen B. Fagg | ☐ | ☐ | ☐ | | 07 | William E. McCracken | ☐ | ☐ | ☐ |
| | 03 | David L. Goodin | ☐ | ☐ | ☐ | | 08 | Patricia L. Moss | ☐ | ☐ | ☐ |
| | 04 | Mark A. Hellerstein | ☐ | ☐ | ☐ | | 09 | Harry J. Pearce | ☐ | ☐ | ☐ |
| | 05 | A. Bart Holaday | ☐ | ☐ | ☐ | | 10 | John K. Wilson | ☐ | ☐ | ☐ |
Please fold here - Do not separate
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| MDU RESOURCES GROUP, INC. | | | | | | | | |
The | ANNUAL MEETING OF STOCKHOLDERS | |
| Tuesday, May 7, 2018, 11:00 a.m. CDT | |
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| This proxy is solicited by the Board of Directors Recommends a Vote “FOR 1 YEAR”Directors. | |
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| The stockholder(s) hereby appoint(s) Harry J. Pearce and Daniel S. Kuntz, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of MDU RESOURCES GROUP, INC. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 11:00 a.m. CDT on May 7, 2019, at the MDU Service Center, 909 Airport Road, Bismarck, North Dakota, and any adjournment or postponement thereof. | |
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| This proxy will also be used to provide voting instructions to John Hancock Trust Company LLC, as Trustee of the MDU Resources Group, Inc. 401(k) Retirement Plan, for any shares of Company common stock held in Item 2.the plan. | |
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2. | AdvisoryYour vote to approveis important! Ensure that your shares are represented at the frequencymeeting. Either (1) vote by Internet, (2) vote by phone, or (3) mark, date, sign, and return this proxy card in the postage-paid envelope provided. The deadline for voting by Internet and phone is 11:59 p.m. Eastern Time on Monday, May 6, 2019. The voting deadline for participants in the MDU Resources Group, Inc. 401(k) Retirement Plan is 11:59 p.m. Eastern Time on Thursday, May 2, 2019. | |
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| This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the recommendations of the vote to approve the compensation paid to the company’s named executive officers.Board of Directors. | ☐ |
| 1 Year | ☐ | 2 Years | ☐ | 3 Years | ☐ | Abstain |
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The Board of Directors Recommends a Vote “FOR” Items 3, 4, and 5. |
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3. | Advisory vote to approve the compensation paid to the company’s named executive officers. | ☐ | For | ☐ | Against | ☐ | Abstain |
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4. | Ratification of the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm for 2017. | ☐ | For | ☐ | Against | ☐ | Abstain |
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5. | Advisory vote to approve an amendment to the company’s bylaws to adopt an exclusive forum for internal corporate claims. | ☐ | For | ☐ | Against | ☐ | Abstain |
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR ALL NOMINEES IN ITEM 1, FOR 1 YEAR IN ITEM 2, AND FOR ITEMS 3, 4, AND 5.
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Date | | Address Changes/Comments: | | | Signature(s) in Box |
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| | | | | | | Please sign exactly as your name(s) appears on Proxy. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy. |
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| (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) | |
| | Continued and to be signed on reverse side | |
