<PAGE>
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 Section 240.14a-11(c) or Section
240.14a-12
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/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(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):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / 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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
- --------------------------------------------------------------------------------
SCHUCHART BUILDING JOHN A. SCHUCHART
918 EAST DIVIDE AVENUE CHAIRMAN OF THE BOARD
MAILING ADDRESS:
P.O. BOX 5650
BISMARCK, ND 58506-5650
(701) 222-7900
March 15, 1999
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders to be
held on Tuesday, April 27, 1999, at 11:00 a.m., Central Daylight Savings Time,
at 909 Airport Road, Bismarck, North Dakota 58504. The other Directors and the
officers join me in extending this invitation.
The formal matters to be acted upon at the meeting are described in the
accompanying Notice of Annual Meeting of Stockholders and Proxy Statement. In
addition to the formal issues, a brief report on current matters of interest
will be presented. Lunch will be served following the meeting.
We were pleased with the response of our stockholders at the 1998 Annual
Meeting at which 88.3 percent of the Common Stock was represented in person or
by proxy. We hope that participation by our stockholders in the affairs of the
Company will increase and that there will be an even greater representation at
the 1999 meeting. If you are unable to attend the meeting but have questions or
comments on the Company's operations, we would like to hear from you.
You will notice that we again are using a letter proxy format. The letter
proxy is larger and easier to read than the former proxy card. It also provides
the convenience of voting your proxy by Touchtone telephone if you are a
stockholder of record. The instructions are on the letter proxy. Representation
of your shares at the meeting is very important. Accordingly, whether or not you
plan to attend the meeting, we urge you to submit your proxy promptly by one of
the two methods offered: (1) by marking, dating, signing, and returning the
enclosed letter proxy in the envelope provided, or (2) by following the
instructions and voting your proxy by Touchtone telephone by calling the toll
free telephone number on the proxy. In either event, if you do attend the
meeting, you may, if you wish, withdraw your proxy and vote in person.
I hope you will find it possible to attend the meeting.
Sincerely,
[/S/ JOHN A. SCHUCHART]
JOHN A. SCHUCHART
<PAGE>
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 27, 1999
------------------------
March 15, 1999
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 27, 1999, at 11:00 a.m., Central Daylight Savings Time,
for the following purposes:
(1) To elect three Directors to three year terms;
(2) To consider and take action upon a proposal, declared advisable by the
Board of Directors of the Company, to amend Article FOURTH of the
Certificate of Incorporation to increase the number of authorized shares
of Common Stock from 75,000,000 with a par value of $3.33 per share to
150,000,000 with a par value of $1.00, all as more fully described in
the accompanying Proxy Statement dated March 15, 1999; 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 March 8, 1999, as
the record date for the determination of common stockholders who will be
entitled to notice of, and to vote at, the meeting.
All stockholders who find it convenient to do so are cordially invited and
urged to attend the meeting in person. It is requested that you either (1) mark,
date, sign, and return the enclosed letter proxy in the envelope provided (no
postage is necessary if mailed in the United States), or (2) submit your proxy
by Touchtone telephone by calling the toll free number on the proxy. The
instructions for using your telephone are printed on the letter proxy. Your
cooperation is appreciated.
By order of the Board of Directors,
[/S/ LESTER H. LOBLE, II]
LESTER H. LOBLE, II
SECRETARY
<PAGE>
MDU RESOURCES GROUP, INC.
SCHUCHART BUILDING
918 EAST DIVIDE AVENUE
MAILING ADDRESS:
P.O. BOX 5650
BISMARCK, ND 58506-5650
(701) 222-7900
------------------------
PROXY STATEMENT
---------------------
This Proxy Statement is furnished to the holders of Common Stock of MDU
Resources Group, Inc. (Company) on behalf of the Board of Directors of the
Company in connection with the solicitation of proxies to be used in voting at
the Annual Meeting of Stockholders to be held on April 27, 1999. The proxy
material was first forwarded to the holders of Common Stock on March 15, 1999.
Stockholders of record may vote their proxies by Touchtone telephone by
calling the toll free telephone number on the proxy or they may mark, date,
sign, and return the enclosed letter proxy in the envelope provided (no postage
is necessary if mailed in the United States). If your shares are held in the
name of a bank or broker, you MAY be able to vote by telephone. Follow the
instructions you receive from your bank or broker.
Any stockholder giving a proxy may revoke it at any time prior to its use at
the meeting by filing with the Secretary either a written instrument of
revocation or a duly executed proxy bearing a later date. In addition, the
powers of a proxy holder are suspended if the person executing the proxy is
present at the meeting and informs the Secretary in open meeting that he wishes
to revoke his proxy and vote in person. Attendance at the meeting will not, in
and of itself, revoke a proxy.
The Company will bear the cost of the solicitation of proxies, including the
charges and expenses of brokerage firms and others, for forwarding solicitation
material to beneficial owners of shares of the Common Stock of the Company. In
addition to the use of the mails, proxies may be solicited by officers and
regular employees of the Company, by personal interview, by telephone, or other
electronic means. Banks, brokerage houses and other institutions, nominees, and
fiduciaries will be requested to forward the soliciting material to their
principals and to obtain authorizations for the execution of the letter proxies
and will, upon request, be reimbursed for reasonable expenses incurred.
Additional solicitation of proxies will be made in the same manner under the
special engagement and direction of Georgeson & Company, Inc. at an anticipated
cost to the Company of approximately $6,000 plus out-of-pocket expenses.
VOTING SECURITIES OUTSTANDING
Only holders of record of Common Stock at the close of business on March 8,
1999, will be entitled to vote at the meeting. On such date there were
outstanding 53,156,004 shares of Common Stock. Each outstanding share of Common
Stock entitles the holder to one vote.
The Bylaws of the Company provide that a majority of the shares of Common
Stock issued and outstanding and entitled to vote in person or by proxy shall
constitute a quorum at a meeting of stockholders of the Company. Shares of
Common Stock represented by a properly submitted proxy are considered present
for purposes of determining a quorum. A proxy may be submitted by returning a
properly signed and dated letter proxy or by following the directions for
submission using a Touchtone telephone.
1
<PAGE>
Under Delaware law, if a quorum is present, the nominees for election as
Directors who receive a plurality of the votes of shares present in person or
represented by proxy and entitled to vote shall be elected as Directors.
"Withheld" votes are not included in the total vote cast for a nominee for
purposes of determining whether a plurality was received and, therefore, have no
negative effect.
Under Delaware law, the proposed amendment to the Certificate of
Incorporation requires the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote. Shares that are not voted
for the amendment, including abstentions and broker non-votes, will have the
same effect as a vote against the amendment.
As of March 8, 1999, no person other than New York Life Trust Company held
of record, or, to the knowledge of the management of the Company, owned
beneficially, 5 percent or more of the outstanding shares of Common Stock of the
Company. New York Life Trust Company, Norwood, MA, held approximately 11.6
percent of the outstanding Common Stock of the Company as trustee of the
Company's Tax Deferred Compensation Savings Plans. New York Life Trust Company
disclaims all beneficial ownership of these shares.
