SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
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 240.14a-11(c)Rule 14a-11(c) or 240.14a-12Rule 14a-12
MDU Resources Group, Inc.Inc
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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 RuleRules 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.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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MDU RESOURCES
GROUP, INC.[LOGO]
- --------------------------------------------------------------------------------
400 NORTH FOURTH STREETSCHUCHART BUILDING JOHN A. SCHUCHART
BISMARCK, ND 58501918 EAST DIVIDE AVENUE CHAIRMAN OF THE BOARD
MAILING ADDRESS:
P.O. BOX 5650
BISMARCK, ND 58506-5650
(701) 222-7900
March 3, 19979, 1998
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders to be
held on Tuesday, April 22, 1997,28, 1998, at 11:00 A.M.a.m., Central Daylight Savings Time,
at 909 Airport Road, Bismarck, North Dakota 58504. The other directorsDirectors 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 Meeting and Proxy Statement. I would like to note for
your special attention that the Board of Directors has recommended to the owners
of Common Stock of the Company the approval of long-term incentive plans for
non-employee directors and for executives. These plans are designed to foster
and promote the success of the Company and its stockholders by making an equity
interest in the Company and a long-term approach essential elements of the
compensation of non-employee directors and executives. Under the plans, the
Board of Directors and the Compensation Committee will have the means to craft
proper incentives and rewards for non-employee directors and executives. Your
Company has recently acquired businesses which operate in highly competitive
markets. Additionally, its traditional utility markets have become deregulated
(natural gas) or soon will be deregulated (electricity). In the past your
Company has, from time to time, brought single component plans to you for
approval. This has been done as needed, with two, three, or more years passing
between each submittal. The changing competitive environment demands more
flexibility and quicker reaction times. The plans provide both.
The plans will serve as an organizational umbrella over the existing
single component incentive plans and will not duplicate those plans. Giving the
Board the flexibility to react to the changing environment will advance the
Company's interests by enhancing its ability to attract, retain and motivate, on
a long-term basis, outstanding individuals of the highest caliber, talent, and
experience to serve in key positions with the Company. The Board believes that
by aligning the interests of those in a position to make significant
contributions to the success of the Company with the interests of the
stockholders of the Company encourages and promotes the long-term growth and
success of the Company. In addition to the formal
issues, a brief report on current matters of interest will be presented.
Luncheon will be served following the meeting.
We were pleased with the response of our stockholders at the 19961997 Annual
Meeting at which 89.088.9 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 19971998 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.
You will notice that we have changed the format of the proxy from a proxy
card to a letter proxy. The new format is larger and is easier to read. It also
provides the convenience of voting your proxy by Touchtone telephone if you are
a stockholder of record. The instructions are on the letter proxy.
Representation of your shares at the meeting is very important and we
urge that,important. Accordingly,
whether or not you now plan to attend the meeting, we urge you to submit your proxy
promptly mark,
date, signby one of the two methods offered: (1) by marking, dating, signing, and
returnreturning the enclosed letter proxy card in the envelope provided, for that
purpose. Ifor (2) by
following the instructions and voting your proxy by Touchtone telephone by
calling the toll free telephone number on the proxy. In either event, 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/JohnSIGNATURE
JOHN A. Schuchart
--------------------
John A. SchuchartSCHUCHART
MDU RESOURCES GROUP, INC.
400 NORTH FOURTH STREETSCHUCHART BUILDING
918 EAST DIVIDE AVENUE
MAILING ADDRESS:
P.O. BOX 5650
BISMARCK, NORTH DAKOTA 58501
----------ND 58506-5650
(701) 222-7900
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 22, 1997
----------28, 1998
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March 3, 19979, 1998
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 22, 1997,28, 1998, at 11:00 A.M.a.m., Central Daylight Savings Time,
for the following purposes:
(1) To elect four directorsfive Directors to three year termsterms; and
one director to a two
year term;
(2) To consider and take action upon a proposal, declared advisable by
the Board of Directors, to approve the 1997 Non-Employee Director Long-Term
Incentive Plan, all as more fully described in the accompanying Proxy Statement
dated March 3, 1997;
(3) To consider and take action upon a proposal, declared advisable by
the Board of Directors, to approve the 1997 Executive Long-Term Incentive Plan,
all as more fully described in the accompanying Proxy Statement dated March 3,
1997; and
(4) 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 27, 1997,1998,
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. It is requested that you either (1) mark,
date, sign, and return the accompanyingenclosed letter proxy in the enclosed return envelope to which noprovided (no
postage need be affixedis necessary if mailed in the United States.States), or (2) submit your proxy
by Touchtone telephone by calling the toll free number on the proxy. The
instructions for using your telephone are printed on the letter proxy. Your
cooperation will beis appreciated.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/LesterBy order of the Board of Directors,
[SIGNATURE]
LESTER H. Loble, II
----------------------
Lester H. Loble,LOBLE, II
SECRETARY
MDU RESOURCES GROUP, INC.
400 NORTH FOURTH STREETSCHUCHART BUILDING
918 EAST DIVIDE AVENUE
MAILING ADDRESS:
P.O. BOX 5650
BISMARCK, NORTH DAKOTA 58501
----------ND 58506-5650
(701) 222-7900
------------------------
PROXY STATEMENT
-------------------------------
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 22, 1997.28, 1998. The proxy
material was first forwarded to the holders of Common Stock on March 3, 1997.9, 1998.
Stockholders of record may vote their proxies by Touchtone telephone by
calling the toll free telephone number on the proxy or they may mark, date,
sign, and return 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. Follow the
instructions you receive from your bank or broker.
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 proxy cardsthe 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 $6,000 plus out-of-pocket expenses.
VOTING SECURITIES OUTSTANDING
Only holders of record of Common Stock at the close of business on February
27, 1997,1998, will be entitled to vote at the meeting. On such date there were
outstanding 28,596,47529,143,332 shares of Common Stock. Each outstanding share of Common
Stock entitles the holder to one vote.
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 signed and returnedsubmitted proxy are considered present
for purposes of determining a quorum. A proxy may be submitted by returning a
properly signed and dated letter proxy or by following the directions for
submission using a Touchtone telephone.
1
Under Delaware law, if a quorum is present, the nominees for election as
directorsDirectors 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.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.
Approval of the 1997 Non-Employee Director Long-Term Incentive Plan and
the 1997 Executive Long-Term Incentive Plan requires the affirmative votes 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 "no" vote; broker
non-votes will have no effect.
As of February 27, 1997,1998, 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 15 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
At the meeting, one Director will be elected to serve a term of two years
until 1999, fourfive Directors will be elected to serve for a term of three
years until 2000,2001, and until their respective successors are elected and qualify.
All of the nominees (except Mr. White) are incumbent Directors and are nominated
for reelection. Unless otherwise marked onspecified 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. -1-
Information concerning the nominees, including
their ages, periods of service as directorsDirectors, and business experience, according
to information furnished to the Company by the respective nominees, is set forth
as follows:
NAME
- ----
John A. Schuchart
(to be elected for a term of two years expiring in 1999)
AGE
- ---
67
FIRST YEAR OF SERVICE AS DIRECTOR
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1976
[PHOTO]
BUSINESS EXPERIENCE
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Mr. Schuchart, Chairman of the Board, was named Chief Executive Officer in June
1980 and Chairman in May 1983. He retired as Chief Executive Officer on December
31, 1994. Mr. Schuchart also serves as an ex officio Director of the
subsidiaries of the Company, the Managing Committee of Montana-Dakota Utilities
Co., and the MDU Resources Foundation. Mr. Schuchart serves on various civic and
charitable organizations in Bismarck, North Dakota, including the Board of
Regents of the University of Mary.
NAME
- ----
San W. Orr, Jr.
(to be elected for a term of three years expiring in 2000)
AGE
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55
FIRST YEAR OF SERVICE AS DIRECTOR
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1978
[PHOTO]
BUSINESS EXPERIENCE
- -------------------
Mr. Orr is an attorney and is in the business of financial and estate
management. He is Chairman of the Boards and a Director of Marathon Electric
Manufacturing Corporation, Mosinee Paper Corporation, and Wausau Paper Mills
Company. He is a Director of Wausau Insurance Com-panies, Marshall & Ilsley
Corporation, M & I First American Bank, and M & I Marshall & llsley Bank. Mr.
Orr also serves on various civic and charitable organizations in Wisconsin
including the Board of Regents of the University of Wisconsin System. He
currently serves on the Audit and Compensation Committees of the Board of
Directors and is Vice Chairman of the Board.
NAME
- ----
Harry J. Pearce
(to be elected for a term of three years expiring in 2000)
AGE
- ---
54
FIRST YEAR OF SERVICE AS DIRECTOR
- ---------------------------------
1997
[PHOTO]
BUSINESS EXPERIENCE
- -------------------
Mr. Pearce is the Vice Chairman and a Director of General Motors Corporation. He
is a Director of Hughes Electronics Corporation, General Motors Acceptance
Corporation, Marriott International Inc., the American Automobile Manufacturers
Association, and the Economic Strategy Institute, the Theodore Roosevelt Medora
Foundation, and is a member of the United States Air Force Academy's Board of
Visitors. He also serves on the Board of Trustees of Howard University and is a
member of the Northwestern University School of Law's Visiting Committee and the
Dean's Advisory Council.
NAME
- ----
Homer A. Scott, Jr.
(to be elected for a term of three years expiring in 2000)
AGE
- ---
62
FIRST YEAR OF SERVICE AS DIRECTOR
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1981
[PHOTO]
BUSINESS EXPERIENCE
- -------------------
Mr. Scott is engaged in the banking and ranching business in the states of
Wyoming and Montana. He is a Director and Chairman of the Board of First
Interstate BancSystem of Montana, Inc., a Director of First Interstate Bank of
Commerce, Montana and Chairman of the Board and a Director of First Interstate
Bank of Commerce, Wyoming. Mr. Scott is a Director and President of Sugarland
Enterprises, Inc., and the managing partner of Sugarland Development Company, a
commercial property development company in Sheridan, Wyoming. He is the owner of
the Sheridan Holiday Inn, principal owner of Sports Mate, Inc., and owner of
Powder Horn Ranch, a housing development and golf course in Sheridan, Wyoming.
