pre14a.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No.
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Filed by
the Registrant x
Filed by
a Party other than the Registrant o
Check the
appropriate box:
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Preliminary
Proxy Statement
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Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to § 240.14a-12
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MDU Resources Group,
Inc.
(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
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No
fee required
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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of each class of securities to which transaction
applies:
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Aggregate
number of securities to which transaction applies:
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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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(4)
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Proposed
maximum aggregate value of transaction:
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paid previously with preliminary materials.
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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.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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1200
West Century Avenue
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Terry
D. Hildestad
President
and
Chief
Executive Officer
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Mailing
Address:
P.O.
Box 5650
Bismarck,
ND 58506-5650
(701)
530-1000
March 12,
2010
To Our
Stockholders:
Please
join us for the 2010 Annual Meeting of Stockholders. The meeting will be held on
Tuesday, April 27, 2010, at 11:00 a.m., Central Daylight Saving
Time, at 909 Airport Road, Bismarck, North Dakota.
The
formal matters are described in the accompanying Notice of Annual Meeting of
Stockholders and Proxy Statement. We also will have a brief report on current
matters of interest. Lunch will be served following
the meeting.
We were
pleased with the stockholder response for the 2009 Annual Meeting at which
88.77 percent of the common stock was represented in person or by proxy. We
hope for an even greater representation at the 2010 meeting.
You may
vote your shares by telephone, by the Internet, or by returning the enclosed
proxy card. Representation of your shares at the meeting is very important. We
urge you to submit your proxy promptly.
Please note that the New York Stock
Exchange rules have changed. Brokers may not vote your shares on the
election of directors if you have not given your broker specific instructions as
to how to vote. Please be sure to give specific voting instructions
to your broker so that your vote can be counted.
All
stockholders who find it convenient to do so are cordially invited and urged to
attend the meeting in person. Registered stockholders will receive a request for
admission ticket(s) with their proxy card that can be completed and returned to
us postage-free. Stockholders whose shares are held in the name of a bank or
broker will not receive a request for admission ticket(s). They should, instead,
(1) call (701) 530-1000 to request an admission ticket(s), (2) bring a
statement from their bank or broker showing proof of stock ownership as of [ • ]
to the annual meeting, and (3) present their admission ticket(s) and photo
identification, such as a driver’s license. Directions to the meeting will be
included with your admission ticket.
I hope
you will find it possible to attend the meeting.
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Sincerely
yours, |
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Terry D.
Hildestad |
MDU
RESOURCES GROUP, INC.
1200 West Century
Avenue
Mailing Address:
P.O. Box 5650
Bismarck, ND
58506-5650
(701)
530-1000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 27,
2010
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Important
Notice Regarding the Availability of Proxy Materials for the
Stockholder
Meeting to Be Held on April 27, 2010
The
2010 Notice of Annual Meeting and Proxy Statement and 2009 Annual
Report
to
Stockholders are available at www.mdu.com/proxymaterials.
March 12,
2010
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, on
Tuesday, April 27, 2010, at 11:00 a.m., Central Daylight Saving Time,
for the following purposes:
(1)
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To
elect ten directors nominated by the board of directors to one-year
terms;
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(2)
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To
repeal Article TWELFTH of our Restated Certificate of Incorporation, which
contains provisions relating to business combinations with interested
stockholders, and make related amendments to Articles THIRTEENTH and
FOURTEENTH;
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(3)
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To
repeal Article FIFTEENTH of our Restated Certificate of Incorporation,
which contains supermajority vote requirements for amendments to certain
articles of our Restated Certificate of
Incorporation;
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(4)
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To
repeal section (c) of Article THIRTEENTH of our Restated Certificate of
Incorporation, which provides that directors may be removed by
stockholders only for cause, and make technical amendments to section (a)
of Article THIRTEENTH;
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(5)
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To
ratify the appointment of Deloitte & Touche LLP as our independent
auditors for 2010;
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(6)
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To
act upon a stockholder proposal requesting a report on coal combustion
waste; and
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(7)
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To
transact any other business that may properly come before the meeting or
any adjournment or adjournments
thereof.
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The board
of directors has set the close of business on [ • ] 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. Registered stockholders will receive a request for
admission ticket(s) with their proxy card that can be completed and returned to
us postage-free. Stockholders whose shares are held in the name of a bank or
broker will not receive a request for admission ticket(s). They should, instead,
(1) call (701) 530-1000 to request an admission ticket(s), (2) bring a
statement from their bank or broker showing proof of stock ownership as of [ • ]
to the annual meeting, and (3) present their admission ticket(s) and photo
identification, such as a driver’s license. Directions to the meeting will be
included with your admission ticket. We look forward to seeing
you.
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By
order of the Board of Directors,
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Paul
K. Sandness
Secretary
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Page
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Notice
of Annual Meeting of Stockholders
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Proxy
Statement
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1
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Voting
Information
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1
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Item
1. Election of Directors
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3
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Director
Nominees
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4
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Item
2. Repeal of Article TWELFTH of our Restated Certificate of Incorporation,
which Contains
Provisions Relating to Business Combinations with Interested Stockholders,
and Related
Amendments to Articles THIRTEENTH and FOURTEENTH
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12
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Item
3. Repeal of Article FIFTEENTH of our Restated Certificate of
Incorporation, which Contains Supermajority
Vote Requirements for Amendments to Certain Articles of our Restated
Certificate of
Incorporation
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14
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Item
4. Repeal of Section (c) of Article THIRTEENTH of our Restated Certificate
of Incorporation, which
Provides that Directors may be Removed by Stockholders Only for Cause, and
Technical Amendments
to Section (a) of Article THIRTEENTH
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15
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Item
5. Ratification of Independent Auditors
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16
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Accounting
and Auditing Matters
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17
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Item
6. Stockholder Proposal Requesting a Report on Coal Combustion
Waste
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18
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Executive
Compensation
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20
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Compensation
Discussion and Analysis
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20
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Compensation
Committee Report
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38
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Summary
Compensation Table for 2009
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39
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Grants
of Plan-Based Awards in 2009
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41
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Outstanding
Equity Awards at Fiscal Year-End 2009
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44
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Option
Exercises and Stock Vested during 2009
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45
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Pension
Benefits for 2009
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46
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Nonqualified
Deferred Compensation for 2009
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50
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Potential
Payments upon Termination or Change of Control
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51
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Director
Compensation for 2009
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59
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Information
Concerning Executive Officers
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61
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Security
Ownership
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63
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Related
Person Transaction Disclosure
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64
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Corporate
Governance
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65
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Section
16(a) Beneficial Ownership Reporting Compliance
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71
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Other
Business
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71
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Shared
Address Stockholders
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71
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2011
Annual Meeting of Stockholders
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72
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Exhibit
A – MDU Resources Group, Inc.’s Proposed Amendments to its
Restated
Certificate
of Incorporation
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A-1
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The board
of directors of MDU Resources Group, Inc. is furnishing this proxy statement
beginning March 12, 2010 to solicit your proxy for use at our annual
meeting of stockholders on April 27, 2010.
We will
pay the cost of soliciting your proxy and reimburse brokers and others for
forwarding proxy material to you. Georgeson Inc. additionally will solicit
proxies for approximately $8,000 plus out-of-pocket expenses.
The
Securities and Exchange Commission’s e-proxy rules allow companies to post their
proxy materials on the Internet and provide only a Notice of Internet
Availability of Proxy Materials to stockholders as an alternative to mailing
full sets of proxy materials except upon request. For 2010, we have elected to
use the Securities and Exchange Commission’s full set delivery option, which
means that while we are posting our proxy materials online, we are also mailing
a full set of our proxy materials to our stockholders. We believe that mailing a
full set of proxy materials will help ensure that a majority of outstanding
shares of our common stock are present in person or represented by proxy at our
meeting. We also hope to help maximize stockholder participation. Therefore,
even if you previously consented to receiving your proxy materials
electronically, you will receive a full set of proxy materials in the mail for
this year’s annual meeting. However, we will continue to evaluate the option of
providing only a Notice of Internet Availability of Proxy Materials to some or
all of our stockholders in the future.
Who may vote?
You may vote if you owned shares of our common stock at the
close of business on [ • ]. You may vote each share that you owned on that date
on each matter presented at the meeting. As of [ • ], we had [ • ] shares of
common stock outstanding entitled to one vote per share.
What am I voting on?
You are voting on:
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the
election of ten directors nominated by the board of directors for one-year
terms
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the
repeal of article TWELFTH of our restated certificate of incorporation,
which contains provisions relating to business combinations with
interested stockholders, and related amendments to articles THIRTEENTH and
FOURTEENTH
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·
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the
repeal of article FIFTEENTH of our restated certificate of incorporation,
which contains supermajority vote requirements for amendments to certain
articles of our restated certificate of
incorporation
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the
repeal of section (c) of article THIRTEENTH of our restated certificate of
incorporation, which provides that directors may be removed by
stockholders only for cause, and technical amendments to section (a) of
article THIRTEENTH
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the
ratification of the appointment of Deloitte & Touche as our
independent auditors for 2010
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a
stockholder proposal requesting a report on coal combustion waste
and
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·
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any
other business that is properly brought before the
meeting.
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What vote is required to pass an item
of business? A majority of our outstanding shares of common
stock entitled to vote must be present in person or represented by proxy to hold
the meeting.
If you
hold shares through an account with a bank or broker, the bank or broker may
vote your shares on some matters even if you do not provide voting
instructions. Brokerage firms have the authority under the New York
Stock Exchange rules to vote shares on certain matters when their customers do
not provide voting instructions. However, on other matters,
when the brokerage firm has not received voting instructions from its
customers, the brokerage firm cannot vote the shares on that matter and a
“broker non-vote” occurs. Please note that the New York Stock
Exchange rules have changed and an uncontested election of directors is no
longer considered a routine matter. This means that
brokers
may not vote your shares on the
election of directors if you have not given your broker specific instructions as
to how to vote. Please be sure to give specific voting instructions
to your broker so that your vote can be counted.
Item
1—Election of Directors
A majority of votes cast is required
to elect a director in an uncontested election. A majority of votes
cast means the number of votes cast “for” a director’s election must exceed the
number of votes cast “against” the director’s election. “Abstentions”
and “broker non-votes” do not count as votes cast “for” or “against” the
director’s election. In a contested election, which is an election in
which the number of nominees for director exceeds the number of directors to be
elected, directors will be elected by a plurality of the votes
cast. If a nominee becomes unavailable for any reason or if a vacancy
should occur before the election, which we do not anticipate, the proxies will
vote your shares in their discretion for another person nominated by the
board.
Our policy on majority voting for
directors and our corporate governance guidelines require any nominee for
re-election as a director to tender to the board, prior to nomination, his or
her irrevocable resignation from the board that will be effective, in an
uncontested election of directors only, upon
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receipt
of a greater number of votes “against” than votes “for” election at our
annual meeting of stockholders and
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·
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acceptance
of such resignation by the board of
directors.
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Following certification of the
stockholder vote, the nominating and governance committee will promptly
recommend to the board whether or not to accept the tendered
resignation. The board will act on the nominating and governance
committee’s recommendation no later than 90 days following the date of the
annual meeting.
Item
2—Repeal of Article TWELFTH of our Restated Certificate of Incorporation, which
Contains Provisions Relating to Business Combinations with Interested
Stockholders, and Related Amendments to Articles THIRTEENTH and
FOURTEENTH
Approval
of Item 2 requires the affirmative vote of a majority of the outstanding shares
of common stock. Abstentions will count as votes “against” the
proposal.
Item
3—Repeal of Article FIFTEENTH of our Restated Certificate of Incorporation,
which Contains Supermajority Vote Requirements for Amendments to Certain
Articles of our Restated Certificate of Incorporation
Approval
of Item 3 requires the affirmative vote of a majority of the outstanding shares
of common stock. Abstentions will count as votes “against” the
proposal.
Item
4—Repeal of Section (c) of Article THIRTEENTH of our Restated Certificate of
Incorporation, which Provides That Directors May Be Removed by Stockholders Only
for Cause, and Technical Amendments to Section (a) of Article
THIRTEENTH
Approval
of Item 4 requires the affirmative vote of a majority of the outstanding shares
of common stock. Abstentions will count as votes “against” the
proposal.
Item
5—Ratification of the Appointment of Deloitte & Touche LLP as our
Independent Auditors for 2010
Approval
of Item 5 requires the affirmative vote of a majority of our common stock
present in person or represented by proxy at the meeting and entitled to vote on
the proposal. Abstentions will count as votes “against” the
proposal.
Item
6—Stockholder Proposal Requesting a Report on Coal Combustion Waste
Approval
of Item 6 requires the affirmative vote of a majority of our common stock
present in person or represented by proxy at the meeting and entitled to vote on
the proposal. Abstentions will count as votes “against” the
proposal. Broker non-votes are not counted as voting power present and,
therefore, are not counted in the vote.
Unless
you specify otherwise when you submit your proxy, the proxies will vote your
shares of common stock “for” all directors nominated by the board of directors,
“for” proposals 2, 3, 4 and 5 and “against” proposal 6.
How do I
vote? There are three ways to vote by proxy:
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by
calling the toll free telephone number on the enclosed proxy
card
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by
using the Internet as described on the enclosed proxy card
or
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·
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by
returning the enclosed proxy card in the envelope
provided.
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You may
be able to vote by telephone or the Internet if your shares are held in the name
of a bank or broker. Follow their instructions.
Can I revoke my
proxy? Yes. You can revoke your proxy
by:
·
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filing
written revocation with the corporate secretary before the
meeting
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·
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filing
a proxy bearing a later date with the corporate secretary before the
meeting or
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·
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revoking
your proxy at the meeting and voting in
person.
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ITEM 1. ELECTION OF
DIRECTORS |
At our
2007 annual meeting of stockholders, our board of directors proposed and our
stockholders approved the declassification of our board of
directors. The declassification was phased in over a three-year
period from 2008 - 2010. Directors elected at our 2007 annual meeting
comprise the last class elected to serve a three-year term, and their terms will
expire at this year’s annual meeting. As a result, commencing with
this year’s annual meeting, our board will be completely
declassified. All nominees for director are nominated to serve
one-year terms, until the annual meeting of stockholders in 2011 and until their
respective successors are elected and qualified, or until their earlier
resignation, removal from office, or death. Effective as of the date
of this year’s annual meeting, the board of directors has set the number of
directors at ten.
The board
of directors expresses its thanks to John L. Olson and Sister Thomas Welder,
O.S.B. Mr. Olson retired from the board effective August 13, 2009
after reaching the mandatory retirement age of 70 for outside
directors. Mr. Olson served on the board for 24 years and on the
audit committee for 23 years. He also served on the compensation and
nominating and governance committees during his tenure. Sister Welder
chose not to seek re-election at this annual meeting because, pursuant to our
bylaws’ mandatory retirement policy, she would be required to retire on May 13,
2010, which is the first regular meeting of the board after she attains the
mandatory retirement age. Sister Welder served on the board for 22
years and on the nominating and governance committee for 21
years. She also served on the finance and audit committees during her
tenure. Their dedicated service and expertise will be
missed.
We have
provided information below about our nominees, all of whom are incumbent
directors, including their ages, years of service as directors, business
experience, and service on other boards of directors, including any other
directorships held during the past five years. We have also included
information about each nominee’s specific experience, qualifications,
attributes, or skills that led the board to conclude that he or she should serve
as a director of MDU Resources Group, Inc. at the time we file our proxy
statement, in light of our business and structure. Unless we
specifically note below, no corporation or organization referred to below is a
subsidiary or other affiliate of ours.
DIRECTOR
NOMINEES
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Thomas
Everist
Age
60
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Director
Since 1995
Compensation
Committee
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Mr. Everist
has served as president and chairman of The Everist Company, Sioux Falls,
South Dakota, an aggregate, concrete, and asphalt production company,
since April 15, 2002. He was previously president and chairman of
L.G. Everist, Inc., Sioux Falls, South Dakota, an aggregate
production company, from 1987 to April 15, 2002. He held a number of
positions in the aggregate and construction industries prior to assuming
his current position with The Everist Company. He is a director of
Showplace Wood Products, Sioux Falls, South Dakota, a custom cabinets
manufacturer, and has been a director of Raven Industries, Inc., Sioux
Falls, South Dakota, a general manufacturer of electronics, flow controls,
and engineered films since 1996, and its chairman of the board since April
1, 2009.
Mr.
Everist attended Stanford University where he received a bachelor’s degree
in mechanical engineering and a master’s degree in construction
management. He is active in the Sioux Falls community and
currently serves as a director on the Sanford Health Foundation, a
non-profit charitable health services organization. From July 2001 to June
2006, he served on the South Dakota Investment Council, the state agency
responsible for prudently investing state funds.
For
the following reasons, the board concluded that Mr. Everist should serve
as a director of MDU Resources Group, Inc., in light of our business and
structure, at the time we file our proxy statement. A
significant portion of MDU Resources Group, Inc.’s earnings is derived
from its construction services and aggregate mining
businesses. Mr. Everist has considerable business experience in
this area, with more than 36 years in the aggregate and construction
materials industry. He has also demonstrated success in his
business and leadership skills, serving as president and chairman of his
companies for over 22 years. We
value other public company board service. Mr. Everist has
experience serving as a director and now chairman of another public
company, which enhances his contributions to our board. His
leadership skills and experience with his own companies and on other
boards enable him to be an effective board member and compensation
committee chairman. With the retirement of John L. Olson and
Sister Thomas Welder, Mr. Everist becomes our longest serving board
member, providing 15 years of board experience as well as extensive
knowledge of our business.
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Karen
B. Fagg
Age
56
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Director
Since 2005
Nominating
and Governance Committee
Compensation
Committee
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Ms. Fagg
has served as vice president of DOWL LLC, d/b/a DOWL HKM, an engineering
and design firm, since April 2008. Ms. Fagg was president from
April 1, 1995 through March 2008, and chairman and majority owner
from June 2000 through March 2008 of HKM Engineering, Inc., Billings,
Montana, an engineering and physical science services firm. HKM
Engineering, Inc. merged with DOWL LLC on April 1, 2008. Ms. Fagg was
employed with MSE, Inc., Butte, Montana, an energy research and
development company, from 1976 through 1988 and served as vice president
of operations and corporate development director. Ms. Fagg
served a four-year term as director of the Montana Department of Natural
Resources and Conservation, Helena, Montana, the state agency charged with
promoting stewardship of Montana’s water, soil, energy, and rangeland
resources; regulating oil and gas exploration and production; and
administering several grant and loan programs from 1989 through
1992.
Ms.
Fagg has a bachelor’s degree in mathematics from Carroll College in
Helena, Montana. She served on the board for St. Vincent’s
Healthcare from October 2003 until October 2009, including a term as board
chair and on the board of Deaconess Billings Clinic Health System from
1994 to 2003. She is a member of the Board of Trustees of
Carroll College, the Board of Advisors of the Charles M. Bair Family
Trust, and a member of the Board of Directors of the Billings Chamber of
Commerce. She is also a member of the Montana State University
Engineering Advisory Council, whose responsibilities include evaluating
the mission and goals of the College of Engineering and assisting in the
development and implementation of the college’s strategic
plan. From 2002 through 2006, she served on the Montana Board
of Investments, the state agency responsible for prudently investing state
funds. From 2001 to 2005, she served on the board of Montana
State University’s Advanced Technology Park. From 2000 to 2007,
she served on the ZooMontana Board and as vice chair from 2006 to
2007.
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For
the following reasons, the board concluded that Ms. Fagg should serve as a
director of MDU Resources Group, Inc., in light of our business and
structure, at the time we file our proxy
statement. Construction and engineering, energy, and the
responsible development of natural resources are all important aspects of
our business. Ms. Fagg has business experience in all these
areas, including 15 years of construction and engineering experience at
DOWL, HKM and its predecessor, HKM Engineering, Inc., where she has served
as vice president, president, and chairman. Ms. Fagg has also
had 12 years of experience in energy research and development at MSE,
Inc., where she served as vice president of operations and corporate
development director, and four years focusing on stewardship of natural
resources as director of the Montana Department of Natural Resources and
Conservation. In addition to her industry experience, Ms. Fagg
brings to our board 12 years of business leadership and management
experience as president and chairman of her own company, as well as
knowledge and experience acquired through her service on a number of
Montana state and community boards.
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Terry
D. Hildestad
Age
60
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Director
Since 2006
President
and Chief Executive Officer
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Mr. Hildestad
was elected president and chief executive officer and a director of the
company effective August 17, 2006. He had served as president and
chief operating officer from May 1, 2005 until August 17, 2006.
Prior to that, he served as president and chief executive officer of our
subsidiary, Knife River Corporation, from 1993 until May 1,
2005. He began his career with the company in 1974 at Knife
River, where he served in several operating positions before becoming its
president. He additionally serves as an executive officer and
as chairman of the company’s principal subsidiaries and of the managing
committees of Montana-Dakota Utilities Co. and Great Plains Natural Gas
Co.
Mr.
Hildestad has a bachelor’s degree from Dickinson State University and has
completed the Advanced Management Program at Harvard School of Business.
Mr. Hildestad is a member of the U.S. Bancorp Western North Dakota
Advisory Board of Directors.
For
the following reasons, the board concluded that Mr. Hildestad should serve
as a director of MDU Resources Group, Inc., in light of our business and
structure, at the time we file our proxy statement. As chief
executive officer of MDU Resources Group, Inc., Mr. Hildestad is the
only officer of the company to sit on our board, consistent with our past
practice. With over 35 years of experience at our company, Mr.
Hildestad has a deep knowledge and understanding of MDU Resources Group,
Inc., its operating companies and its lines of business. Mr. Hildestad has
demonstrated his leadership abilities and his commitment to our company
since he was elected president and chief executive officer and a director
in 2006 and prior to that time through his long service as chief operating
officer of the company and as president and chief executive officer at
Knife River, our construction materials and contracting subsidiary. The
board also believes that Mr. Hildestad’s integrity, values, and good
judgment make him well-suited to serve on our board.
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A.
Bart Holaday
Age
67
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Director
Since 2008
Audit
Committee
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Mr. Holaday
headed the Private Markets Group of UBS Asset Management and its
predecessor entities for 15 years prior to his retirement in 2001, during
which time he managed more than $19 billion in
investments. Prior to that he was vice president and principal
of the InnoVen Venture Capital Group. He was founder and president of
Tenax Oil and Gas Corporation, an onshore Gulf Coast exploration and
production company, from 1980 through 1982. He has four years
of senior management experience with Gulf Oil Corporation, a global energy
and petrochemical company, and eight years of senior management with the
federal government, including the Department of Defense, Department of the
Interior, and the Federal Energy Administration. He is currently the
president and owner of Dakota Renewable Energy Fund, LLC, which invests in
small companies in North Dakota. He is a member of the
investment advisory board of Commons Capital LLC, a venture capital firm;
a member of the board of directors of Adams Street Partners, LLC, a
private equity investment firm; Alerus Financial, a financial services
company; Jamestown College; the United States Air Force Academy Endowment
(chairman); the Falcon Foundation (vice president), which provides
scholarships to Air Force Academy applicants; the Center for Innovation
Foundation at the University of North Dakota (chairman and trustee) and
the University of North Dakota Foundation; and is chairman and CEO of the
Dakota Foundation. He is a past member of the board of directors of the
National Venture Capital Association, Walden University, and the U.S.
Securities and Exchange Commission advisory committee on the regulation of
capital markets.
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Mr.
Holaday has a bachelor’s degree in engineering sciences from the U.S. Air
Force Academy. He was a Rhodes Scholar, earning a bachelor’s
degree and a master’s degree in politics, philosophy, and economics from
Oxford University. He also earned a law degree from George Washington Law
School and is a Chartered Financial Analyst. In 2005, he was
awarded an honorary Doctor of Letters from the University of North
Dakota.
For
the following reasons, the board concluded that Mr. Holaday should serve
as a director of MDU Resources Group, Inc., in light of our business and
structure, at the time we file our proxy statement. MDU
Resources Group, Inc. has significant operations in the natural gas and
oil industry. Mr.
Holaday has knowledge and experience in this industry. He founded and
served as president of Tenax Oil and Gas Corporation. He has
four years experience in senior management with Gulf Oil Corporation and
15 years of experience managing private equity investments, including
investments in oil and gas, as the head of the Private Markets Group of
UBS Asset Management and its predecessor
organizations. This business experience demonstrates his
leadership skills and success in the oil and gas industry. Mr.
Holaday brings to the board his extensive finance and investment
experience as well as his business development skills acquired through his
work at UBS Asset Management, Tenax Oil and Gas Corporation, Gulf Oil
Corporation, and several private equity investment firms. This
will enhance the knowledge of the board and provide useful insights to
management in connection not only with our natural gas and oil business,
but with all of our businesses.
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Dennis
W. Johnson
Age
60
|
|
Director
Since 2001
Audit
Committee
|
Mr. Johnson
is chairman, chief executive officer and president of TMI Corporation, and
chairman and chief executive officer of TMI Systems Design Corporation,
TMI Transport Corporation and TMI Storage Systems Corporation, all of
Dickinson, North Dakota, manufacturers of casework and architectural
woodwork. He has been employed at TMI since 1974 serving as president or
chief executive officer since 1982 and has been the majority stockholder
since 1985. Mr. Johnson is serving his ninth year as president of the
Dickinson City Commission. He previously was a director of the Federal
Reserve Bank of Minneapolis. He is a past member and chairman of the
Theodore Roosevelt Medora Foundation.
Mr.
Johnson has a bachelor of science degree in electrical and electronics
engineering as well as a master of science degree in industrial
engineering from North Dakota State University. He has served
on numerous industry, state, and community boards, including the North
Dakota Workforce Development Council (chairperson), the Decorative
Laminate Products Association, the North Dakota Technology Corporation,
St. Joseph Hospital Life Care Foundation, St. John Evangelical Lutheran
Church, Dickinson State University, the executive operations committee of
the University of Mary Harold Shafer Leadership Center, and the Dickinson
United Way. He also served on North Dakota Governor Sinner’s Education
Action Commission, the North Dakota Job Service Advisory Council, the
North Dakota State University President’s Advisory Council, North Dakota
Governor Schafer’s Transition Team, and chaired North Dakota Governor
Hoeven’s Transition Team. He has received numerous awards including the
1991 Regional Small Business Person of the Year Award and the Greater
North Dakotan Award.
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For
the following reasons, the board concluded that Mr. Johnson should serve
as a director of MDU Resources Group, Inc., in light of our business and
structure, at the time we file our proxy statement. Mr. Johnson
has over 27 years of experience in business management, manufacturing, and
finance, and has demonstrated his success in these areas, through his
positions as chairman, president, and CEO of TMI, as well as through his
prior service as a director of the Federal Reserve Bank of
Minneapolis. His finance experience and leadership skills
enable him to make valuable contributions to our audit committee, which he
has chaired for six years. As a result of his service on a
number of state and local organizations in North Dakota, Mr. Johnson has
significant knowledge of local, state, and regional issues involving North
Dakota, a state where we have significant operations and
assets.
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Thomas C. Knudson
Age
63
|
|
Director
Since 2008
Compensation
Committee
|
Mr. Knudson
has been president of Tom Knudson Interests, LLC, since its formation on
January 14, 2004. Tom Knudson Interests, LLC, provides
consulting services in energy, sustainable development, and
leadership. Mr. Knudson began employment with Conoco Oil
Company (Conoco) in May 1975 and retired in 2004 from Conoco’s successor,
ConocoPhillips, as senior vice president of human resources, government
affairs and communications, and information
technology. Mr. Knudson served as a member of
ConocoPhillips’ management committee. His diverse career at
Conoco and ConocoPhillips included engineering, operations, business
development, and commercial assignments. He was the founding
chairman of the Business Council for Sustainable Development in both the
United States and the United Kingdom. He has been a director of
Bristow Group Inc. since June 2004 and its chairman of the board of
directors since August 2006, and was a director of Natco Group Inc. from
April 2005 to November 2009 and Williams Partners LP from November 2005 to
September 2007. Bristow Group Inc. is a leading provider of helicopter
services to the offshore oil industry. Natco Group Inc. is a
leading manufacturer of oil and gas processing equipment. Williams
Partners LP owns natural gas gathering, transportation, processing, and
treating assets, and also has natural gas liquids fractionating and
storage assets.
Mr.
Knudson has a bachelor’s degree in aerospace engineering from the U.S.
Naval Academy and a master’s degree in aerospace engineering from the U.S.
Naval Postgraduate School. He served as a naval aviator, flying
combat missions in Vietnam, and was a lieutenant commander in 1974 when he
was honorably discharged. Mr. Knudson has served on the
boards of a number of petroleum industry associations, Covenant House
Texas, The Houston Museum of Natural Science, and Alpha USA/Houston. He
has served as an adjunct professor at the Jones Graduate School of
Management at Rice University.
For
the following reasons, the board concluded that Mr. Knudson should serve
as a director of MDU Resources Group, Inc., in light of our business and
structure, at the time we file our proxy statement. A
significant portion of our earnings is derived from natural gas and oil
production and the transportation, storage, and gathering of natural
gas. Mr. Knudson has extensive knowledge and experience in this
industry as a result of his prior employment with Conoco, as well as
through his service on the boards of Natco Group, Inc. and Williams
Partners LP. Mr. Knudson has a broad background in
engineering, operations, and business development, as well as service on
the management committee at Conoco and ConocoPhillips, which bring
additional experience and perspective to our board. His service
as senior vice president of human resources at ConocoPhillips makes him an
excellent fit for our compensation committee. Sustainable
business development is also an important aspect of our business, and Mr.
Knudson, as the founding chairman of the Business Council for Sustainable
Development, brings to our board significant experience and knowledge in
this area. Mr. Knudson also has significant knowledge of local,
state, and regional issues involving Texas, a state where we have
important operations and assets.
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Richard
H. Lewis
Age
60
|
|
Director
Since 2005
Audit
Committee
Nominating
and Governance Committee
|
Mr. Lewis
has been the managing general partner of Brakemaka LLLP, a private
investment partnership for managing family investments, and president of
the Lewis Family Foundation since August 2004. Mr. Lewis serves as
chairman of the board of Entre Pure Industries, Inc., a privately held
company involved in the purified water and ice business. He serves as a
director of Colorado State Bank and Trust and on the senior advisory board
of TPH Partners, L.P., a private equity fund with an energy-only focus.
Mr. Lewis founded Prima Energy Corporation, a natural gas and oil
exploration and production company in 1980, and served as chairman and
chief executive officer of the company until its sale in July
2004. During his tenure, Prima Energy was named to Forbes
Magazine’s 200 Best Small Companies in America list seven times and was
ranked the No. 1 Colorado public company for the decade of the 1990’s in
terms of market return. Mr. Lewis represented natural gas producers on a
panel that studied electric restructuring in Colorado and has testified
before Congressional committees on industry matters. He worked
in private practice as a certified public accountant for eight years prior
to founding Prima Energy.
Mr.
Lewis has a bachelor’s degree in finance and accounting from the
University of Colorado. He served as a board member on the
Colorado Oil and Gas Association from November 1999 to November 2009,
including a term as its president. In 2000, Mr. Lewis was inducted into
the Ernst & Young Entrepreneur of the Year Hall of Fame and in 2004
was inducted into the Rocky Mountain Oil and Gas Hall of
Fame. Mr. Lewis serves as the chairman of the Development
Board of Colorado Uplift, a non-profit organization whose mission is to
build long-term, life-changing relationships with urban youth. He also
serves on the Board of Trustees of Alliance for Choice in Education, which
provides scholarships to inner city youth. He has also served
on the Board of Trustees of the Metro Denver YMCA, the Advisory Council to
the Leeds School of Business at the University of Colorado, and as a
director for the Partnership for the West.
For
the following reasons, the board concluded that Mr. Lewis should serve as
a director of MDU Resources Group, Inc., in light of our business and
structure, at the time we file our proxy statement. MDU
Resources Group, Inc. derives a significant portion of its earnings from
natural gas and oil production, one of our business
segments. Mr. Lewis has extensive business experience,
recognized excellence, and demonstrated success in this industry through
almost 25 years at his company, Prima Energy Corporation, and ten years on
the board of the Colorado Oil and Gas Association. In addition
to his industry experience, he brings investment experience to our board
through his service on the senior advisory board of an energy-only private
equity fund. As a certified public accountant and a director of
Colorado State Bank and Trust, Mr. Lewis also contributes significant
finance and accounting knowledge to our board and audit
committee. Mr. Lewis also brings to the board his knowledge of
local, state, and regional issues involving Colorado and the Rocky
Mountain region, where we have important operations.
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Patricia
L. Moss
Age
56
|
|
Director
Since 2003
Compensation
Committee
|
Ms. Moss
has served as the president and chief executive officer of Cascade
Bancorp, a financial holding company in Bend, Oregon, since 1998, chief
executive officer of Cascade Bancorp’s principal subsidiary, Bank of the
Cascades, since 1993, serving also as president from 1993 to 2003, and a
director of Cascade Bancorp since 1993. She also serves as a
director of the Oregon Investment Fund Advisory Council, a state-sponsored
program to encourage the growth of small businesses within Oregon, and a
director of Clear Choice Health Plans Inc., a multi-state insurance
company.
