-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JD5icdQANUCrZNHnilVepY6ZOR8SzJ+8t3BfIUGxFqqWhcPBOJVB0ozqsafo7mOu zb11EgqO147VMX+6gYWmOA== 0000891554-96-000142.txt : 19960305 0000891554-96-000142.hdr.sgml : 19960305 ACCESSION NUMBER: 0000891554-96-000142 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960304 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MDU RESOURCES GROUP INC CENTRAL INDEX KEY: 0000067716 STANDARD INDUSTRIAL CLASSIFICATION: GAS & OTHER SERVICES COMBINED [4932] IRS NUMBER: 410423660 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-03480 FILM NUMBER: 96531005 BUSINESS ADDRESS: STREET 1: 400 N FOURTH ST CITY: BISMARCK STATE: ND ZIP: 58501 BUSINESS PHONE: 7012227900 MAIL ADDRESS: STREET 1: 400 NORTH FOURTH ST CITY: BISMARCK STATE: ND ZIP: 58501 FORMER COMPANY: FORMER CONFORMED NAME: MONTANA DAKOTA UTILITIES CO DATE OF NAME CHANGE: 19850429 DEF 14A 1 SCHEDULE 14A SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [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) Payment of Filing Fee (Check the appropriate box): [X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2). [ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). [ ] 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: --------------------------------------------------------------- 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:(1) --------------------------------------------------------------- 4) Proposed maximum aggregate value of transaction: --------------------------------------------------------------- (1) Set forth the amount on which the filing fee is calculated and state how it was determined. [X] 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: $125 --------------------------------------------------------------- 2) Form, Schedule or Registration Statement No.: Schedule 14A Preliminary Proxy Material --------------------------------------------------------------- 3) Filing Party: MDU Resources Group, Inc. --------------------------------------------------------------- 4) Date Filed: March 4, 1996 --------------------------------------------------------------- [LOGO] MDU RESOURCES GROUP, INC. - -------------------------------------------------------------------------------- 400 North Fourth Street John A. Schuchart Bismarck, ND 58501 Chairman of the Board (701) 222-7900 March 4, 1996 To Our Stockholders: You are cordially invited to attend the Annual Meeting of Stockholders to be held on Tuesday, April 23, 1996, at 11:00 A.M., Central Daylight Time, at 909 Airport Road, Bismarck, North Dakota 58504. The other directors and officers join me in extending this invitation. The formal matters to be acted upon at the meeting are described in the accompanying Notice of Meeting and Proxy Statement. In addition to the formal issues, a brief report on current matters of interest will be presented. Luncheon will be served following the meeting. We were pleased with the response of our stockholders at the 1995 Annual Meeting at which 83.9 percent of the Common Stock was represented in person or by proxy. We hope that participation by our stockholders in the affairs of the Company will increase and that there will be an even greater representation at the 1996 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. Representation of your shares at the meeting is very important and we urge that, whether or not you now plan to attend the meeting, you promptly mark, date, sign and return the enclosed proxy card in the envelope provided for that purpose. 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 MDU RESOURCES GROUP, INC. 400 North Fourth Street Bismarck, North Dakota 58501 ---------- Notice of Annual Meeting of Stockholders to be held April 23, 1996 ---------- March 4, 1996 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, 1996, at 11:00 A.M., Central Daylight Time, for the following purposes: (1) To elect three directors to three year terms; (2) To transact such other business as may properly come before the meeting or any adjournment or adjournments thereof. The Board of Directors has fixed the close of business on February 26, 1996, 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 date, sign and return the accompanying proxy in the enclosed return envelope, to which no postage need be affixed if mailed in the United States. Your cooperation will be appreciated. By order of the Board of Directors, /s/ LESTER H. LOBLE, II LESTER H. LOBLE, II, Secretary MDU RESOURCES GROUP, INC. 400 North Fourth Street Bismarck, North Dakota 58501 ---------- 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 23, 1996. The proxy material was first forwarded to the holders of Common Stock on March 4, 1996. 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 by telegraph. Banks, brokerage houses and other institutions, nominees and fiduciaries will be requested to forward the soliciting material to their principals and to obtain authorizations for the execution of proxy cards and will, upon request, be reimbursed for reasonable expenses incurred. Additional solicitation of proxies will be made in the same manner under the special engagement and direction of Georgeson & Company, Inc. at an anticipated cost to the Company of approximately $6,000 plus out-of-pocket expenses. VOTING SECURITIES OUTSTANDING Only holders of record of Common Stock at the close of business on February 26, 1996, will be entitled to vote at the meeting. On such date there were outstanding 28,476,981 shares of Common Stock. Each outstanding share of Common Stock entitles the holder to one vote. The Bylaws of the Company provide that a majority of the shares of Common Stock issued and outstanding and entitled to vote in person or by proxy shall constitute a quorum at a meeting of stockholders of the Company. Shares of Common Stock represented by a properly signed and returned proxy are considered present for purposes of determining a quorum. 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. As of February 26, 1996, no person 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. ELECTION OF DIRECTORS At the meeting, three Directors will be elected to serve for a term of three years until 1999 and until their respective successors are elected and qualify. All of the nominees are incumbent Directors and are nominated for reelection. Unless otherwise marked on the proxy, 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 1 the proxy. Information concerning the nominees, including their ages, periods of service as directors and business experience, according to information furnished to the Company by the respective nominees, is set forth as follows:
First Year of Service Name Age as Director Business Experience ---- --- ----------- ------------------- Thomas Everist .......................... 45 1995 Mr. Everist is the President and Chief Executive Officer of (to be elected for a term of three years L. G. Everist, Sioux Falls, South Dakota, an aggregate expiring in 1999) production company. He is Vice President of Spencer (PICTURE) Quarries, Spencer, South Dakota, a rock quarry, and Director of Power Plant Aggregates and Midwest Fly Ash, both of Sioux City, Iowa, which market fly ash, kiln dust and concrete additives, and a Director of Standard Ready Mix, of Sioux City, Iowa. Harold J. Mellen, Jr .................... 61 1989 Mr. Mellen joined the Company in 1985 as Vice President (to be elected for a term of three years --Corporate Development and was named Senior Vice expiring in 1999) President--Finance and Chief Financial Officer in May (PICTURE) 1987, Executive Vice President and Chief Financial and Corporate Development Officer in August 1989, and President and Chief Corporate Development Officer in May 1992. Mr. Mellen became the President and Chief Executive Officer on January 1, 1995. During 1995, Mr. Mellen served as Chairman of the Board, a Director and/or an officer of all principal subsidiaries and Chairman of the Managing Committee of the utility Division of the Company. Robert L. Nance ......................... 59 1993 Mr. Nance is the majority owner and President of Nance (to be elected for a term of three years Petroleum Corporation, Billings, Montana, an oil and expiring in 1999) gas exploration and production company. He is also a (PICTURE) Director of First Interstate Bank of Commerce, Billings, Montana. He is a Director of the Deaconess Billings Clinic Health Organization, Deaconess Medical Center and Billings Clinic, all of Billings, Montana, serves on the National Board of Governors of the Independent Petroleum Association of America, and serves on the Board and is Vice Chairman of the Petroleum Technology Transfer Council. He currently serves on the Finance and Nominating Committees of the Board of Directors.
2 Certain information concerning the remaining directors, whose terms expire either in 1997 or in 1998, including their ages, periods of service as directors and business experience, according to information furnished to the Company, is set forth as follows:
First Year of Service Name Age as Director Business Experience ---- --- ----------- ------------------- San W. Orr, Jr. 54 1978 Mr. Orr is an attorney and is in the business of financial (term expiring in 1997) ................. and estate management. He is Chairman of the Boards and (PICTURE) a Director of Marathon Electric Manufacturing Corporation, Mosinee Paper Corporation, and Wausau Paper Mills Company. He is a Director of Wausau Insurance Companies, Marshall & Ilsley Corporation, M & I First American Bank, and M & I Marshall & llsley Bank. Mr. Orr also serves various civic and charitable organizations in Wisconsin including the Board of Regents of the University of Wisconsin System. He currently serves on the Audit and Compensation Committees of the Board of Directors. John A. Schuchart ....................... 66 1976 Mr. Schuchart, Chairman of the Board, was named Chief (term expiring in 1997) Executive Officer in June 1980 and Chairman in May (PICTURE) 1983. He retired as Chief Executive Officer on December 31, 1994. Mr. Schuchart also serves as an ex officio Director of the subsidiaries of the Company, the Managing Committee of Montana-Dakota Utilities Co., and the MDU Resources Foundation. Mr. Schuchart serves on various civic and charitable organizations in Bismarck, North Dakota, including the Board of Regents of the University of Mary. Homer A. Scott, Jr ...................... 61 1981 Mr. Scott is engaged in the banking and ranching business (term expiring 1997) in the states of Wyoming and Montana. He is a Director (PICTURE) and Chairman of the Board of First Interstate BancSystem of Montana, Inc., a Director of First Interstate Bank of Commerce, Montana and Chairman of the Board and a Director of First Interstate Bank of Commerce, Wyoming. Mr. Scott is a Director and President of Sugarland Enterprises, Inc., and the managing partner of Sugarland Development Company, a commercial property development company in Sheridan, Wyoming. He is the owner of the Sheridan Holiday Inn, principal owner of Sports Mate, Inc., and owner of Powder Horn Ranch, a housing development and golf course in Sheridan, Wyoming. He currently serves on the Audit and Compensation Committees of the Board of Directors. Sister Thomas Welder, O.S.B ............. 55 1988 Sister Welder is the President of the University of Mary, (term expiring in 1997) Bismarck, North Dakota. She is a Director of St. (PICTURE) Alexius Medical Center of Bismarck and Chair of its Marketing Committee. She is also a Director of the Bismarck-Mandan Development Association and is a member and past Director of the Bismarck-Mandan Area Chamber of Commerce. She is also a member of the North Dakota State Women's Business Leadership Council, the Theodore Roosevelt Medora Founder's Society, and Consultant-Evaluator Corps for the North Central Association of Colleges and Schools. She currently serves on the Nominating and Finance Committees of the Board of Directors.