He currently serves on the Audit and Compensation
FIRST YEAR OF
SERVICE AS
NAME AGE DIRECTOR BUSINESS EXPERIENCE
- ------------------------------------ --- ------------- ---------------------------------------------------------
Douglas C. Kane .................... 48 1991 Mr. Kane was elected Executive Vice President, Chief
(to be elected for a term of three Administrative and Corporate Development Officer in
years expiring in 2001) November 1997. He joined the Company as Executive Vice
President and Chief Operating Officer in January 1991.
Prior to that time he was President and Chief Executive
[PHOTO1] Officer of Knife River Corporation from May 1990,
President from September 1987, and previously had
served as Senior Vice President--Operations. During
1997, Mr. Kane served as Director and/or officer of
principal subsidiaries of the Company and as a member
of the Managing Committee of Montana-Dakota Utilities
Co.
Richard L. Muus .................... 68 1985 Mr. Muus retired in April 1989 after 35 years with
(to be elected for a term of three Midwest Federal Savings Bank, Minot, North Dakota. At
years expiring in 2001) the time of his retirement, Mr. Muus was the President
and a Director of the bank. Mr. Muus is a member and
past Director and Officer of the Minot Area Chamber of
[PHOTO1] Commerce and a past Director of the Minot Area
Development Corporation. He has served as Chairman of
the North Dakota Housing Finance Agency Advisory Board,
as a Director of the Federal Home Loan Bank of Des
Moines, and as a director of the U.S. League of Savings
Institutions. He is a member of the Board of Regents of
Minot State University. He currently serves on the
Audit and Finance Committees of the Board of Directors.
-2-
2
NAME
- ----
Sister Thomas Welder, O.S.B.
(to be elected for a term of three years expiring in 2000)
AGE
- ---
56
FIRST YEAR OF SERVICE AS DIRECTOR
- ---------------------------------
1988
[PHOTO]
BUSINESS EXPERIENCE
- -------------------
Sister Welder is the President of the University of Mary, Bismarck, North
Dakota. She is a Director of St. Alexius Medical Center of Bismarck and Chair of
its Marketing Committee. She is also a Director of the Bismarck-Mandan
Development Association 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 Consultant-Evaluator Corps for the North Central
Association of Colleges and Schools. She currently serves on the Nominating and
Finance Committee
FIRST YEAR OF
SERVICE AS
NAME AGE DIRECTOR BUSINESS EXPERIENCE
- ------------------------------------ --- ------------- ---------------------------------------------------------
John L. Olson ...................... 58 1985 Mr. Olson is President and owner of Blue Rock Products
(to be elected for a term of three Company and of Blue Rock Distributing Company located
years expiring in 2001) in Sidney, Montana, a beverage bottling and
distributing company, respectively. Mr. Olson also is
Chairman of the Board and a Director of Admiral
[PHOTO1] Beverage Corporation, Worland, Wyoming, and Ogden,
Utah; he is Chairman of the Board and Director of the
Foundation for Community Care, Sidney, Montana, and a
trustee of the University of Montana Foundation; and he
is trustee for Blue Rock Products Company Profit
Sharing Trust, Sidney, Montana. He currently serves on
the Audit, Compensation, and Nominating Committees of
the Board of Directors.
Joseph T. Simmons .................. 62 1984 Mr. Simmons retired in May 1997 as a Professor of
(to be elected for a term of three Accounting and Finance, University of South Dakota,
years expiring in 2001) Vermillion and was Visiting Professor of Finance,
University of Warsaw, Warsaw, Poland (February--July
1994). Mr. Simmons is the Chairman and President of
[PHOTO1] Simmons Financial Management, Inc. and owner of Simmons
& Associates. He also serves on the Boards of GRO/TECH
and 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 .................... 56 Mr. White joined the Company in November 1991 as Vice
(to be elected for a term of three President--Corporate Development and was named Senior
years expiring in 2001) Vice President--Corporate Development in November 1995.
Effective April 1, 1998, Mr. White will become
President and Chief Executive Officer. Prior to joining
[PHOTO1] 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
comprise the non-utility subsidiaries of The Montana
Power Company.
3
Certain information concerning the remaining directors,Directors, whose terms expire
in 19981999 or in 1999,2000, including their ages, periods of service as directorsDirectors, and
business experience, according to information furnished to the Company, is set
forth as follows:
NAME
- ----
Douglas C. Kane
(term expiring in 1998)
AGE
- ---
47
FIRST YEAR OF SERVICE AS DIRECTOR
- ---------------------------------
1991
[PHOTO]
BUSINESS EXPERIENCE
- -------------------
Mr. Kane joined the Company as Executive Vice President and Chief Operating
Officer in January 1991. Prior to that time he was President and Chief Executive
Officer of Knife River Coal Mining Company from May 1990, President from
September 1987 and previously had served as Senior Vice President--Operations.
During 1996, Mr. Kane served as Director and/or officer of principal
subsidiaries of the Company and as a member of the Managing Committee of
Montana-Dakota Utilities Co.
NAME
- ----
Richard L. Muus
(term expiring in 1998)
AGE
- ---
67
FIRST YEAR OF SERVICE AS DIRECTOR
- ----------------------------------
1985
[PHOTO]
BUSINESS EXPERIENCE
- -------------------
Mr. Muus retired in April 1989 after 35 years with the Midwest Federal Savings
FIRST YEAR OF
SERVICE AS
NAME AGE DIRECTOR BUSINESS EXPERIENCE
- ------------------------------------ --- ------------- ---------------------------------------------------------
Thomas Everist ..................... 48 1995 Mr. Everist is President and Chief Executive Officer of
(term expiring in 1999) L. G. Everist, Sioux Falls, South Dakota, an aggregate
production company. He is Vice President of Spencer
Quarries, Spencer, South Dakota, a rock quarry;
[PHOTO1] Director of Power Plant Aggregates and Midwest Fly Ash,
both of Sioux City, Iowa, which market fly ash, kiln
dust, and concrete additives; a Director of Standard
Ready Mix, of Sioux City, Iowa; and a Director of Raven
Industries, Inc., a general manufacturer of elec-
tronics, sewn products, and plastics, of Sioux Falls,
South Dakota. He currently serves on the Finance
Committee of the Board of Directors.
Harold J. Mellen, Jr. .............. 63 1989 Mr. Mellen, President and Chief Executive Officer, joined
(term expiring in 1999) the Company in 1985 as Vice President-- Corporate
Development; was named Senior Vice President--Finance
and Chief Financial Officer in May 1987; Executive Vice
[PHOTO1] President and Chief Financial and Corporate Development
Officer in August 1989; and President and Chief
Corporate Development Officer in May 1992. Mr. Mellen
became President and Chief Executive Officer on January
1, 1995. During 1997, Mr. Mellen served as Chairman of
the Board, a Director and/or an Officer of all
principal subsidiaries, and Chairman of the Managing
Committee of Montana-Dakota Utilities Co.
Robert L. Nance .................... 61 1993 Mr. Nance is the majority owner, President, and Chief
(term expiring in 1999) Executive Officer of Nance Petroleum Corporation,
Billings, Montana, an oil and gas exploration and
production company. He is also a Director of First
[PHOTO1] Interstate Bank Minot, North Dakota. At the time of his retirement, Mr. Muus was the
President and a Director of the bank. Mr. Muus is a member and past Director and
officer of the Minot Area Chamber of Commerce and a past Director of the Minot
Area Development Corporation. He is a member of the Military Affairs and
Diplomats Committee of the Chamber of Commerce. He is a member of the Board of
Regents of Minot State University. He also served on the Advisory Board and
Finance Committee of St. Joseph Hospital, Minot, North Dakota for 30 years. He
currently serves on the Audit and Finance Committees of the Board of Directors.
NAME
- ----
John L. Olson
(term expiring in 1998)
AGE
- ---
57
FIRST YEAR OF SERVICE AS DIRECTOR
- ---------------------------------
1985
[PHOTO]
BUSINESS EXPERIENCE
- -------------------
Mr. Olson is President and the owner of Blue Rock Products Company and of Blue
Rock Distributing Company located in Sidney, Montana, a beverage bottling and
distributing company, respectively. Mr. Olson also is the 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 and a trustee of the University of Montana, Foundation; he
is trustee for Blue Rock Products Company Profit Sharing Trust, Sidney, Montana.
He currently serves on the Audit, Compensation, and Nominating Committees of the
Board of Directors.
-3-
NAME
- ----
Joseph T. Simmons
(term expiring in 1998)
AGE
- ---
61
FIRST YEAR OF SERVICE AS DIRECTOR
- ---------------------------------
1984
[PHOTO]
BUSINESS EXPERIENCE
- -------------------
Mr. Simmons is Professor of Accounting and Finance, University of South Dakota,
Vermillion and was Visiting Professor of Finance, University of Warsaw, Warsaw,
Poland (February--July 1994). Mr. Simmons is the Chairman and President of
Simmons Financial Management, Inc. and owner of Simmons & Associates. He also
serves on the Boards of GRO/TECH and 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.