PROPOSAL FOR AMENDMENT OF CERTIFICATE OF INCORPORATION: ARTICLE FOURTH
As of the close of business on March 8, 1999, the authorized capital stock
of the Company consisted of 77,000,000 shares 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 500,000 shares of
the par value of $100 per share; the total number of shares of such Preferred
Stock A authorized is 1,000,000 shares without par value; the total number of
shares of such Preference Stock authorized is 500,000 shares without par value;
and the total number of shares of Common Stock authorized is 75,000,000 with a
par value of $3.33 per share. As of March 8, 1999, 53,395,525 common shares were
issued with 8,077,377 shares reserved for issuance under the Dividend
Reinvestment and the Tax Deferred Compensation Savings Plans of the Company.
The Board of Directors of the Company has proposed an amendment to the
Certificate of Incorporation of the Company to increase the authorized number of
common shares from 75,000,000 to 150,000,000 shares and to reduce the par value
of the Common Stock from $3.33 per share to $1.00 per share. The resolution
adopted by the Board of Directors of the Company proposing this amendment to the
Certificate of Incorporation is attached hereto as Exhibit A.
During 1998, the Company effected a three-for-two stock split. After giving
effect to the stock split, there were, as of March 8, 1999, only 13.5 million
authorized shares of Common Stock that were not outstanding or reserved for
issuance. The Board of Directors believes that the additional authorized common
shares may be needed to enable the Company to raise additional capital funds
expeditiously and economically for its ongoing operational needs, for issuance
in the Company's several investment plans or for possible acquisitions, stock
distributions or split, or other corporate purposes. The Board believes it
advisable to authorize additional shares to permit the issuance of shares of
Common Stock without the delay and the expense involved in obtaining stockholder
approval at the time such issuance is determined to be appropriate. The Company
would seek and obtain all necessary regulatory authority prior to the issuance
of additional shares of Common Stock.
The Board of Directors has no plan at the present time for the issuance or
use of the additional shares of Common Stock to be authorized by the amendment.
The issuance of additional shares of authorized Common Stock would be within the
discretion of the Board of Directors, without the requirement of further action
by stockholders unless such action is required by applicable law or the rules of
any stock exchange on which the Company's securities may then be listed. All
newly authorized shares would have the same rights as the presently authorized
shares, including the right to cast one vote per share and to participate in
dividends when and to the extent declared and paid. The Board of Directors
believes that the
2
<PAGE>
reduction in par value will enable the Company to effect a stock split in the
future without further stockholder approval should economic conditions so
warrant and the Board so determines.
The Board of Directors is unaware of any specific effort to obtain control
of the Company, and has no present intention of using the proposed increase in
the number of authorized shares of Common Stock as an anti-takeover device.
However, the Company's authorized but unissued capital stock could be used to
make an attempt to effect a change in control more difficult.
Decreasing the par value is not intended to have any effect on the market
value of the Common Stock.
Under the Company's Certificate of Incorporation, no holders of any class of
stock of the Company are entitled to any preemptive rights with respect to any
shares of the Company's capital stock.
None of the Directors or officers of the Company has any interest, direct or
indirect, in the adoption of the proposed amendment except as a holder of shares
of the Common Stock of the Company.
No financial statements are furnished in connection with this proposal as
they are not deemed material for the exercise of prudent judgment with respect
thereto.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL. Approval of
the proposed amendment to increase the authorized number of shares of Common
Stock and reduce the par value of Common Stock requires the affirmative vote of
the holders of a majority of all of the outstanding Common Stock of the Company.
If a choice has been specified by a stockholder, the shares of Common Stock will
be voted accordingly. If no choice has been specified, the shares will be voted
"FOR" the proposal.
ELECTION OF DIRECTORS
At the meeting, three Directors will be elected to serve for a term of three
years until 2002, and until their respective successors are elected and qualify.
All of the nominees are incumbent Directors and are nominated for reelection.
Harold J. Mellen, Jr., who retired as President and Chief Executive Officer on
March 31, 1998, has decided not to stand for reelection as a Director. Mr.
Mellen served the Company with distinction for 13 years. He joined the Company
in 1985 as Vice President--Corporate Development and rose to President and Chief
Executive Officer on January 1, 1995. He served in that position until his
retirement on March 31, 1998. Unless otherwise specified when the proxy is
submitted, shares of the Common Stock represented by the proxy will be voted for
the nominees named below. If any nominee becomes unavailable for any reason, or
if a vacancy should occur before the election (which events are not
anticipated), the shares represented by the proxy will be voted for another
person in the discretion of the persons named in the proxy. Information
concerning the nominees, including their ages, periods of service
3
<PAGE>
as Directors, and business experience, according to information furnished to the
Company by the respective nominees, is set forth as follows:
<TABLE>
<CAPTION>
FIRST YEAR OF
SERVICE AS
NAME AGE DIRECTOR BUSINESS EXPERIENCE
- ------------------------------------ --- ------------- ---------------------------------------------------------
<S> <C> <C> <C>
Thomas Everist ..................... 49 1995 Mr. Everist is President and Chief Executive Officer of
(to be elected for a term expiring L. G. Everist, Inc., Sioux Falls, South Dakota, an
in 2002) aggregate production company. He is Vice President of
Spencer Quarries, Spencer, South Dakota, a rock quarry;
a Director of Standard Ready Mix, of Sioux City, Iowa;
[PHOTO] and a Director of Raven Industries, Inc., a general
manufacturer of electronics, sewn products, and
plastics, of Sioux Falls, South Dakota. He currently
serves on the Finance and Nominating Committees of the
Board of Directors.
Robert L. Nance .................... 62 1993 Mr. Nance is the majority owner, President, and Chief
(to be elected for a term expiring Executive Officer of Nance Petroleum Corporation,
in 2002) Billings, Montana, an oil and gas exploration and
production company. He is also a Director of First
Interstate Bank-Montana. He serves on the National
[PHOTO] Board of Governors and Executive Committee of the
Independent Petroleum Association of America and serves
on the Board, and is Chairman of the Petroleum Tech-
nology Transfer Council. He currently serves on the
Finance and Nominating Committees of the Board of
Directors.
John A. Schuchart .................. 69 1976 Mr. Schuchart, Chairman of the Board, was named Chief
(to be elected for a term expiring Executive Officer in June 1980 and Chairman in May
in 2002) 1983. He retired as Chief Executive Officer on December
31, 1994. Mr. Schuchart also serves as an ex officio
Director of the subsidiaries of the Company, the
[PHOTO] Managing Committee of Montana-Dakota Utilities Co., and
the MDU Resources Foundation. Mr. Schuchart serves on
various civic and charitable organizations in Bis-
marck, North Dakota, including the Board of Regents of
the University of Mary.
</TABLE>
4
<PAGE>
Certain information concerning the remaining Directors, whose terms expire
in 2000 or in 2001, including their ages, periods of service as Directors, and
business experience, according to information furnished to the Company, is set
forth as follows:
<TABLE>
<CAPTION>
FIRST YEAR OF
SERVICE AS
NAME AGE DIRECTOR BUSINESS EXPERIENCE
- ------------------------------------ --- ------------- ---------------------------------------------------------
<S> <C> <C> <C>
San W. Orr, Jr. .................... 57 1978 Mr. Orr is an attorney and is in the business of
(term expiring in 2000) financial and estate management. He is Chairman of the
Board and a Director of Wausau-Mosinee Paper
Corporation and is Vice Chairman of the Board of M&I
[PHOTO] First American Bank. He is a Director of Wausau
Insurance Companies, Marshall & Ilsley Corporation, and
M & I Marshall & Ilsley Bank. Mr. Orr also serves on
various civic and charitable organizations in Wisconsin
and is President of the Board of Regents of the Univer-
sity of Wisconsin System. He currently serves on the
Audit and Compensation Committees of the Board of
Directors and is Vice Chairman of the Board.
