SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
MDU RESOURCES GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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[LOGO]
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SCHUCHART BUILDING MARTIN A. WHITE
918 EAST DIVIDE AVENUE CHAIRMAN, PRESIDENT &
CHIEF EXECUTIVE OFFICER
MAILING ADDRESS:
P.O. BOX 5650
BISMARCK, ND 58506-5650
(701) 222-7900
March 9, 2001
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders to be
held on Tuesday, April 24, 2001, at 11:00 a.m., Central Daylight Savings Time,
at 909 Airport Road, Bismarck, North Dakota 58504. The other Directors and the
officers join me in extending this invitation.
The formal matters to be acted upon at the meeting are described in the
accompanying Notice of Annual Meeting of Stockholders and Proxy Statement. In
addition to the formal issues, a brief report on current matters of interest
will be presented. Lunch will be served following the meeting.
We were pleased with the response of our stockholders at the 2000 Annual
Meeting at which 77.7 percent of the Common Stock was represented in person or
by proxy. We hope that participation by our stockholders in the affairs of the
Company will increase and that there will be an even greater representation at
the 2001 meeting. If you are unable to attend the meeting but have questions or
comments on the Company's operations, we would like to hear from you.
This year, you may vote your shares by telephone, by the Internet or by
marking, dating, signing and returning the enclosed letter proxy. Representation
of your shares at the meeting is very important. Accordingly, whether or not you
plan to attend the meeting, we urge you to submit your proxy promptly by one of
the three methods offered. If you do attend the meeting, you may, if you wish,
withdraw your proxy and vote in person.
I hope you will find it possible to attend the meeting.
Sincerely,
/s/ Martin A. White
Martin A. White
MDU RESOURCES GROUP, INC.
SCHUCHART BUILDING
918 EAST DIVIDE AVENUE
MAILING ADDRESS:
P.O. BOX 5650
BISMARCK, ND 58506-5650
(701) 222-7900
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 2001
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March 9, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of MDU
Resources Group, Inc. will be held at 909 Airport Road, Bismarck, North Dakota
58504, on Tuesday, April 24, 2001, at 11:00 a.m., Central Daylight Savings Time,
for the following purposes:
(1) To elect four Directors to three year terms and one Director to a one
year term;
(2) To approve amendments to the 1997 Executive Long-Term Incentive Plan;
and
(3) To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on February 26, 2001,
as the record date for the determination of common stockholders who will be
entitled to notice of, and to vote at, the meeting.
All stockholders who find it convenient to do so are cordially invited and
urged to attend the meeting in person.
By order of the Board of Directors,
/s/ LESTER H. LOBLE, II
LESTER H. LOBLE, II
SECRETARY
TABLE OF CONTENTS
PAGE
--------
Notice of Annual Meeting of Stockholders
Proxy Statement
General................................................. 1
Voting Securities Outstanding........................... 1
Election of Directors................................... 2
Proposal to Amend the 1997 Executive Long-Term Incentive
Plan................................................... 7
Executive Compensation.................................. 14
Summary Compensation Table.............................. 14
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values...................... 15
Pension Plan Table...................................... 15
Change-of-Control Arrangements.......................... 16
Compensation Committee Report on Executive
Compensation........................................... 16
MDU Resources Group, Inc. Comparison of Five Year Total
Stockholder Return..................................... 18
Directors' Compensation................................. 19
Section 16(a) Beneficial Ownership Reporting
Compliance............................................. 19
Information Concerning Executive Officers............... 19
Security Ownership...................................... 21
Accounting and Auditing Matters......................... 22
Audit Committee Report.................................. 22
Other Business.......................................... 23
2002 Annual Meeting of Stockholders..................... 23
Exhibits
Exhibit A--MDU Resources Group, Inc. 1997 Executive
Long-Term Incentive Plan............................... A-1
Exhibit B--MDU Resources Group, Inc. Board of Directors'
Audit Committee Charter................................ B-1
i
MDU RESOURCES GROUP, INC.
SCHUCHART BUILDING
918 EAST DIVIDE AVENUE
MAILING ADDRESS:
P.O. BOX 5650
BISMARCK, ND 58506-5650
(701) 222-7900
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PROXY STATEMENT
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This Proxy Statement is furnished to the holders of Common Stock of MDU
Resources Group, Inc. (Company) on behalf of the Board of Directors of the
Company in connection with the solicitation of proxies to be used in voting at
the Annual Meeting of Stockholders to be held on April 24, 2001. The proxy
material was first forwarded to the holders of Common Stock on March 9, 2001.
Stockholders of record may vote their proxies by Touchtone telephone by
calling the toll free telephone number on the proxy, by using the Internet, or
by marking, dating, signing and returning the enclosed letter proxy in the
envelope provided (no postage is necessary if mailed in the United States). If
your shares are held in the name of a bank or broker, you MAY be able to vote by
telephone or the Internet. Follow the instructions you receive from your bank or
broker.
The Company has been advised by counsel that the procedures for Internet and
telephone voting are consistent with the requirements of applicable law.
Stockholders voting through the Internet should understand that there may be
costs associated with electronic access, such as usage charges from Internet
access providers and telephone companies, that must be borne by the stockholder.
Any stockholder giving a proxy may revoke it at any time prior to its use at
the meeting by filing with the Secretary either a written instrument of
revocation or a duly executed proxy bearing a later date. In addition, the
powers of a proxy holder are suspended if the person executing the proxy is
present at the meeting and informs the Secretary in open meeting that he wishes
to revoke his proxy and vote in person. Attendance at the meeting will not, in
and of itself, revoke a proxy.
The Company will bear the cost of the solicitation of proxies, including the
charges and expenses of brokerage firms and others, for forwarding solicitation
material to beneficial owners of shares of the Common Stock of the Company. In
addition to the use of the mails, proxies may be solicited by officers and
regular employees of the Company, by personal interview, by telephone, or other
electronic means. Banks, brokerage houses and other institutions, nominees, and
fiduciaries will be requested to forward the soliciting material to their
principals and to obtain authorizations for the execution of the letter proxies
and will, upon request, be reimbursed for reasonable expenses incurred.
Additional solicitation of proxies will be made in the same manner under the
special engagement and direction of Georgeson & Company, Inc. at an anticipated
cost to the Company of approximately $6,500 plus out-of-pocket expenses.
VOTING SECURITIES OUTSTANDING
Only holders of record of Common Stock at the close of business on
February 26, 2001, will be entitled to vote at the meeting. On such date there
were outstanding 65,725,235 shares of Common Stock. Each outstanding share of
Common Stock entitles the holder to one vote.
1
The Bylaws of the Company provide that a majority of the shares of Common
Stock issued and outstanding and entitled to vote in person or by proxy shall
constitute a quorum at a meeting of stockholders of the Company. Shares of
Common Stock represented by a properly submitted proxy are considered present
for purposes of determining a quorum. A proxy may be submitted by returning a
properly signed and dated letter proxy, by Touchtone telephone, or by the
Internet.
Under Delaware law, if a quorum is present, the nominees for election as
Directors who receive a plurality of the votes of shares present in person or
represented by proxy and entitled to vote shall be elected as Directors.
"Withheld" votes are not included in the total vote cast for a nominee for
purposes of determining whether a plurality was received and, therefore, have no
negative effect.
The proposed amendments to the 1997 Executive Long-Term Incentive Plan for
New York Stock Exchange and Internal Revenue Code purposes require the
affirmative vote of the holders of a majority of the votes cast, provided that
the total votes cast represent over 50 percent in interest of all securities
entitled to vote on the amendments. Under the laws of the State of Delaware, the
Plan amendments require the affirmative vote of the holders of a majority of the
Common Stock present or represented by proxy and entitled to vote. Abstentions
will have the effect of a vote against the amendments and broker non-votes will
have no effect. For the purpose of determining whether the number of votes cast
represents more than 50 percent of the shares of Common Stock entitled to vote,
abstentions will count as votes cast and broker non-votes will not count as
votes cast.
As of February 26, 2001, no person other than New York Life Trust Company
held of record, or, to the knowledge of the management of the Company, owned
beneficially, 5 percent or more of the outstanding shares of Common Stock of the
Company. New York Life Trust Company, Norwood, MA, held approximately
9.1 percent of the outstanding Common Stock of the Company as trustee of the
Company's Tax Deferred Compensation Savings Plans. New York Life Trust Company
disclaims all beneficial ownership of these shares.
ELECTION OF DIRECTORS
Three of the Company's directors have retired or are retiring this year:
Richard L. Muus, San W. Orr, Jr., and John A. Schuchart.
Mr. Muus, who was first elected to the Board in 1985, has reached age 70 and
is not standing for reelection. He currently serves on the Audit Committee and
as chairman of the Finance Committee.
Mr. Orr retired from the Board on November 14, 2000. Mr. Orr was elected to
the Board in 1978. He served most recently on the Audit Committee and as
chairman of the Compensation Committee.
Mr. Schuchart retired as Chairman of the Board on January 12, 2001, his 25th
anniversary with the Company.
The Company thanks each of these men for their many years of distinguished
service to MDU Resources Group, Inc.
At the meeting, four Directors will be elected to serve for a term of three
years until 2004, and one Director will be elected to serve a term of one year
until 2002, and until their respective successors are elected and qualify. All
of the nominees are incumbent Directors and are nominated for reelection. Unless
otherwise specified when the proxy is submitted, shares of the Common Stock
represented by the proxy will be voted for the nominees named below. If any
nominee becomes unavailable for any reason, or if a vacancy should occur before
the election (which events are not anticipated), the shares represented by the
proxy will be voted for another person in the discretion of the persons named in
the proxy. Information
2
concerning the nominees, including their ages, periods of service as Directors,
and business experience, according to information furnished to the Company by
the respective nominees, is set forth as follows:
FIRST YEAR
OF SERVICE
NAME AGE AS DIRECTOR BUSINESS EXPERIENCE
- ---- -------- ----------- ---------------------------------------------
Dennis W. Johnson ................... 51 2001 Mr. Johnson is Chairman and Chief Executive
(to be elected for a term of Officer of TMI Systems Design Corporation,
three years expiring in 2004) TMI Transport Corporation and TMI Storage
Systems Corporation, all of Dickinson,
[PHOTO] North Dakota, manufacturers of casework and
architectural woodwork. Mr. Johnson also is
chairperson of the Theodore Roosevelt
Medora Foundation, a member of the
Dickinson State University Foundation
Board, and a member of the business
advisory councils for Steffes Corporation
and Consolidated Telephone Cooperative. He
is President of the Dickinson City
Commission and previously has served as a
director of the Federal Reserve Bank of
Minneapolis. He currently serves on the
Audit and Finance Committees of the Board
of Directors.
Douglas C. Kane ..................... 51 1991 Mr. Kane was elected Executive Vice
(to be elected for a term of President, Chief Administrative and Corporate
one year expiring in 2002) Development Officer in November 1997. He
joined the Company as Executive Vice
[PHOTO] President and Chief Operating Officer in
January 1991. Prior to that time he was
President and Chief Executive Officer of
Knife River Corporation from May 1990,
President from September 1987, and
previously had served as Senior Vice
President--Operations. During 2000,
Mr. Kane served as Director and/or officer
of principal subsidiaries of the Company
and as a member of the Managing Committees
of Montana-Dakota Utilities Co. and Great
Plains Natural Gas Co. Mr. Kane also serves
as Chairman of the Board of Trustees of the
Western Regional Council. He is the Vice
Chairman of the N.D. Lignite Research
Council and serves on its Executive
Committee
John L. Olson ....................... 61 1985 Mr. Olson is President and owner of Blue Rock
(to be elected for a term of Products Company and of Blue Rock
three years expiring in 2004) Distributing Company located in Sidney,
Montana, a beverage bottling and
[PHOTO] distributing company, respectively.
Mr. Olson also is Chairman of the Board and
a Director of Admiral Beverage Corporation,
Worland, Wyoming, and Ogden, Utah; he is
Chairman of the Board and Director of the
Foundation for Community Care, Sidney,
Montana; Treasurer and a member of the
Executive Committee of the University of
Montana Foundation; a Director of BlueCross
BlueShield of Montana; and is trustee for
Blue Rock Products Company Profit Sharing
Trust, Sidney, Montana. He currently serves
on the Audit and Nominating Committees of
the Board of Directors.
3
FIRST YEAR
OF SERVICE
NAME AGE AS DIRECTOR BUSINESS EXPERIENCE
- ---- -------- ----------- ---------------------------------------------
Joseph T. Simmons ................... 65 1984 Mr. Simmons retired in May 1997 as a
(to be elected for a term of Professor of Accounting and Finance,
three years expiring in 2004) University of South Dakota, Vermillion and
was Visiting Professor of Finance,
[PHOTO] University of Warsaw, Warsaw, Poland
(February--July 1994). Mr. Simmons is the
Chairman and President of Simmons Financial
Management, Inc. He also serves on the
Boards of RE/SPEC in Rapid City, South
Dakota, and Dairilean, Inc. in Sioux Falls,
South Dakota. He currently serves on the
Finance and Nominating Committees of the
Board of Directors.