NAME
- ----
Thomas Everist
(term expiring in 1999)
AGE
- ---
46
FIRST YEAR OF SERVICE AS DIRECTOR
- ---------------------------------
1995
[PHOTO]
BUSINESS EXPERIENCE
- -------------------
Mr. Everist is the President and Chief Executive Officer of L. G. Everist, Sioux
Falls, South Dakota, an aggregate production company. He is Vice President of
Spencer Quarries, Spencer, South Dakota, a rock quarry, and Director of Power
Plant Aggregates and Midwest Fly Ash, both of Sioux City, Iowa, which market fly
ash, kiln dust and concrete additives, a Director of Standard Ready Mix, of
Sioux City, Iowa, and a Director of Raven Industries, Inc. a general
manufacturer of electronics, sewn products and plastics, of Sioux Falls, South
Dakota. He currently serves on the Finance Committee of the Board of Directors.
NAME
- ----
Harold J. Mellen, Jr.
(term expiring in 1999)
AGE
- ---
62
FIRST YEAR OF SERVICE AS DIRECTOR
- ---------------------------------
1989
[PHOTO]
BUSINESS EXPERIENCE
- -------------------
Mr. Mellen joined the Company in 1985 as Vice President--Corporate Development
and was named Senior Vice President--Finance and Chief Financial Officer in May
1987, Executive Vice President and Chief Financial and Corporate Development
Officer in August 1989, and President and Chief Corporate Development Officer in
May 1992. Mr. Mellen became the President and Chief Executive Officer on January
1, 1995. During 1996, Mr. Mellen served as Chairman of the Board, a Director
and/or an officer of all principal subsidiaries and Chairman of the Managing
Committee of Montana-Dakota Utilities Co.
NAME
- ----
Robert L. Nance
(term expiring in 1999)
AGE
- ---
60
FIRST YEAR OF SERVICE AS DIRECTOR
- ---------------------------------
1993
[PHOTO]
BUSINESS EXPERIENCE
- -------------------
Mr. Nance is the majority owner and President of Nance Petroleum Corporation,
Billings, Montana, an oil and gas exploration and production company. He is also
a Director of First Interstate Bank of Commerce, Billings, Montana. He serves on the
National Board of Governors and Executive Committee of
the Independent Petroleum Association of America and
serves on the Board, and is Chairman of the Petroleum
Technology Transfer Council. He currently serves on the
Finance and Nominating Committees of the Board of
Directors.
4
FIRST YEAR OF
SERVICE AS
NAME AGE DIRECTOR BUSINESS EXPERIENCE
- ------------------------------------ --- ------------- ---------------------------------------------------------
John A. Schuchart .................. 68 1976 Mr. Schuchart, Chairman of the Board, was named Chief
(term expiring in 1999) Executive Officer in June 1980 and Chairman in May
1983. He retired as Chief Executive Officer on December
31, 1994. Mr. Schuchart also serves as an ex officio
[PHOTO1] Director of the subsidiaries of the Company, the
Managing Committee of Montana-Dakota Utilities Co., and
the MDU Resources Foundation. Mr. Schuchart serves on
various civic and charitable organizations in Bis-
marck, North Dakota, including the Board of Regents of
the University of Mary.
San W. Orr, Jr. .................... 56 1978 Mr. Orr is an attorney and is in the business of
(term expiring in 2000) financial and estate management. He is Chairman of the
Board and a Director of Wausau-Mosinee Paper
Corporation. He is a Director of Wausau Insurance
[PHOTO1] Companies, Marshall & Ilsley Corporation, M & I First
American Bank, and M & I Marshall & Ilsley Bank. Mr.
Orr also serves on various civic and charitable
organizations in Wisconsin including the Board of
Regents of the University of Wisconsin System. He
currently serves on the Audit and Compensation Commit-
tees of the Board of Directors and is Vice Chairman of
the Board.
Harry J. Pearce .................... 55 1997 Mr. Pearce is the Vice Chairman and a Director of General
(term expiring in 2000) Motors Corporation. He is a Director of Hughes
Electronics Corporation, General Motors Acceptance
Corporation, Marriott International Inc., the American
[PHOTO1] Automobile Manufacturers Association, the Economic
Strategy Institute, the Theodore Roosevelt Medora
Foundation, and is a member of the United States Air
Force Academy's Board of Visitors. He also serves on
the Board of Trustees of Howard University and is a
member of the Dean's Advisory Council of the
Northwestern University School of Law. He currently
serves on the Audit Committee of the Board of
Directors.
5
FIRST YEAR OF
SERVICE AS
NAME AGE DIRECTOR BUSINESS EXPERIENCE
- ------------------------------------ --- ------------- ---------------------------------------------------------
Homer A. Scott, Jr. ................ 63 1981 Mr. Scott is engaged in the banking and ranching business
(term expiring in 2000) in the states of Wyoming and Montana. He is a Director
and Chairman of the Board of First Interstate
BancSystem of Montana, Inc., a Director of First
[PHOTO1] Interstate Bank of Montana, Inc. and Chairman of the
Board, and a Director of First Interstate Bank of
Wyoming, Inc. 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. Sugerland 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. ....... 57 1988 Sister Welder is the President of the University of Mary,
(term expiring in 2000) Bismarck, North Dakota. She is a Director of St.
Alexius Medical Center of Bismarck and Chair of its
Marketing Committee. She is a Director of the
[PHOTO1] Bismarck-Mandan Development Association 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
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.
-4-
During 1996,1997, the Board of Directors had fourfive meetings. The Board of
Directors has an Audit Committee, a NominatingCompensation Committee, a Finance Committee,
and a CompensationNominating Committee. All committeesCommittees are composed entirely of outside
directors.Directors. The Audit Committee, established in 1972, meets regularly with
management, internal auditors, and representatives of the Company's independent
public accountants. The independent accountants have free access to the
Committee and the Board of Directors. In 1996,During 1997, the Committee met three times
and reviewed the scope, timing, and fees for the annual audit, other services
provided by the independent accountants, and the results of audit examinations
completed by the independent accountants. The Audit Committee reports the
results of its activities to the full Board of Directors. No member of the Audit
Committee is or has been an employee of the Company. The Nominating Committee,
which met four times during 1996, recommends to the full Board of Directors
nominees for director. The Compensation Committee,
which met four times during 1996,1997, 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 fourseven times during
1996,1997, 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 four times during 1997, 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.
1997 NON-EMPLOYEE DIRECTOR LONG-TERM INCENTIVE PLAN
At its meeting on February 6 1997, the Board of Directors adopted the
1997 Non-Employee Director Long-Term Incentive Plan (the "Director Plan"),
subject to ratification by the stockholders.
The Board of Directors believes that the Director Plan will help attract
qualified persons to serve as directors, increase the equity interests of
directors in the Company and strengthen the common interest of directors,
stockholders and customers. The Director Plan is also intended to provide
appropriate incentives and rewards to encourage directors to take a long-term
approach in the formulation of corporate policy and to encourage them to remain
on the Board.
The complete text of the Director Plan is set forth as Exhibit "A"
hereto. The following is a summary of the material features of the Director Plan
and is qualified in its entirety by reference to Exhibit "A".
PURPOSE OF THE DIRECTOR PLAN
The purpose of the Director Plan is to promote the success and enhance
the value of the Company by linking the personal interests of non-employee
directors to those of the Company's stockholders and customers. The Director
Plan is further intended to assist the Company in its ability to motivate,
attract and retain highly qualified individuals to serve as directors of the
Company.
EFFECTIVE DATE AND DURATION
The Director Plan will become effective upon ratification by the
stockholders, and shall remain in effect, subject to the right of the Board of
Directors to terminate the Director Plan at any time, until all shares subject
to the Director Plan shall have been purchased or acquired.
AMENDMENTS
The Board may, at any time and from time to time, alter, amend, suspend
or terminate the Director Plan in whole or in part.
ADMINISTRATION OF THE DIRECTOR PLAN
The Director Plan will be administered by a committee appointed by the
Board of Directors or by the Board of Directors (the "Committee").
SHARES SUBJECT TO THE DIRECTOR PLAN
The Director Plan authorizes the grant of up to 200,000 shares of MDU
Resources Group, Inc. Common Stock. 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 Company Common Stock as of December 31, 1996 was
$23.00.
-5-
If any corporate transaction occurs that causes a change in the
capitalization of the Company, the Committee shall make such adjustments to the
number and class of shares of stock delivered, and the number and class and/or
price of shares of Common Stock subject to outstanding awards made under the
Director Plan, as it deems appropriate and equitable to prevent dilution or
enlargement of participants' rights.
ELIGIBILITY AND PARTICIPATION
Only non-employee directors of the Company are eligible to participate in
the Director Plan. The number of directors who will be eligible initially to
participate under the Director Plan will be ten.
GRANTS UNDER THE DIRECTOR PLAN
STOCK OPTIONS. The Committee may grant nonqualified stock options under
the Director Plan. The exercise price for each such award shall be 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.
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 in a combination of the foregoing.
STOCK APPRECIATION RIGHTS. SARs granted under the Director Plan 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 price of the related option.
Freestanding SARs may be exercised upon such terms and conditions as are
imposed by the Committee and 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 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.
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 certain
specified conditions and the payment of shares in lieu of cash based on
performance criteria established by the Committee.
-6-
TERMINATION OF DIRECTOR STATUS
Each award agreement shall set forth the participant's rights with
respect to each award following termination of his position on the Board of
Directors.
TRANSFERABILITY
Except as otherwise determined by the Committee at the time of grant,
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 legal
representative during his or her lifetime.
CHANGE IN CONTROL
Upon a change in control, as defined below,
(a) Any and all options and SARs granted under the Director Plan shall
become immediately exercisable;
(b) Any restriction periods and restrictions imposed on restricted
stock shall be deemed to have expired 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.
For purposes of the above, 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; (v) the sale or other
disposition of all or substantially all of the assets of Montana-Dakota
Utilities Co., other than to a subsidiary of the Company; or (vi) any other
event which shall be deemed by a majority of the Committee to constitute a
"change in control".
AWARD INFORMATION
It is not possible at this time to determine awards that will be made
pursuant to the Director Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the federal tax consequences
related to options to be awarded under the Director Plan.
