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YourVOTE is important
MDU Resources Group, Inc. Proxy Statement
2007 Notice of Annual Meetingand Proxy Statement
1200 West Century Avenue | Terry D. Hildestad President and Chief Executive Officer |
12, 2010
I hope you will find it possible to attend the meeting.
Sincerely yours,
promptly.
Terry D. Hildestad
MDU RESOURCES GROUP, INC.1200 West Century Avenue
Mailing Address:P.O. Box 5650Bismarck, ND 58506-5650(701) 530-1000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERSTO BE HELD APRIL 24, 2007
March 8, 2007
NOTICE IS HEREBY GIVENPlease note that the Annual Meeting of Stockholders of MDU Resources Group, Inc. will be held at 909 Airport Road, Bismarck, North Dakota,New York Stock Exchange rules have changed. Brokers may not vote your shares on Tuesday, April 24, 2007, at 11:00 a.m., Central Daylight Savings Time, for the following purposes:
The boardelection of directors has fixed the close of business on February 26, 2007if you have not given your broker specific instructions as the record date for the determination of common stockholders who willto how to vote. Please be entitledsure to notice of, andgive specific voting instructions to your broker so that your vote at, the meeting.
can be counted.
Sincerely yours, | |
Terry D. Hildestad |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 27, 2010 |
(1) | To elect ten directors nominated by the board of directors to one-year terms; |
(2) | To repeal Article TWELFTH of our Restated Certificate of Incorporation, which contains provisions relating to business combinations with interested stockholders, and make related amendments to Articles THIRTEENTH and FOURTEENTH; |
(3) | To repeal Article FIFTEENTH of our Restated Certificate of Incorporation, which contains supermajority vote requirements for amendments to certain articles of our Restated Certificate of Incorporation; |
(4) | To repeal section (c) of Article THIRTEENTH of our Restated Certificate of Incorporation, which provides that directors may be removed by stockholders only for cause, and make technical amendments to section (a) of Article THIRTEENTH; |
(5) | To ratify the appointment of Deloitte & Touche LLP as our independent auditors for 2010; |
(6) | To act upon a stockholder proposal requesting a report on coal combustion waste; and |
(7) | To transact any other business that may properly come before the meeting or any adjournment or adjournments thereof. |
By order of the Board of Directors,
Paul K. SandnessSecretary
TABLE OF CONTENTS
By order of the Board of Directors, | ||||||
Paul K. Sandness Secretary |
TABLE OF CONTENTS |
PROXY STATEMENT
27, 2010.
VOTING INFORMATION |
Who may vote? You may vote if you owned shares of our common stock at the close of business on February 26, 2007.[ • ]. You may vote each share that you owned on that date on each matter presented at the meeting. As of February 26, 2007,[ • ], we had 181,473,340[ • ] shares of common stock outstanding entitled to one vote per share.
· | the election of ten directors nominated by the board of directors for one-year terms |
· | the repeal of article TWELFTH of our restated certificate of incorporation, which contains provisions relating to business combinations with interested stockholders, and related amendments to articles THIRTEENTH and FOURTEENTH |
· | the repeal of article FIFTEENTH of our restated certificate of incorporation, which contains supermajority vote requirements for amendments to certain articles of our restated certificate of incorporation |
· | the repeal of section (c) of article THIRTEENTH of our restated certificate of incorporation, which provides that directors may be removed by stockholders only for cause, and technical amendments to section (a) of article THIRTEENTH |
· | the ratification of the appointment of Deloitte & Touche as our independent auditors for 2010 |
· | a stockholder proposal requesting a report on coal combustion waste and |
· | any other business that is properly brought before the meeting. |
on the election of directors if you have not given your broker specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker so that your vote can be counted.
election, which we do not anticipate, the proxies will vote your shares in their discretion for another person in their discretion.
We amended our corporate governance guidelines in February 2006 in connection withnominated by the election of directors. In an uncontested election ofboard.
· | 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. |
The board will act on the nominating and governance committee’s recommendation no later than 90 days following the date of the annual meeting.
In orderour Restated Certificate of Incorporation, which Contains Provisions Relating to increaseBusiness Combinations with Interested Stockholders, and Related Amendments to Articles THIRTEENTH and FOURTEENTH
proposal.
In orderour Restated Certificate of Incorporation, which Contains Supermajority Vote Requirements for Amendments to declassifyCertain Articles of our boardRestated Certificate of directors,Incorporation
“against” the proposal.
votes “against” the proposal.
on Coal Combustion Waste
vote.
6.
· | by calling the toll free telephone number on the enclosed proxy card |
· | by using the Internet as described on the enclosed proxy card or |
· | by returning the enclosed proxy card in the envelope provided. |
You may have to pay electronic access charges for internet voting.
· | filing written revocation with the corporate secretary before the meeting |
· | filing a proxy bearing a later date with the corporate secretary before the meeting or |
· | revoking your proxy at the meeting and voting in person. |
ITEM 1. ELECTION OF DIRECTORS |
ITEM 1. ELECTION OF DIRECTORS
Martin A. White retired on August 17, 2006. He had served as chairmandeclassification of our board since February 15, 2001of directors. The declassification was phased in over a three-year period from 2008 - 2010. Directors elected at our 2007 annual meeting comprise the last class elected to serve a three-year term, and chief executive officer since April 1, 1998. Robert L. Nance also retired fromtheir terms will expire at this year’s annual meeting. As a result, commencing with this year’s annual meeting, our board on August 17, 2006. Mr. Nance had been a director since 1993 and was the chairman of the finance committee.
You will be voting on four directorscompletely declassified. All nominees for director are nominated to serve for a termone-year terms, until the annual meeting of three years each until 2010 orstockholders in 2011 and until their respective successors are elected. All nominees are incumbent directorselected and nominated for reelection, except Mr. Hildestad who was elected byqualified, or until their earlier resignation, removal from office, or death. Effective as of the date of this year’s annual meeting, the board of directors inhas set the number of directors at ten.
Thomas Everist Age 60 | Director Since 1995 Compensation Committee | |||
Mr. Everist has served as president and chairman of The Everist Company, Sioux Falls, South Dakota, an aggregate, concrete, and asphalt production company, since April 15, 2002. He was previously president and chairman of L.G. Everist, Inc., Sioux Falls, South Dakota, an aggregate production company, from 1987 to April 15, 2002. He held a number of positions in the aggregate and construction industries prior to assuming his current position with The Everist Company. He is a director of Showplace Wood Products, Sioux Falls, South Dakota, a custom cabinets manufacturer, and has been a director of Raven Industries, Inc., Sioux Falls, South Dakota, a general manufacturer of electronics, flow controls, and engineered films since 1996, and its chairman of the board since April 1, 2009. Mr. Everist attended Stanford University where he received a bachelor’s degree in mechanical engineering and a master’s degree in construction management. He is active in the Sioux Falls community and currently serves as a director on the Sanford Health Foundation, a non-profit charitable health services organization. From July 2001 to June 2006, he served on the South Dakota Investment Council, the state agency responsible for prudently investing state funds. For the following reasons, the board concluded that Mr. Everist should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement. A significant portion of MDU Resources Group, Inc.’s earnings is derived from its construction services and aggregate mining businesses. Mr. Everist has considerable business experience in this area, with more than 36 years in the aggregate and construction materials industry. He has also demonstrated success in his business and leadership skills, serving as president and chairman of his companies for over 22 years. We value other public company board service. Mr. Everist has experience serving as a director and now chairman of another public company, which enhances his contributions to our board. His leadership skills and experience with his own companies and on other boards enable him to be an effective board member and compensation committee chairman. With the retirement of John L. Olson and Sister Thomas Welder, Mr. Everist becomes our longest serving board member, providing 15 years of board experience as well as extensive knowledge of our business. |
Karen B. Fagg Age 56 | Director Since 2005 Nominating and Governance Committee Compensation Committee | |||
Ms. Fagg has served as vice president of DOWL LLC, d/b/a DOWL HKM, an engineering and design firm, since April 2008. Ms. Fagg was president from April 1, 1995 through March 2008, and chairman and majority owner from June 2000 through March 2008 of HKM Engineering, Inc., Billings, Montana, an engineering and physical science services firm. HKM Engineering, Inc. merged with DOWL LLC on April 1, 2008. Ms. Fagg was employed with MSE, Inc., Butte, Montana, an energy research and development company, from 1976 through 1988 and served as vice president of operations and corporate development director. Ms. Fagg served a four-year term as 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 from 1989 through 1992. Ms. Fagg has a bachelor’s degree in mathematics from Carroll College in Helena, Montana. She served on the board for St. Vincent’s Healthcare from October 2003 until October 2009, including a term as board chair and on the board of Deaconess Billings Clinic Health System from 1994 to 2003. She is a member of the Board of Trustees of Carroll College, the Board of Advisors of the Charles M. Bair Family Trust, and a member of the Board of Directors of the Billings Chamber of Commerce. She is also a member of the Montana State University Engineering Advisory Council, whose responsibilities include evaluating the mission and goals of the College of Engineering and assisting in the development and implementation of the college’s strategic plan. From 2002 through 2006, she served on the Montana Board of Investments, the state agency responsible for prudently investing state funds. From 2001 to 2005, she served on the board of Montana State University’s Advanced Technology Park. From 2000 to 2007, she served on the ZooMontana Board and as vice chair from 2006 to 2007. |
For the following reasons, the board concluded that Ms. Fagg should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement. Construction and engineering, energy, and the responsible development of natural resources are all important aspects of our business. Ms. Fagg has business experience in all these areas, including 15 years of construction and engineering experience at DOWL, HKM and its predecessor, HKM Engineering, Inc., where she has served as vice president, president, and chairman. Ms. Fagg has also had 12 years of experience in energy research and development at MSE, Inc., where she served as vice president of operations and corporate development director, and four years focusing on stewardship of natural resources as director of the Montana Department of Natural Resources and Conservation. In addition to her industry experience, Ms. Fagg brings to our board 12 years of business leadership and management experience as president and chairman of her own company, as well as knowledge and experience acquired through her service on a number of Montana state and community boards. |
Terry D. Hildestad Age | Director Since 2006 | |||
President and Chief Executive Officer | ||||
Mr. Hildestad was elected president and chief executive officer and a Mr. Hildestad has a bachelor’s degree from Dickinson State University and has completed the Advanced Management Program at Harvard School of Business. Mr. Hildestad is a member of the U.S. Bancorp Western North Dakota Advisory Board of Directors. For the following reasons, the board concluded that Mr. Hildestad should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement. As chief executive officer of MDU Resources Group, Inc., Mr. Hildestad is the only officer of the company to sit on our board, consistent with our past practice. With over 35 years of experience at our company, Mr. Hildestad has a deep knowledge and understanding of MDU Resources Group, Inc., its operating companies and its lines of business. Mr. Hildestad has demonstrated his leadership abilities and his commitment to our company since he was elected president and chief executive officer and a director in 2006 and prior to that time through his long service as chief operating officer of the company and as president and chief executive officer at Knife River, our construction materials and contracting subsidiary. The board also believes that Mr. Hildestad’s integrity, values, and good judgment make him well-suited to serve on our board. |
A. Bart Holaday Age 67 | Director Since 2008 Audit Committee | |||
Mr. Holaday headed the Private Markets Group of UBS Asset Management and its predecessor entities for 15 years prior to his retirement in 2001, during which time he managed more than $19 billion in investments. Prior to that he was vice president and principal of the InnoVen Venture Capital Group. He was founder and president of Tenax Oil and Gas Corporation, an onshore Gulf Coast exploration and production company, from 1980 through 1982. He has four years of senior management experience with Gulf Oil Corporation, a global energy and petrochemical company, and eight years of senior management with the federal government, including the Department of Defense, Department of the Interior, and the Federal Energy Administration. He is currently the president and owner of Dakota Renewable Energy Fund, LLC, which invests in small companies in North Dakota. He is a member of the investment advisory board of Commons Capital LLC, a venture capital firm; a member of the board of directors of Adams Street Partners, LLC, a private equity investment firm; Alerus Financial, a financial services company; Jamestown College; the United States Air Force Academy Endowment (chairman); the Falcon Foundation (vice president), which provides scholarships to Air Force Academy applicants; the Center for Innovation Foundation at the University of North Dakota (chairman and trustee) and the University of North Dakota Foundation; and is chairman and CEO of the Dakota Foundation. He is a past member of the board of directors of the National Venture Capital Association, Walden University, and the U.S. Securities and Exchange Commission advisory committee on the regulation of capital markets. | ||||
Mr. Holaday has a bachelor’s degree in engineering sciences from the U.S. Air Force Academy. He was a Rhodes Scholar, earning a bachelor’s degree and a master’s degree in politics, philosophy, and economics from Oxford University. He also earned a law degree from George Washington Law School and is a Chartered Financial Analyst. In 2005, he was awarded an honorary Doctor of Letters from the University of North Dakota. For the following reasons, the board concluded that Mr. Holaday should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement. MDU Resources Group, Inc. has significant operations in the natural gas and oil industry. Mr. Holaday has knowledge and experience in this industry. He founded and served as president of Tenax Oil and Gas Corporation. He has four years experience in senior management with Gulf Oil Corporation and 15 years of experience managing private equity investments, including investments in oil and gas, as the head of the Private Markets Group of UBS Asset Management and its predecessor organizations. This business experience demonstrates his leadership skills and success in the oil and gas industry. Mr. Holaday brings to the board his extensive finance and investment experience as well as his business development skills acquired through his work at UBS Asset Management, Tenax Oil and Gas Corporation, Gulf Oil Corporation, and several private equity investment firms. This will enhance the knowledge of the board and provide useful insights to management in connection not only with our natural gas and oil business, but with all of our businesses. |
Dennis W. Johnson Age | Director Since 2001 Audit Committee | |||||
Mr. Johnson is |
Mr. Johnson has a bachelor of science degree in electrical and electronics engineering as well as a master of science degree in industrial engineering from North Dakota State University. He has served on numerous industry, state, and community boards, including the North Dakota Workforce Development Council (chairperson), the Decorative Laminate Products Association, the North Dakota Technology Corporation, St. Joseph Hospital Life Care Foundation, | ||||
The board of directors recommends a vote "for" each nominee.
A plurality of votes of the common stock entitled to vote and present in person or represented by proxy is required to elect a director. "Withheld" votes do not count in determining whether a director nominee receives a plurality of votes.
In an uncontested election, any nominee for director who receives a greater number of votes "withheld" from his or her election than votes "for" his or her election is required to promptly tender his or her resignation to the chairman of the board following certification of the stockholder vote. The nominating and governance committee will then recommend to the board of directors whether to accept or reject the tendered resignation.
CONTINUING INCUMBENT DIRECTORS
Information concerning our continuing incumbent directors, whose terms expire in 2008 or 2009, including their ages, years of service as directors and business experience which each director has furnished to us, is as follows:
DIRECTOR TERMS EXPIRING IN 2008
For the following reasons, the board concluded that Mr. Johnson should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement. Mr. Johnson has over 27 years of experience in business management, manufacturing, and finance, and has demonstrated his success in these areas, through his positions as chairman, president, and CEO of TMI, as well as through his prior service as a director of the Federal Reserve Bank of Minneapolis. His finance experience and leadership skills enable him to make valuable contributions to our audit committee, which he has chaired for six years. 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. |
Thomas C. Knudson Age 63 | Director Since Compensation Committee | |||||
Mr. Mr. Knudson has a bachelor’s degree in aerospace engineering from the U.S. Naval Academy and a master’s degree in aerospace engineering from the U.S. Naval Postgraduate School. He served as a naval aviator, flying combat missions in Vietnam, and was a lieutenant commander in 1974 when he was honorably discharged. Mr. Knudson has served on the boards of a number of petroleum industry associations, Covenant House Texas, The Houston Museum of Natural Science, and Alpha USA/Houston. He has served as For the following reasons, the board concluded that Mr. Knudson should serve as a director of MDU Resources Group, Inc., in light of our business and |
Richard H. Lewis Age | Director Since 2005 | |||
Audit Committee Nominating and Governance |
DIRECTOR TERMS EXPIRING IN 2009
Mr. Lewis has been the Mr. Lewis has a bachelor’s degree in finance and accounting from the University of Colorado. He served as a board member on the Colorado Oil and Gas Association from November 1999 to November 2009, including a term as its president. In 2000, Mr. Lewis was inducted into the Ernst & Young Entrepreneur of the Year Hall of Fame and in 2004 was inducted into the Rocky Mountain Oil and Gas Hall of Fame. Mr. Lewis serves as For the following reasons, the board concluded that Mr. Lewis should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement. MDU Resources Group, Inc. derives a |
Patricia L. Moss Age 56 | Director Since 2003 Compensation Committee | |||
Ms. Moss has served as the president and chief executive officer of Cascade Bancorp, a financial holding company in Bend, Oregon, since 1998, chief executive officer of Cascade Bancorp’s principal subsidiary, Bank of the Cascades, since 1993, serving also as president from 1993 to 2003, and a director of Cascade Bancorp since 1993. She also serves as a director of the Oregon Investment Fund Advisory Council, a state-sponsored program to encourage the growth of small businesses within Oregon, and a director of Clear Choice Health Plans Inc., a multi-state insurance company. Ms. Moss graduated magna cum laude with a bachelor of science degree in business administration from Linfield College in Oregon and did master’s studies at Portland State University. She received commercial banking school certification at the ABA Commercial Banking School at the University of Oklahoma. She served as a director of the Oregon Business Council, whose mission is to mobilize business leaders to contribute to Oregon’s quality of life and economic prosperity; the Cascades Campus Advisory Board of the Oregon State University; the North Pacific Group, Inc., a wholesale distributor of building materials, industrial and hardwood products, and other specialty products; the Aquila Tax Free Trust of Oregon, a mutual fund created especially for the benefit of Oregon residents; and as a director and chair of the St. Charles Medical Center. In August 2009, the Federal Deposit Insurance Corporation and the Oregon Division of Finance and Corporate Securities entered into a consent agreement with Bank of the Cascades that requires the bank to develop and adopt a plan to maintain the capital necessary for it to be “well-capitalized,” to improve its lending policies and its allowance for loan losses, to increase its liquidity, to retain qualified management, and to increase the participation of its board of directors in the affairs of the bank. In October 2009, the bank’s parent, Cascade Bancorp, entered into a written agreement with the Federal Reserve Bank of San Francisco and the Oregon Division relating largely to improving the financial condition of Cascade Bancorp and the bank. For the following reasons, the board concluded that Ms. Moss should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement. A significant portion of MDU Resources Group, Inc.’s utility, construction services, and contracting operations are located in the Pacific Northwest. Ms. Moss has first-hand business experience and knowledge of the Pacific Northwest economy and local, state, and regional issues through her position as president, chief executive officer, and a director at Cascade Bancorp and Bank of the Cascades, where she has over 28 years of experience. Ms. Moss provides to our board her experience in finance and banking as well as her experience in business development through her work at Cascade Bancorp and on the |
Harry J. Pearce Age | Director Since 1997 Chairman of the Board | |||||
Mr. Pearce was elected For the following reasons, the board concluded that Mr. Pearce should serve as a director of MDU Resources Group, Inc., in light of our business and structure, at the time we file our proxy statement. MDU Resources Group, Inc. values public company leadership and the experience directors gain through such leadership. Mr. Pearce is recognized nationally as well as in the State of North Dakota as a business leader and for his business acumen. He has multinational business management experience and proven leadership skills through his position as vice chairman at General Motors, as well as through his extensive service on the boards of large public companies, including Marriott International; Hughes Electronics, where he was chairman; and Nortel Networks, where he also was chairman. He also brings to our board his long experience as a practicing attorney. In addition, Mr. Pearce is focused on corporate governance issues and is the founding chair of the Chairmen’s Forum, an organization comprised of non-executive chairmen of publicly-traded companies. Participants in the Chairmen’s Forum discuss ways to enhance the accountability of corporations to owners and promote a deeper understanding of independent board leadership and effective practices of board chairmanship. The board also believes that Mr. Pearce’s values and commitment to excellence make him well-suited to serve as chairman of our board. |
John K. Wilson Age | Director Since Audit Committee | |||||
Mr. Wilson was president of Durham Resources, LLC, a privately held financial management company, in Omaha, Nebraska, from 1994 to December 31, 2008. He previously was president of Great Plains Energy Corp., a public utility holding company and an affiliate of Durham Resources, LLC, from 1994 to July 1, 2000. He was vice president of Great Plains Natural Gas Co., an affiliate company of Durham Resources, LLC, until July 1, 2000. The company bought Great Plains Energy Corp. and Great Plains Natural Gas Co. on July 1, 2000. Mr. Wilson also served as president of the Mr. Wilson is a certified public accountant. He received his bachelor’s degree in business administration, cum laude, from the University of For the |
ITEM 2. INCREASE IN AUTHORIZED COMMON STOCK
Our capital stock consists
We split our common stock three-for-two effective July 26, 2006. As of February 26, 2007, we had issued and outstanding 181,473,340 shares of common stock, and we had reserved 21,303,212 additional shares for issuance under our director, executive and employee stock plans, potential earn-outs in connection with prior acquisitions, our dividend reinvestment plan and a sales agency financing agreement. Becausedirectors 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. |
ITEM 2. REPEAL OF ARTICLE TWELFTH OF OUR RESTATED CERTIFICATE OF INCORPORATION, WHICH CONTAINS PROVISIONS RELATING TO BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS, AND RELATED AMENDMENTS TO ARTICLES THIRTEENTH AND FOURTEENTH |
· | a merger or consolidation with an interested stockholder |
· | a sale, lease, exchange or other disposition of assets of the company with an aggregate fair market value of $5 million or more to an interested stockholder |
· | the issuance of securities by the company with an aggregate fair market value of $5 million or more to an interested stockholder |
· | a voluntary plan of liquidation or dissolution proposed by an interested stockholder and |
· | a reclassification, recapitalization, merger or any other transaction that increases the proportionate share of outstanding shares of the company owned by an interested stockholder. |
· | prior to the time the person became an interested stockholder, the board of directors approved either the business combination or the transaction that resulted in the person becoming an interested stockholder |
· | upon consummation of the transaction that resulted in the person becoming an interested stockholder, that person owned at least 85% of the outstanding voting stock, excluding certain shares or |
· | the business combination was approved by the board of directors and by at least two-thirds of the outstanding voting stock not owned by the interested stockholder. |
ITEM 3. REPEAL OF ARTICLE FIFTEENTH OF OUR RESTATED CERTIFICATE OF INCORPORATION, WHICH CONTAINS SUPERMAJORITY VOTE REQUIREMENTS FOR AMENDMENTS TO CERTAIN ARTICLES OF OUR RESTATED CERTIFICATE OF INCORPORATION |
· | article TWELFTH, which contains provisions relating to business combinations with interested stockholders and includes a supermajority vote requirement. As described under Item 2 above, article TWELFTH is proposed to be deleted. |
· | article THIRTEENTH, which contains provisions relating to the board of directors and establishes the range for the number of directors on the board, the authority of the board to fix the exact number of directors within the range, the provisions for annual election of directors, and the authority of the board to fill vacancies or newly created directorships |
· | article FOURTEENTH, which sets forth a list of factors for the board of directors to consider in evaluating a proposal by another party to make a tender or exchange offer for securities of the company or to effect a merger, consolidation or other business combination with the company |
· | article FIFTEENTH itself and |
· | article SIXTEENTH, which contains provisions setting forth how stockholder action must be effected and who is entitled to call special meetings of stockholders. |
The additional authorized shares would enable us to issue common stock to raise capital funds expeditiouslystatement and economically for our ongoing operational needs. We could use the shares for our director, executive and employee stock plans and our dividend reinvestment plan, for possible acquisitions, stock distributions or splits or other corporate purposes. We would be able to issue common stock without the delay and expense involved in obtaining stockholder approval when we believe that such issuance is appropriate; however, we would be required to obtain all necessary regulatory approvals prior to issuance of any additional common stock. We have no present plans for issuance or use of the proposed additional authorized common stock.
All newly authorized shares of common stock when issued would have the same rights as the presently authorized shares, including the right to cast one vote per share and to receive dividends when and to the extent we declare and pay them. Company stockholders would have no preemptive rights with respect to the issuance of the additional common stock.
Any issuance of additional shares of common stock would increase the outstanding number of shares of common stock and dilute the percentage ownership of existing stockholders. The dilutive effect of an issuance could discourage a change of control by making it more difficult or costly. We are
not aware of any specific effort to obtain control of us, and we have no present intention of using the proposed increase in authorized common stock to deter a change of control.
None of our directors or officers has any interest, direct or indirect, in the adoption of the proposed amendment except as a holder of our common stock.
We are not furnishing financial statements as we do not believe that they are material for the exercise of prudent judgment regarding this proposal.
The board of directors recommends a vote "for" the proposal to increaseour authorized shares of common stock.
Approval requires the affirmative vote of a majority of all outstanding common stock. Abstentions and broker non-votes will count as votes against this proposal.
ITEM 3. DECLASSIFICATION OF BOARD OF DIRECTORS
Article THIRTEENTH of our restated certificate of incorporation, as amended, provides for a classified board of directors. This means that our board of directors is divided into three classes, as nearly equal in number as possible, with members of each class serving staggered three-year terms. We adopted this system for electing directors in 1985.
Our board of directors has approved and voted to recommend that you approve an amendment to our restated certificate of incorporation to provide for a declassified board of directors. This means that all directors would be elected annually and serve one-year terms.
The board of directors has set the current number of directors at ten, and this proposal would not change the present number of directors. Directors will retain the authority to change the number of directors and to fill any vacancies or newly-created directorships. However, any director elected to fill a vacancy or a newly-created directorship would serve for a term expiring at the next annual meeting.
Classified or staggered boards have been widely adopted and have a long history in corporate law. Proponents of classified boards assert they promote the independence of directors because directors elected for multi-year terms are less subject to outside influence. Proponents of a staggered system for the election of directors also believe it provides continuity and stability in the management of the business and affairs of a company because a majority of directors always have prior experience as directors of the company. Proponents further assert that classified boards may enhance stockholder value by forcing an entity seeking control of a target company to initiate arms-length discussions with the board of the target company because the entity is unable to replace the entire board in a single election.
On the other hand, some investors view classified boards as having the effect of reducing the accountability of directors to stockholders because classified boards limit the ability of stockholders to evaluate and elect all directors on an annual basis. The election of directors is a primary means for stockholders to influence corporate governance policies and to hold management accountable for implementing those policies. In addition, opponents of classified boards assert that a staggered structure for the election of directors may discourage proxy contests in which stockholders have an opportunity to vote for a competing slate of nominees and therefore may erode stockholder value. A number of major corporations have determined that, regardless of the merits of a classified board, principles of good corporate governance dictate that all directors of a corporation be elected annually.