Martin A. White ..................... 59 1998 Mr. White was elected Chairman of the Board
(to be elected for a term of of the Company in February 2001. He joined
three years expiring in 2004) the Company in November 1991 as Vice
President--Corporate Development and was
[PHOTO] named Senior Vice President--Corporate
Development in November 1995. Effective
April 1, 1998, Mr. White became President
and Chief Executive Officer. He also serves
as Chairman of the Board, a Director and/or
an Officer of all principal subsidiaries,
and as Chairman of the Managing Com-
mittees of Montana-Dakota Utilities Co. and
Great Plains Natural Gas Co. Prior to
joining the Company, Mr. White was Chairman
and Chief Executive Officer of White
Resources Corporation (November
1989--October 1991); Executive Vice
President and Chief Operating Officer of
Consolidated TVX Mining Corporation of
Chile (January 1988--November 1989); and
Chairman, President, and Chief Operating
Officer of Entech Inc. (September
1986--December 1988), which formerly
comprised the non-utility subsidiaries of
The Montana Power Company. He is a member
of the University of Mary Board of Regents,
the Missouri Slope Areawide United Way
Board of Trustees and the North Dakota
Lewis & Clark Bicentennial Foundation
Board.
4
Certain information concerning the remaining Directors, whose terms expire
in 2002 or in 2003, including their ages, periods of service as Directors, and
business experience, according to information furnished to the Company, is set
forth as follows:
FIRST YEAR
OF SERVICE
NAME AGE AS DIRECTOR BUSINESS EXPERIENCE
- ---- -------- ----------- ---------------------------------------------
Thomas Everist ...................... 51 1995 Mr. Everist is President and a Director of L.
(term expiring in 2002) G. Everist, Inc., Sioux Falls, South Dakota,
an aggregate production company. He is Vice
[PHOTO] President and a Director of Spencer
Quarries, Spencer, South Dakota, a rock
quarry; a Director of Standard Ready Mix,
of Sioux City, Iowa; and a Director of
Raven Industries, Inc., a general manufac-
turer of electronics, sewn products, and
plastics, of Sioux Falls, South Dakota. He
currently serves on the Compensation and
Finance Committees of the Board of
Directors.
Robert L. Nance ..................... 64 1993 Mr. Nance is the President and Chief
(term expiring in 2002) Executive Officer of Nance Petroleum
Corporation, Billings, Montana, an oil and
[PHOTO] gas exploration and production company. He
also is a Director of First Interstate
Bank-Montana, and a Director of St. Mary
Land and Exploration Co. of Denver,
Colorado. He serves on the National Board
of Governors of the Independent Petroleum
Association of America and serves on the
Board, and is past Chairman of the
Petroleum Technology Transfer Council. He
currently serves on the Finance and
Nominating Committees of the Board of
Directors.
Harry J. Pearce ..................... 58 1997 Mr. Pearce is the Vice Chairman and a
(term expiring in 2003) Director of General Motors Corporation. He is
a Director of Hughes Electronics
[PHOTO] Corporation, General Motors Acceptance
Corporation, Marriott International Inc.,
Alliance of Automobile Manufacturers, and
the Theodore Roosevelt Medora Foundation,
and is Chairman of the United States Air
Force Academy's Board of Visitors and The
Marrow Foundation. He also serves on the
Board of Trustees of Howard University and
Northwestern University. He currently
serves on the Audit and Compensation
Committees of the Board of Directors.
5
FIRST YEAR
OF SERVICE
NAME AGE AS DIRECTOR BUSINESS EXPERIENCE
- ---- -------- ----------- ---------------------------------------------
Homer A. Scott, Jr. ................. 66 1981 Mr. Scott is engaged in the banking and
(term expiring in 2003) hospitality business in the states of Wyoming
and Montana. He is a Director and Chairman
[PHOTO] of the Board of First Interstate
BancSystem, Inc., a Director of First
Interstate Bank-Montana, and Chairman of
the Board and a Director of First
Interstate Bank-Wyoming. Mr. Scott is the
principal owner, a Director and President
of Sugarland Enterprises, Inc., and the
managing partner of Sugarland Development
Company, a commercial property development
company in Sheridan, Wyoming. Sugarland
Enterprises, Inc. owns and manages four
Perkins Restaurants, a Holiday Inn, and
Powder Horn Ranch, a housing development
and golf course near Sheridan. He currently
serves on the Audit and Compensation
Committees of the Board of Directors.
Sister Thomas Welder, O.S.B. ........ 60 1988 Sister Welder is the President of the
(term expiring in 2003) University of Mary, Bismarck, North Dakota.
She is a Director of St. Alexius Medical
[PHOTO] Center of Bismarck and Chair of its
Marketing Committee. She is a Director of
the Bismarck-Mandan Development Asso-
ciation and is a member and past Director
of the Bismarck-Mandan Area Chamber of
Commerce. She is also a member of the
Theodore Roosevelt Medora Founder's Society
and the Consultant-Evaluator Corps for the
North Central Association of Colleges and
Schools. She currently serves on the
Finance and Nominating Committees of the
Board of Directors.
Except where expressly noted, no corporation or organization named above is
a parent, subsidiary, or other affiliate of the Company.
During 2000, the Board of Directors had seven meetings. The Board of
Directors has an Audit Committee, a Compensation Committee, a Finance Committee,
and a Nominating Committee. All Committees are composed entirely of outside
Directors. The Audit Committee, established in 1972, meets regularly with
management, internal auditors, and representatives of the Company's independent
public accountants. During 2000, the Committee met four times. The Compensation
Committee, which met four times during 2000, sets compensation levels for
executive officers and recommends to the full Board of Directors compensation
for the Directors of the Company. The Finance Committee, which met seven times
during 2000, reviews corporate financial plans, policies, budgets, investments
and acquisitions, and reviews and authorizes actions necessary to issue and sell
Common Stock and debt securities of the Company. The Nominating Committee, which
met three times during 2000, recommends to the full Board of Directors nominees
for Director. All incumbent Directors attended more than 75 percent of the
combined total of the meetings of the Board and of the Committees on which the
Director served.
6
PROPOSAL TO AMEND THE 1997 EXECUTIVE LONG-TERM INCENTIVE PLAN
The 1997 Executive Long-Term Incentive Plan (the "LTIP") was approved by the
stockholders at the 1997 Annual Meeting, and Internal Revenue Code Section
162(m) amendments to the LTIP were approved at the 2000 Annual Meeting. On
February 15, 2001, the Board of Directors approved amendments to the plan to
(i) increase the number of shares of stock that may be granted under the LTIP by
4,000,000 (to fund the LTIP for the next few years) and (ii) to increase the
annual limit on grants to covered employees under the plan for purposes of
Section 162(m) of the Internal Revenue Code (the "Code"). In accordance with the
requirements of the New York Stock Exchange and Section 162(m) of the Code, the
stockholders must also approve the LTIP amendments.
The complete text of the LTIP as amended is set forth as Exhibit "A" hereto.
The following is a summary of the material features of the LTIP and is qualified
in its entirety by reference to Exhibit "A".
PURPOSE OF THE LTIP
The purpose of the LTIP is to promote the success and enhance the value of
the Company by linking the personal interests of officers and key employees to
those of the Company's stockholders and customers. The LTIP is further intended
to assist the Company in its ability to motivate, attract and retain highly
qualified individuals to serve as officers and key employees of the Company.
EFFECTIVE DATE AND DURATION
The LTIP became effective on April 22, 1997, and remains in effect, subject
to the right of the Board of Directors to terminate the LTIP at any time, until
all shares subject to the LTIP shall have been purchased or acquired; provided,
however, that no awards may be made after the tenth anniversary of the effective
date.
AMENDMENTS
The Board may, at any time and from time to time, alter, amend, suspend or
terminate the LTIP in whole or in part, subject to certain restrictions as
stated in the LTIP.
ADMINISTRATION OF THE LTIP
The LTIP is administered by the Compensation Committee of the Board or by
any other committee appointed by the Board of Directors (the "Committee").
SHARES SUBJECT TO THE LTIP
When it became effective, the LTIP authorized the grant of up to 1,200,000
shares of MDU Resources Group, Inc. common stock. At February 26, 2001, after
giving effect to stock splits and grants pursuant to the LTIP, 385,709 shares
remain available for issuance. On February 15, 2001, the Board of Directors
approved an increase of 4,000,000 shares of common stock for the LTIP, subject
to stockholder approval at the 2001 Annual Meeting. Shares underlying awards
that lapse or are forfeited may be reused for subsequent awards. Shares may be
authorized but unissued shares of common stock, treasury stock or shares
purchased on the open market. The market value of a share of Company common
stock as of December 31, 2000 was $32.50.
If a stock split, stock dividend or other corporate transaction occurs that
causes a change in the capitalization of the Company, the Committee shall make
appropriate adjustments to the number and class of shares of common stock that
may be granted under the LTIP and the number and class and/or price of shares of
common stock subject to outstanding awards under the LTIP, as it deems
appropriate and equitable to prevent dilution or enlargement of participants'
rights.
7
ELIGIBILITY AND PARTICIPATION
Employees eligible to participate in the LTIP include all officers and key
employees of the Company and its business units, as determined by the Committee,
including employees who are members of the Board of Directors, but excluding
directors who are not employees. The approximate number of employees who are
currently eligible to participate under the LTIP is 130.
GRANTS UNDER THE LTIP
SECTION 162(m). Stock options, SARs and performance unit/performance share
awards are intended to qualify for deductibility under Section 162(m) of the
Code. Dividend equivalents, restricted stock, restricted stock units and other
awards may qualify for deductibility.
The Board of Directors approved an increase in the individual annual limit
on grants to covered employees, from 300,000 to 1,000,000 shares ($6,000,000 for
dividend equivalents), subject to stockholder approval at the 2001 Annual
Meeting. The total number of shares with respect to which options or SARs may be
granted in any calendar year to any covered employee under Section 162(m) of the
Code shall not exceed 1,000,000 shares; (ii) the total number of shares of
restricted stock that are intended to qualify for deduction that may be granted
in any calendar year to any covered employee shall not exceed 1,000,000 shares;
(iii) the total number of performance shares or performance units that may be
granted in any calendar year to any covered employee shall not exceed 1,000,000
shares or units, as the case may be; (iv) the total number of shares that are
intended to qualify for deduction granted pursuant to Article 10 of the Plan in
any calendar year to any covered employee shall not exceed 1,000,000 shares;
(v) the total cash award that is intended to qualify for deduction that may be
paid pursuant to Article 10 of the Plan in any calendar year to any covered
employee shall not exceed $6,000,000; and (vi) the aggregate number of dividend
equivalents that are intended to qualify for deduction that a covered employee
may receive in any calendar year shall not exceed $6,000,000.
A "covered employee" means those persons specified in Section 162(m) of the
Code--generally the chief executive officer and the next four most
highly-compensated officers.
STOCK OPTIONS. The Committee may grant incentive stock options ("ISOs"),
nonqualified stock options ("NQSOs") or a combination thereof under the LTIP.
The exercise price for each such award shall be not less than the average of the
high and low sale prices of Company common stock on the date of grant. Options
shall expire at such times and shall have such other terms and conditions as the
Committee may determine at the time of grant, provided, however, that no ISO
shall be exercisable later than the tenth anniversary of its grant. Dividend
equivalents may also be granted.
The option exercise price is payable in cash, in shares of common stock of
the Company having a fair market value equal to the exercise price, by share
withholding, cashless exercise or any combination of the foregoing.
STOCK APPRECIATION RIGHTS. SARs granted under the LTIP may be in the form
of freestanding SARs, tandem SARs or a combination thereof. The base value of a
freestanding SAR shall be equal to the average of the high and low sale prices
of a share of Company common stock on the date of grant. The base value of a
tandem SAR shall be equal to the option exercise price of the related option.
Freestanding SARs may be exercised upon such terms and conditions as are
imposed by the Committee and as set forth in the SAR award agreement. A tandem
SAR may be exercised only with respect to the shares of common stock of the
Company for which its related option is exercisable.
Upon exercise of an SAR, a participant will receive the product of the
excess of the fair market value of a share of Company common stock on the date
of exercise over the base value multiplied by the number of shares with respect
to which the SAR is exercised. Payment due to the participant upon exercise may
be
8
made in cash, in shares of Company common stock having a fair market value equal
to such cash amount, or in a combination of cash and shares, as determined by
the Committee.
RESTRICTED STOCK. Restricted stock may be granted in such amounts and
subject to such terms and conditions as determined by the Committee. The
Committee may establish performance goals, as described below, for restricted
stock.