-7-
CONSEQUENCES TO THE OPTIONHOLDER
GRANT. There are no federal income tax consequences to the optionholder solely
by reason of the grant of an option under the Director Plan.
EXERCISE. Upon the exercise of an option, 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 as the exercise price.
The optionholder's tax basis in the shares acquired pursuant to the exercise of
an option will be the amount paid upon exercise plus the amount of ordinary
income recognized by the optionholder upon exercise.
DISPOSITION OF SHARES ACQUIRED UNDER AN OPTION. If an optionholder disposes of
shares of Company Common Stock acquired upon exercise of an option in a taxable
transaction, the optionholder will recognize capital gain or loss in an amount
equal to the difference between his basis (as discussed above) in the shares
sold and the total amount realized upon disposition. Any such capital gain or
loss will be 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.
CONSEQUENCES TO THE COMPANY
There are no federal income tax consequences to the Company by reason of the
grant of options.
At the time the optionholder recognizes ordinary income from the exercise of an
option, the Company will be entitled to a federal income tax deduction in the
amount of the ordinary income so recognized (as described above).
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 an
option.
OTHER TAX CONSEQUENCES
The foregoing discussion is not a complete description of the federal income tax
aspects of options under the Director Plan. 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. Approval of the
Director Plan requires the affirmative vote of the holders of a majority of the
Common Stock present or represented and entitled to vote. If a choice has been
specified by a stockholder by means of the ballot on 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.
1997 EXECUTIVE LONG-TERM INCENTIVE PLAN
At its meeting on February 6, 1997, the Board of Directors adopted the
1997 Executive Long-Term Incentive Plan (the "Executive Plan"), subject to
ratification by the stockholders.
The Board of Directors believes that the Executive Plan will help attract
qualified persons to serve as officers and key employees of the Company,
increase the equity interests of executives in the Company and strengthen the
common interest of executives, stockholders and customers. The Executive Plan is
also intended to provide appropriate incentives and rewards to encourage
executives to take a long-term approach in the formulation of corporate policy
and to encourage them to remain with the Company.
The complete text of the Executive Plan is set forth as Exhibit "B"
hereto. The following is a summary of the material features of the Executive
Plan and is qualified in its entirety by reference to Exhibit "B".
-8-
PURPOSE OF THE EXECUTIVE PLAN
The purpose of the Executive Plan 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 Executive
Plan 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 Executive Plan will become effective upon ratification by the
stockholders, and shall remain in effect, subject to the right of the Board of
Directors to terminate the Executive Plan at any time, until all shares subject
to the Executive Plan 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 Executive Plan in whole or in part, subject to certain
restrictions as stated therein.
ADMINISTRATION OF THE EXECUTIVE PLAN
The Executive Plan will be 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 EXECUTIVE PLAN
The Executive Plan authorizes the grant of up to 1,200,000 shares of MDU
Resources Group, Inc. Common Stock. 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 Company Common Stock as of December 31, 1996 was
$23.00.
If any corporate transaction occurs that causes a change in the
capitalization of the Company, the Committee shall make such adjustments to the
number and class of shares of stock delivered, and the number and class and/or
price of shares of Common Stock subject to outstanding awards made under the
Executive Plan, as it deems appropriate and equitable to prevent dilution or
enlargement of participants' rights.
ELIGIBILITY AND PARTICIPATION
Employees eligible to participate in the Executive 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 of Directors,
but excluding directors who are not employees. It is anticipated that the
approximate number of employees who will be eligible initially to participate
under the Executive Plan will be 31.
GRANTS UNDER THE EXECUTIVE PLAN
STOCK OPTIONS. The Committee may grant incentive stock options ("ISOs"),
nonqualified stock options ("NQSOs") or a combination thereof under the
Executive Plan. 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.
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 in a combination of the foregoing.
STOCK APPRECIATION RIGHTS. SARs granted under the Executive Plan 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 price of the related option.
-9-
Freestanding SARs may be exercised upon such terms and conditions as are
imposed by the Committee and 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 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.
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 certain
specified conditions and the payment of shares in lieu of cash based on
performance criteria established by the Committee.
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 Executive Plan, 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 legal representative
during his or her lifetime.
CHANGE IN CONTROL
Upon a change in control, as defined below,
(a) Any and all options and SARs granted under the Executive Plan shall
become immediately exercisable;
(b) Any restriction periods and restrictions imposed on restricted
stock shall be deemed to have expired 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.
-10-
For purposes of the above, 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; (v) the sale or other
disposition of all or substantially all of the assets of Montana-Dakota
Utilities Co., other than to a subsidiary of the Company; or (vi) any other
event which shall be deemed by a majority of the Committee to constitute a
"change in control".
AWARD INFORMATION
It is not possible at this time to determine awards that will be made
pursuant to the Executive Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the federal tax consequences
related to options to be awarded under the Executive Plan.
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 Executive Plan.
EXERCISE. The exercise of an ISO is not a taxable event for regular federal
income tax purposes if certain requirements are satisfied, including the
restriction providing that the optionholder generally must exercise the option
no later than three (3) months following the termination of employment. However,
such exercise may give rise to an 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 as the
exercise price. The ordinary income 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 recognized by the optionholder upon exercise.
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 is
granted and more than one year after the date on which the shares are
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 the 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 is
granted or within one year after the transfer of shares to the optionholder
pursuant to the exercise of the ISO, then at the time of disposition the
optionholder will generally recognize ordinary income equal to the lesser of (i)
the excess of such share's fair market value on the date of exercise over the
-11-
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, then 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), then 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 his
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 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 imposed in addition
to, but only to the extent it exceeds, the optionholder's regular tax for the
taxable year. Generally, AMT is computed at the rate of 26% of the excess of a
taxpayer's alternative minimum taxable income ("AMTI") over the exemption
amount, but only if such excess amount does not exceed $175,000 ($87,500 in the
case of married individuals filing separate returns). The AMT tax rate is 28% of
such excess amount over the $175,000 ($87,500) amount. For these purposes, the
exemption amount is $45,000 for joint returns or returns of surviving spouses
($33,750 for single taxpayers and $22,500 for married individuals filing
separate returns), reduced by 25% of the excess AMTI over $150,000 for joint
returns or returns of surviving spouses ($112,500 for single taxpayers and
$75,000 for married individuals filing separate returns). A taxpayer's AMTI is
essentially the taxpayer's taxable income adjusted pursuant to the AMT
provisions and increased by items of tax preference.
The exercise of ISOs (but not NQSOs) will generally result in an upward
adjustment to the optionholder's AMTI in the year of exercise by an amount equal
to the excess, if any, of the fair market value of the stock on the date of
exercise over the exercise price. The basis of the stock acquired, for AMT
purposes, will equal the exercise price increased by the prior upward adjustment
of the taxpayer's AMTI due to the exercise of the option. This will result in a
corresponding downward adjustment to the optionholder's AMTI in the year the
stock is disposed of.
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 ISOs (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 withholding obligations described below. To the extent
the optionholder recognizes ordinary income by reason of a disqualifying
disposition of the stock acquired upon exercise of ISOs, 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 shares 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 ISOs and NQSOs under the Executive Plan. 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. Approval of
the Executive Plan requires the affirmative vote of the holders of a majority of
the Common Stock present or represented and entitled to vote. If a choice has
been specified by a stockholder by means of the ballot on 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.
-12-
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, 1997, 1996, 1995, and 1994,1995, for those persons who were, at December 31,
1996,1997, (i) the Chief Executive Officer, and (ii) the other four most highly
compensated executive officers of the Company (the "Named Officers"). Footnotes
supplement the information contained in the Tables.
SUMMARY COMPENSATION TABLE
LONG TERMLONG-TERM COMPENSATION
------------------------
AWARDS
------------------------
ANNUAL COMPENSATION COMPENSATION
------------------- --------------
AWARDS
--------------
(A) (B) (C) (D)(F)
-------------------- SECURITIES (G)
(E) (F) (G)
SECURITIES
RESTRICTED UNDERLYING ALL OTHER
STOCK(A) (C) (D) RESTRICTED OPTIONS/ COMPEN-
NAME AND (B) SALARY BONUS 1 AWARD(S)BONUS(1) STOCK SARS SATION 3SATION(3)
PRINCIPAL POSITION YEAR ($) ($) AWARDS ($) (#) ($)
------------------ ---- ------- ------- -------- ------ --------- ------------------------------------------------- --------- --------- --------- ----------- ----------- -----------
Harold J. Mellen, Jr. 1997 342,735 186,450 -- -- 6,598
--President & C.E.O. 1996 276,373 189,150 0 0-- -- 5,886
--President & C.E.O.
1995 249,553 104,824 0-- 49,740 5,886
1994 191,779 50,577 0 0 4,500
Douglas C. Kane 1997 201,772 92,250 -- -- 4,750
--Executive Vice President, 1996 192,281 106,500 0 0-- -- 4,500
--Executive Vice PresidentChief Administrative & 1995 181,210 58,910 0-- 27,952 4,500
& Chief OperatingCorporate Development Officer 1994 138,519 44,878 0 0 4,156
Ronald D. Tipton 1996 190,000 115,363 0 0 4,7881997 200,655 92,250 -- -- 4,948
--President & C.E.O. of 1996 190,000 115,363 -- -- 4,788
Montana-Dakota Utilities Co. 1995 179,039 101,997 31,680 231,680(2) 32,955 3,975
Montana-Dakota Utilities Co. 1994 -- -- -- -- --
Martin A. White 1997 147,316 54,450 -- -- 4,875
--Senior Vice President-- 1996 135,856 52,350 0 0-- -- 4,076
--Senior Vice President--Corporate Development 1995 128,312 23,514 0-- 8,925 3,849
Corporate Development 1994 123,369 24,030 0 0 3,135
Lester H. Loble, IIWarren L. Robinson 1997 128,843 63,750 -- -- 3,865
--Vice President, Treasurer, 1996 122,592 47,100 0 0 3,678
--General Counsel111,937 58,200 -- -- 2,773
& Chief Financial Officer 1995 119,006 26,163 0 9,900 3,041
Secretary 1994 115,446 22,279 0 0 3,080105,446 32,234 -- 15,300 3,358
- -----------------
1.------------------------
(1) Granted pursuant to the Management Incentive Compensation Plan.