3
First Year of Service Name Age as Director Business Experience ---- --- ----------- ------------------- Douglas C. Kane ......................... 46 1991 Mr. Kane joined the Company as Executive Vice President and (term expiring in 1998) Chief Operating Officer in January 1991. Prior to that (PICTURE) time he was President and Chief Executive Officer of Knife River Coal Mining Company from May 1990, President from September 1987 and previously had served as Senior Vice President--Operations. During 1995, Mr. Kane served as Director and/or officer of principal subsidiaries of the Company and as a member of the Managing Committee of the Company's utility Division. Richard L. Muus ......................... 66 1985 Mr. Muus retired in April 1989 after 35 years with the (term expiring in 1998) Midwest Federal Savings Bank, Minot, North Dakota. At (PICTURE) the time of his retirement Mr. Muus was the President and a Director of the bank. Mr. Muus is a member and past Director and Officer of the Minot Area Chamber of Commerce and a past Director of the Minot Area Development Corporation. He is a member of the Military Affairs and Diplomats Committee of the Chamber of Commerce. He is a member of the Board of Regents of Minot State University. He also served on the Advisory Board and Finance Committee of St. Joseph Hospital, Minot, North Dakota for 30 years. He currently serves on the Audit and Finance Committees of the Board of Directors. John L. Olson ........................... 56 1985 Mr. Olson is President and the owner of Blue Rock Products (term expiring in 1998) Company and of Blue Rock Distributing Company located (PICTURE) in Sidney, Montana, a beverage bottling and distributing company, respectively. Mr. Olson also is the Chairman of the Board and a Director of Admiral Beverage Corporation, Worland, Wyoming, and Ogden, Utah; he is Chairman of the Board and Director of the Foundation for Community Care, Sidney, Montana and a trustee of the University of Montana Foundation; he is trustee for Blue Rock Products Company Profit Sharing Trust, Sidney, Montana. He currently serves on the Audit and Compensation Committees of the Board of Directors.
4
First Year of Service Name Age as Director Business Experience ---- --- ----------- ------------------- Joseph T. Simmons ....................... 60 1984 Mr. Simmons is professor of Accounting and Finance, (term expiring in 1998) University of South Dakota, Vermillion and was Visiting (PICTURE) Professor of Finance, University of Warsaw, Warsaw, Poland (February--July, 1994). Mr. Simmons is the Chairman and President of Simmons Financial Management, Inc. and owner of Simmons & Associates. He also serves on the Boards of GRO/TECH and RE/SPEC in Rapid City, South Dakota and Dairilean, Inc. in Sioux Falls, South Dakota. He currently serves on the Finance Committee of the Board of Directors.
Except where expressly noted, no corporation or organization named above is a parent, subsidiary or other affiliate of the Company. During 1995, the Board of Directors had four meetings. The Board of Directors has an Audit Committee, a Nominating Committee, a Finance Committee and a Compensation 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. In 1995, the Committee met four 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, including the recommendations to improve internal controls and the follow-up reports prepared by management. The Audit Committee reports the results of its activities to the full Board of Directors. No member of the Audit Committee is or has been an employee of the Company. The Nominating Committee, which met four times during 1995, recommends to the full Board of Directors nominees for directors and for executive officers. The Nominating Committee will consider nominees recommended by stockholders if the names of such nominees are submitted to the Secretary of the Company on or before November 4, 1996, for the annual meeting expected to be held on April 22, 1997. The Compensation Committee, which met four times during 1995, 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 three times during 1995, reviews corporate financial plans, policies, budgets, investments, acquisitions, and reviews and authorizes actions necessary to issue and sell Common Stock and debt securities of the Company. All incumbent Directors attended more than 75 percent of the combined total of the meetings of the Board and of the committees on which the Director served. 5 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, 1995, 1994, and 1993, for those persons who were, at December 31, 1995, (i) the Chief Executive Officer and (ii) the other four most highly compensated executive officers of the Company (the Named Officers). Footnotes supplement the information contained in the Tables. TABLE 1: SUMMARY COMPENSATION TABLE
Long term Annual compensation compensation ----------------------------- ------------------------- Awards ------------------------- (a) (b) (c) (d) (e) (f) (g) Securities Restricted underlying All other stock Options/ compen- Name and Salary Bonus(1) award(s) SARs(3) sation(4) principal position Year ($) ($) ($) (#) ($) ------------------ ---- ------ -------- ---------- ---------- --------- Harold J. Mellen, Jr. 1995 249,553 104,824 0 49,740 5,886 --President & C.E.O. 1994 191,779 50,577 0 0 4,500 1993 176,995 42,328 0 0 4,497 Ronald D. Tipton 1995 179,039 101,997 31,680(2) 32,955 3,975 --President & C.E.O. of 1994 -- -- -- -- -- Montana-Dakota Utilities Co. 1993 -- -- -- -- -- Douglas C. Kane 1995 181,210 58,910 0 27,952 4,500 --Executive Vice President 1994 138,519 44,878 0 0 4,156 & Chief Operating Officer 1993 131,960 35,264 0 0 3,944 Martin A. White 1995 128,312 23,514 0 8,925 3,849 --Senior Vice President-- 1994 123,369 24,030 0 0 3,135 Corporate Development 1993 119,352 20,700 0 0 920 Lester H. Loble, II 1995 119,006 26,163 0 9,900 3,041 --General Counsel & 1994 115,446 22,279 0 0 3,080 Secretary 1993 111,122 22,275 0 0 3,284
- ---------- 1. Granted pursuant to the Management Incentive Compensation Plan. 2. Non-preferential dividends are paid on the 1,500 shares of stock shown above. 3. "SAR" is an acronym for "stock appreciation right." The Company has no plan or program which uses stock appreciation rights. 4. Totals shown are the Company contributions to the Tax Deferred Compensation Plan, with the exception of Mr. Mellen, whose totals also include insurance premiums in each year of $1,386. 6 TABLE 2: OPTION/SAR(1) GRANTS IN LAST FISCAL YEAR
