SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
MDU RESOURCES GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Your VOTE is important
[MDU RESOURCES LOGO]
MDU Resources Group, Inc. Proxy Statement
2002 Notice of Annual Meeting
and Proxy Statement
[MDU RESOURCES LOGO]
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SCHUCHART BUILDING MARTIN A. WHITE
918 EAST DIVIDE AVENUE CHAIRMAN, PRESIDENT &
CHIEF EXECUTIVE OFFICER
MAILING ADDRESS:
P.O. BOX 5650
BISMARCK, ND 58506-5650
(701) 222-7900
March 8, 2002
To Our Stockholders:
Please join us for the 2002 Annual Meeting of Stockholders. The meeting will
be held on Tuesday, April 23, 2002, at 11:00 a.m., Central Daylight Savings
Time, at 909 Airport Road, Bismarck, North Dakota 58504.
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 2001 Annual Meeting at
which 81.6 percent of the Common Stock was represented in person or by proxy. We
hope for an even greater representation at the 2002 meeting.
You may vote your shares by telephone, by the Internet or by returning the
enclosed letter proxy. Representation of your shares at the meeting is very
important. We urge you to submit your proxy promptly by one of the three
methods.
I hope you will find it possible to attend the meeting.
Sincerely,
/s/ Martin A. White
Martin A. White
MDU RESOURCES GROUP, INC.
SCHUCHART BUILDING
918 EAST DIVIDE AVENUE
MAILING ADDRESS:
P.O. BOX 5650
BISMARCK, ND 58506-5650
(701) 222-7900
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 2002
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March 8, 2002
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of MDU
Resources Group, Inc. will be held at 909 Airport Road, Bismarck, North Dakota
58504, on Tuesday, April 23, 2002, at 11:00 a.m., Central Daylight Savings Time,
for the following purposes:
(1) To elect four Directors to three year terms;
(2) To increase authorized shares of Common Stock from 150,000,000 to
250,000,000 with a par value of $1.00; and
(3) To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on February 25, 2002,
as the record date for the determination of common stockholders who will be
entitled to notice of, and to vote at, the meeting.
All stockholders who find it convenient to do so are cordially invited and
urged to attend the meeting in person.
By order of the Board of Directors,
/s/ Lester H. Loble, II
LESTER H. LOBLE, II
SECRETARY
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TABLE OF CONTENTS
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PAGE
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Notice of Annual Meeting of Stockholders
Proxy Statement............................................. 1
Voting Information........................................ 1
Election of Directors..................................... 2
Director Nominees for Three Year Terms.................. 2
Continuing Incumbent Directors............................ 4
Director Terms Expiring in 2003......................... 4
Director Terms Expiring in 2004......................... 5
Proposal for Increase in Authorized Common Stock Shares... 7
Executive Compensation.................................... 8
Table 1: Summary Compensation Table..................... 8
Table 2: Option/SAR Grants in Last Fiscal Year.......... 9
Table 3: Aggregated Option/SAR Exercises in Last Fiscal
Year and Fiscal Year-End Option/ SAR Values.... 10
Table 4: Long-Term Incentive Plan--Awards in Last Fiscal
Year................................................... 10
Table 5: Pension Plan Table............................. 11
Change of Control Arrangements............................ 12
Compensation Committee Report on Executive Compensation... 13
MDU Resources Group Inc. Comparison of Five Year Total
Stockholder Return...................................... 15
Information Concerning Executive Officers................. 16
Security Ownership........................................ 18
Board and Committee Meetings.............................. 19
Directors' Compensation................................... 19
Section 16(a) Beneficial Ownership Reporting Compliance... 20
Accounting and Auditing Matters........................... 20
Audit Committee Report.................................... 20
Other Business............................................ 21
2003 Annual Meeting of Stockholders....................... 22
Exhibit A................................................. A-1
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PROXY STATEMENT
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This Proxy Statement is being furnished beginning March 8, 2002, by the
Board of Directors of MDU Resources Group, Inc. (Company) to solicit proxies for
use at the Annual Meeting of Stockholders. The meeting will be held on
April 23, 2002.
Your proxy is solicited by the Board of Directors. The Company pays the cost
of soliciting your proxy and reimburses brokers and others for forwarding proxy
material to you. Georgeson & Company, Inc. additionally will solicit proxies for
approximately $6,500 plus out-of-pocket expenses.
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VOTING INFORMATION
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WHO MAY VOTE? You may vote if you owned shares of Common Stock at the close
of business on February 25, 2002. Each share owned on that date may be voted on
each matter presented at the meeting. As of February 25, 2002, the Company had
69,874,062 shares outstanding entitled to one vote per share.
WHAT AM I VOTING ON? You are voting on:
- The election of 4 Directors for 3 year terms each;
- Increasing authorized Common Stock from 150,000,000 shares to 250,000,000
shares; and
- any other business properly brought before the meeting.
WHAT VOTE IS REQUIRED TO PASS AN ITEM OF BUSINESS? A majority of the
outstanding shares of Common Stock entitled to vote must be present in person or
represented by proxy to hold the meeting.
A plurality of votes of the Common Stock shares entitled to vote and present
in person or represented by proxy is required to elect a Director. "Withheld"
votes are not counted in determining whether a plurality of votes was received
by a Director nominee.
A majority of outstanding shares of Common Stock entitled to vote is
required to increase the authorized shares from 150,000,000 to 250,000,000.
Shares not voted for the increase, including abstentions and broker non-votes,
will be considered a vote against the increase.
HOW DO I VOTE? There are three ways to vote by proxy:
- by calling the toll free telephone number on the proxy;
- by using the Internet; or
- by returning the enclosed letter proxy in the envelope provided.
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.
You may have electronic access charges you must pay for Internet voting.
Counsel has advised the Company that the Internet and telephone voting
procedures meet legal requirements.
1
CAN I REVOKE MY PROXY? Yes. You can revoke your proxy by:
- filing written revocation with the Secretary before the meeting;
- filing a proxy bearing a later date with the Secretary; or
- revoking a proxy at the meeting and voting in person.
WHO OWNS MORE THAN 5 PERCENT OF THE COMMON STOCK? As of February 25, 2002,
no person held of record or beneficially owned 5 percent or more of the
outstanding Company Common Stock other than New York Life Trust Company,
Norwood, MA, which held approximately 7.8 percent of the Common Stock as trustee
of the Company's 401(k) Retirement Plan. New York Life Trust Company disclaims
all beneficial ownership of these shares.
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ELECTION OF DIRECTORS
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Four Directors will be elected at the meeting for a term of three years each
until 2005, and until their respective successors are elected. All nominees are
incumbent Directors and nominated for reelection. Your proxy holder will vote
your shares for the Board's nominees unless you instruct otherwise. If a nominee
is unable to serve as a Director, your proxy holder may vote for any substitute
nominee proposed by the Board. Unless specifically noted, no corporation or
organization named below is a parent, subsidiary, or other affiliate of the
Company. Information concerning the nominees, including their ages, years of
service as Directors, and business experience as furnished the Company by each
nominee, is as follows:
DIRECTOR NOMINEES FOR THREE YEAR TERM
[PHOTO] BRUCE R. ALBERTSON Director Since 2001
Age 56 Nominated for term expiring in
2005
Mr. Albertson was named President and Chief Executive Officer of
WinsLoew Furniture, Inc., Birmingham, Alabama, a manufacturer and
distributor of casual and commercial furniture, in January 2002.