Harry J. Pearce .................... 56 1997 Mr. Pearce is the Vice Chairman and a Director of General
(term expiring in 2000) Motors Corporation. He is a Director of Hughes
Electronics Corporation, General Motors Acceptance
Corporation, Delphi Automotive Systems Corporation,
[PHOTO] Marriott International Inc., Alliance of Automobile
Manufacturers, the Economic Strategy Institute, the
Theodore Roosevelt Medora Foundation, and is a member
of the United States Air Force Academy's Board of Visi-
tors. He also serves on the Board of Trustees of Howard
University and is a member of The Northwestern Law
Board of the Northwestern University School of Law. He
currently serves on the Audit and Compensation
Committees of the Board of Directors.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
FIRST YEAR OF
SERVICE AS
NAME AGE DIRECTOR BUSINESS EXPERIENCE
- ------------------------------------ --- ------------- ---------------------------------------------------------
<S> <C> <C> <C>
Homer A. Scott, Jr. ................ 64 1981 Mr. Scott is engaged in the banking and hospitality
(term expiring in 2000) business in the states of Wyoming and Montana. He is a
Director and Chairman of the Board of First Interstate
BancSystem, Inc., a Director of First Interstate
[PHOTO] Bank-Montana, and Chairman of the Board and a Director
of First Interstate Bank-Wyoming. Mr. Scott is the
principal owner, a Director and President of Sugarland
Enterprises, Inc., and the managing partner of Sugar-
land 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 Commit-
tees of the Board of Directors.
Sister Thomas Welder, O.S.B. ....... 58 1988 Sister Welder is the President of the University of Mary,
(term expiring in 2000) Bismarck, North Dakota. She is a Director of St.
Alexius Medical Center of Bismarck and Chair of its
Marketing Committee. She is a Director of the
[PHOTO] Bismarck-Mandan Development Association and is a member
and past Director of the Bismarck-Mandan Area Chamber
of Commerce. She is also a member of the Theodore
Roosevelt Medora Founder's Society and the Consultant-
Evaluator Corps for the North Central Association of
Colleges and Schools. She currently serves on the
Finance and Nominating Committees of the Board of
Directors.
Douglas C. Kane .................... 49 1991 Mr. Kane was elected Executive Vice President, Chief
(term expiring in 2001) Administrative and Corporate Development Officer in
November 1997. He joined the Company as Executive Vice
President and Chief Operating Officer in January 1991.
[PHOTO] Prior to that time he was President and Chief Executive
Officer of Knife River Corporation from May 1990,
President from September 1987, and previously had
served as Senior Vice President-- Operations. During
1998, Mr. Kane served as Director and/or officer of
principal subsidiaries of the Company and as a member
of the Managing Committee of Montana-Dakota Utilities
Co.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
FIRST YEAR OF
SERVICE AS
NAME AGE DIRECTOR BUSINESS EXPERIENCE
- ------------------------------------ --- ------------- ---------------------------------------------------------
<S> <C> <C> <C>
Richard L. Muus .................... 69 1985 Mr. Muus retired in April 1989 after 35 years with
(term expiring in 2001) Midwest Federal Savings Bank, Minot, North Dakota. At
the time of his retirement, Mr. Muus was the President
and a Director of the bank. Mr. Muus is a member and
[PHOTO] past Director and Officer of the Minot Area Chamber of
Commerce and a past Director of the Minot Area Develop-
ment Corporation. He has served as Chairman of the
North Dakota Housing Finance Agency Advisory Board, as
a Director of the Federal Home Loan Bank of Des Moines,
and as a director of the U.S. League of Savings
Institutions. He is a member of the Board of Regents of
Minot State University. He currently serves on the
Audit and Finance Committees of the Board of Directors.
John L. Olson ...................... 59 1985 Mr. Olson is President and owner of Blue Rock Products
(term expiring in 2001) Company and of Blue Rock Distributing Company located
in Sidney, Montana, a beverage bottling and
distributing company, respectively. Mr. Olson also is
[PHOTO] Chairman of the Board and a Director of Admiral
Beverage Corporation, Worland, Wyoming, and Ogden,
Utah; he is Chairman of the Board and Director of the
Foundation for Community Care, Sidney, Montana; a
member of the Executive Committee of the University of
Montana Foundation; a Director of BlueCross BlueShield
of Montana; and is trustee for Blue Rock Products
Company Profit Sharing Trust, Sidney, Montana. He
currently serves on the Audit and Nominating Committees
of the Board of Directors.
Joseph T. Simmons .................. 63 1984 Mr. Simmons retired in May 1997 as a Professor of
(term expiring in 2001) Accounting and Finance, University of South Dakota,
Vermillion and was Visiting Professor of Finance,
University of Warsaw, Warsaw, Poland (February--July
[PHOTO] 1994). Mr. Simmons is the Chairman and President of
Simmons Financial Management, Inc. He also serves on
the Boards of GRO/TECH and RE/SPEC in Rapid City, South
Dakota, and Dairilean, Inc. in Sioux Falls, South
Dakota. He currently serves on the Finance and
Nominating Committees of the Board of Directors.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
FIRST YEAR OF
SERVICE AS
NAME AGE DIRECTOR BUSINESS EXPERIENCE
- ------------------------------------ --- ------------- ---------------------------------------------------------
<S> <C> <C> <C>
Martin A. White .................... 57 1998 Mr. White joined the Company in November 1991 as Vice
(term expiring in 2001) President--Corporate Development and was named Senior
Vice President--Corporate Development in November 1995.
Effective April 1, 1998, Mr. White became President and
[PHOTO] Chief Executive Officer. He also serves as Chairman of
the Board, a Director and/or an Officer of all
principal subsidiaries, and as Chairman of the Managing
Committee of Montana-Dakota Utilities Co. Prior to
joining the Company, Mr. White was Chairman and Chief
Executive Officer of White Resources Corporation
(November 1989-- October 1991); Executive Vice
President and Chief Operating Officer of Consolidated
TVX Mining Corporation of Chile (January 1988--
November 1989); and Chairman, President, and Chief
Operating Officer of Entech Inc. (September
1986--December 1988), which comprise the non-utility
subsidiaries of The Montana Power Company. He is a
member of the University of Mary Board of Regents, the
Missouri Slope Areawide United Way Board of Trustees,
the North Dakota Lewis & Clark Bicentennial Foundation
Board, and the Western Regional Council Board of
Trustees.
</TABLE>
Except where expressly noted, no corporation or organization named above is
a parent, subsidiary, or other affiliate of the Company.
During 1998, the Board of Directors had six meetings. The Board of Directors
has an Audit Committee, a Compensation Committee, a Finance Committee, and a
Nominating Committee. All Committees are composed entirely of outside Directors.