Participants holding restricted stock may exercise full voting rights with
respect to those shares during the restricted period and, subject to the
Committee's right to determine otherwise at the time of grant, will receive
regular cash dividends. All other distributions paid with respect to the
restricted stock shall be credited subject to the same restrictions on
transferability and forfeitability as the shares of restricted stock with
respect to which they were paid.
PERFORMANCE UNITS AND PERFORMANCE SHARES. Performance units and performance
shares may be granted in the amounts and subject to such terms and conditions as
determined by the Committee. The Committee shall set performance goals, which,
depending on the extent to which they are met during the performance periods
established by the Committee, will determine the number and/or value of
performance units/shares that will be paid out to participants.
Participants shall receive payment of the value of performance units/shares
earned after the end of the performance period. Payment of performance
units/shares shall be made in cash and/or shares of common stock which have an
aggregate fair market value equal to the value of the earned performance
units/shares at the end of the applicable performance period, in such
combination as the Committee determines. Such shares may be granted subject to
any restrictions deemed appropriate by the Committee.
OTHER AWARDS. The Committee may make other awards which may include,
without limitation, the grant of shares of common stock based upon attainment of
performance goals established by the Committee as described below, the payment
of shares in lieu of cash or cash based on performance goals and the payment of
shares in lieu of cash under other Company incentive or bonus programs.
PERFORMANCE GOALS
Performance goals, which are established by the Committee, will be based on
one or more of the following measures: sales or revenues, earnings per share,
shareholder return and/or value, funds from operations, operating income, gross
income, net income, cash flow, return on equity, return on capital, earnings
before interest, operating ratios, stock price, customer satisfaction,
accomplishment of mergers, acquisitions, dispositions or similar extraordinary
business transactions, profit returns and margins, financial return ratios
and/or market performance. Performance goals may be measured solely on a
corporate, subsidiary or business unit basis, or a combination thereof.
Performance goals may reflect absolute entity performance or a relative
comparison of entity performance to the performance of a peer group of entities
or other external measure.
TERMINATION OF EMPLOYMENT
Each award agreement shall set forth the participant's rights with respect
to each award following termination of employment with the Company.
TRANSFERABILITY
Except as otherwise determined by the Committee at the time of grant and
subject to the provisions of the LTIP, awards may not be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution, and a participant's rights shall be
exercisable only by the participant or the participant's legal representative
during his or her lifetime.
9
CHANGE IN CONTROL
Upon a change in control, as defined below,
(a) Any and all options and SARs granted under the LTIP shall become
immediately exercisable;
(b) Any restriction periods and restrictions imposed on restricted stock
shall be deemed to have expired; any performance goals shall be deemed to
have been met at the target level; and such restricted stock shall become
immediately vested in full; and
(c) The target payout opportunity attainable under all outstanding awards of
performance units, performance shares and other awards shall be deemed to
have been fully earned for the entire performance period(s) as of the
effective date of the change in control. The vesting of all awards
denominated in shares shall be accelerated as of the effective date of
the change in control, and there shall be paid out in cash to
participants immediately following the effective date of the change in
control the full amount of the targeted cash payout opportunities
associated with outstanding cash-based awards.
A change in control of the Company means the earliest of the following
events to occur: (i) 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 the Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended) of such Person, shall be the beneficial owner of twenty percent (20%)
or more of the voting stock of the Company outstanding; (ii) 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 of the Company; (iii) 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 under the Exchange
Act; (iv) a proposed change in constituency of the Board such that, during any
period of two (2) consecutive years, individuals who at the beginning of such
period constitute the Board cease for any reason to constitute at least a
majority thereof, unless the election or nomination for election by the
stockholders 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 at the beginning of the period; or (v) any other event which shall
be deemed by a majority of the Committee to constitute a "change in control".
10
AWARD INFORMATION
It is not possible at this time to determine awards that will be made in the
future pursuant to the LTIP. Options that have been granted in the past are set
forth in the table below.
OPTION GRANTS UNDER 1997 EXECUTIVE LONG-TERM INCENTIVE PLAN
NUMBER OF
SECURITIES EXERCISE
UNDERLYING PRICE PER EXPIRATION
NAME AND POSITION OPTIONS GRANTED SHARE ($) DATE
- ----------------- --------------- ---------- ----------
Martin A. White............................................ 180,000 29.62 2/15/11
Chairman of the Board, President & C.E.O.
Douglas C. Kane............................................ 62,400 29.62 2/15/11
Executive Vice President, Chief Administrative &
Corporate Development Officer
Ronald D. Tipton........................................... 72,000 29.62 2/15/11
C.E.O. of Montana-Dakota Utilities Co. and Great Plains
Natural Gas Co.
Warren L. Robinson......................................... 62,400 29.62 2/15/11
Executive Vice President, Treasurer & Chief Financial
Officer
Lester H. Loble, II........................................ 54,600 29.62 2/15/11
Vice President, General Counsel & Secretary
All current executive officers as a group.................. 506,800 29.62 2/15/11
All current directors who are not executive officers as a 0 0 0
group.....................................................
Each nominee for election as a director.................... 0 0 0
Each associate of such persons............................. 0 0 0
Each other person who receives 5% of such options.......... 0 0 0
All employees, including all current officers who are not
executive officers, as a group............................ 1,053,827 29.62 2/15/11
Options were granted in 2001 for the 2001-2003 award cycle. The options are
performance accelerated with a ten year term; they vest nine years after grant,
but vesting may be accelerated upon achievement of performance goals established
by the Committee over the three-year performance period. Dividend equivalents
were also granted. The exercise price is fair market value on the date of grant.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the principal federal income tax
consequences relating to options awarded under the LTIP. This summary is based
on the Company's understanding of present federal income tax law and
regulations. The summary does not purport to be complete or applicable to every
specific situation.
CONSEQUENCES TO THE OPTIONHOLDER
GRANT. There are no federal income tax consequences to the optionholder
solely by reason of the grant of ISOs or NQSOs under the LTIP.
11
EXERCISE. The exercise of an ISO is not a taxable event for regular federal
income tax purposes if certain requirements are satisfied, including the
requirement that the optionholder generally must exercise the ISO no later than
three months following the termination of the optionholder's employment with the
Company. However, such exercise may give rise to alternative minimum tax
liability (see "Alternative Minimum Tax" below).
Upon the exercise of a NQSO, the optionholder will generally recognize
ordinary income in an amount equal to the excess of the fair market value of the
shares of Company common stock at the time of exercise over the amount paid
therefor by the optionholder as the exercise price. The ordinary income, if any,
recognized in connection with the exercise by an optionholder of a NQSO will be
subject to both wage and employment tax withholding.
The optionholder's tax basis in the shares acquired pursuant to the exercise
of an option will be the amount paid upon exercise plus, in the case of a NQSO,
the amount of ordinary income, if any, recognized by the optionholder upon
exercise thereof.
QUALIFYING DISPOSITION. If an optionholder disposes of shares of Company
common stock acquired upon exercise of an ISO in a taxable transaction, and such
disposition occurs more than two years from the date on which the option was
granted and more than one year after the date on which the shares were
transferred to the optionholder pursuant to the exercise of the ISO, the
optionholder will recognize long-term capital gain or loss equal to the
difference between the amount realized upon such disposition and the
optionholder's adjusted basis in such shares (generally the option exercise
price).
DISQUALIFYING DISPOSITION. If the optionholder disposes of shares of
Company common stock acquired upon the exercise of an ISO (other than in certain
tax-free transactions) within two years from the date on which the ISO was
granted or within one year after the transfer of shares to the optionholder
pursuant to the exercise of the ISO, at the time of disposition the optionholder
will generally recognize ordinary income equal to the lesser of (i) the excess
of each such share's fair market value on the date of exercise over the exercise
price paid by the optionholder or (ii) the optionholder's actual gain (I.E., the
excess, if any, of the amount realized on the disposition over the exercise
price paid by the optionholder). If the total amount realized on a taxable
disposition (including return of capital and capital gain) exceeds the fair
market value on the date of exercise of the shares of Company common stock
purchased by the optionholder under the option, the optionholder will recognize
a capital gain in the amount of such excess. If the optionholder incurs a loss
on the disposition (i.e., if the total amount realized is less than the exercise
price paid by the optionholder), the loss will be a capital loss.
OTHER DISPOSITION. If an optionholder disposes of shares of Company common
stock acquired upon exercise of a NQSO in a taxable transaction, the
optionholder will recognize capital gain or loss in an amount equal to the
difference between the optionholder's basis (as discussed above) in the shares
sold and the total amount realized upon disposition. Any such capital gain or
loss (and any capital gain or loss recognized on a disqualifying disposition of
shares of Company common stock acquired upon exercise of ISOs as discussed
above) will be short-term or long-term depending on whether the shares of
Company common stock were held for more than one year from the date such shares
were transferred to the optionholder.
ALTERNATIVE MINIMUM TAX. Alternative minimum tax ("AMT") is payable if and
to the extent the amount thereof exceeds the amount of the taxpayer's regular
tax liability, and any AMT paid generally may be credited against future regular
tax liability (but not future AMT liability). AMT applies to alternative minimum
taxable income; generally, regular taxable income, subject to certain
adjustments and increased by items of tax preference, is treated differently
under the AMT.
For AMT purposes, the spread upon exercise of an ISO (but not a NQSO) will
be included in alternative minimum taxable income, and the taxpayer will receive
a tax basis equal to the fair market value of the shares of Company common stock
at such time for subsequent AMT purposes. However, if the
12
optionholder disposes of the ISO shares in the year of exercise, the AMT income
cannot exceed the gain recognized for regular tax purposes, provided that the
disposition meets certain third-party requirements for limiting the gain on a
disqualifying disposition. If there is a disqualifying disposition in a year
other than the year of exercise, the income on the disqualifying disposition is
not considered alternative minimum taxable income.
CONSEQUENCES TO THE COMPANY
There are no federal income tax consequences to the Company by reason of the
grant of ISOs or NQSOs or the exercise of an ISO (other than disqualifying
dispositions).
At the time the optionholder recognizes ordinary income from the exercise of
a NQSO, the Company will be entitled to a federal income tax deduction in the
amount of the ordinary income so recognized (as described above), provided that
the Company satisfies its reporting obligations described below. To the extent
the optionholder recognizes ordinary income by reason of a disqualifying
disposition of the stock acquired upon exercise of an ISO, the Company will be
entitled to a corresponding deduction in the year in which the disposition
occurs.
The Company will be required to report to the Internal Revenue Service any
ordinary income recognized by any optionholder by reason of the exercise of a
NQSO. The Company will be required to withhold income and employment taxes (and
pay the employer's share of employment taxes) with respect to ordinary income
recognized by the optionholder upon the exercise of NQSOs.
OTHER TAX CONSEQUENCES
The foregoing discussion is not a complete description of the federal income
tax aspects of options granted under the LTIP. In addition, administrative and
judicial interpretations of the application of the federal income tax laws are
subject to change. Furthermore, the foregoing discussion does not address state
or local tax consequences.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
The proposed amendments to the LTIP for New York Stock Exchange and Internal
Revenue Code purposes require the affirmative vote of the holders of a majority
of the votes cast, provided that the total votes cast represent over 50 percent
in interest of all securities entitled to vote on the amendments. Under the laws
of the State of Delaware, the LTIP amendments require the affirmative vote of
the holders of a majority of the Common Stock present or represented by proxy
and entitled to vote. Abstentions will have the effect of a vote against the
amendments and broker non-votes will have no effect. For the purposes of
determining whether the number of votes cast represents more than 50 percent of
the shares of Common Stock entitled to vote, abstentions will count as votes
cast and broker non-votes will not count as votes cast.
If a choice has been specified by a stockholder by means of the proxy, the
shares of common stock will be voted accordingly. If no choice has been
specified, the shares will be voted "FOR" the proposal.
13
EXECUTIVE COMPENSATION
Shown below is information concerning the annual and long-term compensation
for services in all capacities to the Company for the calendar years ending
December 31, 2000, 1999, and 1998, for those persons who (i) served as the Chief
Executive Officer during 2000, and (ii) were the other four most highly
compensated executive officers of the Company at December 31, 2000 (the "Named
Officers"). Footnotes supplement the information contained in the Tables.
TABLE 1: SUMMARY COMPENSATION TABLE(1)
LONG-TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- -------------------------- ----------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
NAME AND SALARY BONUS(2) SATION(3) AWARDS SARS PAYOUTS SATION(8)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ------------------ -------- -------- -------- --------- ---------- ---------- ---------- ---------
Martin A. White 2000 394,269 333,239 198,125(4) -- 393,118(7) 5,100
--Chairman of the Board, 1999 323,077 203,960 229,063(5) -- -- 4,872
President & C.E.O. 1998 254,808 139,461 54,157(5) 122,760(6) -- 5,484
Douglas C. Kane 2000 226,654 140,035 99,063(4) -- 178,690(7) 5,100
--Executive Vice 1999 210,220 79,146 114,532(5) -- -- 5,100
President, 1998 210,185 63,032 62,689(5) 55,800(6) -- 4,800
Chief Administrative &
Corporate Development
Officer
Ronald D. Tipton 2000 254,277 135,024 99,063(4) -- 181,517(7) 5,100
--C.E.O. of Montana-Dakota 1999 235,508 70,327 114,532(5) -- -- 4,863
Utilities Co. and Great 1998 223,491 103,500 -- 49,125(6) -- 4,998
Plains Natural Gas Co.