Ms.
Moss graduated magna cum laude with a bachelor of science degree in
business administration from Linfield College in Oregon and did master’s
studies at Portland State University. She received commercial
banking school certification at the ABA Commercial Banking School at the
University of Oklahoma. She served as a director of the Oregon
Business Council, whose mission is to mobilize business leaders to
contribute to Oregon’s quality of life and economic prosperity; the
Cascades Campus Advisory Board of the Oregon State University; the North
Pacific Group, Inc., a wholesale distributor of building materials,
industrial and hardwood products, and other specialty products; the Aquila
Tax Free Trust of Oregon, a mutual fund created especially for the benefit
of Oregon residents; and as a director and chair of the St. Charles
Medical Center.
In
August 2009, the Federal Deposit Insurance Corporation and the Oregon
Division of Finance and Corporate Securities entered into a consent
agreement with Bank of the Cascades that requires the bank to develop and
adopt a plan to maintain the capital necessary for it to be
“well-capitalized,” to improve its lending policies and its allowance for
loan losses, to increase its liquidity, to retain qualified management,
and to increase the participation of its board of directors in the affairs
of the bank. In October 2009, the bank’s parent, Cascade
Bancorp, entered into a written agreement with the Federal Reserve Bank of
San Francisco and the Oregon Division relating largely to improving the
financial condition of Cascade Bancorp and the bank.
For
the following reasons, the board concluded that Ms. Moss should serve as a
director of MDU Resources Group, Inc., in light of our business and
structure, at the time we file our proxy statement. A
significant portion of MDU Resources Group, Inc.’s utility, construction
services, and contracting operations are located in the Pacific
Northwest. Ms. Moss has first-hand business experience and
knowledge of the Pacific Northwest economy and local, state, and regional
issues through her position as president, chief executive officer, and a
director at Cascade Bancorp and Bank of the Cascades, where she has over
28 years of experience. Ms. Moss provides to our board her
experience in finance and banking as well as her experience in business
development through her work at Cascade Bancorp and on the Oregon
Investment Advisory Council and the Oregon Business
Council. Ms. Moss is also certified as a Senior
Professional in Human Resources, which makes her well-suited for our
compensation committee. In deciding that Ms. Moss should be
renominated as a director, the board was mindful of the consent agreement
with Bank of the Cascades, but concluded that Ms. Moss brought the many
skills and experiences discussed above to our board and had proved herself
to be a dedicated and hard-working director.
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Harry
J. Pearce
Age
67
|
|
Director
Since 1997
Chairman
of the Board
|
Mr. Pearce
was elected chairman of the board of the company on August 17, 2006.
Prior to that, he served as lead director effective February 15, 2001
and was vice chairman of the board from November 16, 2000 until
February 15, 2001. Mr. Pearce has been a director of Marriott
International, Inc., a major hotel chain, since 1995. He
was a director of Nortel Networks Corporation, a global telecommunications
company, from January 11, 2005 to August 10, 2009, serving as chairman of
the board from June 29, 2005. He retired on
December 19, 2003, as chairman of Hughes Electronics Corporation, a
General Motors Corporation subsidiary and provider of digital television
entertainment, broadband satellite network, and global video and data
broadcasting. He had served as chairman since June 1,
2001. Mr. Pearce was vice chairman and a director of
General Motors Corporation, one of the world’s largest automakers, from
January 1, 1996 to May 31, 2001. He served on the President’s
Council on Sustainable Development and co-chaired the President’s
Commission on the United States Postal Service. Prior to
joining General Motors, he was a senior partner in the Pearce & Durick
law firm in Bismarck, ND. Mr. Pearce is a director of the
United States Air Force Academy Endowment, and a member of the Advisory
Board of the University of Michigan Cancer Center. He is a Fellow of the
American College of Trial Lawyers and a member of the International
Society of Barristers. He also serves on the Board of Trustees of
Northwestern University. He has served as a chairman or
director on the boards of numerous nonprofit organizations, including as
chairman of the board of Visitors of the U.S. Air Force Academy, chairman
of the National Defense University Foundation, and chairman of the Marrow
Foundation. He currently serves as a director of the National
Bone Marrow Transplant Link and New York Marrow Foundation. Mr.
Pearce received a bachelor’s degree in engineering sciences from the U.S.
Air Force Academy and his law degree from Northwestern University’s School
of Law.
For
the following reasons, the board concluded that Mr. Pearce should serve as
a director of MDU Resources Group, Inc., in light of our business and
structure, at the time we file our proxy statement. MDU
Resources Group, Inc. values public company leadership and the experience
directors gain through such leadership. Mr. Pearce is
recognized nationally as well as in the State of North Dakota as a
business leader and for his business acumen. He has
multinational business management experience and proven leadership skills
through his position as vice chairman at General Motors, as well as
through his extensive service on the boards of large public companies,
including Marriott International; Hughes Electronics, where he was
chairman; and Nortel Networks, where he also was chairman. He
also brings to our board his long experience as a practicing
attorney. In addition, Mr. Pearce is focused on corporate
governance issues and is the founding chair of the Chairmen’s Forum, an
organization comprised of non-executive chairmen of publicly-traded
companies. Participants in the Chairmen’s Forum discuss ways to
enhance the accountability of corporations to owners and promote a deeper
understanding of independent board leadership and effective practices of
board chairmanship. The board also believes that Mr. Pearce’s
values and commitment to excellence make him well-suited to serve as
chairman of our board.
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John
K. Wilson
Age
55
|
|
Director
Since 2003
Audit
Committee
|
Mr. Wilson
was president of Durham Resources, LLC, a privately held financial
management company, in Omaha, Nebraska, from 1994 to December 31, 2008. He
previously was president of Great Plains Energy Corp., a public utility
holding company and an affiliate of Durham Resources, LLC, from 1994 to
July 1, 2000. He was vice president of Great Plains Natural Gas Co.,
an affiliate company of Durham Resources, LLC, until July 1, 2000.
The company bought Great Plains Energy Corp. and Great Plains Natural Gas
Co. on July 1, 2000. Mr. Wilson also served as president of the
Durham Foundation and was a director of Bridges Investment Fund, a mutual
fund, and the Greater Omaha Chamber of Commerce. He is presently a
director of HDR, Inc., an international architecture and engineering firm
based in Omaha, and serves on the advisory boards of US Bank NA Omaha and
Duncan Aviation, an aircraft service provider, headquartered in Lincoln,
Nebraska. He also serves as deputy director of the Robert B.
Daugherty Charitable Foundation.
Mr.
Wilson is a certified public accountant. He received his
bachelor’s degree in business administration, cum laude, from the
University of Nebraska – Omaha. During his career, he was a
member of the audit staff and an audit manager at Peat, Marwick, Mitchell
(now known as KPMG), controller for Great Plains Natural Gas Co., and
chief financial officer and treasurer for all Durham Resources
entities.
For
the following reasons, the board concluded that Mr. Wilson should serve as
a director of MDU Resources Group, Inc., in light of our business and
structure, at the time we file our proxy statement. Mr. Wilson
has an extensive background in finance and accounting as well as extensive
experience with mergers and acquisitions through his education and work
experience at a major accounting firm and his later positions as
controller and vice president of Great Plains Natural Gas Co.; president
of Great Plains Energy Corp.; and president, chief financial officer, and
treasurer for Durham Resources, LLC and all Durham Resources
entities. The electric and natural gas utility business was our
core business when our company was founded in 1924. That
business now operates through four utilities: Montana-Dakota Utilities
Co., Great Plains Natural Gas Co., Cascade Natural Gas Corporation, and
Intermountain Gas Company. Mr. Wilson is our only non-employee
director with direct experience in this area through his prior positions
at Great Plains Natural Gas Co. and Great Plains Energy. In
addition, Mr. Wilson’s extensive finance and accounting experience make
him well-suited for our audit
committee.
|
The
board of directors recommends a vote “for” each nominee.
A
majority of votes cast is required to elect a director in an uncontested
election. A majority of votes cast means the number of votes cast
“for” a director’s election must exceed the number of votes cast “against” the
director’s election. “Abstentions” and “broker non-votes” do not
count as votes cast “for” or “against” the director’s election. In a
contested election, which is an election in which the number of nominees for
director exceeds the number of directors to be elected and which we do not
anticipate, directors will be elected by a plurality of the votes
cast.
Unless
you specify otherwise when you submit your proxy, the proxies will vote your
shares of common stock “for” all directors nominated by the board of
directors. If a nominee becomes unavailable for any reason or if a
vacancy should occur before the election, which we do not anticipate, the
proxies will vote your shares in their discretion for another person nominated
by the board.
Our
policy on majority voting for directors and our corporate governance guidelines
require any nominee for re-election as a director to tender to the board, prior
to nomination, his or her irrevocable resignation from the board that will be
effective, in an uncontested election of directors only, upon:
·
|
receipt
of a greater number of votes “against” than votes “for” election at our
annual meeting of stockholders and
|
·
|
acceptance
of such resignation by the board of
directors.
|
Following
certification of the stockholder vote, the nominating and governance committee
will promptly recommend to the board whether or not to accept the tendered
resignation. The board will act on the nominating and governance
committee’s recommendation no later than 90 days following the date of the
annual meeting.
Please
note that the New York Stock Exchange rules have changed. Brokers may
not vote your shares on the election of directors if you have not given your
broker specific instructions as to how to vote. Please be sure to
give specific voting instructions to your broker so that your vote can be
counted.
ITEM 2.
REPEAL OF ARTICLE TWELFTH OF OUR RESTATED CERTIFICATE OF
INCORPORATION, WHICH CONTAINS PROVISIONS RELATING TO BUSINESS
COMBINATIONS WITH INTERESTED STOCKHOLDERS, AND RELATED AMENDMENTS TO
ARTICLES THIRTEENTH AND
FOURTEENTH |
In
November 2009, we received a stockholder proposal requesting that the board of
directors take the steps necessary to change the stockholder vote requirements
that call for a greater than simple majority vote in our restated certificate of
incorporation, as amended, and bylaws to a majority of votes cast for or against
any proposal.
Article
TWELFTH of our restated certificate of incorporation, which has “fair price”
provisions relating to business combinations with interested stockholders,
contains a supermajority vote requirement. Article TWELFTH provides
that, unless the transaction is approved by two-thirds of the continuing
directors, the fair price and procedural requirements of article TWELFTH will
apply to the business combination, and the business combination must be approved
by at least 80% of the voting power of the outstanding voting
stock. In this proxy statement, we sometimes refer to the provisions
of article TWELFTH as the “fair price” provisions.
Article
TWELFTH requires the affirmative vote of at least 80% of the voting power of our
outstanding voting stock to approve certain transactions involving an
“interested stockholder,” which is a person or group that beneficially owns more
than 10% of our outstanding voting stock.
The
supermajority vote requirement applies to the following
transactions:
·
|
a
merger or consolidation with an interested
stockholder
|
·
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a
sale, lease, exchange or other disposition of assets of the company with
an aggregate fair market value of $5 million or more to an interested
stockholder
|
·
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the
issuance of securities by the company with an aggregate fair market value
of $5 million or more to an interested
stockholder
|
·
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a
voluntary plan of liquidation or dissolution proposed by an interested
stockholder and
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·
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a
reclassification, recapitalization, merger or any other transaction that
increases the proportionate share of outstanding shares of the company
owned by an interested stockholder.
|
The
supermajority vote requirement does not apply to transactions that have been
approved by two-thirds of the continuing directors. Continuing
directors are members of the board who are unaffiliated with, and not nominees
of, an interested stockholder and who were members of the board prior to the
time the interested stockholder became an interested
stockholder. Continuing directors also include directors designated
to succeed continuing directors.
We added
article TWELFTH to our restated certificate of incorporation in
1985. As we discussed in our proxy statement at that time, there had
been a number of instances in which an unsolicited bidder had acquired control
of a company over the objections of management and, after acquiring control, had
compelled a merger, consolidation or sale of assets without an arm’s length
negotiation of the terms. While tender offers or other takeover
attempts could be made at a price substantially above the market price of a
company’s common stock, they frequently were made for less than all of the
outstanding shares of a target company. Such partial offers could
present stockholders with the alternative of either partially liquidating their
investment at a time when that may be disadvantageous or retaining an investment
in an enterprise under new management whose objectives may differ from those of
the remaining stockholders. Article TWELFTH was designed to deal with
then recently-developed takeover strategies such as two-tiered transactions that
often resulted in inequitable treatment of long-term
stockholders. Article TWELFTH was designed to encourage a person
making an unsolicited bid for the company to negotiate with our board of
directors to reach terms that were fair and in the best interests of the
stockholders.
In more
recent years, however, some investors have viewed fair price provisions as
inconsistent with principles of good corporate governance and believe that these
provisions make it more difficult for stockholders to effect change and
participate in important decisions affecting the company. These
investors believe that the supermajority vote requirement that is part of the
fair price provisions limits the ability of a majority of stockholders to effect
change by providing a veto right to a large minority stockholder or group of
stockholders. They also assert that supermajority vote provisions
cause boards and management to be less responsive or accountable to
stockholders. Others have argued that supermajority vote requirements
not only offer little, if any, protection to minority stockholders, but also
have the effect of discouraging legitimate offers for a company by making them
more expensive.
After
receiving the stockholder proposal, the board of directors reviewed the
advantages and disadvantages of the provisions contained in article TWELFTH and
after this review decided to propose the repeal of article TWELFTH to further
our goal of ensuring that our corporate governance policies maximize our
accountability to stockholders.
The
company will continue to be subject to Section 203 of the Delaware General
Corporation Law, whether or not the proposed amendments are
approved. With some exceptions, Section 203 provides that a business
combination, as defined in Section 203, with an interested stockholder, which is
a person owning 15% or more of a company’s outstanding voting stock, cannot be
completed for a three-year period after the date the person became an interested
stockholder, unless
·
|
prior
to the time the person became an interested stockholder, the board of
directors approved either the business combination or the transaction that
resulted in the person becoming an interested
stockholder
|
·
|
upon
consummation of the transaction that resulted in the person becoming an
interested stockholder, that person owned at least 85% of the outstanding
voting stock, excluding certain shares
or
|
·
|
the
business combination was approved by the board of directors and by at
least two-thirds of the outstanding voting stock not owned by the
interested stockholder.
|
In
addition to the deletion of article TWELFTH, the board of directors has proposed
related amendments to articles THIRTEENTH and FOURTEENTH of our restated
certificate of incorporation. These amendments add to article
THIRTEENTH some definitions of terms currently included in article TWELFTH that
are relevant to other articles of our restated certificate of
incorporation. These definitions of terms have been modified to
reflect the repeal of article
TWELFTH. In
addition, in article FOURTEENTH, the amendments substitute the term “business
combination” that was previously defined in article TWELFTH with a description
of the term’s meaning, which is no longer limited to transactions with
“interested stockholders.”
The board
of directors has approved the proposed amendments to our restated certificate of
incorporation described above. The board resolution setting forth the
proposed amendments to our restated certificate of incorporation is included in
exhibit A to this proxy statement and shows the changes that would result from
the amendments. If approved by our stockholders, the amendments will
become effective upon filing with the Secretary of State of the State of
Delaware, which filing we would make promptly after the annual
meeting.
The
board of directors recommends a vote “for” the proposal to repeal article
TWELFTH of our restated certificate of incorporation, which contains provisions
relating to business combinations with interested stockholders, and related
amendments to articles THIRTEENTH and FOURTEENTH.
Approval
requires the affirmative vote of a majority of the outstanding shares of common
stock. Abstentions will count as votes against this
proposal.
ITEM 3. REPEAL OF ARTICLE FIFTEENTH OF OUR RESTATED
CERTIFICATE OF INCORPORATION, WHICH CONTAINS SUPERMAJORITY VOTE
REQUIREMENTS FOR AMENDMENTS TO CERTAIN ARTICLES OF OUR RESTATED
CERTIFICATE OF
INCORPORATION |
As
discussed above under Item 2, in November 2009, we received a stockholder
proposal requesting that the board of directors take the steps necessary to
change the stockholder vote requirements that call for a greater than simple
majority vote in our restated certificate of incorporation and bylaws to a
majority of votes cast for or against any proposal.
Article
FIFTEENTH of our restated certificate of incorporation, as amended, requires the
affirmative vote of at least 80% of the voting power of the outstanding voting
stock to amend, alter, change or repeal, or to adopt any provision inconsistent
with, the following provisions of our restated certificate of
incorporation:
·
|
article
TWELFTH, which contains provisions relating to business combinations with
interested stockholders and includes a supermajority vote
requirement. As described under Item 2 above, article TWELFTH
is proposed to be deleted.
|
·
|
article
THIRTEENTH, which contains provisions relating to the board of directors
and establishes the range for the number of directors on the board, the
authority of the board to fix the exact number of directors within the
range, the provisions for annual election of directors, and the authority
of the board to fill vacancies or newly created
directorships
|
·
|
article
FOURTEENTH, which sets forth a list of factors for the board of directors
to consider in evaluating a proposal by another party to make a tender or
exchange offer for securities of the company or to effect a merger,
consolidation or other business combination with the
company
|
·
|
article
FIFTEENTH itself and
|
·
|
article
SIXTEENTH, which contains provisions setting forth how stockholder action
must be effected and who is entitled to call special meetings of
stockholders.
|
The
supermajority vote requirement does not apply to amendments that are recommended
to stockholders by two-thirds of the continuing directors.
We added
article FIFTEENTH to our restated certificate of incorporation in
1985. The supermajority vote requirement was intended to prevent one
or more stockholders controlling a simple majority of our voting stock from
repealing the fair price and other provisions referred to in article FIFTEENTH
and to give minority stockholders holding in the aggregate in excess of 20% of
the voting power the ability to prevent amendments to the fair price and other
provisions referred to in article FIFTEENTH.
However,
as with fair price provisions, in more recent years, some investors have viewed
supermajority vote requirements as inconsistent with principles of good
corporate governance and argue that such provisions make it more difficult for
stockholders to effect change and participate in important decisions affecting
the company. These investors believe that supermajority vote
requirements limit the ability of a majority of stockholders to effect change by
providing a veto right to a large minority stockholder or group of
stockholders. They also assert that supermajority vote provisions
cause boards and management to be less responsive or accountable to
stockholders. Others have argued that supermajority vote requirements
not only offer little, if any, protection to minority stockholders, but also
have the effect of discouraging legitimate offers for the company by making them
more expensive. A number of major corporations have determined that,
regardless of the merits of supermajority vote provisions, principles of good
corporate governance dictate that such requirements be eliminated.
After
receiving the stockholder proposal, the board of directors reviewed the
advantages and disadvantages of supermajority vote requirements contained in
article FIFTEENTH and, after this review, decided to propose the repeal of
article FIFTEENTH to further our goal of ensuring that our corporate governance
policies maximize our accountability to stockholders.
If
article FIFTEENTH is repealed, the stockholder vote required to approve
amendments to the provisions of our restated articles of incorporation
identified in article FIFTEENTH not recommended to stockholders by two-thirds of
our continuing directors would be reduced from an 80% supermajority vote to a
majority of our outstanding voting stock. Section 242(b) of the
Delaware General Corporation Law would apply to all amendments to our restated
certificate of incorporation and require that charter amendments be approved by
a majority of the outstanding stock entitled to vote thereon and by a majority
of the outstanding stock of each class entitled to vote thereon as a class,
unless the Delaware General Corporation Law or our restated certificate of
incorporation specifically provides for a greater than majority
vote.
The board
of directors has approved the proposed amendment as described
above. The board resolution setting forth the proposed amendment to
our restated certificate of incorporation is included in exhibit A to this proxy
statement and shows the changes that would result from the
amendment. If approved by our stockholders, the amendment will become
effective upon filing with the Secretary of State of the State of Delaware,
which filing we would make promptly after the annual meeting.
The
board of directors recommends a vote “for” the proposal to repeal article
FIFTEENTH of our restated certificate of incorporation, which contains
supermajority vote requirements for amendments to certain articles of our
restated certificate of incorporation.
Approval
requires the affirmative vote of a majority of the outstanding shares of common
stock. Abstentions will count as votes against this
proposal.
ITEM 4. REPEAL OF SECTION (c) OF ARTICLE THIRTEENTH
OF OUR RESTATED CERTIFICATE OF INCORPORATION, WHICH PROVIDES THAT
DIRECTORS MAY BE REMOVED BY STOCKHOLDERS ONLY FOR CAUSE, AND TECHNICAL
AMENDMENTS TO SECTION (a) OF ARTICLE
THIRTEENTH
|
Section
(c) of article THIRTEENTH of our restated certificate of incorporation, as
amended, provides that any director or the entire board of directors may be
removed by stockholders only for cause and sets forth the requirements for such
removal.
In 2007,
our board of directors proposed and our stockholders approved the
declassification of our board. The declassification has been phased
in over a three-year period from 2008 to 2010. Directors elected at
our 2007 annual meeting comprise the last class of directors elected to serve a
three-year term, and their terms will expire with this year’s annual
meeting. As a result, commencing with this year’s annual meeting, our
board will be completely declassified, and all directors at this year’s annual
meeting will be elected to serve one-year terms.
With the
completion of the declassification of our board, section (c) of article
THIRTEENTH will not be consistent with Section 141(k) of the Delaware General
Corporation Law, which provides that the right of stockholders to remove
directors may not be limited to removal for cause unless the board is
classified.
The board
of directors has therefore proposed to repeal section (c) of article THIRTEENTH
and to make technical amendments to section (a) of article
THIRTEENTH.
The board
of directors has approved the proposed amendments to our restated certificate of
incorporation described above. The board resolution setting forth the
proposed amendments to our restated certificate of incorporation is included in
exhibit A to this proxy statement and shows the changes that would result from
the amendments. If approved by our stockholders, the amendments will
become effective upon filing with the Secretary of State of the State of
Delaware, which filing we would make promptly after the annual
meeting. However, even if our stockholders do not approve the repeal
of section (c), it will no longer have any effect because its provisions will be
inconsistent with the Delaware General Corporation Law.
The
board of directors recommends a vote “for” the proposal to repeal section (c) of
article THIRTEENTH of our restated certificate of incorporation, which provides
that directors may be removed by stockholders only for cause, and technical
amendments to section (a) of article THIRTEENTH.
Approval
requires the affirmative vote of a majority of the outstanding shares of common
stock. Abstentions will count as votes against this
proposal.
ITEM 5. RATIFICATION OF INDEPENDENT
AUDITORS
|
The audit
committee at its February 2010 meeting appointed Deloitte & Touche
LLP as our independent auditors for fiscal year 2010. The board of directors
concurred with the audit committee’s decision. Deloitte & Touche LLP
has served as our independent auditors since fiscal year 2002.
Although
your ratification vote will not affect the appointment or retention of Deloitte
& Touche LLP for 2010, the audit committee will consider your vote in
determining its appointment of our independent auditors for the next fiscal
year. The audit committee, in appointing our independent auditors, reserves the
right, in its sole discretion, to change an appointment at any time during a
fiscal year if it determines that such a change would be in our best
interests.
A
representative of Deloitte & Touche LLP will be present at the annual
meeting and will be available to respond to appropriate questions. We do not
anticipate 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
chooses.
The
board of directors recommends a vote “for” the ratification of
Deloitte & Touche LLP as our independent auditors for
2010.
Ratification
of the appointment of Deloitte & Touche LLP as our independent auditors
for 2010 requires the affirmative vote of a majority of our common stock present
in person or represented by proxy at the meeting and entitled to vote on the
proposal. Abstentions will count as votes against this proposal.
In
connection with the audit of our financial statements for 2010, the parties have
drafted an agreement for audit committee approval that contains provisions for
alternative dispute resolution and for the exclusion of punitive damages. The
agreement provides that disputes arising out of our engagement of Deloitte &
Touche LLP are resolved through mediation or arbitration, commonly referred to
as alternative dispute resolution procedures, and that the company’s and
Deloitte & Touche LLP’s rights to pursue punitive damages or other forms of
relief not based upon actual damages are waived. The alternative dispute
resolution provisions do not apply to claims by third parties, such as our
stockholders or creditors.
ACCOUNTING AND AUDITING
MATTERS
|
Fees
The
following table summarizes the aggregate fees that our independent auditors,
Deloitte & Touche LLP, billed or are expected to bill us for
professional services rendered for 2009 and 2008:
|
2009
|
|
|
2008*
|
|
Audit
Fees(a)
|
|
$
|
2,393,800
|
|
|
$
|
2,535,253
|
|
Audit-Related
Fees(b)
|
|
|
52,292
|
|
|
|
78,511
|
|
Tax
Fees(c)
|
|
|
17,600
|
|
|
|
33,653
|
|
All
Other Fees(d)
|
|
|
130,016
|
|
|
|
0
|
|
Total
Fees(e)
|
|
$
|
2,593,708
|
|
|
$
|
2,647,417
|
|
Ratio
of Tax and All Other Fees to Audit and Audit-Related Fees
|
|
|
6.03
|
%
|
|
|
1.29
|
%
|
*
|
The
2008 amounts were adjusted from amounts shown in the 2009 proxy statement
to reflect actual amounts.
|
|
|
(a)
|
Audit
fees for both 2009 and 2008 consisted of services rendered for the audit
of our annual financial statements; reviews of our quarterly financial
statements; comfort letters; statutory and regulatory audits and consents
and other services related to Securities and Exchange Commission
matters.
|
|
|
(b)
|
Audit-related
fees for 2009 are associated with the audit of the Intermountain Gas
Company’s benefit plans and accounting research
assistance. Audit-related fees for 2008 are associated with
accounting research assistance; consultation on accounting process
improvements, including recommended practices and opportunities for
control improvement; and assistance in the transition of benefit plan
audits to another accounting firm.
|
|
|
(c)
|
Tax
fees for 2009 include support services associated with the Cascade Natural
Gas Corporation IRS audit. Tax fees for 2008 are associated
with tax planning, compliance, and support services.
|
|
|
(d)
|
All
other fees for 2009 are for services provided by Deloitte FAS, LLP in
connection with the review of accounting practices and procedures at one
of the company’s operating locations. No fees under the
category of all other fees were incurred during 2008.
|
|
|
(e)
|
Total
fees reported above include out-of-pocket expenses related to the services
provided of $267,708 for 2009 and $269,618 for
2008.
|
Pre-Approval
Policy
The audit
committee pre-approved all services Deloitte & Touche LLP performed in
2009 in accordance with the pre-approval policy and procedures the audit
committee adopted at its August 12, 2003 meeting. This policy is designed
to achieve the continued independence of Deloitte & Touche LLP and to
assist in our compliance with Sections 201 and 202 of the Sarbanes-Oxley Act of
2002 and related rules of the Securities and Exchange Commission.
The
policy defines the permitted services in each of the audit, audit-related, tax
and all other services categories as well as prohibited services. The
pre-approval policy requires management to submit annually for approval to the
audit committee a service plan describing the scope of work and anticipated cost
associated with each category of service. At each regular audit committee
meeting, management reports on services performed by Deloitte & Touche
LLP and the fees paid or accrued through the end of the quarter preceding the
meeting. Management may submit requests for additional permitted services before
the next scheduled audit committee meeting to the designated member of the audit
committee, Dennis W. Johnson, for approval. The designated member updates
the audit committee at the next regularly scheduled meeting regarding any
services that he approved during the interim period. At each regular audit
committee meeting, management may submit to the audit committee for approval a
supplement to the service plan containing any request for additional permitted
services.
In
addition, prior to approving any request for audit-related, tax or all other
services of more than $50,000, Deloitte & Touche LLP will provide a
statement setting forth the reasons why rendering of the proposed services does
not compromise Deloitte & Touche LLP’s independence. This description
and statement by Deloitte & Touche LLP may be incorporated into the
service plan or as an exhibit thereto or may be delivered in a separate written
statement.
ITEM 6. STOCKHOLDER PROPOSAL REQUESTING
A REPORT ON COAL COMBUSTION
WASTE
|
A stockholder has notified us that it
intends to present a resolution for action by the stockholders at the annual
meeting. We will provide the name, address and stock ownership of the
proponent to stockholders promptly after receiving an oral or written
request. The text of the resolution and the supporting statement
submitted by the proponent are as follows.
Stockholder
Proposal
Report On
Risks Associated With Coal Combustion Waste
WHEREAS: Coal combustion waste (CCW)
is a by-product of burning coal that contains high concentrations of
arsenic, mercury, heavy metals and other toxins that pollution control equipment
filters out of smokestacks. Across the country, over 130 million tons
of CCW are being stored in surface waste ponds, impoundments and abandoned
mines.
Our
company’s electricity generation mix is 54% coal, 17% Gas, 4% Renewables, and
26% Purchased power/capacity agreements.
According
to the company, our company operates CCW impoundment sites. CCW is
therefore a significant issue for our company.
In 2007,
the U.S. Environmental Protection Agency (EPA) published a draft risk assessment
that found extremely high risks to human health from the disposal of CCW in
waste ponds and landfills. EPA’s analyses of the behavior of CCW in
unlined disposal sites predict that some metals will migrate and contaminate
nearby groundwater to levels extremely dangerous to people.
The EPA
has found ample evidence at over 60 sites in the U.S. that CCW has polluted
ground and surface waters.
EPA has
identified over 580 CCW impoundment facilities around the country. At
least 49 of these have been labeled “high hazard potential” sites where a dam
breach and subsequent spill of CCW material would likely result in a loss of
human life and significant environmental consequences.
Recent
reports by the New York Times and others have drawn attention to the impactful
presence of CCW in the nation’s air and waterways, through leakage from CCW
impoundments and through direct discharge to surrounding rivers and
streams.
The
Tennessee Valley Authority’s (TVA) 1.1 billion gallon CCW spill in December 2008
that covered over 300 acres in eastern Tennessee with toxic sludge highlights
the serious environmental risks associated with storing CCW. TVA
estimates a total cleanup cost of $1.2 billion. This figure does not
contain the extensive litigation costs that ensued, including the large class
action lawsuit filed against TVA in February 2009.
EPA
officials have indicated that the agency will determine by the end of 2009
whether certain power plant by-products such as coal ash should be treated as
hazardous waste, which would subject CCW to stricter regulations.
RESOLVED: Shareholders request that
the board prepare a report, at reasonable cost and omitting proprietary
information, on the company’s efforts, above and beyond legal compliance, to
reduce environmental and health hazards associated with coal combustion waste
ponds, impoundments and mines, and how those efforts reduce risks to
the
company’s
finance and operations. This report should be available to
shareholders by August 2010.
_________________
Company
Response
The
board of directors recommends a vote “against” this proposal.
Our
company and Montana-Dakota Utilities Co., a division of our company
(“Montana-Dakota”), are committed to environmental stewardship and compliance
with all applicable environmental laws and regulations.
Our company has three primary
environmental goals:
·
|
minimize
waste and maximize resources
|
·
|
support
environmental laws and regulations that are based on sound science and
cost-effective technology and
|
·
|
comply
with or exceed all applicable environmental laws, regulations and permit
requirements.
|
Montana-Dakota’s electric operations
are subject to federal, state and local laws and regulations providing for air,
water and solid waste pollution control; federal health and safety regulations;
and state hazard communication standards.
The
Environmental Protection Agency (“EPA”) has previously determined that fossil
fuel combustion wastes, including coal combustion waste (“CCW”), did not warrant
regulation as a hazardous waste and exempted them from regulation under Subtitle
C (hazardous waste) of the Resource Conservation and Recovery Act
(“RCRA”). However, CCW disposed of in landfills and surface
impoundments is regulated under Subtitle D (solid waste regulations) of the
RCRA, and CCW used as minefill is regulated under Subtitle D and/or under the
Surface Mining Control and Reclamation Act. The EPA announced its
intention to propose new regulations in December 2009 governing management and
storage of CCW in landfills and surface impoundments and to determine whether to
continue to regulate CCW as a non-hazardous solid waste under Subtitle D or to
designate it as hazardous and regulate it under Subtitle C of the
RCRA. In December 2009, however, the EPA announced that it was
deferring taking action on this for a short period of time due to the complexity
of the analysis. The EPA has also announced its intention to revise
existing standards under the Clean Water Act, which would include discharge from
CCW ponds.
Four of
Montana-Dakota’s nine existing electric generating stations have steam turbines
using coal for fuel. Montana-Dakota will also obtain electricity from
Wygen III, a coal-fired electric generating station, when it becomes operational
in spring 2010. Two stations, Coyote and Heskett, are located in
North Dakota; Big Stone is located in South Dakota; Lewis & Clark is located
in Montana; and Wygen III is located in Wyoming. Montana-Dakota is
the owner and operator of Heskett and Lewis & Clark and has a 25 percent
interest in Coyote, a 22.7 percent ownership interest in Big Stone and a 25
percent interest in Wygen III. CCW at these facilities is managed
either in a wet state in ponds with dry disposal, or entirely in a dry
state.