The board of directors has considered carefully the advantages and disadvantages of maintaining a classified board structure, and in the past concluded that it would be in the best interests of the company and its stockholders to maintain the classified board. This year, the company received a stockholder proposal on declassification, and the board again gave due consideration to the various arguments for and against a classified board and consulted with internal and outside advisors. After this review, the board of directors decided that it is an appropriate time to propose declassifying the board. This determination by the board is in furtherance of our goal of ensuring that our corporate governance policies maximize our accountability to stockholders and allow stockholders the opportunity each year to register their views on the performance of the board of directors.
The board of directors has approved the proposed amendment declassifying the board of directors. If approved by the stockholders, we will amend our restated certificate of incorporation to provide for the annual election of all directors.
If our stockholders approve the amendment, the directors elected at this annual meeting of stockholders in 2007 will, along with the directors elected at the annual meetings of stockholders held in 2005 and 2006, serve their full three-year terms. Beginning with the annual meeting of stockholders to be held in 2008, each director whose term is ending will be elected annually and serve until the next following annual meeting or until his or her earlier resignation or termination from the board.
The board resolution including the proposed amendment to our restated certificate of incorporation is included in exhibit B to this proxy statement. We have shownshows the changes to the relevant sections of Article THIRTEENTH of the restated certificate of incorporation resultingthat would result from the amendment. If approved by our stockholders, the amendment will become effective upon filing with the Secretary of State of the State of Delaware, which filing we would make promptly after the annual meeting.
incorporation.
ITEM 4. REPEAL OF SECTION (c) OF ARTICLE THIRTEENTH OF OUR RESTATED CERTIFICATE OF INCORPORATION, WHICH PROVIDES THAT DIRECTORS MAY BE REMOVED BY STOCKHOLDERS ONLY FOR CAUSE, AND TECHNICAL AMENDMENTS TO SECTION (a) OF ARTICLE THIRTEENTH |
ITEM 4. RATIFICATION OF INDEPENDENT AUDITORS
ITEM 5. RATIFICATION OF INDEPENDENT AUDITORS |
ACCOUNTING AND AUDITING MATTERS
ACCOUNTING AND AUDITING MATTERS |
| |||||
---|---|---|---|---|---|
| 2006 | 2005* | |||
Audit Fees(a) | $2,177,287 | $1,831,013 | |||
Audit-Related Fees(b) | 164,446 | 224,152 | |||
Tax Fees(c) | 6,380 | 74,720 | |||
All Other Fees(d) | 0 | 0 | |||
Total Fees(e) | $2,348,113 | $2,129,885 | |||
Ratio of Tax and All Other Fees to Audit and Audit-Related Fees | 0.27 | % | 3.64 | % |
2009 | 2008* | |||||||
Audit Fees(a) | $ | 2,393,800 | $ | 2,535,253 | ||||
Audit-Related Fees(b) | 52,292 | 78,511 | ||||||
Tax Fees(c) | 17,600 | 33,653 | ||||||
All Other Fees(d) | 130,016 | 0 | ||||||
Total Fees(e) | $ | 2,593,708 | $ | 2,647,417 | ||||
Ratio of Tax and All Other Fees to Audit and Audit-Related Fees | 6.03 | % | 1.29 | % |
* | The 2008 amounts were adjusted from amounts shown in the 2009 proxy statement to reflect actual amounts. |
(a) | Audit fees for both 2009 and 2008 consisted of services rendered for the audit of our annual financial statements; reviews of our quarterly financial statements; comfort letters; statutory and regulatory audits and consents and other services related to Securities and Exchange Commission matters. |
(b) | Audit-related fees for 2009 are associated with the audit of the Intermountain Gas Company’s benefit plans and accounting research assistance. Audit-related fees for 2008 are associated with accounting research assistance; consultation on accounting process improvements, including recommended practices and opportunities for control improvement; and assistance in the transition of benefit plan audits to another accounting firm. |
(c) | Tax fees for 2009 include support services associated with the Cascade Natural Gas Corporation IRS audit. Tax fees for 2008 are associated with tax planning, compliance, and support services. |
(d) | All other fees for 2009 are for services provided by Deloitte FAS, LLP in connection with the review of accounting practices and procedures at one of the company’s operating locations. No fees under the category of all other fees were incurred during 2008. |
(e) | Total fees reported above include out-of-pocket expenses related to the services provided of $267,708 for 2009 and $269,618 for 2008. |
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 contemplated to be performed 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 that he 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.
ITEM 6. STOCKHOLDER PROPOSAL REQUESTING A REPORT ON COAL COMBUSTION WASTE |
Calvert Asset ManagementA stockholder has notified us that it intends to submitpresent a resolution for action by the proposal set forth below for considerationstockholders at the annual meeting.
Calvert Resolution We will provide the name, address and Supporting Statement
SUSTAINABILITY REPORT RESOLUTION
Whereas:
Investors increasingly seek disclosurestock ownership of companies' socialthe proponent to stockholders promptly after receiving an oral or written request. The text of the resolution and environmental practicesthe supporting statement submitted by the proponent are as follows.
Mainstream financial companies are seeking tools to understand the links between sustainability performance and capital markets. According to research consultant Innovest, major investment firms including ABN-AMRO, Schroders, T. Rowe Price, and Legg Mason subscribe to information on companies' social and environmental practices to help make investment decisions.
Sustainability refers to endeavors that meet present needs without impairing the ability of future generations to meet their own needs. It includes "encouraging long lasting social well being in communities where [companies] operate, interacting with different stakeholders (e.g. clients, suppliers, employees, government, local communities, and non-governmental organizations), and responding to their specific and evolving needs, thereby securing a long-term "license to operate,' superior customer and employee loyalty, and ultimately superior financial returns" (Dow Jones Sustainability Group).
Globally, approximately 1,500 companies produce reports on sustainability issues (Association of Chartered Certified Accountants, www.corporateregister.com), including more than half of the global Fortune 500 (KPMG International Survey of Corporate Responsibility Reporting 2005).
MDU Resources Group competes internationally, and global expectations regarding sustainability reporting are increasing. The European Commission recommends corporate sustainability reporting, and listed companies in Australia, South Africa and France are required to provide investors with information on their social and environmental performance.
Companies increasingly recognize that transparency and dialogue about sustainability are elements of business success. For example, Unilever's Chairman statedresult in a 2003 speech, "So when we talk about corporate social responsibility, we don't see itloss of human life and significant environmental consequences.
RESOLVED:stricter regulations.
SUPPORTING STATEMENT
Theon the company’s efforts, above and beyond legal compliance, to reduce environmental and health hazards associated with coal combustion waste ponds, impoundments and mines, and how those efforts reduce risks to the
We recommend that MDU Resources Group use the Global Reporting Initiative's Sustainability Reporting Guidelines ("The Guidelines") to prepare the report. The Global Reporting Initiative (www.globalreporting.org) is an international organization developed with representatives from the business, environmental, human rights and labor communities. The Guidelines provide guidance on report content, including performance on direct economic impacts, environmental, labor practices and decent work conditions, human rights, society, and product responsibility. The Guidelines provide a flexible reporting system that allows the omission of content that is not relevant to company operations. Over 700 companies use or consult the Guidelines for sustainability reporting, including Anheuser-Busch, Cadbury Schweppes, Diageo, PepsiCo, and SABMiller.
shareholders by August 2010.
While there are
Wecompany (“Montana-Dakota”), are committed to the conduct of business according to the highest ethical standards, as reflected in our code of conductenvironmental stewardship and our code of ethics, which are posted on our website.
Our code of ethics includes the following provisions:
Introduction
Among the many objectives of MDU Resources Group, Inc., its utility divisioncompliance with all applicable environmental laws and its subsidiaries, stands the constant goal of serving the long-term interests of the owners—our shareholders. In fulfilling this objective we must fully respect the legitimate claims and rights of customers, employees, regulators, the general public, and others whose interests touch upon ours.
Our long-term profitability can only be achieved through fair, honest and intelligent decisions with respect to all those with whom we deal. Considering this position, we will not accept a "quick fix" at the expense of our future well-being.
A Step Beyond...
Our company has always maintained a strong commitment to the concept of corporate citizenship including the view that companies as well as individuals must contribute to the well-being of society. We accomplish this contribution through the important services we provide but it extends far beyond our basic products and services. Our corporate citizenship must include active interest in the quality of life enjoyed by our fellow employees and the citizens of the many cities, towns and states we serve. These contributions are further enhanced by conducting our business with integrity.
In addition to these provisions, the codes cover other sustainability issues including equal opportunity, compliance with laws, workplace safety, fair competition and fair dealing. Further, the codes illustrate our involvement in community activities and professional organizations.
In 1983, we established the MDU Resources Foundation to support institutions, organizations and programs within the geographic area in which we conduct business. The MDU Resources Foundation considers requests from health and human services organizations, educational institutions, civic and community activity organizations, cultural organizations andthree primary environmental organizations. Information about the MDU Resources Foundation is on our website.
Our commitment to conducting our business with integrity includes responsibly developing our earth's natural resources. All of our operating business unitsgoals:
· | minimize waste and maximize resources |
· | support environmental laws and regulations that are based on sound science and cost-effective technology and |
· | comply with or exceed all applicable environmental laws, regulations and permit requirements. |
We are committed to:
An environmental statement is included on our website.
As evidenced in our codesoperator of Heskett and through the MDU Resources Foundation, our companyLewis & Clark and has a commitment towards sustainability. Our25 percent interest in Coyote, a 22.7 percent ownership interest in Big Stone and a 25 percent interest in Wygen III. CCW at these facilities is managed either in a wet state in ponds with dry disposal, or entirely in a dry state.
COMPENSATION DISCUSSION AND ANALYSIS |
• | organic growth as well as a continued disciplined approach to the acquisition of well-managed companies and properties | |
• | the elimination of system-wide cost redundancies through increased focus on integration of operations and standardization and consolidation of various support services and functions across companies within the organization and | |
• | the development of projects that are accretive to earnings per share and return on invested capital. |
Determination of Compensation
How we structure compensation
• | recruit, motivate, reward, and retain the 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 the growth in enterprise value over the long-term | |
• | provide a competitive package relative to industry-specific and general industry comparisons and internal equity, as appropriate, and | |
• | ensure effective utilization and development of talent by working in concert with other management processes – for example, performance appraisal, succession planning, and management development. |
Each year, the compensation committee sets overall compensation targets for each Section 16 officer, as well as individual targets for the three components of compensation—base salary, annual incentive and long-term incentive.
The compensation committee structures the target levels of compensation to enable us to retain and reward the executive officers that we believe are critical to our long-term success. The compensation committee also structures compensation to ensure that a significant portion of our executive officers' opportunity is directly related to our stock performance and other factors that
directly and indirectly influence stockholder value. This includes tying incentive compensation to both (i) total stockholder return, which reflects our corporate performance relative to our performance graph peer group and (ii) business unit or other operational goals.
Because our executive officers recommend to the compensation committee the levels of achievement for our annual incentive compensation awards, the compensation committee and the board of directors review the recommended levels carefully before approving them. This is to ensure that the goals are set sufficiently high to provide our executive officers with true stretch performance goals.
In addition, commencing in 2006, the compensation committee implemented a process whereby annual incentive award payments above the targeted incentive amounts are limited. The limitation restricts total above target incentive payments, on an after-tax basis, to executives at the major business units to 20% of after-tax earnings above target earnings. This limitation ensures that only a portion of incremental earnings above target will be paid to annual incentive award recipients. The compensation committee also imposed this limitation on executives at the MDU Resources Group, Inc. level, using 20% of our after-tax incremental earnings above target as the limit. As we discuss later, the committee also established a requirement for minimum improvement in the return on invested capital measures for incentive purposes to ensure that return on invested capital equals or exceeds the weighted average cost of capital.
• | base salaries in order to provide executive officers with sufficient, regularly-paid income and attract, recruit, and retain executives with the knowledge, skills, and abilities necessary to successfully execute their job duties and responsibilities | |
• | annual incentives in order to be competitive from a total remuneration standpoint and ensure focus on annual financial and operating results and | |
• | long-term incentives in order to be competitive from a total remuneration standpoint and ensure focus on stockholder return. |
• | our named executive officers are in positions to drive, and therefore bear high levels of responsibility for, our corporate performance | |
• | incentive compensation is more variable than base salary and dependent upon our performance | |
• | variable compensation helps ensure focus on the goals that are aligned with our overall strategy and | |
• | the interests of our named executive officers will be aligned with those of our stockholders by making a majority of the named executive officers’ target compensation contingent upon results that are beneficial to stockholders. |
| |||||||
---|---|---|---|---|---|---|---|
Name | % of Total Target Compensation Allocated to Base Salary | % of Total Target Compensation Allocated to Annual Incentive | % of Total Target Compensation Allocated to Long-Term Incentive | ||||
Martin A. White (former CEO) | 30.0 | % | 30.0 | % | 40.0 | % | |
Terry D. Hildestad(1) (CEO) (COO) | 34.7 32.8 | % % | 34.7 32.8 | % % | 30.6 34.4 | % % | |
William E. Schneider | 41.7 | % | 20.8 | % | 37.5 | % | |
Warren L. Robinson(2) (former CFO) | — | — | — | ||||
Vernon A. Raile (CFO) | 41.7 | % | 20.8 | % | 37.5 | % | |
John K. Castleberry(1) (WBI(3) CEO) (EVP—Admin.) | 47.4 44.4 | % % | 23.7 22.2 | % % | 28.9 33.4 | % % | |
John G. Harp | 44.4 | % | 22.2 | % | 33.4 | % |
The compensation committee believes incentive compensation comprising 50% to 70% of total target compensation for the named executive officers is appropriate because:
% of Total Target Compensation Allocated to Base Salary (%) | % of Total Target Compensation Allocated to Incentives | ||||||||||||
Name | Annual (%) | Long-Term (%) | Annual + Long-Term (%) | ||||||||||
Terry D. Hildestad | 28.6 | 28.6 | 42.8 | 71.4 | |||||||||
Vernon A. Raile | 39.2 | 25.5 | 35.3 | 60.8 | |||||||||
John G. Harp * | 39.2 | 25.5 | 35.3 | 60.8 | |||||||||
William E. Schneider | 39.2 | 25.5 | 35.3 | 60.8 | |||||||||
Steven L. Bietz | 39.2 | 25.5 | 35.3 | 60.8 |
* | The percentages listed for Mr. Harp exclude the additional incentive opportunity of $200,000 in 2009, which is discussed in greater detail under the heading “John G. Harp’s Additional 2009 Incentive.” Including the additional incentive opportunity would yield the following percentages: Base Salary, 33.4%; Annual Incentive, 36.5%; Long-Term Incentive, 30.1%; and Annual + Long-Term, 66.6%. |
How we determined 2006 compensation
The compensation committee, in conjunction with the board
The compensation committee determines our named executive officers' annual salaries and annual and long-term incentive targets by reference to salary grades. Each salary grade has a minimum, median and maximum annual salary level as well as annual and long-term incentive target levels, which are expressed as a percentage of the individual's actual annual salary. Named executive officers generally are placed into a salary grade based on historical classification of their positions; however, the compensation committee may place an executive into a different salary grade if it determines that the executive's position, responsibilities or performance warrant the change. Also, the committee considers, upon recommendation from the chief executive officer, a position's relative value. A position's relative value is determined by considering:
Our historical classifications have been:
For 2006, all our named executive officers, benefits under our pension plans and our non-qualified defined benefit retirement plan, which we refer to as the Supplemental Income Security Plan or SISP. Historically, we have provided these programs because they have been instrumental in retaining executive talent; both have vesting requirements which call for minimum lengths of service to earn the full benefits. However, legislative changes relating to pension plans and cost reduction initiatives led to changes in both the pension plans and the SISP. The SISP was also changed to ensure the reductions in defined benefit retirement plans were placedconsistent between executive and non-executive employees. Specifically, benefit accruals under our pension plans ceased after December 31, 2009. We discuss the modifications to both the pension plans and the SISP in their salary grades basedthe narrative following the “Pension Benefits for 2009” table.
At least every two yearsWe discuss the amendments to the plan’s change of control definition in “Potential Payments upon Termination or Change of Control.”
Towers Perrin identified overall competitive compensation targets as well as individual targets for salaries, annual incentives and long-term incentives for each Section 16 officer position. They compared our Section 16 officer positions to like positions contained in general industry salarycompensation surveys, industry-specific salarycompensation surveys and, for our chief executive officer, the chief executive officers in our performance graph peer group. The salarycompensation surveys used by Towers Perrin were:
Survey* | Number of Companies Participating (#) | Median Number of Employees (#) | Number of Publicly- Traded Companies (#)(1) | Median Revenue (000s) ($) | ||||||||||||
Towers Perrin’s Executive Compensation Database | 395 | 18,529 | 283 | 5,730,000 | ||||||||||||
Towers Perrin’s Energy Services Industry Executive Compensation Database | 91 | 3,300 | 63 | 2,960,000 | ||||||||||||
Effective Compensation, Inc.’s Oil & Gas Exploration and Production Survey | 119 | 140 | 69 | 247,000 | ||||||||||||
Mercer’s Energy Compensation Survey | 217 | 610 | 173 | 774,172 | ||||||||||||
Watson Wyatt’s Report on Top Management Compensation | 2,309 | (2 | ) | (2 | ) | (2 | ) |
| ||||||||
---|---|---|---|---|---|---|---|---|
Survey* | Number of Companies Participating | Median Number of Employees | Number of Publicly Traded Companies | Median Revenue ($000s) | ||||
Towers Perrin's Executive Compensation Database | 345 | 19,621 | 214 | 4,615,600 | ||||
Towers Perrin's Energy Services Industry Executive Compensation Database | 87 | 3,460 | 63 | 2,472,400 | ||||
Effective Compensation, Inc.'s Oil & Gas Exploration and Production Survey | 76 | 130 | 48 | 148,000 | ||||
Mercer's Energy Compensation Survey | 199 | 288 | 140 | 351,550 |
Our revenues for 2005 were approximately $3.46 billion.
A total of 2,305 organizations participated in Watson Wyatt's Report on Top Management Compensation. There were 405 organizations with 2,000 to 4,999 employees; 304 organizations with 5,000 to 9,999 employees; 260 organizations with 10,000 to 19,999 employees and 355 organizations with 20,000 or more employees. Also, there were 539 organizations with sales of $2.0 billion or more. Watson Wyatt did not report the number of publicly traded
(1) | For the Towers Perrin Executive Compensation Database, the number listed in the table is the number of companies reporting market capitalization. For the Towers Perrin Energy Services Industry Executive Compensation Database, the number listed in the table is the number of companies reporting three-year stockholder return. |
(2) | The 2,309 organizations participating in the 2007/2008 Watson Wyatt Report included 368 organizations with 2,000 to 4,999 employees; 298 organizations with 5,000 to 9,999 employees; 309 organizations with 10,000 to 19,999 employees; and 372 organizations with 20,000 or more employees. Watson Wyatt did not provide a revenue breakdown or the number of publicly-traded companies participating in its survey. Towers Perrin utilized the 2007/2008 survey and aged the data to January 1, 2009. |
Executive
• Alliant Energy Corporation • Berry Petroleum Company • Black Hills Corporation • Comstock Resources, Inc. • Dycom Industries, Inc. • EMCOR Group, Inc. • Encore Acquisition Company • EQT Corporation (formerly Equitable Resources, Inc.) • Florida Rock Industries, Inc. • Granite Construction Inc. • Martin Marietta Materials, Inc. • National Fuel Gas Co. • Northwest Natural Gas Company | • NSTAR • OGE Energy Corp. • ONEOK, Inc. • Quanta Services, Inc. • Questar Corporation • SCANA Corporation • Southwest Gas Corporation • St. Mary Land & Exploration Company • Swift Energy Company • U.S. Concrete, Inc. • Vectren Corporation • Vulcan Materials Company • Whiting Petroleum Corporation |
• | base salary grades and individual salaries | |
• | annual and long-term incentive targets and | |
• | increases in the level of the SISP benefits to current participants. |
• | working with the outside compensation consultants and the chief executive officer on the determination of recommended salary grades, which have associated annual base salary ranges and incentive targets | |
• | reviewing recommended salary increases and incentive targets submitted by executive officers for officers reporting to them for reasonableness and alignment with company or business unit objectives and to help ensure internal equity and | |
• | designing and updating annual and long-term incentive programs. |
• | participation on our management policy committee, which is the entity responsible for setting corporate-wide operating and management policies and procedures as well as our strategic direction | |
• | the position’s responsibilities relative to our total earnings, use of invested capital, and the stable generation of earnings and cash flow and | |
• | the position’s impact on key strategic initiatives. |
awards were determined, along with the payouts based on performance from the recently completed performance period for prior annual and long-term awards. The following chart showsFebruary meetings occur after the median annualrelease of earnings for the prior year.
2009 Base Salary (000s) | |||||||||||||||||
Position | Grade | Name | Minimum ($) | Midpoint ($) | Maximum ($) | ||||||||||||
President and CEO | K | Terry D. Hildestad | 620 | 775 | 930 | ||||||||||||
Executive Vice President, Treasurer and CFO | J | Vernon A. Raile | 312 | 390 | 468 | ||||||||||||
President and CEO, MDU Construction Services Group, Inc. | J | John G. Harp | 312 | 390 | 468 | ||||||||||||
President and CEO, Knife River Corporation | J | William E. Schneider | 312 | 390 | 468 | ||||||||||||
President and CEO, WBI Holdings, Inc. | J | Steven L. Bietz | 312 | 390 | 468 |
| ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Salary Grade | Median Base Salary ($ 000s) | Target Annual Incentive ($ 000s) | Target Long-Term Incentive ($ 000s) | Target Total ($ 000s) | |||||||||
Martin A. White (former CEO) | K | $ | 750 | $ | 750 | $ | 998 | $ | 2,498 | |||||
Terry D. Hildestad (CEO and COO) | K | $ | 750 | $ | 750 | $ | 998 | $ | 2,498 | |||||
William E. Schneider | J | $ | 375 | $ | 187 | $ | 338 | $ | 900 | |||||
Warren L. Robinson (former CFO) | J | $ | 375 | $ | 187 | $ | 338 | $ | 900 | |||||
Vernon A. Raile (CFO) | J | $ | 375 | $ | 187 | $ | 338 | $ | 900 | |||||
John K. Castleberry (WBI CEO) (EVP—Admin.) | J I | $ $ | 375 310 | $ $ | 187 155 | $ $ | 338 233 | $ $ | 900 698 | |||||
John G. Harp | I | $ | 310 | $ | 155 | $ | 233 | $ | 698 |
After approving theremained unchanged for 2009.
The compensation committee believes that having a range of possible salaries within each salary grade is advantageous as it gives the committee the flexibility to assign different salaries to individual executives within a salary grade to reflect one or more of the following:
• | our performance on financial measurements as compared to our performance graph peer group | |
• | executive’s performance on financial goals | |
• | executive’s performance on non-financial goals, including the results of the performance assessment program | |
• | executive’s experience, tenure, and future potential | |
• | position’s relative value compared to other positions within the company | |
• | relationship of the salary to the competitive salary market value | |
• | internal equity with other executives and | |
• | economic environment of the corporation or executive’s business unit. |
• visionary leadership • strategic thinking • leading with integrity • managing customer focus • financial responsibility • achievement focus • judgment • planning and organization | • leadership • mentoring • relationship building • conflict resolution • organizational savvy • safety • Great Place to Work® |
In the following discussion, we provide further explanation of why and how the compensation committee determined each named executive officer's salary grade and the executive's actual 2006 salary and annual and long-term incentives.
2006 Salary Grades and
The compensation committee began its review of executive compensation data at its August 2005 meeting. It assigned 2006 salary grades and determined 2006 individual base salaries and annual and long-term incentive targets under the annual and long-term plans at the November 2005 meeting. Actual 2006 annual and long-term incentive awards, along with the payouts based on performance from the recently completed performance period for prior annual and long-term awards, were determined at the February 2006 meetings of the compensation committee and the board of directors. The February meetings occurred after the release of earnings for the prior year.
The compensation committee also adjusted compensation, as necessary, at other times during the year to reflect promotions or other changes in executive officers' positions with the company.
Martin A. White
As we discussed above, the compensation committee used data provided by Towers Perrin from five different salary surveys for compensation comparison. In addition to these salary surveys described
above, for the chief executive officer comparison, Towers Perrin also used salary information for the chief executive officers at the following companies, which comprised our performance graph peer group:
Terry D. Hildestad
Terry D. Hildestad was our chief operating officer untilsince August 17, 2006 when he was elected as chief executive officer. Mr. Hildestad was assigned to a salary grade "K." The base salary target for a president and chief operating officer was $485,000, based on the survey data provided by Towers Perrin as a part of their annual competitive analysis. The committee set Mr. Hildestad's actual base salary at $525,000 because he received a commendable performance assessment rating and Knife River Corporation's 2005 financial results were above plan. Mr. Hildestad had been president and chief executive officer of Knife River Corporation. The committee believed that this salary was appropriate because Mr. Hildestad assumed additional responsibilities as our president and chief operating officer and was making significant strides to successfully assume our chief executive officer position in August 2006.
When Mr. Hildestad became our chief executive officer, For 2009, the committee increased his base salary by 7.1%, from $700,000 to $625,000. While the "K" salary grade midpoint was $750,000, the committee believed that setting$750,000. The reasons for Mr. Hildestad's salary at the midpoint would have been premature given his short tenure in the position. The committee looks to sustained performance and contribution over time before setting a named executive officer's base salary at or above the salary grade midpoint. The committee also decided that it would not give Mr. Hildestad a salaryHildestad’s 2009 increase on January 1, 2007 and took this into consideration when increasing his salary to $625,000 in August 2006.
William E. Schneider
William E. Schneider is president and chief executive officer of our subsidiary, Knife River Corporation. Mr. Schneider's assigned salary grade of "J" had a midpoint of $375,000, with a minimum of $300,000 and a maximum of $450,000. Upon recommendation from the chief executive officer, the committee chose the "J" salary grade because they believed Mr. Schneider should be in the same salary grade as our chief financial officer and the chief executive officer of WBI Holdings, Inc.
Mr. Schneider's actual 2006 base salary was $392,000, which was above the 2006 salary grade midpoint of $375,000, because Knife River Corporation's 2005 financial results were above plan, he assumed additional responsibilities as business unit chief executive officer and he received a commendable performance assessment rating. Also, the committee believed a salary above the salary grade midpoint was appropriate given the fact that Mr. Schneider was successfully spearheading a number of Knife River Corporation initiatives, such as a regional operating structure to improve efficiencies and acceleration of Knife River Corporation's migration to a common information systems platform.