Warren L. Robinson 2000 188,462 110,912 79,250(4) -- 121,529(7) 5,100
--Executive Vice 1999 172,396 86,591 91,625(5) -- -- 4,872
President, 1998 150,865 57,855 43,771(5) 37,950(6) -- 4,526
Treasurer & Chief
Financial Officer
Lester H. Loble, II 2000 161,654 81,486 4,551 59,438(4) -- 89,345(7) 4,850
--Vice President, General 1999 150,750 55,355 5,741 68,719(5) -- -- 4,523
Counsel 1998 139,694 43,848 3,963 41,916(5) 27,900(6) -- 4,191
& Secretary
- ------------------------------
(1) All share amounts in the table are adjusted to reflect the Company's
three-for-two stock split on July 13, 1998.
(2) Granted pursuant to the Executive Incentive Compensation Plan.
(3) Above-market interest on deferred compensation.
(4) Valued at fair market value on the date of grant. The restricted stock will
vest nine years from the date of grant, assuming continued employment.
Vesting of some or all shares may be accelerated if total shareholder
return equals or exceeds the 50th percentile of the proxy peer group over a
three year performance cycle. Nonpreferential dividends are paid on the
restricted stock.
At December 31, 2000, the Named Officers held the following amounts of
restricted stock: Mr. White--22,190 shares ($721,841);
Mr. Kane--12,535 shares ($407,764); Mr. Tipton--10,000 shares ($325,300);
Mr. Robinson--9,770 shares ($317,818); and Mr. Loble--7,695 shares
($250,318).
(5) Valued at fair market value on the date of grant. Nonpreferential dividends
are paid on the restricted stock.
(6) Options granted pursuant to the 1992 KESOP for the 1998-2000 performance
cycle.
(7) Dividend equivalents paid with respect to options granted pursuant to the
1992 KESOP for the 1998-2000 performance cycle.
(8) Totals shown are the Company contributions to the Tax Deferred Compensation
Savings Plan.
14
TABLE 2: AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
(A) (B) (C) (D) (E)
SHARES NUMBER OF
ACQUIRED SECURITIES UNDERLYING VALUE OF UNEXERCISED, IN-THE-
ON VALUE UNEXERCISED OPTIONS MONEY OPTIONS
EXERCISE REALIZED AT FISCAL YEAR-END(1) AT FISCAL YEAR-END
(#) ($) (#) ($)
-------- -------- --------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ------------ --------------
Martin A. White.............. -- -- -- 122,760 -- 1,400,078
Douglas C. Kane.............. 46,343 487,939 -- 55,800 -- 636,399
Ronald D. Tipton............. -- -- -- 49,125 -- 560,271
Warren L. Robinson........... -- -- -- 37,950 -- 432,820
Lester H. Loble, II.......... -- -- 14,850 27,900 299,921 318,199
- ------------------------
(1) Vesting is accelerated upon a change in control.
TABLE 3: PENSION PLAN TABLE
YEARS OF SERVICE
----------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
$125,000.................................. $ 79,426 $ 88,022 $ 96,617 $105,213 $113,808
150,000.................................. 95,544 105,952 116,360 126,768 137,176
175,000.................................. 110,575 122,434 134,292 146,150 158,009
200,000.................................. 123,175 135,034 146,892 158,750 170,609
225,000.................................. 134,155 146,014 157,872 169,730 181,589
250,000.................................. 145,075 156,934 168,792 180,650 192,509
300,000.................................. 181,315 193,174 205,032 216,890 228,749
350,000.................................. 228,895 240,754 252,612 264,470 276,329
400,000.................................. 269,875 281,734 293,592 305,450 317,309
450,000.................................. 309,775 321,634 333,492 345,350 357,209
500,000.................................. 349,975 361,834 373,692 385,550 397,409
The Table covers the amounts payable under the Salaried Pension Plan and
non-qualified Supplemental Income Security Plan (SISP). Pension benefits are
determined by the step-rate formula which places emphasis on the highest
consecutive 60 months of earnings within the final 10 years of service. Benefits
for single participants under the Salaried Pension Plan are paid as straight
life amounts and benefits for married participants are paid as actuarially
reduced pensions with a survivorship benefit for spouses, unless participants
choose otherwise. The Salaried Pension Plan also permits preretirement
survivorship benefits upon satisfaction of certain conditions. Additionally,
certain reductions are made for employees electing early retirement.
The Internal Revenue Code places maximum limitations on the amount of
benefits that may be paid under the Salaried Pension Plan. The Company has
adopted a non-qualified SISP for senior management personnel. In 2000, 81 senior
management personnel participated in the SISP, including the Named Officers.
Both plans cover salary shown in column (c) of the Summary Compensation Table
and exclude bonuses and other forms of compensation.
Upon retirement and attainment of age 65, participants in the SISP may elect
a retirement benefit or a survivors' benefit with the benefits payable monthly
for a period of 15 years.
As of December 31, 2000, the Named Officers were credited with the following
years of service under the plans: Mr. White: Pension, 9, SISP, 9; Mr. Kane:
Pension, 29, SISP, 19; Mr. Tipton: Pension, 17,
15
SISP, 17; Mr. Robinson: Pension 12, SISP 12; and Mr. Loble: Pension, 13, SISP,
13. The maximum years of service for benefits under the Pension Plan is 35 and
under the SISP vesting begins at 3 years and is complete after 10 years. Benefit
amounts under both plans are not subject to reduction for offset amounts.
CHANGE-OF-CONTROL ARRANGEMENTS
The Company entered into Change of Control Employment Agreements with the
Named Officers in November 1998, which would become effective for a three-year
period (with automatic annual extension if the Company does not provide
nonrenewal notice at least 60 days prior to the end of each 12-month period)
only upon a change of control of the Company. If a change of control occurs, the
agreements provide for a three-year employment period from the date they become
effective, with base salary not less than the highest amount paid within the
preceding twelve months, an annual bonus not less than the highest bonus paid
within the preceding three years, and participation in the Company's incentive,
savings, retirement and welfare benefit plans.
The agreements also provide that specified payments and benefits would be
paid in the event of termination of employment of the Named Officer by the
Company, other than for cause or disability, or by the Named Officer for good
reason at any time when the agreements are in effect. In such event, each of the
Named Officers would receive payment of an amount equal to three times his
annual base pay plus three times his highest annual bonus (as defined therein).
In addition, under these agreements, each of the officers would receive (i) an
immediate pro-rated cash-out of his bonus for the year of termination based on
the highest annual bonus and (ii) an amount equal to the excess of (a) the
actuarial equivalent of the benefit under Company qualified and nonqualified
retirement plans that the executive would receive if he continued employment
with the Company for an additional three years over (b) the actual benefit paid
or payable under these plans. All benefits of each executive officer under the
Company's welfare benefit plans would continue for at least three years. These
arrangements also provide for certain gross-up payments to compensate these
executive officers for any excise taxes incurred in connection with these
benefits and reimbursement for certain outplacement services.
For these purposes, "cause" means the Named Officer's willful and continued
failure to substantially perform his duties or willfully engaging in illegal
conduct or misconduct materially injurious to the Company, and "good reason"
includes the Company's termination of the Named Officer without cause, the
assignment to the Named Officer of duties inconsistent with his prior status and
position, certain reductions in compensation or benefits, and relocation or
increased travel obligations.
A "change of control" is defined as (i) the acquisition by a party or
certain related parties of 20% or more of the Company's voting securities;
(ii) a turnover in a majority of the Board of Directors without the approval of
a majority of the members of the Board as of November 1998; (iii) a merger or
similar transaction after which the Company's stockholders hold 60% or less of
the voting securities of the surviving entity; or (iv) the stockholders'
approval of the liquidation or dissolution of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The Compensation Committee of the Board of Directors is responsible for
determining the compensation of the Company's executive officers. Composed
entirely of non-employee Directors, the Committee meets several times each year
to review and determine compensation for the executive officers, including the
Chief Executive Officer.
EXECUTIVE COMPENSATION
The Committee firmly believes that appropriate compensation levels succeed
in both attracting and motivating high quality employees. To implement this
philosophy, the Committee analyzes trends in
16
compensation among comparable companies participating in the oil and gas
industry, segments of the energy and mining industries, the peer group of
companies used in the graph following this report, and similar companies from
general industry. The Committee then sets compensation levels that it believes
are competitive within the industry and structured in a manner that rewards
successful performance on the job. There are three components of total executive
compensation: base salary, annual incentive compensation, and long-term
incentive compensation.
In setting base salaries, the Committee does not use a particular formula.
In addition to the data referenced above, other factors the Committee uses in
its analysis include the executive's current salary in comparison to the
competitive industry standard as well as individual performance. Using this
system, the Committee granted to Mr. White, the President and Chief Executive
Officer, a 20.5% increase in base salary for 2000. This increase took into
account Mr. White's personal performance during 2000, his time as chief
executive officer, and comparative industry data. During 2000, only
approximately 34.6% of Mr. White's compensation was base pay. The remainder was
performance-based. This reflects the Committee's belief in the importance of
having substantial at risk compensation to provide a direct and strong link
between performance and executive pay. The other Named Officers received base
salary increases averaging 8.28% for 2000.
In keeping with the Committee's belief that compensation should be directly
linked to successful performance, the Company employs both annual and long-term
incentive compensation plans. The annual incentive compensation is determined
under the Executive Incentive Compensation Plan. The Committee makes awards
based upon the level of corporate earnings, cost efficiency, and individual
performance. Mr. White received a total of $333,239 (or 150.9% of the targeted
amount) in annual incentive compensation for 2000; the other Named Officers
received an average of $116,864, or 149.3% of the targeted amount, based upon
achievement of corporate earnings and individual performance near the maximum
level.
Long-term incentive compensation serves to encourage successful strategic
management and is determined through two different vehicles: the 1992 Key
Employee Stock Option Plan and the 1997 Executive Long-Term Incentive Plan.
Options with a three-year performance cycle (1998-2000) and related dividend
equivalents were granted under the 1992 Key Employee Stock Option Plan in 1998.
Performance goals established by the Committee and described in the 1999 Proxy
Statement for the 1998-2000 performance cycle were exceeded; therefore,
exercisability of the options was accelerated and dividend equivalents were
earned at 130.0%. No additional options were granted in 2000.
Restricted stock awards were made in 2000 to Mr. White and the other Named
Officers under the 1997 Executive Long-Term Incentive Plan. The restricted stock
is performance accelerated; it vests automatically within nine years; however,
vesting may be accelerated if total shareholder return on MDU Resources stock
meets or exceeds the 50th percentile of the peer group (as shown in the
performance graph). The number of shares granted was to raise overall
compensation levels closer to the median (although still slightly below) level
of compensation within the industry. The restricted stock serves to motivate
long-term performance and to align the interests of the executives with those of
stockholders.
In 1994, the Board of Directors adopted Stock Ownership Guidelines under
which executives are required to own Company Common Stock valued from one to
four times their annual salary.
The 2000 compensation paid to the Company's executive officers qualified as
fully deductible under federal tax laws. The Committee continues to review the
impact of federal tax laws on executive compensation, including Section 162(m)
of the Internal Revenue Code.
Harry J. Pearce, Chairman Thomas Everist, Member Homer A. Scott, Jr.,
Member
17
MDU RESOURCES GROUP, INC.
COMPARISON OF FIVE YEAR TOTAL STOCKHOLDER RETURN (1)
Total Stockholder Return Index (1995=100)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MDU S&P 500 PEER GROUP
1995 100.00 100.00 100.00
1996 121.56 122.96 118.85
1997 174.59 163.98 156.35
1998 224.72 210.85 177.55
1999 177.28 255.21 168.49
2000 298.00 231.98 302.28
(1) All data is indexed to December 31, 1995, for the Company, the S&P 500, and
the peer group. Total stockholder return is calculated using the December 31
price for each year. It is assumed that all dividends are reinvested in stock
at the frequency paid, and the returns of each component peer issuer of the
group is weighted according to the issuer's stock market capitalization at
the beginning of the period. Peer Group issuers are Allete (formerly
Minnesota Power, Inc.), Black Hills Corporation, Coastal Corporation,
Equitable Resources, Inc., LG&E Energy Corp., The Montana Power Company,
NorthWestern Corporation, ONEOK, Inc., Otter Tail Power Company, Questar
Corporation, and UGI Corporation. LG&E Energy Corp. merged with Powergen PLC
and discontinued trading on December 11, 2000. However, value as of this date
was included for total return purposes at December 31, 2000.