He was President and Chief Executive Officer of Iomega
Corporation, a data management solutions company, Roy, Utah, from
January 2000 to May 2001. He joined Iomega Corporation as
President and Chief Operating Officer and a Director in 1999. He
formerly served as Vice President, Marketing and Product
Management, worldwide for the General Electric Company (GE) from
1996 to 1999, and as President/Regional Executive, GE Appliances
in Hong Kong from 1992 to 1996. He began his career with GE in
1973. He currently serves on the Audit and Nominating Committees.
2
[PHOTO] THOMAS EVERIST Director Since 1995
Age 52 Nominated for term expiring in
2005
Mr. Everist is President and a Director of L.G. Everist, Inc.,
Sioux Falls, South Dakota, an aggregate production company; Vice
President and a Director of Spencer Quarries, Spencer, South
Dakota, a rock quarry; a Director of Standard Ready Mix, Sioux
City, Iowa; and a Director of Raven Industries, Inc., Sioux Falls,
South Dakota, a general manufacturer of electronics, sewn
products, and plastics. He currently serves on the Compensation
and Finance Committees.
[PHOTO] DOUGLAS C. KANE Director Since 1991
Age 52 Nominated for term expiring in
2005
Mr. Kane was elected Executive Vice President, Chief
Administrative and Corporate Development Officer of the Company in
1997 and President and Chief Executive Officer of MDU Resources
International, Inc. and Centennial Power, Inc. in 2001. He joined
the Company as Executive Vice President and Chief Operating
Officer in 1991. Prior to that, he was President and Chief
Executive Officer of Knife River Corporation from 1990 to 1991,
and President from 1987 to 1990. During 2001, Mr. Kane served as a
Director and/or officer of principal subsidiaries of the Company
and as a member of the Managing Committees of Montana-Dakota
Utilities Co. and Great Plains Natural Gas Co. He is Vice Chairman
of the N.D. Lignite Research Council and serves on its Executive
Committee. He previously served as Chairman of the Board of
Trustees of the Western Regional Council.
[PHOTO] ROBERT L. NANCE Director Since 1993
Age 65 Nominated for term expiring in
2005
Mr. Nance is President and Chief Executive Officer of Nance
Petroleum Corporation, Billings, Montana, an oil and gas
exploration and production company. He also is a Director of First
Interstate Bank-Montana, and a Director of St. Mary Land and
Exploration Co. of Denver, Colorado. He serves on the National
Board of Governors of the Independent Petroleum Association of
America and serves on the Board and is past Chairman of the
Petroleum Technology Transfer Council. He currently serves on the
Finance and Nominating Committees.
3
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CONTINUING INCUMBENT DIRECTORS
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Information concerning the continuing incumbent Directors, whose terms
expire in 2003 or 2004, including their ages, years of service as Directors, and
business experience as furnished the Company by each Director, is as follows:
DIRECTOR TERMS EXPIRING IN 2003
[PHOTO] HARRY J. PEARCE Director Since 1997
Age 59 Term Expires in 2003
Mr. Pearce is Chairman of Hughes Electronics Corporation. He
formerly was Vice Chairman and a Director of General Motors
Corporation. He is a Director of Marriott International, Inc., the
National Defense University Foundation, Inc., and the Theodore
Roosevelt Medora Foundation, and is Chairman of the United States
Air Force Academy's Board of Visitors, the GM Cancer Research
Foundation, and The Marrow Foundation. He is President of the
Leukemia & Lymphoma Society Research Foundation and a Fellow of
the American College of Trial Lawyers. He also serves on the Board
of Trustees of Howard University and Northwestern University. He
currently serves as Lead Director and on the Audit and
Compensation Committees.
[PHOTO] HOMER A. SCOTT, JR. Director Since 1981
Age 67 Term Expires in 2003
Mr. Scott is engaged in the banking and hospitality business in
the states of Wyoming and Montana. He is Chairman of First
Interstate BancSystem, Inc.; and a Director of First Interstate
Bank-Montana. He is the principal owner, a Director and President
of Sugarland Enterprises, Inc., and the managing partner of
Sugarland Development Company, a commercial property development
company in Sheridan, Wyoming. Sugarland Enterprises, Inc. owns
and manages four Perkins Restaurants, a Holiday Inn, and Powder
Horn Ranch, a housing development and golf course near Sheridan.
He currently serves on the Audit and Compensation Committees.
[PHOTO] SISTER THOMAS WELDER, O.S.B. Director Since 1988
Age 61 Term Expires in 2003
Sister Welder is the President of the University of Mary,
Bismarck, North Dakota. She is a Director of St. Alexius Medical
Center of Bismarck and Chair of its Marketing Committee. She is a
Director of the Bismarck-Mandan Development Association and is a
member and past Director of the Bismarck-Mandan Area Chamber of
Commerce. She also is a member of the Theodore Roosevelt Medora
Founder's Society and the Consultant-Evaluator Corps for the North
Central Association of Colleges and Schools. She currently serves
on the Finance and Nominating Committees.
4
DIRECTOR TERMS EXPIRING IN 2004
[PHOTO] DENNIS W. JOHNSON Director Since 2001
Age 52 Term Expires in 2004
Mr. Johnson is 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 also is chairperson of
the Theodore Roosevelt Medora Foundation, a member of the
Dickinson State University Foundation Board, and a member of the
business advisory councils for Steffes Corporation and
Consolidated Telephone Cooperative. He is President of the
Dickinson City Commission and previously was a Director of the
Federal Reserve Bank of Minneapolis. He currently serves on the
Audit and Finance Committees.
[PHOTO] JOHN L. OLSON Director Since 1985
Age 62 Term Expires in 2004
Mr. Olson is President and owner of Blue Rock Products Company and
of Blue Rock Distributing Company, a beverage bottling and
distributing company, respectively, Sidney, Montana. He also is
Chairman of Admiral Beverage Corporation, Worland, Wyoming, and
Ogden, Utah; former Chairman and Director of the Foundation for
Community Care, Sidney, Montana; Treasurer and a member of the
Executive Committee of the University of Montana Foundation; a
Director of BlueCross BlueShield of Montana; and trustee for Blue
Rock Products Company Profit Sharing Trust, Sidney, Montana. He
currently serves on the Audit and Nominating Committees.
[PHOTO] JOSEPH T. SIMMONS Director Since 1984
Age 66 Term Expires in 2004
Mr. Simmons retired in May 1997 as a Professor of Accounting and
Finance, University of South Dakota, Vermillion, and was Visiting
Professor of Finance, University of Warsaw, Warsaw, Poland
(February--July 1994). Mr. Simmons is Chairman and President of
Simmons Financial Management, Inc. He also is a Director of
RE/SPEC in Rapid City, South Dakota, and a Director and Vice
President-Finance for Dairilean, Inc. in Sioux Falls, South
Dakota. He currently serves on the Finance and Nominating
Committees.
5
[PHOTO] MARTIN A. WHITE Director Since 1998
Age 60 Term Expires in 2004
Mr. White was elected Chairman of the Board of the Company in
February 2001. He joined the Company in November 1991 as Vice
President-Corporate Development and was named Senior Vice
President-Corporate Development in November 1995. Effective
April 1, 1998, Mr. White became President and Chief Executive
Officer. He also serves as Chairman, a Director and/or an officer
of all principal subsidiaries, and as Chairman of the Managing
Committees of Montana-Dakota Utilities Co. and Great Plains
Natural Gas Co. Prior to joining the Company, he was the Chairman
and Chief Executive Officer of White Resources Corporation
(November 1989-October 1991); Executive Vice President and Chief
Operating Officer of Consolidated TVX Mining Corporation of Chile
(January 1988-November 1989); and Chairman, President, and Chief
Operating Officer of Entech Inc. (September 1986-December 1988),
which formerly comprised the non-utility subsidiaries of Montana
Power Company. He is a member of the University of Mary Board of
Regents, the Missouri Slope Areawide United Way Board of Trustees
and the North Dakota Lewis & Clark Bicentennial Foundation Board.