Warren L. Robinson
Warren L. Robinson was our executive vice president and chief financial officer until January 3, 2006 and an employee until he retired February 17, 2006. Because of his retirement, Mr. Robinson received no base salary increase or incentive compensation for 2006. As we discussed in our 2006 proxy statement, we entered into an agreement with Warren L. Robinson on November 23, 2005 in connection with his retirement as executive vice president and chief financial officer. Mr. Robinson received a severance payment of $1,000,000. The compensation committee determined that this was an appropriate amount in light of Mr. Robinson's years of service to the company, business acumen and timing in the capital markets, which contributed to our six-fold increase in earnings from 1988 to 2004. Mr. Robinson also had long-term incentive awards which have been or will be paid out based upon company performance in accordance with the terms of the awards.
these key achievements: Why We Chose Them the calendar year. the individual’s actual base salary. Hildestad as a 2009 incentive. “A” rated companies. The committee’s reasons for using this approach recognized: The 2009 long-term incentive targets for each named executive were unchanged from 2008. and then dividing this product by the average of the closing prices of our stock from January the following table: lists the shares granted on February officers’ SISP levels, including the changes effective December 1, 2009: 4999 or 280G when designing our compensation programs. 2009: meeting on February downward based upon individual performance. Unless the committee determines otherwise, performance measure targets shall be adjusted to take into account unusual or nonrecurring events affecting the company, a subsidiary or a division or not met reduced his annual incentive award by 1%. executives, which include Messrs. Hildestad and Raile. In 2009, the 20% limitation was calculated without regard to the noncash ceiling test impairment charge as discussed in the Compensation Discussion and Analysis. Analysis. In addition to Analysis. table and in column (e) of the Summary Compensation Table. These are the earliest ages at which the executives could begin receiving unreduced benefits. Retirement on December 31, Mr. Bietz is currently eligible for a lump sum. $245,000. to: Benefit levels in the amended schedule which became effective on January 1, 2010, are 20% lower than the benefit levels in the original schedule. The amended schedule applies to new participants and participants who receive a benefit level increase on or after January 1, 2010. schedule described above. The additional vesting period associated with a benefit level increase may be waived by the compensation committee. payments that could be provided under the additional retirement benefit if Mr. Harp’s employment were to be terminated on December 31, 2009, refer to the table and related notes in “Potential Payment upon Termination or Change of Control” below. ” plans. 2009. 2009. terms of the agreements as in effect on December 31, 2009. fees. $174. 2009. www.mdu.com. who shares in the household of a director, director nominee, executive officer, or holder of 5% or more of our voting stock. board approved three-year leases for these properties that provide for our indirect subsidiary to pay a combined monthly rent of $10,100 to Mojo, a Montana partnership. job responsibility. In 2009, no directors submitted resignations under this requirement. directors, and officers. Karen B. Fagg became chairman. of risk in the committee's areas of responsibility. statement. 13, 2009. The board of directors has determined that Messrs. Johnson, Holaday, Lewis, Olson (until he retired), and Wilson are In connection with our financial statements for the year ended December 31, board approved, that the annual retainer be increased by $25,000 to $55,000 and that the monthly fees be eliminated, effective June 1, 2009. Director Nominations: Our bylaws provide that director nominations may be made only by (i) the board at any meeting of stockholders or corporate secretary and or before January 27, 2011. . . resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a two-thirds vote of the Continuing Directors 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 thenextannual meeting of MDU RESOURCES GROUP, INC. 27, 2010.• • • • moving Mr. Hildestad’s salary closer to the 2009 salary grade midpoint of $775,000. Vernon A. Raile was elected our chief financial officer effective January 3, 2006. The 2006 market data provided by Towers Perrin showed a targeted base salary of $390,000. However, was assigned to salary grade "J", the historical classification for our chief financial officer. The salary grade had a midpoint of $375,000, a minimum of $300,000 and a maximum of $450,000. The committee determined Mr. Raile's actual 2006 base salary at $318,750, which was an increase of 46.65% from his 2005 base salary. This reflected Mr. Raile's assumption of additional responsibilitieshas served as executive vice president, treasurer and chief financial officer a desire to move hissince January 2006. Mr. Raile’s 2009 base salary closer towas set at $450,000, representing an increase of 12.5% over his 2008 base salary of $400,000. The committee set his 2009 base salary at $450,000, above the midpoint of $375,000, record financial results andhis salary grade, due to his commendable performance assessment rating. However, Mr. Raile's base salary was significantly belowrating, his years of service, and the 2006 salary grade midpoint of $375,000 primarily because of his short tenure as executive vice president, treasurer and chief financial officer. The committee believes aligning compensation targets to competitive benchmarks over time versus all at once is prudent because it gives them the opportunity to assess the executive's performance and contribution in his new role.John K. Castleberry John K. Castleberry was president and chief executive officer of our subsidiary, WBI Holdings, Inc., and had planned to retire in 2006. However, effective March 4, 2006, Mr. Castleberry accepted our offer to become executive vice president—administration of MDU Resources Group, Inc. As president and chief executive officer of WBI Holdings, Inc., Mr. Castleberry's assigned salary grade of "J" had a midpoint of $375,000, a minimum of $300,000 and a maximum of $450,000. Mr. Castleberry's actual base salary for 2006 was $370,000, which was the same as 2005 due to his anticipated retirement in early 2006. As executive vice president—administration of MDU Resources Group, Inc., Mr. Castleberry was placed in a lower salary grade of "I",results associated with a midpoint of $310,000, a minimum of $248,000 and a maximum of $372,000. The compensation committee approved the salary grade assignment for the executive vice president—administration position based on the chief executive officer's recommendation. The chief executive officer's rationale for recommending this salary grade was:•The position's importance in leading our initiative of moving certain functions to a shared services environment. This initiative involves placing duplicative functions across the organization, e.g., payroll, information technology and purchasing, into a centralized organization to leverage economies of scale and to leverage our purchasing power with suppliers and vendors.•Mr. Castleberry's past success in leading WBI Holdings, Inc. In addition, his operational orientation and disciplined approach to developing systems and processes were viewed as qualities necessary to make the shared services initiative a success.•The desire to have Mr. Castleberry in the same salary grade as the president and chief executive officer of MDU Construction Services Group, Inc. Mr. Castleberry's actual salary was set at $300,000 per year, slightly below the midpoint, because of his short tenure in this position. The committee believes that aligning compensation targets to competitive benchmarks over time versus all at once is prudent because it gives them the opportunity to assess the executive's performance and contribution in his new role.• • • key financing initiatives that were undertaken and Mr. Raile’s experience and skill. John G.ishas served as president and chief executive officer of MDU Construction Services Group, Inc. Mr. Harp was assigned to salary grade "I", which had a midpoint of $310,000, a minimum of $248,000 and a maximum of $372,000. The Towers Perrin competitive analysis showed a target base salary of $280,000 forsince September 2004. For 2009, his position. Upon recommendation from the chief executive officer, the committee chose a salary grade with targeted ranges higher than the Towers Perrin data would indicate because the position manages a business unit that until 2005 had poor operational and financial performance, requiring a greater degree of leadership and problem solving than would otherwise have been called for had the business unit been more stable. Mr. Harp's actual 2006 base salary was set at $310,000,$450,000, representing an increase of 12.5% over his 2008 base salary of $400,000. The committee set his 2009 base salary at $450,000, above the midpoint of his salary grade, midpoint, because of the financial turn-around of due to his commendable performance assessment rating and due to results associated with these key achievements:• • Mr. Harp’s strong grasp of all aspects of MDU Construction Services Group, Inc.’s business, including operations, collections, bidding, and personnel. loss in 2004base salary increase because Knife River Corporation’s 2008 nine-month financial results were less than target and because the committee wished to a profit in 2005be consistent with the overall wage freeze imposed across Knife River Corporation.Mr. Harp'schief executive officer of WBI Holdings, Inc. since March 2006. For 2009, his base salary was set at $350,000, representing an increase of 11.8% over his 2008 base salary of $313,100. The committee set his 2009 base salary at $350,000, below the midpoint of his salary grade, due to his commendable performance assessment rating.rating and due to results associated with these key achievements:• • • Mr. Bietz’s leadership in the large-scale development of the Bakken Field. officer'sofficer’s base salary for 20052008 and 20062009 and the percentage change. Name Base Salary
for 2005 Base Salary
for 2006 % Change Martin A. White $ 700,000 $750,000 7.14 % Terry D. Hildestad (CEO) $625,000 effective August 18, 2006 19.04 % (COO) $ 475,000 $525,000 10.52 % William E. Schneider $ 350,000 $392,000 12.00 % Warren L. Robinson $ 425,000 $425,000 0.00 % Vernon A. Raile $ 217,360 $318,750 46.65 % John K. Castleberry (WBI CEO) $ 370,000 $370,000 0.00 % (EVP—Admin.) $300,000 effective March 4, 2006 -18.9 % John G. Harp $ 250,000 $310,000 24.00 % 2006Name Terry D. Hildestad 700.0 750.0 7.1 Vernon A. Raile 400.0 450.0 12.5 John G. Harp 400.0 450.0 12.5 William E. Schneider 447.4 447.4 0.0 Steven L. Bietz 313.1 350.0 11.8 Annuallong-term incentive targets were established by the compensation committee for each salary grade as a percentage of the individual's actual base salary. The chief executive officer's and the chief operating officer's target annual incentive was 100% of base salary, and the other named executive officers' target annual incentives were 50% of their base salaries. These incentive targets were derived in part from competitive data provided by Towers Perrin and in part by the committee's judgment on internal equity of the positions, their relative value to the company and the desire to maintain a consistent annual incentive target for the chief executive officer and the chief operating officer positions as well as for the president and chief executive officers of the business units.thetheir respective business unit and/or the corporation, as well as the value provided to our stockholders. For Messrs. White, Hildestad Robinson,and Raile, and Castleberry, as executive vice president—administration, the performance measures for annual incentive awards are the company'sour annual return on invested capital results compared to target and the company'sour annual earnings per share results compared to target. For Messrs. Schneider, Harp, and Castleberry, as president and chief executive officer of WBI Holdings, Inc.,Bietz, the performance measures for annual incentive awards are their respective business unit'sunit’s annual return on invested capital results compared to target and their respective business unit'sunit’s allocatedDuring Mr. Castleberry's tenure as president and chief executive officerThe 2009 safety results of WBI Holdings, Inc., the safety record of that business unit was also a performance measure for Mr. Castleberry. Target results are generally developed through the company'sBietz’s 2009 annual financial planning process, whereby we assess the future operating environment and build projections of anticipated results. For 2006 the committee implemented a change in how the return on investment capital targets are established for use in our annual incentive plans. incentive.change was implemented to emphasize the needfor each business unit and the company to generate, within a reasonable period of time, a return on invested capital that is at least equal to the business unit's or company's weighted average cost of capital. If a business unit's or the company's return on invested capital, as determined by the annual financial planning process, was below their weighted average cost of capital, the return on invested capital target used for incentive plan purposes was increased. Thecompensation committee believes earnings per share and return on invested capital are very good measurements in assessing how well or how poorly the company is performingperformance from a financial standpoint. The formerEarnings per share is a generally accepted accounting principle measurement and is a key driver of stockholder return over the long-term. The latterReturn on invested capital measures how efficiently and effectively management deploys its capital. Sustained returns on invested capital in excess of the company'sour cost of capital create wealth for the company'sour stockholders.unit'sunit’s earnings by the business unit's proportionunit’s portion of the total company weighted average shares outstanding. Return on invested capital for the company is calculated by dividing the company's net income beforeour earnings, without regard to after tax interest expense net of tax, and preferred stock dividends, by the company'sour average capitalization for a 12-month period.the calendar year. Return on invested capital for a business unit is calculated by dividing the business unit's net income beforeunit’s earnings, without regard to after tax interest expense net of tax, and preferred stock dividends, by the business unit'sunit’s average capitalization for a 12-month period.goalsperformance measures each year based upon recommendations from the chief executive officer. For 2006, theThe compensation committee weighted the goals2009 performance measures for annual return on invested capital compared to plannedtargeted results and allocated earnings per share compared to plannedtargeted results each at 50%. The equal weight given to these two goals represents a change from prior years when the compensation committee weightedbelieves both measures are equally important in driving stockholder value in the goalshort term and over time.at 25% and the goalmeasure for allocated earnings per share at 75%. Upon recommendation from the chief executive officer, the committee changed the weighting. The compensation committee determinedincentive purposes to help ensure that return on invested capital iswill equal or exceed the weighted average cost of capital. Historically, this consideration took the form of a key factorminimum annual increase in determining how well a business unit, unit’s and/or the company, generates returns for a givencompany’s return on invested capital incentive plan performance target(s). For 2009, the committee chose to use the stretch return on invested capital target approved by the board in the 2009 business plan rather than the required annual minimum increase in recognition of the soft economic environment and depressed commodity prices. In the committee’s discretion, it may establish incentive plan performance targets higher, lower, or at the same level of investmentas the prior year’s target and/or results.should therefore comprise a more significant portion ofWhy We Chose Themcompensationtargets as a percentage of executives.namedchief executive officersofficer’s target annual incentive was 100% of his base salary. Messrs. Raile, Harp, Schneider, and Bietz’s target annual incentives were eligible to earn from 0% to 200%65% of their targetedbase salaries. These incentive targets were derived in part from competitive data provided by Towers Perrin and in part by the compensation committee’s desire, based on internal equity, to have a uniform annual incentive.incentive target for the business unit president and chief executive officer positions and the executive vice president, treasurer and chief financial officer position. The target annual incentives for the named executives did not change in 2009 from 2008. The award opportunities available to each named executive officer ranged from no payment if the goals were met below the 85% level to a 200% payout if the goals were met at or above the 115% level. We discuss theIn 2009, Mr. Bietz also had five individual goals relating to WBI Holdings, Inc.’s safety results, and each goal that was not met reduced his annual incentive award opportunities in more detail later in this proxy statement.by 1%.officer's 2006officer’s 2009 base salary, which was used to calculate the annual incentive, the officer's 20062009 annual incentive target percentage, the 2006 financial results as a percentage of plannedofficer’s 2009 incentive plan performance targets, the 2009 incentive plan results, and the annual incentive earned for 2006. 2006
Incentive Plan
Performance
Targets 2006 Incentive
Plan Results 2006
Annual
Incentive
Target 2006
Annual
Incentive
EarnedName 2006 Base
Salary EPS
($) ROIC
(%) EPS
($) ROIC
(%)Martin A. White(1) $ 750,000 100 % 1.40 9.2 1.74 10.6 $ 1,000,000 Terry D. Hildestad $ 562,500 100 % 1.40 9.2 1.74 10.6 $ 1,125,000 William E. Schneider $ 392,000 50 % Please see discussion below $ 392,000 Warren L. Robinson(2) $ 53,125 — — — — — — Vernon A. Raile $ 318,750 50 % 1.40 9.2 1.74 10.6 $ 318,750 John K. Castleberry(3) $ 311,667 50 % Please 1.40 see
9.2 discussion 1.74 below 10.6 $ 299,212 John G. Harp $ 310,000 50 % Please see discussion below $ 310,000 (1)Mr. White's2009.Name 750.0 100 1.09 5.7 [•] [•] [•] 450.0 65 1.09 5.7 [•] [•] [•] 450.0 65 3.17 10.2 [•] [•] [•] 447.4 65 0.52 4.3 [•] [•] [•] 350.0 65 1.69 5.6 [•] [•] [•] (1) Based on earnings per share and return on invested capital for MDU Resources Group, Inc. The 2009 incentive plan results were adjusted to exclude the 2009 noncash impairment charge as discussed below. (2) Based on allocated earnings per share and return on invested capital for MDU Construction Services Group, Inc. The amount for Mr. Harp includes an additional [•] incentive as described below. (3) Based on allocated earnings per share and return on invested capital for Knife River Corporation. 2008 2008 2009 2009 Name EPS EPS EPS 1.77 9.1 1.59 8.0 1.09 5.7 [•] [•] 1.77 9.1 1.59 8.0 1.09 5.7 [•] [•] 2.73 10.5 5.03 17.7 3.17 10.2 [•] [•] 1.03 7.5 0.42 3.5 0.52 4.3 [•] [•] - - - - 1.69 5.6 [•] [•] (1) Based on earnings per share and return on invested capital for MDU Resources Group, Inc. The 2009 incentive plan results were adjusted to exclude the 2009 noncash impairment charge as discussed below. (2) Based on allocated earnings per share and return on invested capital for MDU Construction Services Group, Inc. (3) (4) Based on allocated earnings per share and return on invested capital for WBI Holdings, Inc. The 2009 incentive plan results were adjusted to exclude the 2009 noncash impairment charge as discussed below. · operating cash flows are not affected by a ceiling test charge · the underlying value of the business is not affected by a ceiling test charge, · the ceiling test charge would be driven by a single day point in time price to value natural gas and oil reserves, which may not be reflective of the underlying long-term value of the assets, and · recognition of the Securities and Exchange Commission’s decision to change the “ceiling test” rules from using prices from the last day of the reporting period to a 12-month average of prices on the first day of the month during the reporting period effective December 31, 2009. was prorated due to his retirement in August 2006.(2)Mr. Robinson did not receive an annual incentive in 2006 due to his retirement.(3)Mr. Castleberry's annual incentive is based uponpayment for 2009. goals, Mr. Hildestad’s 2009 incentive plan performance targets were based on our earnings per share and WBI Holdings, Inc. goals proratedreturn on invested capital. We set his 2009 earnings per share target level and return on invested capital below his 2008 targets and actual results to reflect significantly lower commodity prices and the continued effects of the soft economic activity in the construction industries.Castleberry's service with each company.Construction Services Group, Inc.’s 2009 Return on Invested Capital (ROIC) as compared to
Construction Services Group, Inc.’s 2009 Weighted Average Cost of Capital (WACC)Additional Incentive Amount 2009 ROIC is less than 100 basis points above 2009 WACC $0 2009 ROIC is 100 to 199 basis points above 2009 WACC $100,000 2009 ROIC is 200 basis points or more above 2009 WACC $200,000 · recognition of, and rewarding for, effectively managing accounts receivable through timely collections and · MDU Resources Group, Inc. benefited from the excess cash through lower average commercial paper balances in 2009. Schneider's 2006Schneider’s 2009 incentive plan performance targets were based on allocated earnings per share and return on invested capital for Knife River Corporation. HisWe set his 2009 targets were set at levels 18 percent and 8 percent, respectively, above the 2005 achievements for these performance measures. The committee believed that these targets were sufficiently challenging for Mr. Schneider because, in order to attain these financial targets, Mr. Schneider would be required, at a minimum, to implement significant operational changes at certain underperforming subsidiaries. With respect to the 2006 incentive plan results, Knife River Corporation exceeded 2006 targetallocated earnings per share and return on invested capital lower than his 2008 targets and higher than 2008 actual results. The compensation committee arrived at these targets based on the current economic softness in the construction markets, partially offset by 31 percenta significant reduction in Knife River Corporation’s cost structure.24 percent, respectively.return on invested capital results were [•] and [•] of their respective 2009 targets. Therefore, we paid Mr. Schneider achieved these excellent results through[•] as a combination of operational improvements, changes in market strategy and implementation of effective cost controls. Mr. Castleberry's2009 annual incentive was prorated to reflect his service as president and chief executive officer of WBI Holdings, Inc. and executive vice president—administration of MDU Resources Group, Inc. The goals shown in the table are for MDU Resources Group, Inc. only. Mr. Castleberry's incentive plan performance targets, during the portion of time he served asincentive.were based on allocated earnings per share and return on invested capital for WBI Holdings, Inc. The targets were set at levels 2 percent and 19 percent lower, respectively, than the 2005 achievement for these performance measures. The committee believed that the incentive plan performance targets for WBI Holdings, Inc. required sufficient stretch on Mr. Castleberry's part, given that 2005 financial results had benefited from the effects of a favorable regulatory order, combined with expected lower natural gas commodity prices and increasing operational costs for 2006. Furthermore, Mr. Castleberry's performance target for return on invested capital would still be significantly above the cost of capital for his business unit. With respect to the 2006 incentive plan results, WBI Holdings, Inc. exceeded 2006 target earnings per share and return on invested capital by 14 percent and 5 percent, respectively. As president and chief executive officer of MDU Construction Services Group, Inc., Mr. Harp's 2006Bietz’s 2009 incentive plan performance targets were based on allocated earnings per share and return on invested capital for MDU Construction Services Group,WBI Holdings, Inc. His targets wereWe set at levels 6 percent above the 2005 targets for these same performance measures. At the time Mr. Harp assumed thepresidency of this business unit in late 2004, he was confronted with significant challenges in turning around a business unit that had incurred significant losses in 2004. Although the compensation committee believed that Mr. Harp had achieved commendable progress in 2005, significant efforts would be required in 2006 to resolve a number of the issues remaining. Thus, the committee believed that the incentive plan targets for 2006 were sufficiently challenging but not so aggressive as to impede the orderly progress of Mr. Harp's improvement plan. For 2006 incentive plan results, MDU Construction Services Group, Inc. exceeded 2006 targethis 2009 earnings per share and return on invested capital by 66 percenttarget levels below his 2008 target and 35 percent, respectively. This reflects2008 actual results largely to reflect lower commodity prices and lower anticipated production due to reduced capital expenditures.outstanding efforts by Mr. Harp in improving 2006 financialcompany’s 2009 earnings per share and return on invested capital results for this business unit over those for the prior two years. In additionwere [•] and [•] of their respective 2009 targets. These results equated to the annualan incentive of $310,000 Mr. Harp earned under our executive incentive compensation plan, he also earned an additional $500,000 one-time incentive payment. When Mr. Harp[•], which was hired in September 2004reduced by [•] or 1% due to effectuate a turn-aroundnot achieving one of the Utility Services Inc. business unit, now called MDU Construction Services Group, Inc., he was offered one-time incentive opportunitiesfive 2009 safety goals. Therefore, we paid [•] to Mr. Bietz as a 2009 incentive.(i) $250,000 if MDU Construction Services Group, Inc. reported annual net income of $12.5 million in 2007 or sooner and in addition (ii) $500,000 if MDU Construction Services Group, Inc. reported annual net income of $18.6 million or more in fiscal year 2008 or sooner. The first goal was met in 2005, and in fiscal year 2006 MDU Construction Services Group, Inc. met the second goal.DeferredAnnual Incentive Compensationhis/his or her annual incentive, the companywe will credit the deferral with interest at a rate determined by the compensation committee. For 2009, the committee discontinued using the prime rate plus one percentage point. Messrs. Hildestad, Schneider and Raile deferred all or a portionin favor of their annual incentivesusing Moody’s U.S. Long-Term Corporate Bond Yield Average for 2005.· incentive deferrals are a low-cost source of capital for the company and · incentive deferrals are unsecured obligations and therefore carry a higher risk to the executives. 20062009 under the Long-Term Performance-Based Incentive Planmeasures aremeasure is our total stockholder return over a three-year measurement period as compared to the total stockholder returns of the companies in our performance graph peer group.group over the same three-year period. The compensation committee selected this goal because it believes executive pay under a long-term, capital accumulation program such as this should mirror our long-term performance in stockholder return as compared to other public companies in our industries. Payments are made in company stock; dividend equivalents are paid in cash. Similar tois determined by reference to the salary grade. Mr. White's target was 133% of base salary, although Mr. White was not granted performance shares under the program in 2006 due to his retirement. Mr. Hildestad's target was 105% of base salary. Messrs. Schneider's, Raile's and Robinson's targets were 90% of base salary each, although Mr. Robinson was not granted performance shares under the program in 2006 due to his retirement. Messrs. Castleberry's and Harp's targets were 75% of base salary. TheseWe derived these incentive targets were derived in part from competitive data provided by Towers Perrin and in part by the committee'scommittee’s judgment on the impact each position has on our total stockholder return. The committee also believed consistency across positions in the same salary grades wasand keeping the chief executive officer’s long-term incentive target below a level indicated by competitive data were important from an internal equity standpoint.16, 2006,12, 2009, the board of directors, upon recommendation of the compensation committee, made long-term incentiveperformance share grants to the named executive officers in the form of performance shares.officers. The compensation committee determined the target number of performance shares granted to each named executive officer by multiplying the named executive officer's 2006officer’s 2009 base salary by his or her long-term incentive target1, 20062, 2009 through January 23, 2006. Name 2006 base
salary to
determine
target $ 2006 long-term
incentive
target % at
time of grant 2006 long-term
incentive
target $ at
time of grant Average
closing price
of our stock
from Jan. 1
through Jan. 23 Resulting number
of performance
shares granted on
Feb. 16 Performance shares
granted
adjusted for
July 26, 2006
3-for-2
stock splitMartin A. White(1) — — — — — — Terry D. Hildestad(2) $ 525,000 105 % $ 551,250 $ 34.62 15,922 23,883 William E. Schneider $ 392,000 90 % $ 352,800 $ 34.62 10,190 15,285 Warren L. Robinson(3) — — — — — — Vernon A. Raile $ 318,750 90 % $ 286,875 $ 34.62 8,286 12,429 John K. Castleberry $ 300,000 75 % $ 225,000 $ 34.62 6,499 9,748 John G. Harp $ 310,000 75 % $ 232,500 $ 34.62 6,715 10,072 (1)Mr. White was not granted performance shares22, 2009, as shown in 2006 due to his retirement.(2)Mr. Hildestad did not receive any additional performance shares when he became president and chief executive officer in August 2006.(3)Mr. Robinson was not granted performance shares in 2006 due to his retirement.Name Terry D. Hildestad 750,000 150 1,125,000 20.52 54,824 Vernon A. Raile 450,000 90 405,000 20.52 19,736 John G. Harp 450,000 90 405,000 20.52 19,736 William E. Schneider 447,400 90 402,660 20.52 19,622 Steven L. Bietz 350,000 90 315,000 20.52 15,350 20092012 depending on our three-year 2006-20082009-2011 total stockholder return compared to the total three-year stockholder returns of companies in our performance graph peer group. The payout percentage will be a function of our rank against our performance graph peer group as follows:Company's
