MDU RESOURCES GROUP, INC.
DIRECTORS' COMPENSATION POLICY
Each Director who is not a full-time employee of the Company
shall receive compensation made up of annual cash retainers,
common stock and meeting fees. Each Director is also eligible
for awards under the 1997 Non-Employee Director Long-Term
Incentive Plan.
Annual Retainers, Stock Compensation and Stock Option Grants
The Board service annual cash retainer shall be $20,000.
The Lead Director shall receive an annual retainer of $33,000.
The annual retainer for service as Chairman of the Audit,
Compensation, Finance and Nominating Committees shall be $4,000.
Such retainers shall be paid in monthly installments.
The Amended and Restated Deferred Compensation Plan for
Directors adopted on February 13, 1992 and effective January 1,
1992, as amended, permits a Director to defer all or any portion
of the annual cash retainer, as well as meeting fees and any
other cash compensation paid for service as a Director. The
amount deferred is recorded in each participant's deferred
compensation account and credited with income in the manner
prescribed in the Plan. For further details, reference is made
to the Plan, a copy of which is attached.
Each Director shall receive 1,000 shares of Common Stock on
or about the 15th business day following the annual meeting of
stockholders, pursuant to the Non-Employee Directors Stock
Compensation Plan, effective April 25, 1995, as amended. A
Director may decline a stock payment for any plan year, in
writing in advance of the plan year to which stock payment
relates. No cash compensation shall be paid in lieu thereof. By
written election a Director may reduce the cash portion of the
annual retainer and have that amount applied to the purchase of
additional shares. The election must be made on a form provided
by the administrative committee and returned to the committee by
the last business day of the year prior to the year in which the
election is to be effective. The election remains in effect
until changed or revoked. No election may be changed or revoked
for the current year, but may be changed for a subsequent year.
For further details, reference is made to the Non-Employee
Director Stock Compensation Plan, a copy of which is attached.
Each Director shall receive an option grant annually to
purchase 3,000 shares of Company Common Stock. The option shall
vest immediately and is exercisable for 10 years from the date of
the grant. The option price is the fair market value of the
stock at the time of the grant. The option grant is made
pursuant to the 1997 Non-Employee Director Long-Term Incentive
Plan.
Board and Committee Meeting Fee
The fee for each Board meeting attended shall be $1,500 and
for each meeting attended of each Committee of which the Director
is a member, and for attendance at Planning and Pension meetings,
shall be $1,000, payable only to Directors who are not full-time
employees of the Company.
Travel Expense Reimbursement
All Directors will be reimbursed for reasonable travel
expenses including spouse's expenses (providing the spouse
participates in ALL business, community, spouse-specific and
social events), in connection with attendance at meetings of the
Company's Board of Directors and its committees. If the travel
expense is related to the reimbursement of commercial airfare,
such reimbursement will not exceed full-coach rate. If the
travel expense is related to reimbursement of non-commercial
airfare, such reimbursement will not exceed the rate for
comparable travel by means of commercial airline at the first-
class rate.
Directors' Liability
Article Seventeenth of the Company's Restated Certificate of
Incorporation provides that no Director of the Company shall be
liable to the Company or its stockholders for breach of fiduciary
duty as a Director, with certain exceptions stated below.
Section 7.07 of the Company's Bylaws requires the Company to
indemnify fully a Director against expenses, attorneys fees,
judgments, fines and amounts paid in settlement of any suit,
action or proceeding, whether civil or criminal, arising from an
action of a Director by reason of the fact that the Director was
a Director of MDU Resources Group, Inc.
There are exceptions to these protections: breaches of the
Directors' duty of loyalty to the Company or its stockholders,
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law, violation of
Section 174 of the Delaware General Corporation Law (relating to
unlawful declaration of dividends and unlawful purchase of the
company's stock), and transactions from which the Director
derived an improper personal benefit (including short-swing
profits under Section 16(b) of the Securities Exchange Act of
1934).
The Company has and does maintain Directors' and Officers'
liability insurance coverage with a $100,000,000 limit.
Insurance Coverages
The Company maintains the following insurance for protection
of its Directors as they carry out the business of MDU Resources
Group, Inc.
1. General liability and automobile liability
insurance:
The Directors are afforded coverage under the
general liability and automobile liability
insurance of the Company. The policy limit is
$75,000,000 in excess of self-insured
retentions of $500,000 per occurrence for
general liability and $250,000 per occurrence
for automobile liability; or $1,000,000 per
occurrence/$2,000,000 aggregate for general
liability and $1,000,000 per occurrence for
automobile liability, where we are carrying
primary layer insurance coverage.
2. Fiduciary and employee benefit liability insurance:
The Directors are afforded coverage
under the fiduciary and employee benefits
liability insurance of the Company. The
policy has a $35,000,000 limit with no
deductible applicable to the Director.
3. Aircraft liability insurance:
The Company's existing aircraft
liability insurance policy extends coverage
while a non-owned* aircraft is used by a
Director in traveling to and from Director or
Board committee meetings. This insurance
coverage constitutes excess liability
coverage in the amount of $200,000,000.
*Non-owned aircraft is defined as: 1)
any aircraft registered under a "standard"
airworthiness certificate issued by the FAA;
2) aircraft with a seating capacity not
exceeding 40 seats; 3) aircraft that are not
owned by MDU Resources Group, Inc. or any of
its subsidiaries; 4) aircraft that are not
partly or wholly owned by or registered in
the Director's name or the name of any
Director's household member.
4. Travel and sojourn insurance:
All Directors are protected by a group
insurance policy with coverage of $250,000
that provides 24-hour accident protection
while traveling on Company business.
Coverage in all instances begins at the
actual start of a business trip and ends when
the Director returns to his/her home or
regular place of employment.
The beneficiary of the insurance will be
that beneficiary recorded on a beneficiary
designation card provided by the Company.
5. Group life insurance:
All outside Directors are protected by a
non-contributory group life insurance policy
with coverage of $100,000.
The coverage begins the day the Director
is elected to the Board of Directors and
terminates when the Director ceases to be an
outside Director.
A Certificate of Insurance shall be
provided to the Director and the beneficiary
of the insurance will be that beneficiary
recorded on a beneficiary designation card
provided by the Company.
This protection is considered taxable
compensation under current tax laws.
Consequently, the Company will provide each
Director annually on Form 1099 the amount of
taxable income related to this coverage.