The Audit Committee, established in 1972, meets regularly with management,
internal auditors, and representatives of the Company's independent public
accountants. The independent accountants have free access to the Committee and
the Board of Directors. During 1998, the Committee met three times and reviewed
the scope, timing, and fees for the annual audit, other services provided by the
independent accountants, and the results of audit examinations completed by the
independent accountants. The Audit Committee reports the results of its
activities to the full Board of Directors. No member of the Audit Committee is
or has been an employee of the Company. The Compensation Committee, which met
four times during 1998, sets compensation levels for executive officers and
recommends to the full Board of Directors compensation for the Directors of the
Company. The Finance Committee, which met nine times during 1998, reviews
corporate financial plans, policies, budgets, investments and acquisitions, and
reviews and authorizes actions necessary to issue and sell Common Stock and debt
securities of the Company. The Nominating Committee, which met three times
during 1998, recommends to the full Board of Directors nominees for Director.
All incumbent Directors, except Mr. Pearce who was absent from some meetings due
to illness, attended more than 75 percent of the combined total of the meetings
of the Board and of the Committees on which the Director served.
8
<PAGE>
EXECUTIVE COMPENSATION
Shown below is information concerning the annual and long-term compensation
for services in all capacities to the Company for the calendar years ending
December 31, 1998, 1997, and 1996, for those persons who (i) served as the Chief
Executive Officer during 1998, and (ii) were the other four most highly
compensated executive officers of the Company at December 31, 1998 (the "Named
Officers"). Footnotes supplement the information contained in the Tables.
TABLE 1: SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------- ----------------------------- -----------
(A) (B) (C) (D) (E) (F) (G) (H)
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING
COMPEN- STOCK OPTIONS/ LTIP
NAME AND SALARY BONUS(2) SATION(3) AWARDS(4) SARS(5) PAYOUTS(6)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
- ---------------------------- --------- --------- ----------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Martin A. White 1998 254,808 139,461 54,157 122,760 43,937
--President & C.E.O. 1997 147,316 54,450 -- -- --
1996 135,856 52,350 -- -- --
Harold J. Mellen, Jr. 1998 176,447 38,367 16,408 109,243 2,250 244,865
--President & C.E.O. 1997 342,735 186,450 10,581 -- -- --
(retired 3/31/98) 1996 276,373 189,150 -- -- --
Douglas C. Kane 1998 210,185 63,032 62,689 55,800 137,605
--Executive Vice President 1997 201,772 92,250 -- -- --
Chief Administrative & 1996 192,281 106,500 -- -- --
Corporate Development
Officer
Ronald D. Tipton 1998 223,491 103,500 -- 49,125 142,827
--President & C.E.O. of 1997 200,655 92,250 -- -- --
Montana-Dakota Utilities 1996 190,000 115,363 -- -- --
Co.
Warren L. Robinson 1998 150,865 57,855 43,771 37,950 75,320
--Vice President, 1997 128,843 63,750 -- -- --
Treasurer 1996 111,937 58,200 -- -- --
& Chief Financial Officer
Lester H. Loble, II 1998 139,694 43,848 3,963 41,916 27,900 48,737
--Secretary and 1997 127,473 54,450 3,620 -- -- --
General Counsel 1996 122,592 47,100 -- -- --
<CAPTION>
(A) (I)
ALL OTHER
COMPEN-
NAME AND SATION(7)
PRINCIPAL POSITION ($)
- ---------------------------- -----------
<S> <C>
Martin A. White 5,484
--President & C.E.O. 4,875
4,076
Harold J. Mellen, Jr. 12,947
--President & C.E.O. 6,598
(retired 3/31/98) 5,886
Douglas C. Kane 4,800
--Executive Vice President 4,750
Chief Administrative & 4,500
Corporate Development
Officer
Ronald D. Tipton 4,998
--President & C.E.O. of 4,948
Montana-Dakota Utilities 4,788
Co.
Warren L. Robinson 4,526
--Vice President, 3,865
Treasurer 2,773
& Chief Financial Officer
Lester H. Loble, II 4,191
--Secretary and 3,824
General Counsel 3,688
</TABLE>
- ------------------------------
(1) All share amounts in the table are adjusted to reflect the Company's
three-for-two stock split on July 13, 1998.
(2) Granted pursuant to the Executive Incentive Compensation Plan.
(3) Above-market interest on deferred compensation.
(4) The restricted stock awards in the table are valued at fair market value on
the date of grant. At December 31, 1998, the Named Officers held the
following amounts of restricted stock: Mr. White--2,190 shares ($58,172);
Mr. Mellen--4,440 shares ($117,938); Mr. Kane--2,535 shares ($67,336); Mr.
Tipton--2,250 shares ($59,766); Mr. Robinson--1,770 ($47,016); and Mr.
Loble--1,695 shares ($45,023).
(5) Options granted pursuant to the 1992 KESOP for the 1998-2000 performance
cycle except for Mr. Mellen who received options as part of his Director
compensation after his retirement as CEO.
(6) Dividend equivalents paid with respect to options granted pursuant to the
1992 KESOP for the 1995-1997 performance cycle.
(7) Totals shown are the Company contributions to the Tax Deferred Compensation
Savings Plan, with the following exceptions: Mr. White's total includes
insurance premiums of $684; Mr. Mellen's total includes insurance premiums
of $462 and excess retirement benefit of $7,835; and Mr. Tipton's total
includes insurance premiums of $198.
9
<PAGE>
TABLE 2: OPTION/SAR(1) GRANTS IN LAST FISCAL YEAR(2)
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS(3) VALUE
------------------------------------------------------ -------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES IN EXERCISE OR PRESENT
GRANTED FISCAL BASE PRICE EXPIRATION VALUE(4)
NAMED OFFICER (#) YEAR(%) ($/SHARE) DATE ($)
(A) (B) (C) (D) (E) (F)
--------------- ------------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Martin A. White................. 122,760 10.2 21.13 2/10/08 293,396
Harold J. Mellen, Jr............ 2,250 .2 23.08 6/3/08 7,673
Douglas C. Kane................. 55,800 4.6 21.13 2/10/08 133,362
Ronald D. Tipton................ 49,125 4.1 21.13 2/10/08 117,409
Warren L. Robinson.............. 37,950 3.1 21.13 2/10/08 90,701
Lester H. Loble, II............. 27,900 2.3 21.13 2/10/08 66,681
</TABLE>
- ------------------------
(1) "SAR" is an acronym for "stock appreciation right." The Company has no plan
or program which uses stock appreciation rights.
(2) Adjusted to reflect the Company's three-for-two stock split on July 13,
1998.
(3) All options except Mr. Mellen's were granted pursuant to the 1992 Key
Employee Stock Option Plan. Mr. Mellen's options were granted as part of his
Director compensation after his retirement as CEO and vested immediately
upon grant. The options granted under the 1992 Key Employee Stock Option
Plan become exercisable automatically in nine years on February 10, 2007.
Vesting is accelerated upon change in control or upon attainment of certain
performance goals, as follows: during the three year performance cycle
(1998-2000) 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 equity (50%) and
earnings (50%). 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.
Dividend Equivalents granted with the options are described in Table 4.
(4) 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 pursuant to the 1992 Key Employee Stock Option Plan is $2.39 based
on the following inputs:
<TABLE>
<S> <C>
Stock Price (fair market value) at Grant (2/10/98)................. $21.13
Exercise Price..................................................... $21.13
Expected Option Term............................................... 7 Years
Stock Price Volatility............................................. 0.1625
Dividend Yield..................................................... 5.13%
</TABLE>
The model assumes: (a) a risk-free interest rate of 4.78 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.