The
states of North Dakota, South Dakota, and Wyoming have regulations relating to
CCW that far exceed any current federal regulations. North Dakota,
South Dakota, and Wyoming require facilities located within each state - Coyote
and Heskett in North Dakota, Big Stone in South Dakota, and Wygen III in Wyoming
- to obtain permits for managing CCW impoundments and for long-term CCW
disposal. The permits for each facility require that impoundments for
CCW be appropriately designed and that ground water be
monitored. Site staff and state environmental agency staff routinely
inspect each site. Annual reports for these facilities, summarizing
ground water results and activities conducted at these sites, are submitted to
each respective regulatory agency: North Dakota Department of Health, South
Dakota Department of Environment and Natural Resources, and Wyoming Department
of Environmental Quality.
While the
state of Montana has no requirements at this time for managing CCW,
Montana-Dakota has adopted what it considers to be “best practices” at the Lewis
& Clark Station, where it manages CCW in ponds and dewaters the waste prior
to ultimate dry disposal at a naturally clay lined disposal area adjacent to the
mine from which the plant receives its coal.
The ponds
were designed and constructed under the supervision of a consulting professional
engineer, requiring liners (clay or high density polyethylene), and appropriate
stability and erosion prevention measures. There are ground water
monitoring wells, which are sampled semiannually.
There are
also weekly visual inspections of the ponds by plant technicians and a biennial
visual inspection by the Montana Department of Environmental Quality Water
Protection Bureau. The yard crews inspect the ash handling system daily, and in
winter, the inspections are conducted twice daily.
The board
of directors respects our stockholders’ interest in environmental and health
matters. However, the board believes that Montana-Dakota has already taken
appropriate actions to manage its CCW and that the investment of human and
financial resources that would be required to produce such a report would not be
a necessary or prudent use of stockholder assets.
Therefore,
the board of directors recommends a vote “against” this proposal.
Approval
requires the affirmative vote of a majority of our common stock present in
person or represented by proxy at the meeting and entitled to vote on the
proposal. Abstentions will count as votes against this
proposal. Broker non-votes are not counted as voting power present and,
therefore, are not counted in the vote.
COMPENSATION DISCUSSION
AND ANALYSIS |
The
following compensation discussion and analysis may contain statements regarding
corporate performance targets and goals. These targets and goals are disclosed
in the limited context of our compensation programs and should not be understood
to be statements of management’s expectations or estimates of results or other
guidance. We specifically caution investors not to apply these statements to
other contexts.
Introduction
In this
compensation discussion and analysis, we discuss our compensation objectives,
our decisions, and the reasons for our decisions relating to 2009 compensation
for our named executive officers.
For 2009,
our named executive officers were Terry D. Hildestad, Vernon A. Raile, John G.
Harp, William E. Schneider, and Steven L. Bietz. Mr. Bietz, president and chief
executive officer of WBI Holdings, Inc., is a named executive officer for the
first time.
Each year
we conduct a strategic analysis to identify opportunities and challenges
associated with the operating environments in which we do business. Our strategy
is to apply our expertise in three core lines of business – energy, construction
materials, and utility resources – to increase
market share, increase profitability, and enhance stockholder value
through:
|
•
|
organic
growth as well as a continued disciplined approach to the acquisition of
well-managed companies and properties
|
|
•
|
the
elimination of system-wide cost redundancies through increased focus on
integration of operations and standardization and consolidation of various
support services and functions across companies within the organization
and
|
|
•
|
the
development of projects that are accretive to earnings per share and
return on invested capital.
|
Objectives
of our Compensation Program
We
structure our compensation program to help retain and reward the executive
officers who we believe are critical to our long-term success. We have a written
executive compensation policy for our Section 16 officers, including all
our named executive officers. Our policy has the following stated
objectives:
|
•
|
recruit,
motivate, reward, and retain the high performing executive talent required
to create superior long-term total stockholder return in comparison to our
peer group
|
|
•
|
reward
executives for short-term performance as well as the growth in enterprise
value over the long-term
|
|
•
|
provide
a competitive package relative to industry-specific and general industry
comparisons and internal equity, as appropriate, and
|
|
•
|
ensure
effective utilization and development of talent by working in concert with
other management processes – for example, performance appraisal,
succession planning, and management
development.
|
We
pay/grant
|
•
|
base
salaries in order to provide executive officers with sufficient,
regularly-paid income and attract, recruit, and retain executives with the
knowledge, skills, and abilities necessary to successfully execute their
job duties and responsibilities
|
|
•
|
annual
incentives in order to be competitive from a total remuneration standpoint
and ensure focus on annual financial and operating results
and
|
|
•
|
long-term
incentives in order to be competitive from a total remuneration standpoint
and ensure focus on stockholder
return.
|
If
earned, incentive compensation, which consists of annual cash incentive awards
and three-year performance share awards under our Long-Term Performance-Based
Incentive Plan, makes up the greatest portion of our named executive officers’
total compensation. The compensation committee believes incentive compensation
that comprised approximately 61% to 71% of total target compensation for the
named executive officers for 2009 is appropriate because:
|
•
|
our
named executive officers are in positions to drive, and therefore bear
high levels of responsibility for, our corporate
performance
|
|
•
|
incentive
compensation is more variable than base salary and dependent upon our
performance
|
|
•
|
variable
compensation helps ensure focus on the goals that are aligned with our
overall strategy and
|
|
•
|
the
interests of our named executive officers will be aligned with those of
our stockholders by making a majority of the named executive officers’
target compensation contingent upon results that are beneficial to
stockholders.
|
The
following table shows the allocation of total target compensation for 2009 among
the individual components of base salary, annual incentive, and long-term
incentive:
|
%
of Total
Target
Compensation
Allocated
to
Base
Salary (%)
|
%
of Total Target Compensation
Allocated
to Incentives
|
Name
|
Annual
(%)
|
|
|
Long-Term
(%)
|
|
|
Annual
+
Long-Term
(%)
|
Terry
D. Hildestad
|
|
|
28.6
|
|
28.6
|
|
|
|
42.8
|
|
|
|
71.4
|
Vernon
A. Raile
|
|
|
39.2
|
|
25.5
|
|
|
|
35.3
|
|
|
|
60.8
|
John
G. Harp *
|
|
|
39.2
|
|
25.5
|
|
|
|
35.3
|
|
|
|
60.8
|
William
E. Schneider
|
|
|
39.2
|
|
25.5
|
|
|
|
35.3
|
|
|
|
60.8
|
Steven
L. Bietz
|
|
|
39.2
|
|
25.5
|
|
|
|
35.3
|
|
|
|
60.8
|
*
|
The
percentages listed for Mr. Harp exclude the additional incentive
opportunity of $200,000 in 2009, which is discussed in greater detail
under the heading “John G. Harp’s Additional 2009 Incentive.” Including
the additional incentive opportunity would yield the following
percentages: Base Salary, 33.4%; Annual Incentive, 36.5%; Long-Term
Incentive, 30.1%; and Annual + Long-Term,
66.6%.
|
In order
to reward long-term growth as well as short-term results, the compensation
committee establishes incentive targets that emphasize long-term compensation as
much as or more than short-term compensation for all Section 16 officers.
The annual incentive targets for 2009 range from 30% to 100% of base salary and
the long-term incentive targets range from 30% to 150% of base salary, depending
on the executive’s salary grade. Generally, our approach is to allocate a higher
percentage of total target compensation to the long-term incentive than to the
short-term incentive for our higher level executives, since they are in a better
position to influence our long-term performance.
Additionally,
the long-term incentive, if earned, is paid in company common stock. These
awards, combined with our stock ownership guidelines, promote ownership of our
stock by the named executive officers. The compensation committee believes that,
as stockholders, the named executive officers will be motivated to consistently
deliver financial results that build wealth for all stockholders over the
long-term.
We also
offer our Section 16 officers, including all of our named executive
officers, benefits under our pension plans and our non-qualified defined benefit
retirement plan, which we refer to as the Supplemental Income Security Plan or
SISP. Historically, we have provided these programs because they have
been instrumental in retaining executive talent; both have vesting requirements
which call for minimum lengths of service to earn the full
benefits. However, legislative changes relating to pension plans and
cost reduction initiatives led to changes in both the pension plans and the
SISP. The SISP was also changed to ensure the reductions in defined
benefit retirement plans were consistent between executive and non-executive
employees. Specifically, benefit accruals under our pension plans
ceased after December 31, 2009. We discuss the modifications to both the pension
plans and the SISP in the narrative following the “Pension Benefits for 2009”
table.
All of
our named executive officers have change of control employment agreements. The
change of control employment agreements define “change of control” to include
consummation of a merger or similar transaction rather than merely stockholder
approval of the merger.
We
believe it is important to encourage our executive officers to continue working
for us during any change of control transaction periods and to provide severance
payments and benefits if employment is terminated for no fault of the officer
following a change of control. These agreements provide a measure of job and
financial security so that potentially disruptive transactions do not affect the
officers’ judgment when working on behalf of the company and its stockholders
prior to and after a change of control. We do not view the change of control
agreements as additional compensation and do not take them into account when
determining the amount of compensation provided because the events required to
trigger these payments and benefits may never occur.
In
addition to these agreements, the Long-Term Performance-Based Incentive Plan
provides for accelerated vesting and payment of performance awards at the time
of a change of control. In 2009, we amended the plan’s “change of
control” definition so that vesting and payment of awards are not triggered
prematurely. The compensation committee believes that these
protections are necessary to reassure the officers that they will not lose prior
incentive awards or otherwise be adversely affected by a change of
control. We discuss the amendments to the plan’s change of control
definition in “Potential Payments upon Termination or Change of
Control.”
Role
of Compensation Consultants and Management
Role
of Compensation Consultants
In 2008,
the compensation committee retained Towers Perrin, a nationally recognized
consulting firm, to assess the competitive pay levels for base salary and
incentive compensation for each Section 16 officer position and to assist
the compensation committee in establishing competitive 2009 compensation targets
for our Section 16 officers. The assessment included identifying material
changes to the positions analyzed, updating competitive compensation
information, gathering and analyzing relevant general and industry-specific
survey data, and updating the base salary structure. Towers Perrin assessed
competitive pay levels for base salary, total annual cash, which is base salary
plus annual incentives, and total direct compensation, which is the sum of total
annual cash and the expected value of long-term incentives. They compared our
positions to like positions contained in general industry compensation surveys,
industry-specific compensation surveys and, for our chief executive officer, the
chief executive officers in our performance graph peer group. The compensation
surveys used by Towers Perrin were:
Survey*
|
|
Number
of
Companies
Participating
(#)
|
|
Median
Number
of
Employees
(#)
|
|
Number
of
Publicly-
Traded
Companies
(#)(1)
|
|
Median
Revenue
(000s)
($)
|
Towers
Perrin’s Executive Compensation Database
|
|
|
395 |
|
|
|
18,529 |
|
|
|
283 |
|
|
|
5,730,000 |
|
Towers
Perrin’s Energy Services Industry Executive Compensation
Database
|
|
|
91 |
|
|
|
3,300 |
|
|
|
63 |
|
|
|
2,960,000 |
|
Effective
Compensation,
Inc.’s Oil & Gas Exploration and Production
Survey
|
|
|
119 |
|
|
|
140 |
|
|
|
69 |
|
|
|
247,000 |
|
Mercer’s
Energy Compensation Survey
|
|
|
217 |
|
|
|
610 |
|
|
|
173 |
|
|
|
774,172 |
|
Watson
Wyatt’s Report on Top Management Compensation
|
|
|
2,309 |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(2 |
) |
(1)
|
For
the Towers Perrin Executive Compensation Database, the number listed in
the table is the number of companies reporting market capitalization. For
the Towers Perrin Energy Services Industry Executive Compensation
Database, the number listed in the table is the number of companies
reporting three-year stockholder return.
|
|
|
(2)
|
The
2,309 organizations participating in the 2007/2008 Watson Wyatt Report
included 368 organizations with 2,000 to 4,999 employees; 298
organizations with 5,000 to 9,999 employees; 309 organizations with 10,000
to 19,999 employees; and 372 organizations with 20,000 or more employees.
Watson Wyatt did not provide a revenue breakdown or the number of
publicly-traded companies participating in its survey. Towers Perrin
utilized the 2007/2008 survey and aged the data to January 1,
2009.
|
*The
information in the table is based solely upon information provided by the
publishers of the surveys and is not deemed filed or a part of this compensation
discussion and analysis for certification purposes.
Our
revenues for 2007, 2008, and 2009 were approximately $4.2 billion, $5.0 billion,
and [•] billion, respectively.
In
addition to the above compensation surveys, for the chief executive officer
comparison, Towers Perrin used information for the chief executive officers at
the following companies, which comprised our performance graph peer group in
July of 2007:
|
•
Alliant Energy Corporation
•
Berry Petroleum Company
•
Black Hills Corporation
•
Comstock Resources, Inc.
•
Dycom Industries, Inc.
•
EMCOR Group, Inc.
•
Encore Acquisition Company
•
EQT Corporation (formerly Equitable
Resources, Inc.)
•
Florida Rock Industries, Inc.
•
Granite Construction Inc.
•
Martin Marietta Materials, Inc.
•
National Fuel Gas Co.
•
Northwest Natural Gas Company
|
|
•
NSTAR
•
OGE Energy Corp.
•
ONEOK, Inc.
•
Quanta Services, Inc.
•
Questar Corporation
•
SCANA Corporation
•
Southwest Gas Corporation
•
St. Mary Land & Exploration Company
•
Swift Energy Company
•
U.S. Concrete, Inc.
•
Vectren Corporation
•
Vulcan Materials Company
•
Whiting Petroleum Corporation
|
Role
of Management
The chief
executive officer played an important role in recommending 2009 compensation to
the committee for the other named executive officers. The chief executive
officer attended compensation committee meetings; however, he was not present
during discussions regarding his compensation. In addition, he assessed the
performance of the named executive officers and worked with the human resources
department and compensation consultants to recommend:
|
•
|
base
salary grades and individual salaries
|
|
•
|
annual
and long-term incentive targets and
|
|
•
|
increases
in the level of the SISP benefits to current
participants.
|
Our human
resources personnel also supported the chief executive officer and the
compensation committee by:
|
•
|
working
with the outside compensation consultants and the chief executive officer
on the determination of recommended salary grades, which have associated
annual base salary ranges and incentive targets
|
|
•
|
reviewing
recommended salary increases and incentive targets submitted by executive
officers for officers reporting to them for reasonableness and alignment
with company or business unit objectives and to help ensure internal
equity and
|
|
•
|
designing
and updating annual and long-term incentive
programs.
|
Once
performance goals are approved by the compensation committee, the committee
generally does not modify the goals. However, if major unforeseen changes in
economic and environmental conditions or other significant factors beyond the
control of management substantially affected their ability to achieve the
specified performance goals, the compensation committee, in consultation with
the chief executive officer, may modify the performance goals. Such goal
modifications will only be considered in years of unusually adverse or favorable
external conditions.
Internal
Equity – Relative Value of Named Executive Officer Positions
From an
internal equity standpoint, the compensation committee considers, upon
recommendation of the chief executive officer, the relative value of each named
executive officer position when making compensation decisions. A
position’s relative value is determined by considering:
|
•
|
participation
on our management policy committee, which is the entity responsible for
setting corporate-wide operating and management policies and procedures as
well as our strategic direction
|
|
•
|
the
position’s responsibilities relative to our total earnings, use of
invested capital, and the stable generation of earnings and cash flow
and
|
|
•
|
the
position’s impact on key strategic
initiatives.
|
This
consideration impacts the assignment of a salary grade, short-term incentive
targets, and long-term incentive targets. The compensation committee
may make adjustments from competitive data in one or more of these items to
ensure the pay differences between the chief executive officer and the other
named executive officers are reasonable in their judgment in light of the
internal equity factors described above. For example, the
compensation committee has historically assigned a long-term incentive target
percentage to the chief executive officer position that is lower than the
competitive level indicated through market data. The committee’s
rationale is to have the chief executive officer’s compensation closer to the
compensation of his direct reports than what the market data would otherwise
indicate.
To test
the reasonableness of the company’s approach on pay equity, the compensation
committee measured the chief executive officer’s compensation as a multiple of
the compensation paid to our other four named executives, then compared these
multiples to competitive pay information provided by Towers
Perrin. The chart below shows the company’s pay multiples and the
competitive pay multiples.
We
calculated the four multiples in the chart by dividing our chief executive
officer’s target total direct compensation by the target total direct
compensation of each of our four named executives. We calculated the
four competitive pay multiples by dividing the target total direct compensation
for the chief executive officer position, as provided by Towers Perrin, by the
target total direct compensation of each position similar to each of our four
named executives, as provided by Towers Perrin. For purposes of this
comparison, target total direct compensation consists of base salary plus target
annual incentive plus target long-term incentive.
The
company’s chief executive officer multiples are less than chief executive
officer pay multiples as calculated with competitive data*. The
committee views the lower multiples as support for the belief that compensation
targets among the named executives are equitably distributed.
____________________________________
*The
information in the chart showing chief executive officer pay multiples from
competitive data is based solely upon information provided by the publishers of
the compensation surveys discussed earlier and is not deemed filed or a
part of this compensation discussion and analysis for certification
purposes.
Decisions
for 2009
The
compensation committee, in conjunction with the board of directors, determined
all compensation for each named executive officer for 2009 and set overall and
individual compensation targets for the three components of compensation — base
salary, annual incentive, and long-term incentive. The compensation committee
made recommendations to the board of directors regarding compensation of all
Section 16 officers, and the board of directors then approved the
recommendations.
The
compensation committee reviewed competitive executive compensation data from
Towers Perrin and established salary grades at its August 2008 meeting. At the
November 2008 meeting, it established individual base salaries, target annual
incentive award levels, and target long-term incentive award levels for 2009. At
the February meetings of the compensation committee and the board of directors,
annual and long-term incentive awards were determined, along with the payouts
based on performance from the recently completed performance period for prior
annual and long-term awards. The February meetings occur after the release of
earnings for the prior year.
Salary
Grades for 2009
The
compensation committee determines the named executive officers’ base salaries
and annual and long-term incentive targets by reference to salary grades. Each
salary grade has a minimum, midpoint, and maximum annual salary level with the
midpoint targeted at approximately the 50th percentile of data provided by
Towers Perrin for positions in the salary grade. The compensation committee may
adjust the salary grades away from the 50th percentile in order to balance
the
external
market data with internal equity. The salary grades also have annual and
long-term incentive target levels, which are expressed as a percentage of the
individual’s actual annual salary. We generally place named executive
officers into a salary grade based on historical classification of their
positions; however, the compensation committee, at its August meeting, reviews
each classification and may place a position into a different salary grade if it
determines that the targeted competitive compensation for the position changes
significantly or the executive’s responsibilities and/or performance warrants a
different salary grade. The committee also considers, upon recommendation from
the chief executive officer, a position’s relative value as discussed
above.
Our named
executive officers’ salary grade classifications are listed below along with the
2009 base salary ranges associated with each classification:
|
|
|
|
|
|
2009
Base Salary (000s)
|
|
Position
|
|
|
Grade
|
|
|
Name
|
|
|
|
Minimum
($)
|
|
|
Midpoint
($)
|
|
|
Maximum
($)
|
|
President
and CEO
|
|
|
K
|
|
|
Terry
D. Hildestad
|
|
|
|
620
|
|
|
775
|
|
|
930
|
|
Executive
Vice President, Treasurer and CFO
|
|
|
J
|
|
|
Vernon
A. Raile
|
|
|
|
312
|
|
|
390
|
|
|
468
|
|
President
and CEO, MDU Construction Services Group, Inc.
|
|
|
J
|
|
|
John
G. Harp
|
|
|
|
312
|
|
|
390
|
|
|
468
|
|
President
and CEO, Knife River Corporation
|
|
|
J
|
|
|
William E. Schneider
|
|
|
|
312
|
|
|
390
|
|
|
468
|
|
President
and CEO, WBI Holdings, Inc.
|
|
|
J
|
|
|
Steven
L. Bietz
|
|
|
|
312
|
|
|
390
|
|
|
468
|
|
The
executive vice president, treasurer and chief financial officer and the
president and chief executive officers of Knife River Corporation, MDU
Construction Services Group, Inc., and WBI Holdings, Inc. are assigned to salary
grade “J.” The committee believes that from an internal equity standpoint, these
positions should carry the same salary grade. The salary grades for our named
executive officers remained unchanged for 2009.
The
compensation committee determines where, within each salary grade, an
individual’s base salary should be. The compensation committee believes that
having a range of possible salaries within each salary grade gives the committee
the flexibility to assign different salaries to individual executives within a
salary grade to reflect one or more of the following:
|
•
|
our
performance on financial measurements as compared to our performance graph
peer group
|
|
•
|
executive’s
performance on financial goals
|
|
•
|
executive’s
performance on non-financial goals, including the results of the
performance assessment program
|
|
•
|
executive’s
experience, tenure, and future potential
|
|
•
|
position’s
relative value compared to other positions within the company
|
|
•
|
relationship
of the salary to the competitive salary market value
|
|
•
|
internal
equity with other executives and
|
|
•
|
economic
environment of the corporation or executive’s business
unit.
|
Our
performance assessment program rates performance in the following areas, which
help determine actual salaries within the range of salaries associated with the
executive’s salary grade:
• visionary
leadership
• strategic
thinking
• leading
with integrity
• managing
customer focus
• financial
responsibility
• achievement
focus
• judgment
• planning
and organization
|
• leadership
• mentoring
• relationship
building
• conflict
resolution
• organizational
savvy
• safety
• Great
Place to Work®
|
An
executive’s overall performance in our performance assessment program is rated
on a scale of one to five, with five as the highest rating denoting
distinguished performance. An overall performance above 3.75 is considered
commendable performance.
The chief
executive officer assessed each named executive officer’s performance under the
performance assessment program, and the compensation committee, as well as the
full board of directors, assessed the chief executive
officer’s performance.
Base
Salaries of the Named Executive Officers for 2009
Terry D.
Hildestad
Mr. Hildestad
has served as chief executive officer since August 2006. For 2009, the committee
increased his salary by 7.1%, from $700,000 to $750,000. The reasons for
Mr. Hildestad’s 2009 increase were:
|
•
|
the
company’s 2008 forecasted financial results (based on 9 months’ actual
plus 3 months’ estimate) on earnings per share (EPS) and return on
invested capital (ROIC) were higher than 2008 targets by 12.4% and 6.6%,
respectively
|
|
•
|
the
company’s ROIC for the twelve months ended June 30, 2008 was 19.1% higher
than the median ROIC for the performance graph peer companies over the
same time period on a continuing operations basis
|
|
•
|
the
board recognized Mr. Hildestad’s strong leadership during difficult
economic times, as well as fostering a culture of integrity throughout the
organization, and
|
|
•
|
moving
Mr. Hildestad’s salary closer to the 2009 salary grade midpoint of
$775,000.
|
Vernon A.
Raile
Mr. Raile
has served as executive vice president, treasurer and chief financial officer
since January 2006. Mr. Raile’s 2009 base salary was set at $450,000,
representing an increase of 12.5% over his 2008 base salary of $400,000. The
committee set his 2009 base salary at $450,000, above the midpoint of his salary
grade, due to his commendable performance assessment rating, his years of
service, and the results associated with these key achievements:
|
•
|
the
company’s 2008 forecasted financial results (based on 9 months’ actual
plus 3 months’ estimate) on EPS and ROIC were higher than 2008 targets by
12.4% and 6.6%, respectively
|
|
•
|
the
company’s ROIC for the twelve months ended June 30, 2008 was 19.1% higher
than the median ROIC for the performance graph peer companies over the
same time period on a continuing operations basis, and
|
|
•
|
key
financing initiatives that were undertaken and Mr. Raile’s experience and
skill.
|
John G.
Harp
Mr. Harp
has served as president and chief executive officer of MDU Construction Services
Group, Inc. since September 2004. For 2009, his base salary was set at $450,000,
representing an increase of 12.5% over his 2008 base salary of $400,000. The
committee set his 2009 base salary at $450,000, above the midpoint of his salary
grade, due to his commendable performance assessment rating and due to results
associated with these key achievements:
|
•
|
MDU
Construction Services Group, Inc.’s 2008 forecasted financial results
(based on 9 months’ actual plus 3 months’ estimate) on EPS and ROIC were
higher than 2008 targets by 74.0% and 59.1%, respectively
|
|
•
|
MDU
Construction Services Group, Inc.’s ROIC for the twelve months ended June
30, 2008 was 115.9% higher than the median ROIC of construction services
companies in our performance graph peer group, and
|
|
•
|
Mr.
Harp’s strong grasp of all aspects of MDU Construction Services Group,
Inc.’s business, including operations, collections, bidding, and
personnel.
|
William E.
Schneider
Mr. Schneider
has served as president and chief executive officer of Knife River Corporation
since May 2005. Mr. Schneider’s 2009 base salary was maintained at
$447,400, representing no increase from 2008. The committee did not grant Mr.
Schneider a base salary increase because Knife River Corporation’s 2008
nine-month financial results were less than target and because the committee
wished to be consistent with the overall wage freeze imposed across Knife River
Corporation.
Steven L.
Bietz
Mr. Bietz
has served as president and chief executive officer of WBI Holdings, Inc. since
March 2006. For 2009, his base salary was set at $350,000, representing an
increase of 11.8% over his 2008 base salary of $313,100. The committee set his
2009 base salary at $350,000, below the midpoint of his salary grade, due to his
commendable performance assessment rating and due to results associated with
these key achievements:
|
•
|
WBI
Holdings, Inc.’s 2008 forecasted financial results (based on 9 months’
actual plus 3 months’ estimate) on EPS and ROIC were higher than 2008
targets by 37.1% and 30.9%, respectively
|
|
•
|
The
ROIC associated with the oil and natural gas exploration and production
unit of WBI Holdings, Inc. for the twelve month period ended June 30, 2008
was 58.4% higher than the median ROIC of oil and natural gas exploration
and production companies in our performance graph peer group,
and
|
|
•
|
Mr.
Bietz’s leadership in the large-scale development of the Bakken
Field.
|
The
following table shows each named executive officer’s base salary for 2008 and
2009 and the percentage change.
Name
|
Base
Salary
for
2008
(000s)
($)
|
|
Base
Salary
for
2009
(000s)
($)
|
|
%
Change
(%)
|
Terry
D. Hildestad
|
|
|
700.0
|
|
|
750.0
|
|
|
7.1
|
Vernon
A. Raile
|
|
|
400.0
|
|
|
450.0
|
|
|
12.5
|
John
G. Harp
|
|
|
400.0
|
|
|
450.0
|
|
|
12.5
|
William
E. Schneider
|
|
|
447.4
|
|
|
447.4
|
|
|
0.0
|
Steven
L. Bietz
|
|
|
313.1
|
|
|
350.0
|
|
|
11.8
|
2009
Annual Incentives
What the Performance
Measures Are and Why We Chose Them
The
compensation committee develops and reviews financial and other corporate
performance measures to help ensure that compensation to the executives reflects
the success of their respective business unit and/or the corporation, as well as
the value provided to our stockholders. For Messrs. Hildestad and Raile, the
performance measures for annual incentive awards are our annual return on
invested capital results compared to target and our annual earnings per share
results compared to target. For Messrs. Schneider, Harp, and Bietz, the
performance measures for annual incentive awards are their respective business
unit’s annual return on invested capital results compared to target and their
respective business unit’s allocated
earnings
per share results compared to target. The 2009 safety results of WBI
Holdings, Inc. was also a measure for Mr. Bietz’s 2009 annual
incentive.
The
compensation committee believes earnings per share and return on invested
capital are very good measurements in assessing company performance from a
financial standpoint. Earnings per share is a generally accepted accounting
principle measurement and is a key driver of stockholder return over the
long-term. Return on invested capital measures how efficiently and effectively
management deploys its capital. Sustained returns on invested capital in excess
of our cost of capital create wealth for our stockholders.
Allocated
earnings per share for a business unit is calculated by dividing that business
unit’s earnings by the business unit’s portion of the total company weighted
average shares outstanding. Return on invested capital for the company is
calculated by dividing our earnings, without regard to after tax interest
expense and preferred stock dividends, by our average capitalization for the
calendar year. Return on invested capital for a business unit is calculated by
dividing the business unit’s earnings, without regard to after tax interest
expense and preferred stock dividends, by the business unit’s average
capitalization for the calendar year.
The
compensation committee determines the weighting of the performance measures each
year based upon recommendations from the chief executive officer. The
compensation committee weighted the 2009 performance measures for return on
invested capital compared to targeted results and allocated earnings per share
compared to targeted results each at 50%. The compensation committee believes
both measures are equally important in driving stockholder value in the short
term and over time.
We limit
the after-tax annual incentive compensation we will pay above the target amount
to 20% of earnings in excess of planned earnings. We calculate the earnings in
excess of planned earnings without regard to the after-tax annual incentive
amounts above target. We measure the 20% limitation at the major business unit
level for business unit executives, which include Messrs. Harp, Schneider and
Bietz, and at the corporate level for corporate executives, which include
Messrs. Hildestad and Raile. In 2009, the 20% limitation was
calculated without regard to the noncash ceiling test impairment charge that we
discuss later.
We
establish our incentive plan performance targets in connection with our annual
financial planning process, where we assess the economic environment,
competitive outlook, industry trends, and company specific conditions to set
projections of results. The committee evaluates the projected results and uses
this evaluation to establish the incentive plan performance targets. The
committee also considers annual improvement in the return on invested capital
measure for incentive purposes to help ensure that return on invested capital
will equal or exceed the weighted average cost of capital. Historically, this
consideration took the form of a minimum annual increase in a business unit’s
and/or the company’s return on invested capital incentive plan performance
target(s). For 2009, the committee chose to use the stretch return on invested
capital target approved by the board in the 2009 business plan rather than the
required annual minimum increase in recognition of the soft economic environment
and depressed commodity prices. In the committee’s discretion, it may
establish incentive plan performance targets higher, lower, or at the same level
as the prior year’s target and/or results.
What the Incentive Targets
Are and Why We Chose Them
The
compensation committee established the annual incentive targets as a percentage
of the individual’s actual base salary.
The chief
executive officer’s target annual incentive was 100% of his base salary. Messrs.
Raile, Harp, Schneider, and Bietz’s target annual incentives were 65% of their
base salaries. These incentive targets were derived in part from competitive
data provided by Towers Perrin and in part by the compensation committee’s
desire, based on internal equity, to have a uniform annual incentive target for
the business unit president and chief executive officer positions and the
executive vice president, treasurer and chief financial officer
position. The target annual incentives for the named executives did
not change in 2009 from 2008. The award opportunities available to
each named executive officer ranged from no payment if the goals were met below
the 85% level to a 200% payout if the goals were met at or above the 115%
level. In 2009, Mr. Bietz also had five individual goals relating to
WBI Holdings, Inc.’s safety results, and each goal that was not met reduced his
annual incentive award by 1%.
The table
below lists each named executive officer’s 2009 base salary, the 2009 annual
incentive target percentage, the officer’s 2009 incentive plan performance
targets, the 2009 incentive plan results, and the annual incentive earned for
2009.
Name
|
2009
Base
Salary
(000s)
($)
|
|
2009
Annual
Incentive
Target
(%)
|
|
2009
Incentive
Plan
Performance
Targets
|
|
2009
Incentive
Plan
Results
|
|
2009
Annual
Incentive
Earned
(000s)
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS
($)
|
|
|
ROIC
(%)
|
|
EPS
($)
|
|
|
ROIC
(%)
|
|
Terry
D. Hildestad1
|
|
|
750.0
|
|
|
100
|
|
|
1.09
|
|
|
|
5.7
|
|
|
[•]
|
|
|
|
[•]
|
|
|
[•]
|
|
Vernon
A. Raile1
|
|
|
450.0
|
|
|
65
|
|
|
1.09
|
|
|
|
5.7
|
|
|
[•]
|
|
|
|
[•]
|
|
|
[•]
|
|
John
G. Harp2
|
|
|
450.0
|
|
|
65
|
|
|
3.17
|
|
|
|
10.2
|
|
|
[•]
|
|
|
|
[•]
|
|
|
[•]
|
|
William
E. Schneider3
|
|
|
447.4
|
|
|
65
|
|
|
0.52
|
|
|
|
4.3
|
|
|
[•]
|
|
|
|
[•]
|
|
|
[•]
|
|
Steven
L. Bietz4
|
|
|
350.0
|
|
|
65
|
|
|
1.69
|
|
|
|
5.6
|
|
|
[•]
|
|
|
|
[•]
|
|
|
[•]
|
|
(1)
|
Based
on earnings per share and return on invested capital for MDU Resources
Group, Inc. The 2009 incentive plan results were adjusted to
exclude the 2009 noncash impairment charge as discussed
below.
|
|
|
(2)
|
Based
on allocated earnings per share and return on invested capital for MDU
Construction Services Group, Inc. The amount for Mr. Harp includes an
additional [•] incentive as described below.
|
|
|
(3)
|
Based
on allocated earnings per share and return on invested capital for Knife
River Corporation.
|
(4)
|
Based
on allocated earnings per share and return on invested capital for WBI
Holdings, Inc. The 2009 incentive plan results were adjusted to
exclude the 2009 noncash impairment charge as discussed below. Also in
2009, WBI Holdings, Inc. met four of five safety goals, and therefore Mr.