Grant date Individual Grants(2) value ------------------------------------------------------------- --------------- Number of Percent of securities total options underlying granted to Exercise or Grant date options granted employees in base price Expiration present value(3) Named Officer (#) fiscal year ($/share) date ($) (a) (b) (c) (d) (e) (f) ------------ ------------- ----------- --------- ---------- ---------------- Harold J. Mellen, Jr.......... 49,740 16.9 18.50 02/08/05 132,806 Ronald D. Tipton.............. 32,955 11.2 18.50 02/08/05 87,990 Douglas C. Kane............... 27,952 9.5 18.50 02/08/05 74,637 Martin A. White............... 8,925 3.0 18.50 02/08/05 23,830 Lester H. Loble, II........... 9,900 3.4 18.50 02/08/05 26,433
- ---------- 1. "SAR" is an acronym for "stock appreciation right." The Company has no plan or program which uses stock appreciation rights. 2. The options granted under the 1992 Key Employee Stock Option Plan become exercisable automatically in nine years on February 8, 2004. Vesting is accelerated upon change in control or upon attainment of certain performance goals, as follows: during the three year performance cycle (1995-1997) 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%). 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. Performance goals for Montana-Dakota Utilities Co., which are applicable to Mr. Tipton, are based on regulatory return (50%), and net income (50%), and at least 94% of the goals must be met to accelerate vesting. Dividend Equivalents granted with the options are described in Table 4. 3. 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 is $2.67 based on the following inputs: Stock Price (fair market value) at Grant (2/8/95)........... $18.50 Exercise Price.............................................. $18.50 Option Term................................................. 10 Years Stock Price Volatility...................................... 15.8% Dividend Yield.............................................. 5.8% The model assumes: (a) a risk-free interest rate of 7.8 percent on a U.S. Treasury Note with a maturity date of approximately 10 years; (b) Stock Price Volatility is calculated using a one year average of stock prices for calendar year 1994; (c) Dividend Yield is calculated using the annual dividend rate in effect at the date of grant ($1.07 per share). The option value was not discounted to reflect any accelerated vesting of the options or to reflect any exercise of the options prior to the end of the 10 year period. Notwithstanding the fact that these options are non-transferable, no discount for lack of marketability was taken. 7 TABLE 3: AGGREGATED OPTION/SAR(1) EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR(1) VALUES
(a) (b) (c) (d) (e) Shares Number of acquired securities underlying Value of unexercised, on Value unexercised options in-the-money options exercise realized at fiscal year-end at fiscal year-end (#) ($) (#) ($) ------- ------ --------------------------- ---------------------------- Name Exercisable Unexercisable Exercisable Unexercisable ----- ----------- ------------- ----------- ------------- Harold J. Mellen, Jr. ......... -- -- 20,610 49,740 85,016 68,393 Ronald D. Tipton ............. -- -- 14,685 32,955 60,576 45,313 Douglas C. Kane .............. 1,500 9,375 18,360 27,952 75,735 38,434 Martin A. White .............. 770 3,030 8,040 8,925 33,165 12,272 Lester H. Loble, II .......... 1,000 6,250 7,695 9,900 31,742 13,613
- ---------- 1. "SAR" is an acronym for "stock appreciation right." The Company has no plan or program which uses stock appreciation rights. TABLE 4: LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
Estimated future payouts under non-stock price-based plans ------------------------------------------- (a) (b) (c) (d) (e) (f) Performance Number of or other shares, units period until or other maturation Threshold Target Maximum Named Officer rights (#)(1) or payout ($) ($) ($) ------------ ----------- ----------- ---------- ---------- -------------- Harold J. Mellen, Jr.......... 49,740 12/31/97 81,325 162,650 243,975 Ronald D. Tipton.............. 32,955 12/31/97 53,881 107,763 161,644 Douglas C. Kane............... 27,952 12/31/97 45,702 91,403 137,105 Martin A. White............... 8,925 12/31/97 14,592 29,185 43,777 Lester H. Loble, II........... 9,900 12/31/97 16,187 32,373 48,560
- ---------- 1. 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 (1995-1997) depending upon (1) the level of achievement of performance goals established for the Company and Montana-Dakota Utilities Co. 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. PENSION PLAN TABLE
Years of Service ------------------------------------------------------------------------------- Remuneration 15 20 25 30 35 or more - ------------- --------- --------- --------- --------- --------- $125,000................ $ 77,904 $ 86,592 $ 95,280 $103,968 $112,656 150,000................ 91,980 102,480 112,980 123,480 133,980 175,000................ 106,056 118,368 130,692 143,004 155,316 200,000................ 120,132 134,256 148,392 162,516 176,640 225,000................ 134,208 150,156 166,092 182,028 197,964 250,000................ 148,296 166,044 183,792 201,540 219,288 300,000................ 176,448 197,820 219,204 240,576 261,948 400,000................ 206,832 235,464 264,084 292,716 321,336 450,000................ 217,716 249,960 282,216 314,460 346,716 500,000................ 228,588 264,456 300,336 336,216 372,084
8 The table covers the amounts payable under the Salaried Pension Plan and non-qualified Supplemental Income Security Plan. Pension benefits are determined by the step-rate formula which places emphasis on the highest consecutive 60 months of earnings within the final 10 years of service. Benefits for single participants under the Salaried Pension Plan are paid as straight life amounts and benefits for married participants are paid as actuarially reduced pensions with a survivorship benefit for spouses, unless participants choose otherwise. The Salaried Pension Plan also permits pre-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 the amount of benefits that may be paid under the Salaried Pension Plan. The Company has adopted a non-qualified Supplemental Income Security Plan (SISP) for senior management personnel. In 1995, 80 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, 1995, the Named Officers were credited with the following years of service under the plans; Mr. Mellen: Pension, 10, SISP, 10; Mr. Tipton: Pension, 12 , SISP, 11; Mr. Kane: Pension, 5, SISP, 11; Mr. White: Pension, 4, SISP, 4; and Mr. Loble: Pension, 8, SISP, 8. The maximum years of service for benefits under the Pension Plan is 35 and under the SISP vesting begins at 3 years and is complete after 10 years. Benefit amounts under both plans are not subject to reduction for offset amounts. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION Introduction Decisions on compensation for the Company's executive officers are made by the Compensation Committee of the Board of Directors. The Committee was created in 1967 and has been and is composed entirely of non-employee directors. In the late part of each calendar year, the Committee reviews and approves, with any modifications it deems appropriate, the Executive Compensation Policy for the executive officers including the Chief Executive Officer. The approved plan is implemented the following calendar year. Executive Compensation Policy The Executive Compensation Policy is designed to attract and retain qualified executive officers, to recognize above-average job performance and to provide a direct and strong link between Company performance and executive pay. The Board of Directors in 1994 adopted Stock Ownership Guidelines under which executives are required to own Company Common Stock valued from two times their annual salary to four times their annual salary (in the case of the Chief Executive Officer). Total compensation is intended to be competitive with that paid by comparable companies in the regulated electric and gas utility industry and relevant segments of the energy and mining industries. There are four components of total executive compensation: (1) Base salary; (2) Management Incentive Compensation Plan; (3) 1992 Key Employee Stock Option Plan; and (4) Restricted Stock Bonus Plan. As indicated above, the base salary component of compensation is designed to be competitive with that paid by comparable companies. An external consultant provides comparative surveys (Edison Electric Institute Executive Compensation Survey, American Gas Association Top Management Survey, Executive Compensation Services Top Management Report, KPMG Peat Marwick LLP Oil and Gas Compensation Survey and PAS Inc. Executive Compensation Survey for Contractors). While the companies used in these surveys are not the same as the peer group of companies used in the Performance Graph, the Compensation Committee believes these surveys provide a broader base of data and are commonly used to set executive salaries. The Edison Electric Institute Executive Compensation Survey is a 1994 survey prepared by Edison Electric Institute and includes nearly 100 participants of diverse size, comprised of electric or electric/gas utility companies, utility parent companies or diversified parent companies. The American Gas Association Top Management Survey is a 1994 survey of salary for 95 natural gas companies-distribution, transmission, combination (gas and electric) and integrated. The Executive Compensation Services Top Management Report is a 1995-96 survey of executive compensation for 1,270 companies cutting across all major industry lines. The consultant then used the 61 utility respondents from this survey-water, telephone, electric and gas-for comparison purposes. The KPMG 9 Survey includes 123 participants from the oil and gas industry and the PAS Survey for Contractors has over 250 participants. The external data from those surveys is used to develop a market-consensus salary for each executive position. "Market-consensus salary" represents the market value for each position based upon the above referenced surveys. For executive officers the consensus reflects a 60 percent weighting of general industry data and a 40 percent weighting of utility industry data. It is the policy of the Compensation Committee to set a targeted range of compensation from 80%-120% around the market-consensus salary and to set 95% of the market-consensus salary as the salary administration objective for the executive positions in the Company. The Compensation Committee uses this objective together with an analysis of the value of the executive position and individual evaluation to establish base salaries for executive officers within the targeted range. A premium is added to the market-consensus salary in order to set the salary of the Chief Executive Officer and other executive officers to reflect the diversified nature of the Company. The consultant uses the peer group of companies in the Performance Graph to determine the premium. All executive officers are eligible for awards under the Company's various incentive plans referred to above. The Compensation Committee believes that offering incentives to executive officers will enhance the long-term performance of the Company, promote cost efficiency and further overall stockholder returns. The Committee uses these plans as it deems appropriate to achieve these goals. The Compensation Committee determines awards pursuant to these plans based generally on what it believes other similar companies are doing. The Company has not formulated any policy with regard to the deductibility of qualifying compensation paid to executive officers under Section 162(m) of the Internal Revenue Code. 1995 Compensation for Executive Officers and Chief Executive Officer Compensation paid to executive officers of the Company in 1995 was comprised of base salary, cash awards under the Management Incentive Compensation Plan and stock option grants and dividend equivalents under the 1992 Key Employee Stock Option Plan. Mr. Tipton also received an award of restricted stock. Base salary increases for executive officers during 1995 ranged from 3% to 32.3% and averaged 11.1%. Salary increases were a function of (1) the Compensation Committee's assessment of the individual performance of each executive and (2) the current salary of each executive compared to that paid by comparable companies as determined by the external consultant (as discussed above). A more favorable performance appraisal permitted a larger increase. If the current salary lagged that paid by comparable companies, a larger increase was permitted. The base salaries during 1995 averaged 81.25% of the market-consensus salary for the Company's executive positions. Mr. Mellen was elected Chief Executive Officer effective January 1, 1995. At that time his base salary was $240,000. Effective July 1, 1995, his base salary was increased to $261,600. This reflected a 9% increase. His base salary is 72.9% of the market-consensus salary as adjusted by the premium