The option grants to Mr. Mellen were made pursuant to the 1997 Non-Employee
Director Long-Term Incentive Plan under assumptions similar to those for the
Key Employee Stock Option Plan except
10
<PAGE>
that assumptions differing from those utilized with respect to the Key
Employee Stock Option Plan were: (a) a Stock Price at grant and Exercise
Price of $23.08; (b) a risk free interest rate of 4.87 percent; (c) Stock
Price Volatility of 0.2001; and (d) Dividend Yield of 4.94 percent. Based on
these inputs, the estimated present value of each stock option granted to
Mr. Mellen is $3.41.
TABLE 3: AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES(1)
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF
SHARES SECURITIES UNDERLYING VALUE OF UNEXERCISED,
ACQUIRED ON VALUE UNEXERCISED OPTIONS IN-THE- MONEY OPTIONS
EXERCISE REALIZED AT FISCAL YEAR-END(2) AT FISCAL YEAR-END
(#) ($) (#) ($)
----------- --------- ------------------------ ------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Martin A. White............... 22,652 319,271 0 122,760 0 667,508
Harold J. Mellen, Jr.......... 74,610 767,800 2,250(3) 0 7,828 0
Douglas C. Kane............... 10,000 147,500 46,343 55,800 667,518 303,413
Ronald D. Tipton.............. 49,432 666,304 0 49,125 0 267,117
Warren L. Robinson............ 17,137 179,309 7,912 37,950 112,581 206,353
Lester H. Loble, II........... 0 0 14,850 27,900 211,304 151,706
</TABLE>
- ------------------------
(1) Adjusted to reflect the Company's three-for-two stock split on July 13,
1998.
(2) Vesting is accelerated upon a change in control.
(3) Options were awarded under the 1997 Non-Employee Director Long-Term
Incentive Plan on June 3, 1998.
TABLE 4: LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-BASED PLANS
-----------------------------------
(A) (B) (C) (D) (E) (F)
NUMBER OF PERFORMANCE
SHARES, OR OTHER
UNITS OR PERIOD
OTHER UNTIL
RIGHTS MATURATION THRESHOLD TARGET MAXIMUM
NAMED OFFICER (#)(2) OR PAYOUT ($) ($) ($)
- ----------------------------------------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Martin A. White.......................... 122,760 1998-2000 147,312 294,624 441,936
Harold J. Mellen, Jr..................... -- -- -- -- --
Douglas C. Kane.......................... 55,800 1998-2000 66,960 133,920 200,880
Ronald D. Tipton......................... 49,125 1998-2000 58,950 117,900 176,850
Warren L. Robinson....................... 37,950 1998-2000 45,540 91,080 136,620
Lester H. Loble, II...................... 27,900 1998-2000 33,480 66,960 100,440
</TABLE>
- ------------------------
(1) Adjusted to reflect the Company's three-for-two stock split on July 13,
1998.
(2) Dividend equivalents were granted pursuant to the 1992 Key Employee Stock
Option 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 150% at the end of the three year
performance cycle (1998-2000) 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
11
<PAGE>
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.
TABLE 5: PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ----------------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$125,000............................................. $ 79,572 $ 88,215 $ 96,859 $ 105,503 $ 114,147
150,000............................................. 95,689 106,145 116,602 127,058 137,514
175,000............................................. 108,545 119,726 130,908 142,090 153,271
200,000............................................. 121,145 132,326 143,508 154,690 165,871
225,000............................................. 132,125 143,306 154,488 165,670 176,851
250,000............................................. 143,045 154,226 165,408 176,590 187,771
300,000............................................. 179,285 190,466 201,648 212,830 224,011
350,000............................................. 226,865 238,046 249,228 260,410 271,591
400,000............................................. 267,845 279,026 290,208 301,390 312,571
450,000............................................. 307,745 318,926 330,108 341,290 352,471
500,000............................................. 347,945 359,126 370,308 381,490 392,671
</TABLE>
The Table covers the amounts payable under the Salaried Pension Plan and
non-qualified Supplemental Income Security Plan (SISP). Pension benefits are
determined by the step-rate formula which places emphasis on the highest
consecutive 60 months of earnings within the final 10 years of service. Benefits
for single participants under the Salaried Pension Plan are paid as straight
life amounts and benefits for married participants are paid as actuarially
reduced pensions with a survivorship benefit for spouses, unless participants
choose otherwise. The Salaried Pension Plan also permits preretirement
survivorship benefits upon satisfaction of certain conditions. Additionally,
certain reductions are made for employees electing early retirement.
The Internal Revenue Code places maximum limitations on the amount of
benefits that may be paid under the Salaried Pension Plan. The Company has
adopted a non-qualified SISP for senior management personnel. In 1998, 70 senior
management personnel participated in the SISP, including the Named Officers.
Both plans cover salary shown in column (c) of the Summary Compensation Table
and exclude bonuses and other forms of compensation.
Upon retirement and attainment of age 65, participants in the SISP may elect
a retirement benefit or a survivors' benefit with the benefits payable monthly
for a period of 15 years.
As of December 31, 1998, the Named Officers were credited with the following
years of service under the plans: Mr. White: Pension, 7, SISP, 7; Mr. Mellen:
Pension, 12, SISP, 12; Mr. Kane: Pension, 27, SISP, 17; Mr. Tipton: Pension, 15,
SISP, 15; Mr. Robinson: Pension 10, SISP 10; and Mr. Loble: Pension, 11, SISP,
11. The maximum years of service for benefits under the Pension Plan is 35 and
under the SISP vesting begins at 3 years and is complete after 10 years. Benefit
amounts under both plans are not subject to reduction for offset amounts.
CHANGE-OF-CONTROL ARRANGEMENTS
The Company entered into Change of Control Employment Agreements with the
Named Officers (except Mr. Mellen) in November 1998, which would become
effective for a three-year period (with automatic annual extension if the
Company does not provide nonrenewal notice at least 60 days prior to the end of
each 12-month period) only upon a change of control of the Company. If a change
of control occurs, the agreements provide for a three-year employment period
from the date they become effective, with base salary not less than the highest
amount paid within the preceding twelve months, an annual
12
<PAGE>
bonus not less than the highest bonus paid within the preceding three years, and
participation in the Company's incentive, savings, retirement and welfare
benefit plans.
The agreements also provide that specified payments and benefits would be
paid in the event of involuntary termination of employment, other than for cause
or disability, at any time when the agreements are in effect. In such event,
each of the Named Officers (except Mr. Mellen) would receive payment of an
amount equal to three times his annual base pay plus three times his highest
annual bonus (as defined therein). In addition, under these agreements, each of
the officers would receive (i) an immediate pro-rated cash-out of his bonus for
the year of termination based on the highest annual bonus and (ii) an amount
equal to the excess of (a) the actuarial equivalent of the benefit under Company
qualified and nonqualified retirement plans that the executive would receive if
he continued employment with the Company for an additional three years over (b)
the actual benefit paid or payable under these plans. All benefits of each
executive officer under the Company's welfare benefit plans would continue for
at least three years. These arrangements also provide for certain gross-up
payments to compensate these executive officers for any excise taxes incurred in
connection with these benefits and reimbursement for certain outplacement
services.