Bietz’s 2009 Annual Incentive Earned reflects a reduction of 1% or
[•].
|
The
following table shows the changes in our performance targets and achievements
for both 2008 and 2009.
|
|
|
2008
Incentive
Plan
Performance
Targets
|
|
2008
Incentive
Plan
Results
|
|
2009
Incentive
Plan
Performance
Targets
|
|
2009
Incentive
Plan
Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
|
EPS
($)
|
|
|
|
ROIC
(%)
|
|
|
EPS
($)
|
|
|
|
ROIC
(%)
|
|
|
EPS
($)
|
|
|
|
ROIC
(%)
|
|
|
EPS
($)
|
|
|
|
ROIC
(%)
|
|
|
Terry
D. Hildestad1
|
|
|
1.77
|
|
|
|
9.1
|
|
|
1.59
|
|
|
|
8.0
|
|
|
1.09
|
|
|
|
5.7
|
|
|
[•]
|
|
|
|
[•]
|
|
|
Vernon
A. Raile1
|
|
|
1.77
|
|
|
|
9.1
|
|
|
1.59
|
|
|
|
8.0
|
|
|
1.09
|
|
|
|
5.7
|
|
|
[•]
|
|
|
|
[•]
|
|
|
John
G. Harp2
|
|
|
2.73
|
|
|
|
10.5
|
|
|
5.03
|
|
|
|
17.7
|
|
|
3.17
|
|
|
|
10.2
|
|
|
[•]
|
|
|
|
[•]
|
|
|
William
E. Schneider3
|
|
|
1.03
|
|
|
|
7.5
|
|
|
0.42
|
|
|
|
3.5
|
|
|
0.52
|
|
|
|
4.3
|
|
|
[•]
|
|
|
|
[•]
|
|
|
Steven
L. Bietz4
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
1.69
|
|
|
|
5.6
|
|
|
[•]
|
|
|
|
[•]
|
|
|
(1)
|
Based
on earnings per share and return on invested capital for MDU Resources
Group, Inc. The 2009 incentive plan results were adjusted to exclude the
2009 noncash impairment charge as discussed below.
|
|
|
(2)
|
Based
on allocated earnings per share and return on invested capital for MDU
Construction Services Group, Inc.
|
|
|
(3)
|
Based
on allocated earnings per share and return on invested capital for Knife
River Corporation.
|
(4)
|
Based
on allocated earnings per share and return on invested capital for WBI
Holdings, Inc. The 2009 incentive plan results were adjusted to
exclude the 2009 noncash impairment charge as discussed
below.
|
2009 Annual Incentive
Results and the Impact of the 2009 Noncash Impairment
Charges
The
company uses the full-cost method of accounting for its natural gas and oil
activities. Under this method, the company is required to perform
quarterly “ceiling tests” to compare the present value of the future net cash
flow from proven reserves to the book value of those reserves at the balance
sheet date.
Due to
the low energy prices at the beginning of 2009, the compensation committee at
the February 2009 meeting decided to disregard, for purposes of calculating 2009
annual incentives, the effects of any potential noncash ceiling test impairment
charges related to the company’s natural gas and oil properties. The
committee’s rationale for the decision was:
·
|
operating
cash flows are not affected by a ceiling test
charge
|
·
|
the
underlying value of the business is not affected by a ceiling test
charge,
|
·
|
the
ceiling test charge would be driven by a single day point in time price to
value natural gas and oil reserves, which may not be reflective of the
underlying long-term value of the assets,
and
|
·
|
recognition
of the Securities and Exchange Commission’s decision to change the
“ceiling test” rules from using prices from the last day of the reporting
period to a 12-month average of prices on the first day of the
month during the reporting period effective December 31,
2009.
|
On March
31, 2009, the company recorded a $384.4 million after-tax noncash
charge. If the committee had not excluded the noncash charge, our
named executives would not have received an incentive payment for
2009.
Terry D. Hildestad’s 2009
Annual Incentive Award
As
president and chief executive officer of MDU Resources Group, Inc.,
Mr. Hildestad’s 2009 incentive plan performance targets were based on our
earnings per share and return on invested capital. We set his 2009 earnings per
share target level and return on invested capital below his 2008 targets and
actual results to reflect significantly lower commodity prices and the continued
effects of the soft economic activity in the construction
industries.
For 2009
incentive plan results, the company’s 2009 earnings per share and return on
invested capital results were [•] and [•] of their respective 2009 targets.
Therefore, we paid [•] to Mr. Hildestad as a 2009 incentive.
Vernon A. Raile’s 2009
Annual Incentive Award
As
executive vice president, treasurer and chief financial officer of MDU Resources
Group, Inc., Mr. Raile’s 2009 incentive plan performance targets were based
on our earnings per share and return on invested capital. As discussed above for
Mr. Hildestad, we set his 2009 earnings per share target level and return on
invested capital below his 2008 targets and actual results to reflect
significantly lower commodity prices and the continued effects of the soft
economic activity in the construction industries.
For 2009
incentive plan results, the company’s 2009 earnings per share and return on
invested capital results were [•] and [•] of their respective 2009 targets.
Therefore, we paid [•] to Mr. Raile as a 2009 incentive.
John G. Harp’s 2009 Annual
Incentive Award
As
president and chief executive officer of MDU Construction Services Group, Inc.,
we based Mr. Harp’s 2009 incentive plan performance targets on allocated
earnings per share and return on invested capital for MDU Construction Services
Group, Inc. We set his 2009 earnings per share target level above his 2008
earnings per share target level to reflect the 2009 planned dividend to MDU
Resources Group, Inc., which we projected would reduce the allocated shares for
MDU Construction Services Group, Inc. and therefore increase its allocated
earnings per share. We set the 2009 return on invested capital target
slightly lower than the 2008 return on invested capital target to reflect lower
anticipated earnings. The 2009
earnings
per share and return on invested capital targets were lower than the actual
results for 2008 to reflect the downturn in the Las Vegas construction
market.
For 2009
incentive plan results, MDU Construction Services Group, Inc.’s 2009 earnings
per share results and return on invested capital results were [•] and [•] of
their respective 2009 targets. These results would normally equate to
an incentive payment of [•]. Therefore, we paid Mr. Harp [•] as a
2009 annual incentive.
John G. Harp’s Additional
2009 Incentive
In
addition to the 2009 annual incentive award, Mr. Harp had the opportunity to
earn an additional incentive, which the compensation committee structured as
follows:
Construction
Services Group, Inc.’s 2009 Return on Invested Capital (ROIC) as compared
to Construction Services Group, Inc.’s 2009 Weighted Average Cost of
Capital (WACC)
|
Additional
Incentive Amount
|
2009
ROIC is less than 100 basis points above 2009 WACC
|
$0
|
2009
ROIC is 100 to 199 basis points above 2009 WACC
|
$100,000
|
2009
ROIC is 200 basis points or more above 2009 WACC
|
$200,000
|
Throughout
2009, MDU Construction Services Group, Inc. accumulated significant amounts of
cash through effective working capital management. These amounts exceeded the
amounts anticipated at the beginning of 2009, resulting in the reduction of all
of its commercial paper and more dividends to MDU Resources Group, Inc. than
originally projected. In addition, MDU Construction Services Group,
Inc. was able to lend the remaining excess cash to other MDU Resources
subsidiaries, reducing debt at the MDU Resources Group, Inc. level. Although the
remaining excess cash did not lower the invested capital at MDU Construction
Services Group, Inc. on a stand alone basis, it did lower the overall invested
capital of MDU Resources Group, Inc. Therefore, the compensation committee, upon
recommendation from the chief executive officer, approved calculating MDU
Construction Services Group, Inc.’s 2009 return on invested capital to reflect
the excess cash accumulated. The committee’s rationale for this
decision was:
·
|
recognition
of, and rewarding for, effectively managing accounts receivable through
timely collections and
|
·
|
MDU
Resources Group, Inc. benefited from the excess cash through lower average
commercial paper balances in 2009.
|
MDU
Construction Services Group, Inc.’s 2009 return on invested capital for purposes
of determining Mr. Harp’s additional 2009 incentive amount was [•] compared to
its 2009 weighted average cost of capital of [•]. Because the 2009
return on invested capital of [•] was [•] the reported 2009 weighted average
cost of capital of [•], Mr. Harp received [•] in additional incentive for
2009.
William E. Schneider’s 2009
Annual Incentive Award
As
president and chief executive officer of Knife River Corporation,
Mr. Schneider’s 2009 incentive plan performance targets were based on
allocated earnings per share and return on invested capital for Knife River
Corporation. We set his 2009 targets for allocated earnings per share and return
on invested capital lower than his 2008 targets and higher than 2008 actual
results. The compensation committee arrived at these targets based on the
current economic softness in the construction markets, partially offset by a
significant reduction in Knife River Corporation’s cost structure.
For 2009,
Knife River Corporation’s 2009 earnings per share and return on invested capital
results were [•] and [•] of their respective 2009 targets. Therefore, we paid
Mr. Schneider [•] as a 2009 annual incentive.
Steven L. Bietz’s 2009
Annual Incentive Award
As
president and chief executive officer of WBI Holdings, Inc., Mr. Bietz’s
2009 incentive plan performance targets were based on allocated earnings per
share and return on invested capital for WBI Holdings, Inc. We set his 2009
earnings per share and return on invested capital target levels below his 2008
target and 2008 actual results largely to reflect lower commodity prices and
lower anticipated production due to reduced capital expenditures.
For 2009
incentive plan results, the company’s 2009 earnings per share and return on
invested capital results were [•] and [•] of their respective 2009 targets.
These results equated to an incentive of [•], which was reduced by [•] or 1% due
to not achieving one of the five 2009 safety goals. Therefore, we paid [•] to
Mr. Bietz as a 2009 incentive.
Deferral of Annual Incentive
Compensation
We
provide executives the opportunity to defer receipt of earned annual incentives.
If an executive chooses to defer his or her annual incentive, we will credit the
deferral with interest at a rate determined by the compensation committee. For
2009, the committee discontinued using the prime rate in favor of using Moody’s
U.S. Long-Term Corporate Bond Yield Average for “A” rated
companies. The committee’s reasons for using this approach
recognized:
·
|
incentive
deferrals are a low-cost source of capital for the company
and
|
·
|
incentive
deferrals are unsecured obligations and therefore carry a higher risk to
the executives.
|
2009
Long-Term Incentives
Awards Granted in 2009 under
the Long-Term Performance-Based Incentive Plan
We use
the Long-Term Performance-Based Incentive Plan, which is an omnibus plan and has
been approved by our stockholders, for long-term incentive compensation. We
discontinued the use of stock options in 2003 and now use performance shares as
the only form of long-term incentive compensation.
The
compensation committee uses the performance graph peer group as the comparator
group to determine relative stockholder return and potential payments under the
Long-Term Performance-Based Incentive Plan for its 2009-2011 performance share
award cycle. The companies comprising our performance graph peer group are the
same companies listed above under the heading “Role of Compensation Consultants”
with the exception of Florida Rock Industries, which was acquired in late
2007.
The
performance measure is our total stockholder return over a three-year
measurement period as compared to the total stockholder returns of the companies
in our performance graph peer group over the same three-year period. The
compensation committee selected this goal because it believes executive pay
under a long-term, capital accumulation program such as this should mirror our
long-term performance in stockholder return as compared to other public
companies in our industries. Payments are made in company stock; dividend
equivalents are paid in cash.
Total
stockholder return is the percentage change in the value of an investment in the
common stock of a company, from the closing price on the last trading day in the
calendar year preceding the beginning of the performance period, through the
last trading day in the final year of the performance period. It is assumed that
dividends are reinvested in additional shares of common stock at the frequency
paid.
As with
the annual incentive target, we determined the long-term incentive target for a
given position by reference to the salary grade. We derived these incentive
targets in part from competitive data provided by Towers Perrin and in part by
the committee’s judgment on the impact each position has on our total
stockholder return. The committee also believed consistency across positions in
the same salary grades and keeping the chief executive officer’s long-term
incentive target below a level indicated by competitive data were important from
an internal equity standpoint. The 2009 long-term incentive targets for each
named executive were unchanged from 2008.
On
February 12, 2009, the board of directors, upon recommendation of the
compensation committee, made performance share grants to the named executive
officers. The compensation committee determined the target number of performance
shares granted to each named executive officer by multiplying the named
executive officer’s 2009 base salary by his or her long-term incentive target
and then dividing this product by the average of the closing prices of our stock
from January 2, 2009 through January 22, 2009, as shown in the
following table:
Name
|
2009
Base
Salary
to
Determine
Target
($)
|
|
2009
Long-Term
Incentive
Target
at
Time
of
Grant
(%)
|
|
2009
Long-Term
Incentive
Target
at
Time
of
Grant
($)
|
|
Average
Closing
Price
of
Our Stock
From
January 2
Through
January
22
($)
|
|
Resulting
Number
of
Performance
Shares
Granted
on
February
12
(#)
|
Terry
D. Hildestad
|
|
|
750,000
|
|
|
150
|
|
|
1,125,000
|
|
|
20.52
|
|
|
54,824
|
Vernon
A. Raile
|
|
|
450,000
|
|
|
90
|
|
|
405,000
|
|
|
20.52
|
|
|
19,736
|
John
G. Harp
|
|
|
450,000
|
|
|
90
|
|
|
405,000
|
|
|
20.52
|
|
|
19,736
|
William
E. Schneider
|
|
|
447,400
|
|
|
90
|
|
|
402,660
|
|
|
20.52
|
|
|
19,622
|
Steven
L. Bietz
|
|
|
350,000
|
|
|
90
|
|
|
315,000
|
|
|
20.52
|
|
|
15,350
|
From 0%
to 200% of the target grant will be paid out in February 2012 depending on our
three-year 2009-2011 total stockholder return compared to the total three-year
stockholder returns of companies in our performance graph peer group. The payout
percentage will be a function of our rank against our performance graph peer
group as follows:
The
Company’s
Percentile
Rank
|
|
Payout
Percentage of
February
12, 2009 Grant
|
100th
|
|
|
|
200%
|
75th
|
|
|
|
150%
|
50th
|
|
|
|
100%
|
40th
|
|
|
|
10%
|
Less
than 40th
|
|
|
|
0%
|
Payouts
for percentile ranks falling between the intervals will be interpolated. We also
will pay dividend equivalents in cash on the number of shares actually earned
for the performance period. The dividend equivalents will be paid in 2012 at the
same time as the performance awards are paid.
Awards Paid on
February 12, 2009 under the Long-Term Performance-Based Incentive
Plan
We
granted performance shares to our named executive officers under the Long-Term
Performance-Based Incentive Plan on February 16, 2006 for the 2006 through
2008 performance period. Our total stockholder return for the 2006 through 2008
performance period was 5.46%, which corresponded to a percentile rank of 48%
against our performance graph peer group. The percentile rank of 48%
corresponded to a payout percentage of 82%, meaning 82% of the target shares
originally granted plus dividend equivalents were paid to the named executive
officers. The table below lists the shares granted on February 16, 2006,
the shares paid on February 12, 2009 based on the payout percentage, and
the dividend equivalents earned.
Name
|
|
Shares
Granted
on
February 16,
20061
(#)
|
|
Payout
Percentage
(%)
|
|
Shares
Paid
on
February 12,
20091
(#)
|
|
Dividend
Equivalents
($)
|
Terry
D. Hildestad
|
|
|
23,883 |
|
|
|
82 |
|
|
|
19,584 |
|
|
|
32,968 |
|
Vernon
A. Raile
|
|
|
12,429 |
|
|
|
82 |
|
|
|
10,192 |
|
|
|
17,157 |
|
John
G. Harp
|
|
|
10,072 |
|
|
|
82 |
|
|
|
8,259 |
|
|
|
13,903 |
|
William
E. Schneider
|
|
|
15,285 |
|
|
|
82 |
|
|
|
12,534 |
|
|
|
21,100 |
|
Steven
L. Bietz
|
|
|
7,018 |
|
|
|
82 |
|
|
|
5,755 |
|
|
|
9,688 |
|
(1)
|
Shares
are adjusted for the 3-for-2 stock split effective July 26,
2006.
|
PEER4
Analysi$: Comparison of Pay for Performance Ratios
Each year
we compare our named executive officers’ pay for performance ratios to the pay
for performance ratios of the named executive officers in the performance graph
peer group. This analysis looks at the relationship between our compensation
levels and our average annual total stockholder return in comparison to the peer
group over a five-year period. All data used in the analysis, including the
valuation of long-term incentives and calculation of stockholder return, were
compiled by Equilar, Inc., an independent service provider, which uses each
company’s annual filings as a basis of its data collection.
This
analysis consisted of dividing what we paid our named executive officers for the
years 2004 through 2008 by our average annual total stockholder return for the
same five-year period to yield our pay ratio. Our pay ratio was then compared to
the pay ratio of the companies in the performance graph peer group, which was
calculated by dividing total direct compensation for all the proxy group
executives by the sum of each company’s average annual total stockholder return
for the same five-year period. The results are shown in the following
chart.
5
Year Total Direct Compensation to 5 Year Total Stockholder Return*
|
MDU
Resources
Group,
Inc.
($)
|
|
Performance
Graph
Peer
Group
($)
|
Dollars
of Total Direct Compensation1
per Point of Total Stockholder Return
|
|
|
5,489,386
|
|
|
5,390,223
|
(1)
|
Total
direct compensation is the sum of annual base salaries, annual incentives,
the value of long-term incentives at grant and all other compensation as
reported in the proxy statements. For 2006, 2007 and 2008, total direct
compensation also includes the change in pension values and nonqualified
deferred compensation earnings as reported in the proxy
statements.
|
*The
chart is not deemed filed or a part of this compensation discussion and analysis
for certification purposes.
The
results of the analysis showed that we paid our named executive officers
slightly more than what the peer group companies paid their named executive
officers for comparable levels of stockholder return over the five-year period.
Specifically, as indicated in the chart, the data shows that we paid our named
executive officers approximately $99,000 more per point of stockholder return
than our performance graph peer group. We have been conducting our PEER4
Analysi$ since 2004.
Post-Termination
Compensation and Benefits
Pension
Plans
Effective
2006, we no longer offer defined benefit pension plans to new non-bargaining
unit employees. The defined benefit plans available to employees hired before
2006 were amended to cease benefit accruals after December 31,
2009. The frozen benefit provided through our qualified defined
benefit pension plans is determined by years of service and base
salary. Effective 2010 for those employees who were participants in
defined benefit pension plans and for executives and other employees hired after
2006, the company offers increased company contributions to our 401(k)
plan.
Supplemental
Income Security Plan
Benefits
Offered
We offer
certain key managers and executives, including all of our named executive
officers, benefits under our non-qualified retirement plan, which we refer to as
the Supplemental Income Security Plan or SISP. The SISP has a ten-year vesting
schedule and was amended to add an additional vesting requirement for benefit
level increases occurring on or after
January
1, 2010. The SISP provides participants with additional retirement income and
death benefits. The additional retirement income may take two
forms:
|
•
|
a
supplemental retirement benefit payable for fifteen years beginning at the
later of age 65 or after employment ends. The company amended this portion
of the benefit to reflect a 20% reduction in future benefit levels for
employees who join the plan on or after January 1, 2010 or for current
participants who receive benefit level increases on or after January 1,
2010.
|
|
•
|
an
additional retirement benefit to offset the Internal Revenue Code
limitations placed on benefits payable under our qualified defined benefit
pension plans. The company amended the additional retirement benefit to no
longer allow new participants and to cease benefit accruals for existing
participants after December 31, 2009. If eligible, the
participants receive this retirement benefit after they separate from the
company and until they reach age 65. In order to be eligible to receive
the additional retirement benefit, participants must vest in their pension
benefit, which requires five years of service, and their pension must be
limited by the Internal Revenue Code. Mr. Harp has an additional
qualification in that he must remain employed until age 60 in order to
receive this additional retirement
benefit.
|
A death
benefit is provided if SISP participants die before their supplemental
retirement benefits commence or if they elect to receive death benefits in lieu
of all or a part of their supplemental retirement benefits. The death benefit is
payable for 15 years.
We
believe the SISP is critical in retaining the talent necessary to drive
long-term stockholder value. In addition, we believe that the 10-year vesting
provision of the SISP, augmented by an additional three years of vesting for
benefit level increases occurring on or after January 1, 2010, helps promote
retention of key executive officers.
Benefit Level
Increases
The chief
executive officer recommends benefit level increases to the compensation
committee for participants except himself. The chief executive
officer considers, among other things, the participant’s salary in relation to
the salary ranges that correspond with the SISP benefit levels, the
participant’s performance, the performance of the applicable business unit or
the company, and the cost associated with the benefit level
increase.
Each
November, the compensation committee considers SISP benefit level increases for
the upcoming year as recommended by the chief executive officer and also
considers benefit level increases for the chief executive officer. In November
2008, Messrs. Raile, Harp, and Bietz each received an increase in their SISP
benefit levels, which were effective on January 1, 2009. The benefit level
increases recognized each named executive’s contribution to the success of the
company and individual business unit, where applicable. The
committee, however, approved the chief executive officer’s recommendation to
limit the benefit increases for Messrs. Harp and Bietz to a level below the
levels that corresponded to each named executive’s base salary. The
chief executive officer’s rationale was to limit additional costs associated
with the benefit level increases in light of the uncertain economic
times. The committee believed Mr. Hildestad’s benefit level was
appropriate and therefore did not grant him an increase.
In
November 2009, Messrs. Harp, Schneider, and Bietz each received an increase in
their SISP benefit levels which was effective on December 1, 2009. The
committee’s rationale for Messrs. Harp and Bietz’s benefit level increases was
recognition of their continued contribution to the financial success of the
company and to bring their SISP benefit levels in line with their current
salary. Mr. Schneider was awarded a benefit level increase to one level above
the level corresponding to his current base salary in recognition of his
leadership in the financial turnaround of Knife River
Corporation. The following table reflects our named executive
officers’ SISP levels, including the changes effective December 1,
2009:
|
|
January 1, 2009
Annual
SISP Benefits
|
|
December 31, 2009
Annual
SISP Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Survivors ($) |
|
Retirement
($)
|
|
Survivors
($)
|
|
Retirement
($)
|
Terry
D. Hildestad
|
|
|
1,025,040
|
|
|
|
512,520
|
|
|
|
1,025,040
|
|
|
|
512,520
|
|
Vernon
A. Raile
|
|
|
548,400
|
|
|
|
274,200
|
|
|
|
548,400
|
|
|
|
274,200
|
|
John
G. Harp
|
|
|
468,600
|
|
|
|
234,300
|
|
|
|
548,400
|
|
|
|
274,200
|
|
William
E. Schneider
|
|
|
468,600
|
|
|
|
234,300
|
|
|
|
548,400
|
|
|
|
274,200
|
|
Steven
L. Bietz
|
|
|
328,080
|
|
|
|
164,040
|
|
|
|
386,640
|
|
|
|
193,320
|
|
Clawback
In
November 2005, we implemented a guideline for repayment of incentives due to
accounting restatements, commonly referred to as a clawback policy, whereby the
compensation committee may seek repayment of annual and long-term incentives
paid to executives if accounting restatements occur within three years after the
payment of incentives under the annual and long-term plans. Under our clawback
policy, the compensation committee may require employees to forfeit awards and
may rescind vesting, or the acceleration of vesting, of an award.
Impact
of Tax and Accounting Treatment
The
compensation committee may consider the impact of tax and/or accounting
treatment in determining compensation. Section 162(m) of the Internal Revenue
Code places a limit of $1 million on the amount of compensation paid to certain
officers that we may deduct as a business expense in any tax year unless, among
other things, the compensation qualifies as performance-based compensation, as
that term is used in Section 162(m). Generally, long-term incentive compensation
and annual incentive awards for our chief executive officer and those executive
officers whose overall compensation is likely to exceed $1 million are
structured to be deductible for purposes of Section 162(m) of the Internal
Revenue Code, but we may pay compensation to an executive officer that is not
deductible. All annual or long-term incentive compensation paid to our named
executive officers for 2009 satisfied the requirements for
deductibility.
Section
409A of the Internal Revenue Code imposes additional income taxes on executive
officers for certain types of deferred compensation if the deferral does not
comply with Section 409A. We have amended our compensation plans and
arrangements affected by Section 409A with the objective of not triggering any
additional income taxes under Section 409A.
Section
4999 of the Internal Revenue Code imposes an excise tax on payments to
executives and others of amounts that are considered to be related to a change
of control if they exceed levels specified in Section 280G of the Internal
Revenue Code. The potential impact of the Section 4999 excise tax is addressed
with the modified tax payment provisions in the change of control employment
agreements, which are described earlier in this compensation discussion and
analysis and later in the proxy statement under the heading “Potential Payments
upon Termination or Change of Control.” We do not consider the potential impact
of Section 4999 or 280G when designing our compensation programs.
The
compensation committee also considers the accounting and cash flow implications
of various forms of executive compensation. In our financial statements, we
record salaries and annual incentive compensation as expenses in the
amount paid, or to be paid, to the named executive officers. For our equity
awards, accounting rules also require that we record an expense in our
financial statements. We calculate the accounting expense of equity awards to
employees in accordance with FASB Accounting Standards Codification Topic
718.
Stock
Ownership Guidelines
We
instituted stock ownership guidelines on May 5, 1993, which we revised in
February 2003, to encourage executives to own a multiple of their base salary in
our common stock. All officers who participate in our Long-Term
Performance-Based Incentive Plan are subject to the guidelines. The guidelines
call for the executive to reach the multiple within five years. Unvested
performance shares and other unvested equity awards do not count towards the
guidelines. In 2009, the compensation committee reviewed these guidelines
against the performance graph peer companies who published ownership guidelines,
and determined no change was necessary. Each February, the compensation
committee receives a report on the status of stock holdings by executives. The
table shows the named executive officers’ holdings as of December 31,
2009:
Name
|
Assigned
Guideline
Multiple
of
Base
Salary
|
|
Actual
Holdings
as a
Multiple
of
Base
Salary
|
|
Number
of
Years
at
Guideline
Multiple
(#)
|
|
Terry
D. Hildestad
|
|
4X
|
|
5.79
|
|
4.67
|
|
Vernon
A. Raile
|
|
3X
|
|
2.96
|
|
4.00
|
|
John
G. Harp
|
|
3X
|
|
4.06
|
|
5.25
|
|
William
E. Schneider
|
|
3X
|
|
5.43
|
|
8.00
|
|
Steven
L. Bietz
|
|
3X
|
|
3.95
|
|
7.33
|
|
The
compensation committee may consider the guidelines and the executive’s stock
ownership in determining compensation. The committee, however, did not do so
with respect to 2009 compensation.
Policy
Regarding Hedging Stock Ownership
In our
Executive Compensation Policy, we adopted a policy that prohibits executives
from hedging their ownership of company common stock. Executives may not enter
into transactions that allow the executive to benefit from devaluation of our
stock or otherwise own stock technically but without the full benefits and risks
of such ownership.
COMPENSATION
COMMITTEE REPORT |
The
compensation committee has reviewed and discussed the Compensation Discussion
and Analysis required by Reg. S-K, Item 402(b) with management. Based on the
review and discussions referred to in the preceding sentence, the compensation
committee recommended to the board of directors that the Compensation Discussion
and Analysis be included in our proxy statement on Schedule 14A.
Thomas
Everist, Chairman
Karen
B. Fagg
Thomas
C. Knudson
Patricia
L. Moss
Summary
Compensation Table for
2009 |
Name
and
Principal
Position
(a)
|
|
Year
(b)
|
Salary
($)
(c)
|
Bonus
($)
(d)
|
Stock
Awards
($)
(e)(1)
|
Option
Awards
($)
(f)(1)
|
Non-Equity
Incentive
Plan
Compensation
($)
(g)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(h)(2)
|
All
Other
Compensation
($)
(i)
|
Total
($)
(j)
|
|
Terry
D. Hildestad
President
and CEO
|
|
2009
2008
|
750,000
700,000
|
—
|
1,117,861
1,200,485
|
|
[•]
310,800
|
825,319
898,941
|
9,824(3)
9,476
|
[•]
3,119,702
|
2007
|
625,000
|
—
|
779,293
|
—
|
1,250,000
|
1,362,413
|
7,026
|
4,023,732
|
|
|
|
|
|
|
|
|
|
|
|
Vernon
A. Raile
Executive
Vice President, Treasurer and CFO
|
|
2009
2008
|
450,000
400,000
|
—
|
402,417
411,575
|
|
[•]
115,440
|
695,177
498,210
|
8,124(3)
7,176
|
[•]
1,432,401
|
2007
|
350,700
|
—
|
295,882
|
—
|
350,700
|
555,248
|
7,026
|
1,559,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
G. Harp
President
and CEO of MDU Construction Services Group, Inc.
|
|
2009
2008
|
450,000
400,000
|
—
|
402,417
411,575
|
—
|
[•] (4)
720,000(5)
|
761,670(6)
338,774(6)
|
23,272(7)
23,230(7)
|
[•]
1,893,579
|
2007
|
341,000
|
—
|
239,763
|
—
|
341,000
|
47,334(6)
|
23,080(7)
|
992,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
E. Schneider
President
and CEO of Knife River Corporation
|
|
2009
2008
|
447,400
447,400
|
—
|
400,093
460,374
|
—
|
[•]
—
|
726,646
180,801
|
9,324(3)
8,976
|
[•]
1,097,551
|
2007
|
422,000
|
—
|
356,052
|
—
|
206,780
|
450,347
|
7,026
|
1,442,205
|
|
|
|
|
|
|
|
|
|
Steven
L. Bietz
President
and CEO of
WBI
Holdings, Inc.
|
|
2009
2008
2007
|
350,000
—
—
|
—
|
312,987
—
—
|
—
|
[•]
—
—
|
475,985
—
—
|
8,084(3)
—
—
|
[•]
—
—
|
(1)
|
Amounts
in this column represent the aggregate grant date fair value of the
performance share awards calculated in accordance with Financial
Accounting Standards Board Accounting Standards Codification Topic 718 –
Share-Based Payment. Amounts for 2008 and 2007 have been
recalculated to comply with the new requirements. This column was prepared
assuming none of the awards will be forfeited. The amounts were calculated
using a Monte Carlo simulation, as described in Note 13 of our audited
financial statements in our Annual Report on Form 10-K for the year ended
December 31, 2009.
|
(2)
|
Amounts
shown represent the change in the actuarial present value for years ended
December 31, 2007, 2008, and 2009 for the named executive officers’
accumulated benefits under the pension plan, excess SISP, and SISP and,
for Mr. Harp, the additional retirement benefit, collectively
referred to as the “accumulated pension change,” plus above market
earnings on deferred annual incentives, if any. The amounts shown are
based on accumulated pension change and above market earnings as of
December 31, 2007, 2008, and 2009, as
follows:
|
|
|
Accumulated
Pension
Change
|
|
Above
Market
Earnings
|
|
Name |
|
12/31/2007
($)
|
|
12/31/2008
($)
|
|
12/31/2009
($)
|
|
12/31/2007
($)
|
|
12/31/2008
($)
|
|
12/31/2009
($)
|
|
|
Terry
D. Hildestad
|
|
|
1,336,815
|
|
|
|
883,351
|
|
|
|
806,554
|
|
|
25,598
|
|
|
|
15,590
|
|
|
|
18,765
|
|
|
|
Vernon
A. Raile
|
|
|
508,987
|
|
|
|
469,755
|
|
|
|
661,243
|
|
|
46,261
|
|
|
|
28,455
|
|
|
|
33,934
|
|
|
|
John
G. Harp
|
|
|
38,498
|
|
|
|
331,558
|
|
|
|
743,334
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Additional
Retirement
(John
G. Harp)*
|
|
|
8,836
|
|
|
|
7,216
|
|
|
|
18,336
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
William
E. Schneider
|
|
|
411,123
|
|
|
|
155,816
|
|
|
|
696,572
|
|
|
39,224
|
|
|
|
24,985
|
|
|
|
30,074
|
|
|
|
Steven
L. Bietz
|
|
|
—
|
|
|
|
—
|
|
|
|
475,985
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
*See
footnote 6.