6
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PROPOSAL FOR INCREASE IN AUTHORIZED COMMON STOCK SHARES
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The Company's capital stock consists of 152,000,000 authorized shares
divided into four classes, namely, (1) 500,000 Preferred Stock shares with a par
value of $100 per share; (2) 1,000,000 Preferred Stock A shares without par
value; (3) 500,000 Preference Stock shares without par value; and
(4) 150,000,000 Common Stock shares with a par value of $1.00 per share. As of
February 25, 2002, 69,874,062 Common Stock shares were issued with 8,649,181
additional shares reserved for issuance under the Company's various Director,
executive and employee stock plans, a potential earn-out in connection with a
prior acquisition, and the Dividend Reinvestment Plan.
The Board of Directors' resolution, attached as Exhibit A, proposes a
Restated Certificate of Incorporation amendment to increase authorized Common
Stock from 150,000,000 to 250,000,000 shares with no reduction in the par value
of $1.00 per share.
The additional authorized shares would enable the Company to raise
additional capital funds expeditiously and economically for its ongoing
operational needs. The shares also may be used for the Company's investment and
incentive plans or for possible acquisitions, stock distributions or splits, or
other corporate purposes. It also would permit Common Stock issuance without the
delay and expense involved in obtaining stockholder approval when such issuance
is deemed appropriate. The Company would obtain all necessary regulatory
authority prior to issuance of additional Common Stock.
There is no present plan for issuance or use of the proposed additional
authorized Common Stock. All newly authorized shares would have the same rights
as the presently authorized shares, including the right, when issued, to cast
one vote per share and to participate in dividends when and to the extent
declared and paid. Company stockholders have no preemptive rights with respect
to the issuance of additional Company shares.
The Board of Directors doesn't know of any specific effort to obtain control
of the Company, and has no present intention of using the proposed increase in
authorized Common Stock as an anti-takeover device. However, the Company's
authorized but unissued Common Stock could be used to make a change in control
attempt more difficult.
None of the Company Directors or officers has any interest, direct or
indirect, in the adoption of the proposed amendment except as a holder of
Company Common Stock.
No financial statements are furnished as they are not deemed material for
the exercise of prudent judgment regarding this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL. Approval
requires the affirmative vote of a majority of all the outstanding Common Stock
shares. If a stockholder has specified a choice, the shares will be voted
accordingly. If no choice has been specified, the shares will be voted "FOR" the
proposal.
7
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EXECUTIVE COMPENSATION
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TABLE 1: SUMMARY COMPENSATION TABLE
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Long-term compensation
-----------------------------------------
Annual compensation Awards Payouts
------------------------------ ------------------------- ----------
(e) (g)
OTHER (f) SECURITIES (i)
ANNUAL RESTRICTED UNDERLYING (h) ALL OTHER
(a) (c) (d) COMPEN- STOCK OPTIONS/ LTIP COMPEN-
NAME AND (b) SALARY BONUS(1) SATION(2) AWARDS SARS PAYOUTS SATION(7)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
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Martin A. White 2001 450,000 374,500 594,800(3) 180,000(5) -- 5,100
--Chairman of the Board, 2000 394,269 333,239 198,125(4) -- 393,118(6) 5,100
President & C.E.O. 1999 323,077 203,960 229,063(4) -- -- 4,872
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Douglas C. Kane 2001 249,127 145,446 148,700(3) 62,400(5) -- 5,100
--Executive Vice President, 2000 226,654 140,035 99,063(4) -- 178,690(6) 5,100
Chief Administrative & 1999 210,220 79,146 114,532(4) -- -- 5,100
Corporate Development
Officer
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Ronald D. Tipton 2001 279,038 35,437 148,700(3) 72,000(5) -- 5,100
--C.E.O. of Montana-Dakota 2000 254,277 135,024 99,063(4) -- 181,517(6) 5,100
Utilities Co. and Great 1999 235,508 70,327 114,532(4) -- -- 4,863
Plains Natural Gas Co.
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Warren L. Robinson 2001 237,077 146,290 148,700(3) 62,400(5) -- 5,100
--Executive Vice President, 2000 188,462 110,912 79,250(4) -- 121,529(6) 5,100
Treasurer & Chief 1999 172,396 86,591 91,625(4) -- -- 4,872
Financial Officer
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Lester H. Loble, II 2001 190,846 105,219 13,291 118,960(3) 54,600(5) -- 5,100
--Vice President, General 2000 161,654 81,486 4,551 59,438(4) -- 89,345(6) 4,850
Counsel 1999 150,750 55,355 5,741 68,719(4) -- -- 4,523
& Secretary
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(1) Granted pursuant to the Executive Incentive Compensation Plan.
(2) Above-market interest on deferred compensation.
(3) Valued at fair market value on the date of grant. The restricted stock will
vest nine years from the date of grant, assuming continued employment.
Vesting of some or all shares may be accelerated if total shareholder
return equals or exceeds the 50th percentile of the proxy peer group over a
three year performance cycle. Nonpreferential dividends are paid on the
restricted stock.
At December 31, 2001, the Named Officers held the following amounts of
restricted stock: Mr. White--40,000 shares ($1,126,000);
Mr. Kane--15,000 shares ($422,250); Mr. Tipton--15,000 shares ($422,250);
Mr. Robinson--13,000 shares ($365,950); and Mr. Loble--10,000 shares
($281,500).
(4) Valued at fair market value on the date of grant. Nonpreferential dividends
are paid on the restricted stock.
(5) Options granted pursuant to the 1992 KESOP or the 1997 Executive Long-Term
Incentive Plan for the 2001-2003 performance cycle.
(6) Dividend equivalents paid with respect to options granted pursuant to the
1992 KESOP for the 1998-2000 performance cycle.
(7) Totals shown are the Company contributions to the Company 401(k) Retirement
Plan.
8
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TABLE 2: OPTION/SAR GRANTS IN LAST FISCAL YEAR
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GRANT DATE
INDIVIDUAL GRANTS(1) VALUE
---------------------------------------------- ------------
(c)
PERCENT OF
(b) TOTAL
NUMBER OF OPTIONS (d)
SECURITIES GRANTED TO EXERCISE (f)
UNDERLYING EMPLOYEES OR GRANT DATE
OPTIONS IN BASE (e) PRESENT
(a) GRANTED FISCAL PRICE EXPIRATION VALUE(2)
NAMED OFFICER (#) YEAR(%) ($/SHARE) DATE ($)
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Martin A. White............... 180,000 6.7 29.74 2/15/11 1,303,200
-------------------------------------------------------------
Douglas C. Kane............... 62,400 2.3 29.74 2/15/11 451,776
-------------------------------------------------------------
Ronald D. Tipton.............. 72,000 2.7 29.74 2/15/11 521,280
-------------------------------------------------------------
Warren L. Robinson............ 62,400 2.3 29.74 2/15/11 451,776
-------------------------------------------------------------
Lester H. Loble, II........... 54,600 2.0 29.74 2/15/11 395,304
---------------------------------------------------------------------------------------------
(1) All options were granted pursuant to the 1992 Key Employee Stock Option Plan
or the 1997 Executive Long-Term Incentive Plan. The options become
exercisable automatically in nine years on February 15, 2010. Vesting is
accelerated upon change in control or upon attainment of certain performance
goals, as follows: during the three year performance cycle (2001 - 2003)
performance goals established for the Company by the Compensation Committee
are based on return on equity (25%), earnings per share (25%) and total
relative shareholder return (50%). Performance goals for Montana-Dakota
Utilities Co. and the utility services companies, which are applicable to
Mr. Tipton, are based on return on invested capital (60%) and earnings
(40%). From 50% to 100% of the options granted may become exercisable at the
end of the three year performance cycle if from 90% to 100% of the goals are
met and, in the case of Mr. Tipton, if 94% to 100% of the goals are met.
Dividend Equivalents granted with the options are described in Table 4.