For these purposes, "cause" means the Named Officer's willful and continued
failure to substantially perform his duties or willfully engaging in illegal
conduct or misconduct materially injurious to the Company, and "good reason"
includes the Company's termination of the Named Officer without cause, the
assignment to the Named Officer of duties inconsistent with his prior status and
position, certain reductions in compensation or benefits, and relocation or
increased travel obligations.
A "change of control" is defined as (i) the acquisition by a party or
certain related parties of 20% or more of the Company's voting securities; (ii)
a turnover in a majority of the Board of Directors without the approval of a
majority of the members of the Board as of November 1998; (iii) a merger or
similar transaction after which the Company's shareholders hold 60% or less of
the voting securities of the surviving entity; or (iv) the stockholders'
approval of the liquidation or dissolution of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The Compensation Committee of the Board of Directors is responsible for
determining the compensation of the Company's executive officers. Composed
entirely of non-employee Directors, the Committee meets several times each year
to review and determine compensation for the executive officers, including the
Chief Executive Officer.
EXECUTIVE COMPENSATION
The Committee firmly believes that appropriate compensation levels succeed
in both attracting and motivating high quality employees. To implement this
philosophy, the Committee analyzes trends in compensation among comparable
companies participating in the oil and gas industry, segments of the energy and
mining industries, the peer group of companies used in the graph following this
report, and similar companies from general industry. The Committee then sets
compensation levels that it believes are competitive within the industry and
structured in a manner that rewards successful performance on the job. There are
three components of total executive compensation: base salary, annual incentive
compensation, and long-term incentive compensation.
In setting base salaries, the Committee does not use a particular formula.
In addition to the data referenced above, other factors the Committee uses in
its analysis include the executive's current salary in comparison to the
competitive industry standard as well as individual performance. Using this
system, the Committee granted to Mr. White, the President and Chief Executive
Officer, a 44% increase in base salary. This increase took into account Mr.
White's promotion from Senior Vice President -- Corporate
13
<PAGE>
Development to President and Chief Executive Officer, his personal role in
achieving 1998 corporate performance, his rapid and capable assumption of his
new duties, and the successful acquisitions made during the year. During 1998,
only approximately 39.7% of Mr. White's compensation was base pay. The remainder
was performance-based. This reflects the Committee's belief in the importance of
having substantial at risk compensation to provide a direct and strong link
between performance and executive pay. The other Named Officers, excluding Mr.
Mellen, received base salary increases averaging 6.4% in 1998.
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 $139,461 (or 116.7% of the targeted
amount) in annual incentive compensation for 1998; the other Named Officers,
excluding Mr. Mellen, received an average of $67,059, or 119% of the targeted
amount, based upon achievement of corporate earnings and individual performance
near the maximum level.
Long-term incentive compensation serves to encourage successful strategic
management and is determined through three different vehicles: the 1992 Key
Employee Stock Option Plan, the Restricted Stock Bonus Plan, and the 1997
Executive Long-Term Incentive Plan. Options with a three-year performance cycle
(1998-2000) and related dividend equivalents were granted in 1998 under the 1992
Key Employee Stock Option Plan to Mr. White, the other Named Officers and
certain other executives. Since options granted in 1995 vested in full in 1997
based upon achievement of performance goals at the maximum level for the
1995-1997 performance cycle, the Committee granted new stock options and
dividend equivalents in 1998 to continue to motivate executives to achieve
long-term corporate performance goals and to encourage ownership by them of
Company common stock. The options become exercisable automatically in nine
years, but vesting may be accelerated if certain performance goals are achieved.
The number of options and dividend equivalents granted was determined based upon
a percent of the salary of each executive.
Restricted stock awards were also made in 1998 to Mr. White and the other
Named Officers to reward them for successful acquisitions completed by the
Company during 1998. The restricted stock serves to motivate long-term
performance and to align the interests of the executives with those of
stockholders.
In 1994, the Board of Directors adopted Stock Ownership Guidelines under
which executives are required to own Company Common Stock valued from one to
four times their annual salary.
The 1998 compensation paid to the Company's executive officers qualified as
fully deductible under federal tax laws. The Committee continues to review the
impact of federal tax laws on executive compensation, including Section 162(m)
of the Internal Revenue Code, but has not formulated any policy with regard
thereto.
San W. Orr, Jr., Chairman Harry J. Pearce, Member Homer A. Scott, Jr., Member
14
<PAGE>
MDU RESOURCES GROUP, INC.
COMPARISON OF FIVE YEAR TOTAL STOCKHOLDER RETURN (1)
Total Stockholder Return Index (1993=100)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MDU S&P 500 NEW PEER GROUP OLD PEER GROUP
<S> <C> <C> <C> <C>
1993 $100.00 $100.00 $100.00 $100.00
1994 $91.00 $101.00 $91.00 $91.00
1995 $106.00 $139.00 $115.00 $113.00
1996 $129.00 $171.00 $136.00 $117.00
1997 $185.00 $229.00 $179.00 $159.00
1998 $238.00 $294.00 $204.00 $176.00
</TABLE>
(1) All data is indexed to December 31, 1993, 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 Black Hills
Corporation, Coastal Corporation, Equitable Resources, Inc., LG&E Energy
Corp., Minnesota Power & Light Company, The Montana Power Company,
Northwestern Corporation, ONEOK, Inc., Otter Tail Power Company, Questar
Corporation, and UGI Corporation. Old Peer Group issuers are Black Hills
Corporation, CILCORP, Inc., Equitable Resources, Inc., Florida Progress
Corporation, Minnesota Power & Light Company, The Montana Power Company,
ONEOK, Inc., Questar Corporation, South Jersey Industries, Inc., Teco Energy,
Inc., UGI Corporation, and Utilicorp United Inc. The peer group was changed
to include issuers that better reflect the Company's mix of regulated and
unregulated businesses.
DIRECTORS' COMPENSATION
Each Director who is not an officer of the Company (except the Chairman of
the Board) receives $13,000 and 450 shares of Company Common Stock as an annual
retainer for Board service. The Chairman receives $52,000 and 450 shares of
Company Common Stock. Audit and Nominating Committee Chairmen each receive a
$2,500 annual retainer, and Finance and Compensation Committee Chairmen each
receive a $4,000 annual retainer. Additionally, each Director who is not an
officer of the Company receives $1,000 for each meeting of the Board of
Directors attended and each Committee member who is not an officer of the
Company receives $1,000 for each Committee meeting attended. All Directors
except the Chairman of the Board must defer $1,000 of the retainer, which amount
is credited to a deferral account quarterly. The deferral amount is divided by
the market price of Company Common Stock and
15
<PAGE>
converted to investment units. If dividends are paid on Company Common Stock
then an equivalent amount is credited for each investment unit and the resulting
amount is converted to investment units and credited to such Directors'
accounts. After a participating Director leaves the Board, dies, or becomes
disabled, then the investment units credited to that Director's account are
multiplied times the market price of the Company Common Stock, converted to a
dollar value, and paid to the Director or named beneficiary in equal monthly
payments (with interest) over a five year period. Of the remaining cash
retainer, each Director may direct the retainer be paid in one or a combination
of the following forms: (1) deferred into the account described, (2) Company
stock, or (3) cash. Each Director who is not an officer of the Company received
on June 3, 1998, an option to purchase 2,250 shares of Company Common Stock. The
option award vested immediately and is exercisable for 10 years from the date of
grant. The option price was $23.0833, the fair market value of the stock on the
date of the grant.