18
DIRECTORS' COMPENSATION
Each Director who is not an officer of the Company (except the Chairman of
the Board) receives $13,000 and 450 shares of Company Common Stock as an annual
retainer for Board service. The Chairman receives $52,000 and 450 shares of
Company Common Stock. Audit and Nominating Committee Chairmen each receive a
$2,500 annual retainer, and Finance and Compensation Committee Chairmen each
receive a $4,000 annual retainer. Additionally, each Director who is not an
officer of the Company receives $1,000 for each meeting of the Board of
Directors attended and each Committee member who is not an officer of the
Company receives $1,000 for each Committee meeting attended. All Directors
except the Chairman of the Board must defer $1,000 of the retainer, which amount
is credited to a deferral account quarterly. The deferral amount is divided by
the market price of Company Common Stock and converted to investment units. If
dividends are paid on Company Common Stock then an equivalent amount is credited
for each investment unit and the resulting amount is converted to investment
units and credited to such Directors' accounts. After a participating Director
leaves the Board, dies, or becomes disabled, then the investment units credited
to that Director's account are multiplied times the market price of the Company
Common Stock, converted to a dollar value, and paid to the Director or named
beneficiary in equal monthly payments (with interest) over a five year period.
Of the remaining cash retainer, each Director may direct the retainer be paid in
one or a combination of the following forms: (1) deferred into the account
described, (2) Company stock, or (3) cash. Each Director who is not an officer
of the Company received on May 12, 2000, an option to purchase 2,250 shares of
Company Common Stock. The option award vested immediately and is exercisable for
10 years from the date of grant. The exercise price is $21.625, the fair market
value of the stock on the date of the grant.
The Company also has a post-retirement arrangement for Directors who are not
officers or retired officers of the Company which provides that after retirement
from the Board, a Director is entitled to receive an annual amount equal to the
sum of all annual retainers in effect at the time of retirement. Such amount
will be paid to the Director or named beneficiary in equal monthly installments
over a period of time equal to the period of service on the Board.
The Company also has a program whereby past Directors of the Company may be
chosen each year as "Director Emeritus" and each such past Director so chosen
may be invited to participate as a nonvoting member of the Company's Board of
Directors. Each such "Director Emeritus" serves for five years and receives no
compensation, other than reimbursement by the Company for reasonable travel
expenses in connection with attendance at meetings of the Company's Board of
Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of the Forms 3, 4 and 5 submitted to the Company
during and with respect to calendar year 2000, or written representations that
no Forms 5 were required, the Company believes that all such reports were timely
filed except that Mr. Thomas Everist, a director, filed late one report on Form
4 reporting one transaction.
INFORMATION CONCERNING EXECUTIVE OFFICERS
Executive officers of the Company are elected by the Board of Directors and
serve until the next annual meeting of the Board. Any executive officer so
elected may be removed at any time by the affirmative vote of a majority of the
Board. Certain information concerning such executive officers, including their
ages, present corporate positions, and business experience, is set forth below.
PRESENT CORPORATE POSITION
NAME AGE AND BUSINESS EXPERIENCE
- ---- -------- -----------------------------------------------------
Martin A. White................. 59 Chairman of the Board, President and Chief Executive
Officer. For information about Mr. White, see
"Election of Directors."
19
PRESENT CORPORATE POSITION
NAME AGE AND BUSINESS EXPERIENCE
- ---- -------- -----------------------------------------------------
Cathleen M. Christopherson...... 56 Ms. Christopherson was elected Vice
President-Corporate Communications effective
November 1989. Prior to that she served as
Assistant Vice President-Corporate Communications
effective September 1989 and Division Manager of
Montana-Dakota Utilities Co., a Division of the
Company, from August 1984.
Richard A. Espeland............. 57 Mr. Espeland was elected Vice President-Human
Resources effective August 2000. Prior to that he
served as Human Resources Manager from June 1990,
and Human Resource Development Manager effective
December 1989.
Douglas C. Kane................. 51 Executive Vice President, Chief Administrative and
Corporate Development Officer. For information
about Mr. Kane, see "Election of Directors."
Lester H. Loble, II............. 59 Mr. Loble was elected Vice President, General Counsel
and Secretary of the Company effective May 1999.
Prior to that he served as General Counsel and
Secretary of the Company effective May 1987.
Mr. Loble also serves as a Director and/or Vice
President, General Counsel and Secretary of the
principal subsidiaries of the Company. Mr. Loble is
also a member and the Secretary of the Managing
Committees of Montana-Dakota Utilities Co. and
Great Plains Natural Gas Co., Divisions of the
Company.
Vernon A. Raile................. 56 Mr. Raile was elected Vice President, Controller and
Chief Accounting Officer effective August 1992. Prior
to that he was Controller and Chief Accounting
Officer from May 1989, Assistant Treasurer from
December 1987, and Tax Manager from March 1980.
Warren L. Robinson.............. 50 Mr. Robinson was elected Executive Vice President,
Treasurer and Chief Financial Officer of the
Company effective May 1999. Prior to that he served
as Vice President, Treasurer and Chief Financial
Officer of the Company effective August 1992. He is
also Vice President, Vice President and Chief
Financial Officer, Treasurer and Assistant
Secretary, Vice President and Treasurer, or
Treasurer, of subsidiaries of the Company.
Mr. Robinson also serves as a Director of the
principal subsidiaries of the Company.
Mr. Robinson also is a member of the Managing
Committees of Montana-Dakota Utilities Co. and
Great Plains Natural Gas Co., Divisions of the
Company. Prior to 1992 he served as Treasurer and
Assistant Secretary from December 1989, Manager of
Corporate Development and Assistant Treasurer from
May 1989 to December 1989, and Manager of Corporate
Development from October 1988.
20
PRESENT CORPORATE POSITION
NAME AGE AND BUSINESS EXPERIENCE
- ---- -------- -----------------------------------------------------
Ronald D. Tipton................ 54 Mr. Tipton was elected Chief Executive Officer of
Montana-Dakota Utilities Co. and of Great Plains
Natural Gas Co. effective July 1, 2000. He
previously was President and Chief Executive
Officer of Montana-Dakota Utilities Co. effective
January 1995. Prior to that time he served
Williston Basin Interstate Pipeline Company in the
following capacities: President and Chief Executive
Officer from May 1994, President from May 1990,
Executive Vice President from May 1989, and Vice
President-Gas Supply from January 1985. From
January 1983 to January 1985 he was the Assistant
Vice President-Gas Supply of Montana-Dakota
Utilities Co.
Robert E. Wood.................. 58 Mr. Wood was elected Vice President-Public Affairs
and Environmental Policy of the Company effective
August 1991. Before that he was Vice
President-Public Affairs from June 1986. For five
years prior thereto he served as Manager of
Legislative Affairs for the Company.
SECURITY OWNERSHIP
The Table below sets forth the number of shares of capital stock of the
Company owned beneficially as of December 31, 2000, by each Director and each
nominee for Director, each Named Officer and by all Directors and executive
officers of the Company as a group.
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE
OWNERSHIP OF CLASS
----------------- ----------
NAME COMMON(1) COMMON
- ---- ----------------- ----------
Thomas Everist.............................................. 1,392,020(2) 2.1
Dennis W. Johnson........................................... 18(3) *
Douglas C. Kane............................................. 67,255(4)(5) *
Lester H. Loble, II......................................... 52,269(4) *
Richard L. Muus............................................. 23,612 *
Robert L. Nance............................................. 18,479 *
John L. Olson............................................... 34,200 *
Harry J. Pearce............................................. 33,056 *
Warren L. Robinson.......................................... 33,457(4)(6) *
John A. Schuchart........................................... 213,803(7) *
Homer A. Scott, Jr.......................................... 20,509(8) *
Joseph T. Simmons........................................... 22,680 *
Ronald D. Tipton............................................ 61,865(4) *
Sister Thomas Welder........................................ 13,435(9) *
Martin A. White............................................. 54,087(4)(10) *
All Directors and executive officers of the Company as a
group (18 in number)...................................... 2,161,827(4) 3.3%
- ------------------------
* Less than one percent of the class.
(1) The totals include beneficial ownership of shares which may be acquired
within 60 days pursuant to stock options: Mr. Everist 6,750 shares,
Mr. Loble 14,850 shares, Mr. Muus 9,000 shares, Mr. Nance
21
9,000 shares, Mr. Olson 6,750 shares, Mr. Pearce 6,750 shares,
Mr. Schuchart 6,750 shares, Mr. Scott 9,000 shares, Mr. Simmons 9,000
shares, Sister Thomas Welder: see footnote 9, and all Directors and all
executive officers of the Company as a group 95,293 shares.
(2) Includes 1,376,020 shares of common stock acquired through the sale of
Connolly-Pacific Co. to the Company.
(3) Consists of shares owned by Mr. Johnson's wife.
(4) Includes full shares allocated to the officer's account in the Tax Deferred
Compensation Savings Plan.
(5) Includes 23,335 shares owned by Mr. Kane's wife. Mr. Kane disclaims all
beneficial ownership of the shares owned by his wife.
(6) Includes 333 shares owned by Mr. Robinson's child and 225 shares by his
wife.
(7) Includes 118,099 shares owned by Mr. Schuchart's wife. Mr. Schuchart
disclaims all beneficial ownership of the shares owned by his wife.
(8) Includes 11,509 shares held by Homer A. Scott, Jr. Trust. Mr. Scott is a
co-trustee of the trust and shares voting and investment power with respect
to these shares.
(9) 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 2,700 shares and
it may acquire 9,000 shares within 60 days pursuant to stock options. The
University owns 1,735 shares. Sister Welder disclaims all beneficial
ownership of the shares owned by the Monastery and the University.
(10) Includes 610 shares owned by Mr. White's wife.
ACCOUNTING AND AUDITING MATTERS
Upon recommendation of the Audit Committee, the Board of Directors has
selected and employed the firm of Arthur Andersen LLP as the Company's
independent certified public accountants to audit its financial statements for
the fiscal year 2000. The Audit Committee is presently composed of
Messrs. Dennis W. Johnson, Richard L. Muus, John L. Olson, Harry J. Pearce, and
Homer A. Scott, Jr. (Chairman). This will be the fifteenth year in which the
firm has acted in this capacity. A representative of Arthur Andersen will be
present at the Annual Meeting of Stockholders. It is not anticipated that the
representative will make a prepared statement at the meeting. However, he or she
will be free to do so if he or she so chooses, as well as responding to
appropriate questions.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of five
non-employee directors of the Company. A sixth non-employee member, San W. Orr,
retired from the Board of Directors effective November 14, 2000. All members are
independent as defined in the applicable New York Stock Exchange listing
standards. The Committee held four meetings during 2000.
The Audit Committee is governed by a written charter adopted in 1979 and
reissued on May 11, 2000. The Audit Committee Charter is included as Exhibit "B"
to the Proxy Statement.
In connection with the December 31, 2000 financial statements, 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 SAS 61 (Codification of Statements on Auditing Standards, AU
Section 380); (3) received the written disclosures and the letter from the
independent accountants required by Independence Standards Board Standard No. 1
(Independence Discussions with
22
Audit Committees), and discussed with the independent accountant the independent
accountant's independence.
Based on the review and discussions referred to in items (1) through (3) of
the above paragraph, the Audit Committee recommended to the Board of Directors
that the audited financial statements be included in the Company's Annual Report
on Form 10-K for the last fiscal year for filing with the Securities and
Exchange Commission.
The Audit Committee has considered whether the provision of services covered
in Items 9(e)(2) and (e)(3) of Schedule 14A under the Securities Exchange Act of
1934 is compatible with maintaining the independence of Arthur Andersen LLP. The
Committee believes that the fees billed by Arthur Andersen LLP for the services
set forth below are compatible with Arthur Andersen LLP maintaining its
independence as the Company's principal accountant.
AUDIT FEES
The aggregate fees billed or expected to be billed by Arthur Andersen LLP
for professional services rendered for the audit of the Company's annual
financial statements for 2000 and the reviews of the financial statements
included in the Company's Forms 10-Q for 2000 are $444,500.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by Arthur Andersen LLP for 2000 for the
professional services described in Paragraph (c)(4)(ii) of Rule 2-01 of
Regulation S-X.
ALL OTHER FEES
The aggregate fees billed or expected to be billed for services rendered by
Arthur Andersen LLP, other than services described in the preceding two
paragraphs, for 2000 are $647,544.
The Audit Committee of the Board of Directors of MDU Resources Group, Inc.
Homer A. Scott, Jr., Chairman Dennis W. Johnson Richard L. Muus
John L. Olson Harry J. Pearce
OTHER BUSINESS
The management of the Company knows of no other matter to come before the
meeting. However, if any matter requiring a vote of the stockholders should
arise, it is the intention of the persons named in the enclosed proxy to vote in
accordance with their best judgment.