Company’sFeb. 16, 2006 200% 150% 100% 10% 0% 20092012 at the same time as the performance awards are paid.16, 200612, 2009 under the Long-Term Performance-Based Incentive Plan13, 200316, 2006 for the 20032006 through 20052008 performance period. As we reported in last year's proxy statement, these performance shares vested at the 118% payout level. Our total stockholder return for the 20032006 through 20052008 performance period was 106.56%5.46%, which corresponded to a percentile rank of 59%48% against our performance graph peer group. The percentile rank of 59%48% corresponded to a payout percentage of 118%82%, meaning 118%82% of the target shares originally granted plus dividend equivalents were paid to the named executive officers. The table below13, 2003,16, 2006, the shares paid on February 16, 200612, 2009 based on the payout percentage, and the dividend equivalents earned. Name Shares
granted on
February 13,
2003(2) Payout
percentage Shares paid on
February 16,
2006(2) Dividend
EquivalentsMartin A. White 17,083 118 % 20,158 $ 28,222 Terry D. Hildestad 5,809 118 % 6,855 $ 9,597 William E. Schneider 4,324 118 % 5,103 $ 7,144 Warren L. Robinson 5,809 118 % 6,855 $ 9,597 Vernon A. Raile 2,134 118 % 2,518 $ 3,526 John K. Castleberry 5,809 118 % 6,855 $ 9,597 John G. Harp(1) — — — — (1) Mr. Harp was not granted performance shares in 2003 because he was not then an employee of the company.(2) Shares are adjusted for the 3-for-2 stock split effective October 29, 2003 and the July 26, 2006 stock split. We granted shares of restricted stock to our named executive officers in 2000, pursuant to our accelerated restricted stock program. Vesting of 54% of these shares was accelerated after the first performance cycle, 2000-2002, based upon achievement of total shareholder return results as compared to the performance graph peer group. Our total shareholder return as compared to the performance graph peer group for the second performance cycle, 2003-2005, resulted in acceleration of vesting the remaining shares on February 16, 2006. The named executive officers received shares as follows: Mr. White—10,350 shares; Mr. Hildestad—5,175 shares; Mr. Robinson—4,140 shares; Mr. Raile—2,587 shares; Mr. Schneider—4,140 shares; and Mr. Castleberry—4,140 shares. Mr. Harp was not granted restricted shares.Perquisites and Tax Gross-Ups Our named executive officers have limited perquisites, which may include personal use of our plane, limited accompaniment of family members with executives traveling for business purposes, reasonable vehicle allowances, home office allowances and subsidized annual physical examinations. In connection with Martin White's retirement in August 2006, we paid the cost of travel for members of Mr. White's family to attend his retirement party and also provided a tax gross-up to Mr. White on this amount. While the company has rarely provided tax gross-ups, the board believed that it was appropriate in recognition of Mr. White's very successful tenure as our chairman and chief executive officer.Pension Plans Effective 2006, we no longer offer pensions to new employees. Instead, executives and other employees are offered increased company contributions to our 401(k) plan. The pension plans continue in effect for all employees hired before 2006. We provide our executives and other employees hired before 2006 with income for their retirement through our qualified defined benefit pension plans, where benefits are determined by years of service and base salary. For benefits under the pension plans, 35 years is the maximum number of years of service the participants in these plans can accrue. Pension benefits are determined by the step-rate Name Terry D. Hildestad 23,883 82 19,584 32,968 Vernon A. Raile 12,429 82 10,192 17,157 John G. Harp 10,072 82 8,259 13,903 William E. Schneider 15,285 82 12,534 21,100 Steven L. Bietz 7,018 82 5,755 9,688 formula that emphasizes the highest consecutive 60 months of base salary within the last 10 years of service. Employees who retire early receive reduced benefits under the pension plans. We discuss other material terms of the pension plans later in this proxy statement. Because benefits under our pension plan increase with an employee's period of service and earnings, we believe the pension encourages our employees to make long-term commitments to the company, and as such, serves as an important retention tool.Supplemental Income Security Plan We also offer certain key managers and executives, including all of our named executive officers, benefits under our nonqualified retirement plan, which we refer to as the Supplemental Income Security Plan or SISP. The SISP was adopted in 1982 to provide participants with additional retirement income and death benefits. The additional retirement income may take two forms:•a supplemental retirement benefit payable for fifteen years beginning at the later of age 65 or after employment ends and•an additional retirement benefit to offset the Internal Revenue Code limitations placed on benefits payable under our qualified defined benefit pension plans. If eligible, the participants receive this retirement benefit after they separate from the company and until they reach age 65. In order to be eligible to receive the additional retirement benefit, they must vest in their pension benefit, which requires five years of service, and their pension must be limited by the Internal Revenue Code. Mr. Harp has an additional qualification in that he must remain employed until age 60 in order to receive this additional retirement benefit. A death benefit is provided if SISP participants die before their supplemental retirement benefits commence or if they elect to receive death benefits in lieu of all or a part of their supplemental retirement benefits. We discuss the other terms of the SISP later in the proxy statement. In November 2006, we amended the SISP to give the compensation committee the responsibility of selecting participants and establishing levels of participation. The committee's selections are based on recommendations from the chief executive officer. Previously, the chief executive officer selected participants in the SISP and their level of participation. Participation, as well as the level of participation, was solely at the discretion of the chief executive officer and was intended to reward those who made significant contributions to our success and profitability. In November 2005, certain named executive officers received upgrades to their SISP levels that became effective on January 1,(1) Shares are adjusted for the 3-for-2 stock split effective July 26, 2006. 2006. The upgrades, along with the chief executive officer's rationale for the upgrades, are summarized in the following table: Pre January 1, 2006
Annual SISP Benefits Post January 1, 2006
Annual SISP Benefits Name Survivors Retirement Survivors Retirement Rationale for upgrade Martin A. White(1) $ 1,025,040 $ 512,520 $ 1,025,040 $ 512,520 — Terry D. Hildestad $ 386,640 $ 193,320 $ 548,400 $ 274,200 Assumption of additional duties of president and chief operating officer William E. Schneider $ 251,400 $ 125,700 $ 386,640 $ 193,320 Assumption of additional duties of president and chief executive officer, Knife River Corporation Warren L. Robinson $ 386,640 $ 193,320 $ 468,600 $ 234,300 Recognition of past performance and contribution to our success Vernon A. Raile $ 175,200 $ 87,600 $ 291,480 $ 145,750 Assumption of additional duties of executive vice president, treasurer and chief financial officer John K. Castleberry $ 386,640 $ 193,320 $ 468,600 $ 234,300 Recognition of past performance and contribution to our success. John G. Harp $ 219,000 $ 109,500 $ 291,480 $ 145,750 Recognition of past performance and contribution to our success. (1)Mr. White did not receive an upgrade to his SISP level. In 2003, we considered increasing the retirement benefits provided under the SISP, and we engaged Towers Perrin to compare the retirement benefits provided under the SISP to similar plans provided by companies in our performance graph peer group. Towers Perrin's analysis showed that the retirement benefits provided by the SISP were higher, as a percentage of final annual compensation, than supplemental retirement benefits provided by most of the companies in the performance graph peer group, assuming final annual compensation of $200,000, $500,000 or $1,000,000 and length of service of 15, 20, 25 or 30 years. The extent to which the benefits under the SISP exceeded benefits provided by the other companies depended on the level of final annual compensation and years of service assumed. Based on Towers Perrin's findings, we determined that the SISP benefits should not be increased; however, because of the SISP's importance to our success in recruitment and retention of exceptional executive talent, the SISP benefit levels were maintained. To encourage Mr. Harp to remain with the company through 2007, on November 16, 2006, upon recommendation of our chief executive officer and the compensation committee, our board of directors approved an additional retirement benefit for Mr. Harp. The benefit provides for Mr. Harp to receive payments that represent the equivalent of an additional three years of service under the pension plan and the SISP if he does not resign or retire before January 2, 2008 and if he has acceptable successors in place prior to his departure. The additional three years of service recognize Mr. Harp's previousemployment with a subsidiary of the company. To calculate the additional retirement benefit, we assumed Mr. Harp had acceptable successors in place by January 2, 2008, and he resigned on that date. Under this assumption the equivalent of adding three years of service for pension purposes would equate to $1,351 per month for the remainder of his life, and he would begin receiving the $1,351 per month on August 1, 2008. We further assumed his life expectancy on August 1, 2008 to be 25 years, or 300 months. Therefore, total payments for the equivalent of an additional three years of service under the pension plan would be $405,252. For SISP, we used the same assumptions of having acceptable successors in place by January 2, 2008 and resigning on that date. In this case the equivalent of the additional three years of service under the SISP would be $4,858 per month, which Mr. Harp would begin receiving at age 65. Under the SISP, payments last for 15 years or 180 months; therefore the total payments to Mr. Harp would be $874,440.Post-Termination Compensation and Benefits We have entered into change of control employment agreements with each of our Section 16 officers, including our named executive officers. We believe it is important to provide an inducement for our executive officers to continue working for us during any change of control transition periods and to provide severance benefits if employment is terminated in connection with a change of control. If a change of control should occur, each agreement provides for a three-year employment period from the date of the change of control. During the employment period, the executive officer receives guaranteed minimum levels of compensation and benefits and severance benefits. In addition if the company or a successor terminates the executive officer's employment without cause or if the executive officer resigns for good reason, in either case, during the employment period or prior to the employment period if the termination is deemed to be related to the change of control, the executive officer is entitled to receive three times base salary and bonus as well as other amounts. The change of control employment agreements define "change of control" to include:•an individual, entity or group acquiring 20% or more of our voting securities•a turnover in a majority of our board of directors without the approval of a majority of the directors who were members of the board as of the agreement date or whose election was approved by such board members•consummation of a merger or consolidation, unless our stockholders immediately prior to the merger beneficially own more than 60% of the outstanding shares and voting power of the resulting corporation after the merger or•the stockholders approving liquidation or dissolution of the company. Having the actual consummation of a merger or similar transaction rather than the stockholder approval date is a conservative trigger and prevents payouts from being made prematurely, in the event consummation were not to occur. The agreements contain what are commonly referred to as "13th month triggers," which provide that a resignation for good reason includes resignation for any reason during the 30 day period beginning on the first anniversary of the change of control. The compensation committee believes that providing severance benefits for terminations without cause or for good reason limits the provision of severance benefits to situations where an executive officer's employment is terminated due to the change of control and through no fault of the executive. The compensation committee believes the 13th month trigger encourages executive officers to remain with the company or a successor during the critical year-long transition period following a transaction, which is beneficial to the company and its stockholders, and protects executive officers who choose to so continue employment. The agreements also provide what is commonly referred to as a modified tax gross-up. This provides for an additional payment to make an executive whole for federal excise taxes on excess parachute payments, unless the excess parachute payments are not more than 110% of the safe harbor amount. In that case, the payments to the executive would be reduced to the safe harbor amount. The board of directors and the compensation committee reviewed the change of control agreements in 2006. We compared the terms of our change of control agreements to those of certain members of our performance graph peer group and to the Frederic W. Cook & Co., Inc., 2005 Change-in-Control Report, Prevalence and Design of Executive Change-in-Control Arrangements at Each of the Top 50 NYSE and NASDAQ Companies. The compensation committee determined that the terms of the agreement were consistent with current practice and in the best interests of the stockholders because the agreement provides an incentive for executives to remain employed through any change of control. In addition to these agreements, the terms of the Long-Term Performance-Based Incentive Plan call for accelerated vesting of awards previously granted but not yet vested at the time of a change of control and payment of performance awards. In the case of any termination of employment, the compensation committee may also consider providing severance benefits on a case-by-case basis. The compensation committee adopted a checklist of factors in February 2005 to consider when determining whether any such severance benefits will be made upon termination.analysi$Analysi$: Comparison of Pay for Performance Ratiosofficers'officers’ pay for performance ratios to the pay for performance ratios of the named executive officers in the performance graph peer group. This analysis looks at the relationship between our compensation levels and our average annual total stockholder return in comparison to the peer group over a five-year period. All data used in the analysis, including the valuation of long-term incentives and calculation of stockholder return, were compiled by Equilar, Inc., an independent service provider, which uses each company'scompany’s annual filings as a basis of theirits data collection.comparingdividing what we paid our named executive officers for the years 20012004 through 2005 to2008 by our average annual total stockholder return for the same five-year period.period to yield our pay ratio. Our pay ratio was then compared to the pay ratio of the companies in the performance graph peer group, which was calculated by dividing total direct compensation for all the proxy group executives by the sum of each company'scompany’s average annual total stockholder return for the same five-year period. The results are shown in the following chart. MDU Resources Group, Inc. Performance Graph Peer Group Dollars of Total Direct Compensation(1) per point of Total Stockholder Return $ 3,084,702 $ 5,777,577 5,489,386 5,390,223 (1) Total direct compensation is the sum of annual base salaries, annual incentives, the value of long-term incentives at grant and all other compensation as reported in the proxy statements. For 2006, 2007 and 2008, total direct compensation also includes the change in pension values and nonqualified deferred compensation earnings as reported in the proxy statements. (1)Total direct compensation is the sum of annual base salaries, annual incentives, the value of long-term incentives at grant and other compensation as reported in the proxy statements.significantly lessslightly more than what the peer group companies paid their named executive officers for comparable levels of stockholder return over the five-year period. Specifically, as indicated in the chart, the data shows that we paid our named executivesexecutive officers approximately $2.7 million less$99,000 more per point of stockholder return than our performance graph peer group. We have been conducting our PEER4 Analysi$ since 2004.• • an additional retirement benefit to offset the Internal Revenue Code limitations placed on benefits payable under our qualified defined benefit pension plans. The company amended the additional retirement benefit to no longer allow new participants and to cease benefit accruals for existing participants after December 31, 2009. If eligible, the participants receive this retirement benefit after they separate from the company and until they reach age 65. In order to be eligible to receive the additional retirement benefit, participants must vest in their pension benefit, which requires five years of service, and their pension must be limited by the Internal Revenue Code. Mr. Harp has an additional qualification in that he must remain employed until age 60 in order to receive this additional retirement benefit. believes this comparison helps demonstratefor participants except himself. The chief executive officer considers, among other things, the participant’s salary in relation to the salary ranges that correspond with the SISP benefit levels, the participant’s performance, the performance of the applicable business unit or the company, and the cost associated with the benefit level increase.stockholders receive good value for ournamed executive compensation expense. January 1, 2009 December 31, 2009 Name Survivors
($) Terry D. Hildestad 1,025,040 512,520 1,025,040 512,520 Vernon A. Raile 548,400 274,200 548,400 274,200 John G. Harp 468,600 234,300 548,400 274,200 William E. Schneider 468,600 234,300 548,400 274,200 Steven L. Bietz 328,080 164,040 386,640 193,320 We in November 2005 whereby the compensation committee may seek repayment of annual and long-term incentives paid to executives if accounting restatements occur within three years after the payment of incentives under the annual and long-term plans. Under our clawback policy, the compensation committee may require employees to forfeit awards and may rescind vesting, or the acceleration of vesting, of an award.$1,000,000$1 million are structured to be deductible for purposes of Section 162(m) of the Internal Revenue Code, but we may pay compensation to an executive officer that is not deductible. Approximately $120,000All annual or long-term incentive compensation paid to Mr. Harpour named executive officers for 2009 satisfied the requirements for deductibility.2006 wasSection 280G of the Internal Revenue Code. The potential impact of the Section 4999 excise tax is addressed with the modified tax payment provisions in the change of control employment agreements, which are described earlier in this compensation discussion and analysis and later in the proxy statement under the heading “Potential Payments upon Termination or Change of Control.” We do not deductible for purposesconsider the potential impact of Section 162(m).officers'officers’ holdings as of December 31, 2006: Name Guideline multiple
of base salary Actual holdings
as a multiple
of base salary Number of years
at guideline multipleMartin A. White(1) — — — Terry D. Hildestad 4 X 5.27 1.67 William E. Schneider 3 X 3.67 4.00 Warren L. Robinson(1) — — — Vernon A. Raile 3 X 3.09 1.00 John K. Castleberry 3 X 1.40 4.00 John G. Harp 3 X 8.31 2.25 (1)Retired.Name Terry D. Hildestad 4X 5.79 4.67 Vernon A. Raile 3X 2.96 4.00 John G. Harp 3X 4.06 5.25 William E. Schneider 3X 5.43 8.00 Steven L. Bietz 3X 3.95 7.33 executive'sexecutive’s stock ownership in determining compensation. The committee, however, did not do so with respect to 20062009 compensation.Summary Compensation Table for 2006 Name and
Principal Position
(a) Year
(b) Salary
($)
(c) Bonus
($)
(d) Stock
Awards
($)
(e)(1) Option
Awards
($)
(f)(1) Non-Equity
Incentive Plan
Compensation
($)
(g) Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($)
(h)(2) All Other
Compensation
($)
(i) Total
($)
(j)Terry D. Hildestad
President and CEO(3) 2006 562,500 — 376,394 25,084 1,125,000 636,071 6,876 2,731,925 Martin A. White
Former Chairman and CEO(4) 2006 468,750 — 218,206 (5) — 1,000,000 161,547 25,110 (6) 1,873,613 Vernon A. Raile
Executive Vice President, Treasurer and CFO 2006 318,750 — 161,690 — 318,750 549,118 6,876 1,355,184 Warren L. Robinson
Former Executive Vice President and CFO(7) 2006 53,125 — 93,142 (8) — — 423,656 1,001,685 (9) 1,571,608 William E. Schneider
President and CEO of Knife River Corporation 2006 392,000 — 248,217 20,729 392,000 575,325 6,876 1,635,147 John K. Castleberry
Executive Vice President—
Administration(10) 2006 311,667 — 323,641 — 299,212 43,845 6,876 985,241 John G. Harp
President and CEO of MDU Construction Services Group, Inc. 2006 310,000 — 150,566 — 810,000 (11) 772,200 (12) 31,323 (13) 2,074,089 (1)Amounts in these columns represent the dollar amount recognized for financial statement reporting purposes for the 2006 fiscal year for restricted stock awards, performance share awards and stock option awards granted in 2006 and prior years. These amounts reflect our accounting expense for these awards and do not correspond to the actual value that will be recognized by the named executive officers. Assumptions used to determine the amounts in these columns are the same as used in the valuation of compensation expense for our audited financial statements, except for the effect of estimated forfeitures. Statement of Financial Accounting Standards No. 123 (revised), "Share-Based Payment (revised 2004)" requires us to estimate forfeitures when awards are granted and reduce estimated compensation expense accordingly. These columns were prepared assuming none of the awards will be forfeited. However, for both these columns and our audited financial statements, compensation expense is adjusted for actual forfeitures. The grant date fair value of restricted stock awards was based on the market price of our stock on the grant date. The grant date fair value for the performance shares granted in 2006 was determined by Monte Carlo simulation using a blended volatility term structure in the range of 17.65% to 18.79% comprised of 50 percent historical volatility and 50 percent implied volatility and a risk-free interest rate term structure in the range of 4.66% to 4.79% based on U.S. Treasury security rates in effect as of the grant date. In addition, the mean overall simulation paths of the discounted dividends expected to be earned in the performance period used in the valuation was $1.37 per target share. The grant date fair value for the performance share awards granted in 2004 and 2005 was equal to the market value of our common stock on the grant date. The fair value of stock options was estimated on the grant date using the Black-Scholes option-pricing model. The fair value of the options granted and the underlying assumptions were as follows:FairSummary Compensation Table for 2009 2007 625,000 — 779,293 — 1,250,000 1,362,413 7,026 4,023,732 2007 350,700 — 295,882 — 350,700 555,248 7,026 1,559,556 2007 341,000 — 239,763 — 341,000 47,334(6) 23,080(7) 992,177 2007 422,000 — 356,052 — 206,780 450,347 7,026 1,442,205 (1) Amounts in this column represent the aggregate grant date fair value of options at grant date$3.22Risk-free interest rate5.18%Expected price volatility25.94%Expected dividend yield3.53%Expected lifethe performance share awards calculated in years7Dateaccordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 – Share-Based Payment. Amounts for 2008 and 2007 have been recalculated to comply with the new requirements. This column was prepared assuming none of GrantFebruary 14, 2001the awards will be forfeited. The amounts were calculated using a Monte Carlo simulation, as described in Note 13 of our audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2009. For additional information about these stock awards and option awards, refer to Note 13 of our audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2006.(2)Amounts shown represent the change in the actuarial present value of the named executive officers' accumulated benefit under the pension plan and the Supplemental Income Security Plan (SISP) from December 31, 2005 to December 31, 2006, collectively referred to as "accumulated pension change," plus above market earnings on deferred annual incentives. The specific amounts are:(2) Amounts shown represent the change in the actuarial present value for years ended December 31, 2007, 2008, and 2009 for the named executive officers’ accumulated benefits under the pension plan, excess SISP, and SISP and, for Mr. Harp, the additional retirement benefit, collectively referred to as the “accumulated pension change,” plus above market earnings on deferred annual incentives, if any. The amounts shown are based on accumulated pension change and above market earnings as of December 31, 2007, 2008, and 2009, as follows: Accumulated
Pension Change ($) Above Market
Earnings ($)Mr. Hildestad 620,152 15,919 Mr. White 161,547 — Mr. Raile 522,057 27,061 Mr. Robinson 410,296 13,360 Mr. Schneider 559,229 16,096 Mr. Castleberry 43,845 — Name Terry D. Hildestad 1,336,815 883,351 806,554 25,598 15,590 18,765 Vernon A. Raile 508,987 469,755 661,243 46,261 28,455 33,934 John G. Harp 38,498 331,558 743,334 — — — 8,836 7,216 18,336 — — — William E. Schneider 411,123 155,816 696,572 39,224 24,985 30,074 Steven L. Bietz — — 475,985 — — — 12 regarding Mr. Harp.(3)Elected president and chief executive officer effective August 17, 2006.(4)Retired effective August 17, 2006.(5)Mr. White forfeited 14,850 shares of restricted stock and 23,762 performance shares upon his retirement.(6)Includes a company contribution to Mr. White's 401(k) account, a tax gross-up for airplane travel cost of $1,978, his spouse's personal travel on commercial aircraft, payment of a life insurance premium, an additional payment for Mr. White's long-term disability insurance and the aggregate incremental cost of Mr. White's personal travel on our aircraft.(7)Resigned as Executive Vice President and CFO effective January 3, 2006 and as an employee effective February 17, 2006.(8)Mr. Robinson forfeited 3,712 shares of restricted stock and 11,686 performance shares upon his retirement.(9)Includes a $1,000,000 severance payment in connection with his retirement and a company contribution to Mr. Robinson's 401(k) account.(10)Mr. Castleberry was president and chief executive officer of WBI Holdings, Inc. until March 3, 2006, when he became executive vice president—administration of MDU Resources Group, Inc.(11)Includes one-time incentive payment of $500,000 in addition to his executive incentive compensation plan payment.(12)Comprised of:
6.Accumulated Pension Change — $ 257,377 Above market interest — — Present value of additional years of service for pension plan — $ 197,550 Present value of additional years of service for SISP — $ 317,273 In addition to accumulated pension under the pension plan and SISP and incentive deferral earnings on deferred annual incentives, this amount is the present value of the equivalent of additional years of service credit for purposes of Mr. Harp's pension and SISP. In November 2006, the compensation committee approved Mr. Harp receiving the equivalent of an additional three years of service credit for purposes of his pension and SISP if he remains an employee of the company through January 2, 2008 and has acceptable successors in place by such time. The December 31, 2006 present value of the equivalent of the additional three years of vesting for pension purposes was calculated by assuming Mr. Harp meets the eligibility conditions for additional credited service and discounting 300 anticipated monthly payments of $1,351 per month, starting on August 1, 2008 and ending 300 months later, his assumed mortality under GAM 94, by a discount rate of 5.75%. The December 31, 2006 present value of the equivalent of the additional three years of vesting for SISP purposes was calculated by assuming Mr. Harp meets the eligibility conditions for additional credited service and discounting 180 monthly payments of $4,858 per month, beginning at age 65, back to December 31, 2006, using a discount rate of 5.75%. Both the $197,550 and the $317, 273 will be amortized throughout 2007 and reflected in our financial statements for that year.(13)Includes a company contribution to Mr. Harp's 401(k) account, payment of a life insurance premium, an additional premium for Mr. Harp's long-term disability insurance and Mr. Harp's office and automobile allowance.(3) Includes company contributions to the 401(k) account, payment of a life insurance premium, and matching contributions to charitable organizations. (4) Includes one-time incentive payment of $[•] in addition to his annual incentive compensation. (5) Includes one-time incentive payment of $200,000 in addition to his executive incentive compensation plan payment. (6) In addition to the change in the actuarial present value of Mr. Harp’s accumulated benefit under the pension plan, excess SISP, and SISP, this amount also includes the following amounts attributable to Mr. Harp’s additional retirement benefit: 2007 2008 2009 Change in present value of additional years of service for pension plan $ 6,033 $ 3,570 $ 13,077 Change in present value of additional years of service for excess SISP 2,803 3,646 5,259 Change in present value of additional years of service for SISP — — — Mr. Harp’s additional retirement benefit is described in the narrative that follows the Pension Benefits for 2009 table. The additional retirement benefit provides Mr. Harp with additional retirement benefits equal to the additional benefit he would earn under the pension plan, excess SISP, and the SISP if he had three additional years of service. The amounts in the table above reflect the change in present value of this additional benefit in 2007, 2008, and 2009. The additional retirement benefit was determined by calculating the actuarial present values of the accumulated benefits under the pension plan, excess SISP, and SISP, with and without the three additional years of service, using the same assumptions used to determine the amounts disclosed in the Pension Benefits for 2009 table. Because Mr. Harp would be fully vested in his SISP benefit if he retired at age 65, the assumed retirement age of these calculations, the additional years of service provided by the additional retirement agreement would not increase that benefit. If Mr. Harp retires before becoming 100% vested in his SISP benefit, his SISP benefit would be less than the amount shown in the Pension Benefits for 2009 table, but the payments he would receive under the additional retirement benefit arrangement would increase, as would the amounts reflected in the table above and in the Summary Compensation Table. (7) Includes a company contribution to Mr. Harp’s 401(k) account, a matching contribution to a charity, payment of a life insurance premium, an additional premium for Mr. Harp’s long-term disability insurance, and Mr. Harp’s office and automobile allowance. Grants of Plan-Based Awards in 2006 Estimated Future