The Company also has a post-retirement arrangement for Directors who are not
officers or retired officers of the Company which provides that after retirement
from the Board, a Director is entitled to receive an annual amount equal to the
sum of all annual retainers in effect at the time of retirement. Such amount
will be paid to the Director or named beneficiary in equal monthly installments
over a period of time equal to the period of service on the Board.
The Company also has a program whereby past Directors of the Company may be
chosen each year as "Director Emeritus" and each such past Director so chosen
may be invited to participate as a nonvoting member of the Company's Board of
Directors. Each such "Director Emeritus" serves for five years and receives no
compensation, other than reimbursement by the Company for reasonable travel
expenses in connection with attendance at meetings of the Company's Board of
Directors.
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.
<TABLE>
<CAPTION>
PRESENT CORPORATE POSITION
NAME AGE AND BUSINESS EXPERIENCE
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Martin A. White........................ 57 President and Chief Executive Officer. For information about Mr.
White, see "Election of Directors."
Cathleen M. Christopherson............. 54 Ms. Christopherson was elected Vice President-Corporate
Communications effective November 1989. Prior to that she served
as Assistant Vice President-Corporate Communications effective
September 1989 and Division Manager of Montana-Dakota Utilities
Co., a Division of the Company, from August 1984.
Douglas C. Kane........................ 49 Executive Vice President, Chief Administrative and Corporate
Development Officer. For information about Mr. Kane, see
"Election of Directors."
Lester H. Loble, II.................... 57 Mr. Loble was elected General Counsel and Secretary of the Company
effective May 1987. Mr. Loble also serves as a Director and/or
General Counsel and Secretary of the principal subsidiaries of
the Company. Mr. Loble is also a member and the Secretary of the
Managing Committee of Montana-Dakota Utilities Co., a Division
of the Company.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
PRESENT CORPORATE POSITION
NAME AGE AND BUSINESS EXPERIENCE
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Vernon A. Raile........................ 54 Mr. Raile was elected Vice President, Controller and Chief
Accounting Officer effective August 1992. Prior to that he was
Controller and Chief Accounting Officer from May 1989, Assistant
Treasurer from December 1987, and Tax Manager from March 1980.
Warren L. Robinson..................... 48 Mr. Robinson was elected Vice President, Treasurer and Chief
Financial Officer of the Company effective August 1992. He is
also Vice President, Vice President and Chief Financial Officer,
Treasurer and Assistant Secretary, or Treasurer, of subsidiaries
of the Company. Mr. Robinson also is a member of the Managing
Committee of Montana-Dakota Utilities Co., a Division 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....................... 52 Mr. Tipton was elected President and Chief Executive Officer of
Montana-Dakota Utilities Co. effective January 1995. Prior to
that time he served Williston Basin Interstate Pipeline Company
in the following capacities: President and Chief Executive
Officer 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......................... 56 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.
</TABLE>
17
<PAGE>
SECURITY OWNERSHIP
The Table below sets forth the number of shares of capital stock of the
Company owned beneficially as of December 31, 1998, by each Director and each
nominee for Director, each Named Officer and by all Directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE OF
OWNERSHIP CLASS
------------------ -------------
NAME COMMON(1) COMMON
- ---------------------------------------------------------------------------------- ------------------ -------------
<S> <C> <C>
Thomas Everist.................................................................... 10,600 *
Douglas C. Kane................................................................... 91,208(2) *
Lester H. Loble, II............................................................... 45,217(2) *
Harold J. Mellen, Jr.............................................................. 57,365 *
Richard L. Muus................................................................... 15,816 *
Robert L. Nance................................................................... 10,726(3) *
John L. Olson..................................................................... 28,800 *
San W. Orr, Jr.................................................................... 137,176(4) *
Harry J. Pearce................................................................... 20,821 *
Warren L. Robinson................................................................ 30,766(2)(5) *
John A. Schuchart................................................................. 204,381(6) *
Homer A. Scott, Jr................................................................ 12,403(7) *
Joseph T. Simmons................................................................. 16,367 *
Ronald D. Tipton.................................................................. 48,625(2) *
Sister Thomas Welder.............................................................. 4,950(8) *
Martin A. White................................................................... 29,466(2) *
All Directors and executive officers of the Company as a group (19 in number)..... 867,366(2) 1.6%
</TABLE>
- ------------------------
* Less than one percent of the class.
(1) The totals include beneficial ownership of shares which may be acquired
within 60 days pursuant to stock options: Mr. Everist 2,250 shares, Mr. Kane
46,343 shares, Mr. Loble 14,850 shares, Mr. Mellen 2,250 shares, Mr. Muus
4,500 shares, Mr. Nance 4,500 shares, Mr. Olson 2,250 shares, Mr. Orr 4,500
shares, Mr. Pearce 2,250 shares, Mr. Robinson 7,912 shares, Mr. Schuchart
2,250 shares, Mr. Scott 4,500 shares, Mr. Simmons 4,500 shares, Sister
Thomas Welder: see footnote 8, and all Directors and all executive officers
of the Company as a group 145,539 shares.
(2) Includes full shares allocated to the officer's account in the Tax Deferred
Compensation Savings Plan.
(3) 2,250 shares of the total is owned by Nance Petroleum Corporation.
(4) Mr. Orr serves as a co-trustee with shared voting and investment power of
various trusts and as an officer and Director of the corporate trustee for
various other trusts holding these shares. Mr. Orr disclaims beneficial
ownership of all but 4,149 shares held by the trusts.
(5) Includes 689 shares owned by Mr. Robinson's children and 225 shares by his
wife.
(6) Includes 118,099 shares owned by Mr. Schuchart's wife. Mr. Schuchart
disclaims all beneficial ownership of the shares owned by his wife.
(7) Shares held by Homer A. Scott, Jr. Trust. Mr. Scott is a co-trustee of the
trust and shares voting and investment power with respect to these shares.
(8) Shares held by the Annunciation Monastery, of which community Sister Thomas
Welder is a member. The total includes 4,500 shares which may be acquired
within 60 days pursuant to stock options. Sister Thomas Welder disclaims all
beneficial ownership of these shares owned by the Monastery.
18
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ACCOUNTING AND AUDITING MATTERS
Upon recommendation of the Audit Committee, the Board of Directors has
selected and employed the firm of Arthur Andersen LLP as the Company's
independent certified public accountants to audit its financial statements for
the fiscal year 1998. The Audit Committee is presently composed of Messrs.
Richard L. Muus, John L. Olson, San W. Orr, Jr., Harry J. Pearce, and Homer A.
Scott, Jr. (Chairman). This will be the thirteenth year in which the firm has
acted in this capacity. A representative of Arthur Andersen will be present at
the Annual Meeting of Stockholders. It is not anticipated that the
representative will make a prepared statement at the meeting. However, he or she
will be free to do so if he or she so chooses, as well as responding to
appropriate questions.
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.