of 15% as recommended by the consultant. The Committee also considered the Company's financial results during the six months he had been Chief Executive Officer and the smooth transition under his leadership. The Committee did not give formal weighting to the criteria used in order to set salary increases for the executive officers or for the Chief Executive Officer. The Management Incentive Compensation Plan is structured so that cash incentive awards reflect the attainment of specific annual levels of performance. The performance measures used reflect both the stockholders' interest (earnings) and the customers' interest (cost efficiency). Additionally, individual performance is evaluated and appropriate adjustments to target award levels may be made. Target award levels are a percentage of each participant's assigned salary grade midpoint. The percentage for the Chief Executive Officer was 35% and for the other executive officers ranged from 25% to 30%. A target incentive fund is developed at the beginning of each plan year based upon the aggregate target award levels of all participants. The size of the fund will increase or decrease based upon actual Company performance in relation to the pre-established goals. Individual awards will be greater or lesser than target amounts based upon an assessment of individual performance. Awards can range from 0% (less than 90% of budgeted earnings per share) to 150% (more than 108% of budgeted earnings per share) of the target amount. The annual corporate performance targets for 1995 were based on the degree of achievement of 103% of budgeted earnings. As a result of actual earnings exceeding threshold level of performance, and individual performance goals being met, cash awards were made under the plan for the year 1995 to four executive officers in the aggregate amount of $202,736. The Chief Executive Officer received $104,824 for the year 1995. This amount was a payout of 85.5% of the targeted award, based on the Company's actual earnings exceeding the threshold level of performance and upon individual performance. The cost efficiency performance measure in 1995 affected 10 only one executive officer, Mr. Tipton, whose award opportunity was based 75% on cost efficiency and 25% on budgeted earnings of his division. Mr. Tipton received $101,997. The 1992 Key Employee Stock Option Plan is to motivate executives to achieve specified long-term performance goals of the Company and to encourage ownership by them of the common stock of the Company. It is designed to reinforce financial and strategic objectives, to emphasize pay for performance, and to focus executive effort on long-term sustainable value creation. This aligns the interests of the executives with those of the shareholders. The plan consists of two elements: stock option grants and dividend equivalents. Ten year options and dividend equivalents were granted under the plan in 1995 to 13 executives of the Company, including all executive officers. The options become exercisable (at the fair market value on the date of the grant) automatically in nine years but vesting may be accelerated if certain performance goals are achieved. A performance cycle of three years was established by the Committee: 1995-1997. Performance cycles for the remainder of the nine years have not yet been set. Performance goals were also established by the Committee based on return on equity (25 percent), earning per share (25 percent), and total relative stockholder return compared to a peer group of 12 energy diverse companies (50 percent). The companies are identified in the notes to the graph following this report. Performance goals for Montana-Dakota Utilities Co., which are applicable to Mr. Tipton, are based on regulatory return (50 percent) and net income (50 percent). Individual performance is also weighed. Dividend equivalents are accrued based on the number of options held and are earned from 0% to 150% at the end of each performance cycle based upon the achievement of the stated performance goals. As shown on the Tables, the Chief Executive Officer received a grant of 49,740 options and dividend equivalents. The number of options and dividend equivalents granted to the executive officers was established based upon the mid-point of the 1995 salary range for employees of that level and the length of the performance cycle. The grants ranged from 10% for lower level executive officers to 35% for the Chief Executive Officer. The Compensation Committee made grants under the 1992 Key Employee Stock Option Plan of performance-accelerated options and dividend equivalents to serve as an incentive to the executive officers to meet corporate goals and to subject a larger percentage of executive officers' total salary package to risk. The Compensation Committee may grant additional options and dividend equivalents each year, as it determines. The Restricted Stock Bonus Plan provides for awards of restricted stock to individuals when designated by the Compensation Committee as having demonstrated superior individual performance. The awards serve as a motivator for long-term performance and as a retention device for individuals who have demonstrated superior performance. The executive has a stake in the Company's financial performance. Again, this aligns the interest of the executives with those of the stockholders. In November, 1995, Mr. Tipton received an award of 1,500 shares. In addition, restrictions lapsed with respect to 1,500 shares of restricted stock previously granted to Mr. Tipton. 51.5% of the Chief Executive Officer's total compensation during 1995 was based on objective annual performance criteria (through the Management Incentive Compensation Plan) or long-term performance criteria (through the 1992 Key Employee Stock Option Plan, reflecting the dividend equivalents accrued on the 1995 option grants). An average of 43% of the total compensation of the other executive officers was based on objective annual performance criteria (through the Management Incentive Compensation Plan) or long-term performance criteria (through the 1992 Key Employee Stock Option Plan, reflecting the dividend equivalents accrued on the 1995 option grants). The Committee believes that having 51.5% of the compensation of Chief Executive Officer and an average of 43% of the compensation of other executive officers at risk is sufficient to provide a direct and strong link between Company performance and executive pay. San W. Orr, Jr., Chairman Homer A. Scott, Jr., Member John L. Olson, Member