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, meeting fees and post-retirement income:
Annual Retainers
The Board service annual cash retainer shall be $13,000. That
of the Chairman of the Board shall be four times that of the other
Directors. The annual retainer for service as Chairman of the
Audit or Nominating Committee shall be $2,500 and of the
Compensation or Finance Committee, $4,000. Such retainers shall be
paid in monthly installments.
A minimum of $1,000 of the annual cash retainer shall be
deferred under the Amended and Restated Deferred Compensation Plan
for Directors adopted on February 13, 1992 and effective January 1,
1992. If the Chairman of the Board is a retired employee such
deferral need not be made and this Plan shall not apply. The Plan
permits a Director to defer all or any portion of the annual cash
retainer above the mandatory $1,000 deferral. 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 450 shares of Common Stock on or
about the 15th business day following the annual meeting of
stockholders. 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 at least
six months prior to the applicable annual meeting of stockholders.
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.
Board and Committee Meeting Fee
The fee for each Board meeting attended shall be $1,000 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.
Post-Retirement Income
After retirement from the Board, each Director who does not
receive a pension benefit from the Company is entitled to receive
annual compensation in an amount equal to the sum of all annual
retainers being received by the Director at the time of the
Director's retirement. "Annual compensation" shall include the
value of the 450 shares of Common Stock at the time of retirement.
The dollar value included in the calculation of the amount of
annual compensation shall be the average of the high price and the
low price of the Common Stock as traded on the New York Stock
Exchange on the day of the annual meeting or, if no stock is traded
on that day, then the average on the day next preceding the annual
meeting date on which Common Stock was traded. The annual
compensation will be paid to the Director (or to the Director's
named beneficiary in the event the Director dies after retirement
and while the Director is still being paid the annual compensation)
in equal monthly installments over a period of time equal to the
period of service of the Director on the Board. Should a Director
die while in office, annual compensation will be paid to the
Director's named beneficiary in an amount equal to the sum of all
annual retainers being received by the Director at the time of the
Director's death. The annual compensation will be paid in equal
monthly installments over a period of time equal to the period of
service of the deceased on the Board.
If there is a "change in control" (as hereinafter defined)
then within 14 days thereafter the following actions shall be
taken:
(1) The Post-Retirement Income of each Director
currently serving on the Board and entitled to
receive such Income shall be calculated as if the
Director had retired immediately prior to the
change in control.
(2) The entire amount of the Post-Retirement Income (as
calculated under the preceding paragraph) to which
each Director is entitled shall be paid to each
Director in a lump sum.
(3) Each retired Director who, at the time the change
in control occurs, is retired and is receiving, or
is entitled to receive, Post-Retirement Income,
shall receive all remaining Post-Retirement Income
which has not been paid to the retired Director
(or the retired Director's beneficiary) in a lump
sum and not in installments.
"Change in control" shall mean the earlier of the following to
occur: (a) the public announcement by the Company or by any person
(which shall not include the Company, any subsidiary of the Company
or any employee benefit plan of the Company or of any subsidiary of
the Company) ("Person") that such Person, who or which, together
with all Affiliates and Associates (within the meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (17 C.F.R.
240.12b-2)) of such Person, shall be the beneficial owner of twenty
percent (20%) or more of the voting stock then outstanding; (b) the
commencement of, or after the first public announcement of any
Person to commence, a tender or exchange offer the consummation of
which would result in any Person becoming the beneficial owner of
voting stock aggregating thirty percent (30%) or more of the then
outstanding voting stock; (c) the announcement of any transaction
relating to the Company required to be described pursuant to the
requirements of Item 6(e) of Schedule 14A of Regulation 14A of the
Securities and Exchange Commission under the Securities Exchange
Act of 1934 (17 C.F.R. 240.14a-101, item 6(e)); (d) a proposed
change in the constituency of the Board of Directors of the Company
such that, during any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the
Board of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election or
nomination for election by the shareholders of the Company of each
new director was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who were members of the Board of
Directors of the Company at the beginning of the period; or (e) any
other event which shall be deemed by a majority of the Compensation
Committee of the Board of Directors of the Company to constitute a
"change in control."
Directors Emeritus
The Board of Directors may elect from those persons who have
been members of the Board of Directors, Directors Emeritus. Those
elected shall have served as a Director for at least ten years. The
designation as a Director Emeritus may be renewed annually by the
Board of Directors, but not beyond the fifth year following the
Director's retirement from the Board of Directors.
Each person so designated may, from time to time, be invited
by the Chairman of the Board to participate as a nonvoting member
of the Company's Board of Directors. A Director Emeritus so
participating shall receive no meeting fee although reimbursement
for reasonable travel expenses in connection with attendance at the
meeting will be provided.
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 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. 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 Montana-Dakota Utilities Co. or 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 $75,000,000 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 limitation is
$75,000,000 in excess of the $500,000 per
occurrence retention for general liability and
$250,000 per occurrence retention for automobile
liability which the Company has elected to self
insure.
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.
In the case of aircraft owned by a Director, this coverage is
excess over and above primary insurance which must be carried
personally by a Director on the owned aircraft. Before coverage
over and above primary insurance will be provided, a Certificate of
Insurance from the Director must be received, submitted to the
Company's insurance carrier and approved. The Company's insurance
carrier shall have the right to determine the amount and limits of
coverage.
3. 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.
4. 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.