2000 ANNUAL MEETING OF STOCKHOLDERS
Under the Company's Bylaws, nominations for Director may be made only by the
Board or the Nominating Committee, or by a stockholder entitled to vote who has
delivered written notice to the Secretary of the Company (containing certain
information specified in the Bylaws) not less than 120 days prior to the
anniversary of the date on which the Company first mailed its proxy materials
for the prior year's annual meeting. The Bylaws also provide that no business
may be brought before an annual meeting of the stockholders except as specified
in the notice of the meeting or as otherwise properly brought before the meeting
by or at the direction of the Board or by a stockholder entitled to vote who has
delivered written notice to the Secretary of the Company (containing certain
information specified in the Bylaws) not less than 120 days prior to the
anniversary of the date on which the Company first mailed its proxy materials
for the prior year's annual meeting.
Rule 14a-4 of the Securities and Exchange Commission's proxy rules allows
the Company to use discretionary voting authority to vote on matters coming
before an annual meeting of stockholders, if the Company does not have notice of
the matter at least 45 days before the anniversary of the date on which the
Company first mailed its proxy materials for the prior year's annual meeting of
stockholders or the date specified by an advance notice provision in the
Company's Bylaws. The Company's Bylaws contain such an advance notice provision
as decribed above. For the Company's Annual Meeting of Stockholders expected to
be held on April 25, 2000, stockholders must submit such written notice to the
Secretary of the Company on or before November 16, 1999.
These requirements are separate and apart from and in addition to the
Securities and Exchange Commission's requirements that a stockholder must meet
in order to have a stockholder proposal included in the Company's Proxy
Statement under Rule 14a-8 of the Exchange Act. For purposes of the Company's
Annual Meeting of Stockholders expected to be held on April 25, 2000, any
stockholder who wishes to submit a proposal for inclusion in the Company's proxy
materials must submit such proposal to the Secretary of the Company on or before
November 16, 1999.
19
<PAGE>
A copy of the full text of the Bylaw provisions discussed above may be
obtained by writing to the Secretary of the Company.
------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (EXCLUDING EXHIBITS) FOR
THE YEAR ENDED DECEMBER 31, 1998, WHICH IS REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WILL BE MADE AVAILABLE TO STOCKHOLDERS TO
WHOM THIS PROXY STATEMENT IS MAILED, WITHOUT CHARGE, UPON WRITTEN REQUEST TO THE
OFFICE OF THE TREASURER OF MDU RESOURCES GROUP, INC., SCHUCHART BUILDING, 918
EAST DIVIDE AVENUE, MAILING ADDRESS: P.O. BOX 5650, BISMARCK, ND 58506-5650.
By order of the Board of Directors,
[/S/ LESTER H. LOBLE, II]
Lester H. Loble, II
SECRETARY
March 15, 1999
20
<PAGE>
EXHIBIT A
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 75,000,000 shares of Common Stock with the
par value of $3.33, to 150,000,000 shares with the par value of $1.00, effective
at the close of business on the date on which the appropriate Certificate of
Amendment to the Company's 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 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 One Hundred Fifty-two Million (152,000,000)
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
One Hundred Fifty Million (150,000,000) of the par value of One and
no/100 Dollars ($1.00) per share (hereinafter called the "Common
Stock"), amounting in the aggregate to One Hundred Fifty Million Dollars
($150,000,000).
FURTHER RESOLVED, that the Board of Directors hereby directs that the
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.
<PAGE>
[LOGO] PROXY
ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 1999 - 11:00 AM (CDT)
The undersigned hereby appoints John A. Schuchart, Martin A. White, 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 AM (CDT), April 27, 1999, at 909 Airport Road, Bismarck, ND
58504, and at any adjournment thereof, upon all subjects that may properly come
before the meeting, including the matters described in the Proxy Statement
furnished herewith, subject to any directions indicated below. YOUR VOTE IS
IMPORTANT! ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING. Either (1)
mark, date, sign, and return this letter proxy in the envelope provided (no
postage is necessary if mailed in the United States), or (2) submit your proxy
by Touchtone telephone (following the instructions on the reverse side). IF NO
DIRECTIONS ARE GIVEN, THE PROXIES WILL VOTE FOR THE ELECTION OF ALL LISTED
NOMINEES, IN ACCORD WITH THE DIRECTORS' RECOMMENDATION ON THE OTHER MATTER
LISTED ON THIS PROXY, AND AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE MEETING. We regret that we are unable to respond to
comments noted on this proxy. We do welcome communications from stockholders, so
if you have comments please send them in a separate letter. Thank you.
PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE: /X/
Item 1. THE ELECTION OF DIRECTORS
NOMINEES: 01 Thomas Everist 02 Robert L. Nance 03 John A. Schuchart
/ / FOR ALL NOMINEES / / WITHHOLD FOR ALL NOMINEES / / WITHHOLD FOR
To withhold authority to vote for any individual nominee, mark the box next
to "WITHHOLD FOR" and write the nominee's name in the space provided:
_________________________________________________________ . Your shares
will be voted for the remaining nominees.
Item 2. AMEND ARTICLE FOURTH OF THE CERTIFICATE OF INCORPORATION increasing the
number of shares of Common Stock and decreasing the par value of Common Stock.
/ / FOR / / AGAINST / / ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES IN ITEM 1 AND "FOR"
ITEM 2.
<PAGE>
[LOGO] -------------
COMPANY #
CONTROL #
-------------
ANNUAL MEETING OF STOCKHOLDERS - APRIL 27, 1999
MDU Resources Group, Inc. offers you the convenience of voting your proxy by
Touchtone telephone using the toll-free automated telephone voting system.
Your telephone vote allows your shares to be voted in the same manner as if
you marked, signed and returned the proxy card. This system is available 24
hours a day. A recorded voice will confirm your vote has been cast as you
directed and end the phone call. The deadline for voting by telephone is
11:00 AM (CDT) one business day prior to the Annual Meeting date.
TELEPHONE VOTING INSTRUCTIONS: Using a Touchtone telephone, dial 1-800-240-
6326. When prompted, enter the 3 digit company number located in the box in the
upper right-hand corner. When prompted, enter the 7 digit control number that
follows the 3 digit company number.
- --------------------------------------------------------------------------------
Option #1: To vote as the Board of Directors recommends on ALL matters, press 1.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Option #2: If you choose to vote each item separately, press 0.
- --------------------------------------------------------------------------------
Item 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9; to WITHHOLD FOR AN INDIVIDUAL nominee, press 0. You will be
asked to enter the 2 digit number next to the nominee name you wish to
withhold.
Item 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
When asked, please confirm your vote by pressing 1.
(IF YOU VOTE BY TELEPHONE, DO NOT MAIL BACK YOUR PROXY.)
THANK YOU FOR VOTING - PLEASE DETACH HERE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS ON APRIL 27, 1999.
ANNUAL MEETING OF STOCKHOLDERS
909 AIRPORT ROAD
BISMARCK, ND 58504
APRIL 27, 1999
11:00 AM (CDT)
(KEEP FOR REFERENCE)
PLEASE DETACH HERE.
Dated:_______________, 1999
___________________________
Signature
___________________________
Signature
Please sign exactly as name(s) appear to the left. If signing for a
corporation or partnership or as agent, attorney or fiduciary, indicate the
capacity in which you are signing. If you do attend the meeting and decide to
vote by ballot, such vote will supersede this proxy.
YOUR VOTE IS IMPORTANT.
PLEASE VOTE BY TELEPHONE OR COMPLETE, DATE,
SIGN AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