Payouts Under Non-Equity
Incentive Plan Awards Estimated Future
Payouts Under Equity
Incentive Plan Awards Name
(a) Grant
Date
(b) Threshold
($)
(c) Target
($)
(d) Maximum
($)
(e) Threshold
(#)
(f) Target
(#)
(g) Maximum
(#)
(h) All Other
Stock
Awards:
Number of
Shares of
Stock or
Units (#)
(i) All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
(j) Exercise
or Base
Price of
Option
Awards
($/Sh)
(k) Grant
Date
Fair
Value of
Stock and
Option
Awards
($)
(l)Terry D. Hildestad 2/16/06(1) 82,031 328,125 656,250 — — — — — — — 2/16/06(2) — — — 2,388 23,883 47,766 — — — 602,329 8/16/06(1) 58,594 234,375 468,750 — — — — — — — Martin A. White 2/16/06(3) 187,500 750,000 1,500,000 — — — — — — — Vernon A. Raile 2/16/06(4) 39,844 159,375 318,750 — — — — — — — 2/16/06(2) — — — 1,243 12,429 24,858 — — — 313,459 Warren L. Robinson — — — — — — — — — — — William E. Schneider 2/16/06(5) 49,000 196,000 392,000 — — — — — — — 2/16/06(2) — — — 1,529 15,285 30,570 — — — 385,488 John K. Castleberry 2/16/06(6) 7,708 30,833 61,667 — — — — — — — 3/04/06(7) 31,250 125,000 250,000 — — — — — — — 2/16/06(2) — — — 975 9,748 19,496 — — — 245,845 John G. Harp 2/16/06(8) 38,750 155,000 310,000 — — — — — — — 2/16/06(2) — — — 1,007 10,072 20,144 — — — 254,016 (1)Annual incentive for 2006 granted pursuant to the Long-Term Performance-Based Incentive Plan. Mr. Hildestad's grants are prorated to reflect his 7.5 months as COO and his 4.5 months as CEO.Grants of Plan-Based Awards in 2009 Terry D. Hildestad 2/12/09(1) 187,500 750,000 1,500,000 — — — — — — 2/12/09(2) — — — 5,482 54,824 109,648 — — — 1,117,861 Vernon A. Raile 2/12/09(1) 73,125 292,500 585,000 — — — — — — 2/12/09(2) — — — 1,973 19,736 39,472 — — — 402,417 John G. Harp 2/12/09(1) 73,125 292,500 585,000 — — — — — — 2/12/09(2) — — — 1,973 19,736 39,472 — — — 402,417 2/12/09(3) 100,000 200,000 William E. Schneider 2/12/09(1) 72,703 290,810 581,620 — — — — — — 2/12/09(2) — — — 1,962 19,622 39,244 — — — 400,093 Steven L. Bietz 2/12/09(4) 56,875 227,500 455,000 — — — — — — 2/12/09(2) — — — 1,535 15,350 30,700 — — — 312,987 (2)Performance shares for the 2006-2008 performance period(1) Annual incentive for 2009 granted pursuant to the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan. (2) Performance shares for the 2009-2011 performance period granted pursuant to the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan. (3)Annual incentive for 2006 granted pursuant to the Long-Term Performance-Based Incentive Plan.(3) Mr. Harp’s additional 2009 incentive opportunity. (4)Annual incentive for 2006 granted pursuant to the MDU Resources Group, Inc. Executive Incentive Compensation Plan.(5)Annual incentive for 2006 granted pursuant to the Knife River Corporation Executive Incentive Compensation Plan.(6)Annual incentive for 2006 granted pursuant to the WBI Holdings, Inc. Executive Incentive Compensation Plan. Mr. Castleberry's awards are prorated to reflect his two months as CEO of WBI Holdings and his ten months as Executive Vice President—Administration of MDU Resources Group, Inc.(7)Annual incentive for 2006 granted pursuant to the MDU Resources Group, Inc. Executive Incentive Compensation Plan. Mr. Castleberry's awards are prorated to reflect his two months as CEO of WBI Holdings and his ten months as Executive Vice President—Administration of MDU Resources Group, Inc.(8)Annual incentive for 2006 granted pursuant to the MDU Construction Services Group, Inc. Executive Incentive Compensation Plan.(4) Annual incentive for 2009 granted pursuant to the WBI Holdings Inc. Executive Incentive Compensation Plan. 14, 2006,11, 2009, the compensation committee recommended 2006the 2009 annual incentive award opportunities for our named executive officers, and the board approved these opportunities at its16, 2006.12, 2009. These award opportunities are reflected in the Grants of Plan-Based Awards table at grant on February 16, 200612, 2009 in columns (c), (d), and (e) and in the Summary Compensation Table as earned with respect to 20062009 in column (g).uponon a percent of the executive'sexecutive’s base salary. Actual payment may range from zero to 200% of the target based upon achievement of corporate goals. Participants who retire, die or become disabled during the year remainaward. Subject toannual incentive award under the Long-Term Performance-Based Incentive Plan, Messrs. Hildestad, Raile, Schneider, and Harp must have remained employed by the company through December 31, 2009, unless the compensation committee's discretion, executives who terminate employment for other reasons are not eligible for an award.committee determines otherwise. The committee has full discretion to determine the extent to which goals have been achieved, the payment level, whether any final payment will be made, and whether to adjust awards downward.White, Hildestad Robinson and Raile, and for Mr. Castleberry, as executive vice president—administration, the performance measures for annual incentive awards are our annual return on invested capital achieved compared to target and our annual earnings per share achieved compared to target. For Messrs. Schneider, and Harp, and for Mr. Castleberry, as president and chief executive officer of WBI Holdings, Inc.,Bietz, the performance measures for annual incentive awards are their respective business unit'sunit’s annual return on invested capital achieved compared to target and their respective business unit'sunit’s allocated earnings per share achieved compared to target. DuringIn 2009, Mr. Castleberry's tenure as president and chief executive officer ofBietz had five individual goals relating to WBI Holdings Inc., the’s safety record ofresults, and each goal that business unit also was a performance measure for Mr. Castleberry.2006,2009, the compensation committee weighted the goals for annual return on invested capital compared to planned results and allocated earnings per share compared to planned results each at 50%.aggregate amount ofafter-tax annual incentive compensation we will pay above the target amount to all our executive officers to 20 percent20% of after tax earnings in excess of planned earnings. The 20 percentWe calculate the earnings in excess of planned earnings without regard to the after-tax annual incentive amounts above target. We measure the 20% limitation is measured at the major business unit level for business unit and operating company executives, which include Messrs. Harp, Schneider, and Bietz, and at the corporate level for corporate executives.2006 earnings per share
results as a % of 2006 plan Corresponding
payment of earnings
per share annual
incentive target less than 85% 0 % Less than 85% 0% 85% 25 % 25% 90% 50 % 50% 95% 75 % 75% 100% 100 % 100% 103% 120 % 120% 106% 140 % 140% 109% 160 % 160% 112% 180 % 180% 115% or more 200 % 115% 200%
2006 return on invested
capital results as a % of 2006 plan
Corresponding
payment of
return on invested
capital annual
incentive target
less than 85% 0 % Less than 85% 0% 85% 25 % 25% 90% 50 % 50% 95% 75 % 75% 100% 100 % 100% 103% 120 % 120% 106% 140 % 140% 109% 160 % 160% 112% 180 % 180% 115% or more 200 % 115% 200% compensation discussionCompensation Discussion and analysis.Mr. Harpthehis 2009 annual incentive award opportunity under our Long-Term Performance-Based Incentive Plan, Mr. Harp earned under our executive incentive compensation plan, he also earnedhad an opportunity to earn an additional $500,000 one-time incentive, payment. When Mr. Harpwhich was hired in September 2004structured as follows:Construction Services Group, Inc.’s 2009 Return on Invested Capital (ROIC) as compared to Construction Services Group, Inc.’s 2009 Weighted Average Cost of Capital (WACC) Additional Incentive Amount 2009 ROIC is less than 100 basis points above 2009 WACC $0 2009 ROIC is 100 to 199 basis points above 2009 WACC $100,000 2009 ROIC is 200 basis points or more above 2009 WACC $200,000 effectuate a turn-around of MDU Construction Services Group, Inc., he was offered incentive opportunities of (i) $250,000 if MDU Construction Services Group, Inc. reported annual net income of $12.5 million in 2007 or soonerpayment, please refer to the Compensation Discussion and in addition (ii) $500,000 if MDU Construction Services Group, Inc. reported annual net income of $18.6 million or more in fiscal year 2008 or sooner. The first goal was met in 2005, and in fiscal year 2006 MDU Construction Services Group, Inc. met the second goal.14, 2006,11, 2009, the compensation committee recommended long-term incentive grants to the named executive officers in the form of performance shares, and the board approved these grants at its meeting on February 16, 2006.12, 2009. These grants are reflected in columns (f), (g), (h), and (l) of the Grants of Plan-Based Awards table.20092012, depending on our 2006-20082009-2011 total stockholder return compared to the total three-year stockholder returns of companies in our performance graph peer group. The payout percentage is determined as follows:The Company'sCompany’s Percentile RankFeb. 16, 2006 200%75th 150200%%50 75th 100%40th 10150%%100% 10% 0% 0% 20092012 at the same time as the performance awards are paid. Warren L. Robinson was our executive vice president and chief financial officer until January 3, 2006 and an employee until he retired February 17, 2006. Because of his retirement, Mr. Robinson received no base salary increase or incentive compensation for 2006. We entered into an agreement with Warren L. Robinson on November 23, 2005 in connection with his retirement as executive vice president and chief financial officer. Mr. Robinson received a severance payment of $1,000,000.2006.2009. Name Salary
($) Total
Compensation
($) Salary as % of
Total Compensation Terry D. Hildestad 562,500 2,731,925 20.59 % Martin A. White 468,750 1,873,613 25.02 % Vernon A. Raile 318,750 1,355,184 23.52 % Warren L. Robinson 53,125 1,571,608 3.38 % William E. Schneider 392,000 1,635,147 23.97 % John K. Castleberry 311,667 985,241 31.63 % John G. Harp 310,000 2,074,089 14.94 % Name Terry D. Hildestad 750,000 [•] [•] Vernon A. Raile 450,000 [•] [•] John G. Harp 450,000 [•] [•] William E. Schneider 447,400 [•] [•] Steven L. Bietz 350,000 [•] [•] Outstanding Equity Awards at Fiscal Year-End 2009 Option Awards Stock Awards Terry D. Hildestad — — — — — 3,712 87,603 181,830 4,291,188 Vernon A. Raile — — — — — 1,114 26,290 65,438 1,544,337 John G. Harp — — — — — — — 63,055 1,488,098 William E. Schneider — — — — — 2,970 70,092 69,354 1,636,754 Steven L. Bietz — — — — — 558 13,169 51,545 1,216,462 (1) (2) These shares of restricted stock were granted in 2001 and vest automatically on February 15, 2010. Vesting of some or all shares may be accelerated upon change of control or if the total stockholder return equals or exceeds the 50th percentile of the performance graph peer group during the final three-year performance cycle 2007-2009. Non-preferential dividends are paid on these shares. Outstanding Equity Awards at Fiscal Year-End 2006 Option Awards Stock Awards Name
(a) Number of Securities Underlying Unexercised Options Exercisable
(#)
(b) Number of Securities Underlying Unexercised Options Unexercisable
(#)
(c)(1, 2) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)
(d) Option Exercise Price
($)
(e)(1) Option Expiration Date
(f) Number of Shares or Units of Stock That Have Not Vested
(#)
(g)(1, 3) Market Value of Shares or Units of Stock That Have Not Vested
($)
(h) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
(i)(4) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
(j)(5)Terry D. Hildestad — 68,995 — 13.2178 2/15/2011 3,712 95,176 62,650 1,606,346 Martin A. White — — — — — — — 104,702 2,684,559 Vernon A. Raile — — — — — 1,114 28,563 25,155 644,974 Warren L. Robinson — — — — — — — 27,081 694,357 William E. Schneider — 57,015 — 13.2178 2/15/2011 2,970 76,151 41,353 1,060,291 John K. Castleberry — — — — — 2,970 76,151 48,515 1,243,925 John G. Harp — — — — — — — 20,839 534,312 (1)Adjusted(3) Named Executive Officer Award Shares Terry D. Hildestad 2007 33,091 12/31/09 2008 39,091 12/31/10 2009 109,648 12/31/11 Vernon A. Raile 2007 12,564 12/31/09 2008 13,402 12/31/10 2009 39,472 12/31/11 John G. Harp 2007 10,181 12/31/09 2008 13,402 12/31/10 2009 39,472 12/31/11 William E. Schneider 2007 15,119 12/31/09 2008 14,991 12/31/10 2009 39,244 12/31/11 Steven L. Bietz 2007 10,354 12/31/09 2008 10,491 12/31/10 2009 30,700 12/31/11 3-for-2 stock split effective July 26, 2006.(2)These options were granted in 2001 and vest on February 15, 2010. Vesting of some or all options may be accelerated upon change of control or upon attainment of performance goals during three-year performance cycles: 2001-2003, 2004-2006 and 2007-2009. Dividend equivalents were granted with theoptions and may be earned from 0% to 200% at the end of the performance cycles to the extent options vest.(3)These shares of restricted stock were granted in 2001 and vest on February 15, 2010. Vesting of some or all shares may be accelerated upon change of control or if the total stockholder return equals or exceeds the 50th percentile of the performance graph peer group during three-year performance cycles: 2001-2003, 2004-2006 and 2007-2009. Non-preferential dividends2007 award are paid on these shares.(4)Consists of performance shares for the 2004-2006, 2005-2007 and 2006-2008 performance periods, shown at the target level (100%) based on 2006results for the 2007-2009 performance abovecycle at target.threshold2008 award are shown at the target level but below target.(5)Value(100%) based on the number of performance shares at target multiplied by $25.64, the year-end closing price.Option Exercises and Stock Vested during 2006 Option Awards Stock Awards Name
(a) Number of
Shares Acquired
on Exercise
(#)
(b) Value Realized
on Exercise
($)
(c) Number of
Shares Acquired
on Vesting
(#)
(d)(1,2) Value Realized
on Vesting
($)
(e)(3)Terry D. Hildestad — — 12,030 287,490 Martin A. White — — 30,508 732,968 Vernon A. Raile — — 5,105 121,475 Warren L. Robinson — — 10,995 263,582 William E. Schneider — — 9,243 220,658 John K. Castleberry — — 10,995 263,582 John G. Harp — — — — (1)Adjustedresults for the 3-for-2 stock split effective July 26, 2006.(2)Reflects (i)first two years of the 2008-2010 performance sharescycle at target.2003-2005 performance period that vested2009 award are shown at the maximum level (200%) based on February 16, 2006 and (ii) the remaining shares of accelerated restricted stock granted in 2000 that accelerated vested on February 16, 2006 based upon achievement of performance goalsresults for the secondfirst year of the 2009-2011 performance cycle 2003-2005.above target.(4) Value based on the number of performance shares reflected in column (i) multiplied by $23.60, the year-end closing price for 2009. Option Exercises and Stock Vested during 2009 (3)Reflects the value of performance shares and the dividend equivalents that were paid on the vested shares and the value of the accelerated restricted stock, based on our stock price of $23.10 (split adjusted) on February 16, 2006. Option Awards Stock Awards Terry D. Hildestad — — 19,584 397,426 Vernon A. Raile — — 10,192 206,830 John G. Harp — — 8,259 167,603 William E. Schneider — — 12,534 254,358 Steven L. Bietz — — 5,755 116,789 (2) Reflects performance shares for the 2006-2008 performance period that vested on February 12, 2009. (3) Reflects the value of performance shares based on our stock price of $18.61 on February 12, 2009, and the dividend equivalents that were paid on the vested shares. Pension Benefits for 2006Name
(a) Plan Name
(b) Number of
Years Credited
Service
(#)
(c) Present Value
of Accumulated
Benefit
($)
(d) Payments
During Last
Fiscal Year
($)
(e)Terry D. Hildestad Pension Plan 33 875,873 — SISP I(1) 24 1,274,008 — SISP II(2) 24 533,012 — SISP Excess 24 194,634 — Martin A. White Pension Plan 14 466,772 13,318 SISP I(1) 14 4,514,530 146,000 SISP II(2) 14 768,089 — SISP Excess 0 0 — Vernon A. Raile Pension Plan 27 767,583 — SISP I(1) 24 763,487 — SISP II(2) 24 506,725 — SISP Excess 24 3,388 — Warren L. Robinson Pension Plan 17 540,847 36,168 SISP I(1) 17 1,274,008 — SISP II(2) 17 270,065 — SISP Excess 17 119,538 32,245 William E. Schneider Pension Plan 13 461,550 — SISP I(1) 12 926,385 — SISP II(2) 12 498,346 — SISP Excess 12 32,591 — John K. Castleberry Pension Plan 25 504,348 — SISP I(1) 18 963,319 — SISP II(2) 18 204,205 — SISP Excess 18 135,396 — John G. Harp Pension Plan 2 48,474 — SISP I(1) 1 0 — SISP II(2) 1 812,144 — SISP Excess 1 1,763 — Harp Additional Retirement Benefit 3 514,823 — (1)Grandfathered under Section 409A.Pension Benefits for 2009 Terry D. Hildestad Pension Plan 35 1,369,893 — SISP I(1) 27 1,487,740 — SISP II(2) 27 2,456,479 — SISP Excess 27 842,854 — Vernon A. Raile Pension Plan 30 1,033,470 — SISP I(1) 27 891,572 — SISP II(2) 27 1,899,169 — SISP Excess 27 — — John G. Harp Pension Plan 5 172,100 — SISP I(1) 4 — — SISP II(2) 4 1,784,336 — SISP Excess 4 33,837 — Harp Additional Retirement Benefit 4 120,136 — William E. Schneider Pension Plan 16 667,138 — SISP I(1) 15 1,081,798 — SISP II(2) 15 1,278,020 — SISP Excess 15 128,798 — Steven L. Bietz Pension Plan 28 675,382 — SISP I(1) 15 458,686 — SISP II(2) 15 440,819 — SISP Excess 15 72,082 — (2)Not grandfathered under Section 409A.(1) Grandfathered under Section 409A. (2) Not grandfathered under Section 409A. infor the pension plan and excess SISP rows represent the actuarial present values of the executives'executives’ accumulated benefits accrued as of December 31, 2006,2009, calculated using a 5.75% discount rate, the 1994 Group Annuity Mortality Table for post-retirement mortality and no recognition of future salary increases or pre-retirement mortality. The assumed retirement ages for these benefits was age 60 for Messrs. Hildestad, CastleberryHarp and HarpBietz and age 62 for Mr. Schneider.20062009, was assumed for Mr.Messrs. Hildestad and Raile, who iswere age 62. For Messrs. White60 and Robinson, the amounts reflect the fact64 on that they are retired and receiving benefits.date. The amounts shown infor the SISP I and SISP II rows were determined using a 5.75% discount rate and assume benefits commenced at age 65. The assumptions used to calculate Mr. Harp'sHarp’s additional retirement benefit are described below.White, Raile, Robinson, Castleberry and Harp participate in the MDU Resources Group, Inc. Pension Plan for Non-Bargaining Unit Employees, which we refer to as our pension plan. Mr. Schneider participates in the Knife River Corporation Salaried Employees'Employees’ Pension Plan, which we refer to as the KR pension plan. Mr. Bietz participates in the Williston Basin Interstate Pipeline Company Pension Plan, which we refer to as the WBI pension plan. Pension benefits under our pension plan and the WBI pension plan are based uponon the participant'sparticipant’s average annual salary over the 60 consecutive month period in which the participant received the highest annual salary during the participant'sparticipant’s final 10 years of service. For this purpose, only a participant'sparticipant’s salary is considered; bonusesincentives and other forms of compensation are not included. Benefits are determined by multiplying (1) the participant'sparticipant’s years of credited service by (2) the sum of (a) the average annual salary up to the social security integration level times 1.1% and (b) the average annual salary over the social security integration level times 1.45%. The KR pension plan uses the same formula except that 1.2% and 1.6% are used instead of 1.1% and 1.45%. The maximumMr.Messrs. Hildestad and Raile is currentlywere eligible for unreduced retirement benefits under our pension plan. Mr. White, who retired in August 2006, is receiving unreduced retirement benefits.plan on December 31, 2009. Participants whose employment terminates between the ages of 55 and 60, with 5 years of service, in our pension plan or the WBI pension plan and between the ages of 55 and 62, with 5 years of service, in the KR pension plan are eligible for early retirement benefits. Early retirement benefits are determined by reducing the normal retirement benefit by .25%0.25% per month for each month before age 60 in our pension plan and the WBI pension plan and age 62 in the KR pension plan. If a participant'sparticipant’s employment terminates before age 55, the same reduction applies for each month the termination occurs before age 62, with the reduction capped at 21%. Messrs. Hildestad,Harp and Schneider and Robinson are currently eligible for early retirement benefits.survivorshipsurvivor benefit for spouses, unless participants choose otherwise. Participants who terminate employment before age 55 may elect to receive their benefits in a lump sum.2006,2009, the maximum annual benefit payable under the pension plans was $175,000$195,000 and the maximum amount of compensation that could be recognized when determining benefits was $220,000.nonqualifiednon-qualified retirement plan, which we refer to as the Supplemental Income Security Plan or SISP. Benefits under the SISP consist of:•a supplemental retirement benefit intended to supplement the retirement income provided under our qualified pension plans—we refer to this benefit as the regular SISP benefit•an excess retirement benefit relating to Internal Revenue Code limitations on retirement benefits provided under our qualified pension plans—we refer to this benefit as the excess SISP benefit and•death benefits—• • • death benefits - we refer to these benefits as the SISP death benefit. death benefit.• • • • freeze excess SISP benefit accruals. aone of two schedules attached to the SISP - the original schedule or the amended schedule. Our compensation committee, after receiving recommendations from our chief executive officer, determines the level at which participants are placed in the schedule.schedules. A participant'sparticipant’s placement is generally, but not always, determined by reference to the participant'sparticipant’s annual base salary.participant'sparticipant’s election, if the participant dies before the regular SISP benefit would commence, only the SISP death benefit is provided. If the participant elects to receive both a regular SISP benefit and a SISP death benefit, each of the benefits is reduced proportionately."Potential“Potential Payments Uponupon Termination or Change of Control." We” the SISP in 2005 to address changes in applicable tax laws resulting from the enactment of section 409A of the Internal Revenue Code. As amended, regularRegular SISP benefits that were vested as of December 31, 2004 and were thereby grandfathered under section 409A remain subject to SISP provisions then in effect. Weeffect, which we refer to these benefits as SISP I benefits. Regular SISP benefits that are subject to section 409A, which we refer to as SISP II benefits, are governed by amended provisions intended to comply with section 409A. Participants generally have more discretion with respect to the distributions of their SISP I benefits.Distribution ofThe SISP II benefits generallycommence when the participant attains age 65 or, if later, when the participant retires, subject to a six-month delay if the participant is deferred for six months andsubject to the provisions of section 409A of the Internal Revenue Code that require delayed commencement of these types of retirement benefits. The SISP II benefits are paid over 180 months or, if commencement of payments is delayed for six months, 173 months. If the commencement of benefits is delayed for six months, the first payment includes the payments that would have been paid during the six-month period. If the participant dies after the regular SISP benefits have begun but before receipt of all of the regular SISP benefits, the remaining payments are made to the participant'sparticipant’s designated beneficiary.benefits—ifI benefits. If this is elected, the participant retains the right to receive a monthly SISP death benefit if death occurs prior to the commencement of the regular SISP I benefit. Alternatively, participants can elect to receive both a regular SISP benefit and a SISP death benefit. A similar, one-time election may be made with respect to SISP II benefits, provided the election is made sufficiently in advance of the date SISP retirement benefits start.forms—forms - a life annuity, one hundred percent100% joint and survivor annuity, or a joint and two-thirds joint and survivor annuity, provided that the cost of providing these actuarial equivalent forms of benefits does not exceed the cost of providing the normal form of benefit. Additionally, the SISP's administratormay choose to pay the SISP I benefits in the form of an actuarial equivalent lump sum. Neither the election to receive an actuarial equivalent benefit nor the administrator'sadministrator’s right to pay the regular SISP benefit in the form of an actuarially equivalent lump sum are available with respect to SISP II benefits.•0% vesting for less than 3 years of participation•20% vesting for 3 years of participation•• • • • an additional 10% vesting for each additional year of participation up to 100% vesting for 10 years of participation. and•anin the SISP or the end of the regular vesting schedule described above. The additional 10%three-year vesting requirement for eachbenefit level increases is pro-rated for participants who are officers, attain age 65 and are required to retire, pursuant to the company’s bylaws, prior to the end of the additional vesting period as follows:participation upthe increase vests for participants required to 100%retire at least two years but less than three years after the increase is granted.for 10 years of participation.scheduleschedules as the regular SISP benefits.ourthe qualified pension planplans absent the limitations under the Internal Revenue Code and (2) the actual benefits payable to the participant under the qualified pension plan. Participants are only eligible for the excess SISP benefits if (1) the participant is fully vested under histhe qualified pension plan, (2) the participant'sparticipant’s employment terminates prior to age 65, and (3) benefits under the qualified pension plan are reduced due to limitations under the Internal Revenue Code on plan compensation. Effective January 1, 2005, participants who were not then vested in the excess SISP benefits were also required to remain actively employed by the company until age 60. In 2009, the plan was amended to limit eligibility of the excess SISP benefit to current SISP participants (1) who are already vested in the excess SISP benefit or (2) who will become vested in the excess SISP benefits if they remain employed with the company until age 60. The plan was further amended to freeze the excess SISP benefits to a maximum of the benefit level payable based on the participant’s years of service and compensation level as of December 31, 2009. With the exception of Mr. Harp, each of the named executive officers would be entitled to the excess SISP benefitsbenefit if they were to terminate employment prior to age 65. Mr. Harp must remain employed until age 60 to become entitled to his excess SISP benefit.participant'sparticipant’s employment terminates and continue up to age 65 or until the death of the participant, if prior to age 65. If a participant who dies prior to age 65 elected a joint and survivor benefit, the survivor'ssurvivor’s excess SISP benefits arebenefit is paid until the date the participant would have attained age 65. through 2007, on November 16, 2006, upon recommendation of our chief executive officer and the compensation committee, our board of directors approved an additional retirement benefit for Mr. Harp. The benefit provides for Mr. Harp to receive payments that represent the equivalent of an additional three years of service under theour pension plan, the excess SISP, and the SISP if he does not resign or retire before January 2, 2008 and if he has acceptable successors in place prior to his departure.SISP. The additional three years of service recognize Mr. Harp'sHarp’s previous employment with a subsidiary of the company. To calculate payments Mr. Harp could receive due to his additional retirement benefit, we applied the additional years of service to each of the retirement arrangements and assumed he remained employed until age 60, for purposes of calculating the additional benefit under the pension plan and excess SISP, and age 65, for purposes of calculating the additional benefit under the SISP II. Because Mr. Harp would be fully vested in the SISP II benefit if he retired at age 65, the additional years of service provided by the agreement would not increase his SISP II benefit. Consequently, the amount shown in the table does not include any additional benefit attributable to the SISP II. If Mr. Harp were to retire before achieving 10 years of service and becoming fully vested in his SISP II benefit, the additional years of service provided by the additional retirement benefit we assumed Mr. Harp had acceptable successors in place by January 2, 2008, and he resigned on that date. Under this assumption, adding three years of service for pension purposes would equate to $1,351 per month for the remainder ofincrease his life, and he would begin receiving the $1,351 per month on August 1, 2008. We further assumed his life expectancy on August 1, 2008 to be 25 years, or 300 months. Therefore, total payments for the equivalent of an additional three years of service under the pension plan would be $405,252. To calculate Mr. Harp's SISP benefits, we used the same assumptions of having acceptable successors in place by January 2, 2008 and resigning on that date. In this case the equivalent of the additional three years of servicevesting percentage under the SISP II and therefore would be $4,858 per month, which Mr. Harp would begin receiving at age 65. Under the SISP, payments last for 15 years or 180 months; therefore the total payments to Mr. Harp would be $874,440. The calculations to determine the presentvalues shownresult in the Pension Benefits for 2006 table are delineated in footnote 12an additional payment. For a description of the Summary Compensation Table."Potential“Potential Payments Uponupon Termination or Change of Control."Nonqualified Deferred Compensation for 2006Name
(a) Executive
Contributions in
Last FY
($)
(b)(1) Registrant
Contributions in
Last FY
($)
(c) Earnings in
Aggregate
Last FY
($)
(d) Aggregate
Withdrawals/
Distributions
($)
(e) Aggregate
Balance at
Last FYE
($)