(2) Present values were calculated using the Black-Scholes option pricing model
which has been adjusted to take dividends into account. Use of this model
should not be viewed in any way as a forecast of the future performance of
the Company's stock. The estimated present value of each stock option
granted is $7.24 based on the following inputs:
Stock Price (fair market value) at Grant (2/14/01).......... $ 29.74
Exercise Price.............................................. $ 29.74
Expected Option Term........................................ 7 Years
Stock Price Volatility...................................... 0.2594
Dividend Yield.............................................. 3.53%
The model assumes: (a) a risk-free interest rate of 5.18 percent on a U.S.
Treasury Note with a maturity date of approximately 7 years; (b) Stock Price
Volatility is calculated using a three year historical average of stock
prices from grant date; (c) Dividend Yield is calculated using the
historical dividend rate for three years from the date of grant. The option
value was not discounted to reflect any accelerated vesting of the options.
Notwithstanding the fact that these options are non-transferable, no
discount for lack of marketability was taken.
9
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TABLE 3: AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
--------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
SHARES NUMBER OF
ACQUIRED SECURITIES UNDERLYING VALUE OF UNEXERCISED,
ON VALUE UNEXERCISED OPTIONS IN-THE- MONEY OPTIONS
EXERCISE REALIZED AT FISCAL YEAR-END(1) AT FISCAL YEAR-END
(#) ($) (#) ($)
------------------------------------------------------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------
---------------------------------------------
Martin A. White........... 62,000 1,141,570 60,760 180,000 413,168
Douglas C. Kane........... -- -- 55,800 62,400 379,440
Ronald D. Tipton.......... -- -- 49,125 72,000 334,050
Warren L. Robinson........ -- -- 37,950 62,400 258,060
Lester H. Loble, II....... 8,750 231,934 34,000 54,600 284,829
(1) Vesting is accelerated upon a change in control.
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TABLE 4: LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
-------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS.
------------------------------
(b) (c)
NUMBER OF PERFORMANCE
SHARES, OR OTHER
UNITS OR PERIOD
OTHER UNTIL (d) (e) (f)
(a) RIGHTS MATURATION THRESHOLD TARGET MAXIMUM
NAMED OFFICER (#)(1) OR PAYOUT ($) ($) ($)
------------------------------------------------------------------------------------------------
Martin A. White........................ 180,000 2001-2003 248,400 496,800 993,600
Douglas C. Kane........................ 62,400 2001-2003 86,112 172,224 344,448
Ronald D. Tipton....................... 72,000 2001-2003 99,360 198,720 397,440
Warren L. Robinson..................... 62,400 2001-2003 86,112 172,224 344,448
Lester H. Loble, II.................... 54,600 2001-2003 75,348 150,696 301,392
(1) Dividend equivalents were granted pursuant to the 1992 Key Employee Stock
Option Plan and the 1997 Executive Long-Term Incentive Plan based on the
number of options granted to each Named Officer (see Table 2). Dividend
equivalents entitle the recipient to the cash amount equal to any dividend
declared by the Board of Directors on the common stock of the Company. The
table assumes the current level of dividends. Dividend equivalents may be
earned from 0% to 200% at the end of the three year performance cycle
(2001-2003) depending upon (1) the level of achievement of performance goals
established for the Company and Montana-Dakota Utilities Co. and the utility
services companies by the Compensation Committee and (2) individual
performance. Vesting is accelerated upon a change in control. See Table 2
for a description of the goals. Dividend equivalents that are not earned are
forfeited.
10
--------------------------------------------------------------------------------
TABLE 5: PENSION PLAN TABLE
--------------------------------------------------------------------------------
YEARS OF SERVICE
----------------------------------------------------------------
REMUNERATION 15 20 25 30 35
--------------------------------------------------------------------------------------------------
$125,000.................... $ 79,130 $ 87,626 $ 96,123 $104,619 $113,116
150,000.................... 95,247 105,556 115,865 126,174 136,483
175,000.................... 110,277 122,036 133,795 145,554 157,313
200,000.................... 122,877 134,636 146,395 158,154 169,913
225,000.................... 133,857 145,616 157,375 169,134 180,893
250,000.................... 144,777 156,536 168,295 180,054 191,813
300,000.................... 181,017 192,776 204,535 216,294 228,053
350,000.................... 228,597 240,356 252,115 263,874 275,633
400,000.................... 269,577 281,336 293,095 304,854 316,613
450,000.................... 309,477 321,236 332,995 344,754 356,513
500,000.................... 380,877 392,636 404,395 416,154 427,913
The Table covers the amounts payable under the Salaried Pension Plan and
non-qualified Supplemental Income Security Plan (SISP).
Pension benefits are determined by the step-rate formula that places
emphasis on the highest consecutive 60 months of earnings within the final
10 years of service.
Benefits for single participants under the Salaried Pension Plan are paid as
straight life amounts and benefits for married participants are paid as
actuarially reduced pensions with a survivorship benefit for spouses, unless
participants choose otherwise.
The Salaried Pension Plan also permits pre-retirement survivorship benefits
upon satisfaction of certain conditions. Additionally, certain reductions are
made for employees electing early retirement.
The Internal Revenue Code places maximum limitations on benefit amounts that
may be paid under the Salaried Pension Plan.
The Company has adopted a non-qualified SISP for senior management
personnel. In 2001, 76 senior management personnel participated in the SISP,
including the Named Officers.
Both plans cover salary shown in column (c) of the Summary Compensation
Table and exclude bonuses and other forms of compensation.
Upon retirement and reaching age 65, participants in the SISP may elect a
retirement benefit or a survivors' benefit with the benefits payable monthly for
15 years.
As of December 31, 2001, the Named Officers were credited with the following
years of service under the plans:
PENSION
SERVICE SISP SERVICE
NAME YEARS YEARS
---------------------------------------------------------------------------------
Martin A. White......................................... 10 10
Douglas C. Kane......................................... 30 20
Ronald D. Tipton........................................ 18 18
Warren L. Robinson...................................... 13 13
Lester H. Loble, II..................................... 14 14
11
The maximum years of service for benefits under the Pension Plan is 35.
Vesting under the SISP begins at 3 years and is complete after 10 years. Benefit
amounts under both plans are not subject to reduction for offset amounts.
--------------------------------------------------------------------------------
CHANGE-OF-CONTROL ARRANGEMENTS
--------------------------------------------------------------------------------
The Company entered into Change of Control Employment Agreements with the
Named Officers in November 1998, which would become effective for a three-year
period only upon a Company change of control. There is an automatic annual
extension if the Company does not provide non-renewal notice at least 60 days
prior to the end of each 12-month period.
If a change of control occurs, the agreements provide for a three-year
employment period from the date they become effective, with base salary not less
than the highest amount paid within the preceding twelve months, an annual bonus
not less than the highest bonus paid within the preceding three years, and
participation in the Company's incentive, savings, retirement and welfare
benefit plans.
The agreements also provide that specified payments and benefits would be
paid if the Named Officer's employment is terminated by the Company, other than
for cause or disability, or by the Named Officer for good reason at any time
when the agreements are in effect.
In such event, a Named Officer would receive an amount equal to three times
his annual base pay plus three times his highest annual bonus (as defined). In
addition, he would receive (i) an immediate pro-rated cash-out of his bonus for
the year of termination based on the highest annual bonus and (ii) an amount
equal to the excess of (a) the actuarial equivalent of the benefit under Company
qualified and nonqualified retirement plans that he would receive if he
continued employment with the Company for an additional three years over
(b) the actual benefit paid or payable under these plans.
All benefits of each Named Officer under the Company's welfare benefit plans
would continue for at least three years. These arrangements also provide for
certain gross-up payments to compensate them for any excise taxes incurred in
connection with these benefits and reimbursement for certain outplacement
services.
For these purposes, "cause" means the Named Officer's willful and continued
failure to substantially perform his duties or willfully engaging in illegal
conduct or misconduct materially injurious to the Company. "Good reason"
includes the Company's termination of the Named Officer without cause, the
assignment to the Named Officer of duties inconsistent with his prior status and
position, certain reductions in compensation or benefits, and relocation or
increased travel obligations.