2002 ANNUAL MEETING OF STOCKHOLDERS
Under the Company's Bylaws, nominations for Director may be made only by the
Board or the Nominating Committee, or by a stockholder entitled to vote who has
delivered written notice to the Secretary of the Company (containing certain
information specified in the Bylaws) not less than 120 days prior to the
anniversary of the date on which the Company first mailed its proxy materials
for the prior year's annual meeting. The Bylaws also provide that no business
may be brought before an annual meeting of the stockholders except as specified
in the notice of the meeting or as otherwise properly brought before the meeting
by or at the direction of the Board or by a stockholder entitled to vote who has
delivered written notice to the Secretary of the Company (containing certain
information specified in the Bylaws) not less than 120 days prior to the
anniversary of the date on which the Company first mailed its proxy materials
for the prior year's annual meeting.
23
Rule 14a-4 of the Securities and Exchange Commission's proxy rules allows
the Company to use discretionary voting authority to vote on matters coming
before an annual meeting of stockholders, if the Company does not have notice of
the matter at least 45 days before the anniversary of the date on which the
Company first mailed its proxy materials for the prior year's annual meeting of
stockholders or the date specified by an advance notice provision in the
Company's Bylaws. The Company's Bylaws contain such an advance notice provision
as decribed above. For the Company's Annual Meeting of Stockholders expected to
be held on April 23, 2002, stockholders must submit such written notice to the
Secretary of the Company on or before November 9, 2001.
These requirements are separate and apart from and in addition to the
Securities and Exchange Commission's requirements that a stockholder must meet
in order to have a stockholder proposal included in the Company's Proxy
Statement under Rule 14a-8 of the Exchange Act. For purposes of the Company's
Annual Meeting of Stockholders expected to be held on April 23, 2002, any
stockholder who wishes to submit a proposal for inclusion in the Company's proxy
materials must submit such proposal to the Secretary of the Company on or before
November 9, 2001.
A copy of the full text of the Bylaw provisions discussed above may be
obtained by writing to the Secretary of the Company.
The Company hereby undertakes to deliver promptly, upon written or oral
request, a separate copy of the Annual Report to Stockholders, or Proxy
Statement, as applicable, to a Company stockholder at a shared address to which
a single copy of the document was delivered.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (EXCLUDING EXHIBITS), FOR
THE YEAR ENDED DECEMBER 31, 2000, WHICH IS REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WILL BE MADE AVAILABLE TO STOCKHOLDERS TO
WHOM THIS PROXY STATEMENT IS MAILED, WITHOUT CHARGE, UPON WRITTEN OR ORAL
REQUEST TO THE OFFICE OF THE TREASURER OF MDU RESOURCES GROUP, INC., SCHUCHART
BUILDING, 918 EAST DIVIDE AVENUE, MAILING ADDRESS: P.O. BOX 5650, BISMARCK, ND
58506-5650, TELEPHONE NUMBER: (701) 222-7900.
By order of the Board of Directors,
/s/ LESTER H. LOBLE, II
Lester H. Loble, II
SECRETARY
March 9, 2001
24
EXHIBIT A
MDU RESOURCES GROUP, INC
1997 EXECUTIVE LONG-TERM INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. MDU Resources Group, Inc., a Delaware
corporation (hereinafter referred to as the "Company"), hereby establishes an
incentive compensation plan to be known as the "MDU Resources Group, Inc. 1997
Executive Long-Term Incentive Plan" (hereinafter referred to as the "Plan"), as
set forth in this document. The Plan permits the grant of Nonqualified Stock
Options (NQSO), Incentive Stock Options (ISO), Stock Appreciation Rights (SAR),
Restricted Stock, Performance Units, Performance Shares and other awards.
The Plan shall become effective when approved by the stockholders at the
annual meeting on April 22, 1997 (the "Effective Date"), and shall remain in
effect as provided in Section 1.3 herein.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the success
and enhance the value of the Company by linking the personal interests of
Participants to those of Company stockholders and customers.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract and retain the services of Participants upon whose
judgment, interest and special effort the successful conduct of its operations
is largely dependent.
1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date,
as described in Section 1.1 herein, and shall remain in effect, subject to the
right of the Board of Directors to terminate the Plan at any time pursuant to
Article 15 herein, until all Shares subject to it shall have been purchased or
acquired according to the Plan's provisions. However, in no event may an Award
be made under the Plan on or after the day immediately preceding the tenth
anniversary of the Effective Date.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below and, when such meaning is intended, the initial letter of the word
is capitalized:
2.1 "AWARD" means, individually or collectively, a grant under the Plan of
NQSOs, ISOs, SARs, Restricted Stock, Performance Units, Performance Shares or
any other type of award permitted under Article 10 of the Plan.
2.2 "AWARD AGREEMENT" means an agreement entered into by each Participant
and the Company, setting forth the terms and provisions applicable to an Award
granted to a Participant under the Plan.
2.3 "BASE VALUE" of an SAR shall have the meaning set forth in Section 7.1
herein.
2.4 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
2.5 "CHANGE IN CONTROL" means the earliest 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 the Rule 12b-2 of the General Rules and Regulations under the
Exchange Act) of such Person, shall be the beneficial owner of twenty percent
(20%) or more of the voting stock of the Company 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
A-1
stock of the Company; (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 under the Exchange Act; (d) a proposed change in
constituency of the Board such that, during any period of two (2) consecutive
years, individuals who at the beginning of such period constitute the Board
cease for any reason to constitute at least a majority thereof, unless the
election or nomination for election by the stockholders 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 at the beginning of
the period; or (e) any other event which shall be deemed by a majority of the
Compensation Committee to constitute a "change in control".
2.6 "CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
2.7 "COMMITTEE" means the Committee, as specified in Article 3, appointed
by the Board to administer the Plan with respect to Awards.
2.8 "COMPANY" means MDU Resources Group, Inc., a Delaware corporation, or
any successor thereto as provided in Article 17 herein.
2.9 "COVERED EMPLOYEE" means any Participant who would be considered a
"Covered Employee" for purposes of Section 162(m) of the Code.
2.10 "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company.
2.11 "DISABILITY" means "permanent and total disability" as defined under
Section 22(e)(3) of the Code.
2.12 "DIVIDEND EQUIVALENT" means, with respect to Shares subject to an
Award, a right to be paid an amount equal to dividends declared on an equal
number of outstanding Shares.
2.13 "ELIGIBLE EMPLOYEE" means an Employee who is eligible to participate
in the Plan, as set forth in Section 5.1 herein.
2.14 "EMPLOYEE" means any full-time or regularly-scheduled part-time
employee of the Company or of the Company's Subsidiaries, who is not covered by
any collective bargaining agreement to which the Company or any of its
Subsidiaries is a party. Directors who are not otherwise employed by the Company
shall not be considered Employees for purposes of the Plan. For purposes of the
Plan, transfer of employment of a Participant between the Company and any one of
its Subsidiaries (or between Subsidiaries) shall not be deemed a termination of
employment.
2.15 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.16 "EXERCISE PERIOD" means the period during which an SAR or Option is
exercisable, as set forth in the related Award Agreement.
2.17 "FAIR MARKET VALUE" shall mean the average of the high and low sale
prices as reported in the consolidated transaction reporting system or, if there
is no such sale on the relevant date, then on the last previous day on which a
sale was reported.
2.18 "FREESTANDING SAR" means an SAR that is granted independently of any
Option.
2.19 "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares,
granted under Article 6 herein, which is designated as an Incentive Stock Option
and satisfies the requirements of Section 422 of the Code.
2.20 "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase
Shares, granted under Article 6 herein, which is not intended to be an Incentive
Stock Option under Section 422 of the Code.
2.21 "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option.
A-2
2.22 "OPTION PRICE" means the price at which a Share may be purchased by a
Participant pursuant to an Option, as determined by the Committee and set forth
in the Option Award Agreement.
2.23 "PARTICIPANT" means an Employee of the Company who has outstanding an
Award granted under the Plan.
2.24 "PERFORMANCE GOALS" means the performance goals established by the
Committee, which shall be based on one or more of the following measures: sales
or revenues, earnings per share, shareholder return and/or value, funds from
operations, operating income, gross income, net income, cash flow, return on
equity, return on capital, earnings before interest, operating ratios, stock
price, customer satisfaction, accomplishment of mergers, acquisitions,
dispositions or similar extraordinary business transactions, profit returns and
margins, financial return ratios and/or market performance. Performance goals
may be measured solely on a corporate subsidiary or business unit basis, or a
combination thereof. Performance goals may reflect absolute entity performance
or a relative comparison of entity performance to the performance of a peer
group of entities or other external measure.
2.25 "PERFORMANCE UNIT" means an Award granted to an Employee, as described
in Article 9 herein.
2.26 "PERFORMANCE SHARE" means an Award granted to an Employee, as
described in Article 9 herein.
2.27 "PERIOD OF RESTRICTION" means the period during which the transfer of
Restricted Stock is limited in some way, as provided in Article 8 herein.
2.28 "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act, as used in Sections 13(d) and 14(d) thereof,
including usage in the definition of a "group" in Section 13(d) thereof.
2.29 "QUALIFIED RESTRICTED STOCK" means an Award of Restricted Stock
designated as Qualified Restricted Stock by the Committee at the time of grant
and intended to qualify for the exemption from the limitation on deductibility
imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(C).
2.30 "RESTRICTED STOCK" means an Award of Shares granted to a Participant
pursuant to Article 8 herein.
2.31 "SHARES" means the shares of common stock of the Company.
2.32 "STOCK APPRECIATION RIGHT" or "SAR" means a right, granted alone or in
connection with a related Option, designated as an SAR, to receive a payment on
the day the right is exercised, pursuant to the terms of Article 7 herein. Each
SAR shall be denominated in terms of one Share.
2.33 "SUBSIDIARY" means any corporation that is a "subsidiary corporation"
of the Company as that term is defined in Section 424(f) of the Code.
2.34 "TANDEM SAR" means an SAR that is granted in connection with a related
Option, the exercise of which shall require forfeiture of the right to purchase
a Share under the related Option (and when a Share is purchased under the
Option, the Tandem SAR shall be similarly canceled).
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the Board. The
members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors.
3.2 AUTHORITY OF THE COMMITTEE. The Committee shall have full power except
as limited by law, the Articles of Incorporation and the Bylaws of the Company,
subject to such other restricting limitations or directions as may be imposed by
the Board and subject to the provisions herein, to determine the size and types
of Awards; to determine the terms and conditions of such Awards in a manner
consistent with the
A-3
Plan; to construe and interpret the Plan and any agreement or instrument entered
into under the Plan; to establish, amend or waive rules and regulations for the
Plan's administration; and (subject to the provisions of Article 15 herein) to
amend the terms and conditions of any outstanding Award. Further, the Committee
shall make all other determinations which may be necessary or advisable for the
administration of the Plan. As permitted by law, the Committee may delegate its
authorities as identified hereunder.
3.3 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any Shares acquired pursuant to Awards under the Plan as it may
deem advisable, including, without limitation, restrictions to comply with
applicable Federal securities laws, with the requirements of any stock exchange
or market upon which such Shares are then listed and/or traded and with any blue
sky or state securities laws applicable to such Shares.
3.4 APPROVAL. The Board or the Committee shall approve all Awards made
under the Plan and all elections made by Participants, prior to their effective
date, to the extent necessary to comply with Rule 16b-3 under the Exchange Act.
3.5 DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its stockholders, Employees, Participants and their
estates and beneficiaries.
3.6 COSTS. The Company shall pay all costs of administration of the Plan.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to Section 4.2 herein, the maximum number of
Shares available for grant under the Plan shall be 5,800,000. Shares underlying
lapsed or forfeited Awards, or Awards that are not paid in Shares, may be reused
for other Awards. Shares granted pursuant to the Plan may be (i) authorized but
unissued Shares of Common Stock, (ii) treasury shares, or (iii) shares purchased
on the open market.
4.2 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
split, stock dividend, split-up, share combination or other change in the
corporate structure of the Company affecting the Shares, such adjustment shall
be made in the number and class of Shares which may be delivered under the Plan,
and in the number and class of and/or price of Shares subject to outstanding
Awards granted under the Plan, as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number. Notwithstanding the foregoing,
(i) each such adjustment with respect to an Incentive Stock Option shall comply
with the rules of Section 424(a) of the Code and (ii) in no event shall any
adjustment be made which would render any Incentive Stock Option granted
hereunder to be other than an incentive stock option for purposes of Section 422
of the Code.