(f)Terry D. Hildestad 20,597 — 49,367 — 664,805 Martin A. White — — — — — Vernon A. Raile 195,624 — 87,475 — 1,201,243 Warren L. Robinson — — 43,698 — 589,860 William E. Schneider 166,667 — 49,180 — 677,952 John K. Castleberry — — — — — John G. Harp — — — — — (1)Amounts reported for Mr. Hildestad were reflected in the Summary Compensation Table for 2005 but not in the Summary Compensation Table for 2006. Amounts reported in the Summary Compensation Table for 2006 in column (g) that our named executive officers have elected to defer are credited in 2007 and will be reflected in this table for 2007.Nonqualified Deferred Compensation for 2009 Terry D. Hildestad — — 52,314 — 835,932 Vernon A. Raile — — 94,556 — 1,510,791 John G. Harp — — — — — William E. Schneider — — 83,840 — 1,339,689(1) Steven L. Bietz — — — — — (1) Includes $392,000, which was reported in the Summary Compensation Table for 2006 in column (g). will accrue interest at a rate determined annually by the compensation committee. The committee has established the interest rate at prime plus one percent as reported on the last Friday in January of each year. The interest rate in effect for 2006, commencing2009 was 6.48% or the “Moody’s Rate,” which was defined by reference to the U.S. Long-Term Corporate Bond Yield Average for “A” rated companies. Effective January 27, 2006 was 8.25%.1, 2009, “Moody’s Rate” is the number that results from adding the daily Moody’s U.S. Long-Term Corporate Bond Yield Average for “A” rated companies as of the last business day of each month for the 12-month period ending October 31, 2008, and dividing by 12. The deferred amount will be paid in accordance with the participant'sparticipant’s election, following termination of employment or beginning in the fifth year following the year the award was granted. The amounts will be paid in accordance with the participant'sparticipant’s election in a lump sum or in monthly installments not to exceed 120 months. In the event of a change of control, all amounts become immediately payable.• • • • acquisition of our assets having a gross fair market value at least equal to 40% of the total gross fair market value of all of our assets. Potential Payments upon Termination or Change of Control Potential Payments upon Termination or Change of Controltables—Potential Payments upon Termination or Change of Control—tables show the payments and benefits our named executive officers would receive in connection with a variety of employment termination scenarios and upon a change of control. For the named executive officers other than Messrs. White and Robinson, theThe information assumes the terminations and the change of control occurred on December 31, 2006. For Messrs. White and Robinson, the information relates to their actual retirements on August 17, 2006 and February 17, 2006, respectively.2009. All of the payments and benefits described below would be provided by the company or its subsidiaries.do not include amounts such asexclude base salary, 2009 annual incentives, and stock awards the named executive officers earned due to employment through December 31, 2006 or2009, and compensation orand benefits provided under plans or arrangements 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, accrued vacation pay, continuation of health care benefits, and life insurance benefits. The tables also do not include the named executive officers'officers’ benefits under our nonqualified account balance deferred compensation plan.plans that are reported in the Nonqualified Deferred Compensation for 2009 table. See the Pension Benefits for 20062009 table and the Nonqualified Deferred Compensation for 20062009 table, and accompanying narratives, for a description of the named executive officers'officers’ accumulated benefits under our qualified defined benefit pension plans and our nonqualified account balance deferred compensation plan.executives,officers, the limit on base salary is $200,000. For other salaried employees, the limit is $100,000. For all salaried employees, disability payments continue until age 65 if disability occurs at or before age 60 and for 5 years if disability occurs between the ages of 60 and 65. Disability benefits are reduced for amounts paid as retirement benefits. The amounts in the tables 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. PresentThe present value of the disability benefits was determined using a discount rate of 5.75%. As the tables reflect, with the exceptionsexception of Messrs.Mr. Harp, and Schneider, the reduction for amounts paid as retirement benefits would eliminate the executives' disability benefits assuming a termination of employment on December 31, 2006.share basedshare-based awards granted under our Long-Term Performance-Based Incentive Plan vest and non-share basednon-share-based awards are paid in cash. All of the named executive officers' outstanding unvested stock options and all shares of restricted stock would vest in full upon a change of control. All performance share awards would vest at their target levels. For this purpose, the term change of control is defined as:•the public announcement that another entity will acquire 20% or more of our voting stock•commencement of a tender or exchange offer the consummation of which would result in the acquisition of 30% or more of our voting stock•the announcement of a transaction that would constitute a change in control under Item 6(e) of Schedule 14A under the Securities Exchange Act of 1934, as amended•a proposed change in a majority of our board of directors during any two consecutive years, unless the election or nomination of each new director was approved by a vote of at least two-thirds of the directors then still in office who were members of the board at the beginning of the period or•any other event deemed by a majority of the compensation committee of our board to constitute a change of control.• • • • stockholder approval of the company’s liquidation or dissolution. • • if the termination of employment occurs during the third year of the performance period, the executive receives the full amount of any performance shares earned. second yearparticipant’s employment terminates for any reason before the participant has reached age 55 and completed 10 years of service. Performance shares and related dividend equivalents for those participants whose employment is terminated after the performance period, the executive receives aparticipant has reached age 55 and completed 10 years of service will be prorated portion of any performance shares earned based on the number of months employed during the performance period. If a termination of employment occurs for a reason other than cause during the third year of the performance period, the executive receives the full amount of any performance shares earned. as described above.20062009 termination is assumed, the 2006-2008named executive officers’ 2009-2011 performance share awards would be forfeited, any amounts earned under the 2005-20072008-2010 performance share awards would be reduced by 12/36thsone-third, and any amounts earned under the 2004-20062007-2009 performance share awards would not be earned.reduced. The number of performance shares earned depends on actual performance through the full performance period. To illustrateAs actual performance for the potential2007-2009 performance share awards has been determined, the amounts for these awards in the event of a non-change of control termination were based on actual performance, which resulted in vesting that could occur under different employment termination scenarios, weof 100% of the target award. Amounts for the 2008-2010 performance share awards are also shown at target, based upon assumed target performance. No amounts are shown for the 2009-2011 performance share awards because such awards would be achieved.forfeited. Although vesting would only occur after completion of the performance period, the amounts shown in the tables were not reduced to reflect the present value of the performance shares that could vest. Dividend equivalents attributable to earned performance shares would also be paid. Dividend equivalents accrued through December 31, 20062009 are included in the amounts shown.2006. The value of the vesting of unvested stock options shown in the tables was determined by multiplying the number of unvested options that would vest upon the change of control by an amount equal to the excess of the closing price of our stock on December 31, 2006 over the exercise price of unvested options."change“change of control"control” as:•the acquisition by an individual, entity or group of 20% or more of our voting securities•a turnover in a majority of our board of directors without the approval of a majority of the members of the board who were members of the board as of the agreement date or whose election was approved by such board members•consummation of a merger or consolidation, unless our stockholders immediately prior to the merger beneficially own more than 60% of the outstanding shares and voting power of the resulting corporation after the merger or•stockholder approval of our liquidation or dissolution.• • • • stockholder approval of our liquidation or dissolution. •a base salary not less than twelve times the highest monthly salary paid within the preceding twelve months•annual bonuses* not less than the highest annual bonus for any of the three years before the change of control and• • • • • office and support staff, vacation, and expense reimbursement consistent with such benefits as they were provided before the change of control. *"Bonus" for purposes of the change of control employment agreements refers to annual incentive compensation.2006,2009, the guaranteed minimum level of base salary provided over the three-year employment period would not result in an increase in any of the named executive officers'officers’ base salaries, except for Mr. Castleberry. Mr. Castleberry would be entitled to a minimum base salary of $370,000, which is $70,000 more than his base salary on December 31, 2006.salaries. The minimum annual bonusincentive amounts Messrs. Hildestad, Raile, Harp, Schneider, Castleberry and HarpBietz would be entitled to over the three-year employment period would be $516,194, $187,200, $213,435, $360,750$[ • ], $[ • ], $[ • ], $[ • ], and $250,000,$[ • ], respectively. The agreements also provide that severance payments and benefits will be provided:•if the named executive officer's employment is terminated during the employment period, other than for cause or disability•if the named executive officer's employment is terminated prior to the change of control, if connected to the change of control, other than for cause or disability or•the named executive officer resigns for good reason, which includes for any reason during the 30-day period beginning on the first anniversary of the change of control. "Cause"• • the named executive officer resigns for good reason. officer'sofficer’s willful and continued failure to substantially perform his duties or willfully engaging in illegal conduct or gross misconduct materially injurious to the company. "Good reason"“Good reason” includes:•the diminution of the named executive officer's position, authority, duties or responsibilities•the reduction of the named executive officer's pay or benefits and•relocation or increased travel obligations.• • • our material breach of the agreement. •• accrued but unused vacation and accrued but unused vacation• • • • • a payment equal to any federal excise tax on excess parachute payments if the total parachute payments exceed 110% of the safe harbor amount for that tax. If this 110% threshold is not exceeded, the named executive officer’s payments and benefits would be reduced to avoid the tax. The named executive officers are not reimbursed for any taxes imposed on this tax reimbursement payment. deferred compensation•a lump sum payment equal to three times his (a) annual salary using the higher of the then current annual salary or twelve times the highest monthly salary paid within the twelve months before the change of control and (b) annual bonus using the highest annual bonus for any of the three years before the change of control or, if higher, the annual bonus for the most recently completed fiscal year•a pro-rated annual bonus for the year of termination•an amount equal to the excess of (a) the actuarial equivalent of the benefit under our qualified pension plan and nonqualified defined benefit retirement plans that the executive would receive if employment continued for an additional three years over (b) the actuarial equivalent of the actual benefit paid or payable under these plans•welfare benefit plan coverage for the executive and his family for three years and an additional three years of service for purposes of determining eligibility for retiree welfare benefits•outplacement benefits and•a modified tax gross-up. This is an additional payment to make the executive whole for any federal excise tax on excess parachute payments. The gross-up payment is not made if the total parachute payments are not more than 110% of the safe harbor amount for that tax. In that case, the executive'sseverance payments and benefits would be reduced to avoidreflects the tax.made.paid. The tables do not reflect any such severance benefits, as these benefits are made in the discretion of the committee on a case by casecase-by-case basis and it is not possible to estimate the severance benefits, if any, that would be made.paid. Executive Benefits and
Payments Upon
Termination or
Change of Control Voluntary
Termination Not for Cause
Termination For Cause
Termination Death Disability Not for Cause
or Good
Reason
Termination
(change of control) Change of
Control
(without
termination)Compensation: Base Salary $ 1,875,000 Short-term Incentive $ 4,500,000 2004-2006 Performance Shares $ 532,839 $ 532,839 $ 532,839 $ 532,839 $ 532,839 $ 532,839 2005-2007 Performance Shares $ 339,821 $ 339,821 $ 339,821 $ 339,821 $ 509,731 $ 509,731 2006-2008 Performance Shares $ 624,860 $ 624,860 Stock Options $ 959,417 $ 959,417 Restricted Stock $ 95,176 $ 95,176 Benefits and Perquisites: Incremental Pension Regular SISP(1) $ 1,807,020 $ 1,807,020 $ 1,807,020 $ 1,807,020 $ 1,807,020 Excess SISP $ 518,827 (2) $ 518,827 (2) $ 518,827 (2) $ 518,827 (2) 615,203 (3) SISP Death Benefit(4) $ 5,529,675 Post-Retirement Health Care Disability Benefits Continuation of Welfare Benefits $ 50,556 Outplacement Services $ 50,000 280G Tax Gross-up(5) $ 4,318,981 (1)Represents the present value of Mr. Hildestad's vested regular SISP benefit as of December 31, 2006, which was $22,850 per month for 15 years, commencing at age 65. Present value was determined using a 5.75% discount rate. The terms of the regular SISP benefit are described following the Pension Benefits for 2006 table.(2)Represents the present value of all excess SISP benefits Mr. Hildestad would be entitled to upon termination of employment under the SISP. The terms of the excess SISP benefit are described following the Pension Benefits for 2006 table.(3)Represents the present value of all excess SISP benefits Mr. Hildestad would be entitled to upon termination of employment under the SISP, plus the payment that would be made under Mr. Hildestad's change of control agreement attributable to three additional years of assumed employment under our qualified pension plan and nonqualified defined benefit retirement plan. The additional years of employment would decrease the actuarial present value of Mr. Hildestad's qualified pension plan benefits and increase the actuarial present value of his excess SISP benefits.(4)Represents the present value of 180 monthly payments of $45,700 per month, which would be paid as a SISP death benefit under the SISP. Present value was determined using a 5.75% discount rate. The terms of the SISP death benefit are described following the Pension Benefits for 2006 table.(5)Assumes an incremental overall tax rate of 41.994%, increased by the Internal Revenue Code section 4999 excise tax of 20%. Compensation: Base Salary 2,250,000 Short-term Incentive(1) [ • ] 2007-2009 Performance Shares 836,653 836,653 836,653 836,653 836,653 836,653 2008-2010 Performance Shares 645,270 645,270 645,270 645,270 967,893 967,893 2009-2011 Performance Shares 1,326,741 1,326,741 Restricted Stock 87,603 87,603 Benefits and Perquisites: Regular SISP(2) 3,944,219 3,944,219 3,944,219 3,944,219 Excess SISP(3) 842,838 842,838 842,838 842,838 SISP Death Benefits(4) 10,335,773 Disability Benefits Outplacement Services 50,000 280G Tax(5) 1,940,878 Total 6,268,980 6,268,980 11,817,696 6,268,980 [ • ] 3,218,890 Martin A. White Executive Benefits and
Payments Upon
Termination or
Change of Control Voluntary
Termination(1) Not for Cause
Termination For Cause
Termination Death Disability Not for Cause
or Good
Reason
Termination
(change of control) Change of
Control
(without
termination)Compensation: Base Salary Short-term Incentive $ 1,000,000 2004-2006 Performance Shares $ 2,034,255 2005-2007 Performance Shares $ 527,831 2006-2008 Performance Shares Stock Options Restricted Stock Benefits and Perquisites: Incremental Pension Regular SISP Excess SISP SISP Death Benefit Post-Retirement Health Care Disability Benefits Continuation of Welfare Benefits Outplacement Service 280G Tax Gross-up (1)Mr. White retired on August 17, 2006. His termination qualified as normal retirement under our qualified pension plan and our SISP. These plans and Mr. White's benefits under them are described in the Pension Benefits for 2006 table and accompanying narrative.(1) Includes the prorated annual incentive for the year of termination, which is the full annual incentive since we assume termination occurred on December 31, 2009, and the additional severance payment of three times the annual incentive. For each of these, we used the higher of (1) the annual incentive earned in 2009 or (2) the highest annual incentive paid in 2007, 2008, and 2009. (2) Represents the present value of Mr. Hildestad’s vested regular SISP benefit as of December 31, 2009, which was $42,710 per month for 15 years, commencing at age 65. Present value was determined using a 5.75% discount rate. The terms of the regular SISP benefit are described following the Pension Benefits for 2009 table. The three additional years of vesting credit assumed for purposes of calculating the additional SISP benefit under Mr. Hildestad’s change of control agreement would not increase the actuarial present value of his SISP amount. (3) Represents the present value of all excess SISP benefits Mr. Hildestad would be entitled to upon termination of employment under the SISP. The terms of the excess SISP benefit are described following the Pension Benefits for 2009 table. The three additional years of employment assumed for purposes of calculating the additional retirement plan payment under Mr. Hildestad’s change of control agreement would not increase the actuarial present value of his excess SISP benefits. (4) Represents the present value of 180 monthly payments of $85,420 per month, which would be paid as a SISP death benefit under the SISP. Present value was determined using a 5.75% discount rate. The terms of the SISP death benefit are described following the Pension Benefits for 2009 table. (5) Determined applying the Internal Revenue Code section 4999 excise tax of 20% only if 110% threshold is exceeded. Executive Benefits and
Payments Upon
Termination or
Change of Control Voluntary
Termination Not for Cause
Termination For Cause
Termination Death Disability Not for Cause
or Good
Reason
Termination
(change of control) Change of
Control
(without
termination)Compensation: Base Salary $ 956,250 Short-term Incentive $ 1,275,000 2004-2006 Performance Shares $ 175,922 $ 175,922 $ 175,922 $ 175,922 $ 175,922 $ 175,922 2005-2007 Performance Shares $ 110,892 $ 110,892 $ 110,892 $ 110,892 $ 166,338 $ 166,338 2006-2008 Performance Shares $ 325,185 $ 325,185 Stock Options Restricted Stock $ 28,563 $ 28,563 Benefits and Perquisites: Incremental Pension Regular SISP(1) $ 1,270,212 $ 1,270,212 $ 1,270,212 $ 1,270,212 $ 1,270,212 Excess SISP(2) $ 23,152 $ 23,152 $ 23,152 $ 23,152 $ 23,152 SISP Death Benefit(3) $ 2,939,077 Post-Retirement Health Care Disability Benefits Continuation of Welfare Benefits $ 39,012 Outplacement Services $ 50,000 280G Tax Gross-up(4) $ 1,406,754 (1) Compensation: Base Salary 1,350,000 Short-term Incentive(1) [ • ] 2007-2009 Performance Shares 317,661 317,661 317,661 317,661 317,661 317,661 2008-2010 Performance Shares 221,231 221,231 221,231 221,231 331,834 331,834 2009-2011 Performance Shares 477,611 477,611 Restricted Stock 26,290 26,290 Benefits and Perquisites: Regular SISP(2) 2,790,741 2,790,741 2,790,741 2,790,741 SISP Death Benefits(3) 5,529,675 Disability Benefits Outplacement Services 50,000 280G Tax(4) 856,992 Total 3,329,633 3,329,633 6,068,567 3,329,633 [ • ] 1,153,396 (1) Includes the prorated annual incentive for the year of termination, which is the full annual incentive since we assume termination occurred on December 31, 2009, and the additional severance payment of three times the annual incentive. For each of these, we used the higher of (1) the annual incentive earned in 2009 or (2) the highest annual incentive paid in 2007, 2008, and 2009. (2) Represents the present value of Mr. Raile’s vested regular SISP benefit as of December 31, 2009, which was $22,850 per month for 15 years, commencing at age 65. Present value was determined using a 5.75% discount rate. The terms of the regular SISP benefit are described following the Pension Benefits for 2009 table. The three additional years of vesting credit assumed for purposes of calculating the additional SISP benefit under Mr. Raile’s change of control agreement would not increase the actuarial present value of his SISP amount. (3) Represents the present value of 180 monthly payments of $45,700 per month, which would be paid as a SISP death benefit under the SISP. Present value was determined using a 5.75% discount rate. The terms of the SISP death benefit are described following the Pension Benefits for 2009 table. (4) Determined applying the Internal Revenue Code section 4999 excise tax of 20% only if 110% threshold is exceeded. Compensation: Base Salary 1,350,000 Short-term Incentive(1) [ • ] 2007-2009 Performance Shares 257,410 257,410 257,410 257,410 257,410 257,410 2008-2010 Performance Shares 221,231 221,231 221,231 221,231 331,834 331,834 2009-2011 Performance Shares 477,611 477,611 Restricted Stock Benefits and Perquisites: Incremental Pension(2) 107,307 107,307 107,307 184,737 Regular SISP 1,249,035 (3) 1,249,035 (3) 1,603,546 (4) 1,784,336 (5) Excess SISP 116,185 SISP Death Benefits(6) 5,529,675 Disability Benefits(7) 227,839 Outplacement Services 50,000 280G Tax(8) 1,068,156 Total 1,834,983 6,008,316 2,417,333 [ • ] 1,066,855 (1) (2) (3) (4) Represents the present value of the additional SISP retirement benefit due to an additional two years vesting under our SISP. The terms of the SISP benefit are described following the Pension Benefits for 2009 table. Present value was determined using a 5.75% discount rate. (5) Represents the present value of the disability benefit after reduction for amounts that would be paid as retirement benefits. Present value was determined using a 5.75% discount rate. (8) Determined applying the Internal Revenue Code section 4999 excise tax of 20% only if 110% threshold is exceeded. Compensation: Base Salary 1,342,200 Short-term Incentive(1) [ • ] 2007-2009 Performance Shares 382,260 382,260 382,260 382,260 382,260 382,260 2008-2010 Performance Shares 247,451 247,451 247,451 247,451 371,177 371,177 2009-2011 Performance Shares 474,852 474,852 Restricted Stock 70,092 70,092 Benefits and Perquisites: Regular SISP(2) 2,359,818 2,359,818 2,359,818 2,359,818 Excess SISP(3) 126,868 126,868 126,868 126,868 SISP Death Benefits(4) 5,529,675 Disability Benefits Outplacement Services 50,000 280G Tax(5) 808,830 Total 3,116,397 3,116,397 6,159,386 3,116,397 [ • ] 1,298,381 (1) Includes the prorated annual incentive for the year of termination, which is the full annual incentive since we assume termination occurred on December 31, 2009, and the additional severance payment of three times the annual incentive. For each of these, we used the higher of (1) the annual incentive earned in 2009 or (2) the highest annual incentive paid in 2007, 2008, and 2009. (2) Represents the present value of Mr. Schneider’s vested regular SISP benefit as of December 31, 2009, which was $22,850 per month for 15 years, commencing at age 65. Present value was determined using a 5.75% discount rate. The terms of the regular SISP benefit are described following the Pension Benefits for 2009 table. The three additional years of vesting credit assumed for purposes of calculating the additional SISP benefit under Mr. Schneider’s change of control agreement would not increase the actuarial present value of his SISP amount. (3) Represents the present value of all excess SISP benefits Mr. Schneider would be entitled to upon termination of employment under the SISP. The terms of the excess SISP benefit are described following the Pension Benefits for 2009 table. The three additional years of employment assumed for purposes of calculating the additional retirement plan payment under Mr. Schneider’s change of control agreement would not increase the actuarial present value of his excess SISP benefits. (4) Represents the present value of 180 monthly payments of $45,700 per month, which would be paid as a SISP death benefit under the SISP. Present value was determined using a 5.75% discount rate. The terms of the SISP death benefit are described following the Pension Benefits for 2009 table. (5) Determined applying the Internal Revenue Code section 4999 excise tax of 20% only if 110% threshold is exceeded. Compensation: Base Salary 1,050,000 Short-term Incentive(1) [ • ] 2007-2009 Performance Shares 261,784 261,784 261,784 261,784 261,784 261,784 2008-2010 Performance Shares 173,171 173,171 173,171 173,171 259,757 259,757 2009-2011 Performance Shares 371,470 371,470 Restricted Stock 13,169 13,169 Benefits and Perquisites: Regular SISP(2) 899,505 899,505 899,505 899,505 Excess SISP(3) 146,033 146,033 146,033 242,471 SISP Death Benefits(4) 3,898,602 Disability Benefits Outplacement Services 50,000 280G Tax(5) 671,881 Total 1,480,493 1,480,493 4,333,557 1,480,493 [ • ] 906,180 (1) Includes the prorated annual incentive for the year of termination, which is the full annual incentive since we assume termination occurred on December 31, 2009, and the additional severance payment of three times the annual incentive. For each of these, we used the higher of (1) the annual incentive earned in 2009 or (2) the highest annual incentive paid in 2007, 2008, and 2009. (2) Represents the present value of Mr. Bietz’s vested regular SISP benefit as of December 31, 2009, which was $16,110 per month for 15 years, commencing at age 65. Present value was determined using a 5.75% discount rate. The terms of the regular SISP benefit are described following the Pension Benefits for 2009 table. The three additional years of vesting credit assumed for purposes of calculating the additional SISP benefit under Mr. Bietz’s change of control agreement would not increase the actuarial present value of his SISP amount. (3) Represents the present value of all excess SISP benefits Mr. Bietz would be entitled to upon termination of employment under the SISP. The terms of the excess SISP benefit are described following the Pension Benefits for 2009 table. (4) Represents the present value of 180 monthly payments of $32,220 per month, which would be paid as a SISP death benefit under the SISP. Present value was determined using a 5.75% discount rate. The terms of the SISP death benefit are described following the Pension Benefits for 2009 table. (5) Determined applying the Internal Revenue Code section 4999 excise tax of 20% only if 110% threshold is exceeded. Director Compensation for 2009 Name (a) Thomas Everist 57,083 69,445 —(3) — — 174 126,702 Karen B. Fagg 55,250 (4) 69,445 — — — 174 124,869 A. Bart Holaday 50,583 69,445 — — — 174 120,202 Dennis W. Johnson 59,083 69,445 — — — 174 128,702 Thomas C. Knudson 52,083 69,445 — — — 174 121,702 Richard H. Lewis 55,083 69,445 — — — 174 124,702 Patricia L. Moss 52,083 (5) 69,445 — — — 174 121,702 John L. Olson 40,083 (6) 69,445 —(7) — — 563,060 (9) 672,588 Harry J. Pearce 130,000 69,445 —(8) — — 174 199,619 Sister Thomas Welder 50,583 69,445 — — — 174 120,202 John K. Wilson 53,583 (10) 69,445 — — — 174 123,202 (1) Valued based on $17.147, the purchase price of the stock on the date of grant, May 18, 2009, which is the grant date fair value. (2) Group life insurance premiums, except for Mr. Olson. (3) Mr. Everist had 18,562 stock options outstanding as of December 31, 2009. (4) Includes $17,984 that Ms. Fagg received in our common stock in lieu of cash. (5) Includes $52,064 that Ms. Moss received in our common stock in lieu of cash. (6) Mr. Olson retired on August 13, 2009. (7) (8) Mr. Pearce had 13,500 stock options outstanding as of December 31, 2009. (10) Includes $44,578 that Mr. Wilson received in our common stock in lieu of cash. present value of Mr. Raile's vested regular SISP benefit as of December 31, 2006, which was $12,145 per month for 15 years, commencing at age 65. Present value was determined using a 5.75% discount rate. The terms ofboard approved changes to the regular SISP benefit are described following the Pension Benefits for 2006 table.(2)Represents the present value of all excess SISP benefits Mr. Raile would be entitled to upon termination of employment under the SISP. The terms of the excess SISP benefit are described following the Pension Benefits for 2006 table. The three additional years of employment assumed for purposes of calculating the additional retirement plan payment under Mr. Raile's change of control agreement would not increase the actuarial present value of his qualified pension plan benefits or his excess SISP benefits.(3)Represents the present value of 180 monthly payments of $24,290 per month, which would be paid as a SISP death benefit under the SISP. Present value was determined using a 5.75% discount rate. The terms of the SISP death benefit are described following the Pension Benefits for 2006 table.(4)Assumes an incremental overall tax rate of 41.994%, increased by the Internal Revenue Code section 4999 excise tax of 20%.Warren L. Robinson Executive Benefits and
Payments Upon
Termination or
Change of Control Voluntary
Termination(1) Not for Cause
Termination For Cause
Termination Death Disability Not for Cause
or Good
Reason
Termination
(change of control) Change of
Control
(without
termination)Compensation: Base Salary(2) $ 1,000,000 Short-term Incentive 2004-2006 Performance Shares $ 532,839 2005-2007 Performance Shares $ 132,138 2006-2008 Performance Shares Stock Options Restricted Stock Benefits and Perquisites: Incremental Pension Regular SISP Excess SISP SISP Death Benefit Post-Retirement Health Care Disability Benefits Continuation of Welfare Benefits Outplacement Services 280G Tax Gross-up
stock retainers payable to our non-employee directors.(1)Mr. Robinson retired on February 17, 2006. His termination qualified as early retirement under our qualified pension plan and our SISP. Mr. Robinson also had an accumulated benefit under our nonqualified deferred compensation plan. These plans and Mr. Robinson's benefits under them are described in the Pension Benefits for 2006 tableMDU Resources Group, Inc. Directors’ Compensation Policy, and the Nonqualified Deferred Compensation for 2006following table shows the cash and accompanying narratives.(2)Paid as severance upon retirement. Executive Benefits and
Payments Upon
Termination or
Change of Control Voluntary
Termination Not for Cause
Termination For Cause
Termination Death Disability Not for Cause
or Good
Reason
Termination
(change of control) Change of
Control
(without