12
A "change of control" is defined as (i) the acquisition by a party or
certain related parties of 20% or more of the Company's voting securities;
(ii) a turnover in a majority of the Board of Directors without the approval of
a majority of the members of the Board as of November 1998; (iii) a merger or
similar transaction after which the Company's stockholders hold 60% or less of
the voting securities of the surviving entity; or (iv) the stockholders'
approval of the Company's liquidation or dissolution.
--------------------------------------------------------------------------------
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
INTRODUCTION
The Compensation Committee of the Board of Directors is responsible for
determining the compensation of the Company's executive officers. Composed
entirely of non-employee Directors, the Committee meets several times each year
to review and determine compensation for the executive officers, including the
Chief Executive Officer.
EXECUTIVE COMPENSATION
The Committee believes that appropriate compensation levels succeed in both
attracting and motivating high quality employees. To implement this philosophy,
the Committee analyzes trends in compensation among comparable companies
participating in the oil and gas industry, segments of the energy and mining
industries, the peer group of companies used in the graph following this report,
and similar companies from general industry. The Committee then sets
compensation levels that it believes are competitive within the industry and
structured in a manner that rewards successful job performance. There are three
components of total executive compensation: base salary, annual incentive
compensation, and long-term incentive compensation.
In setting base salaries, the Committee does not use a particular formula.
In addition to the above data, other factors the Committee uses in its analysis
include the executive's current salary in comparison to the competitive industry
standard as well as individual performance. Because of changing Mr. White's
salary review from mid-year to a calendar year basis to coincide with the salary
reviews of the other Named Officers, Mr. White, the Chairman, President and
Chief Executive Officer, received no increase in base salary for 2001. The
increase in salary shown in the Summary Compensation Table reflects a full year
at Mr. White's salary set in August 2000. During 2001, only approximately 27.1%
of Mr. White's compensation was base pay. The remainder was performance-based.
This reflects the Committee's belief in the importance of having substantial at
risk compensation to provide a direct and strong link between performance and
executive pay. For the other Named Officers, the Committee targeted salaries at
the midpoint of the competitive industry standard, rather than at 95% of the
midpoint, as in the past. The other Named Officers received base salary
increases averaging 16.20% for 2001.
In keeping with the Committee's belief that compensation should be directly
linked to successful performance, the Company employs both annual and long-term
incentive compensation plans. The annual incentive compensation is determined
under the Executive Incentive Compensation Plan. The Committee makes awards
based upon the level of corporate earnings, cost efficiency, and individual
performance. Mr. White received a total of $374,500 (or 149.8% of the targeted
amount) in annual incentive compensation for 2001; the other Named Officers
received an average of $132,318 or 149.0% of the targeted amount, (except
Mr. Tipton who received $35,437 or 40% of the targeted amount), based upon
achievement of corporate earnings and individual performance near the maximum
level.
Long-term incentive compensation serves to encourage successful strategic
management and is awarded under two plans: the 1992 Key Employee Stock Option
Plan and the 1997 Executive Long-Term Incentive Plan. Options granted in 1998
vested in full in 2000 based upon achievement of performance goals at the
maximum level for the 1998-2000 performance cycle. In support of the Company's
reward philosophy and to maintain alignment with marketplace practice, the
Committee granted new stock options and dividend equivalents in 2001 to continue
to motivate executives to achieve long-term corporate performance goals and to
encourage ownership by them of Company Common Stock. Options with a three-year
performance cycle (2001-2003) and related dividend equivalents were granted to
Mr. White, the other Named Officers, and certain other executives in 2001 under
the 1992 Key Employee Stock Option Plan (KESOP), using up the remaining KESOP
reserve balance, with the remainder being granted under the 1997 Executive
Long-Term Incentive Plan. The options become exercisable automatically in nine
years, but vesting may be accelerated if certain performance goals are achieved.
The size of awards is based upon an executive's established pay grade, which
takes into consideration the job's internal value, based on overall complexity
and responsibility, and external value as reflected in a market competitiveness
comparison.
13
All regular employees participate in the growth of the Company through the
Option Award Program. Stock options were granted under this program to all
employees in 1998.
At December 31, 2001, there were approximately 3.5 million options
outstanding under the Company's various plans, which is approximately 5% of
shares outstanding.
Restricted stock awards also were made in 2001 to Mr. White and the other
Named Officers under the 1997 Executive Long-Term Incentive Plan. The restricted
stock is performance accelerated; it vests automatically within nine years;
however, vesting may be accelerated if total stockholder return on Company
Common Stock meets or exceeds the 50th percentile of the peer group (as shown in
the performance graph). The number of shares granted was to raise overall
compensation levels closer to the median (although still slightly below) level
of compensation within the industry. The restricted stock serves to motivate
long-term performance and to align the interests of the executives with those of
stockholders. The Committee accelerated vesting of one half of the restricted
stock granted in 1999, based on achievement of performance goals for the
three-year period 1999-2001 at the 49th percentile.
In 1994, the Board of Directors adopted Stock Ownership Guidelines under
which executives are required to own Company Common Stock valued from one to
four times their annual salary.
The 2001 compensation paid to the Company's executive officers qualified as
fully deductible under federal tax laws. The Committee continues to monitor the
impact of federal tax laws on executive compensation, including Section 162(m)
of the Internal Revenue Code.
HARRY J. PEARCE, CHAIRMAN
THOMAS EVERIST, MEMBER
HOMER A. SCOTT, MEMBER
14
--------------------------------------------------------------------------------
MDU RESOURCES GROUP, INC.
COMPARISON OF FIVE YEAR TOTAL STOCKHOLDER RETURN (1)
--------------------------------------------------------------------------------
Total Stockholder Return Index (1996=100)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
1996 1997 1998 1999 2000 2001
S&P 500 100.00 133.36 171.48 207.56 188.66 166.24
MDU 100.00 143.63 184.87 145.84 245.15 219.02
New Peer Group 100.00 124.50 135.98 119.46 189.20 175.11
Old Peer Group 100.00 131.56 149.39 141.83 252.73 212.39
(1) All data is indexed to December 31, 1996, for the Company, the S&P 500, and
the peer groups. Total stockholder return is calculated using the
December 31 price for each year. It is assumed that all dividends are
reinvested in stock at the frequency paid, and the returns of each component
peer issuer of the group is weighted according to the issuer's stock market
capitalization at the beginning of the period.
New Peer Group issuers are Allegheny Energy, Inc., Allete, Inc., Alliant
Energy Corporation, Black Hills Corporation, Comstock Resources, Inc.,
Equitable Resources, Inc., Florida Rock Industries, Inc., Hanson PLC ADR,
KeySpan Corporation (returns included for the full years of trading for 1999
through 2001), Kinder Morgan, Inc., Louis Dreyfus Natural Gas Corp. (returns
included for the full years of trading for 1997 through 2000. Discontinued
trading in 2001, the result of the acquisition by Dominion Resources, Inc.),
Martin Marietta Materials, Inc., Newfield Exploration Company, NICOR, Inc.,
OGE Energy Corp., ONEOK, Inc., Peoples Energy Corporation, Pogo Producing
Company, Quanta Services, Inc. (returns included for the full years of
trading for 1999 through 2001), Questar Corporation, SCANA Corporation,
Stone Energy Corporation, TECO Energy, Inc., UGI Corporation, Vectren
Corporation (formerly Indiana Energy, Inc.), Vulcan Materials Company, and
XTO Energy, Inc.(formerly Cross Timbers Oil Company).
Old Peer Group issuers are Allete, Inc., Black Hills Corporation, Coastal
Corporation (merged with El Paso Corporation in 2001. Returns included for
years 1997 through 2000), Equitable Resources, Inc., LG&E Energy Corp.