4.3 INDIVIDUAL LIMITATIONS. Subject to Section 4.2 herein, (i) the total
number of Shares with respect to which Options or SARs may be granted in any
calendar year to any Covered Employee shall not exceed 1,000,000 Shares;
(ii) the total number of shares of Qualified Restricted Stock that may be
granted in any calendar year to any Covered Employee shall not exceed 1,000,000
Shares; (iii) the total number of Performance Shares or Performance Units that
may be granted in any calendar year to any Covered Employee shall not exceed
1,000,000 Shares or Units, as the case may be; (iv) the total number of Shares
that are intended to qualify for deduction under Section 162(m) of the Code
granted pursuant to Article 10 herein in any calendar year to any Covered
Employee shall not exceed 1,000,000 Shares; (v) the total cash Award that is
intended to qualify for deduction under Section 162(m) of the Code that may be
paid pursuant to Article 10 herein in any calendar year to any Covered Employee
shall not exceed $6,000,000; and (vi) the aggregate number of Dividend
Equivalents that are intended to qualify for deduction under
A-4
Section 162(m) of the Code that a Covered Employee may receive in any calendar
year shall not exceed $6,000,000.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in the Plan include all
officers and key employees of the Company and its Subsidiaries, as determined by
the Committee, including Employees who are members of the Board, but excluding
Directors who are not Employees.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and conditions of the Plan,
Options may be granted to an Eligible Employee at any time and from time to
time, as shall be determined by the Committee.
The Committee shall have complete discretion in determining the number of
Shares subject to Options granted to each Participant (subject to Article 4
herein) and, consistent with the provisions of the Plan, in determining the
terms and conditions pertaining to such Options. The Committee may grant ISOs,
NQSOs, or a combination thereof.
6.2 OPTION AWARD AGREEMENT. Each Option grant shall be evidenced by an
Option Award Agreement that shall specify the Option Price, the term of the
Option, the number of Shares to which the Option pertains, the Exercise Period
and such other provisions as the Committee shall determine, including but not
limited to any rights to Dividend Equivalents. The Option Award Agreement shall
also specify whether the Option is intended to be an ISO or an NQSO.
The Option Price for each Share purchasable under any Incentive Stock Option
granted hereunder shall be not less than one hundred percent (100%) of the Fair
Market Value per Share at the date the Option is granted; and provided, further,
that in the case of an Incentive Stock Option granted to a person who, at the
time such Incentive Stock Option is granted, owns shares of stock of the Company
or of any Subsidiary which possess more than ten percent (10%) of the total
combined voting power of all classes of shares of stock of the Company or of any
Subsidiary, the Option Price for each Share shall be not less than one hundred
ten percent (110%) of the Fair Market Value per Share at the date the Option is
granted. The Option Price will be subject to adjustment in accordance with the
provisions of Section 4.2 of the Plan.
No Incentive Stock Option by its terms shall be exercisable after the
expiration of ten (10) years from the date of grant of the Option; provided,
however, in the case of an Incentive Stock Option granted to a person who, at
the time such Option is granted, owns shares of stock of the Company or of any
Subsidiary possessing more than ten percent (10%) of the total combined voting
power of all classes of shares of stock of the Company or of any Subsidiary,
such Option shall not be exercisable after the expiration of five (5) years from
the date such Option is granted.
6.3 EXERCISE OF AND PAYMENT FOR OPTIONS. Options granted under the Plan
shall be exercisable at such times and be subject to such restrictions and
conditions as the Committee shall in each instance approve.
A Participant may exercise an Option at any time during the Exercise Period.
Options shall be exercised by the delivery of a written notice of exercise to
the Company or its designee, setting forth the number of Shares with respect to
which the Option is to be exercised, accompanied by provisions for full payment
for the Shares.
The Option Price upon exercise of any Option shall be payable either:
(a) in cash or its equivalent, (b) by tendering previously acquired Shares
having an aggregate Fair Market Value at the time of exercise
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equal to the total Option Price (provided that the Shares which are tendered
must have been held by the Participant for at least six (6) months prior to
their tender to satisfy the Option Price), (c) by share withholding, (d) by
cashless exercise or (e) by a combination of (a),(b),(c), and/or (d).
As soon as practicable after receipt of a written notification of exercise
of an Option and provisions for full payment therefor, there shall be delivered
to the Participant, in the Participant's name, Share certificates in an
appropriate amount based upon the number of Shares purchased under the
Option(s).
6.4 TERMINATION OF EMPLOYMENT. Each Option Award Agreement shall set forth
the extent to which the Participant shall have the right to exercise the Option
following termination of the Participant's employment with the Company and its
Subsidiaries. Such provisions shall be determined in the sole discretion of the
Committee (subject to applicable law), shall be included in the Option Award
Agreement entered into with Participants, need not be uniform among all Options
granted pursuant to the Plan or among Participants and may reflect distinctions
based on the reasons for termination of employment. If the employment of a
Participant by the Company or by any Subsidiary is terminated for any reason
other than death, any Incentive Stock Option granted to such Participant may not
be exercised later than three (3) months (one (1) year in the case of
termination due to Disability) after the date of such termination of employment.
6.5 TRANSFERABILITY OF OPTIONS. Except as otherwise determined by the
Committee and set forth in the Option Award Agreement, no Option granted under
the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution, and
all Incentive Stock Options granted to a Participant under the Plan shall be
exercisable during his or her lifetime only by such Participant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan, an SAR
may be granted to an Eligible Employee at any time and from time to time as
shall be determined by the Committee. The Committee may grant Freestanding SARs,
Tandem SARs or any combination of these forms of SAR.
The Committee shall have complete discretion in determining the number of
SARs granted to each Participant (subject to Article 4 herein) and, consistent
with the provisions of the Plan, in determining the terms and conditions
pertaining to such SARs.
The Base Value of a Freestanding SAR shall equal the Fair Market Value of a
Share on the date of grant of the SAR. The Base Value of Tandem SARs shall equal
the Option Price of the related Option.
7.2 SAR AWARD AGREEMENT. Each SAR grant shall be evidenced by an SAR Award
Agreement that shall specify the number of SARs granted, the Base Value, the
term of the SAR, the Exercise Period and such other provisions as the Committee
shall determine.
7.3 EXERCISE AND PAYMENT OF SARS. Tandem SARs may be exercised for all or
part of the Shares subject to the related Option upon the surrender of the right
to exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of the Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one hundred
percent (100%) of the difference between the Option Price of the underlying ISO
and the Fair Market Value of the Shares subject to the underlying ISO at the
time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only
when the Fair Market Value of the Shares subject to the ISO exceeds the Option
Price of the ISO.
A-6
Freestanding SARs may be exercised upon whatever terms and conditions the
Committee, in its sole discretion, imposes upon them.
A Participant may exercise an SAR at any time during the Exercise Period.
SARs shall be exercised by the delivery of a written notice of exercise to the
Company, setting forth the number of SARs being exercised. Upon exercise of an
SAR, a Participant shall be entitled to receive payment from the Company in an
amount equal to the product of:
(a) the excess of (i) the Fair Market Value of a Share on the date of
exercise over (ii) the Base Value multiplied by
(b) the number of Shares with respect to which the SAR is exercised.
At the sole discretion of the Committee, the payment to the Participant upon
SAR exercise may be in cash, in Shares of equivalent value, or in some
combination thereof.
7.4 TERMINATION OF EMPLOYMENT. Each SAR Award Agreement shall set forth
the extent to which the Participant shall have the right to exercise the SAR
following termination of the Participant's employment with the Company and its
Subsidiaries. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the SAR Award Agreement entered into with
Participants, need not be uniform among all SARs granted pursuant to the Plan or
among Participants and may reflect distinctions based on the reasons for
termination of employment.
7.5 TRANSFERABILITY OF SARS. Except as otherwise determined by the
Committee and set forth in the SAR Award Agreement, no SAR granted under the
Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution, and
all SARs granted to a Participant under the Plan shall be exercisable during his
or her lifetime only by such Participant or his or her legal representative.
ARTICLE 8. RESTRICTED STOCK
8.1 GRANT OF RESTRICTED STOCK. Subject to the terms and conditions of the
Plan, Restricted Stock may be granted to Eligible Employees at any time and from
time to time, as shall be determined by the Committee.
The Committee shall have complete discretion in determining the number of
shares of Restricted Stock granted to each Participant (subject to Article 4
herein) and, consistent with the provisions of the Plan, in determining the
terms and conditions pertaining to such Restricted Stock.
In addition, the Committee may, prior to or at the time of grant, designate
an Award of Restricted Stock as Qualified Restricted Stock, in which event it
will condition the grant or vesting, as applicable, of such Qualified Restricted
Stock upon the attainment of the Performance Goals selected by the Committee.
8.2 RESTRICTED STOCK AWARD AGREEMENT. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period or
Periods of Restriction, the number of Restricted Stock Shares granted and such
other provisions as the Committee shall determine.
8.3 TRANSFERABILITY. Restricted Stock granted hereunder may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction established by the Committee and
specified in the Restricted Stock Award Agreement. All rights with respect to
the Restricted Stock granted to a Participant under the Plan shall be available
during his or her lifetime only to such Participant or his or her legal
representative.
A-7
8.4 CERTIFICATE LEGEND. Each certificate representing Restricted Stock
granted pursuant to the Plan may bear a legend substantially as follows:
"The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary or by operation of law, is
subject to certain restrictions on transfer as set forth in MDU
Resources Group, Inc. 1997 Executive Long-Term Incentive Plan, and in a
Restricted Stock Award Agreement. A copy of such Plan and such Agreement
may be obtained from MDU Resources Group, Inc."
The Company shall have the right to retain the certificates representing
Restricted Stock in the Company's possession until such time as all restrictions
applicable to such Shares have been satisfied.
8.5 REMOVAL OF RESTRICTIONS. Restricted Stock shall become freely
transferable by the Participant after the last day of the Period of Restriction
applicable thereto. Once Restricted Stock is released from the restrictions, the
Participant shall be entitled to have the legend referred to in Section 8.4
removed from his or her stock certificate.
8.6 VOTING RIGHTS. During the Period of Restriction, Participants holding
Restricted Stock may exercise full voting rights with respect to those Shares.
8.7 DIVIDENDS AND OTHER DISTRIBUTIONS. Subject to the Committee's right to
determine otherwise at the time of grant, during the Period of Restriction,
Participants holding Restricted Stock shall receive all regular cash dividends
paid with respect to all Shares while they are so held. All other distributions
paid with respect to such Restricted Stock shall be credited to Participants
subject to the same restrictions on transferability and forfeitability as the
Restricted Stock with respect to which they were paid and shall be paid to the
Participant within forty-five (45) days following the full vesting of the
Restricted Stock with respect to which such distributions were made.
8.8 TERMINATION OF EMPLOYMENT. Each Restricted Stock Award Agreement shall
set forth the extent to which the Participant shall have the right to receive
unvested Restricted Stock following termination of the Participant's employment
with the Company and its Subsidiaries. Such provisions shall be determined in
the sole discretion of the Committee, shall be included in the Restricted Stock
Award Agreement entered into with Participants, need not be uniform among all
grants of Restricted Stock or among Participants and may reflect distinctions
based on the reasons for termination of employment.
ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1 GRANT OF PERFORMANCE UNITS AND PERFORMANCE SHARES. Subject to the
terms and conditions of the Plan, Performance Units and/or Performance Shares
may be granted to an Eligible Employee at any time and from time to time, as
shall be determined by the Committee.
The Committee shall have complete discretion in determining the number of
Performance Units and/ or Performance Shares granted to each Participant
(subject to Article 4 herein) and, consistent with the provisions of the Plan,
in determining the terms and conditions pertaining to such Awards.
9.2 PERFORMANCE UNIT/PERFORMANCE SHARE AWARD AGREEMENT. Each grant of
Performance Units and/or Performance Shares shall be evidenced by a Performance
Unit and/or Performance Share Award Agreement that shall specify the number of
Performance Units and/or Performance Shares granted, the initial value (if
applicable), the Performance Period, the Performance Goals and such other
provisions as the Committee shall determine, including but not limited to any
rights to Dividend Equivalents.
9.3 VALUE OF PERFORMANCE UNITS/PERFORMANCE SHARES. Each Performance Unit
shall have an initial value that is established by the Committee at the time of
grant. The value of a Performance Share shall be equal to the Fair Market Value
of a Share. The Committee shall set Performance Goals in its discretion which,
depending on the extent to which they are met, will determine the number and/or
value of
A-8
Performance Units/Performance Shares that will be paid out to the Participants.
The time period during which the Performance Goals must be met shall be called a
"Performance Period."
9.4 EARNING OF PERFORMANCE UNITS/PERFORMANCE SHARES. After the applicable
Performance Period has ended, the holder of Performance Units/Performance Shares
shall be entitled to receive a payout with respect to the Performance
Units/Performance Shares earned by the Participant over the Performance Period,
to be determined as a function of the extent to which the corresponding
Performance Goals have been achieved.