Stanley F. Staples, Jr., Member 11 MDU RESOURCES GROUP, INC. COMPARISON OF FIVE YEAR TOTAL STOCKHOLDER RETURN(1) Total Stockholder Return Index (1990 = 100) [The following table was represented as a line graph in the printed material] - -------------------------------------------------------------------------------- 1990 1991 1992 1993 1994 1995 ---- ---- ---- ---- ---------------- MDU 100 128 145 182 166 193 S&P 500 100 130 140 155 157 215 PEER GROUP 100 131 145 160 146 180 - -------------------------------------------------------------------------------- (1) All data is indexed to December 31, 1990, for the Company, the S&P 500, and the peer group. Total stockholder return is calculated using the December 31 price for each year. It is assumed that all dividends are reinvested in stock at the frequency paid, and the returns of each component peer issuer of the group are weighted according to the issuer's stock market capitalization at the beginning of the period. The peer issuers are Black Hills Corp., Cilcorp Inc., Equitable Resources Inc., Florida Progress Corp., Minnesota Power & Light Company, The Montana Power Company, Oneok Inc., Questar Corp., South Jersey Industries, Teco Energy Inc., UGI Corp., and Utilicorp United Inc. DIRECTORS' COMPENSATION Each Director who is not an officer of the Company receives $13,000 and 300 shares of Company common stock as an annual retainer for Board Service. Audit and Compensation Committee Chairmen each receive a $2,500 annual retainer, and Finance and Nominating Committee Chairmen each receive a $1,000 annual retainer. Additionally, each Director who is not an officer of the Company receives $700 for each meeting of the Board of Directors attended and each Committee member who is not an officer of the Company receives $700 for each Committee meeting attended. All Directors must defer $1,000 of the annual Board cash retainer, which amount is credited to a deferral account quarterly. The deferral amount is divided by the market price of Company Common Stock and converted to investment units. If dividends are paid on Company Common Stock then an equivalent amount is credited for each investment unit and the resulting amount is converted to investment units and credited to such Directors' accounts. When 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 at that time, converted to a dollar value and paid to the Director or named beneficiary in equal monthly payments (with interest) over a five year period. Each Director may also defer all or any part of the remaining $12,000 Board retainer paid in cash. 12 The Company also has a post-retirement arrangement for Directors who are not officers of the Company which provides that after retirement from the Board, a Director is entitled to receive annual compensation in an amount equal to the sum of all annual retainers in effect at the time of retirement. Such amount will be paid to the Director or named beneficiary in equal monthly installments over a period of time equal to the period of service on the Board. 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. Present Corporate Position Name Age and Business Experience ----- --- ----------------------- Harold J. Mellen, Jr........... 61 President and Chief Executive Officer. For information about Mr. Mellen, see "Election of Directors." Cathleen M. Christopherson..... 51 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................ 46 Executive Vice President and Chief Operating Officer. For information about Mr. Kane, see "Election of Directors." Lester H. Loble, II............ 54 Mr. Loble was elected General Counsel and Secretary of the Company effective May 1987. Mr. Loble also serves as a Director and/or General Counsel and Secretary of the principal subsidiaries of the Company. Mr. Loble is also a member and the Secretary of the Managing Committee of Montana-Dakota Utilities Co., a Division of the Company. Vernon A. Raile................ 51 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............. 45 Mr. Robinson was elected Vice President, Treasurer and Chief Financial Officer of the Company effective August 1992. He is also Treasurer and Assistant Secretary, or Secretary, of subsidiaries of the Company. Prior to that he served as Treasurer and Assistant Secretary from December 1989, and as Manager of Corporate Development and Assistant Treasurer from May 1989 to December 1989 and Manager of Corporate Development from October 1988. Ronald D. Tipton............... 49 Mr. Tipton was elected President and Chief Executive Officer of Montana-Dakota Utilities Co. on January 1, 1995. Prior to that time he served Williston Basin Interstate Pipeline Company in the following capacities: President and Chief Executive Officer from May 1994, President from May 1990, Executive Vice President from May 1989, Vice President--Gas Supply from January 1985. From January 1983 to January 1985 he was the Assistant Vice President--Gas Supply of Montana-Dakota Utilities Co. 13 Present Corporate Position Name Age and Business Experience ----- --- ----------------------- Martin A. White................ 54 Mr. White was elected Senior Vice President--Corporate Development November 1995. Prior to that he served as Vice President--Corporate Development from November 1991. Prior to that he was Chairman and Chief Executive Officer of White Resources Corp., a mining company, from January 1990, and Executive Vice President and Chief Operating Officer of Consolidated TVX Mining Corporation from January 1988. Prior to that he was President and Chief Operating Officer of Entech, Inc., a subsidiary of The Montana Power Company. Robert E. Wood................. 53 Mr. Wood has been Vice President-Public Affairs and Environmental Policy of the Company since August 1991. Before that he was Vice President-Public Affairs from June 1986. For five years prior thereto he served as Manager of Legislative Affairs for the Company. Section 16(a) of the Securities Exchange Act of 1934 requires directors and certain officers of the Company to file reports concerning their ownership of Company stock. During 1995, Mr. Tipton inadvertently filed one late report on Form 4 with respect to an award of restricted stock under the Company's Restricted Stock Bonus Plan. SECURITY OWNERSHIP The table below sets forth the number of shares of capital stock of the Company owned beneficially as of December 31, 1995, by each director and each nominee for director, each Named Officer and by all directors and executive officers of the Company as a group.