2.(2) The restricted stock award is valued in the tableTable at fair market value on
the date of the grant. Its value at December 31, 19961997, was $34,500.$48,140.
Non-preferential dividends are paid on the shares.
3.(3) Totals shown are the Company contributions to the Tax Deferred Compensation
Savings Plan, with the exceptions of Mr. Mellen, whose totals also include
an insurance premium in the amount of $1,386Mr. Tipton, and Mr. Tipton,White,
whose totals also include insurance premiums in the amounts of $288.$1,848, $198,
and $456 respectively.
7
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
(A) (B)
SHARES (C)
ACQUIRED ON VALUE
EXERCISE REALIZED
(#) ($)
----------- ----------
(D) (E)
SHARES
NUMBER OF ACQUIRED(E)
SECURITIES UNDERLYING VALUE OF UNEXERCISED,
ON VALUE UNEXERCISED OPTIONS IN-THE-MONEYIN-THE- MONEY OPTIONS
EXERCISE REALIZED
AT FISCAL YEAR-END 1YEAR-END(1) AT FISCAL YEAR-END
(#) ($)
(#) ($)
------ -------- ---------------------------- ---------------------------(A) -------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----- ------------------------------------ ----------- ------------- ----------- -------------
Harold J. Mellen, Jr.. 20,610 $135,253Jr................ -- $ -- -- 49,740 $ -- $223,830$ 652,838
Douglas C. Kane ...... 7,750 50,359 10,610Kane..................... 1,000 8,500 9,610 27,952 76,923 125,784152,559 366,870
Ronald D. Tipton ..... 5,000 32,813Tipton.................... 9,685 82,323 -- 32,955 70,216 148,298-- 432,534
Martin A. White ...... -- -- 8,040White..................... 1,863 14,555 6,177 8,925 58,290 40,163
Lester H. Loble, II .. 2,300 15,344 5,395 9,900 39,114 44,55098,060 117,141
Warren L. Robinson.................. 1,000 6,688 1,400 15,300 22,225 200,813
- -----------------
1.------------------------
(1) Vesting is accelerated upon a change in control.
-13-
PENSION PLAN TABLE
YEARS OF SERVICE
-------------------------------------------------------------------------------------------------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------- --------- --------- --------- --------- -------------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
$125,000 ........$125,000............................................. $ 77,87579,626 $ 86,55488,288 $ 95,232 $103,911 $112,589
150,000 ........ 91,953 102,444 112,935 123,426 133,917
175,000 ........ 106,030 118,334 130,637 142,941 155,244
200,000 ........ 120,108 134,224 148,340 162,456 176,572
225,000 ........ 134,185 150,114 166,042 181,971 197,899
250,000 ........ 148,263 166,004 183,745 201,486 219,227
300,000 ........ 176,418 197,784 219,150 240,516 261,882
350,000 ........ 195,933 220,924 245,915 270,906 295,897
400,000 ........ 206,808 235,424 264,040 292,656 321,272
450,000 ........ 217,683 249,924 282,165 314,406 346,647
500,000 ........ 228,558 264,424 300,290 336,156 372,02296,950 $ 105,612 $ 114,274
150,000............................................. 95,743 106,218 116,692 127,167 137,641
175,000............................................. 108,598 119,798 130,997 142,197 153,396
200,000............................................. 121,198 132,398 143,597 154,797 165,996
225,000............................................. 132,178 143,378 154,577 165,777 176,976
250,000............................................. 143,098 154,298 165,497 176,697 187,896
300,000............................................. 179,338 190,538 201,737 212,937 224,136
350,000............................................. 226,918 238,118 249,317 260,517 271,716
400,000............................................. 267,898 279,098 290,297 301,497 312,696
450,000............................................. 307,798 318,998 330,197 341,397 352,596
500,000............................................. 347,998 359,198 370,397 381,597 392,796
The tableTable 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 pre-retirementpreretirement
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 Supplemental Income Security PlanSISP for senior management personnel. In 1996, 751997, 73 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.
8
As of December 31, 1996,1997, the Named Officers were credited with the following
years of service under the plans;plans: Mr. Mellen: Pension, 11,12, SISP, 11;12; Mr. Tipton:
Pension, 13,14, SISP, 11;14; Mr. Kane: Pension, 25,26, SISP, 11;16; Mr. White: Pension 5,6,
SISP, 5;6; and Mr. Loble:Robinson: Pension 9, SISP 9. 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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
Decisions on compensation for the Company's executive officers are made by
the Compensation Committee of the Board of Directors. The Committee was created
in 1967 and has been and is composed entirely of non-employee directors.Directors. In the
late part of each calendar year, the Committee reviews and approves, with any
modifications it deems appropriate, the Executive Compensation Policy for the
executive officers including the Chief Executive Officer. The approved plan is
implemented the following calendar year.
EXECUTIVE COMPENSATION POLICY
The Executive Compensation Policy is designed to attract and retain
qualified executive officers, to recognize above-average job performance, and to
provide a direct and strong link between Company performance and executive pay.
The Board of Directors in 1994 adopted Stock Ownership Guidelines under which
executives are required to own Company Common Stock valued from two times their
annual salary to four times their annual salary (in the case of the Chief
Executive Officer). Total compensation is intended to be competitive with that paid by comparable
-14-
companies in the regulated electric and gas utility industry, relevant segments
of the energy and mining industries, and companies from general industry. There
are fourthree components of total executive compensation: (1) Base salary;
(2) Management Incentive Compensation Plan;
(3) 1992 Key Employee Stock Option Plan; and
(4) Restricted Stock Bonus Plan.
As indicated above, the base salary, componentannual
incentive compensation, and long-term incentive compensation.
For 1997, compensation paid to the Company's executive officers qualified as
fully deductible under federal tax laws. The Committee continues to review the
impact of compensation is designed
to be competitive with that paid by comparable companies. An external consultant
reviews comparative surveysfederal tax laws, including Edison Electric Institute Executive
Compensation Survey, American Gas Association Top Management Survey, KPMG Peat
Marwick LLP Oil and Gas Compensation Survey, PAS Inc. Executive Compensation
Survey for Contractors, Towers Perrin Executive Compensation DataBank, and
Executive Compensation Services Top Management Report. WhileSection 162(m) of the companies used
in these surveys are not the same as the peer group of companies used in the
Performance Graph, the Compensation Committee believes these surveys provide a
broader base of data and are commonly used to set executive salaries. The Edison
Electric Institute Executive Compensation Survey is a 1995 survey prepared by
Edison Electric Institute and includes nearly 100 participants of diverse size,
comprised of electric or electric/gas utility companies, utility parent
companies or diversified parent companies. The American Gas Association Top
Management Survey is a 1995 survey of salary for 87 natural gas
companies-distribution, transmission, combination (gas and electric) and
integrated. The KPMG Survey includes 123 participants from the oil and gas
industry and the PAS Survey for Contractors has over 250 participants. The
Towers Perrin Executive Compensation DataBank is a 1995 survey of over 425
companies representing a variety of industries and revenue levels; and the
Executive Compensation Services Top Management Report is a 1995-96 survey ofInternal Revenue
Code, on executive compensation, for 1,270 companies cutting across all major industry
lines. The consultant used these two surveys, including data representative of
the companies' revenue levels, for a general industry comparison. The external
data from all these surveys is used to develop a market-consensus salary for
each executive position. "Market-consensus salary" represents the market value
for each position based upon the above referenced surveys. For executive
officers the consensus reflects a 50 percent weighting of general industry data
and a 50 percent weighting of utility industry data. The Compensation Committee
sets a targeted range of compensation from 80%-115% around the market-consensus
salary. The Compensation Committee uses this targeted range together with an
analysis of the value of the executive position and individual evaluation to
establish base salaries for executive officers. In the case of the Chief
Executive Officer, the same methodology is used and, in addition, the Committee
takes into consideration salary information from the peer group of companies in
the Performance Graph.
All executive officers are eligible for awards under the Company's
various incentive plans referred to above. The Compensation Committee believes
that offering incentives to executive officers will enhance the long-term
performance of the Company, promote cost efficiency and further overall
stockholder returns. The Committee uses these plans as it deems appropriate to
achieve these goals. The Compensation Committee determines awards pursuant to
these plans based generally on what it believes other similar companies are
doing.
The Companybut has not formulated any policy with regard
thereto.
The Board of Directors in 1993 adopted Stock Ownership Guidelines, under
which executives are required to own Company Common Stock valued from one times
their annual salary to four times their annual salary (in the deductibility of qualifying compensation paid to executive officers under
Section 162(m)case of the Internal Revenue Code.
1996 COMPENSATION FOR EXECUTIVE OFFICERS AND CHIEF EXECUTIVE OFFICER
Compensation paid to executive officersChief
Executive Officer).
BASE SALARY
Base salaries are reviewed annually for all employees of the Company,
including executive officers. The Compensation Committee uses data from a number
of comparative compensation surveys provided by an external consultant to
develop a market consensus salary for each executive position. The surveys
reflect a larger and more diversified group of companies than companies included
in 1996the peer group in the graph following this report. The Committee also
examined data from the peer group of companies.