(discontinued trading on December 11, 2000 as a result of merger with
Powergen PLC. Returns included for years 1997 through date of merger), The
Montana Power Company, NorthWestern Corporation, ONEOK, Inc., Otter Tail
Corporation (formerly Otter Tail Power Company), Questar Corporation and UGI
Corporation.
The peer group was changed to include issuers that better reflect the
Company's mix of regulated and unregulated businesses.
15
--------------------------------------------------------------------------------
INFORMATION CONCERNING EXECUTIVE OFFICERS
--------------------------------------------------------------------------------
Executive officers of the Company are elected by the Board of Directors and
serve until the next annual meeting of the Board. Any executive officer so
elected may be removed at any time by the affirmative vote of a majority of the
Board. Certain information concerning such executive officers, including their
ages, present corporate positions, and business experience, is set forth below.
PRESENT CORPORATE POSITION
NAME AGE AND BUSINESS EXPERIENCE
---- -------- -----------------------------------------------------
Martin A. White................. 60 Chairman of the Board, President and Chief Executive
Officer. For information about Mr. White, see
"Election of Directors."
Cathleen M. Christopherson...... 57 Ms. Christopherson was elected Vice
President-Corporate Communications effective
November 1989. Prior to that she served as
Assistant Vice President-Corporate Communications
effective September 1989 and Division Manager of
Montana-Dakota Utilities Co., a Division of the
Company, from August 1984.
Richard A. Espeland............. 58 Mr. Espeland was elected Vice President-Human
Resources effective August 2000. Prior to that he
served as Human Resources Manager from June 1990,
and Human Resource Development Manager effective
December 1989.
Douglas C. Kane................. 52 Executive Vice President, Chief Administrative and
Corporate Development Officer. For information
about Mr. Kane, see "Election of Directors."
Lester H. Loble, II............. 60 Mr. Loble was elected Vice President, General Counsel
and Secretary of the Company effective May 1999.
Prior to that he served as General Counsel and
Secretary of the Company effective May 1987.
Mr. Loble also serves as a Director and/or Vice
President, General Counsel and Secretary of the
principal subsidiaries of the Company. Mr. Loble
also is a member and the Secretary of the Managing
Committees of Montana-Dakota Utilities Co. and
Great Plains Natural Gas Co., Divisions of the
Company.
Vernon A. Raile................. 57 Mr. Raile was elected Vice President, Controller and
Chief Accounting Officer effective August 1992. Prior
to that he was Controller and Chief Accounting
Officer from May 1989, Assistant Treasurer from
December 1987, and Tax Manager from March 1980.
16
PRESENT CORPORATE POSITION
NAME AGE AND BUSINESS EXPERIENCE
---- -------- -----------------------------------------------------
Warren L. Robinson.............. 51 Mr. Robinson was elected Executive Vice President,
Treasurer and Chief Financial Officer of the
Company effective May 1999. Prior to that he served
as Vice President, Treasurer and Chief Financial
Officer of the Company effective August 1992. He
serves in similar positions and as a Director of
the principal subsidiaries of the Company.
Mr. Robinson was elected President and Chief
Executive Officer of Centennial Holdings Capital
Corp. in November 2000, and of FutureSource Capital
Corp. and InterSource Insurance Company in 2001. He
also is a member of the Managing Committees of
Montana-Dakota Utilities Co. and Great Plains
Natural Gas Co., Divisions of the Company. Prior to
1992 he served as Treasurer and Assistant Secretary
from December 1989, Manager of Corporate
Development and Assistant Treasurer from May 1989
to December 1989, and Manager of Corporate
Development from October 1988.
Ronald D. Tipton................ 55 Mr. Tipton was elected Chief Executive Officer of
Montana-Dakota Utilities Co. and of Great Plains
Natural Gas Co. effective July 1, 2000. He
previously was President and Chief Executive
Officer of Montana-Dakota Utilities Co. effective
January 1995. Prior to that time he served
Williston Basin Interstate Pipeline Company in the
following capacities: President and Chief Executive
Officer from May 1994, President from May 1990,
Executive Vice President from May 1989, and Vice
President-Gas Supply from January 1985. From
January 1983 to January 1985 he was the Assistant
Vice President-Gas Supply of Montana-Dakota
Utilities Co.
Robert E. Wood.................. 59 Mr. Wood was elected Vice President-Public Affairs
and Environmental Policy of the Company effective
August 1991. Before that he was Vice
President-Public Affairs from June 1986. For five
years prior thereto he served as Manager of
Legislative Affairs for the Company.
17
--------------------------------------------------------------------------------
SECURITY OWNERSHIP
--------------------------------------------------------------------------------
The Table below sets forth the number of shares of capital stock of the
Company owned beneficially as of December 31, 2001, by each Director and each
nominee for Director, each Named Officer and by all Directors and executive
officers of the Company as a group.
COMMON SHARES BENEFICIALLY
OWNED INCLUDE:
-------------------------------
SHARES
INDIVIDUALS
HAVE RIGHTS TO
COMMON SHARES ACQUIRE SHARES HELD BY
BENEFICIALLY WITHIN 60 FAMILY PERCENTAGE
NAME OWNED(1) DAYS(2) MEMBERS(3) OF CLASS
---- --------------- -------------- -------------- ----------
Bruce R. Albertson...................... 3,824 3,000 *
Thomas Everist.......................... 1,396,020(4) 9,750 2.0%
Dennis W. Johnson....................... 7,227(5) 3,000 2,027 *
Douglas C. Kane......................... 114,153(6)(7) 55,800 23,335 *
Lester H. Loble, II..................... 65,887(7) 34,000 *
Robert L. Nance......................... 26,084 12,000 600 *
John L. Olson........................... 38,200 9,750 *
Harry J. Pearce......................... 37,866 9,750 *
Warren L. Robinson...................... 63,020(7) 37,950 670 *
Homer A. Scott, Jr...................... 26,012(8) 12,000 *
Joseph T. Simmons....................... 27,105(9) 12,000 *
Ronald D. Tipton........................ 102,069(7) 49,125 *
Sister Thomas Welder.................... 19,012(10) 12,000(10) *
Martin A. White......................... 114,131(7) 60,760 20,674 *
All Directors and executive officers of
the Company as a group (18 in
number)............................... 2,189,373(7) 367,278 47,306 3.1%
* 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,
or any combination thereof.
(2) Indicates shares of the Company's stock that certain executive officers and
Directors have the right to acquire within 60 days pursuant to stock
options. Shares indicated are included in the Common Shares Beneficially
Owned column.
(3) Shares indicated are included in the Common Shares Beneficially Owned
column.
(4) Includes 1,376,020 shares of Common Stock acquired through the sale of
Connolly-Pacific to the Company.
(5) Mr. Johnson disclaims all beneficial ownership of the 2,027 shares owned by
his wife.
(6) Mr. Kane disclaims all beneficial ownership of the 23,335 shares owned by
his wife.
(7) Includes full shares allocated to the officer's account in the Company's
401(k) Retirement Plan.
(8) Includes 14,012 shares held by Homer A. Scott, Jr. Trust. Mr. Scott is
co-trustee of the trust and shares voting and investment power with respect
to these shares.
(9) Includes 15,105 shares held by Simmons Professional Financial Planning,
Inc.
(10) The total includes shares held by the Annunciation Monastery (of which
community Sister Welder is a member) and by the University of Mary (of
which Sister Welder is the president). The Monastery owns 3,700 shares and
it may acquire 12,000 shares within 60 days pursuant to stock options. The
University owns 3,312 shares. Sister Welder disclaims all beneficial
ownership of the shares owned by the Monastery and the University.
18
--------------------------------------------------------------------------------
BOARD AND COMMITTEE MEETINGS
--------------------------------------------------------------------------------
During 2001, the Board of Directors held seven meetings.