(3)
|
Includes
company contributions to the 401(k) account, payment of a life insurance
premium, and matching contributions to charitable
organizations.
|
(4)
|
Includes
one-time incentive payment of $[•] in addition to his annual incentive
compensation.
|
(5)
|
Includes
one-time incentive payment of $200,000 in addition to his executive
incentive compensation plan
payment.
|
(6)
|
In
addition to the change in the actuarial present value of Mr. Harp’s
accumulated benefit under the pension plan, excess SISP, and SISP, this
amount also includes the following amounts attributable to Mr. Harp’s
additional retirement benefit:
|
|
|
|
2007
|
|
2008
|
|
2009
|
|
Change
in present value of additional years of service for pension
plan
|
|
$
|
6,033
|
|
|
$
|
3,570
|
|
|
$
|
13,077
|
|
|
Change
in present value of additional years of service for excess
SISP
|
|
|
2,803
|
|
|
|
3,646
|
|
|
|
5,259
|
|
|
Change
in present value of additional years of service for SISP
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Mr. Harp’s
additional retirement benefit is described in the narrative that follows
the Pension Benefits for 2009 table. The additional retirement benefit
provides Mr. Harp with additional retirement benefits equal to the
additional benefit he would earn under the pension plan, excess SISP, and
the SISP if he had three additional years of service. The amounts in the
table above reflect the change in present value of this additional benefit
in 2007, 2008, and 2009. The additional retirement benefit was determined
by calculating the actuarial present values of the accumulated benefits
under the pension plan, excess SISP, and SISP, with and without the three
additional years of service, using the same assumptions used to determine
the amounts disclosed in the Pension Benefits for 2009 table. Because
Mr. Harp would be fully vested in his SISP benefit if he retired at
age 65, the assumed retirement age of these calculations, the additional
years of service provided by the additional retirement agreement would not
increase that benefit. If Mr. Harp retires before becoming 100%
vested in his SISP benefit, his SISP benefit would be less than the amount
shown in the Pension Benefits for 2009 table, but the payments he would
receive under the additional retirement benefit arrangement would
increase, as would the amounts reflected in the table above and in the
Summary Compensation Table.
|
(7)
|
Includes
a company contribution to Mr. Harp’s 401(k) account, a matching
contribution to a charity, payment of a life insurance premium, an
additional premium for Mr. Harp’s long-term disability insurance, and
Mr. Harp’s office and automobile
allowance.
|
Grants of
Plan-Based Awards in
2009 |
|
|
|
Estimated
Future
Payouts
Under Non-Equity
Incentive Plan
Awards
|
|
Estimated
Future
Payouts
Under Equity
Incentive Plan
Awards
|
All
Other
Stock
Awards:
Number
of
Shares
of
Stock
or
Units
(#)
(i)
|
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
(j)
|
|
Exercise
or
Base
Price
of
Option
Awards
($/Sh)
(k)
|
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards
($)
(l)
|
Name
(a)
|
|
Grant
Date
(b)
|
Threshold
($)
(c)
|
Target
($)
(d)
|
Maximum
($)
(e)
|
|
Threshold
(#)
(f)
|
Target
(#)
(g)
|
Maximum
(#)
(h)
|
|
|
|
Terry
D. Hildestad
|
|
2/12/09(1)
|
187,500
|
750,000
|
1,500,000
|
|
—
|
—
|
—
|
—
|
|
—
|
|
—
|
|
|
|
|
2/12/09(2)
|
—
|
—
|
—
|
|
5,482
|
54,824
|
109,648
|
—
|
|
—
|
|
—
|
|
1,117,861
|
Vernon
A. Raile
|
|
2/12/09(1)
|
73,125
|
292,500
|
585,000
|
|
—
|
—
|
—
|
—
|
|
—
|
|
—
|
|
|
2/12/09(2)
|
—
|
—
|
—
|
|
1,973
|
19,736
|
39,472
|
—
|
|
—
|
|
—
|
|
402,417
|
John
G. Harp
|
|
2/12/09(1)
|
73,125
|
292,500
|
585,000
|
|
—
|
—
|
—
|
—
|
|
—
|
|
—
|
|
|
2/12/09(2)
|
—
|
—
|
—
|
|
1,973
|
19,736
|
39,472
|
—
|
|
—
|
|
—
|
|
402,417
|
|
|
2/12/09(3)
|
100,000
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
William
E. Schneider
|
|
2/12/09(1)
|
72,703
|
290,810
|
581,620
|
|
—
|
—
|
—
|
—
|
|
—
|
|
—
|
|
|
2/12/09(2)
|
—
|
—
|
—
|
|
1,962
|
19,622
|
39,244
|
—
|
|
—
|
|
—
|
|
400,093
|
Steven
L. Bietz
|
|
2/12/09(4)
|
56,875
|
227,500
|
455,000
|
|
—
|
—
|
—
|
—
|
|
—
|
|
—
|
|
|
2/12/09(2)
|
—
|
—
|
—
|
|
1,535
|
15,350
|
30,700
|
—
|
|
—
|
|
—
|
|
312,987
|
(1)
|
Annual
incentive for 2009 granted pursuant to the MDU Resources Group, Inc.
Long-Term Performance-Based Incentive
Plan.
|
(2)
|
Performance
shares for the 2009-2011 performance period granted pursuant to the MDU
Resources Group, Inc. Long-Term Performance-Based Incentive
Plan.
|
(3)
|
Mr. Harp’s
additional 2009 incentive
opportunity.
|
(4)
|
Annual
incentive for 2009 granted pursuant to the WBI Holdings Inc. Executive
Incentive Compensation Plan.
|
Narrative
Discussion Relating to the Summary Compensation Table
and
Grants of Plan-Based Awards Table
Incentive
Awards
Annual
Incentive
On
February 11, 2009, the compensation committee recommended the 2009 annual
incentive award opportunities for our named executive officers, and the board
approved these opportunities at its meeting on February 12, 2009. These
award opportunities are reflected in the Grants of Plan-Based Awards table at
grant on February 12, 2009 in columns (c), (d), and (e) and in the Summary
Compensation Table as earned with respect to 2009 in column (g).
Executive
officers may receive annual cash incentive awards based upon achievement of
annual performance measures with a threshold, target, and maximum level. A
target incentive award is established based on a percent of the executive’s base
salary. Actual payment may range from zero to 200% of the target based upon
achievement of corporate goals.
In order
to be eligible to receive an annual incentive award under the Long-Term
Performance-Based Incentive Plan, Messrs. Hildestad, Raile, Schneider, and Harp
must have remained employed by the company through December 31, 2009,
unless the compensation committee determines otherwise. The committee has full
discretion to determine the extent to which goals have been achieved, the
payment level, whether any final payment will be made, and whether to adjust
awards downward based upon individual performance. Unless the committee
determines otherwise, performance measure targets shall be adjusted to take into
account unusual or nonrecurring events affecting the company, a subsidiary or a
division or
business
unit, or any of their financial statements, or changes in applicable laws,
regulations or accounting principles to the extent such unusual or nonrecurring
events or changes in applicable laws, regulations or accounting principles
otherwise would result in dilution or enlargement of the annual incentive award
intended to be provided. Such adjustments are made in a manner that will not
cause the award to fail to qualify as performance-based compensation for
purposes of Section 162(m) of the Internal Revenue Code.
With
respect to annual incentive awards granted pursuant to the WBI Holdings, Inc.
Executive Incentive Compensation Plan, which includes Mr. Bietz, participants
who retire at age 65 during the year remain eligible to receive an award.
Subject to the compensation committee’s discretion, executives who terminate
employment for other reasons are not eligible for an award.
The
committee has full discretion to determine the extent to which goals have been
achieved, the payment level, and whether any final payment will be made. Once
performance goals are approved by the committee for executive incentive
compensation plan awards, the committee generally does not modify the goals.
However, if major unforeseen changes in economic and environmental conditions or
other significant factors beyond the control of management substantially
affected management’s ability to achieve the specified performance goals, the
committee, in consultation with the chief executive officer, may modify the
performance goals. Such goal modifications will only be considered in years of
unusually adverse or favorable external conditions.
For
Messrs. Hildestad and Raile, the performance measures for annual incentive
awards are our annual return on invested capital achieved compared to target and
our annual earnings per share achieved compared to target. For Messrs.
Schneider, Harp, and Bietz, the performance measures for annual incentive awards
are their respective business unit’s annual return on invested capital achieved
compared to target and their respective business unit’s allocated earnings per
share achieved compared to target. In 2009, Mr. Bietz had five
individual goals relating to WBI Holdings Inc.’s safety results, and each goal
that was not met reduced his annual incentive award by 1%.
For 2009,
the compensation committee weighted the goals for annual return on invested
capital compared to planned results and allocated earnings per share compared to
planned results each at 50%.
We limit
the after-tax annual incentive compensation we will pay above the target amount
to 20% of earnings in excess of planned earnings. We calculate the earnings in
excess of planned earnings without regard to the after-tax annual incentive
amounts above target. We measure the 20% limitation at the major business unit
level for business unit and operating company executives, which include Messrs.
Harp, Schneider, and Bietz, and at the corporate level for corporate executives,
which include Messrs. Hildestad and Raile. In 2009, the 20%
limitation was calculated without regard to the noncash ceiling test impairment
charge as discussed in the Compensation Discussion and Analysis.
The award
opportunities available to each named executive officer were:
2009
earnings per share
results
as a % of 2009 target
|
|
|
Corresponding
payment of
annual
incentive target based on
earnings
per share
|
|
Less
than 85%
|
|
|
|
|
0%
|
|
85%
|
|
|
|
|
25%
|
|
90%
|
|
|
|
|
50%
|
|
95%
|
|
|
|
|
75%
|
|
100%
|
|
|
|
|
100%
|
|
103%
|
|
|
|
|
120%
|
|
106%
|
|
|
|
|
140%
|
|
109%
|
|
|
|
|
160%
|
|
112%
|
|
|
|
|
180%
|
|
115%
|
|
|
|
|
200%
|
|
2009
return on invested capital
results
as a % of 2009 target
|
|
|
Corresponding
payment of
annual
incentive target based on
return
on invested capital
|
|
Less
than 85%
|
|
|
|
|
0%
|
|
85%
|
|
|
|
|
25%
|
|
90%
|
|
|
|
|
50%
|
|
95%
|
|
|
|
|
75%
|
|
100%
|
|
|
|
|
100%
|
|
103%
|
|
|
|
|
120%
|
|
106%
|
|
|
|
|
140%
|
|
109%
|
|
|
|
|
160%
|
|
112%
|
|
|
|
|
180%
|
|
115%
|
|
|
|
|
200%
|
|
For discussion of the specific incentive plan performance targets and results,
please see the Compensation Discussion and Analysis.
In addition to his 2009 annual
incentive award opportunity under our Long-Term Performance-Based Incentive
Plan, Mr. Harp had an opportunity to earn an additional incentive, which
was structured as follows:
Construction
Services Group, Inc.’s 2009 Return on Invested Capital (ROIC) as compared
to Construction Services Group, Inc.’s 2009 Weighted Average Cost of
Capital (WACC)
|
Additional
Incentive Amount
|
2009
ROIC is less than 100 basis points above 2009 WACC
|
$0
|
2009
ROIC is 100 to 199 basis points above 2009 WACC
|
$100,000
|
2009
ROIC is 200 basis points or more above 2009 WACC
|
$200,000
|
For a specific discussion of this
additional incentive opportunity and the compensation committee’s determination
with respect to payment, please refer to the Compensation Discussion and
Analysis.
Long-Term
Incentive
On
February 11, 2009, the compensation committee recommended long-term
incentive grants to the named executive officers in the form of performance
shares, and the board approved these grants at its meeting on February 12,
2009. These grants are reflected in columns (f), (g), (h), and (l) of the Grants
of Plan-Based Awards table and in column (e) of the Summary Compensation
Table.
From 0%
to 200% of the target grant will be paid out in February 2012, depending on our
2009-2011 total stockholder return compared to the total three-year stockholder
returns of companies in our performance graph peer group. The payout percentage
is determined as follows:
The
Company’s Percentile Rank |
|
Payout
Percentage of
February
12, 2009 Grant
|
|
|
100th
|
|
|
|
200%
|
|
|
75th
|
|
|
|
150%
|
|
|
50th
|
|
|
|
100%
|
|
|
40th
|
|
|
|
10%
|
|
|
Less
than 40th
|
|
|
|
0%
|
|
Payouts
for percentile ranks falling between the intervals will be interpolated. We also
will pay dividend equivalents in cash on the number of shares actually earned
for the performance period. The dividend equivalents will be paid in 2012 at the
same time as the performance awards are paid.
Salary
and Bonus in Proportion to Total Compensation
The
following table shows the proportion of salary to total compensation. We paid no
bonuses to our named executive officers in 2009.
Name
|
Salary
($)
|
Total
Compensation
($)
|
Salary
as % of
Total Compensation
|
|
|
Terry
D. Hildestad
|
|
|
750,000
|
|
[•]
|
|
[•]
|
|
|
Vernon
A. Raile
|
|
|
450,000
|
|
[•]
|
|
[•]
|
|
|
John
G. Harp
|
|
|
450,000
|
|
[•]
|
|
[•]
|
|
|
William
E. Schneider
|
|
|
447,400
|
|
[•]
|
|
[•]
|
|
|
Steven
L. Bietz
|
|
|
350,000
|
|
[•]
|
|
[•]
|
|
|
Outstanding
Equity Awards at Fiscal Year-End
2009 |
|
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
|
Name
(a)
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
(b)
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
(c)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d)
|
|
|
Option
Exercise
Price
($)
(e)
|
|
|
Option
Expiration
Date
(f)
|
|
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
(g)(1,2)
|
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
(h)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
(i)(3)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
($)
(j)(4)
|
|
|
Terry
D. Hildestad
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,712
|
|
|
|
87,603
|
|
|
|
181,830
|
|
|
|
4,291,188
|
|
|
Vernon
A. Raile
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,114
|
|
|
|
26,290
|
|
|
|
65,438
|
|
|
|
1,544,337
|
|
|
John
G. Harp
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
63,055
|
|
|
|
1,488,098
|
|
|
William
E. Schneider
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,970
|
|
|
|
70,092
|
|
|
|
69,354
|
|
|
|
1,636,754
|
|
|
Steven
L. Bietz
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
558
|
|
|
|
13,169
|
|
|
|
51,545
|
|
|
|
1,216,462
|
|
|
(1)
|
Adjusted
for the 3-for-2 stock split effective July 26, 2006.
|
(2)
|
These
shares of restricted stock were granted in 2001 and vest automatically on
February 15, 2010. Vesting of some or all shares may be accelerated
upon change of control or if the total stockholder return equals or
exceeds the 50th percentile of the performance graph peer group during the
final three-year performance cycle 2007-2009. Non-preferential dividends
are paid on these shares.
|
Named
Executive Officer
|
|
Award
|
|
Shares
|
End
of
Performance
Period
|
|
|
Terry
D. Hildestad
|
|
|
|
2007
|
|
|
|
33,091
|
|
|
12/31/09
|
|
|
|
2008
|
|
|
|
39,091
|
|
|
12/31/10
|
|
|
|
2009
|
|
|
|
109,648
|
|
|
12/31/11
|
|
|
Vernon
A. Raile
|
|
|
|
2007
|
|
|
|
12,564
|
|
|
12/31/09
|
|
|
|
2008
|
|
|
|
13,402
|
|
|
12/31/10
|
|
|
|
2009
|
|
|
|
39,472
|
|
|
12/31/11
|
|
|
John
G. Harp
|
|
|
|
2007
|
|
|
|
10,181
|
|
|
12/31/09
|
|
|
|
2008
|
|
|
|
13,402
|
|
|
12/31/10
|
|
|
|
2009
|
|
|
|
39,472
|
|
|
12/31/11
|
|
|
William
E. Schneider
|
|
|
|
2007
|
|
|
|
15,119
|
|
|
12/31/09
|
|
|
|
2008
|
|
|
|
14,991
|
|
|
12/31/10
|
|
|
|
2009
|
|
|
|
39,244
|
|
|
12/31/11
|
|
|
Steven
L. Bietz
|
|
|
|
2007
|
|
|
|
10,354
|
|
|
12/31/09
|
|
|
|
2008
|
|
|
|
10,491
|
|
|
12/31/10
|
|
|
|
2009
|
|
|
|
30,700
|
|
|
12/31/11
|
|
|
Shares
for the 2007 award are shown at the target level (100%) based on results for the
2007-2009 performance cycle at target.
Shares
for the 2008 award are shown at the target level (100%) based on results for the
first two years of the 2008-2010 performance cycle at target.
Shares
for the 2009 award are shown at the maximum level (200%) based on results for
the first year of the 2009-2011 performance cycle above target.
(4)
|
Value
based on the number of performance shares reflected in column (i)
multiplied by $23.60, the year-end closing price for
2009.
|
Option
Exercises and Stock Vested during
2009 |
|
|
|
Option
Awards
|
|
|
Stock
Awards
|
Name
(a)
|
|
|
Number
of
Shares
Acquired
on
Exercise
(#)
(b)
|
|
|
Value
Realized
on
Exercise
($)
(c)
|
|
|
Number
of
Shares
Acquired
on
Vesting
(#)
(d)(1,2)
|
|
Value
Realized
on
Vesting
($)
(e)(3)
|
|
Terry
D. Hildestad
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,584
|
|
|
|
397,426
|
|
|
Vernon
A. Raile
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,192
|
|
|
|
206,830
|
|
|
John
G. Harp
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,259
|
|
|
|
167,603
|
|
|
William
E. Schneider
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,534
|
|
|
|
254,358
|
|
|
Steven
L. Bietz
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,755
|
|
|
|
116,789
|
|
|
(1)
|
Adjusted
for the 3-for-2 stock split effective July 26,
2006.
|
(2)
|
Reflects
performance shares for the 2006-2008 performance period that vested on
February 12, 2009.
|
(3)
|
Reflects
the value of performance shares based on our stock price of $18.61 on
February 12, 2009, and the dividend equivalents that were paid on the
vested shares.
|
Pension
Benefits for
2009 |
Name
(a)
|
Plan
Name
(b)
|
Number
of
Years
Credited
Service
(#)
(c)
|
Present
Value
of
Accumulated
Benefit
($)
(d)
|
Payments
During
Last
Fiscal
Year
($)
(e)
|
Terry
D. Hildestad
|
Pension
Plan
|
35
|
1,369,893
|
|
—
|
|
SISP
I(1)
|
27
|
1,487,740
|
|
—
|
|
SISP II(2)
|
27
|
2,456,479
|
|
—
|
|
SISP
Excess
|
27
|
842,854
|
|
—
|
Vernon
A. Raile
|
Pension
Plan
|
30
|
1,033,470
|
|
—
|
|
SISP
I(1)
|
27
|
891,572
|
|
—
|
|
SISP II(2)
|
27
|
1,899,169
|
|
—
|
|
SISP
Excess
|
27
|
—
|
|
—
|
John
G. Harp
|
Pension
Plan
|
5
|
172,100
|
|
—
|
|
SISP
I(1)
|
4
|
—
|
|
—
|
|
SISP II(2)
|
4
|
1,784,336
|
|
—
|
|
SISP
Excess
|
4
|
33,837
|
|
—
|
|
Harp
Additional Retirement Benefit
|
4
|
120,136
|
|
—
|
William
E. Schneider
|
Pension
Plan
|
16
|
667,138
|
|
—
|
|
SISP
I(1)
|
15
|
1,081,798
|
|
—
|
|
SISP II(2)
|
15
|
1,278,020
|
|
—
|
|
SISP
Excess
|
15
|
128,798
|
|
—
|
Steven
L. Bietz
|
Pension
Plan
|
28
|
675,382
|
|
—
|
|
SISP
I(1)
|
15
|
458,686
|
|
—
|
|
SISP
II(2)
|
15
|
440,819
|
|
—
|
|
SISP
Excess
|
15
|
72,082
|
|
—
|
(1)
|
Grandfathered
under Section 409A.
|
(2)
|
Not
grandfathered under Section 409A.
|
The
amounts shown for the pension plan and excess SISP represent the actuarial
present values of the executives’ accumulated benefits accrued as of
December 31, 2009, calculated using a 5.75% discount rate, the 1994 Group
Annuity Mortality Table for post-retirement mortality and no recognition of
future salary increases or pre-retirement mortality. The assumed retirement ages
for these benefits was age 60 for Messrs. Harp and Bietz and age 62 for
Mr. Schneider. These are the earliest ages at which the executives could
begin receiving unreduced benefits. Retirement on December 31, 2009, was
assumed for Messrs. Hildestad and Raile, who were age 60 and 64 on that
date. The amounts shown for the SISP I and SISP II were determined using a 5.75%
discount rate and assume benefits commenced at age 65. The assumptions used to
calculate Mr. Harp’s additional retirement benefit are described
below.
Pension
Plans
Messrs.
Hildestad, Raile, and Harp participate in the MDU Resources Group, Inc. Pension
Plan for Non-Bargaining Unit Employees, which we refer to as our pension plan.
Mr. Schneider participates in the Knife River Corporation Salaried
Employees’ Pension Plan, which we refer to as the KR pension plan. Mr. Bietz
participates in the Williston Basin Interstate Pipeline Company Pension Plan,
which we refer to as the WBI pension plan. Pension benefits under our pension
plan and the WBI pension plan are based on the participant’s average annual
salary over the 60 consecutive month period in which the participant
received the highest annual salary during the participant’s final 10 years
of service. For this purpose, only a participant’s salary is considered;
incentives and other forms of compensation are not included. Benefits are
determined by multiplying (1) the participant’s years of credited service by (2)
the sum of (a) the average annual salary up to the social security integration
level times 1.1% and (b) the average annual salary over the social security
integration level times 1.45%. The KR pension plan uses the same formula except
that 1.2% and 1.6% are used instead of 1.1% and 1.45%. The maximum
years of
service recognized when determining benefits under each of the pension plans is
35. Pension plan benefits are not reduced for social
security benefits.
Each of
the pension plans was amended to cease benefit accruals after December 31, 2009,
meaning the normal retirement benefit will not change.
To
receive unreduced retirement benefits under our pension plan and the WBI pension
plan, participants must either remain employed until age 60 or elect to defer
commencement of benefits until age 60. Under the KR pension plan,
participants must remain employed until age 62 or elect to defer commencement of
benefits until age 62 to receive unreduced benefits. Messrs. Hildestad and
Raile were eligible for unreduced retirement benefits under our pension plan on
December 31, 2009. Participants whose employment terminates between the ages of
55 and 60, with 5 years of service, in our pension plan or the WBI pension plan
and between the ages of 55 and 62, with 5 years of service, in the KR pension
plan are eligible for early retirement benefits. Early retirement benefits are
determined by reducing the normal retirement benefit by 0.25% per month for each
month before age 60 in our pension plan and the WBI pension plan and age 62 in
the KR pension plan. If a participant’s employment terminates before age 55, the
same reduction applies for each month the termination occurs before age 62, with
the reduction capped at 21%. Messrs. Harp and Schneider are currently eligible
for early retirement benefits.
Benefits
for single participants under the pension plans are paid as straight life
amounts and benefits for married participants are paid as actuarially reduced
pensions with a survivor benefit for spouses, unless participants choose
otherwise. Participants who terminate employment before age 55 may elect to
receive their benefits in a lump sum. Mr. Bietz is currently eligible for a lump
sum.
The
Internal Revenue Code places limitations on benefit amounts that may be paid
under the pension plans and on the amount of compensation that may be recognized
when determining benefits. In 2009, the maximum annual benefit payable under the
pension plans was $195,000 and the maximum amount of compensation that could be
recognized when determining benefits was $245,000.
Supplemental
Income Security Plan
We also
offer key managers and executives, including all of our named executive
officers, benefits under our non-qualified retirement plan, which we refer to as
the Supplemental Income Security Plan or SISP. Benefits under the SISP consist
of:
|
•
|
a
supplemental retirement benefit intended to augment the retirement income
provided under our qualified pension plans - we refer to this benefit as
the regular SISP benefit
|
|
•
|
an
excess retirement benefit relating to Internal Revenue Code limitations on
retirement benefits provided under our qualified pension plans - we refer
to this benefit as the excess SISP benefit and
|
|
•
|
death
benefits - we refer to these benefits as the SISP death
benefit.
|
Effective
January 1, 2010, we amended the SISP to:
|
•
|
reduce
by 20% the regular SISP and death benefit levels in the benefit schedule
used to determine regular SISP and death benefits for new participants and
participants whose benefit levels increase on or after January 1,
2010
|
|
•
|
impose
an additional vesting period applicable to any increased regular SISP
benefit and SISP death benefit occurring on or after January 1,
2010
|
|
•
|
eliminate
the excess SISP benefit for new participants and current participants who
were not already eligible for the excess SISP benefit and
|
|
•
|
freeze
excess SISP benefit accruals.
|
SISP
benefits are forfeited if the participant’s employment is terminated for
cause.
Regular
SISP Benefits and Death Benefits
Regular
SISP benefits and death benefits are determined by reference to one of two
schedules attached to the SISP - the original schedule or the amended schedule.
Our compensation committee, after receiving recommendations from our chief
executive officer, determines the level at which participants are placed in the
schedules. A participant’s placement is generally, but not always, determined by
reference to the participant’s annual base salary. Benefit levels in the
amended schedule which became effective on January 1, 2010, are 20% lower than
the benefit levels in the original schedule. The amended schedule applies to new
participants and participants who receive a benefit level increase on or after
January 1, 2010.
Participants
can elect to receive (1) the regular SISP benefit only, (2) the SISP death
benefit only, or (3) a combination of both. Regardless of the participant’s
election, if the participant dies before the regular SISP benefit would
commence, only the SISP death benefit is provided. If the participant elects to
receive both a regular SISP benefit and a SISP death benefit, each of the
benefits is reduced proportionately.
The
regular SISP benefits reflected in the table above are based on the assumption
that the participant elects to receive only the regular SISP benefit. The
present values of the SISP death benefits that would be provided if the named
executive officers were to die prior to the commencement of regular SISP
benefits are reflected in the table that appears in the section entitled
“Potential Payments upon Termination or Change of Control.”
The SISP
was amended to address changes in applicable tax laws resulting from the
enactment of section 409A of the Internal Revenue Code. Regular SISP benefits
that were vested as of December 31, 2004 and were thereby grandfathered
under section 409A remain subject to SISP provisions then in effect, which we
refer to as SISP I benefits. Regular SISP benefits that are subject to section
409A, which we refer to as SISP II benefits, are governed by amended provisions
intended to comply with section 409A. Participants generally have more
discretion with respect to the distributions of their SISP I
benefits.
The time
and manner in which the regular SISP benefits are paid depend on a variety of
factors, including the time and form of benefit elected by the participant and
whether the benefits are SISP I or SISP II benefits. Unless the participant
elects otherwise, the SISP I benefits are paid over 180 months, with benefits
commencing when the participant attains age 65 or, if later, when the
participant retires. The SISP II benefits commence when the participant attains
age 65 or, if later, when the participant retires, subject to a six-month delay
if the participant is subject to the provisions of section 409A of the Internal
Revenue Code that require delayed commencement of these types of retirement
benefits. The SISP II benefits are paid over 180 months or, if
commencement of payments is delayed for six months, 173 months. If
the commencement of benefits is delayed for six months, the first payment
includes the payments that would have been paid during the six-month period. If
the participant dies after the regular SISP benefits have begun but before
receipt of all of the regular SISP benefits, the remaining payments are made to
the participant’s designated beneficiary.
Rather
than receiving their regular SISP I benefits in equal monthly installments over
15 years commencing at age 65, participants can elect a different form and time
of commencement of their SISP I benefits. Participants can elect to defer
commencement of the regular SISP I benefits. If this is elected, the participant
retains the right to receive a monthly SISP death benefit if death occurs prior
to the commencement of the regular SISP I benefit.
Participants
also can elect to receive their SISP I benefits in one of three actuarially
equivalent forms - a life annuity, 100% joint and survivor annuity, or a joint
and two-thirds joint and survivor annuity, provided that the cost of providing
these actuarial equivalent forms of benefits does not exceed the cost of
providing the normal form of benefit. Neither the election to receive an
actuarial equivalent benefit nor the administrator’s right to pay the regular
SISP benefit in the form of an actuarially equivalent lump sum are available
with respect to SISP II benefits.
To
promote retention, the regular SISP benefits are subject to the following
ten-year vesting schedule:
|
•
|
0%
vesting for less than 3 years of participation
|
|
•
|
20%
vesting for 3 years of participation
|
|
•
|
40%
vesting for 4 years of participation and
|
|
•
|
an
additional 10% vesting for each additional year of participation up to
100% vesting for 10 years of
participation.
|
In 2009,
the plan was amended to impose an additional vesting requirement on benefit
level increases for the regular SISP benefit granted on or after January 1,
2010. The requirement applies only to the increased benefit level. The increased
benefit vests after the later of three additional years of participation in the
SISP or the end of the regular vesting schedule described above. The
additional three-year vesting requirement for benefit level increases is
pro-rated for participants who are officers, attain age 65 and are required to
retire, pursuant to the company’s bylaws, prior to the end of the additional
vesting period as follows:
|
•
|
33%
of the increase vests for participants required to retire at least one
year but less than two years after the increase is granted
and
|
|
•
|
66%
of the increase vests for participants required to retire at least two
years but less than three years after the increase is
granted.
|
The
benefit level increases of participants who attain age 65 and are required to
retire pursuant to the company’s bylaws will be further reduced to the extent
the participants are not fully vested in their regular SISP benefit under the
10-year vesting schedule described above. The additional vesting period
associated with a benefit level increase may be waived by the compensation
committee.
SISP death benefits become fully
vested if the participant dies while actively employed. Otherwise, the SISP
death benefits are subject to the same vesting schedules as the regular SISP
benefits.
Excess
SISP Benefits
Excess
SISP benefits are equal to the difference between (1) the monthly
retirement benefits that would have been payable to the participant under the
qualified pension plans absent the limitations under the Internal Revenue Code
and (2) the actual benefits payable to the participant under the qualified
pension plan. Participants are only eligible for the excess SISP benefits if (1)
the participant is fully vested under the qualified pension plan, (2) the
participant’s employment terminates prior to age 65, and (3) benefits under
the qualified pension plan are reduced due to limitations under the Internal
Revenue Code on plan compensation. Effective January 1, 2005, participants who
were not then vested in the excess SISP benefits were also required to remain
actively employed by the company until age 60. In 2009, the plan was amended to
limit eligibility of the excess SISP benefit to current SISP participants (1)
who are already vested in the excess SISP benefit or (2) who will become vested
in the excess SISP benefits if they remain employed with the company until age
60. The plan was further amended to freeze the excess SISP benefits to a maximum
of the benefit level payable based on the participant’s years of service and
compensation level as of December 31, 2009. With the exception of Mr. Harp,
each of the named executive officers would be entitled to the excess SISP
benefit if they were to terminate employment prior to age 65. Mr. Harp must
remain employed until age 60 to become entitled to his excess SISP
benefit.
Benefits
generally commence six months after the participant’s employment terminates and
continue up to age 65 or until the death of the participant, if prior to
age 65. If a participant who dies prior to age 65 elected a joint and
survivor benefit, the survivor’s excess SISP benefit is paid until the date the
participant would have attained age 65.
Mr. Harp’s
Additional Retirement Benefit
To
encourage Mr. Harp to remain with the company, on November 16, 2006,
upon recommendation of our chief executive officer and the compensation
committee, our board of directors approved an additional retirement benefit for
Mr. Harp. The benefit provides for Mr. Harp to receive payments that
represent the equivalent of an additional three years of service under our
pension plan, the excess SISP, and the SISP. The additional three years of
service recognize Mr. Harp’s previous employment with a subsidiary of the
company. To calculate payments Mr. Harp could receive due to his additional
retirement benefit, we applied the additional years of service to each of the
retirement arrangements and assumed he remained employed until age 60, for
purposes of calculating the additional benefit under the pension plan and excess
SISP, and age 65, for purposes of calculating the additional benefit under the
SISP II. Because Mr. Harp would be fully vested in the SISP II benefit
if he retired at age 65, the additional years of service provided by the
agreement would not increase his SISP II benefit. Consequently, the amount
shown in the table does not include any additional benefit attributable to the
SISP II. If Mr. Harp were to retire before achieving 10 years of
service and becoming fully vested in his SISP II benefit, the additional years
of service provided by the additional retirement benefit would increase his
vesting percentage under the SISP II and therefore would result in an additional
payment. For a description of the payments that could be provided under the
additional retirement benefit if Mr. Harp’s employment were to be
terminated on December 31, 2009, refer to the table and related notes in
“Potential Payment upon Termination or Change of Control” below.
The SISP
also provides that if a participant becomes totally disabled, the participant
will continue to receive credit for up to two additional years under the SISP as
long as the participant is totally disabled during such time. Since the named
executive officers other than Mr. Harp are fully vested in their SISP
benefits, this would not result in any incremental benefit for the named
executive officers other than Mr. Harp. The present value of these two
additional years of service for Mr. Harp is reflected in the table that
appears in the section entitled “Potential Payments upon Termination or Change
of Control.”