The market consensus salary, which is based upon general industry data,
utility industry data, and peer group data, represents the perceived market
value of each position. Base salaries are then set by the Compensation
Committee, which considers (i) a targeted range of compensation around the
market consensus salary (80% - 115% for 1997), (ii) the executive's current
salary in comparison to the targeted range, and (iii) individual performance. No
formal weighting was comprisedgiven to any of these criteria. In 1997, base salary, cash awards under the Management Incentive
Compensation Plan and dividend equivalents accruing on option grants made
previously under the 1992 Key Employee Stock Option Plan.
Base salary
increases for the eight executive officers during 1996 ranged from 0%
to 10.96% and averaged 4.87%6.57%. Salary increases were a function of (1) the
Compensation Committee's assessment of the individual performance of each
executive and (2) the current salary of each executive compared to that paid by
comparable companies as determined by the external consultant (as discussed
above). A more favorable performance appraisal permitted a larger increase. If
the current salary lagged that paid by comparable companies, a larger increase
was permitted. TheTheir base salaries
during 1996 averaged 82.02%94.3% of the
market-consensus salary for the Company's executive positions. Fortheir market consensus salaries. Mr. Mellen, the Chief
Executive Officer, the consultant used the surveys described above and
considered the salary information from the peer group of companies in the
Performance Graph to determine the Chief Executive Officer market-consensus
salary. The base salary of Mr. Mellenreceived a 4.8% increase effective for the year 1996 reflected an increase of
10.96% over his 1995 base salary. The Committee determined Mr. Mellen's increase
-15-
through consideration ofbeginning
July 1, 1997, based upon the survey data discussed above the Company's overall
financial performance in 1996criteria and Mr. Mellen's individual performance including
his personal role in
achieving 19961997 corporate performance. The Committee also
consideredperformance, his development of a succession plan, and
the successful acquisitions made during the year. During 1997, approximately
55.9% of Mr. Mellen's leadership in positioningcompensation was
9
base pay. The remainder was performance based. This reflects the Company for the futureCommittee's
belief in the rapidly-changing regulatory environment. The Committee did not give formal
weightingimportance of having substantial at-risk compensation to provide a
direct and strong link between Company performance and executive pay.
ANNUAL INCENTIVE COMPENSATION
Annual incentive compensation is determined under the criteria used in order to set salary increases for the
executive officers or for the Chief Executive Officer.
The Management Incentive
Compensation Plan is structured so that cash
incentive awards reflect the attainment of specific annual levels of
performance.Plan. The performance measures used reflect both the stockholders'
interest (earnings) and the customers' interest (cost efficiency). Additionally,
individual performance is evaluated and appropriate adjustments to target award
levels may be made.made, although there is no formal weighting of corporate and
individual performance. Target award levels are set at a percentage of each
participant's assigned salary grade midpoint. The percentage for the Chief Executive Officer
was 35% and for the other executive officers ranged from 20% to 30%. A target
incentive fund is developed at the beginning of each plan year based upon the
aggregate target award levels of all participants. The size of the fund will
increase or decrease based uponmidpoint, with actual Company performance in relation to the
pre-established goals. Individual awards will be greater or lesser than target
amounts based upon an assessment of individual performance. Awards can rangeranging from 0% (less than 90% of budgeted earnings per share) to 150% (more than 108%
of budgeted earnings per share)
of the target amount. The annual corporate
performance targets for 1996 wereFor 1997, eight executive officers received an average of
145.9%, based on the degree of(i) achievement of 105% of
budgeted earnings. As a result of actualcorporate earnings exceeding thresholdat or near the maximum
level of performance and (ii) individual performance goals being met, cash awards were made
under the plan for the year 1996 to nine executive officers in the aggregate
amount of $675,673. The Chief Executive Officerperformance. Mr. Mellen received
$189,150 for the year
1996. This amount was a payout of$186,450 or 150% of the targeted award, based on the
Company's actual earnings exceeding the threshold level of performance and upon
individual performance.amount.
LONG-TERM INCENTIVE COMPENSATION
The 1992 Key Employee Stock Option Plan, isthe Restricted Stock Bonus Plan,
and the 1997 Executive Long-Term Incentive Plan, approved by the stockholders at
last year's annual meeting, are the plans pursuant to motivate executives to
achieve specifiedwhich the Compensation
Committee may grant opportunities for long-term performance goalsincentive compensation. This
type of the Company and to encourage
ownership by them of the Common Stock of the Company. Itcompensation is designed to reinforce financial and strategic corporate
objectives, to emphasize pay for performance, and to focus executive effortexecutives on
long-term sustainable value creation. This
aligns the interests of the executivesOptions with those of the stockholder. The plan
consists of two elements: stock option grants and dividend equivalents.
Since optionsa three-year performance
cycle (1995-97) and related dividend equivalents were granted in 1995 andunder the three year performance cycle (1995-97) is still running, the Compensation
Committee determined that it was not necessary to grant further awards in 1996
to achieve the goals stated above.
The Restricted Stock Bonus Plan provides for awards of restricted stock
to individuals when designated by the Compensation Committee as having
demonstrated superior individual performance. The awards serve as a motivator
for long-term performance and as a retention device for individuals who have
demonstrated superior performance. The executive has a stake in the Company's
financial performance. Again, this aligns the interest of the executives with
those of the stockholders. No awards were made under this plan during 1996.
49.5% of the Chief Executive Officer's total compensation during 1996 was
based on objective annual performance criteria (through the Management Incentive
Compensation Plan) or long-term performance criteria (through the 1992 Key
Employee Stock
Option Plan reflectingin 1995. Performance goals established by the Committee and
described in the 1996 Proxy Statement for the 1995-97 performance cycle were
exceeded; therefore, exercisability of the options was accelerated and dividend
equivalents accrued on the
1995 option grants)were earned at 149%. An average of 40.1% of the total compensation of theNo options or other executive officers was based on objective annual performance criteria (through
the Management Incentive Compensation Plan) or long-term performance criteria
(through the 1992 Key Employee Stock Option Plan, reflecting the dividend
equivalents accrued on the 1995 option grants). The Committee believes that
having 49.5% of the compensation of the Chief Executive Officer and an average
of 40.1% of the compensation of other executive officers at risk provides a
direct and strong link between Company performance and executive pay.grants were made
in 1997.
San W. Orr, Jr., Chairman John L. Olson, Member Homer A. Scott, Jr., Member
John L. Olson, Member
-16-10
MDU RESOURCES GROUP, INC.
COMPARISON OF FIVE YEAR TOTAL SHAREHOLDERSTOCKHOLDER RETURN 1
[The following table represents a graph in the printed piece.]
- --------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
MDU 100 113 142 130 150 183
S&P 500 100 108 118 120 165 203
Peer Group 100 111 122 111 138 142
- --------------------------------------------------------------------------------(1)
Total Stockholder Return Index (1992=100)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
S & P
MDU 500 PEER GROUP
----------- ----------- -----------
1992 $ 100 $ 100 $ 100
1993 $ 125 $ 110 $ 110
1994 $ 114 $ 112 $ 100
1995 $ 133 $ 153 $ 124
1996 $ 161 $ 189 $ 128
1997 $ 232 $ 252 $ 174
(1) All data is indexed to December 31, 1991,1992, 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 areis weighted according to the issuer's stock market
capitalization at the beginning of the period. The peer issuers are Black
Hills Corp., CilcorpCorporation, CILCORP Inc., Equitable Resources, Inc., Florida
Progress Corp.,Corporation, Minnesota Power & Light Company, The Montana Power
Company, ONEOK, Inc., Questar Corp.,Corporation, South Jersey Industries, Inc.,
Teco Energy, Inc., UGI Corp.,Corporation, and Utilicorp United Inc.
DIRECTORS' COMPENSATION
Each Director who is not an officer of the Company (except the Chairman of
the Board) receives $13,000 and 300 shares of Company Common Stock as an annual
retainer for Board service. The Chairman receives $52,000 and 300 shares of
Company Common Stock. Audit and Compensation Committee Chairmen each receive a
$2,500 annual retainer, and Finance and Nominating Committee Chairmen each
receive a $1,000 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 $1000$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 an option award on June 3, 1997, of 1,500 shares of
Company Common Stock. The option award vested immediately and is exercisable for
10 years from the date of grant. The option price was $24.5625, the fair market
value of the stock on the date of the grant.
11
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 annual compensation in an
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.
-17-
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.
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.
NAME
- ----
Harold J. Mellen, Jr.
AGE
- ---
62
PRESENT CORPORATE POSITION AND BUSINESS EXPERIENCE
- --------------------------------------------------
President and Chief Executive Officer. For information about Mr. Mellen, see
"Election of Directors."
NAME
- ----
Cathleen M. Christopherson
AGE
- ---
52
PRESENT CORPORATE POSITION AND BUSINESS EXPERIENCE
- --------------------------------------------------
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.
NAME
- ----
Douglas C. Kane
AGE
- ---
47
PRESENT CORPORATE POSITION AND BUSINESS EXPERIENCE
- --------------------------------------------------
Executive Vice President and Chief Operating Officer. For information about Mr.
Kane, see "Election of Directors."
NAME
- ----
Lester H. Loble, II
AGE
- ---
55
PRESENT CORPORATE POSITION AND BUSINESS EXPERIENCE
- --------------------------------------------------
Mr. Loble was elected General Counsel and Secretary of the Company effective May
1987. Mr. Loble also serves as a Director and/or General Counsel and Secretary
of the principal subsidiaries of the Company. Mr. Loble is also a member and the
Secretary of the Managing Committee of Montana-Dakota Utilities Co., a Division
of the Company.
NAME
- ----
Vernon A. Raile
AGE
- ---
52
PRESENT CORPORATE POSITION AND BUSINESS EXPERIENCE
- --------------------------------------------------
PRESENT CORPORATE POSITION
NAME AGE AND BUSINESS EXPERIENCE
- --------------------------------------- --- -------------------------------------------------------------------
Harold J. Mellen, Jr................... 63 President and Chief Executive Officer. For information about Mr.