termination)Compensation: Base Salary $ 1,176,000 Short-term Incentive $ 1,568,000 2004-2006 Performance Shares $ 356,591 $ 356,591 $ 356,591 $ 356,591 $ 356,591 $ 356,591 2005-2007 Performance Shares $ 229,622 $ 229,622 $ 229,622 $ 229,622 $ 344,433 $ 344,433 2006-2008 Performance Shares $ 399,908 $ 399,908 Stock Options $ 792,828 $ 792,828 Restricted Stock $ 76,151 $ 76,151 Benefits and Perquisites: Incremental Pension(1) $ 61,234 Regular SISP(2) $ 1,424,731 $ 1,424,731 $ 1,424,731 $ 1,424,731 $ 1,424,731 Excess SISP $ 90,058 (3) $ 90,058 (3) $ 90,058 (3) $ 90,058 (3) $ 93,357 (4) SISP Death Benefit(5) $ 3,898,602 Post-Retirement Health Care Disability Benefits $ 24,597 Continuation of Welfare Benefits $ 37,592 Outplacement Services $ 50,000 280G Tax Gross-up(6) $ 2,098,388 Effective June 1, 2009 Prior to June 1, 2009 Base Retainer $55,000 $ 30,000 Additional Retainers: Non-Executive Chairman 75,000 100,000 (1)(2) Lead Director, if any 33,000 33,000 Audit Committee Chairman 10,000 10,000 Compensation Committee Chairman 5,000 5,000 Nominating and Governance Committee Chairman 5,000 5,000 Meeting Fees: Board Meeting – 1,500 Committee Meeting – 1,500 Annual Stock Retainer 4,050 shares 4,050 shares Represents the payment that would be made under Mr. Schneider's change $50,000 of control agreement based on the increasethis amount was paid in the actuarial present value of his pension plan benefit that would result if he continued employment for an additional three years.(2)Represents the present value of Mr. Schneider's vested regular SISP benefit as of December 31, 2006, which was $16,110 per month for 15 years, commencing at age 65. Present value was determined using a 5.75% discount rate. The terms of the regular SISP benefit are described following the Pension Benefits for 2006 table.(3)Represents the present value of all excess SISP benefits Mr. Schneider would be entitled to upon termination of employment under the SISP. The terms of the excess SISP benefit are described following the Pension Benefits for 2006 table.(4)Represents the present value of all excess SISP benefits Mr. Schneider would be entitled to upon termination of employment under the SISP, plus the payment that would be made under Mr. Schneider's change of control agreement based on the increase in the actuarial present value of his excess SISP benefit that would result if he continued employment for an additional three years.(5)Represents the present value of 180 monthly payments of $32,220 per month, which would be paid as a SISP death benefit under the SISP. Present value was determined using a 5.75% discount rate. The terms of the SISP death benefit are described following the Pension Benefits for 2006 table.(6)Assumes an incremental overall tax rate of 41.994%, increased by the Internal Revenue Code section 4999 excise tax of 20%.John K. Castleberry Executive Benefits and
Payments Upon
Termination or
Change of Control Voluntary
Termination Not for Cause
Termination For Cause
Termination Death Disability Not for Cause
or Good
Reason
Termination
(change of control) Change of
Control
(without
termination)Compensation: Base Salary $ 1,110,000 Short-term Incentive $ 1,443,000 2004-2006 Performance Shares $ 532,839 $ 532,839 $ 532,839 $ 532,839 $ 532,839 $ 532,839 2005-2007 Performance Shares $ 339,821 $ 339,821 $ 339,821 $ 339,821 $ 509,731 $ 509,731 2006-2008 Performance Shares $ 255,041 $ 255,041 Stock Options Restricted Stock $ 76,151 $ 76,151 Benefits and Perquisites: Incremental Pension(1) $ 89,800 Regular SISP(2) $ 1,167,524 $ 1,167,524 $ 1,167,524 $ 1,167,524 $ 1,167,524 Excess SISP(3) $ 248,110 $ 248,110 $ 248,110 $ 248,110 $ 248,110 SISP Death Benefit(4) $ 4,725,029 Post-Retirement Health Care $ 76,517 Disability Benefits Continuation of Welfare Benefits $ 52,139 Outplacement Services $ 50,000 280G Tax Gross-up(5) $ 1,718,364 (1)Represents the payment that would be made under Mr. Castleberry's change of control agreement attributable to three additional years of assumed employment under our qualified pension plan and nonqualified defined benefit retirement plan. The additional years of employment would increase the actuarial present value of Mr. Castleberry's qualified pension plan benefits and decrease the actuarial present value of his excess SISP benefits.(2)Represents the present value of Mr. Castleberry's vested regular SISP benefit as of December 31, 2006, which was $19,525 per month for 15 years, commencing at age 65. Present value was determined using a 5.75% discount rate. The terms of the regular SISP benefit are described following the Pension Benefits for 2006 table.(3)Represents the present value of all excess SISP benefits Mr. Castleberry would be entitled to upon termination of employment under the SISP. The terms of the excess SISP benefit are described following the Pension Benefits for 2006 table.(4)Represents the present value of 180 monthly payments of $39,050 per month, which would be paid as a SISP death benefit under the SISP. Present value was determined using a 5.75% discount rate. The terms of the SISP death benefit are described following the Pension Benefits for 2006 table.(5)Assumes an incremental overall tax rate of 41.994%, increased by the Internal Revenue Code section 4999 excise tax of 20%.John G. Harp Executive Benefits and
Payments Upon
Termination or
Change of Control Voluntary
Termination Not for Cause
Termination For Cause
Termination Death Disability Not for Cause
or Good
Reason
Termination
(change of control) Change of
Control
(without
termination)Compensation: Base Salary $ 930,000 Short-term Incentive $ 1,240,000 2004-2006 Performance Shares 2005-2007 Performance Shares $ 191,343 $ 191,343 $ 191,343 $ 191,343 $ 287,014 $ 287,014 2006-2008 Performance Shares Stock Options Restricted Stock Benefits and Perquisites: Incremental Pension(1) $ 244,668 Regular SISP $ 158,637 (2) $ 555,229 (3) Excess SISP SISP Death Benefit(4) $ 2,939,077 Post-Retirement Health Care Disability Benefits $ 482,562 Continuation of Welfare Benefits $ 33,060 Outplacement Services $ 50,000 280G Tax Gross-up(5) $ 1,544,744 (1)Represents the payment that would be made under Mr. Harp's change of control agreement based on the increase in the actuarial present value of his qualified pension plan benefit that would result if he continued employment for an additional three years. Also represents the equivalent of three additional years of service that would be provided under the retirement benefit agreement described following the Pension Benefits for 2006 table.(2)Represents the present value of the additional SISP retirement benefit due to an additional two years vesting under our SISP. The terms of the SISP are described following the Pension Benefits for 2006 table. Present value was determined using a 5.75% discount rate.(3)Represents the payment that would be made under Mr. Harp's change of control agreement based on the increase in the actuarial present value of his regular SISP benefit that would result if he continued employment for an additional three years. Also includes the additional benefit attributable to three additional years of service that would be provided under the retirement benefit agreement described following the Pension Benefits for 2006 table.(4)Represents the present value of 180 monthly payments of $24,290 per month, which would be paid as a SISP death benefit under the SISP. Present value was determined using a 5.75% discount rate. The terms of the SISP death benefit are described following the Pension Benefits for 2006 table.(5)Assumes an incremental overall tax rate of 36.45%, increased by the Internal Revenue Code section 4999 excise tax of 20%.Director Compensation for 2006 Name
(a) Fees
Earned
or Paid
in Cash
($)
(b) Stock
Awards
($)
(c)(1) Option
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($)
(d) Non-Equity
Incentive
Plan
Compensation
($)
(e) Change in
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Nonqualified
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(g)(2) Total
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(h)Thomas Everist 51,250 100,208 — (3) — — 276 151,734 Karen B. Fagg 54,333 (4) 100,208 — — — 276 154,817 Dennis W. Johnson 65,000 (5) 100,208 — — — 276 165,484 Richard H. Lewis 58,833 100,208 — — — 276 159,317 Patricia L. Moss 52,833 (6) 100,208 — — — 276 153,317 Robert L. Nance(7) 39,000 100,208 — (8) — — 910,394 (9) 1,049,602 John L. Olson 60,417 100,208 — (10) — — 276 160,901 Harry J. Pearce 86,306 (11) 118,756 (12) — (13) — — 276 205,338 Sister Thomas Welder, O.S.B. 54,333 100,208 — (14) — — 276 154,817 John K. Wilson 55,833 (15) 100,208 — — — 276 156,317 (1)Valued based on $37.11, the purchase price of the stock on the date of grant, April 28, 2006.(2)Group life insurance premium, except for Mr. Nance.(3)Mr. Everist had 28,686 stock options outstanding as of December 31, 2006.(4)Includes $12,905 that Ms. Fagg received in ourcompany common stock in lieu of cash.(5)Includes $64,990 that Mr. Johnson received in our common stock in lieu of cash.(6)Includes $52,833 that Ms. Moss received in our common stock in lieu of cash.(7)Retired effective August 17, 2006.(8)Mr. Nance had 33,748 stock options outstanding as of December 31, 2006.(9)Comprised of a group life insurance premium of $184 and the value of Mr. Nance's deferred compensation at December 31, 2006, which became payable over five years in accordance with his election after his retirement.(10)Mr. Olson had 28,686 stock options outstanding as of December 31, 2006.(11)Includes $86,291 that Mr. Pearce received in our common stock in lieu of cash.(12)Includes $100,208 for the April 28, 2006 stock grant and $18,548 of stock as part of Mr. Pearce's retainer as chairman of the board.(13)Mr. Pearce had 13,500 stock options outstanding as of December 31, 2006.(14)Sister Thomas Welder is a member of the Benedictine Sisters of the Annunciation, B.M.V., which had 5,500 stock options outstanding as of December 31, 2006.(15)Includes $25,810 that Mr. Wilson received in our common stock in lieu of cash. We increased compensation for our directors effective Juneprior to January 1, 2006. Each non-employee director receives $30,000 and 4,050 shares of our common stock as an annual retainer for2009.service. The lead director, if any, receives an additional $33,000. The non-executive chairman, which is a new position, receives an additional $100,000, one-half in cash and one-half in stock. We make the grants of the 4,050 shares our common stock on or about the fifteenth business day following the annual meeting of stockholders pursuant to the 1997 Non-Employee Director Long-Term Incentive Plan. The audit committee chairman receives an additional $10,000 annual retainer, an increase of $2,500. The nominating and governance and compensation committee chairmen each receive an additional $5,000 annual retainer, an increase of $1,000. Each non-employee director also receives $1,500 for each board meeting attended and each committee member receives $1,500 for each committee meeting attended.director'sdirector’s beneficiaries during the time each director serves on the board. The annual cost per director is $276.2006.director'sdirector’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'sdirector’s retirement from the board.director's annual cashdirector’s base retainer. A director, with good cause and with the knowledge of the board, may donate or assign all of the director'sdirector’s company common stock to a charitable, religious, or non-profit organization in lieu of ownership. Shares acquired through purchases on the open market and participation in our director stock plans will be considered in ownership calculations as will ownership of our common stock by a spouse. A director is allowed five years commencing January 1 of the year following the year of that director'sdirector’s initial election to the board to meet the guideline requirements. The level of common stock ownership is monitored with an annual report made to the compensation committee of the board atboard. For stock ownership, please see “Security Ownership.”February meeting.director to benefit from devaluation of our stock or otherwise own stock technically but without the full benefits and risks of such ownership.INFORMATION CONCERNING EXECUTIVE OFFICERS OurINFORMATION CONCERNING EXECUTIVE OFFICERS the next annual meeting of the board.their successors are chosen and qualify. A majority of our board of directors may remove any executive officer at any time. Information concerning our executive officers, including their ages, present corporate positions, and business experience, is as follows:Name Age Terry D. Hildestad 5760 President and Chief Executive Officer. For information about Mr. Hildestad, see "Election“Election of Directors."”Steven L. Bietz 4851 Mr. Bietz was elected Presidentpresident and Chief Executive Officerchief executive officer of WBI Holdings, Inc. effective March 4, 2006; Presidentpresident effective January 2, 2006; Executive Vice Presidentexecutive vice president and Chief Operating Officerchief operating officer effective September 1, 2002; Vice President—Administrationvice president-administration and Chief Accounting Officerchief accounting officer effective November 3, 1999; Vice-President—Administrationvice president-administration effective February 1997; and Controllercontroller effective January 1994.John K. Castleberry 52William R. Connors 48 Mr. CastleberryConnors was elected Executive Vice President—Administrationvice president–renewable resources of MDU Resources Group, Inc., effective March 4, 2006; President and Chief Executive OfficerSeptember 1, 2008. Prior to that, he was vice president-business development of WBI Holdings, Inc. and Williston Basin Interstate Pipeline CompanyCascade Natural Gas Corporation effective November 1998; and President of WBI Holdings, Inc. effective January 1995.Paul Gatzemeier56Mr. Gatzemeier was elected President and Chief Executive Officer of Centennial Energy Resources LLC effective November 11, 2004; Vice President and General Manager2007; vice president-origination, contracts & regulatory of Centennial Energy Resources, LLC, effective January 31, 2003; and Vice President and General Manager2007; vice president-origination, contracts & regulatory of Centennial Holdings Capital Corp.Power, Inc., effective July 2005; and, was first employed as vice president-contracts & regulatory of Centennial Power, Inc., effective July 2004. Prior to that Mr. Connors was of counsel to Miller Nash, LLP, a law firm in Seattle, Washington.Mark A. Del Vecchio 50 Mr. Del Vecchio was elected vice president–human resources on October 1, 2007. From November 3, 2003 to October 1, 2007, Mr. Del Vecchio was director of executive programs and compensation. From April 1996 to October 31, 2003, Mr. Del Vecchio was vice president and member of The Carter Group, LLC, an executive search and management consulting company. David L. Goodin 48 Mr. Goodin was elected president and chief executive officer of Montana-Dakota Utilities Co., Great Plains Natural Gas Co., and Cascade Natural Gas Corporation effective June 2001.6, 2008, and president and chief executive officer of Intermountain Gas Company effective October 1, 2008. Prior to that, he was president of Montana-Dakota Utilities Co. and Great Plains Natural Gas Co. effective March 1, 2008; president of Cascade Natural Gas Corporation effective July 2, 2007; executive vice president-operations and acquisitions of Montana-Dakota Utilities Co. effective January 2007; vice president-operations effective January 2000; electric systems manager effective April 1999; electric systems supervisor effective August 1993; division electric superintendent effective February 1989; and division electrical engineer effective May 1983.John G. Harp 5457 Mr. Harp was elected Presidentpresident and Chief Executive Officerchief executive officer of Utility Services Inc., which is now MDU Construction Services Group, Inc., effective September 29, 2004. From May 2004 to September 29, 2004, Mr. Harp was Vice Presidentvice president of Ledcor Technical Services Inc., a provider of fiber optic cable maintenance services. From April 2001 to May 2004, he was Presidentpresident of JODE CORP., a broadband maintenance company. Mr. Harp sold JODE CORP. to Ledcor Construction in May 2004. Prior to that, he was Presidentpresident of Harp Line Constructors Co. and Harp Engineering, Inc. from July 1998, when they were bought by Utility Services Inc., to April 2001.Bruce T. Imsdahl 58Mr. Imsdahl was elected President and Chief Executive Officer of Montana-Dakota Utilities Co. and Great Plains Natural Gas Co., divisions of the Company, effective November 11, 2004. He previously was President of these two divisions effective July 4, 2003. Prior to that, he was Executive Vice President of these divisions effective February 5, 2003, Vice President—Energy Supply of Montana-Dakota Utilities Co. effective November 1, 1992 and Vice President—Power Supply of Montana-Dakota Utilities Co. effective May 4, 1989. Nicole A. Kivisto 3336 Ms. Kivisto was elected Controllervice president, controller and chief accounting officer effective December 1, 2005.February 17, 2010. Prior to that she was controller effective December 1, 2005; a Financial Analystfinancial analyst IV in the Corporate Planning Department effective May 2003; a Financialfinancial and Investor Relations Analystinvestor relations analyst in the Investor Relations Department effective May 2000; and a Financial Analystfinancial analyst in the Corporate Accounting Department effective July 1995.Douglass A. Mahowald 60 Cynthia J. Norland 55 Ms. Norland was elected vice president–administration effective July 16, 2007. Prior to that she was the assistant vice president–administration effective January 17, 2007; associate general counsel in the Legal Department effective March 6, 2004; and senior attorney in the Legal Department effective June 1, 1995. Vernon A. Raile 6265 Mr. Raile was elected Executive Vice President, Treasurerretired on [February 16, 2010]. He served as executive vice president, treasurer and Chief Financial Officerchief financial officer effective March 1, 2006; Executive Vice Presidentexecutive vice president and Chief Financial Officerchief financial officer effective January 3, 2006; and Senior Vice President, Controllersenior vice president, controller and Chief Accounting Officerchief accounting officer effective November 2002. He served as Controllercontroller until May 2003. He was Vice President, Controllervice president, controller and Chief Accounting Officerchief accounting officer from August 1992 until November 2002.Cindy C. Redding 48 Ms. Redding was elected Vice President-Human Resources effective July 2003 and was Director of Human Resources from December 2002 until July 2003. Before joining the Company, she served from July 1998 until December 2002 in the positions of Director, Human Resources, Molded Plastics Division, as Corporate Benefits Planning & Delivery Manager, and as Manager, Strategic Staffing Services, for Sonoco Products Company, a global packaging company. Prior to that, Ms. Redding worked for Abbott Laboratories, a global health care company, as Manager, Human Resources, Abbott International Division, from 1997 to July 1998. From 1980 to 1997, she worked in various business administration and human resources roles, domestic and international, for Amoco Corporation, a worldwide integrated energy company.Paul K. Sandness 5255 Mr. Sandness was elected General Counselgeneral counsel and Secretarysecretary of the Company,company, its divisions and major subsidiaries effective April 6, 2004. He also was elected a Directordirector of the Company'scompany’s principal subsidiaries and was appointed to the Managing Committees of Montana-Dakota Utilities Co. and Great Plains Natural Gas Co. Prior to that he served as a Senior Attorneysenior attorney effective 1987 and as an Assistant Secretaryassistant secretary of several subsidiary companies.William E. Schneider 5861 Mr. Schneider was elected Presidentpresident and Chief Executive Officerchief executive officer of Knife River Corporation effective May 1, 2005; and Senior Vice President—Construction Materialssenior vice president-construction materials effective from September 15, 1999 to April 30, 2005.Doran N. Schwartz 3740 Mr. Schwartz was elected Vice Presidentvice president and Chief Accounting Officerchief financial officer effective February 17, 2010. Prior to that he was vice president and chief accounting officer effective March 1, 2006; and Assistant Vice President-Special Projectsassistant vice president-special projects effective September 6, 2005. Prior to that, heHe was Directordirector of Controllershipmembership rewards for American Express, a financial services company, from November 2004 to August 1, 2005; Audit Manageraudit manager for Deloitte & Touche, an audit and professional services company, from June 2002 to November 2004; and Audit Manager/Senioraudit manager/senior for Arthur Andersen, an audit and professional services company, from December 1997 to June 2002. John P. Stumpf 4750 Mr. Stumpf was elected Vice President—Strategic Planningvice president–strategic planning effective December 1, 2006. Mr. Stumpf was Vice President—Corporate Developmentvice president–corporate development for Knife River Corporation from July 1, 2002 to November 30, 2006 and Directordirector of Corporate Developmentcorporate development of Knife River Corporation from January 14, 2002 to June 30, 2002. Prior to that, he was Special Projects Managerspecial projects manager for Knife River Corporation from May 1, 2000 to January 13, 2002.SECURITY OWNERSHIPSECURITY OWNERSHIP 2006. Common Shares Beneficially Owned Include: Name Common Shares
Beneficially Owned(1) Shares Individuals Have Rights
to Acquire Within 60 Days(2) Shares Held By Family
Members(3) Percent of Class John K. Castleberry 16,980 (7) * Thomas Everist 3,458,473 (4) 28,686 1.9 Karen B. Fagg 4,550 * John G. Harp 100,516 (7) * Terry D. Hildestad 115,625 (7) * Dennis W. Johnson 46,365 (5) 4,560 * Richard H. Lewis 4,050 * Patricia L. Moss 23,572 * John L. Olson 111,148 28,686 * Harry J. Pearce 141,186 13,500 * Vernon A. Raile 38,449 (7) * Warren L. Robinson 14,111 (6) 5,505 * William E. Schneider 56,092 (7) * Sister Thomas Welder 60,260 (8) 5,500 * Martin A. White 304,431 (9) 83,283 * John K. Wilson 41,942 * All directors and executive officers as a group (24 in number) 4,709,398 76,822 94,885 2.6
2009.*Less than one percent of the class.(1)"Beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or investment power with respect to a security. Name Steven L. Bietz 58,516 (5) * Thomas Everist 1,870,623 (6) 18,562 1.0 26,642 Karen B. Fagg 19,381 * John G. Harp 77,356 (5) * Terry D. Hildestad 184,043 (5) * A. Bart Holaday 14,050 * Dennis W. Johnson 67,506 (7) 4,560 * Thomas C. Knudson 9,500 * Richard H. Lewis 16,200 * 10,152 Patricia L. Moss 42,276 * Harry J. Pearce 158,850 13,500 * 43,806 Vernon A. Raile 56,426 (5) * William E. Schneider 102,898 (5) * Sister Thomas Welder 46,942 (8) * 20,271 John K. Wilson 67,578 * All directors and executive officers as a group (23 in number) 2,929,144 42,512 14,146 1.6 100,871 (2)Indicates shares of our stock that executive officers and directors have the right to acquire within 60 days pursuant to stock options. These shares are included in the "Common Shares Beneficially Owned" column.* Less than one percent of the class. (1) “Beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or investment power with respect to a security. (3)These shares are included in the "Common Shares Beneficially Owned"(2) Indicates shares of our stock that executive officers and directors have the right to acquire within 60 days pursuant to stock options. These shares are included in the “Common Shares Beneficially Owned” column. (3) These shares are included in the “Common Shares Beneficially Owned” column. (4)Includes 3,420,000 shares of common stock acquired through the sale of Connolly-Pacific to us.(4) 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. (5) Includes full shares allocated to the officer’s account in our 401(k) retirement plan. (6) Includes 1,820,000 shares of common stock acquired through the sale of Connolly-Pacific to us. (5)(7) Mr. Johnson disclaims all beneficial ownership of the 4,560 shares owned by his wife. (6)Mr. Robinson resigned from his position as an officer on January 3, 2006 and retired effective February 17, 2006.(7)Includes full shares allocated to the officer's account in our 401(k) retirement plan.(8)The total includes shares held by the Annunciation Monastery, of which community Sister Welder is a member, and by the University of Mary, of which Sister Welder is the president. The monastery owns 42,873 shares, and it may acquire 5,500 shares within 60 days pursuant to stock options. The university owns 11,887 shares. Sister Welder disclaims all beneficial ownership of the shares owned by the monastery and the university.(9)Includes full shares allocated to the officer's account in our 401(k) retirement plan. Mr. White retired on August 17, 2006.(8) The total includes shares held by the Annunciation Monastery, of which community Sister Welder is a member, and by the University of Mary, of which Sister Welder is the president emerita. The monastery owns 33,260 shares. Sister Welder disclaims all beneficial ownership of the shares owned by the monastery and the university. Title of Class Name and Address of
Beneficial Owner Amount and Nature of
Beneficial Ownership Percent
of Class Common Stock New York Life Trust Company
51 Madison Avenue
New York, NY 10010 11,510,290 (1) 6.36 % (1)In a Schedule 13G/A, Amendment No. 7, filed on February 15, 2007, New York Life Trust Company indicates that it holds these shares as directed trustee of our 401(k) plan and has sole voting and dispositive power with respect to all shares.Title of Class Common Stock 10,800,821(1) 5.881% Common Stock 10,863,566(2) 5.79% RELATED PERSON DISCLOSURE(1) In a Schedule 13G/A, Amendment No. 9, filed on February 13, 2009, New York Life Trust Company indicates that it holds these shares as directed trustee of our 401(k) plan and has sole voting and dispositive power with respect to all shares. (2) RELATED PERSON TRANSACTION DISCLOSURE www.mdu.com.committee'scommittee’s review.which ultimately decides whetherand officers of the company with respect to approve or ratify athe related person transaction. The board's decisionUpon receipt of the committee’s recommendation, the board of directors or officers, as the case may be, based ontakes such action as they deem appropriate in light of their responsibilities under applicable laws and regulations.committee's recommendation or on its independent evaluationboard of whetherdirectors reviewed two leases between an indirect subsidiary of the transaction iscompany and a Montana partnership, Mojo, owned by John G. Harp, President and Chief Executive Officer of MDU Construction Services Group, Inc., and his brother, Michael D. Harp. The properties described in these two leases are located in Kalispell and Billings, Montana and have been leased since 1998. In November 2007, the audit committee determined that renewing these leases was in the company’s best interests after it reviewed 2004 third party appraisals for the properties and a 2007 appraisal of the Kalispell property and considered the consumer price index and our stockholdersoperating companies’ knowledge of local property markets. The audit committee recommended and the company.CORPORATE GOVERNANCECORPORATE GOVERNANCE a statement of policyguidelines on director independence that includes categorical standardsare included in our corporate governance guidelines, which are available for director independence. We have posted this statement of policy toreview on our corporate website atwww.mdu.com and attached the policy to our proxy statement as exhibit "C"http://www.mdu.com/Documents/Governance/ 2008_11_CorpGvrnGuide.pdf. The board of directors has determined that Thomas Everist, Karen B. Fagg, A. Bart Holaday, Dennis W. Johnson, Thomas C. Knudson, Richard H. Lewis, Patricia L. Moss, Robert L. Nance, John L. Olson (until he retired August 13, 2009), Harry J. Pearce, Sister Thomas Welder, and John K. Wilson:•have or had no material relationship with us and•are or were independent in accordance with our statement of policy on director independence standards, the New York Stock Exchange listing standards and the Sarbanes-Oxley Act of 2002.• • are independent in accordance with our director independence guidelines and the New York Stock Exchange listing standards. 2006,2009, the board of directors considered the following transactions or relationships:•Mr. Everist's• • • charitable contributions to St. Alexius Medical Center in the amount of $6,000 – Sister Welder was a director of St. Alexius; payment of our employees’ tuition and education-related expenses and charitable contributions in the amount of $62,500 to the University of Mary – Sister Welder was the president of the University of Mary in 2008; and charitable contributions to Missouri Slope Areawide United Way in the amount of $20,500 – Sister Welder was a director of the Missouri Slope Areawide United Way and • approximately 3.5 million shares of our common stock•charitable contributions to the City of Dickinson and the Theodore Roosevelt Medora Foundation—Mr. Johnson is president of the City of Dickinson board of commissioners and wasJob Responsibilityof the foundation•business relationships that we describeto tender his or her resignation after a material change in the notes to our financial statements in our Annual Report on Form 10-K for the year ended December 31, 2006 between subsidiaries of MDU Resources Group, Inc. and companies with which Mr. Nance, our director who retired in August 2006, is affiliated and•the provision of electric service and charitable contributions to the University of Mary and St. Alexius Medical Center—Sister Welder is president of the University of Mary and a director of St. Alexius.applicableand ethics, which we refer to directors, officers, managerial employees andas the Leading With Integrity Guide, which applies to all employees, involved in financial activities on our behalf. We also have a code of ethics that applies generally to our employees.regarding