Nonqualified Deferred Compensation for
2009
|
Name
(a)
|
|
|
Executive
Contributions
in
Last
FY
($)
(b)
|
|
|
Registrant
Contributions
in
Last
FY
($)
(c)
|
|
|
Earnings
in
Aggregate
Last
FY
($)
(d)
|
|
|
Aggregate
Withdrawals/
Distributions
($)
(e)
|
|
|
Aggregate
Balance
at
Last
FYE
($)
(f)
|
|
|
Terry
D. Hildestad
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
52,314
|
|
|
|
—
|
|
|
|
835,932
|
|
|
Vernon
A. Raile
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
94,556
|
|
|
|
—
|
|
|
|
1,510,791
|
|
|
John
G. Harp
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
William
E. Schneider
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
83,840
|
|
|
|
—
|
|
|
|
1,339,689(1)
|
|
|
Steven
L. Bietz
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(1)
|
Includes
$392,000, which was reported in the Summary Compensation Table for 2006 in
column (g).
|
Participants
in the executive incentive compensation plans may elect to defer up to 100% of
their annual incentive awards. Deferred amounts accrue interest at a rate
determined annually by the compensation committee. The interest rate in effect
for 2009 was 6.48% or the “Moody’s Rate,” which was defined by reference to the
U.S. Long-Term Corporate Bond Yield Average for “A” rated
companies. Effective January 1, 2009, “Moody’s Rate” is the number
that results from adding the daily Moody’s U.S. Long-Term Corporate Bond Yield
Average for “A” rated companies as of the last business day of each month for
the 12-month period ending October 31, 2008, and dividing by 12. The deferred
amount will be paid in accordance with the participant’s election, following
termination of employment or beginning in the fifth year following the year the
award was granted. The amounts will be paid in accordance with the participant’s
election in a lump sum or in monthly installments not to exceed 120 months. In
the event of a change of control, all amounts become immediately
payable.
A change
of control is defined as
|
•
|
an
acquisition during a 12-month period of 30% or more of the total voting
power of our stock
|
|
•
|
an
acquisition of our stock that, together with stock already held by the
acquirer, constitutes more than 50% of the total fair market value or
total voting power of our stock
|
|
•
|
replacement
of a majority of the members of our board of directors during any 12-month
period by directors whose appointment or election is not endorsed by a
majority of the members of our board of directors or
|
|
•
|
acquisition
of our assets having a gross fair market value at least equal to 40% of
the total gross fair market value of all of our
assets.
|
Potential Payments upon Termination or Change of
Control
|
The
following tables show the payments and benefits our named executive officers
would receive in connection with a variety of employment termination scenarios
and upon a change of control. The information assumes the terminations and the
change of control occurred on December 31, 2009. All of the payments and
benefits described below would be provided by the company or its
subsidiaries.
The
tables exclude base salary, 2009 annual incentives, stock awards the named
executive officers earned due to employment through December 31, 2009, and
compensation and benefits provided under plans or arrangements that do not
discriminate in favor of the named executive officers and that are generally
available to all salaried employees, such as benefits under our qualified
defined benefit pension plan, accrued vacation pay, continuation of health care
benefits, and life insurance benefits. The tables also do not include the named
executive officers’ benefits under our nonqualified deferred compensation plans
that are reported in the Nonqualified Deferred Compensation for 2009 table. See
the Pension Benefits for 2009 table and the Nonqualified Deferred Compensation
for 2009 table, and accompanying narratives, for a description of the named
executive officers’ accumulated benefits under our qualified defined benefit
pension plans and our nonqualified deferred compensation plans.
We
provide disability benefits to all of our salaried employees equal to 60% of
their base salary, subject to a cap on the amount of base salary taken into
account when calculating benefits. For officers, the limit on base salary is
$200,000. For other salaried employees, the limit is $100,000. For all salaried
employees, disability payments continue until age 65 if disability occurs at or
before age 60 and for 5 years if disability occurs between the ages of 60
and 65. Disability benefits are reduced for amounts paid as retirement benefits.
The amounts in the tables reflect the present value of the disability benefits
attributable to the additional $100,000 of base salary recognized for executives
under our disability program, subject to the 60% limitation, after reduction for
amounts that would be paid as retirement benefits. The present value of the
disability benefits was determined using a discount rate of 5.75%. As the tables
reflect, with the exception of Mr. Harp, the reduction for amounts paid as
retirement benefits would eliminate disability benefits assuming a termination
of employment on December 31, 2009.
Upon a
change of control, share-based awards granted under our Long-Term
Performance-Based Incentive Plan vest and non-share-based awards are paid in
cash. All shares of restricted stock would vest in full upon a change of
control. All performance share awards would vest at their target levels. For
this purpose, the term change of control is defined as:
|
•
|
the
acquisition by an individual, entity, or group of 20% or more of our
outstanding voting securities
|
|
•
|
a
turnover in a majority of our board of directors without the approval of a
majority of the members of the board who were members of the board as of
the plan’s effective date or whose election was approved by such board
members
|
|
•
|
consummation
of a merger or consolidation or sale or other disposition of all or
substantially all of the company’s assets, unless the company’s
stockholders immediately prior to the transaction beneficially own more
than 60% of the outstanding shares and voting power of the resulting
corporation after the merger or the corporation that acquires the
company’s assets, as the case may be or
|
|
•
|
stockholder
approval of the company’s liquidation or
dissolution.
|
Shares of
restricted stock and associated dividends are forfeited upon termination of
employment. Performance shares are forfeited if termination of employment occurs
during the first year of the performance period. If a termination of employment
occurs for a reason other than cause, performance share awards granted prior to
2009 are prorated as follows:
|
•
|
if
the termination of employment occurs during the second year of the
performance period, the executive receives a prorated portion of any
performance shares earned based on the number of months employed during
the performance period and
|
|
•
|
if
the termination of employment occurs during the third year of the
performance period, the executive receives the full amount of any
performance shares earned.
|
Beginning
with performance share awards granted in 2009, these awards will be forfeited if
the participant’s employment terminates for any reason before the participant
has reached age 55 and completed 10 years of service. Performance shares and
related dividend equivalents for those participants whose employment is
terminated after the participant has reached age 55 and completed 10 years of
service will be prorated as described above.
Accordingly,
if a December 31, 2009 termination is assumed, the named executive
officers’ 2009-2011 performance share awards would be forfeited, any amounts
earned under the 2008-2010 performance share awards would be reduced by
one-third, and any amounts earned under the 2007-2009 performance share awards
would not be reduced. The number of performance shares earned depends on actual
performance through the full performance period. As actual performance for the
2007-2009 performance share awards has been determined, the amounts for these
awards in the event of a non-change of control termination were based on actual
performance, which resulted in vesting of 100% of the target
award. Amounts for the 2008-2010 performance share awards are also
shown at target, based upon assumed target performance. No amounts
are shown for the 2009-2011 performance share awards because such awards would
be forfeited. Although vesting would only occur after completion of
the performance period, the amounts shown in the tables were not reduced to
reflect the present value of the performance shares that could vest. Dividend
equivalents attributable to earned performance shares would also be paid.
Dividend equivalents accrued through December 31, 2009 are included in the
amounts shown.
The value
of the vesting of shares of restricted stock and performance shares shown in the
tables was determined by multiplying the number of shares of restricted stock or
performance shares that would vest upon termination or a change of control by
the closing price of our stock on December 31, 2009.
We also
have change of control employment agreements with our named executive officers
and other executives, which provide certain protections to the executives in the
event there is a change of control of the company.
For these
purposes, we define “change of control” as:
|
•
|
the
acquisition by an individual, entity, or group of 20% or more of our
voting securities
|
|
•
|
a
turnover in a majority of our board of directors without the approval of a
majority of the members of the board who were members of the board as of
the agreement date or whose election was approved by such board
members
|
|
•
|
consummation
of a merger or consolidation, unless our stockholders immediately prior to
the merger beneficially own more than 60% of the outstanding shares and
voting power of the resulting corporation after the merger or
|
|
•
|
stockholder
approval of our liquidation or
dissolution.
|
If a
change of control occurs, the agreements provide for a three-year employment
period from the date of the change of control, during which the named executive
officer is entitled to receive:
|
•
|
a
base salary of not less than twelve times the highest monthly salary paid
within the preceding twelve months
|
|
•
|
annual
incentive opportunity of not less than the highest annual incentive paid
in any of the three years before the change of control
|
|
•
|
participation
in our incentive, savings, retirement, and welfare benefit
plans
|
|
•
|
reasonable
vehicle allowance, home office allowance, and subsidized annual physical
examinations and
|
|
•
|
office
and support staff, vacation, and expense reimbursement consistent with
such benefits as they were provided before the change of
control.
|
Assuming
a change of control occurred on December 31, 2009, the guaranteed minimum
level of base salary provided over the three-year employment period would not
result in an increase in any of the named executive officers’ base salaries. The
minimum annual incentive amounts Messrs. Hildestad, Raile, Harp, Schneider, and
Bietz would be entitled to over the three-year employment period would be $[ •
], $[ • ], $[ • ], $[ • ], and $[ • ], respectively. The agreements also provide
that severance payments and benefits will be provided:
|
•
|
if
we terminate the named executive officer’s employment during the
employment period, other than for cause or disability, or
|
|
•
|
the
named executive officer resigns for good
reason.
|
“Cause”
means the named executive officer’s willful and continued failure to
substantially perform his duties or willfully engaging in illegal conduct or
gross misconduct materially injurious to the company. “Good reason”
includes:
|
•
|
a
material diminution of the named executive officer’s authority, duties, or
responsibilities
|
|
•
|
a
material change in the named executive officer’s work location
and
|
|
•
|
our
material breach of the agreement.
|
In such
event, the named executive officer would receive:
|
•
|
accrued
but unpaid base salary and accrued but unused vacation
|
|
•
|
a
lump sum payment equal to three times his (a) annual salary using the
higher of the then current annual salary or twelve times the highest
monthly salary paid within the twelve months before the change of control
and (b) annual incentive using the highest annual incentive paid in any of
the three years before the change of control or, if higher, the annual
incentive for the most recently completed fiscal year
|
|
•
|
a
pro-rated annual incentive for the year of termination
|
|
•
|
an
amount equal to the actuarial equivalent of the additional benefit the
named executive officer would receive under the SISP and any other
supplemental or excess retirement plan if employment continued for an
additional three years
|
|
•
|
outplacement
benefits and
|
|
•
|
a
payment equal to any federal excise tax on excess parachute payments if
the total parachute payments exceed 110% of the safe harbor amount for
that tax. If this 110% threshold is not exceeded, the named executive
officer’s payments and benefits would be reduced to avoid the tax. The
named executive officers are not reimbursed for any taxes imposed on this
tax reimbursement payment.
|
This
description of severance payments and benefits reflects the terms of the
agreements as in effect on December 31, 2009.
The
compensation committee may also consider providing severance benefits on a
case-by-case basis for employment terminations not related to a change of
control. The compensation committee adopted a checklist of factors in
February 2005 to consider when determining whether any such severance
benefits should be paid. The tables do not reflect any such severance benefits,
as these benefits are made in the discretion of the committee on a case-by-case
basis and it is not possible to estimate the severance benefits, if any, that
would be paid.
Terry
D. Hildestad
Executive
Benefits and
Payments
Upon
Termination
or
Change
of Control
|
|
Voluntary
Termination
($)
|
Not
for
Cause
Termination
($)
|
For
Cause
Termination
($)
|
|
Death
($)
|
Disability
($)
|
Not
for
Cause
or
Good
Reason
Termination
Following
Change
of
Control
($)
|
Change
of
Control
(Without
Termination)
($)
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
Salary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,250,000
|
|
|
|
|
|
Short-term
Incentive(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[
• ]
|
|
|
|
|
|
2007-2009
Performance Shares
|
|
|
|
836,653
|
|
|
836,653
|
|
|
|
|
|
836,653
|
|
|
836,653
|
|
|
836,653
|
|
|
836,653
|
|
|
2008-2010
Performance Shares
|
|
|
|
645,270
|
|
|
645,270
|
|
|
|
|
|
645,270
|
|
|
645,270
|
|
|
967,893
|
|
|
967,893
|
|
|
2009-2011
Performance Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,326,741
|
|
|
1,326,741
|
|
|
Restricted
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,603
|
|
|
87,603
|
|
|
Benefits
and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular
SISP(2)
|
|
|
|
3,944,219
|
|
|
3,944,219
|
|
|
|
|
|
|
|
|
3,944,219
|
|
|
3,944,219
|
|
|
|
|
|
Excess
SISP(3)
|
|
|
|
842,838
|
|
|
842,838
|
|
|
|
|
|
|
|
|
842,838
|
|
|
842,838
|
|
|
|
|
|
SISP
Death Benefits(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
10,335,773
|
|
|
|
|
|
|
|
|
|
|
|
Disability
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outplacement
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
280G
Tax(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,940,878
|
|
|
|
|
|
Total
|
|
|
|
6,268,980
|
|
|
6,268,980
|
|
|
|
|
|
11,817,696
|
|
|
6,268,980
|
|
|
[
• ]
|
|
|
3,218,890
|
|
|
(1)
|
Includes
the prorated annual incentive for the year of termination, which is the
full annual incentive since we assume termination occurred on
December 31, 2009, and the additional severance payment of three
times the annual incentive. For each of these, we used the higher of (1)
the annual incentive earned in 2009 or (2) the highest annual incentive
paid in 2007, 2008, and 2009.
|
(2)
|
Represents
the present value of Mr. Hildestad’s vested regular SISP benefit as
of December 31, 2009, which was $42,710 per month for 15 years,
commencing at age 65. Present value was determined using a 5.75% discount
rate. The terms of the regular SISP benefit are described following the
Pension Benefits for 2009 table. The three additional years of vesting
credit assumed for purposes of calculating the additional SISP benefit
under Mr. Hildestad’s change of control agreement would not increase the
actuarial present value of his SISP
amount.
|
(3)
|
Represents
the present value of all excess SISP benefits Mr. Hildestad would be
entitled to upon termination of employment under the SISP. The terms of
the excess SISP benefit are described following the Pension Benefits for
2009 table. The three additional years of employment assumed for purposes
of calculating the additional retirement plan payment under
Mr. Hildestad’s change of control agreement would not increase the
actuarial present value of his excess SISP
benefits.
|
(4)
|
Represents
the present value of 180 monthly payments of $85,420 per month, which
would be paid as a SISP death benefit under the SISP. Present value was
determined using a 5.75% discount rate. The terms of the SISP death
benefit are described following the Pension Benefits for 2009
table.
|
(5)
|
Determined
applying the Internal Revenue Code section 4999 excise tax of 20% only if
110% threshold is exceeded.
|
Vernon
A. Raile
Executive
Benefits and
Payments
Upon
Termination
or
Change
of Control
|
Voluntary
Termination
($)
|
Not
for
Cause
Termination
($)
|
For
Cause
Termination
($)
|
Death
($)
|
Disability
($)
|
Not
for
Cause
or
Good
Reason
Termination
Following
Change
of
Control
($)
|
Change
of
Control
(Without
Termination)
($)
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
Salary
|
|
|
|
|
|
|
|
|
|
|
|
|
1,350,000
|
|
|
|
|
Short-term
Incentive(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
[ •
]
|
|
|
|
|
2007-2009
Performance Shares
|
|
|
317,661
|
|
317,661
|
|
|
|
317,661
|
|
317,661
|
|
317,661
|
|
317,661
|
|
|
2008-2010
Performance Shares
|
|
|
221,231
|
|
221,231
|
|
|
|
221,231
|
|
221,231
|
|
331,834
|
|
331,834
|
|
|
2009-2011
Performance Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
477,611
|
|
477,611
|
|
|
Restricted
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
26,290
|
|
26,290
|
|
|
Benefits
and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular
SISP(2)
|
|
|
2,790,741
|
|
2,790,741
|
|
|
|
|
|
2,790,741
|
|
2,790,741
|
|
|
|
|
SISP
Death Benefits(3)
|
|
|
|
|
|
|
|
|
5,529,675
|
|
|
|
|
|
|
|
|
Disability
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outplacement
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
280G
Tax(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
856,992
|
|
|
|
|
Total
|
|
|
3,329,633
|
|
3,329,633
|
|
|
|
6,068,567
|
|
3,329,633
|
|
[
• ]
|
|
1,153,396
|
|
|
(1)
|
Includes
the prorated annual incentive for the year of termination, which is the
full annual incentive since we assume termination occurred on
December 31, 2009, and the additional severance payment of three
times the annual incentive. For each of these, we used the higher of (1)
the annual incentive earned in 2009 or (2) the highest annual incentive
paid in 2007, 2008, and 2009.
|
(2)
|
Represents
the present value of Mr. Raile’s vested regular SISP benefit as of
December 31, 2009, which was $22,850 per month for 15 years,
commencing at age 65. Present value was determined using a 5.75% discount
rate. The terms of the regular SISP benefit are described following the
Pension Benefits for 2009 table. The three additional years of vesting
credit assumed for purposes of calculating the additional SISP benefit
under Mr. Raile’s change of control agreement would not increase the
actuarial present value of his SISP
amount.
|
(3)
|
Represents
the present value of 180 monthly payments of $45,700 per month, which
would be paid as a SISP death benefit under the SISP. Present value was
determined using a 5.75% discount rate. The terms of the SISP death
benefit are described following the Pension Benefits for 2009
table.
|
(4)
|
Determined
applying the Internal Revenue Code section 4999 excise tax of 20% only if
110% threshold is exceeded.
|
John
G. Harp
Executive
Benefits and
Payments
Upon
Termination
or
Change
of Control
|
Voluntary
Termination
($)
|
|
Not
for
Cause
Termination
($)
|
|
For
Cause
Termination
($)
|
|
|
Death
($)
|
|
|
Disability
($)
|
|
Not
for
Cause
or
Good
Reason
Termination
Following
Change
of
Control
($)
|
|
Change
of
Control
(Without
Termination)
($)
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
Salary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,350,000
|
|
|
|
|
|
|
Short-term
Incentive(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[
• ]
|
|
|
|
|
|
|
2007-2009
Performance Shares
|
|
|
257,410
|
|
|
|
257,410
|
|
|
|
|
|
|
|
257,410
|
|
|
|
257,410
|
|
|
|
257,410
|
|
|
|
257,410
|
|
|
2008-2010
Performance Shares
|
|
|
221,231
|
|
|
|
221,231
|
|
|
|
|
|
|
|
221,231
|
|
|
|
221,231
|
|
|
|
331,834
|
|
|
|
331,834
|
|
|
2009-2011
Performance Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
477,611
|
|
|
|
477,611
|
|
|
Restricted
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits
and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incremental
Pension(2)
|
|
|
107,307
|
|
|
|
107,307
|
|
|
|
|
|
|
|
|
|
|
|
107,307
|
|
|
|
184,737
|
|
|
|
|
|
|
Regular
SISP
|
|
|
1,249,035
|
(3) |
|
|
1,249,035
|
(3) |
|
|
|
|
|
|
|
|
|
|
1,603,546
|
(4)
|
|
|
1,784,336
|
(5) |
|
|
|
|
|
Excess
SISP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116,185
|
|
|
|
|
|
|
SISP
Death Benefits(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,529,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability
Benefits(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
227,839
|
|
|
|
|
|
|
|
|
|
|
Outplacement
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
280G
Tax(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,068,156
|
|
|
|
|
|
|
Total
|
|
|
1,834,983
|
|
|
|
|
|
|
|
|
|
|
|
6,008,316
|
|
|
|
2,417,333
|
|
|
|
[
• ]
|
|
|
|
1,066,855
|
|
|
(1)
|
Includes
the prorated annual incentive for the year of termination, which is the
full annual incentive since we assume termination occurred on
December 31, 2009, and the additional severance payment of three
times the annual incentive. For each of these, we used the higher of (1)
the annual incentive earned in 2009 or (2) the highest annual incentive
paid in 2007, 2008, and 2009.
|
(2)
|
Represents
the equivalent of three additional years of service that would be provided
under the Harp additional retirement benefit described following the
Pension Benefits for 2009 table.
|
(3)
|
Represents
the present value of Mr. Harp’s vested regular SISP benefit as of December
31, 2009, which was $15,995 per month for 15 years, commencing at age
65. Present value was determined using a 5.75% discount rate.
The terms of the regular SISP benefit are described following the Pension
Benefits for 2009 table. Also includes the additional benefit attributable
to three additional years of service that would be provided under the
retirement benefit agreement described following the Pension Benefits for
2009 table.
|
(4)
|
Represents
the present value of the additional SISP retirement benefit due to an
additional two years vesting under our SISP. The terms of the SISP benefit
are described following the Pension Benefits for 2009 table. Present value
was determined using a 5.75% discount
rate.
|
(5)
|
Represents
the payment that would be made under Mr. Harp’s change of control
agreement based on the increase in the actuarial present value of his
regular SISP benefit that would result if he continued employment for an
additional three years. Also includes the additional benefit attributable
to three additional years of service that would be provided under the
retirement benefit agreement described following the Pension Benefits for
2009 table.
|
(6)
|
Represents
the present value of 180 monthly payments of $45,700 per month, which
would be paid as a SISP death benefit under the SISP. Present value was
determined using a 5.75% discount rate. The terms of the SISP death
benefit are described following the Pension Benefits for 2009
table.
|
(7)
|
Represents
the present value of the disability benefit after reduction for
amounts that would be paid as retirement benefits. Present
value was determined using a 5.75% discount rate.
|
(8)
|
Determined
applying the Internal Revenue Code section 4999 excise tax of 20% only if
110% threshold is exceeded.
|
William
E. Schneider
Executive
Benefits and
Payments
Upon
Termination
or
Change
of Control
|
|
|
Voluntary
Termination
($)
|
|
Not
for
Cause
Termination
(4)
|
|
For
Cause
Termination
($)
|
|
Death
($)
|
|
Disability
($)
|
Not
for
Cause
or
Good
Reason
Termination
Following
Change
of
Control
($)
|
|
Change
of
Control
(Without
Termination)
($)
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
Salary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,342,200
|
|
|
|
|
|
|
Short-term
Incentive(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[
• ]
|
|
|
|
|
|
|
2007-2009
Performance Shares
|
|
|
|
|
382,260
|
|
|
|
382,260
|
|
|
|
|
|
382,260
|
|
|
|
382,260
|
|
|
382,260
|
|
|
|
382,260
|
|
|
2008-2010
Performance Shares
|
|
|
|
|
247,451
|
|
|
|
247,451
|
|
|
|
|
|
247,451
|
|
|
|
247,451
|
|
|
371,177
|
|
|
|
371,177
|
|
|
2009-2011
Performance Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
474,852
|
|
|
|
474,852
|
|
|
Restricted
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,092
|
|
|
|
70,092
|
|
|
Benefits
and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular
SISP(2)
|
|
|
|
|
2,359,818
|
|
|
|
2,359,818
|
|
|
|
|
|
|
|
|
|
2,359,818
|
|
|
2,359,818
|
|
|
|
|
|
|
Excess
SISP(3)
|
|
|
|
|
126,868
|
|
|
|
126,868
|
|
|
|
|
|
|
|
|
|
126,868
|
|
|
126,868
|
|
|
|
|
|
|
SISP
Death Benefits(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,529,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outplacement
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
280G
Tax(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
808,830
|
|
|
|
|
|
|
Total
|
|
|
|
|
3,116,397
|
|
|
|
3,116,397
|
|
|
|
|
|
6,159,386
|
|
|
|
3,116,397
|
|
|
[
• ]
|
|
|
|
1,298,381
|
|
|
(1)
|
Includes
the prorated annual incentive for the year of termination, which is the
full annual incentive since we assume termination occurred on
December 31, 2009, and the additional severance payment of three
times the annual incentive. For each of these, we used the higher of (1)
the annual incentive earned in 2009 or (2) the highest annual incentive
paid in 2007, 2008, and 2009.
|
(2)
|
Represents
the present value of Mr. Schneider’s vested regular SISP benefit as
of December 31, 2009, which was $22,850 per month for 15 years,
commencing at age 65. Present value was determined using a 5.75% discount
rate. The terms of the regular SISP benefit are described following the
Pension Benefits for 2009 table. The three additional years of vesting
credit assumed for purposes of calculating the additional SISP benefit
under Mr. Schneider’s change of control agreement would not increase the
actuarial present value of his SISP
amount.
|
(3)
|
Represents
the present value of all excess SISP benefits Mr. Schneider would be
entitled to upon termination of employment under the SISP. The terms of
the excess SISP benefit are described following the Pension Benefits for
2009 table. The three additional years of employment assumed for purposes
of calculating the additional retirement plan payment under
Mr. Schneider’s change of control agreement would not increase the
actuarial present value of his excess SISP
benefits.
|
(4)
|
Represents
the present value of 180 monthly payments of $45,700 per month, which
would be paid as a SISP death benefit under the SISP. Present value was
determined using a 5.75% discount rate. The terms of the SISP death
benefit are described following the Pension Benefits for 2009
table.
|
(5)
|
Determined
applying the Internal Revenue Code section 4999 excise tax of 20% only if
110% threshold is exceeded.
|
Steven L.
Bietz
Executive
Benefits and
Payments
Upon
Termination
or
Change
of Control
|
|
|
Voluntary
Termination
($)
|
|
Not
for
Cause
Termination
($)
|
|
For
Cause
Termination
($)
|
|
Death
($)
|
|
Disability
($)
|
|
Not
for
Cause
or
Good
Reason
Termination
Following
Change
of
Control
($)
|
|
Change
of
Control
(Without
Termination)
($)
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
Salary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,050,000
|
|
|
|
|
|
|
Short-term
Incentive(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[
• ]
|
|
|
|
|
|
|
2007-2009
Performance Shares
|
|
|
|
|
261,784
|
|
|
|
261,784
|
|
|
|
|
|
|
|
261,784
|
|
|
|
261,784
|
|
|
|
261,784
|
|
|
|
261,784
|
|
|
2008-2010
Performance Shares
|
|
|
|
|
173,171
|
|
|
|
173,171
|
|
|
|
|
|
|
|
173,171
|
|
|
|
173,171
|
|
|
|
259,757
|
|
|
|
259,757
|
|
|
2009-2011
Performance Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
371,470
|
|
|
|
371,470
|
|
|
Restricted
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,169
|
|
|
|
13,169
|
|
|
Benefits
and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular
SISP(2)
|
|
|
|
|
899,505
|
|
|
|
899,505
|
|
|
|
|
|
|
|
|
|
|
|
899,505
|
|
|
|
899,505
|
|
|
|
|
|
|
Excess
SISP(3)
|
|
|
|
|
146,033
|
|
|
|
146,033
|
|
|
|
|
|
|
|
|
|
|
|
146,033
|
|
|
|
242,471
|
|
|
|
|
|
|
SISP
Death Benefits(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,898,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outplacement
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
280G
Tax(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
671,881
|
|
|
|
|
|
|
Total
|
|
|
|
|
1,480,493
|
|
|
|
1,480,493
|
|
|
|
|
|
|
|
4,333,557
|
|
|
|
1,480,493
|
|
|
|
[
• ]
|
|
|
|
906,180
|
|
|
(1)
|
Includes
the prorated annual incentive for the year of termination, which is the
full annual incentive since we assume termination occurred on
December 31, 2009, and the additional severance payment of three
times the annual incentive. For each of these, we used the higher of (1)
the annual incentive earned in 2009 or (2) the highest annual incentive
paid in 2007, 2008, and 2009.
|
(2)
|
Represents
the present value of Mr. Bietz’s vested regular SISP benefit as of
December 31, 2009, which was $16,110 per month for 15 years,
commencing at age 65. Present value was determined using a 5.75% discount
rate. The terms of the regular SISP benefit are described following the
Pension Benefits for 2009 table. The three additional years of vesting
credit assumed for purposes of calculating the additional SISP benefit
under Mr. Bietz’s change of control agreement would not increase the
actuarial present value of his SISP
amount.
|
(3)
|
Represents
the present value of all excess SISP benefits Mr. Bietz would be
entitled to upon termination of employment under the SISP. The terms of
the excess SISP benefit are described following the Pension Benefits for
2009 table.
|
(4)
|
Represents
the present value of 180 monthly payments of $32,220 per month, which
would be paid as a SISP death benefit under the SISP. Present value was
determined using a 5.75% discount rate. The terms of the SISP death
benefit are described following the Pension Benefits for 2009
table.
|
(5)
|
Determined
applying the Internal Revenue Code section 4999 excise tax of 20% only if
110% threshold is exceeded.
|
Director Compensation for
2009
|
Name
(a)
|
|
|
Fees
Earned
or
Paid
in
Cash
($)
(b)
|
|
Stock
Awards
($)
(c)(1)
|
|
|
Option
Awards
($)
(d)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
(e)
|
|
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(f)
|
|
|
All
Other
Compensation
($)
(g)
(2)
|
|
Total
($)
(h)
|
|
|
|
|
|
Thomas
Everist
|
|
|
|
|
57,083
|
|
|
|
69,445
|
|
|
|
—(3)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
174
|
|
|
|
126,702
|
|
|
Karen
B. Fagg
|
|
|
|
|
55,250
|
(4) |
|
|
69,445
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
174
|
|
|
|
124,869
|
|
|
A.
Bart Holaday
|
|
|
|
|
50,583
|
|
|
|
69,445
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
174
|
|
|
|
120,202
|
|
|
Dennis
W. Johnson
|
|
|
|
|
59,083
|
|
|
|
69,445
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
174
|
|
|
|
128,702
|
|
|
Thomas
C. Knudson
|
|
|
|
|
52,083
|
|
|
|
69,445
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
174
|
|
|
|
121,702
|
|
|
Richard
H. Lewis
|
|
|
|
|
55,083
|
|
|
|
69,445
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
174
|
|
|
|
124,702
|
|
|
Patricia
L. Moss
|
|
|
|
|
52,083
|
(5) |
|
|
69,445
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
174
|
|
|
|
121,702
|
|
|
John
L. Olson
|
|
|
|
|
40,083
|
(6) |
|
|
69,445
|
|
|
|
—(7)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
563,060
|
(9) |
|
|
672,588
|
|
|
Harry
J. Pearce
|
|
|
|
|
130,000
|
|
|
|
69,445
|
|
|
|
—(8)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
174
|
|
|
|
199,619
|
|
|
Sister
Thomas Welder
|
|
|
|
|
50,583
|
|
|
|
69,445
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
174
|
|
|
|
120,202
|
|
|
John
K. Wilson
|
|
|
|
|
53,583
|
(10) |
|
|
69,445
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
174
|
|
|
|
123,202
|
|
|
(1)
|
Valued
based on $17.147, the purchase price of the stock on the date of grant,
May 18, 2009, which is the grant date fair
value.
|
(2)
|
Group
life insurance premiums, except for Mr.
Olson.
|
(3)
|
Mr. Everist
had 18,562 stock options outstanding as of December 31,
2009.
|
(4)
|
Includes
$17,984 that Ms. Fagg received in our common stock in lieu of
cash.
|
(5)
|
Includes
$52,064 that Ms. Moss received in our common stock in lieu of
cash.
|
(6)
|
Mr.
Olson retired on August 13, 2009.
|
(7)
|
Mr. Olson
had 18,562 stock options outstanding as of December 31,
2009.
|
(8)
|
Mr. Pearce
had 13,500 stock options outstanding as of December 31,
2009.
|
(9)
|
Comprised
of a group life insurance premium of $116 and the value of Mr. Olson’s
deferred compensation at December 31, 2009, which is payable over
five years in monthly installments.
|
(10)
|
Includes
$44,578 that Mr. Wilson received in our common stock in lieu of
cash.
|
|
|
Effective June 1, 2009, the board
approved changes to the MDU Resources Group, Inc. Directors’ Compensation
Policy, and the following table shows the cash and stock retainers payable to
our non-employee directors.
|
Effective
June 1, 2009
|
Prior
to June 1, 2009
|
Base
Retainer
|
$55,000
|
$ 30,000
|
Additional
Retainers:
|
|
|
Non-Executive
Chairman
|
75,000
|
100,000
(1)(2)
|
Lead
Director, if any
|
33,000
|
33,000
|
Audit
Committee Chairman
|
10,000
|
10,000
|
Compensation
Committee Chairman
|
5,000
|
5,000
|
Nominating
and Governance Committee Chairman
|
5,000
|
5,000
|
Meeting
Fees:
|
|
|
Board
Meeting
|
–
|
1,500
|
Committee
Meeting
|
–
|
1,500
|
Annual
Stock Retainer
|
4,050
shares
|
4,050 shares
|
(1)
$50,000 of this amount was paid in company common stock prior to January 1,
2009.
(2) The
Non-Executive Chairman does not receive board or committee meeting
fees.