9.5 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/PERFORMANCE
SHARES. Payment of earned Performance Units/Performance Shares shall be made
following the close of the applicable Performance Period. The Committee, in its
sole discretion, may pay earned Performance Units/Performance Shares in cash or
in Shares (or in a combination thereof), which have an aggregate Fair Market
Value equal to the value of the earned Performance Units/Performance Shares at
the close of the applicable Performance Period. Such Shares may be granted
subject to any restrictions deemed appropriate by the Committee.
9.6 TERMINATION OF EMPLOYMENT. Each Performance Unit/Performance Share
Award Agreement shall set forth the extent to which the Participant shall have
the right to receive a Performance Unit/ Performance Share payment following
termination of the Participant's employment with the Company and its
Subsidiaries during a Performance Period. Such provisions shall be determined in
the sole discretion of the Committee, shall be included in the Award Agreement
entered into with Participants, need not be uniform among all grants of
Performance Units/Performance Shares or among Participants and may reflect
distinctions based on reasons for termination of employment.
9.7 TRANSFERABILITY. Except as otherwise determined by the Committee and
set forth in the Performance Unit/Performance Share Award Agreement, Performance
Units/Performance Shares may not be sold, transferred, pledged, assigned or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution, and a Participant's rights with respect to Performance
Units/Performance Shares granted under the Plan shall be available during the
Participant's lifetime only to such Participant or the Participant's legal
representative.
ARTICLE 10. OTHER AWARDS
The Committee shall have the right to grant other Awards which may include,
without limitation, the grant of Shares based on attainment of Performance Goals
established by the Committee, the payment of Shares in lieu of cash, or cash
based on attainment of Performance Goals established by the Committee, and the
payment of Shares in lieu of cash under other Company incentive or bonus
programs. Payment under or settlement of any such Awards shall be made in such
manner and at such times as the Committee may determine.
ARTICLE 11. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant's lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate.
The spouse of a married Participant domiciled in a community property
jurisdiction shall join in any designation of beneficiary or beneficiaries other
than the spouse.
A-9
ARTICLE 12. DEFERRALS
The Committee may permit a Participant to defer the Participant's receipt of
the payment of cash or the delivery of Shares that would otherwise be due to
such Participant under the Plan. If any such deferral election is permitted, the
Committee shall, in its sole discretion, establish rules and procedures for such
payment deferrals.
ARTICLE 13. RIGHTS OF EMPLOYEES
13.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, for any reason or no reason in the Company's sole discretion, nor confer
upon any Participant any right to continue in the employ of the Company.
13.2 PARTICIPATION. No Employee shall have the right to be selected to
receive an Award under the Plan, or, having been so selected, to be selected to
receive a future Award.
ARTICLE 14. CHANGE IN CONTROL
The terms of this Article 14 shall immediately become operative, without
further action or consent by any person or entity, upon a Change in Control, and
once operative shall supersede and take control over any other provisions of
this Plan.
Upon a Change in Control
(a) Any and all Options and SARs granted hereunder shall become immediately
exercisable;
(b) Any restriction periods and restrictions imposed on Restricted Shares
and Qualified Restricted Shares shall be deemed to have expired and such
Restricted Shares and Qualified Restricted Shares shall become
immediately vested in full; and
(c) The target payout opportunity attainable under all outstanding Awards of
Performance Units, Performance Shares and other Awards shall be deemed to
have been fully earned for the entire Performance Period(s) as of the
effective date of the Change in Control. The vesting of all Awards
denominated in Shares shall be accelerated as of the effective date of
the Change in Control, and there shall be paid out in cash to
Participants immediately following the effective date of the Change in
Control the full amount of the targeted cash payout opportunities
associated with outstanding cash-based Awards.
ARTICLE 15. AMENDMENT, MODIFICATION AND TERMINATION
15.1 AMENDMENT, MODIFICATION AND TERMINATION. The Board may, at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part, provided that no amendment shall be made which shall increase the total
number of Shares which may be issued and sold pursuant to Incentive Stock
Options, reduce the minimum exercise price in the case of an Incentive Stock
Option or modify the provisions of the Plan relating to eligibility with respect
to Incentive Stock Options unless such amendment is made by or with the approval
of the stockholders within 12 months of the effective date of such amendment,
but only if such approval is required by any applicable provision of law. The
Board of Directors of the Company is also authorized to amend the Plan and the
Options granted hereunder to maintain qualification as "incentive stock options"
within the meaning of Section 422 of the Code, if applicable.
15.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award, unless such termination, modification or amendment is required by
applicable law and except as otherwise provided herein.
A-10
ARTICLE 16. WITHHOLDING
16.1 TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to an
Award made under the Plan.
16.2 SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock,
or upon any other taxable event arising out of or as a result of Awards granted
hereunder, Participants may elect to satisfy the withholding requirement, in
whole or in part, by tendering previously-owned Shares or by having the Company
withhold Shares having a Fair Market Value on the date the tax is to be
determined equal to the statutory total tax which could be imposed on the
transaction. All elections shall be irrevocable, made in writing and signed by
the Participant.
ARTICLE 17. SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 18. LEGAL CONSTRUCTION
18.1 GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular and the singular shall include the plural.
18.2 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
18.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
18.4 GOVERNING LAW. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with, and
governed by, the laws of the State of Delaware.
A-11
EXHIBIT B
MDU RESOURCES GROUP, INC.
BOARD OF DIRECTORS' AUDIT COMMITTEE
CHARTER
PURPOSE
The Audit Committee assists the Board in fulfilling its oversight
responsibilities to the stockholders, and serves as a communication link among
the Board, management, the independent auditors, and the internal auditors.
AUTHORITY
The Audit Committee may conduct or authorize investigations into any
activities it deems necessary and appropriate. The Audit Committee may retain
independent counsel, auditors, or others to conduct investigations or assist in
the accomplishment of its responsibilities.
The Audit Committee and the Board have the ultimate authority to select,
evaluate and, where appropriate, replace the independent auditors or to nominate
in any proxy statement the independent auditors to be proposed for shareholder
approval, as determined by the Audit Committee and the Board. The independent
auditors are ultimately accountable to the Audit Committee and the Board.
RESPONSIBILITIES
The Audit Committee shall:
1. Recommend to the Board independent auditors for appointment by the
Company, evaluate the performance of the Company's independent auditors
and, if circumstances warrant, recommend to the Board the replacement of
the independent auditors.
2. Review the fees and expenses of the independent auditors.
3. Review the nonauditing services performed for the Company by the
independent auditors.
4. Review annually the overall plan of the audit as proposed by the
independent auditors and management, including the scope of the
examination to be performed, the assistance to be provided by the
internal auditors and any developments in accounting principles and
auditing standards that may affect either the financial statements or
the audit.
5. Prior to release of the annual report to the stockholders, review and
discuss the audited financial statements and the results of the audit
with the independent auditors and management. Discuss matters required
to be communicated to audit committees in accordance with Statement on
Auditing Standards No. 61.
6. Report to the Board on the scope and results of the annual audit,
including a report prepared in accordance with Item 306 of Regulation
S-K to be included in the Company's proxy statement, and from time to
time report on other activities of the Committee and recommend to the
Board such changes, additions or variations in the auditing, accounting
and control functions as the Committee may deem desirable.
7. Recommend to the Board whether the audited financial statements should
be included in the Company's annual report on Form 10-K.
B-1
Audit Committee Charter
Page 2
8. Require that the independent auditors review the financial information
included in the Company's quarterly reports on Form 10-Q prior to the
Company's filing of the reports with the Securities and Exchange
Commission.
9. Require that the independent auditors submit on an annual basis to the
Audit Committee a formal written statement delineating all relationships
between the independent auditors and the Company.
10. Actively engage in a dialogue with the independent auditors with respect
to any disclosed relationships or services that may impact the
objectivity and independence of the independent auditors and recommend
that the Board take appropriate action in response to the independent
auditors' written statement to satisfy itself of the independent
auditors' independence.
11. With the independent auditors, management and the internal auditors,
review and analyze periodically the Company's internal accounting
control systems and related corporate policies and control systems,
compliance with applicable laws and regulations, and assess management's
attitude toward internal controls and the process for establishing and
monitoring internal controls.
12. Review annually the scope and results of the internal audit program.
Review with the internal audit manager compliance with appropriate audit
standards.
13. Review and concur in the appointment or replacement of the internal
audit manager.
14. Meet periodically with management, the internal audit manager, and the
independent auditors in separate executive sessions with respect to any
matters for which the Audit Committee is responsible.
15. On a quarterly basis, the Chairman of the Committee shall perform a
review of the expense reports of the Chief Executive Officer.
16. Review the Code of Conduct report presented annually by the General
Counsel.
17. Review and reassess the adequacy of the Audit Committee Charter on an
annual basis.
AUDIT COMMITTEE COMPOSITION
The Audit Committee is a standing committee of the Board. Members of the
Audit Committee are elected annually by the Board. The Audit Committee shall
consist of not less than three members of the Board.
Each member of the Audit Committee shall meet the independence requirements
of section 303.01 of the New York Stock Exchange Listed Company Manual. Each
member shall be financially literate or must become financially literate within
a reasonable time after appointment to the Audit Committee, and at least one
member must have accounting or related financial management expertise, as the
Board interprets such qualifications in its business judgment.
The responsibilities of Audit Committee members are in addition to those
duties set out for a member of the Board. Meetings of the Audit Committee will
be held whenever deemed necessary by the Audit Committee Chairman.
B-2
MDU RESOURCES GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, APRIL 24, 2001
11:00 A.M. CENTRAL DAYLIGHT SAVINGS TIME
909 AIRPORT ROAD
BISMARCK, ND 58504
-------------------------------------------------------------
If you consented to access the ANNUAL 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:
HTTP://WWW.MDU.COM/2001-PROXY.HTML
-------------------------------------------------------------
[MDU RESOURCES GROUP INC. LOGO]
Schuchart Building
918 East Divide Avenue
MAILING ADDRESS:
P.O. Box 5650
Bismarck, ND 58506-5650
(701) 222-7900 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS ON APRIL 24, 2001.
THIS PROXY WILL ALSO BE USED TO PROVIDE VOTING INSTRUCTIONS TO NEW YORK LIFE
TRUST COMPANY, AS TRUSTEE OF THE MDU RESOURCES GROUP, INC. 401(k) RETIREMENT
PLAN, FOR ANY SHARES OF COMPANY COMMON STOCK HELD IN THE PLAN.
The undersigned hereby appoints Martin A. White, Douglas C. Kane, and Lester H.
Loble, II, and each of them, proxies, with full power of substitution, to vote
all Common Stock of the undersigned at the Annual Meeting of Stockholders to be
held at 11:00 a.m. (CDT), April 24, 2001, at 909 Airport Road, Bismarck, ND
58504, and at any adjournment 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 Touchtone telephone, (2) submit your proxy by
Internet, or (3) mark, date, sign, and return this letter proxy in the envelope
provided (no postage is necessary if mailed in the United States). IF NO
DIRECTIONS ARE GIVEN, THE PROXIES WILL VOTE IN ACCORD WITH THE DIRECTORS'
RECOMMENDATION ON ALL MATTERS LISTED ON THIS PROXY, AND AT THEIR DISCRETION ON
ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
SEE REVERSE FOR VOTING INSTRUCTIONS.
----------------------------
COMPANY #
CONTROL #
----------------------------
THERE ARE THREE WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, DATED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK *** EASY *** IMMEDIATE
- - Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week,
until 11:00 a.m. (CDT) on Monday, April 23, 2001.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
- - Follow the simple instructions the Voice provides you.
VOTE BY INTERNET -- WWW.EPROXY.COM/MDU/ -- QUICK *** EASY *** IMMEDIATE
- - Use the Internet to vote your proxy 24 hours a day, 7 days a week, until 11:00
a.m. (CDT) on Monday, April 23, 2001.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above to obtain your records and create an
electronic ballot.
The Company has been advised by counsel that the procedures for Internet and
Telephone voting are consistent with the requirements of applicable law.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to MDU Resources Group, Inc., c/o Shareowner
Services-SM-, P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD.
- PLEASE DETACH HERE -
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES AND "FOR" ITEM 2.
1. ELECTION OF DIRECTORS: 01 Dennis W. Johnson 04 Joseph T. Simmons / / Vote FOR / / Vote WITHHELD
02 Douglas C. Kane 05 Martin A. White all nominees from all nominees
03 John L. Olson
(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.)
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2. APPROVE AMENDMENTS TO 1997 EXECUTIVE LONG-TERM INCENTIVE PLAN / / For / / Against / / Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box / / Indicate changes below:
Date ________________________________
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Signature(s) in box Please sign exactly as
your name(s) appear on Proxy. If held in
joint tenancy, all persons must sign.
Trustees, administrators, etc., should
include title and authority. Corporations
should provide full name of corporation and
title of authorized officer signing the
proxy.