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 Exchange listing standards,• • waivers of the code of conduct for our directors or executive officers, as required by New York Stock Exchange listing standards www.mdu.comhttp://www.mdu.com/Documents/Governance/IntegrityGuide.pdf.2006,2009, the board of directors held eightfive meetings. Each incumbent director attended at least 75 percent75% of the combined total meetings of the board and the committees on which the director served during 2006.2009. Director attendance at our annual meeting of stockholders is left to the discretion of each director. TwoFour directors attended our 20062009 annual meeting of stockholders. served as lead director until August 17, 2006, when he was elected non-employee chairman of the board.board on August 17, 2006. Mr. Pearce 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 with the chief executive officer at each regularly scheduled quarterly board of directors meeting.along withon our website at http://www.mdu.com/Governance/Pages/Boardcode of conduct,are available at http://www.mdu.com/Documents/Governance/2008_11_CorpGvrnGuide.pdf, and code of ethics,our Leading With Integritywww.mdu.comhttp://www.mdu.com/Documents/Governance/IntegrityGuide.pdf. You may obtain copies of any of these documents by writing to the secretary, MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650.fourthree times during 2006.2009. The committee members arewere John L. Olson, chairman, Karen B. Fagg, Richard H. Lewis, and Sister Thomas Welder. RobertJohn L. NanceOlson served as a memberchairman of the committee until his retirementhe retired from the board on August 17, 2006. Thomas Everist, Harry J. Pearce13, 2009, and John K. Wilson served as members of the committee until August 17, 2006.•• • • • corporate governance guidelines applicable to us. organization, membership and function•committee structure and membership•succession planning for our executivein overseeing the management and•corporate governance guidelines applicable to us. We have aus andus. We will consider candidates that our stockholders recommend. In November 2008, we amended our policy to include additional information stockholders must provide regarding their recommended candidates. Stockholders may submit director candidate recommendations to the nominating and governance committee chairman in care of the secretary at MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650. Please include the following information:•the candidate's name, age, business address and telephone number•the candidate's principal occupation and•• • • • • • any other information you believe is relevant with respect to the recommendation. recommendation. You should submit such informationsecretary of MDU Resources Group, Inc. at least 120 days prior to the anniversaryaddress above. Our bylaws are alsomail date of last year's proxy statement, or for next year, no later than November 9, 2007.individual's:•• • • • • • • • prior and future compliance with applicable law and all 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. characteras appropriate, in light of the current composition and needs of the board. The nominating and governance committee will assess 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 reflects diversity in business and professional experience,•experience which complement the skills and experience of current board membersgender.•success in the individual's chosen field of endeavor•skill in the areas of accounting and financial management, banking, general management, human resources, marketing, operations, public affairs, law and operations abroad•background in publicly traded companies•geographic area of residence and•affiliations or relationships with other groups, organizations or entities.2006.2009. The audit committee members are Dennis W. Johnson, chairman, A. Bart Holaday, Richard H. Lewis, John L. Olson and John K. Wilson. RobertJohn L. NanceOlson served as a member ofon the committee until his retirementhe retired from the board on August 17, 2006. Patricia L. Moss and Sister Thomas Welder served as members of the committee until August 17, 2006."audit“audit committee financial experts"experts” as defined by Securities and Exchange Commission regulations and Messrs. Johnson, Holaday, Lewis, Olson (until he retired), and Wilson are all independent under the applicable New York Stock Exchange listing standards.•• • • • • • prepares the report that Securities and Exchange Commission rules require we include in our annual proxy statement. assists the board's oversight of•the integrity of our financial statements•our compliance with legal and regulatory requirements•the independent auditors' qualifications and independence and•the performance of our internal audit function and independent auditors and•prepares the report that Securities and Exchange Commission rules require we include in our annual proxy statement.AUDIT COMMITTEE REPORT2006,2009, the audit committee has (1) reviewed and discussed the audited financial statements with management; (2) discussed with the independent auditors the matters required to be discussed by statement on Auditing Standards No. 61, as amended, AICPA,(AICPA, Professional Standards, Vol. 1, AU section 380,380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; (3) received the written disclosures and the letter from the independent accountants required by Independence Standards Board Standard No. 1,Independence Discussions with Audit Committees, as adopted byapplicable requirements of the Public Company Accounting Oversight Board in Rule 3600T,regarding the independent accountant’s communications with the audit committee concerning independence, and discussed with the independent accountant the independent accountant'saccountant’s independence.20062009 for filing with the Securities and Exchange Commission.John L. Olson2006.2009. The compensation committee members are Thomas Everist, chairman, Karen B. Fagg, Thomas C. Knudson, and Patricia L. Moss. Dennis W. Johnson, Richard H. Lewis and Harry J. Pearce served as members of the committee until August 17, 2006. Mr. Pearce served as chairman of the committee until June 1, 2006.committee'scommittee’s responsibilities, as set forth in its charter, include:•review and recommend changes to the board regarding our executive compensation policies for directors and executives•evaluate the chief executive officer's performance and, either as a committee or together with other independent directors as directed by the board, determine his compensation•recommend to the board the compensation of our other Section 16 officers and directors•establish goals, make awards, review performance and determine, or recommend to the board, awards earned under our annual and long-term incentive compensation plans•review and discuss with management the compensation discussion and analysis and based upon such review and discussion, determine whether to recommend to the board that the compensation discussion and analysis be included in our proxy statement or our Annual Report on Form 10-K•arrange for the preparation of and approve the compensation committee report to be included in our proxy statement or Annual Report on Form 10-K and•sole authority to retain and discharge and approve fees for compensation consultants.• • • • • arrange for the preparation of and approve the compensation committee report to be included in our proxy statement and/or Annual Report on Form 10-K and offor our Section 16 officers and directors. TheyThe compensation committee makes recommendations to the board regarding compensation of all Section 16 officers, and the board then approves the recommendations. The compensation committee and the board may not delegate thistheir authority. They may, however, use recommendations from outside consultants, the chief executive officer, and the human resources department. The chief executive officer, the chief financial officer, the vice president—humanpresident-human resources, and general counsel regularly attend compensation committee meetings. The committee meets in executive session as needed. The compensation committee makes recommendations to the board regarding compensation of all Section 16 officers, and the board then approves the recommendations.compensation discussionCompensation Discussion and analysis.Analysis. We also discuss in the compensation discussionCompensation Discussion and analysisAnalysis the role of our executive officers and compensation consultants in determining or recommending compensation for our Section 16 officers.· match company positions to survey data · develop 2010 competitive estimates on base salaries and targeted short-term and long-term incentives · compare company base salaries and targeted short-term and long-term incentives, by position, to market estimates · construct a recommended 2010 salary grade structure, salary grade changes, and changes in base salaries and incentive targets based on competitive data and · address general trends in executive compensation, such as overall salary movement and the recession’s impact on executive compensation. TheIn February 2009, the compensation committee reviewed and made recommendations with respect to directordecided that the compensation atreview for the board of directors would be undertaken internally by the company, rather than by an outside consultant. At its May 2006 meeting. At that2009 meeting, the committee reviewed a survey onthe analysis of competitive data and recent trends in director compensation prepared by Towers Perrin at the direction of the compensation committee.company. The Towers Perrin survey used marketcompany’s analysis was based on proxy data from our performance graph peer group companies gatheredcompiled by Equilar and on data from their 2006 proxy filings.the National Association of Corporate Directors 2008/2009 Director Compensation Report. The committee compared this survey data to our:•annual cash retainer to non-employee directorsour directors’ compensation and to the non-executive chairmaneach of the board•stock awards to all non-employee directors•board meeting fees to all non-employee directors•committee meeting fees and•committee chairperson fees. Our chief executive officer reported to the committee on the portion of the survey regarding non-executive chairman compensation.its components. After review and discussion of the market data, the compensation committee made recommendations to increasewhich indicated that aggregate director compensation towas at the 61st percentilemedian of the market data in the Towers Perrin survey. The board approved the recommendations. At its May and August 2006 meetings, the committee also reviewed a report prepared by the National Association of Corporate Directors on best practices on director compensation. The committee noted that,2008/2009 Director Compensation Report companies and above the median – 65th percentile – of the six best practices identified inpeer group companies, the report, five of the policies, regarding director compensation programs, director stock ownershipcommittee recommended, and the use of independent professional or financial service providers, have been adopted.SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCESECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 20062009 or written representations that no Forms 5 were required, we believe that all such reports were timely filed.OTHER BUSINESS OurOTHER BUSINESS knows of no other mattersintends to comebring before the meeting. However, ifmeeting any business other than the matters referred to in the notice of annual meeting and this proxy statement. In addition, other than as described under Item 6 above and in the following sentences, we have not been informed that any other matter will be presented to the meeting by others. One stockholder proposal was submitted for inclusion in the proxy statement, which we have omitted pursuant to Rule 14a-8 of the Securities and Exchange Commission’s proxy rules. If this stockholder complies with our advance notice bylaw provisions and properly presents the proposal at the annual meeting, it is the intention of the persons named in the proxy to vote against this proposal. If any other matter requiring a vote of the stockholders should arise, the persons named in the enclosed proxy will vote in accordance with their best judgment.SHARED ADDRESS STOCKHOLDERSSHARED ADDRESS STOCKHOLDERS "householding,"“householding,” is designed to reduce our printing and postage costs. However, if a stockholder of record wishes to receive a separate annual report orto 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 58506-5650.58506-5650, 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.orand proxy statement as applicable, to a stockholder at a shared address to which a single copy of the document was delivered.2011 ANNUAL MEETING OF STOCKHOLDERS 2008 ANNUAL MEETING OF STOCKHOLDERSthe nominating committee or(ii) at an annual meeting by a stockholder entitled to vote for the election of directors and who has complied with the procedures established by the bylaws. For a nomination to be properly brought before an annual meeting by a stockholder, the stockholder intending to make the nomination must have given timely and proper notice of the nomination in writing to the corporate secretary in accordance with and containing all information and the completed questionnaire provided for in the bylaws. To be timely, such notice must be delivered writtento or mailed to the corporate secretary and received at our principal executive offices not later than 90 days prior to the first anniversary of the preceding year’s annual meeting of stockholders. For purposes of our annual meeting of stockholders expected to be held April 26, 2011, any stockholder who wishes to submit a nomination must submit the required notice to the corporate secretary. The written notice must contain certain information specified in the bylaws and must be received at least 120 days prior to the anniversary datesecretary on which we first mailed our proxy materials for the prior year's annual stockholders' meeting.or before January 27, 2011.stockholders' meeting except (i) as specified in the meeting notice given by or at the direction of the board, (ii) as otherwise properly brought before the meeting by or at the direction of the board or (iii) properly brought before the meeting by a stockholder entitled to vote who has delivered writtencomplied with the procedures established by the bylaws. For business to be properly brought before an annual meeting by a stockholder (other than nomination of a person for election as a director which is described above) the stockholder must have given timely and proper notice of such business in writing to the company secretary. The writtencorporate secretary, in accordance with, and containing all information provided for in the bylaws and such business must be a proper matter for stockholder action under the General Corporation Law of Delaware. To be timely, such notice must contain certain information specified inbe delivered or mailed to the bylaws must be received at least 120our principal offices not later than the close of business 90 days prior to the first anniversary dateof the preceding year’s annual meeting of stockholders. For purposes of our annual meeting expected to be held April 26, 2011, any stockholder who wishes to bring business before the meeting (other than nomination of a person for election as a director which is described above) must submit the required notice to the corporate secretary on which we first mailed our proxy materials for the prior year's annual stockholders' meeting.Commission'sCommission’s proxy rules allows us to use discretionary voting authority to vote on matters coming before an annual stockholders'stockholders’ meeting if we do not have notice of the matter at least 45 days before the anniversary date on which we first mailed our proxy materials for the prior year'syear’s annual stockholders'stockholders’ meeting or the date specified by an advance notice provision in our bylaws. Our bylaws contain an advance notice provision that we have described above. For our annual meeting of stockholders expected to be held on April 22, 2008,26, 2011, stockholders must submit such written notice to the corporate secretary on or before November 9, 2007.January 27, 2011.Commission'sCommission’s requirements that a stockholder must meet to have a stockholder proposal included in our proxy statement under Rule 14a-8 of the Exchange Act. For purposes of our annual meeting of stockholders expected to be held on April 22, 2008,26, 2011, any stockholder who wishes to submit a proposal for inclusion in our proxy materials must submit such proposal to the corporate secretary on or before November 9, 2007.12, 2010.mailfurnish this proxy statement a copy of our Annual Report on Form 10-K, excluding exhibits, for the year ended December 31, 2006,2009, which is required to be filed with the Securities and Exchange Commission. 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, ND 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.numberprovisions requiring a supermajority vote by stockholders set forth in Articles TWELFTH and FIFTEENTH of sharesthe Restated Certificate of Common Stock whichIncorporation of the Company is authorizedCorporation be repealed, and that certain technical amendments to issuethe provisions of Articles THIRTEENTH and FOURTEENTH of the Restated Certificate of Incorporation of the Corporation be increased from 250,000,000 shares of Common Stockadopted in connection with the par valuerepeal of $1.00 per share, to 500,000,000 shares withsuch supermajority vote provisions and the par valuedeclassification of $1.00 per share,the Board of Directors of the Corporation effected in 2007, effective at the close of business on the date on which the appropriate Certificate of Amendment to the Company'sCorporation’s Restated Certificate of Incorporation is filed in the office of the Secretary of State of the State of Delaware;Company, as heretofore amended, be further amended by deleting the first paragraph of Article FOURTH, and by inserting in place thereof a new first paragraph of said Article FOURTH to read as follows: FOURTH. The total number of shares of stock which the Corporation, shall have authority to issue isTwoFive HundredFiftyTwo Million (252,000,000502,000,000) divided into four 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 (500,000) shares of the par value of One Hundred Dollars ($100) per share (hereinafter called the "Preferred Stock") amounting in the aggregate to Fifty Million Dollars ($50,000,000). The total number of shares of such Preferred Stock A authorized is One Million (1,000,000) shares without par value (hereinafter called the "Preferred Stock A"). The total number of shares 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 isTwoFive HundredFifty Million (250,000,000500,000,000) of the par value of One and no/100 Dollars ($1.00) per share (hereinafter called the "Common Stock"), amounting in the aggregate toTwoFive Hundred Million Dollars ($250,000,000500,000,000). FURTHER RESOLVED, that the Board of Directors hereby directs that this resolution and above proposed amendment be attached as an exhibit to the proxy statement for the Company's next Annual or Special Meeting of Stockholders for consideration by the Stockholders entitled to vote in respect thereof.EXHIBIT B RESOLVED, that the Board of Directors of MDU Resources Group, Inc. hereby declares it advisable: (A) That the Board of Directors of the Company be declassified and the members of the Board of Directors be elected annually, effective at the close of business on the date on which the appropriate Certificate of Amendment to the Company's Restated Certificate of Incorporation is filed in the office of the Secretary of State of the State of Delaware; (B) That, in order to effect the foregoing, the Restated Certificate of Incorporation of the Company, as heretofore amended, be further amended by amending ArticleArticles TWELFTH, THIRTEENTH, to readFOURTEENTH and FIFTEENTH as follows: THIRTEENTH.The Board of Directors shall be divided into three classes as nearly equal in number as may be. The initial term of office ofAt each director in the first class shall expire at the annual meeting of stockholders, in 1986; the initial term of office of each director in the second class shall expire at the annual meeting of stockholders in 1987; and the initial term of office of each director in the third class shall expire at the annual meeting of stockholders in 1988. At each annual election commencing at theAt each annual meeting of stockholdersof 1986,, thedirectorssuccessors to the class ofshall be electedwhose term expires at that timefor terms expiring at the next annual meeting of to hold office for a term of three years to succeed those whose term expires, so that the term of one class of directors shall expire each year.stockholders;stockholders; provided, however, that each director elected at the annual meetings of stockholders held in 2005, 2006 and 2007 shall serve for the full three-year term to which such director was elected.elected. Each director shall hold office for the term for which he is elected or appointed and until his successor shall be elected and qualified or until his earlier resignation, removal from office or death, or until he shall resign or be removed.removed each director then serving as such shall nevertheless continue as(i)directora until the expiration of his current term, or until his earlier resignation, removal from office or of the class of which he is a memberdeath, and (ii) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to maintain such classes as nearly equal in number as may be..death.stockholdersat which the term of the class to which they have been elected expires.stockholders. If one or more directors shall resign from the Board 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 officefor a term expiring at the next annual meeting of stockholders.as herein provided in the filling of other vacancies.amendmentamendments be attached as an exhibit to the proxy statement for the Company's nextCorporation’s 2010 Annual or Special Meeting of Stockholders for consideration by the stockholders entitled to vote in respect thereof.thereof;EXHIBIT CMDU Resources Group, Inc.StatementPolicyDirector Independence Standards Itthe proposed amendments to the Restated Certificate of Incorporation by the stockholders, the proper officers of the Corporation be, and each of them hereby is, authorized and directed to file a Certificate of Amendment to the senseCorporation’s Restated Certificate of this Board that the expertise and perspective of independent directors is of great value and benefit to MDU Resources Group, Inc. ("MDU") and its stockholders. Accordingly, and in keeping other high standardsSecretary of corporate governance which this Board has established for itself, the listing standardsState of the New York Stock Exchange, and laws and regulations applicableState of Delaware, to MDU, this Board establishesamend the following guidelinesCorporation’s Registration Statement on director independence and for determining whether its members are independent.II.Director Independence—General The Board believes that a substantial majority of its members should satisfy these standards for independence. No director may be deemed independent unlessForm 8-A relating to the Board affirmatively determines, after due deliberation, that the director has no material relationship with MDU either directly or as a partner, shareholder or officer of an organization that has a relationship with MDU. In each case, the Board shall broadly consider all the relevant facts and circumstances and shall apply these standards. Trivial orde minimis affiliations or connections to MDU by a director or his or her immediate family will not generally be cause for the Board to determine that the director is not independent. In addition a director is not independent if:(1)The director is, or has been within the last three years, an employee, or has an immediately family member who is, or has been within the last three years, an executive officer, of MDU.(2)The director has received, or has an immediate family member who has received, during any twelve month period within the last three years, more than $100,000 in direct compensation from MDU, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).(3)(A) The director or an immediate family membercommon stock of the director is a current partner of a firm that is MDU's internalCorporation, and to file any and all other documents and to take any and all such further action as they deem necessary or external auditor; (B) the director is a current employee ofappropriate to reflect such a firm; (C) the director has an immediate family member who is a current employee of such a firm and who participates in the firm's audit, assurance or tax compliance (but not tax planning) practice; or (D) the director or an immediate family member of the director was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on MDU's audit within that time.amendments.(4)The director or an immediate family member of the director is, or has been within the last three years, employed as an executive officer of another company where any of MDU's present executive officers at the same time serves or served on that company's compensation committee.(5)The director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, MDU for property or services in an amount which in any of the last three fiscal years exceeds the greater of $1 million, or 2% of such other company's consolidated gross revenues. In applying the foregoing, both the payments and the consolidated gross revenues to be measured will be those reported in the last completed fiscal year. Contributions to tax exempt organizations are not considered "payments" for purposes of this paragraph 5.Relationships involving a director's affiliation with another company that account for lesser amounts than those specified in this paragraph 5 will not be considered to be material relationships that would impair the director's independence, provided that the related payments for goods and services or in connection with other contractual arrangements (i) are made in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable transactions with non-affiliated parties, or (ii) involve the rendering of services as a public utility at rates or charges fixed in conformity with law or governmental authority.(6)The director (or an immediate family member of the director) serves as an officer, director or trustee for a not-for-profit organization, and, within the organization's preceding three fiscal years, MDU's discretionary contributions in any single year to the organization exceed 2% of that organization's consolidated gross revenues, or $1 million, whichever is greater. MDU's automatic matching of employee charitable contributions will not be included in the amount of MDU's contributions for purposes of this paragraph (6).(7)The director is (or is affiliated with an organization that is) a significant advisor, counsel or consultant to MDU.(8)The ownership of stock of MDU by directors is encouraged and substantial stock ownership (not involving control) will not affect the independence status of a director. For purposes of Section II(3) of this policy only, "immediate family member" means a director's spouse, minor child or stepchild, or an adult child or stepchild sharing a home with the director. As used elsewhere in this policy, the term "immediate family member" includes a person's spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person's home. The Board will annually review the commercial, industrial, banking, consulting, legal, accounting and charitable (and other non-profit) relationships between MDU's directors and the organizations with which they and the members of their immediate families have material interests. For relationships that are either not covered by or do not satisfy these guidelines, the determination of whether the relationship is material or not, and therefore whether the director would be independent or not, shall be made by the directors satisfying the independence guidelines.III.Director Independence—Audit Committee Members No director who is a member of the Audit Committee of the Board may accept any consulting, advisory or compensatory fee from MDU, or from any of its subsidiary companies, other than in that director's capacity as a member of the Board or any of the Board's several committees. In addition, no director who is a member of the Audit Committee may be an affiliated person of MDU or any of its subsidiary companies apart from affiliation occasioned by the director's service as a member of the Board or any of the Board's several committees. A director would be deemed an affiliated person of MDU if that director directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with MDU.IV.Approval, Adoption, Amendment and Restatement This Statement of Policy of the Board of Directors of MDU was approved and adopted by resolution of the Board of Directors of MDU at a meeting thereof held the 13th day of August, 2003, and was amended and restated the 17th day of February, 2005.24, 2007
27, 2010SavingsSaving TimeIf you consented to access theAnnual Report to Stockholders and Proxy Statement via the Internet,these documents may be viewed by going to the MDU Resources Group, Inc. website.The website address is: www.mdu.com/2007-proxy.htmlIf you would like to access the proxy materials electronically next yeargo to the following Consent site address:www.econsent.com/mdu/
proxy 24, 2007.SavingsSaving Time, April 24, 2007,27, 2010, at 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. Either (1) submit your proxy by touch-tone telephone, (2) submit your proxy by Internet or (3) mark, date, sign and return this letter 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'Directors’ recommendation on all matters listed on this proxy, and at their discretion on any other matters that may properly come before the meeting. COMPANY # ADDRESS BLOCK There are three ways to vote your Proxytelephonephone or Internet vote authorizes the Named Proxiesnamed proxies to vote yourshares in the same manner as if you marked, dated, signed and returnedyour proxy card. VOTE BY PHONE — TOLL FREE — 1-800-560-1965 — QUICK * * * EASY * * * IMMEDIATE•Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week, until 12:00 noon (CDT) on Monday, April 23, 2007.•Please have your proxy card and the last four digits of your Social Security Number or Tax Payer Identification Number available.•Follow the simple instructions the Voice provides you.VOTE BY INTERNET —– www.eproxy.com/mdu/ — QUICK * * * EASY * * * IMMEDIATEmdu•24 hours a day, 7 days a week, until 12:00 noonp.m. (CDT) on Monday, April 23, 2007.26, 2010.• Please have your proxy card and the last four digits of your Social Security Number or Tax Payer Identification Number available. Follow the simple instructions to obtain your records and create an electronic ballot.VOTE BY MAIL– Mark, sign and date your proxy card and return it in the postage-paid envelope we've provided, or return it toMDU Resources Group, Inc.,c/o Shareowner Services,SM, P.O. Box 64873, St. Paul, MN 55164-0873."FOR" “FOR” all Nominees, "FOR"nominees and “FOR” Items 2, 3, and 4, and "AGAINST" Item 5.1. Election of directors: FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN 01. Thomas Everist o o o 06. Thomas C. Knudson o o o 02. Karen B. Fagg o o o 07. Richard H. Lewis o o o 03. Terry D. Hildestad o o o 08. Patricia L. Moss o o o 04. A. Bart Holaday o o o 09. Harry J. Pearce o o o 05. Dennis W. Johnson o o o 10. John K. Wilson o o o 1.2.Repeal of article TWELFTH of our restated certificate of incorporation, relating to business combinations with interested stockholders, and related amendments. Electiono For3. directors:article FIFTEENTH of our restated certificate of incorporation, which contains supermajority vote requirements.01 Terry D. Hildestad02 Dennis W. Johnson4. 03 John L. Olson04 John K. WilsonRepeal of section (c) of article THIRTEENTH of our restated certificate of incorporation, which provides that directors may be removed only for cause.Vote FOR allnominees (exceptas indicated below)Vote WITHHELDfrom all nomineesAbstain 5. (Instructions: To withhold authority to vote for any indicated nominee,write the number(s) of the nominee(s) in the box provided to the right.)— Please fold here —2.Amend Article FOURTH of our restated certificate of incorporation to increase our authorized shares of common stockoForoAgainstoAbstain3.Amend Article THIRTEENTH of our restated certificate of incorporation to declassify our board of directorsoForoAgainstoAbstain4.Ratification of Deloitte & Touche LLP as our independent auditors for 20072010.ForAgainstoAbstain 5.Stockholder6.Stockholder proposal requesting sustainabilitya report on coal combustion waste.ForAgainstoAbstain EACH DIRECTOR,FOR ITEMS 2, 3, AND 4, AND 5, AND AGAINSTAGAINST ITEM 5.6.Address Change? Mark Box Date ____________________________________________________________________oIndicate changes below:DateSignature(s) in boxBox appearappears on Proxy. If held in joint tenancy, all persons mustshould sign. Trustees, administrators,administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy.
Proxy.