In
addition to liability insurance, we maintain group life insurance in the amount
of $100,000 on each non-employee director for the benefit of each director’s
beneficiaries during the time each director serves on the board. The annual cost
per director is $174.
Directors
may defer all or any portion of the annual cash retainer, meeting fees, if any,
and any other cash compensation paid for service as a director pursuant to the
Deferred Compensation Plan for Directors. Deferred amounts are held as phantom
stock with dividend accruals and are paid out in cash over a five-year period
after the director leaves the board.
Directors
are reimbursed for all reasonable travel expenses including spousal expenses in
connection with attendance at meetings of the board and its committees. All
amounts together with any other perquisites were below the disclosure threshold
for 2009.
Our
post-retirement income plan for directors was terminated in May 2001 for
current and future directors. The net present value of each director’s benefit
was calculated and converted into phantom stock. Payment is deferred pursuant to
the Deferred Compensation Plan for Directors and will be made in cash over a
five-year period after the director’s retirement from the board.
The board
adopted stock ownership guidelines for directors in November 2005. Each
director is expected to own our common stock equal in value to five times the
director’s base retainer. A director, with good cause and with the knowledge of
the board, may donate or assign all of the director’s company common stock to a
charitable, religious, or non-profit organization in lieu of ownership. Shares
acquired through purchases on the open market and participation in our director
stock plans will be considered in ownership calculations as will ownership of
our common stock by a spouse. A director is allowed five years commencing
January 1 of the year following the year of that director’s initial
election to the board to meet the guideline requirements. The level of common
stock ownership is monitored with an annual report made to the compensation
committee of the board. For stock ownership, please see “Security
Ownership.”
In our
Director Compensation Policy, we prohibit our directors from hedging their
ownership of company common stock. Directors may not enter into transactions
that allow the director to benefit from devaluation of our stock or otherwise
own stock technically but without the full benefits and risks of such
ownership.
Narrative
Disclosure of our Compensation Policies and Practices as They Relate to Risk
Management
We have
reviewed our compensation policies and practices for all employees and concluded
that any risks arising from our policies and programs are not reasonably likely
to have a material adverse effect on our company.
INFORMATION CONCERNING EXECUTIVE
OFFICERS
|
At the
first annual meeting of the board after the annual meeting of stockholders, our
board of directors elects our executive officers, who serve until their
successors are chosen and qualify. A majority of our board of directors may
remove any executive officer at any time. Information concerning our executive
officers, including their ages, present corporate positions, and business
experience, is as follows:
Name
|
|
Age
|
|
Present
Corporate Position
and
Business Experience
|
Terry
D. Hildestad
|
|
60
|
|
President
and Chief Executive Officer. For information about Mr. Hildestad, see
“Election of Directors.”
|
|
|
|
|
|
Steven
L. Bietz
|
|
51
|
|
Mr. Bietz
was elected president and chief executive officer of WBI Holdings, Inc.
effective March 4, 2006; president effective January 2, 2006;
executive vice president and chief operating officer effective
September 1, 2002; vice president-administration and chief
accounting officer effective November 3, 1999; vice
president-administration effective February 1997; and controller effective
January 1994.
|
|
|
|
|
|
William
R. Connors
|
|
48
|
|
Mr. Connors
was elected vice president–renewable resources of MDU Resources Group,
Inc., effective September 1, 2008. Prior to that, he was vice
president-business development of Cascade Natural Gas Corporation
effective November 2007; vice president-origination, contracts &
regulatory of Centennial Energy Resources, LLC, effective January 2007;
vice president-origination, contracts & regulatory of Centennial
Power, Inc., effective July 2005; and, was first employed as vice
president-contracts & regulatory of Centennial Power, Inc., effective
July 2004. Prior to that Mr. Connors was of counsel to Miller Nash,
LLP, a law firm in Seattle, Washington.
|
|
|
|
|
|
Mark
A. Del Vecchio
|
|
50
|
|
Mr. Del
Vecchio was elected vice president–human resources on October 1,
2007. From November 3, 2003 to October 1, 2007, Mr. Del
Vecchio was director of executive programs and compensation. From April
1996 to October 31, 2003, Mr. Del Vecchio was vice president and
member of The Carter Group, LLC, an executive search and management
consulting company.
|
|
|
|
|
|
David
L. Goodin
|
|
48
|
|
Mr. Goodin
was elected president and chief executive officer of Montana-Dakota
Utilities Co., Great Plains Natural Gas Co., and Cascade Natural Gas
Corporation effective June 6, 2008, and president and chief executive
officer of Intermountain Gas Company effective October 1, 2008. Prior to
that, he was president of Montana-Dakota Utilities Co. and Great Plains
Natural Gas Co. effective March 1, 2008; president of Cascade Natural
Gas Corporation effective July 2, 2007; executive vice
president-operations and acquisitions of Montana-Dakota Utilities Co.
effective January 2007; vice president-operations effective January 2000;
electric systems manager effective April 1999; electric systems supervisor
effective August 1993; division electric superintendent effective February
1989; and division electrical engineer effective
May 1983.
|
|
|
|
|
|
|
|
John
G. Harp
|
|
57
|
|
Mr. Harp
was elected president and chief executive officer of Utility Services
Inc., which is now MDU Construction Services Group, Inc., effective
September 29, 2004. From May 2004 to September 29, 2004,
Mr. Harp was vice president of Ledcor Technical Services Inc., a
provider of fiber optic cable maintenance services. From April 2001 to May
2004, he was president of JODE CORP., a broadband maintenance company.
Mr. Harp sold JODE CORP. to Ledcor Construction in May 2004. Prior to
that, he was president of Harp Line Constructors Co. and Harp Engineering,
Inc. from July 1998, when they were bought by Utility Services Inc., to
April 2001.
|
|
Name
|
|
Age
|
|
Present
Corporate Position
and
Business Experience
|
|
Nicole
A. Kivisto
|
|
36
|
|
Ms. Kivisto
was elected vice president, controller and chief accounting officer
effective February 17, 2010. Prior to that she was controller
effective December 1, 2005; a financial analyst IV in the
Corporate Planning Department effective May 2003; a financial and
investor relations analyst in the Investor Relations Department effective
May 2000; and a financial analyst in the Corporate Accounting
Department effective July 1995.
|
|
|
|
|
|
|
|
Douglass
A. Mahowald
|
|
60
|
|
Mr.
Mahowald was elected treasurer and assistant secretary effective February
17, 2010. Prior to that he was the assistant treasurer and
assistant secretary effective August 1992; treasury services manager
effective November 1982; and budget statistician effective February
1982.
|
|
Cynthia
J. Norland
|
|
55
|
|
Ms. Norland
was elected vice president–administration effective July 16, 2007.
Prior to that she was the assistant vice president–administration
effective January 17, 2007; associate general counsel in the Legal
Department effective March 6, 2004; and senior attorney in the Legal
Department effective June 1, 1995.
|
|
|
|
|
|
|
|
Vernon
A. Raile
|
|
65
|
|
Mr. Raile
retired on [February 16, 2010]. He served as executive vice president,
treasurer and chief financial officer effective March 1, 2006;
executive vice president and chief financial officer effective
January 3, 2006; and senior vice president, controller and chief
accounting officer effective November 2002. He served as controller until
May 2003. He was vice president, controller and chief accounting officer
from August 1992 until November 2002.
|
|
|
|
|
|
|
|
Paul
K. Sandness
|
|
55
|
|
Mr. Sandness
was elected general counsel and secretary of the company, its divisions
and major subsidiaries effective April 6, 2004. He also was elected a
director of the company’s principal subsidiaries and was appointed to the
Managing Committees of Montana-Dakota Utilities Co. and Great Plains
Natural Gas Co. Prior to that he served as a senior attorney effective
1987 and as an assistant secretary of several
subsidiary companies.
|
|
|
|
|
|
|
|
William E. Schneider
|
|
61
|
|
Mr. Schneider
was elected president and chief executive officer of Knife River
Corporation effective May 1, 2005; and senior vice
president-construction materials effective from September 15, 1999 to
April 30, 2005.
|
|
|
|
|
|
|
|
Doran
N. Schwartz
|
|
40
|
|
Mr. Schwartz
was elected vice president and chief financial officer effective February
17, 2010. Prior to that he was vice president and chief
accounting officer effective March 1, 2006; and assistant vice
president-special projects effective September 6, 2005. He was
director of membership rewards for American Express, a financial services
company, from November 2004 to August 1, 2005; audit manager for Deloitte
& Touche, an audit and professional services company, from June 2002
to November 2004; and audit manager/senior for Arthur Andersen, an audit
and professional services company, from December 1997 to June
2002.
|
|
|
|
|
|
|
|
John
P. Stumpf
|
|
50
|
|
Mr. Stumpf
was elected vice president–strategic planning effective December 1,
2006. Mr. Stumpf was vice president–corporate development for Knife
River Corporation from July 1, 2002 to November 30, 2006 and
director of corporate development of Knife River Corporation from
January 14, 2002 to June 30, 2002. Prior to that, he was special
projects manager for Knife River Corporation from May 1, 2000 to
January 13, 2002.
|
|
The table
below sets forth the number of shares of our capital stock that each director
and each nominee for director, each named executive officer and all directors
and executive officers as a group owned beneficially as of December 31,
2009.
|
|
|
|
Common
Shares Beneficially
Owned
Include:
|
|
|
|
|
Name
|
|
Common
Shares
Beneficially
Owned(1)
|
Shares
Individuals
Have
Rights
to
Acquire
Within
60
Days(2)
|
|
Shares
Held By
Family
Members(3)
|
|
Percent
of
Class
|
|
Deferred
Director
Fees
Held
as
Phantom
Stock(4)
|
Steven
L. Bietz
|
|
58,516
|
(5) |
|
|
|
|
*
|
|
|
Thomas
Everist
|
|
1,870,623
|
(6) |
18,562
|
|
|
|
1.0
|
|
26,642
|
Karen
B. Fagg
|
|
19,381
|
|
|
|
|
|
*
|
|
|
John
G. Harp
|
|
77,356
|
(5) |
|
|
|
|
*
|
|
|
Terry
D. Hildestad
|
|
184,043
|
(5) |
|
|
|
|
*
|
|
|
A.
Bart Holaday
|
|
14,050
|
|
|
|
|
|
*
|
|
|
Dennis
W. Johnson
|
|
67,506
|
(7) |
|
|
4,560
|
|
*
|
|
|
Thomas
C. Knudson
|
|
9,500
|
|
|
|
|
|
*
|
|
|
Richard
H. Lewis
|
|
16,200
|
|
|
|
|
|
*
|
|
10,152
|
Patricia
L. Moss
|
|
42,276
|
|
|
|
|
|
*
|
|
|
Harry
J. Pearce
|
|
158,850
|
|
13,500
|
|
|
|
*
|
|
43,806
|
Vernon
A. Raile
|
|
56,426
|
(5) |
|
|
|
|
*
|
|
|
William
E. Schneider
|
|
102,898
|
(5) |
|
|
|
|
*
|
|
|
Sister
Thomas Welder
|
|
46,942
|
(8) |
|
|
|
|
*
|
|
20,271
|
John
K. Wilson
|
|
67,578
|
|
|
|
|
|
*
|
|
|
All
directors and executive officers as a group (23 in number)
|
|
2,929,144
|
|
42,512
|
|
14,146
|
|
1.6
|
|
100,871
|
*
|
Less
than one percent of the class.
|
(1)
|
“Beneficial
ownership” means the sole or shared power to vote, or to direct the voting
of, a security, or investment power with respect to a
security.
|
(2)
|
Indicates
shares of our stock that executive officers and directors have the right
to acquire within 60 days pursuant to stock options. These shares are
included in the “Common Shares Beneficially Owned”
column.
|
(3)
|
These
shares are included in the “Common Shares Beneficially Owned”
column.
|
(4)
|
These
shares are not included in the “Common Shares Beneficially Owned” column.
Directors may defer all or a portion of their cash compensation pursuant
to the Deferred Compensation Plan for Directors. Deferred amounts are held
as phantom stock with dividend accruals and are paid out in cash over a
five-year period after the director leaves the board.
|
|
|
(5)
|
Includes
full shares allocated to the officer’s account in our 401(k) retirement
plan.
|
(6)
|
Includes
1,820,000 shares of common stock acquired through the sale of
Connolly-Pacific to us.
|
(7)
|
Mr. Johnson
disclaims all beneficial ownership of the 4,560 shares owned by his
wife.
|
(8)
|
The
total includes shares held by the Annunciation Monastery, of which
community Sister Welder is a member, and by the University of Mary, of
which Sister Welder is the president emerita. The monastery owns 33,260
shares. Sister Welder disclaims all beneficial ownership of the shares
owned by the monastery and the
university.
|
_______________
The table
below sets forth information with respect to any person we know to be the
beneficial owner of more than five percent of any class of our voting
securities.
Title
of Class
|
|
Name
and Address
of
Beneficial Owner
|
|
Amount
and Nature
of
Beneficial Ownership
|
|
Percent
of
Class
|
|
Common
Stock
|
|
New
York Life Trust Company
51
Madison Avenue
New
York, NY 10010
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10,800,821(1)
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5.881%
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Common
Stock
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BlackRock,
Inc.
40 East 52nd Street
New York, NY 10022
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10,863,566(2)
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5.79%
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(1)
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In
a Schedule 13G/A, Amendment No. 9, filed on February 13, 2009, New York
Life Trust Company indicates that it holds these shares as directed
trustee of our 401(k) plan and has sole voting and dispositive power with
respect to all shares.
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(2)
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In
a Schedule 13G, filed on January 29, 2010, BlackRock, Inc. reports that it
completed its acquisition of Barclays Global Investors on December 1, 2009
and amends the most recent Schedule 13G filing made by Barclays Global
Investors, NA and certain of its affiliates with respect to our common
stock. BlackRock, Inc. reports sole voting and dispositive
power with respect to all shares as the parent holding company or control
person of BlackRock Asset Management Japan Limited, BlackRock Advisors
(UK) Limited, BlackRock Institutional Trust Company, N.A., BlackRock Fund
Advisors, BlackRock Asset Management Canada Limited, BlackRock Asset
Management Australia Limited, BlackRock Advisors, LLC, BlackRock Capital
Management, Inc., BlackRock Financial Management, Inc., BlackRock
Investment Management, LLC, BlackRock (Luxembourg) S.A., BlackRock Fund
Managers Ltd, BlackRock International Ltd and BlackRock Investment
Management UK Ltd.
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RELATED PERSON TRANSACTION
DISCLOSURE
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The board
of directors has adopted a policy for the review of related person transactions.
This policy is contained in our corporate governance guidelines, which are
posted on our website at www.mdu.com.
The audit
committee reviews related person transactions in which we are or will be a
participant to determine if they are in the best interests of our stockholders
and the company. Financial transactions, arrangements, relationships, or any
series of similar transactions, arrangements, or relationships in which a
related person had or will have a material interest and that exceed $120,000 are
subject to the committee’s review.
Related
persons are directors, director nominees, executive officers, holders of 5% or
more of our voting stock, and their immediate family members. Immediate family
members are spouses, parents, stepparents, mothers-in-law, fathers-in-law,
siblings, brothers-in-law, sisters-in-law, children, stepchildren,
daughters-in-law, sons-in-law, and any person, other than a tenant or domestic
employee, who shares in the household of a director, director nominee, executive
officer, or holder of 5% or more of our voting stock.
After its
review, the committee makes a determination or a recommendation to the board and
officers of the company with respect to the related person transaction. Upon
receipt of the committee’s recommendation, the board of directors or officers,
as the case may be, takes such action as they deem appropriate in light of their
responsibilities under applicable laws and regulations.
The audit
committee and the board of directors reviewed two leases between an indirect
subsidiary of the company and a Montana partnership, Mojo, owned by John G.
Harp, President and Chief Executive Officer of MDU Construction Services Group,
Inc., and his brother, Michael D. Harp. The properties described in these two
leases are located in Kalispell and Billings, Montana and have been leased since
1998. In November 2007, the audit committee determined that renewing
these leases was in the company’s best interests after it reviewed 2004 third
party appraisals for the properties and a 2007 appraisal of the Kalispell
property and considered the consumer price index and our operating companies’
knowledge of local property markets. The audit committee recommended and the
board approved three-year leases for these properties that provide for our
indirect subsidiary to pay a combined monthly rent of $10,100 to Mojo, a Montana
partnership.
Director
Independence
The board
of directors has adopted guidelines on director independence that are included
in our corporate governance guidelines, which are available for review on our
corporate website at http://www.mdu.com/Documents/Governance/
2008_11_CorpGvrnGuide.pdf. The board of directors has determined that
Thomas Everist, Karen B. Fagg, A. Bart Holaday, Dennis W. Johnson, Thomas C.
Knudson, Richard H. Lewis, Patricia L. Moss, John L. Olson (until he retired
August 13, 2009), Harry J. Pearce, Sister Thomas Welder, and John K.
Wilson:
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have
no material relationship with us and
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are
independent in accordance with our director independence guidelines
and the New York Stock Exchange listing
standards.
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In
determining director independence for 2009, the board of directors considered
the following transactions or relationships:
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Mr. Everist’s
ownership at that time of approximately 1.8 million shares of our common
stock
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charitable
contributions to the City of Dickinson in the amount of $20,000 –
Mr. Johnson was president of the City of Dickinson board of
commissioners; payment to the company for utility line relocation done by
our division, Montana-Dakota Utilities Co., in the regular course of
business at the request of TMI Systems Design Corporation in the amount of
$71,530 – Mr. Johnson was Chairman and Chief Executive Officer of TMI
Systems Design Corporation
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charitable
contributions to Colorado UpLift in the amount of $25,000 – Mr. Lewis
was a director and member of Colorado UpLift’s executive
committee
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charitable
contributions to St. Alexius Medical Center in the amount of $6,000 –
Sister Welder was a director of St. Alexius; payment of our employees’
tuition and education-related expenses and charitable contributions
in the amount of $62,500 to the University of Mary – Sister Welder was the
president of the University of Mary in 2008; and charitable contributions
to Missouri Slope Areawide United Way in the amount of $20,500 – Sister
Welder was a director of the Missouri Slope Areawide United Way
and
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public
utility services provided by our utility operations to entities with which
directors are affiliated at rates fixed by the regulatory bodies having
jurisdiction.
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Director
Resignation Upon Change of Job Responsibility
Our
corporate governance guidelines require a director to tender his or her
resignation after a material change in job responsibility. In 2009, no directors
submitted resignations under this requirement.
Code
of Conduct
We have a
code of conduct and ethics, which we refer to as the Leading With Integrity
Guide, which applies to all employees, directors, and officers.
We intend
to satisfy our disclosure obligations regarding:
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amendments
to, or waivers of, any provision of the code of conduct that applies to
our principal executive officer, principal financial officer, and
principal accounting officer and that relates to any element of the code
of ethics definition in Regulation S-K, Item 406(b) and
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waivers
of the code of conduct for our directors or executive officers, as
required by New York Stock Exchange listing
standards
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by
posting such information on our website at http://www.mdu.com/Documents/Governance/IntegrityGuide.pdf.
Board
Leadership Structure and Board’s Role in Risk Oversight
The board
separated the positions of chairman of the board and chief executive officer in
2006 and elected Harry J. Pearce, a non-employee independent director, as our
chairman, and Terry D. Hildestad as our president and chief executive officer.
Separating these positions allows our chief executive officer to focus on our
day-to-day business, while allowing the chairman of the board to lead the board
in its fundamental role of providing advice to and independent oversight of
management. The board recognizes the time, effort, and energy that the chief
executive officer is required to devote to his position in the current business
environment, as well as the commitment required to serve as our chairman,
particularly as the board’s oversight responsibilities continue to grow. While
our bylaws and corporate governance guidelines do not require that our chairman
and chief executive officer positions be separate, the board believes that
having separate positions and having an independent outside director serve as
chairman is the appropriate leadership structure for the company at this time
and demonstrates our commitment to good corporate governance.
Risk is inherent with every business,
and how well a business manages risk can ultimately determine its
success. We face a number of risks, including economic risks,
environmental and regulatory risks, and others, such as the impact of
competition and weather conditions. Management is responsible for the day-to-day
management of risks the company faces, while the board, as a whole and through
its committees, has responsibility for the oversight of risk
management. In its risk oversight role, the board of directors has
the responsibility to satisfy itself that the risk management processes designed
and implemented by management are adequate and functioning as
designed.
The board believes that establishing
the right “tone at the top” and that full and open communication between
management and the board of directors are essential for effective risk
management and oversight. Our chairman meets regularly with our president and
chief executive officer and other senior officers to discuss strategy and risks
facing the company. Senior management attends the quarterly board meetings and
is available to address any questions or concerns raised by the board on risk
management-related and any other matters. Each quarter, the board of directors
receives presentations from senior management on strategic matters involving our
operations. The board holds strategic planning sessions with senior management
to discuss strategies, key challenges, and risks and opportunities for the
company.
While the board is ultimately
responsible for risk oversight at our company, our three board committees assist
the board in fulfilling its oversight responsibilities in certain areas of risk.
The audit committee assists the board in fulfilling its oversight
responsibilities with respect to risk management in the areas of financial
reporting, internal controls and compliance with legal and regulatory
requirements, and, in accordance with New York Stock Exchange requirements,
discusses policies with respect to risk assessment and risk management. Risk
assessment reports are regularly provided by management to the audit
committee. The compensation committee assists the board in fulfilling
its oversight responsibilities with respect to the management of risks arising
from our compensation policies and programs. The nominating and
governance committee assists the board in fulfilling its oversight
responsibilities with respect to the management of risks associated with board
organization, membership and structure, succession planning for our directors
and executive officers, and corporate governance.
Board
Meetings and Committees
During
2009, the board of directors held five meetings. Each incumbent director
attended at least 75% of the combined total meetings of the board and the
committees on which the director served during 2009. Director attendance at our
annual meeting of stockholders is left to the discretion of each director. Four
directors attended our 2009 annual meeting of stockholders.
Harry J.
Pearce was elected non-employee chairman of the board on August 17, 2006.
Mr. Pearce served as lead director from February 15, 2001 to
August 17, 2006. He presides at the executive session of the non-employee
directors held in connection with each regularly scheduled quarterly board of
directors meeting. The non-employee directors also meet in executive session
with the chief executive officer at each regularly scheduled quarterly board of
directors meeting.
The board
has a standing audit committee, compensation committee, and nominating and
governance committee. These committees are composed entirely of independent
directors under the applicable New York Stock Exchange listing
standards.
The
audit, compensation, and nominating and governance committees have charters,
which are available for review on our website at http://www.mdu.com/Governance/Pages/Board
ChartersandCommittees.aspx.
Our corporate governance guidelines are available at http://www.mdu.com/Documents/Governance/2008_11_CorpGvrnGuide.pdf,
and our Leading With Integrity
Guide is
also on our website at http://www.mdu.com/Documents/Governance/IntegrityGuide.pdf.
Nominating
and Governance Committee
The
nominating and governance committee met three times during 2009. The committee
members were John L. Olson, chairman, Karen B. Fagg, Richard H. Lewis, and
Sister Thomas Welder. John L. Olson served as chairman of the
committee until he retired from the board on August 13, 2009, and Karen B. Fagg
became chairman.
The
nominating and governance committee provides recommendations to the board with
respect to:
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board
organization, membership, and function
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committee
structure and membership
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succession
planning for our executive management and directors and
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corporate
governance guidelines applicable to
us.
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The
nominating and governance committee assists the board in overseeing the
management of risk in the committee's areas of responsibility.
The
committee identifies individuals qualified to become directors and recommends to
the board the nominees for director for the next annual meeting of stockholders.
The committee also identifies and recommends to the board individuals qualified
to become our principal officers and the nominees for membership on each board
committee. The committee oversees the evaluation of the board and
management.
In
identifying nominees for director, the committee consults with board members,
our management, consultants, and other individuals likely to possess an
understanding of our business and knowledge concerning suitable director
candidates.
Our
corporate governance guidelines include our policy on consideration of director
candidates recommended to us. We will consider candidates that our stockholders
recommend. In November 2008, we amended our policy to include additional
information stockholders must provide regarding their recommended candidates.
Stockholders may submit director candidate recommendations to the nominating and
governance committee chairman in care of the secretary at MDU Resources Group,
Inc., P.O. Box 5650, Bismarck, ND 58506-5650. Please include the following
information:
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the
candidate’s name, age, business address, residence address, and telephone
number
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the
candidate’s principal occupation
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the
class and number of shares of our stock owned by the
candidate
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a
description of the candidate’s qualifications to be a
director
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whether
the candidate would be an independent director and
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any
other information you believe is relevant with respect to the
recommendation.
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These
guidelines provide information to stockholders who wish to recommend candidates
for director for consideration by the nominating and governance committee.
Stockholders who wish to actually nominate persons for election to our board at
an annual meeting of stockholders must follow the procedures set forth in
section 2.08 of our bylaws. You may obtain a copy of the bylaws by writing to
the secretary of MDU Resources Group, Inc. at the address above. Our bylaws are
also
available
on our website at http://www.mdu.com/Documents/Governance/MDU%20ResourcesBylaws.pdf.
See also the section entitled “2011 Annual Meeting of Stockholders” later in the
proxy statement.
There are
no differences in the manner by which the committee evaluates director
candidates recommended by stockholders and those recommended by other
sources.
In
evaluating director candidates, the committee considers an
individual’s
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background,
character, and experience
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skills
and experience which complement the skills and experience of current board
members
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success
in the individual’s chosen field of endeavor
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skill
in the areas of accounting and financial management, banking, general
management, human resources, marketing, operations, public affairs, law,
and operations abroad
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background
in publicly traded companies
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geographic
area of residence
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independence,
including affiliations or relationships with other groups, organizations,
or entities and
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prior
and future compliance with applicable law and all applicable corporate
governance, code of conduct and ethics, conflict of interest, corporate
opportunities, confidentiality, stock ownership and trading policies, and
our other policies and guidelines.
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On February 11, 2010, the board, upon
recommendation of the nominating and governance committee, amended our corporate
governance guidelines to include diversity as a consideration in identifying
nominees for director. When identifying nominees to serve as
director, the nominating and governance committee will consider candidates with
diverse business and professional experience, skills, gender, and ethnic
background, as appropriate, in light of the current composition and needs of the
board. The nominating and governance committee will assess the
effectiveness of this policy annually in connection with the nomination of
directors for election at the annual meeting of stockholders. The
composition of the current board reflects diversity in business and professional
experience, skills, and gender.
The
committee generally will hire an outside firm to perform a background check on
potential nominees.
Audit
Committee
The audit
committee is a separately-designated standing committee established in
accordance with section 3(a)(58)(A) of the Securities Exchange Act of
1934.
The audit
committee met seven times during 2009. The audit committee members are Dennis W.
Johnson, chairman, A. Bart Holaday, Richard H. Lewis, and John K. Wilson. John
L. Olson served on the committee until he retired from the board on August 13,
2009. The board of directors has determined that Messrs. Johnson,
Holaday, Lewis, Olson (until he retired), and Wilson are “audit committee
financial experts” as defined by Securities and Exchange Commission regulations
and Messrs. Johnson, Holaday, Lewis, Olson (until he retired), and Wilson are
independent under the applicable New York Stock Exchange listing
standards.
The audit
committee assists the board of directors in fulfilling its oversight
responsibilities to the stockholders and serves as a communication link among
the board, management, the independent auditors, and the internal auditors. The
audit committee:
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assists
the board’s oversight of
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the
integrity of our financial statements and system of internal
controls
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our
compliance with legal and regulatory requirements
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the
independent auditors’ qualifications and independence
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the
performance of our internal audit function and independent auditors
and
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risk
management in the audit committee's areas of resonsibility
and
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prepares
the report that Securities and Exchange Commission rules require we
include in our annual proxy statement. |
Audit
Committee Report
In connection with our financial
statements for the year ended December 31, 2009, the audit committee has
(1) reviewed and discussed the audited financial statements with
management; (2) discussed with the independent auditors the matters
required to be discussed by statement on Auditing Standards No. 61, as
amended, (AICPA, Professional
Standards, Vol. 1, AU section 380), as adopted by the Public Company
Accounting Oversight Board in Rule 3200T; (3) received the written
disclosures and the letter from the independent accountants required by
applicable requirements of the Public Company Accounting Oversight Board
regarding the independent accountant’s communications with the audit committee
concerning independence, and discussed with the independent accountant the
independent accountant’s independence.
Based on the review and discussions
referred to in items (1) through (3) of the above paragraph, the audit
committee recommended to the board of directors that the audited financial
statements be included in our Annual Report on Form 10-K for the year ended
December 31, 2009 for filing with the Securities and Exchange
Commission.
Dennis
W. Johnson, Chairman
A.
Bart Holaday
Richard
H. Lewis
John
K. Wilson
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Compensation
Committee
The
compensation committee met four times during 2009. The compensation committee
members are Thomas Everist, chairman, Karen B. Fagg, Thomas C. Knudson, and
Patricia L. Moss.
The
compensation committee’s responsibilities, as set forth in its charter,
include:
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review
and recommend changes to the board regarding our executive compensation
policies for directors and executives
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evaluate
the chief executive officer’s performance and, either as a committee or
together with other independent directors as directed by the board,
determine his or her compensation
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recommend
to the board the compensation of our other Section 16 officers and
directors
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establish
goals, make awards, review performance and determine, or recommend to the
board, awards earned under our annual and long-term incentive compensation
plans
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review
and discuss with management the compensation discussion and analysis and
based upon such review and discussion, determine whether to recommend to
the board that the compensation discussion and analysis be included in our
proxy statement and/or our Annual Report on Form 10-K
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arrange
for the preparation of and approve the compensation committee report to be
included in our proxy statement and/or Annual Report on Form 10-K
and
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assist
the board in overseeing the management of risk in the committee's areas of
responsibility.
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The
compensation committee and the board of directors have sole and direct
responsibility for determining compensation for our Section 16 officers and
directors. The compensation committee makes recommendations to the board
regarding compensation of all Section 16 officers, and the board then
approves the recommendations. The compensation committee and the board may not
delegate their authority. They may, however, use recommendations from outside
consultants, the chief executive officer, and the human resources department.
The chief executive officer, the chief financial officer, the vice
president-human resources, and general counsel regularly attend compensation
committee meetings. The committee meets in executive session as
needed.
We
discuss our processes and procedures for consideration and determination of
compensation of our Section 16 officers in the Compensation Discussion and
Analysis. We also discuss in the Compensation Discussion and Analysis the role
of our executive officers and compensation consultants in determining or
recommending compensation for our Section 16 officers.
The
compensation committee has sole authority to retain, discharge, and approve fees
and other terms and conditions for retention of compensation consultants to
assist in consideration of the compensation of the chief executive officer, the
other Section 16 officers, and the board of directors. The compensation
committee charter requires the committee’s pre-approval of the engagement of the
committee’s compensation consultants by the company for any other
purpose.
In
February 2009, the compensation committee approved the retention of Towers
Perrin as its compensation consultant for 2009 to perform duties to be
identified in an engagement letter. In an engagement letter dated
March 3, 2009 and signed by the chairman of the compensation committee, the
compensation committee requested Towers Perrin to provide an executive
compensation review similar to those prepared in prior years.
The
review was to
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match
company positions to survey data
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develop
2010 competitive estimates on base salaries and targeted short-term and
long-term incentives
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compare
company base salaries and targeted short-term and long-term incentives, by
position, to market estimates
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construct
a recommended 2010 salary grade structure, salary grade changes, and
changes in base salaries and incentive targets based on competitive data
and
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address
general trends in executive compensation, such as overall salary movement
and the recession’s impact on executive
compensation.
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In May
2009, upon recommendation of the chairman, the committee decided not to continue
the consultant’s engagement for 2009 due to budget concerns and the company’s
ability to access data through other sources.
The
compensation committee did authorize the company to participate in compensation
and employee benefits surveys sponsored by Towers Perrin.
The board of directors determines
compensation for our non-employee directors based upon recommendations from the
compensation committee. In February 2009, the compensation committee decided
that the compensation review for the board of directors would be undertaken
internally by the company, rather than by an outside consultant. At
its May 2009 meeting, the committee reviewed the analysis of competitive data
and recent trends in director compensation prepared by the
company. The company’s analysis was based on proxy data from our
performance graph peer group companies compiled by Equilar and on data from the
National Association of Corporate Directors 2008/2009 Director Compensation
Report. The committee compared this data to our directors’
compensation and each of its components. After review and discussion
of the market data, which indicated that aggregate director compensation was at
the median of the National Association of Corporate Directors 2008/2009 Director
Compensation Report companies and above the median – 65th
percentile – of the peer group companies, the compensation committee
recommended, and the board approved, that the annual retainer be increased by
$25,000 to $55,000 and that the monthly fees be eliminated, effective June 1,
2009.