Mellen, see "Election of Directors."
Cathleen M. Christopherson............. 53 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.
Douglas C. Kane........................ 48 Executive Vice President, Chief Administrative and Corporate
Development Officer. For information about Mr. Kane, see
"Election of Directors."
Lester H. Loble, II.................... 56 Mr. Loble was elected General Counsel and Secretary of the Company
effective May 1987. Mr. Loble also serves as a Director and/or
General Counsel and Secretary of the principal subsidiaries of
the Company. Mr. Loble is also a member and the Secretary of the
Managing Committee of Montana-Dakota Utilities Co., a Division of
the Company.
Vernon A. Raile........................ 53 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.
NAME
- ----
Warren L. Robinson
AGE
- ---
46
PRESENT CORPORATE POSITION AND BUSINESS EXPERIENCE
- --------------------------------------------------
12
PRESENT CORPORATE POSITION
NAME AGE AND BUSINESS EXPERIENCE
- --------------------------------------- --- -------------------------------------------------------------------
Warren L. Robinson..................... 47 Mr. Robinson was elected Vice President, Treasurer and Chief
Financial Officer of the Company effective August 1992. He is
also Treasurer and Assistant Secretary, or Secretary, of
subsidiaries of the Company. Prior to that 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.
Ronald D. Tipton....................... 51 Mr. Tipton was elected 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 form 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.
Martin A. White........................ 56 Senior Vice President-Corporate Development. For information about
Mr. White, see "Election of Directors."
Robert E. Wood......................... 55 Mr. Wood was elected Vice President-Public Affairs and
Environmental Policy of the Company effective August 1992. He is also Treasurer and Assistant
Secretary, or Secretary, of subsidiaries of the Company. Prior to that he served
as Treasurer and Assistant Secretary from December 1989, and as Manager of
Corporate Development and Assistant Treasurer from May 1989 to December 1989 and
Manager of Corporate Development from October 1988.
NAME
- ----
Ronald D. Tipton
AGE
- ---
50
PRESENT CORPORATE POSITION AND BUSINESS EXPERIENCE
- --------------------------------------------------
Mr. Tipton was elected President and Chief Executive Officer of Montana-Dakota
Utilities Co. on January 1, 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, 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.
NAME
- ----
Martin A. White
AGE
- ---
55
PRESENT CORPORATE POSITION AND BUSINESS EXPERIENCE
- --------------------------------------------------
Mr. White was elected Senior Vice President-Corporate Development effective
November 1995. Prior to that he served as Vice President-Corporate Development
from November 1991.
-18-
NAME
- ----
Robert E. Wood
AGE
- ---
54
PRESENT CORPORATE POSITION AND BUSINESS EXPERIENCE
- --------------------------------------------------
Mr. Wood has been Vice President-Public Affairs and Environmental Policy of the
Company since 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.
13
SECURITY OWNERSHIP
The tableTable below sets forth the number of shares of capital stock of the
Company owned beneficially as of December 31, 1996,1997, by each directorDirector and each
nominee for director,Director, each Named Officer and by all directorsDirectors and executive
officers of the Company as a group.
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP PERCENTAGE OF CLASS
------------------------------ ------------------------------------------------ --------------------------
NAME COMMONCOMMON(1) PREFERRED COMMON PREFERRED
----- ------ --------- ------ ---------- -------------------------------------------------------------------- ----------- ------------- ----------- -------------
Thomas Everist .............................. 800Everist...................................................... 2,600 -- * --
Douglas C. Kane ............................. 25,464(a) -- * --
Lester H. Loble, II ......................... 12,713(a)Kane..................................................... 37,311(2) -- * --
Harold J. Mellen, Jr. ....................... 31,934(a)Jr................................................ 33,168(2) -- * --
Richard L. Muus ............................. 5,783Muus..................................................... 8,088 -- * --
Robert L. Nance ............................. 3,477Nance..................................................... 5,313 -- * --
John L. Olson ............................... 15,600Olson....................................................... 17,400 -- * --
San W. Orr, Jr. ............................. 172,051(b)Jr...................................................... 89,903(3) -- * --
Harry J. Pearce .............................Pearce..................................................... 11,902 -- * --
-- --Warren L. Robinson.................................................. 10,397(2) 6 * *
John A. Schuchart ........................... 129,102(c)Schuchart................................................... 132,979(4) -- * --
Homer A. Scott, Jr. ......................... 3,929(d)Jr.................................................. 6,047(5) -- * --
Joseph T. Simmons ........................... 6,735Simmons................................................... 8,857 -- * --
Ronald D. Tipton ............................ 17,314(a)Tipton.................................................... 23,441(2) -- * --
Sister Thomas Welder ........................Welder................................................ 1,800(6) -- -- --* --
Martin A. White ............................. 10,165(a)White..................................................... 18,078(2) -- * --
All directorsDirectors and executive officers of the Company as a group (20(19
in number) .......... 476,577(a) 6 1.7........................................................ 388,800(2) 1.33% *
- --------------------------------
* Less than one percent of the class.
(a)(1) The totals include beneficial ownership of shares which may be acquired
within 60 days pursuant to stock options: Mr. Everist 1,500 shares, Mr. Kane
9,610 shares, Mr. Muus 1,500 shares, Mr. Nance 1,500 shares, Mr. Olson 1,500
shares, Mr. Orr 1,500 shares, Mr. Pearce 1,500 shares, Mr. Robinson 1,400
shares, Mr. Schuchart 1,500 shares, Mr. Scott 1,500 shares, Mr. Simmons
1,500 shares, Sister Thomas Welder: see footnote 6, Mr. White 6,177 shares,
and all Directors and all executive officers of the Company as a group
41,482 shares.
(2) Includes full shares allocated to the officer's account in the Tax Deferred
Compensation Savings Plan.
(b)(3) Mr. Orr serves as a co-trustee with shared voting and investment power of
various trusts and as an officer and directorDirector of the corporate trustee for
various other trusts holding these shares. Mr. Orr disclaims beneficial
ownership of all but 1,8112,466 shares held by the trusts.
(c)(4) Includes shares owned by Mr. Schuchart's wife. Mr. Schuchart disclaims all
beneficial ownership of the shares owned by his wife.
(d)(5) 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.
(6) Shares held by the Annunciation Priory, of which community Sister Thomas
Welder is a member. The total includes 1,500 shares which may be acquired
within 60 days pursuant to stock options. Sister Thomas Welder disclaims all
beneficial ownership of these shares owned by the Priory.
14
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 1996.1997. The Audit Committee is presently composed of Messrs.
Richard L. Muus, John L. Olson, San W. Orr, Jr., Harry J. Pearce, and Homer A.
Scott, Jr. (Chairman). This will be the eleventhtwelfth year in which the firm has acted
in this capacity. A representative of Arthur Andersen is expected towill 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.
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 form of proxy to vote in
accordance with their best judgment.
-19-
19981999 ANNUAL MEETING OF STOCKHOLDERS
Under the Company's Bylaws, as recently amended, 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 90 days prior to the
Company'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 90 days prior to the Company's annual meeting.
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 28, 1998,27, 1999, 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 3, 1997.9, 1998.
A copy of the full text of the Bylaw provisions discussed above may be
obtained by writing to the Secretary of the Company.
-------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (EXCLUDING EXHIBITS) FOR
THE YEAR ENDED DECEMBER 31, 1996,1997, 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 REQUEST TO THE
OFFICE OF THE TREASURER OF MDU RESOURCES GROUP, INC., 400 NORTH FOURTH STREET,SCHUCHART BUILDING, 918
EAST DIVIDE AVENUE, MAILING ADDRESS: P.O. BOX 5650, BISMARCK, NORTH DAKOTA 58501.ND 58506-5650.
By order of the Board of Directors,
/s/[SIGNATURE]
Lester H. Loble, II
----------------------
LESTER H. LOBLE, II
SECRETARY
March 3, 1997
-20-9, 1998
15
EXHIBIT A
MDU RESOURCES GROUP, INC.
1997 NON-EMPLOYEE DIRECTOR 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 plan to be known as the "MDU Resources Group, Inc. 1997 Non-Employee
Director 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), 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 assist the Company in its ability to motivate, attract and
retain highly qualified individuals to serve as directors of the Company.
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 14 herein, until all Shares subject to it shall have been purchased or
acquired according to the Plan's provisions.
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, 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 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; (e) the sale or other
disposition of all or substantially all of the assets of Montana-Dakota
Utilities Co., other than to a subsidiary of the Company; or (f) any other event
which shall be deemed by a majority of the 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 15 herein.
2.9 "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company.
2.10 "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.
2.11 "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.
2.12 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.13 "EXERCISE PERIOD" means the period during which an SAR or Option is
exercisable, as set forth in the related Award Agreement.
2.14 "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.
2.15 "FREESTANDING SAR" means an SAR that is granted independently of any
Option.
2.16 "NON-EMPLOYEE DIRECTOR" means any person who is elected or appointed
to the Board and who is not an Employee.
2.17 "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.
2.18 "OPTION" means a Nonqualified Stock Option.
2.19 "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.
2.20 "PARTICIPANT" means a Non-Employee Director who has outstanding an
Award granted under the Plan.
2.21 "PERFORMANCE UNIT" means an Award granted to a Participant, as
described in Article 9 herein.
2.22 "PERFORMANCE SHARE" means an Award granted to a Participant, as
described in Article 9 herein.
2.23 "PERIOD OF RESTRICTION" means the period during which the transfer
of Restricted Stock is limited in some way, as provided in Article 8 herein.
2.24 "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.
2.25 "RESTRICTED STOCK" means an Award of Shares granted to a Participant
pursuant to Article 8 herein.
2.26 "SHARES" means the shares of common stock of the Company.
2.27 "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.