The Board has an Audit Committee, a Compensation Committee, a Finance
Committee, and a Nominating Committee. All committees are composed entirely of
outside Directors.
The Audit Committee meets regularly with management, internal auditors, and
representatives of the Company's independent public accountants. During 2001,
the Committee met four times.
The Compensation Committee, which met four times during 2001, sets
compensation levels for executive officers and recommends compensation for the
Company Directors to the full Board.
The Finance Committee, which met five times during 2001, reviews corporate
financial plans, policies, budgets, investments and acquisitions, and reviews
and authorizes actions necessary to issue and sell Company Common Stock and debt
securities.
The Nominating Committee, which met four times during 2001, makes Director
nominee recommendations to the full Board.
Each incumbent Director attended more than 75 percent of the combined total
meetings of the Board and the Committees on which the Director served during
2001.
--------------------------------------------------------------------------------
DIRECTORS' COMPENSATION
--------------------------------------------------------------------------------
An independent study of peer group companies concerning outside director
compensation and retirement plans was commissioned during 2001.
Based on the study, compensation for outside Directors was increased and the
Directors' retirement plan was eliminated.
Each non-officer Director receives $20,000 ($33,000 for the Lead Director
starting in 2002) and 1,000 shares of Company Common Stock as an annual retainer
for Board service. A non-officer Chairman (not presently existing) would receive
$52,000 and 1,000 shares of Company Common Stock as an annual retainer.
Audit, Nominating, Finance and Compensation Committee Chairmen each receive
a $4,000 annual retainer.
Each non-officer Director additionally receives $1,500 for each Board
meeting attended and each Committee member receives $1,000 for each Committee
meeting attended.
Each non-officer Director receives an annual option to purchase 3,000 shares
of Common Stock. On May 17, 2001, each non-officer Director received an option
to purchase which vested immediately and is exercisable for 10 years from date
of grant. The exercise price is $38.55, the fair market value of the stock on
the date of grant.
The Company post-retirement income plan for Directors was terminated 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.
In connection with the late John A. Schuchart's retirement as Chairman of
the Board in January 2001, the Company agreed to (i) pay him for life (with
survivor benefits) the non-officer Chairman's annual retainer of $52,000 and 450
(now 1,000) shares of Common Stock, (ii) pay meeting fees and continue group
life insurance through April 2002, (iii) make the annual option grant in
May 2001, and (iv) waive forfeiture of any options held at retirement.
19
--------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
--------------------------------------------------------------------------------
Based solely upon a review of the Forms 3, 4 and 5 submitted to the Company
during and with respect to calendar year 2001, or written representations that
no Forms 5 were required, the Company believes all such reports were timely
filed except that Mr. Johnson underreported his holdings on Form 3 by 9 shares,
which has been corrected, and Directors Everist, Nance, Olson, Pearce, Scott,
Simmons and Welder filed late Forms 5 relating to deferred compensation under
the Deferred Compensation Plan for Directors.
--------------------------------------------------------------------------------
ACCOUNTING AND AUDITING MATTERS
--------------------------------------------------------------------------------
Upon recommendation of the Audit Committee, the Board of Directors, in May
2001, selected and employed the firm of Arthur Andersen LLP as the Company's
independent certified public accountants to audit its financial statements for
the fiscal year 2001.
On February 14, 2002, upon the recommendation of the Audit Committee, the
Board of Directors approved the dismissal of Arthur Andersen LLP as the
Company's independent auditors following the 2001 audit. As of March 8, 2002,
the Company had not selected independent auditors for the 2002 fiscal year, but
was in the process of reviewing new auditor candidates.
In connection with the audits for the two most recent fiscal years and
through February 20, 2002, there have been no disagreements with Arthur Andersen
LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Arthur Andersen LLP, would have caused Arthur Andersen
LLP to make reference thereto in connection with its report on the financial
statements of the Company for such time periods. Also, during those time
periods, there have been no "reportable events," as such term is used in
Item 304(a)(1)(v) of Regulation S-K.
Arthur Andersen LLP's reports on the financial statements of the Company for
the last two years neither contained an adverse opinion or disclaimer of
opinion, nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles.
A representative of Arthur Andersen LLP will be present at the Annual
Meeting of Stockholders. It is not anticipated that the representative will make
a prepared statement at the meeting. However, he or she will be free to do so if
he or she so chooses, as well as respond to appropriate questions.
--------------------------------------------------------------------------------
AUDIT COMMITTEE REPORT
--------------------------------------------------------------------------------
The Audit Committee consists of five non-employee Directors of the Company.
All members are independent as defined in the applicable New York Stock Exchange
listing standards. The Committee held four meetings during 2001.
20
The Audit Committee is governed by a written charter adopted in 1979 and
reissued on May 11, 2000.
In connection with the December 31, 2001 financial statements, the Audit
Committee has (1) reviewed and discussed the audited financial statements with
management; (2) discussed with the independent auditors the matters required to
be discussed by SAS 61 (Codification of Statements on Auditing Standards, AU
Section380); (3) received the written disclosures and the letter from the
independent accountants required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and discussed with the
independent accountant the independent accountant's independence.
Based on the review and discussions referred to in items (1) through (3) of
the above paragraph, the Audit Committee recommended to the Board of Directors
that the audited financial statements be included in the Company's Annual Report
on Form 10-K for the last fiscal year for filing with the Securities and
Exchange Commission.
The Audit Committee has considered whether the provision of services covered
in Items 9(e)(2) and (e)(3) of Schedule 14A under the Securities Exchange Act of
1934 is compatible with maintaining the independence of Arthur Andersen LLP. The
Committee believes that the fees billed by Arthur Andersen LLP for the services
set forth below are compatible with Arthur Andersen LLP maintaining its
independence as the Company's principal accountant.
AUDIT FEES: The aggregate fees billed or expected to be billed by Arthur
Andersen LLP for professional services rendered for the audit of the Company's
annual financial statements for 2001 and the reviews of the financial statements
included in the Company's Forms 10-Q for 2001 are $523,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES: The fees
billed by Arthur Andersen LLP for 2001 for the professional services described
in Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X were $3,594,425.
ALL OTHER FEES: The aggregate fees billed or expected to be billed for
services rendered by Arthur Andersen LLP, other than services described in the
preceding two paragraphs, for 2001 were $443,171.
HOMER A. SCOTT, JR. CHAIRMAN
BRUCE R. ALBERTSON
DENNIS W. JOHNSON
JOHN L. OLSON
HARRY J. PEARCE
--------------------------------------------------------------------------------
OTHER BUSINESS
--------------------------------------------------------------------------------
The management of the Company knows of no other matter to come before the
meeting. However, if any matter requiring a vote of the stockholders should
arise, it is the intention of the persons named in the enclosed proxy to vote in
accordance with their best judgment.
21
--------------------------------------------------------------------------------
2003 ANNUAL MEETING OF STOCKHOLDERS
--------------------------------------------------------------------------------
DIRECTOR NOMINATIONS: The Company's Bylaws provide that Director
nominations may be made only by the Board or the Nominating Committee, or by a
stockholder entitled to vote who has delivered written notice to the Company
Secretary (containing certain information specified in the Bylaws) at least
120 days prior to the anniversary date on which the Company first mailed its
proxy materials for the prior year's annual stockholders' meeting.
OTHER MEETING BUSINESS: The Bylaws also provide that no business may be
brought before an annual stockholders' meeting except as specified in the
meeting notice or as otherwise properly brought before the meeting by the Board
or by a stockholder entitled to vote who has delivered written notice to the
Company Secretary (containing certain information specified in the Bylaws) at
least 120 days prior to the anniversary date on which the Company first mailed
its proxy materials for the prior year's annual stockholders' meeting.