Stockholder
Communications
Stockholders
and other interested parties who wish to contact the board of directors or an
individual director, including our non-employee chairman or non-employee
directors as a group, should address a communication in care of the secretary at
MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650. The secretary
will forward all communications.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
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Section 16
of the Securities Exchange Act of 1934, as amended, requires that officers,
directors, and holders of more than 10% of our common stock file reports of
their trading in our equity securities with the Securities and Exchange
Commission. Based solely on a review of Forms 3, 4, and 5 and any amendments to
these forms furnished to us during and with respect to 2009 or written
representations that no Forms 5 were required, we believe that all such reports
were timely filed.
Neither
the board of directors nor management intends to bring before the meeting any
business other than the matters referred to in the notice of annual meeting and
this proxy statement. In addition, other than as described under Item 6 above
and in the following sentences, we have not been informed that any other matter
will be presented to the meeting by others. One stockholder proposal was
submitted for inclusion in the proxy statement, which we have omitted pursuant
to Rule 14a-8 of the Securities and Exchange Commission’s proxy rules. If this
stockholder complies with our advance notice bylaw provisions and properly
presents the proposal at the annual meeting, it is the intention of the persons
named in the proxy to vote against this proposal. If any other matter
requiring a vote of the stockholders should arise, the persons named in the
enclosed proxy will vote in accordance with their best judgment.
SHARED ADDRESS
STOCKHOLDERS
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In
accordance with a notice sent to eligible stockholders who share a single
address, we are sending only one annual report to stockholders and one proxy
statement to that address unless we received instructions to the contrary from
any stockholder at that address. This practice, known as “householding,” is
designed to reduce our printing and postage costs. However, if a stockholder of
record wishes to receive a separate annual report to stockholders and proxy
statement in the future, he or she may contact the office of the treasurer at
MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650, Telephone
Number: (701) 530-1000. Eligible stockholders of record who receive
multiple copies of our annual report to stockholders and proxy statement can
request householding by contacting us in the same manner. Stockholders who own
shares through a bank, broker, or other nominee can request householding by
contacting the nominee.
We hereby
undertake to deliver promptly, upon written or oral request, a separate copy of
the annual report to stockholders and proxy statement to a stockholder at a
shared address to which a single copy of the document was
delivered.
2011 ANNUAL MEETING OF
STOCKHOLDERS
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Director Nominations:
Our bylaws provide that director nominations may be made only
by (i) the board at any meeting of stockholders or (ii) at an annual meeting by
a stockholder entitled to vote for the election of directors and who has
complied
with the procedures established by the bylaws. For a nomination to be properly
brought before an annual meeting by a stockholder, the stockholder intending to
make the nomination must have given timely and proper notice of the nomination
in writing to the corporate secretary in accordance with and containing all
information and the completed questionnaire provided for in the bylaws. To be
timely, such notice must be delivered to or mailed to the corporate secretary
and received at our principal executive offices not later than 90 days prior to
the first anniversary of the preceding year’s annual meeting of stockholders.
For purposes of our annual meeting of stockholders expected to be held
April 26, 2011, any stockholder who wishes to submit a nomination must
submit the required notice to the corporate secretary on or before
January 27, 2011.
Other Meeting Business:
Our bylaws also provide that no business may be brought before
an annual meeting except (i) as specified in the meeting notice given by or at
the direction of the board, (ii) as otherwise properly brought before the
meeting by or at the direction of the board or (iii) properly brought before the
meeting by a stockholder entitled to vote who has complied with the procedures
established by the bylaws. For business to be properly brought before an annual
meeting by a stockholder (other than nomination of a person for election as a
director which is described above) the stockholder must have given timely and
proper notice of such business in writing to the corporate secretary, in
accordance with, and containing all information provided for in the bylaws and
such business must be a proper matter for stockholder action under the General
Corporation Law of Delaware. To be timely, such notice must be delivered or
mailed to the corporate secretary and received at our principal offices not
later than the close of business 90 days prior to the first anniversary of the
preceding year’s annual meeting of stockholders. For purposes of our annual
meeting expected to be held April 26, 2011, any stockholder who wishes to
bring business before the meeting (other than nomination of a person for
election as a director which is described above) must submit the required notice
to the corporate secretary on or before January 27, 2011.
Discretionary Voting:
Rule 14a-4 of the Securities and Exchange Commission’s
proxy rules allows us to use discretionary voting authority to vote on matters
coming before an annual stockholders’ meeting if we do not have notice of the
matter at least 45 days before the anniversary date on which we first
mailed our proxy materials for the prior year’s annual stockholders’ meeting or
the date specified by an advance notice provision in our bylaws. Our bylaws
contain an advance notice provision that we have described above. For our annual
meeting of stockholders expected to be held on April 26, 2011, stockholders
must submit such written notice to the corporate secretary on or before January
27, 2011.
Stockholder Proposals:
The requirements we describe above are separate from and in
addition to the Securities and Exchange Commission’s requirements that a
stockholder must meet to have a stockholder proposal included in our proxy
statement under Rule 14a-8 of the Exchange Act. For purposes of our annual
meeting of stockholders expected to be held on April 26, 2011, any
stockholder who wishes to submit a proposal for inclusion in our proxy materials
must submit such proposal to the corporate secretary on or before
November 12, 2010.
Bylaw Copies:
You may obtain a copy of the full text of the bylaw provisions
discussed above by writing to the corporate secretary. Our bylaws are also
available on our website at: http://www.mdu.com/Documents/Governance/
MDU%20ResourcesBylaws.pdf.
We
will make available to our stockholders to whom we furnish this proxy statement
a copy of our Annual Report on Form 10-K, excluding exhibits, for the year
ended December 31, 2009, which is required to be filed with the Securities
and Exchange Commission. You may obtain a copy, without charge, upon written or
oral request to the Office of the Treasurer of MDU Resources Group, Inc.,
1200 West Century Avenue, Mailing Address: P.O. Box 5650, Bismarck, ND
58506-5650, Telephone Number: (701) 530-1000. You may also access our
Annual Report on Form 10-K through our website at www.mdu.com.
By order
of the Board of Directors,
Paul K. Sandness
Secretary
March 12, 2010
MDU
Resources Group, Inc.’s Proposed Amendments
to
Its Restated Certificate of Incorporation
RESOLVED,
that the Board of Directors of MDU Resources Group, Inc. (the “Corporation”)
hereby declares it advisable:
(A) That
the provisions requiring a supermajority vote by stockholders set forth in
Articles TWELFTH and FIFTEENTH of the Restated Certificate of Incorporation of
the Corporation be repealed, and that certain technical amendments to the
provisions of Articles THIRTEENTH and FOURTEENTH of the Restated Certificate of
Incorporation of the Corporation be adopted in connection with the repeal of
such supermajority vote provisions and the declassification of the Board of
Directors of the Corporation effected in 2007, effective at the close of
business on the date on which the appropriate Certificate of Amendment to the
Corporation’s Restated Certificate of Incorporation is filed in the office of
the Secretary of State of the State of Delaware;
(B) That,
in order to effect the foregoing, the Restated Certificate of Incorporation of
the Corporation, as heretofore amended, be further amended by amending Articles
TWELFTH, THIRTEENTH, FOURTEENTH and FIFTEENTH as follows:
TWELFTH. [RESERVED]
Part I. For
the purposes
of this Article TWELFTH, the following terms
shall have the meaning hereinafter set
forth:
(a) “Affiliate” or
“Associate” shall have the respective meanings ascribed to such terms in the
General Rules and Regulations under the Securities Exchange Act of 1934 as in
effect on January 1, 1985.
(b) A person shall be a
“Beneficial Owner” of any Voting Stock:
(i) which such person or any
of its Affiliates or Associates (as herein defined) beneficially owns, directly
or indirectly; or
(ii) which such person or any
of its Affiliates or Associates has (A) the right to acquire (whether such right
is exercisable immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or
understanding; or
(iii) which are beneficially
owned, directly or indirectly, by any other person with which such person or any
of its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
shares of Voting Stock.
(c) “Business Combination”
shall mean any of the following:
(i) any merger
or consolidation of the Corporation or any Subsidiary with (A) any Interested
Stockholder or (B) any other corporation (whether or not itself
an Interested Stockholder) which is, or after such merger or consolidation would
be, an Affiliate of an Interested Stockholder; or
(ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) to or with any Interested
Stockholder or any Affiliate of any Interested Stockholder of any assets of
the Corporation or any Subsidiary having an aggregate Fair Market Value of
$5,000,000 or more but shall not include transactions between the Corporation
and its Subsidiaries; or
(iii) the
issuance or transfer by the Corporation or any subsidiary (in one transaction or
a series of transactions) of any securities of the Corporation or any subsidiary
to any Interested Stockholder or any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property (or a combination thereof)
having an aggregate Fair Market Value of $5,000,000 or more;
or,
(iv) the
adoption of any plan or proposal for the liquidation or dissolution of the
Corporation proposed by or on behalf of an Interested Stockholder or any
Affiliate of any Interested Stockholder; or
(v) any
reclassification of securities (including any reverse stock split), or
recapitalization of the Corporation, statutory share exchange, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary which is directly or
indirectly owned by any Interested Stockholder or any Affiliate of any
Interested Stockholder.
(d) “Continuing Director”
shall mean any member of the Board of Directors of the Corporation (the “Board”)
who is
unaffiliated with, and not a nominee of, the Interested
Stockholder (as such term is used in the context of a Business
Combination)
and was a member of the Board prior to the time that
the
Interested Stockholder became an Interested Stockholder and any successor of a
Continuing Director who is unaffiliated with, and not a nominee of, the Interested Stockholder
and is designated to succeed a Continuing Director by two-thirds of Continuing Directors then
on the Board.
(e) “Fair Market Value”
means:
(i) in the
case of stock, the highest closing sale price during the thirty-day period
immediately preceding the date in question of a share of such stock on the
Composite Tape for the New York Stock Exchange-Listed Stocks, or, if such stock
is not quoted on the Composite Tape for the New York Stock Exchange, or, if such
stock is not listed on such Exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934 on which such
stock is listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such stock during the
thirty-day period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System (“NASDAQ”) or,
if NASDAQ is not then in use, any other system then in use, or, if no such
quotations are available, the fair market value on the date in question of a
share of such stock as determined by two-thirds of the Continuing Directors in
good faith; and
(ii) in the
case of property other than cash or stock, the fair market value of such
property on the date in question as determined by a majority of the Continuing
Directors in good faith.
(f) “Institutional Voting
Stock” shall mean any class of Voting Stock which was issued to and continues to
be held solely by one or more insurance companies, pension funds, commercial
banks, savings banks and/or similar financial institutions or institutional
investors.
(g) “Interested Stockholder”
shall mean any person (other than the Corporation or any Subsidiary) who or
which:
(i) is the Beneficial Owner, directly or
indirectly, of more than 10 percent of the voting power of the then outstanding
Voting Stock; or
(ii) is an Affiliate of the
Corporation and at any time within the two-year period immediately prior to the
date in question, became the Beneficial Owner, directly or indirectly,
of 10 percent or more of
the voting power of the then outstanding Voting Stock; or
(iii) is an assignee of or has
otherwise succeeded to any shares of Voting Stock which were at any time within
the two-year period immediately prior to the
date in question beneficially owned by any Interested Stockholder, if such
assignment or succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the meaning of the
Securities Act of 1933.
For the purpose of
determining whether a person is an Interested Stockholder pursuant to this
paragraph
(g), the
number of shares of Voting Stock deemed to be outstanding shall include shares
deemed owned through application of paragraph (b) of this
Part I but
shall not include any other shares of Voting Stock which may be issuable
pursuant to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(h) In the event of any
Business Combination in which the Corporation survives the phrase “consideration
other than cash to be received” as used in Sections (a) and (b) of Part II of
this Article TWELFTH shall include the shares of Common Stock and/or the shares
of any other class of outstanding Voting Stock retained by the holders of such
shares.
(i) A “person” shall mean any
individual, firm, partnership, trust, corporation or
other entity.
(j) “Subsidiary” means any
corporation of which a majority of any class of equity security is owned,
directly or indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Interested Stockholder set forth in paragraph (g) of this
Part I, the
term “Subsidiary” shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(k) “Voting Stock” shall mean
each share of stock of the Corporation generally entitled to vote in elections
of directors.
The Continuing Directors
of the Corporation shall have the power and duty to determine, for the purposes of this
Article TWELFTH, on the basis of
information known to them after reasonable inquiry, all facts
necessary to determine the applicability of the various provisions of this
Article TWELFTH, including
(a) whether
a person is an Interested Stockholder, (b) the number of shares of
Voting Stock beneficially owned by any person, (c) whether a person is an
Affiliate or Associate of another, and (d) whether a class
of Voting Stock is Institutional Voting Stock. Any such
determination made in good faith shall be binding and conclusive on all
parties.
PART
II.
Except as otherwise
expressly provided in Part III of this Article TWELFTH and in addition to any
other provision of law and as may otherwise be set forth in the Certificate of
Incorporation, the consummation of any Business Combination shall require that
all of the following conditions shall have been met:
(a) The aggregate amount of
the cash and the Fair Market Value as of the date of the consummation of the
Business Combination of consideration other than cash to be received per share
by holders of Common Stock in such Business Combination shall be at least equal
to the highest of the following:
(i) (if applicable) the
highest per share price (including any brokerage commissions, transfer taxes and
soliciting dealers’ fees) paid by the Interested Stockholder for any shares of
Common Stock acquired by it (A) within the two-year period immediately prior to
the first public announcement of the proposal of the Business Combination (the
“Announcement Date”) or (B) in the transaction in which it became an Interested
Stockholder, whichever is highest;
(ii) the Fair Market
Value per share of Common Stock on the Announcement Date or on the date on which
the Interested Stockholder became an Interested Stockholder (such latter
date is referred to in this Article TWELFTH as the “Determination Date”),
whichever is higher; and
(iii) (if applicable) the
price per share equal to the Fair Market Value per share of Common Stock
determined pursuant to paragraph (ii) above, multiplied by the ratio of (A) the
highest per share price (including any brokerage commissions, transfer
taxes and soliciting dealers’ fees) paid by the Interested Stockholder for any
shares of Common Stock acquired by it within the two-year period immediately
prior to the Announcement Date to (B) the Fair Market Value per share of Common
Stock on the first day in such two-year period upon which the Interested
Stockholder acquired any shares of Common Stock.
(b) The aggregate amount of
the cash and the Fair Market Value as of the date of the consummation of the
Business Combination of consideration other than cash to be received per share
by holders of shares of any class of outstanding Voting Stock other than Common
Stock (and other than Institutional Voting Stock), shall be at least equal to
the highest of the following (it being intended that the requirements of
this paragraph (b) shall be required to be met with respect to every class of
outstanding Voting Stock, whether or not the Interested Stockholder has
previously acquired any shares of a particular class of Voting
Stock):
(i) (if applicable) the
highest per share price (including any brokerage commissions, transfer taxes and
soliciting dealers’ fees) paid by the Interested Stockholder for any shares of
such class of Voting Stock acquired by it (A) within the two-year period
immediately prior to the Announcement Date or (B) in the transaction in
which it became an Interested Stockholder, whichever is
higher;
(ii) (if applicable) the
highest preferential amount per share to which the holders of shares of such
class of Voting Stock are entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(iii) the Fair Market
Value per share of such class of Voting Stock on the Announcement Date or on the
Determination Date, whichever is higher; and
(iv) (if applicable) the
price per share equal to the Fair Market Value per share of such class of Voting
Stock determined pursuant to paragraph (b)(iii) above, multiplied by the ratio
of (A) the highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers’ fees) paid by the Interested
Stockholder for any shares of such class of Voting Stock acquired by it within
the two-year period immediately prior to the Announcement Date to (B) the Fair
Market Value per share of such class of Voting Stock on the first day in such
two-year period upon which the Interested Stockholder acquired any shares of
such class of Voting Stock.
(c) The
consideration to be received by holders of a particular class of outstanding
Voting Stock (including Common Stock) shall be in cash or in the same form as
the Interested Stockholder has previously paid for shares of such class of
Voting Stock. If the Interested Stockholder has paid for shares of
any class of Voting Stock with varying forms of consideration, the form of
consideration for such class of Voting Stock shall be either cash or the form
used to acquire the largest number of shares of such class of Voting Stock
previously acquired by it.
(d) After such
Interested Stockholder has become an Interested Stockholder and prior to the
consummation of such Business Combination:
(i) except as approved by
two-thirds of the Continuing Directors, there shall have been no failure to
declare and pay at the regular date therefor any full quarterly dividends
(whether or not cumulative) on the outstanding Preferred
Stock;
(ii) there shall have
been (A) no reduction in the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any subdivision of the Common Stock), except as
approved by two-thirds of the Continuing Directors, and (B) an increase in such
annual rate of dividends as necessary to reflect any reclassification
(including any reverse stock split), recapitalization, reorganization or
any similar transaction which has the effect of reducing the number of
outstanding shares of the Common Stock, unless the failure so to increase such
annual rate is approved by two-thirds of the Continuing Directors;
and
(iii) such Interested
Stockholder shall have not become the beneficial owner of any additional shares
of Voting Stock except as part of the transaction which results in such
Interested Stockholder becoming an Interested Stockholder.
(e) After such
Interested Stockholder has become an Interested Stockholder, such Interested
Stockholder shall not have received the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances, guarantees, pledges
or other financial assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation of or in connection with
such Business Combination or otherwise.
(f) A proxy or
information statement describing the proposed Business Combination and
containing the information specified for proxy or information statements under
the Securities Exchange Act of 1934 and the rules and regulations thereunder (or
any subsequent provisions replacing such Act, rules or regulations) shall be
mailed to stockholders of the Corporation at least thirty days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions).
PART
III.
Unless the Business
Combination shall have been approved by two-thirds of the Continuing Directors,
(a) the provisions of Part II of this Article TWELFTH shall be applicable to
each particular Business Combination, and (b) any such Business Combination
shall be approved by the affirmative vote of at least four-fifths of the voting
power of all shares of Voting Stock (considered for purposes of this
Article TWELFTH as one class, it being understood that for purposes of this
Article TWELFTH, each share of Voting Stock shall have the number of votes
granted to it pursuant to Article FOURTH of the Certificate of
Incorporation).
PART
IV.
Nothing contained in this
Article TWELFTH shall be construed to relieve any Interested Stockholder from
any fiduciary obligation imposed by law.
THIRTEENTH. (a) The
business and affairs of the Corporation shall be managed by the Board of
Directors consisting of not less than six nor more than fifteen
persons. The exact number of directors within the limitations
specified in the preceding sentence shall be fixed from time to time by the
Board of Directors pursuant to a resolution adopted by two-thirds of the
Continuing Directors. The directors need not be elected by ballot
unless required by the By-Laws of the Corporation.
At each
annual meeting of stockholders, the directors shall be elected for terms
expiring at the next annual meeting of stockholders; provided, however, that
each director elected at the annual meetings of stockholders held in 2005, 2006
and 2007 shall serve for the full three-year term to which such director was
elected. Each director shall hold office for the term for
which he is elected or appointed and until his successor shall be elected and
qualified or until his earlier
resignation, removal from office or death, or until he shall
resign or be removed.
In the
event of any increase or decrease in the authorized number of directors, each
director then serving as such shall nevertheless continue as director until the
expiration of his current term, or until
his earlier resignation, removal from office or death.
(b) Newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
shall be filled by a two-thirds vote of the Continuing Directors then in office,
or a sole remaining director, although less than a quorum, and directors so
chosen shall hold office for a term expiring at the next annual meeting of
stockholders. If one or more directors shall resign from the Board
effective as of a future date, such vacancy or vacancies shall be filled
pursuant to the provisions hereof, and such new directorship(s) shall become
effective when such resignation or resignations shall become effective, and each
director so chosen shall hold office for a term expiring at the next annual
meeting of stockholders.
(c) [RESERVED]
Any director or the
entire Board of Directors may be removed; however, such removal must be for
cause and must be approved as set forth in this Section. Except as
may otherwise be provided by law, cause for removal shall be construed to exist
only if: (i) the director whose removal is proposed has been
convicted, or where a director was granted immunity to testify where another has
been convicted, of a felony by a court of competent jurisdiction and such
conviction is no longer subject to direct appeal; (ii) such director has been
grossly negligent in the performance of his duties to the Corporation; or (iii)
such director has been adjudicated by a court of competent jurisdiction to be
mentally incompetent, which mental incompetency directly affects his ability as
a director of the Corporation, and such adjudication is no longer subject to
direct appeal.
Removal for cause, as
cause is defined above, must be approved by at least a majority vote of the
shares of the Corporation then entitled to be voted at an election for that
director, and the action for removal must be brought within three months of such
conviction or adjudication.
Notwithstanding the
foregoing, and except as otherwise provided by law, in the event that Preferred
Stock of the Corporation is issued and holders of any one or more series of such
Preferred Stock are entitled, voting separately as a class, to elect one or more
directors of the Corporation to serve for such terms as set forth in the
Certificate of Incorporation, the provisions of this Article THIRTEENTH, Section
(c), shall also apply, in respect to the removal of a director or directors so
elected to the vote of the holders of the outstanding shares of that class and
not to the vote of the outstanding shares as a whole.
(d) Any
directors elected pursuant to special voting rights of one or more series of
Preferred Stock, voting as a class, shall be excluded from, and for no purpose
be counted in, the scope and operation of the foregoing provisions, unless
expressly stated.
(e) For
purposes of this Article THIRTEENTH,
the following terms shall have the meanings
hereinafter set forth:
(i) “Affiliate”
or “Associate” shall have the respective meanings ascribed to such terms in the
General Rules and Regulations under the Securities Exchange Act of 1934 as in
effect on January 1, 1985.
(ii) A
person shall be a “Beneficial Owner” of any Voting Stock:
(A)
which
such person or any of its Affiliates or Associates beneficially owns, directly
or indirectly; or
(B) which
such person or any of its Affiliates or Associates has (1)
the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise,
or (2)
the right to vote pursuant to any agreement,
arrangement or understanding; or
(C) which
are beneficially owned, directly or indirectly, by any other person with which
such person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Voting Stock.
(iii) “Continuing
Director” shall mean any member of the Board of Directors of the Corporation
who
is unaffiliated with, and not a nominee of, any
Interested Stockholder
and was a member of the Board of
Directors prior to the time that any
Interested Stockholder became an Interested Stockholder and any successor of a
Continuing Director who is unaffiliated with, and not a nominee of, any
Interested Stockholder and is designated to succeed a Continuing Director by
two-thirds of the
Continuing
Directors then on the Board
of Directors.
(iv) “Interested
Stockholder” shall mean any person (other than the Corporation or any
Subsidiary) who or which:
(A)
is
the Beneficial Owner, directly or indirectly, of more than 10 percent of the
voting power of the then outstanding Voting Stock; or
(B) is
an Affiliate of the Corporation and at any time within the two-year period
immediately prior to the date in question, became the Beneficial Owner, directly
or indirectly, of more than 10 percent of the voting power of the then
outstanding Voting Stock; or
(C) is
an assignee of or has otherwise succeeded to any shares of Voting Stock which
were at any time within the two-year period immediately prior to the date in
question beneficially owned by any Interested Stockholder, if such assignment or
succession shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of the
Securities Act of 1933.
For
the purpose of determining whether a person is an Interested Stockholder
pursuant to this Article
THIRTEENTH, Section (e)(iv),
the number of shares of Voting Stock deemed to be outstanding shall include
shares deemed owned through application of Section
(e)(ii) of this Article THIRTEENTH
but shall not include any other shares of Voting Stock which may be issuable
pursuant to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(v) A
“person” shall mean any individual, firm, partnership,
trust, corporation or other entity.
(vi) “Subsidiary”
means any corporation of which a majority of any class of equity security is
owned, directly or indirectly, by the Corporation; provided, however, that for
the purposes of the definition of Interested Stockholder set forth in
Section
(e)(iv) of this Article THIRTEENTH,
the term “Subsidiary” shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(vii) “Voting
Stock” shall mean each share of stock of the Corporation generally entitled to
vote in elections of directors.
The
Continuing Directors of the Corporation shall have the power and duty to
determine, on
the basis of information known to them after reasonable
inquiry, all facts necessary to determine the applicability of the various
provisions of this Article THIRTEENTH,
including (A)
whether a person is an Interested Stockholder, (B)
the number of shares of Voting Stock beneficially owned by any person,
and
(C)
whether a person is an Affiliate or Associate of another. Any
such determination made in good faith shall be binding and conclusive on all
parties.
(f) Capitalized
terms used and not defined in Article FOURTEENTH or in Article SIXTEENTH of the
Certificate of Incorporation which are defined in Section (e) of this Article
THIRTEENTH shall have the meanings, for purposes of Article FOURTEENTH and
Article SIXTEENTH of the Certificate of Incorporation, ascribed to such terms in
Section (e) of this Article THIRTEENTH.
FOURTEENTH. The
Board of Directors, in evaluating any proposal by another party to (a) make a
tender or exchange offer for any securities of the Corporation, (b) effect a
Business
Combination (as defined in Article TWELFTH),merger,
consolidation or other business combination
of the Corporation or
(c) effect any other transaction having an effect upon the properties,
operations or control of the Corporation similar to a tender or exchange offer
or Business Combination
for
any securities of the Corporation or a merger, consolidation or other
business
combination
of the Corporation, as the case may be, whether by an Interested
Stockholder (as
defined in Article TWELFTH) or otherwise, may, in connection with the
exercise of its judgment as to what is in the best interests of the Corporation
and its stockholders, give due consideration to the following:
(i) the
consideration to be received by the Corporation or its stockholders in
connection with such transaction in relation not only to the then current market
price for the outstanding capital stock of the Corporation, but also to the
market price for the capital stock of the Corporation over a period of years,
the estimated price that might be achieved in a negotiated sale of the
Corporation as a whole or in part through orderly liquidation, the premiums over
market price for the securities of other corporations in similar transactions,
current political, economic and other factors bearing on securities prices and
the Corporation’s financial condition, future prospects and future value as an
independent Corporation;
(ii) the
character, integrity and business philosophy of the other party or parties to
the transaction and the management of such party or parties;
(iii) the
business and financial conditions and earnings prospects of the other party or
parties to the transaction, including, but not limited to, debt service and
other existing or likely financial obligations of such party or parties, the
intention of the other party or parties to the transaction regarding the use of
the assets of the Corporation to finance the acquisition, and the possible
effect of such conditions upon the Corporation and its Subsidiaries and the
other elements of the communities in which the Corporation and its Subsidiaries
operate or are located;
(iv) the
projected social, legal and economic effects of the proposed action or
transaction upon the Corporation or its Subsidiaries, its employees, suppliers,
customers and others having similar relationships with the Corporation, and the
communities in which the Corporation and its Subsidiaries do
business;
(v) the
general desirability of the continuance of the Corporation as an independent
entity; and
(vi) such
other factors as the Continuing Directors may deem relevant.
FIFTEENTH. [RESERVED] Notwithstanding anything
to the contrary contained in this Certificate of Incorporation or the By-Laws of
the Corporation (and notwithstanding the fact that a lesser percentage may be
specified by law, this Certificate of Incorporation or the By-Laws of the
Corporation), the affirmative vote of the holders of at least four-fifths of the
voting power of the then outstanding Voting Stock shall be required to amend,
alter, change or repeal, or to adopt any provision inconsistent with, Articles
TWELFTH, THIRTEENTH, FOURTEENTH, FIFTEENTH and SIXTEENTH of this Certificate of
Incorporation, provided that such four-fifths vote shall not be required
for any amendment, alteration, change or repeal recommended to the stockholders
by two-thirds of the Continuing Directors, as defined in Article
TWELFTH.
FURTHER
RESOLVED, that the Board of Directors hereby directs that this resolution and
above proposed amendments be attached as an exhibit to the proxy statement for
the Corporation’s 2010 Annual Meeting of Stockholders for consideration by the
stockholders entitled to vote in respect thereof;
FURTHER
RESOLVED, that upon approval of the proposed amendments to the Restated
Certificate of Incorporation by the stockholders, the proper officers of the
Corporation be, and each of them hereby is, authorized and directed to file a
Certificate of Amendment to the Corporation’s Restated Certificate of
Incorporation
with the
Secretary of State of the State of Delaware, to amend the Corporation’s
Registration Statement on Form 8-A relating to the common stock of the
Corporation, and to file any and all other documents and to take any and all
such further action as they deem necessary or appropriate to reflect such
amendments.
MDU
RESOURCES GROUP, INC.
ANNUAL
MEETING OF STOCKHOLDERS
Tuesday,
April 27, 2010
11:00
a.m. Central Daylight Saving Time
909
Airport Road
Bismarck,
ND
|
|
|
1200
West Century Avenue
Mailing
Address:
P.O.
Box 5650
Bismarck,
ND 58506-5650
(701)
530-1000
|
proxy
|
This
proxy is solicited on behalf of the Board of Directors for the
Annual
Meeting of Stockholders on April 27, 2010.
This
proxy will also be used to provide voting instructions to New York Life Trust
Company, as Trustee of the MDU Resources Group, Inc. 401(k) Retirement Plan, for
any shares of Company common stock held in the plan.
The
undersigned hereby appoints Harry J. Pearce and Paul K. Sandness and each of
them, proxies, with full power of substitution, to vote all Common Stock of the
undersigned at the Annual Meeting of Stockholders to be held at 11:00 a.m.,
Central Daylight Saving Time, April 27, 2010, at 909 Airport Road, Bismarck, ND,
and at any adjournment(s) thereof, upon all subjects that may properly come
before the meeting, including the matters described in the Proxy Statement
furnished herewith, subject to any directions indicated on the reverse side.
Your vote is important! Ensure
that your shares are represented at the meeting. Either (1) submit your
proxy by touch-tone telephone, (2) submit your proxy by Internet or (3) mark,
date, sign and return this proxy card in the envelope provided (no postage is
necessary if mailed in the United States). If no directions are given, the
proxies will vote in accordance with the Directors’ recommendation on all
matters listed on this proxy, and at their discretion on any other matters that
may properly come before the meeting.
See
reverse for voting instructions.
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Address Change? Mark
Box to the right and indicate changes below o
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COMPANY
#
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ADDRESS
BLOCK
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Vote
by Internet, Telephone or Mail
24
Hours a Day, 7 Days a Week
Your
phone or Internet vote authorizes the named proxies to vote your shares in
the same manner as if you marked, signed and returned your proxy
card.
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INTERNET –
www.eproxy.com/mdu
Use
the Internet to vote your proxy until 12:00 p.m. (CDT) on Monday, April
26, 2010.
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PHONE –
1-800-560-1965
Use
a touch-tone telephone to vote your proxy until 12:00 p.m. (CDT) on
Monday, April 26, 2010.
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MAIL – Mark, sign and
date your proxy card and return it in the postage-paid envelope provided,
or return it to MDU Resources Group, Inc., c/o Shareowner Services, P.O.
Box 64873, St. Paul, MN 55164-0873.
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If
you vote by Phone or Internet, please do not mail your Proxy Card.
Please
fold here – Do not separate
The
Board of Directors Recommends a Vote “FOR” all nominees and “FOR” Items 2, 3, 4,
and 5.
1.
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Election
of directors:
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FOR
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AGAINST
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ABSTAIN
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FOR
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AGAINST
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ABSTAIN
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01.
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Thomas
Everist
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o
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o
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o
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06.
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Thomas
C. Knudson
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o
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o
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o
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02.
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Karen
B. Fagg
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o
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o
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o
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07.
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Richard
H. Lewis
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o
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o
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o
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03.
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Terry
D. Hildestad
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o
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o
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o
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08.
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Patricia
L. Moss
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o
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o
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o
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04.
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A.
Bart Holaday
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o
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o
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o
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09.
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Harry
J. Pearce
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o
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o
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o
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05.
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Dennis
W. Johnson
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o
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o
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o
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10.
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John
K. Wilson
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o
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o
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o
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2.
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Repeal
of article TWELFTH of our restated certificate of incorporation, relating
to business combinations with interested stockholders, and related
amendments.
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3. |
Repeal
of article FIFTEENTH of our restated certificate of incorporation, which
contains supermajority vote requirements.
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4. |
Repeal
of section (c) of article THIRTEENTH of our restated certificate of
incorporation, which provides that directors may be removed only for
cause.
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5. |
Ratification
of Deloitte & Touche LLP as our independent auditors for
2010.
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The
Board of Directors Recommends a Vote “AGAINST” Item 6.
6.Stockholder proposal requesting a
report on coal combustion waste.
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THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS
GIVEN, WILL BE VOTED FOR ALL NOMINEES,
FOR ITEMS 2, 3,
4, AND 5, AND AGAINST ITEM
6.
Date
____________________________________________________________________ |
Signature(s) in
Box
Please
sign exactly as your name(s) appears on Proxy. If held in joint tenancy,
all persons should sign. Trustees, administrators, etc., should
include title and authority. Corporations should provide full name of
corporation and title of authorized officer signing the
Proxy.
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