2.28 "SUBSIDIARY" means any corporation that is a "subsidiary
corporation" of the Company as that term is defined in Section 424(f) of the
Code.
2.29 "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).
A-2
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by any committee
appointed by the Board or by the Board of Directors (the "Committee").
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 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 14 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 Committee or the Board 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, 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 200,000. 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
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.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in the Plan are any
persons elected or appointed to the Board 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 Non-Employee
Directors 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 a Non-Employee Director at any time and from time to
time, as shall be determined by the Committee.
A-3
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.
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.
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 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 DIRECTOR STATUS. 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 position on the Board of
the Company. Such provisions shall be determined in the sole discretion of the
Committee, 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 director status.
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 Options 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 7. STOCK APPRECIATION RIGHTS
7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan, an
SAR may be granted to a Non-Employee Director 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.
A-4
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 DIRECTOR STATUS. 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 position on the Board of the
Company. 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 director status.
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 a Non-Employee Director 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.
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.
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
Non-Employee Director 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.
A-5
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 DIRECTOR STATUS. 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 position on the Board of the Company. 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 director status.
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 a Non-Employee Director 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 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 DIRECTOR STATUS. 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 position on the Board of the Company 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 director status.
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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 certain conditions and
the payment of Shares in lieu of cash, or cash based on performance criteria
established by the Committee. 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.
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. CHANGE IN CONTROL
The terms of this Article 13 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 shall be deemed to have expired and such 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 14. AMENDMENT, MODIFICATION AND TERMINATION
14.1 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.
14.2 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.
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ARTICLE 15. 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 16. LEGAL CONSTRUCTION
16.1 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.
16.2 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.
16.3 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.
16.4 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.
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EXHIBIT B
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 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; (e) the sale or other
disposition of all or substantially all of the assets of Montana-Dakota
Utilities Co., other than to a subsidiary of the Company; or (f) 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 "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company.
2.10 "DISABILITY" means "permanent and total disability" as defined
under Section 22(e)(3) of the Code.
2.11 "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.
2.12 "ELIGIBLE EMPLOYEE" means an Employee who is eligible to
participate in the Plan, as set forth in Section 5.1 herein.
2.13 "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.
2.14 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
2.15 "EXERCISE PERIOD" means the period during which an SAR or Option is
exercisable, as set forth in the related Award Agreement.
2.16 "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.
2.17 "FREESTANDING SAR" means an SAR that is granted independently of
any Option.
2.18 "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.
2.19 "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.
2.20 "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option.
2.21 "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.
2.22 "PARTICIPANT" means an Employee of the Company who has outstanding
an Award granted under the Plan.
2.23 "PERFORMANCE UNIT" means an Award granted to an Employee, as
described in Article 9 herein.
2.24 "PERFORMANCE SHARE" means an Award granted to an Employee, as
described in Article 9 herein.
2.25 "PERIOD OF RESTRICTION" means the period during which the transfer
of Restricted Stock is limited in some way, as provided in Article 8 herein.
2.26 "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.
2.27 "RESTRICTED STOCK" means an Award of Shares granted to a
Participant pursuant to Article 8 herein.
B-2
2.28 "SHARES" means the shares of common stock of the Company.
2.29 "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.
2.30 "SUBSIDIARY" means any corporation that is a "subsidiary
corporation" of the Company as that term is defined in Section 424(f) of the
Code.
2.31 "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 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 1,200,000. 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
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
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Incentive Stock Option granted hereunder to be other than an incentive stock
option for purposes of Section 422 of the Code.
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 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).
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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.
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.
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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.
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.
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
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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 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.
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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 certain conditions,
the payment of Shares in lieu of cash, or cash based on performance criteria
established by the Committee, and the payment of Shares in lieu of cash under
other Company incentive 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.
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 shall be deemed to have expired and such 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
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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.
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.
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(Front side of Proxy Card)
MDU RESOURCES GROUP, INC.[LOGO] PROXY
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS
ON APRIL 22, 1997.28, 1998 - 11:00 AM (CDT)
The undersigned hereby appoints John A. Schuchart, Harold J. Mellen, Jr.,Martin A. White, and Lester
H. Loble, II, and each of them, proxies, with full power of substitution, to
vote all Common SharesStock of the undersigned at the Annual Meeting of Stockholders
to be held at 11:00 A.M.AM (CDT), April 22, 1997,28, 1998, 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 below. YOUR VOTE IS
IMPORTANT! ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING. Either (1)
mark, date, sign, and return this letter proxy in the envelope provided (no
postage is necessary if mailed in the United States), or (2) submit your proxy
by Touchtone telephone (following the instructions on the reverse side of this card.side). IF NO
DIRECTIONS ARE GIVEN, THE PROXIES WILL VOTE FOR THE ELECTION OF ALL LISTED
NOMINEES IN ACCORD WITH THE DIRECTORS'
RECOMMENDATIONS ON THE OTHER MATTERS LISTED ON THE REVERSE SIDE OF THIS CARD AND AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE MEETING. We regret that we are unable to respond to comments noted on
this proxy. IfWe do welcome communications from stockholders, so if you have
comments please send them in a separate letter. YOUR VOTE FOR THE ELECTION OF DIRECTORS MAY BE INDICATED ON THE REVERSE SIDE OF
THIS CARD. Nominees are: San W. Orr, Jr., Harry J. Pearce, John A. Schuchart,
Homer A. Scott, Jr., and Sister Thomas Welder, O.S.B.
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR OTHERWISE TO 400 NORTH FOURTH
STREET, BISMARCK, ND 58501, SO THAT YOUR SHARES CAN BE REPRESENTED AT THE
MEETING.
- --------------------------------------------------------------------------------
(Reverse side of Proxy Card)Thank you.
PLEASE MARK YOUR VOTESVOTE AS IN THIS EXAMPLE: /X/
Item 1. THE ELECTION OF DIRECTORS
RECOMMEND A VOTE "FOR" ON A., B. AND C. BELOW
- -------------------------------------------------------------------------------------------------------------
NOMINEES: 01 Douglas C. Kane 02 Richard L. Muus 03 John L. Olson 04 Joseph T. Simmons 05 Martin A. White
- -------------------------------------------------------------------------------------------------------------
/ / FOR ALL NOMINEES / / WITHHOLD FOR ALL NOMINEES / / WITHHOLD FOR
To withhold authority to vote for all director nominees, mark the "FOR" box on item "A." To withhold
voting for all nominees, mark the "WITHHELD" box. To withhold voting for a
particularany individual nominee, mark the "FOR ALL EXCEPT" box next
to "WITHHOLD FOR" and enter name(s) ofwrite the exception(s)nominee's name in the space provided; yourprovided:
_________________________________________________________ . Your shares
will be voted for the remaining nominees.
FOR WITHHELD FOR ALL EXCEPT
A. Election of All Director Nominees. Exceptions ______________________________ / / / / / /
FOR AGAINST ABSTAIN
B. Approve the 1997 Non-Employee Director Long-Term Incentive Plan. ___________ / / / / / /
C. Approve the 1997 Executive Long-Term Incentive Plan. _______________________ / / / / / /
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments thereof.
SIGN HERE AS NAME(S) APPEAR AT LEFT
-------------------------------------
-------------------------------------
` PLEASE SIGN THIS PROXY AND RETURN IT
PROMPTLY WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING. IF SIGNING FOR A
CORPORATION OR PARTNERSHIP OR AS
AGENT, ATTORNEY OR FIDUCIARY,
INDICATE THE CAPACITY IN WHICH YOU
ARE SIGNING. IF YOU DO ATTEND THE
MEETING AND DECIDE TO VOTE BY BALLOT,
SUCH VOTE WILL SUPERSEDE THIS PROXY.
DATE __________________________, 1997
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES IN ITEM 1.
[LOGO] -------------
COMPANY #
CONTROL #
-------------
ANNUAL MEETING OF STOCKHOLDERS - APRIL 28, 1998
YOU CAN NOW VOTE YOUR PROXY BY TOUCHTONE TELEPHONE USING THE TOLL-FREE AUTOMATED
TELEPHONE VOTING SYSTEM.
This system is available 24 hours a day. A recorded voice will confirm your vote
has been cast as you directed and end the phone call. You do not have to mail
back your proxy voting form -- your vote will be recorded electronically. The
deadline for voting by telephone is 11:00 AM (CDT) one business day prior to the
Annual Meeting date.
TELEPHONE VOTING INSTRUCTIONS:
- - Using a Touchtone telephone, dial 1-800-240-6326.
- - When prompted, enter the 3 digit company number located in the box in the
upper right hand corner.
- - When prompted, enter your 7 digit Numerical Control Number that follows the
three digit company number.
- - When prompted, press "1" to vote FOR ALL NOMINEES - OR -
- - Press "9" to WITHHOLD FOR ALL NOMINEES - OR -
- - Press "0" to WITHHOLD FOR AN INDIVIDUAL NOMINEE and listen to the
instructions. (You will be asked to enter the two-digit number next to the
nominee name you wish to withhold.)
- - When prompted, please confirm your vote by Pressing "1".
(IF YOU VOTE BY TELEPHONE, DO NOT MAIL BACK YOUR PROXY.)
THANK YOU FOR VOTING.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS ON APRIL 28, 1998.
ANNUAL MEETING OF STOCKHOLDERS
909 AIRPORT ROAD
BISMARCK, ND 58504
APRIL 28, 1998
11:00 AM(CDT)
Dated:_______________, 1998
___________________________
Signature
___________________________
Signature
Please sign exactly as name(s) appear to the left. If signing for a corporation
or partnership or as agent, attorney or fiduciary, indicate the capacity in
which you are signing. If you do attend the meeting and decide to vote by
ballot, such vote will supersede this proxy.
YOUR VOTE IS IMPORTANT.
PLEASE VOTE BY TELEPHONE OR COMPLETE, DATE,
SIGN AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.