DISCRETIONARY VOTING: Rule 14a-4 of the Securities and Exchange
Commission's proxy rules allows the Company to use discretionary voting
authority to vote on matters coming before an annual stockholders' meeting if
the Company does not have notice of the matter at least 45 days before the
anniversary date on which the Company first mailed its proxy materials for the
prior year's annual stockholders' meeting or the date specified by an advance
notice provision in the Company's Bylaws. The Company's Bylaws contain such an
advance notice provision as described above. For the Company's Annual Meeting of
Stockholders expected to be held on April 22, 2003, stockholders must submit
such written notice to the Company Secretary on or before November 8, 2002.
STOCKHOLDER PROPOSALS: These requirements 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 the Company's Proxy Statement
under Rule 14a-8 of the Exchange Act. For purposes of the Company's Annual
Meeting of Stockholders expected to be held on April 22, 2003, any stockholder
who wishes to submit a proposal for inclusion in the Company's proxy materials
must submit such proposal to the Company Secretary on or before November 8,
2002.
BYLAW COPIES: A copy of the full text of the Bylaw provisions discussed
above may be obtained by writing to the Company Secretary.
SHARED ADDRESS STOCKHOLDERS: The Company hereby undertakes to deliver
promptly, upon written or oral request, a separate copy of the Annual Report to
Stockholders, or Proxy Statement, as applicable, to a Company stockholder at a
shared address to which a single copy of the document was delivered. Requests
should be made to the Office of the Treasurer at the below address.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (EXCLUDING EXHIBITS), FOR
THE YEAR ENDED DECEMBER 31, 2001, WHICH IS REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WILL BE MADE AVAILABLE TO STOCKHOLDERS TO
WHOM THIS PROXY STATEMENT IS MAILED, WITHOUT CHARGE, UPON WRITTEN OR ORAL
REQUEST TO THE OFFICE OF THE TREASURER OF MDU RESOURCES GROUP, INC., SCHUCHART
BUILDING, 918 EAST DIVIDE AVENUE, MAILING ADDRESS: P.O. BOX 5650, BISMARCK, ND
58506-5650, TELEPHONE NUMBER: (701) 222-7900.
By order of the Board of Directors,
[/S/ LESTER H. LOBLE, II]
Lester H. Loble, II
Secretary
March 8, 2002
22
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EXHIBIT A
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RESOLVED, that the Board of Directors of MDU Resources Group, Inc. hereby
declares it advisable:
(A) That the number of shares of Common Stock which the Company is
authorized to issue be increased from 150,000,000 shares of Common Stock with
the par value of $1.00 per share, to 250,000,000 shares with the par value of
$1.00 per share, effective at the close of business on the date on which the
appropriate Certificate of Amendment to the Company'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 Company, as heretofore amended, be further amended by
deleting the first paragraph of Article FOURTH, and by inserting in place
thereof a new first paragraph of said Article FOURTH to read as follows:
FOURTH. The total number of shares of stock which the Corporation shall
have authority to issue is Two Hundred Fifty-Two Million (252,000,000)
divided into four classes, namely, Preferred Stock, Preferred Stock A,
Preference Stock, and Common Stock. The total number of shares of such
Preferred Stock authorized is Five Hundred Thousand (500,000) shares of
the par value of One Hundred Dollars ($100) per share (hereinafter
called the "Preferred Stock") amounting in the aggregate to Fifty
Million Dollars ($50,000,000). The total number of shares of such
Preferred Stock A authorized is One Million (1,000,000) shares without
par value (hereinafter called the "Preferred Stock A"). The total number
of shares of such Preference Stock authorized is Five Hundred Thousand
(500,000) shares without par value (hereinafter called the "Preference
Stock"). The total number of shares of such Common Stock authorized is
Two Hundred Fifty Million (250,000,000) of the par value of One and
no/100 Dollars ($1.00) per share (hereinafter called the "Common
Stock"), amounting in the aggregate to Two Hundred Fifty Million Dollars
($250,000,000).
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 Company's next Annual or Special Meeting of Stockholders for
consideration by the Stockholders entitled to vote in respect thereof.
A-1
[MDU RESOURCES LOGO]
MDU RESOURCES GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
Tuesday, April 23, 2002
11:00 a.m. Central Daylight Savings Time
909 Airport Road
Bismarck, ND 58504
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If you consented to access the ANNUAL REPORT TO STOCKHOLDERS
AND PROXY STATEMENT via the Internet, these documents may be
viewed by going to the MDU Resources Group, Inc. website.
The website address is:
http://www.mdu.com/2002-proxy.html
------------------------------------------------------------------
[MDU RESOURCES LOGO]
SCHUCHART BUILDING
918 EAST DIVIDE AVENUE
MAILING ADDRESS:
P.O. BOX 5650
BISMARCK, ND 58506-5650
(701) 222-7900 PROXY
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS ON APRIL 23, 2002.
THIS PROXY WILL ALSO BE USED TO PROVIDE VOTING INSTRUCTIONS TO NEW YORK LIFE
TRUST COMPANY, AS TRUSTEE OF THE MDU RESOURCES GROUP, INC. 401(k) RETIREMENT
PLAN, FOR ANY SHARES OF COMPANY COMMON STOCK HELD IN THE PLAN.
The undersigned hereby appoints Martin A. White, Douglas C. Kane, and Lester H.
Loble, II, and each of them, proxies, with full power of substitution, to vote
all Common Stock of the undersigned at the Annual Meeting of Stockholders to be
held at 11:00 a.m. (CDT), April 23, 2002, at 909 Airport Road, Bismarck, ND
58504, and at any adjournment thereof, upon all subjects that may properly come
before the meeting, including the matters described in the Proxy Statement
furnished herewith, subject to any directions indicated on the reverse side.
Your vote is important! Ensure that your shares are represented at the meeting.
Either (1) submit your proxy by Touchtone telephone, (2) submit your proxy by
Internet, or (3) mark, date, sign, and return this letter proxy in the envelope
provided (no postage is necessary if mailed in the United States). If no
directions are given, the proxies will vote in accord with the Directors'
recommendation on all matters listed on this proxy, and at their discretion on
any other matters that may properly come before the meeting.
SEE REVERSE FOR VOTING INSTRUCTIONS.
---------------------
COMPANY #
CONTROL #
---------------------
THERE ARE THREE WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, DATED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK *** EASY *** IMMEDIATE
- Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week, until 11:00 a.m. (CDT) on Monday, April 22, 2002.
- You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
- Follow the simple instructions the Voice provides you.
VOTE BY INTERNET -- WWW.EPROXY.COM/MDU/ -- QUICK *** EASY *** IMMEDIATE
- Use the Internet to vote your proxy 24 hours a day, 7 days a week, until
11:00 a.m. (CDT) on Monday, April 22, 2002.
- You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above to obtain your records and create an
electronic ballot.
The Company has been advised by counsel that the procedures for Internet and
Telephone voting are consistent with the requirements of applicable law.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we've provided or return it to MDU Resources Group, Inc., c/o
Shareowner Services(SM), P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD.
v PLEASE DETACH HERE v
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES AND "FOR" ITEM 2.
1. ELECTION OF DIRECTORS: 01 Bruce R. Albertson 03 Douglas C. Kane / / Vote FOR / / Vote WITHHELD
02 Thomas Everist 04 Robert L. Nance all nominees from all nominees
(Instructions:To withhold authority to vote for any indicated nominee, --------------------------------------
write the number(s) of the nominee(s) in the box provided to the right.)
--------------------------------------
2. AMEND ARTICLE FOURTH OF THE RESTATED CERTIFICATE OF INCORPORATION
increasing the number of shares of Common Stock. / / For / / Against / / Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box / / Indicate changes below:
Date ___________________________
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Signature(s) in box
Please sign exactly as your name(s)
appear on Proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc., should
include title and authority.
Corporations should provide full name
of corporation and title of authorized
officer signing the proxy.