Amount and Nature of Beneficial Ownership Percentage of Class -------------------------- ------------------- Name Common Preferred Common Preferred ----- -------- -------- -------- -------- Thomas Everist.......................................... -- -- -- -- Douglas C. Kane......................................... 34,959(a) -- * -- Lester H. Loble, II..................................... 17,637(a) -- * -- Harold J. Mellen, Jr.................................... 35,910(a) -- * -- Richard L. Muus......................................... 5,509 -- * -- Robert L. Nance......................................... 3,150 -- * -- John L. Olson........................................... 15,300 -- * -- San W. Orr, Jr.......................................... 171,883(b) -- * -- John A. Schuchart....................................... 127,583(c) -- * -- Charles L. Scofield..................................... 12,300 -- * -- Homer A. Scott, Jr...................................... 3,300(d) -- * -- Joseph T. Simmons....................................... 6,115 -- * -- Stanley F. Staples, Jr.................................. 125,820(e) 300 * * Ronald D. Tipton........................................ 12,550(a) -- * -- Sister Thomas Welder.................................... 19,198(f) -- * -- Martin A. White......................................... 16,175(a) -- * -- All directors and executive officers of the Company as a group (18 in number)................................ 688,243(a) 306 2.4 *
- ---------- * Less than one percent of the class. (a) Includes full shares allocated to the officer's account in the Tax Deferred Compensation Savings Plan. Also includes presently exercisable stock options in the following amounts: Mr. Kane, 18,360; Mr. Loble, 7,695; Mr. Mellen, 20,610; Mr. Tipton, 14,685 (also included is Mr. Tipton's grant of 1,500 shares of restricted stock); Mr. White, 8,040; and all directors and executive officers as a group: 89,390. (b) 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 1,143 shares held by the trusts. (c) Includes shares owned by Mr. Schuchart's wife. Mr. Schuchart disclaims all beneficial ownership of the shares owned by his wife. (d) 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. (e) All except 1,800 shares of Common Stock are held in the name of the Judd S. Alexander Foundation, Inc. and Walter Alexander Foundation, Inc. Mr. Staples as the Chief Executive Officer of the Judd S. Alexander Foundation, Inc., and the Secretary of the Walter Alexander Foundation, Inc., disclaims all beneficial ownership of the shares held by the Foundations. (f) Shares of Common Stock owned by University of Mary. Sr. Welder, as President of the University of Mary, disclaims all beneficial ownership of these shares. 14 ACCOUNTING AND AUDITING MATTERS Upon recommendation of the Audit Committee, the Board of Directors has selected and employed the firm of Arthur Andersen LLP as the Company's independent certified public accountants to audit its financial statements for the fiscal year 1995. The Audit Committee is presently composed of Messrs. Richard L. Muus, John L. Olson, San W. Orr, Jr., and Homer A. Scott, Jr. (Chairman). This will be the tenth year in which the firm has acted in this capacity. A representative of Arthur Andersen is expected to be present at the Annual Meeting of Stockholders. It is not anticipated that the representative will make a prepared statement at the meeting. However, he or she will be free to do so if he or she so chooses as well as responding to appropriate questions. OTHER BUSINESS The management of the Company knows of no other matter to come before the meeting. However, if any matter requiring a vote of the stockholders should arise, it is the intention of the persons named in the enclosed form of proxy to vote in accordance with their best judgment. 1997 ANNUAL MEETING OF STOCKHOLDERS Any stockholder who wishes to submit a proposal for inclusion in the proxy material relating to the Company's Annual Meeting of Stockholders expected to be held on April 22, 1997, must submit such proposal to the Secretary of the Company on or before November 4, 1996. ---------- A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (EXCLUDING EXHIBITS) FOR THE YEAR ENDED DECEMBER 31, 1995, WHICH IS REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE MADE AVAILABLE TO STOCKHOLDERS TO WHOM THIS PROXY STATEMENT IS MAILED, WITHOUT CHARGE, UPON WRITTEN REQUEST TO THE OFFICE OF THE TREASURER OF MDU RESOURCES GROUP, INC., 400 NORTH FOURTH STREET, BISMARCK, NORTH DAKOTA 58501. By order of the Board of Directors, /s/ LESTER H. LOBLE, II LESTER H. LOBLE, II Secretary March 4, 1996 15 MDU RESOURCES GROUP, INC. PROXY ================================================================================ This proxy is solicited on behalf of the Board of Directors for the Annual Meeting of Stockholders on April 23, 1996. The undersigned hereby appoints John A. Schuchart, Harold J. Mellen, Jr., and Lester H. Loble, II, and each of them, proxies, with full power of substitution, to vote all Common Shares of the undersigned at the Annual Meeting of Stockholders to be held at 11:00 a.m. (CDT), April 23, 1996, 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 of this card. If no directions are given, the proxies will vote for the election of all listed nominees, and at their discretion on any other matter that may properly come before the meeting. We are unable to respond to comments noted on this proxy. If you have comments please send in a separate letter. Your vote for the election of Directors may be indicated on the reverse side of this card. Nominees are: Thomas Everist, Harold J. Mellen, Jr. and Robert L. Nance. Your vote is important! Please sign and date on the reverse and return promptly in the enclosed postage-paid envelope or otherwise to 400 North Fourth Street, Bismarck, ND 58501, so that your shares can be represented at the meeting. ================================================================================ Please mark your vote as in this example: [X] Directors recommend a vote "FOR" on A. below To vote for all director nominees, mark the "FOR" box on item "A." To withhold voting for all nominees, mark the "WITHHELD" box. To withhold voting for a particular nominee, mark the "FOR ALL EXCEPT" box and enter name(s) of the exception(s) in the space provided; your shares will be voted for the remaining nominees. - -------------------------------------------------------------------------------- FOR WITHHELD FOR ALL EXCEPT A. Election of All Director Nominees. [ ] [ ] [ ] Exceptions__________________________ - -------------------------------------------------------------------------------- Sign here as name(s) appear at left ------------------------------ ------------------------------ Please sign this proxy and return it promptly whether or not you plan to attend the meeting. If signing for a corporation or partnership or as agent, attorney or fiduciary, indicate the capacity in which you are signing. If you do attend the meeting and decide to vote by ballot, such vote will supersede this proxy. Date ___________________, 1996 -----END PRIVACY-ENHANCED MESSAGE-----