KNIFE
RIVER CORPORATION
EXECUTIVE
INCENTIVE COMPENSATION PLAN
I.
PURPOSE
The
purpose of the Executive Incentive Compensation Plan (the "Plan")
is to provide an incentive for key executives of Knife River
Corporation (the "Company") and any subsidiaries participating in
the Plan (each a "Subsidiary", and together, the "Subsidiaries") to
focus their efforts on the achievement of challenging and demanding
corporate objectives. The Plan is designed to reward
successful corporate performance calculated from January 1 to
December 31 of each Plan Year, as measured against specified
performance goals as well as exceptional individual
performance. When corporate or subsidiary performance
reaches or exceeds the performance targets and individual
performance is exemplary, incentive compensation awards, in
conjunction with salaries, will provide a level of compensation
which recognizes the skills and efforts of the key
executives.
II.
DEFINITIONS
Capitalized
terms not otherwise defined herein shall have the meanings given
them in the Company’s Executive Incentive Compensation Plan
Rules and Regulations.
III.
BASIC PLAN CONCEPT
The
Plan provides an opportunity to earn annual incentive compensation
based on the achievement of specified annual performance
objectives. A target incentive award for each
individual
within the Plan is established based on the position level and
actual base salary, provided, however, that the Compensation
Committee of the Board of Directors (the "Committee") of the
Company in its sole discretion may, instead of actual base salary,
use the assigned salary grade market value (midpoint)
("Salary"). The target incentive award represents the
amount to be paid, subject to the achievement of the performance
objective targets established each year. Larger incentive awards
than target may be authorized when performance exceeds targets;
lesser or no amounts may be paid when performance is below
target.
It is
recognized that during a Plan Year major unforeseen changes in
economic and environmental conditions or other significant factors
beyond the control of management may substantially affect the
ability of the Plan Participants to achieve the specified
performance goals. Therefore, in its review of corporate
performance the Committee, in consultation with the Chief Executive
Officer of MDU Resources Group, Inc., may modify the performance
targets. However, it is contemplated that such target
modifications will be necessary only in years of unusually adverse
or favorable external conditions.
IV.
ADMINISTRATION
The
Plan shall be administered by the Committee with the assistance of
the President of the Company. The Committee shall
approve annually, prior to the beginning of each Plan Year, the
list of eligible Participants, and the target incentive award level
for each position within the Plan. The Plan's
performance targets for the year shall be approved by the Committee
no later than its regularly scheduled February meeting during that
Plan
Year. The
Committee shall have final discretion to determine actual award
payment levels, method of payment, and whether or not payments
shall be made for any Plan Year.
The
Board of Directors of the Company may, at any time and from time to
time, alter, amend, supersede or terminate the Plan in whole or in
part, provided that no termination, amendment or modification of
the Plan shall adversely affect in any material way an award that
has met all requirements for payment without the written consent of
the Participant holding such award, unless such termination,
modification or amendment is required by applicable law.
V.
ELIGIBILITY
Key
executives of the Company or the Subsidiaries who are determined by
the Committee to have a key role in both the establishment and
achievement of Company and/or Subsidiary objectives shall be
eligible to participate in the Plan.
Nothing
in the Plan shall interfere with or limit in any way the right of
the Company or any Subsidiary to terminate any Participant's
employment at any time, for any reason or no reason in the
Company's or a Subsidiary's sole discretion, or confer upon any
Participant any right to continue in the employment of the Company
or any Subsidiary. No executive shall have the right to
be selected to receive an award under the Plan, or, having been so
selected, to be selected to receive a future award.
VI.
PLAN PERFORMANCE MEASURES
Performance
measures shall be established that consider shareholder and
customer interests. These measures shall be evaluated
annually based on achievement of specified goals.
The
performance measure reflective of shareholders' interest will be
the percentage attainment of corporate goals, as determined each
year by the Committee. This measure may be applied at
the Company level for some individuals, such as the President,
whose major or sole impact is Company-wide, or at the Subsidiary
level for individuals whose major or sole impact is on Subsidiary
results.
Individual
performance will be assessed based on the achievement of annually
established individual objectives.
Threshold,
target and maximum award levels will be established annually for
each performance measure. The Committee will retain the
right to make all interpretations as to the actual attainment of
the desired results and will determine whether any circumstances
beyond the control of management need to be considered.
VII.
TARGET INCENTIVE AWARDS
Target
incentive awards will be expressed as a percentage of each
Participant's Salary. These percentages shall vary by
position and reflect larger reward opportunity for positions having
greater effect on the establishment and accomplishment of the
Company's or a Subsidiary's objectives. A schedule
showing the target awards as a percentage of Salary for eligible
positions will be prepared by the Committee for each Plan
Year.
VIII.
INCENTIVE FUND DETERMINATION
The
target incentive fund is the sum of the individual target incentive
awards for all eligible Participants. Once the incentive
targets have been determined by the Committee, a target incentive
fund shall be established and accrued ratably by the
Company. The incentive fund and accruals may be adjusted
during the year.
After
the close of each Plan Year, the Company will prepare an analysis
showing the Company's and each Subsidiary's performance in relation
to each of the performance measures employed. This will
be provided to the Committee for review and comparison to
threshold, target and maximum performance levels. In
addition, any recommendations of the President will be presented at
this time. The Committee will then determine the amount
of the target incentive fund earned.
IX.
INDIVIDUAL AWARD DETERMINATION
Each
individual Participant's award will be based first upon the level
of performance achieved by the Company and/or the Subsidiary and
secondly based upon the individual's performance. The
criteria applicable for assessing individual performance will be
approved by the Committee no later than its regularly scheduled
February meeting during the Plan Year. The assessment by
the Committee, after consultation with the President, of
achievement relative to the established criteria, as determined by
a percentage from 0 percent to 200 percent, will be applied to the
Participant's target incentive award which has been first adjusted
for Company or Subsidiary performance.
X.
PAYMENT OF AWARDS
Except
as provided below or as otherwise determined by the Committee, in
order to receive an award under the Plan, the Participant must
remain in the employment of the Company or the Subsidiary for the
entire Service Year. If a Participant terminates
employment with the Company pursuant to Section 5.01 of the
Company's Bylaws which provides for mandatory retirement for
certain officers on their 65th birthday (or terminates employment
with a Subsidiary pursuant to a similar Subsidiary Bylaw provision)
and if the Participant's 65th birthday occurs during the Service
Year, determination of whether the performance measures have been
met will be made at the end of the Service Year, and to the extent
met, payment of the award will be made to the Participant,
prorated. Proration of awards shall be based upon the
number of full months elapsed from and including January to and
including the month in which the Participant's 65th birthday
occurs. The prorated award shall be paid as soon as
practicable in the year following the Service Year, but in all
events between January 1 and March 10.
A
Participant who transfers between the Company or a Subsidiary and
another company in the MDU Resources Group, Inc. system may receive
a prorated award at the discretion of the Committee.
Payments
made under this Plan will not be considered part of compensation
for pension purposes. Payments will be made in cash as
soon as practicable in the year following the Service Year, but in
all events between January 1 and March 10. Incentive
awards may be deferred if the appropriate elections have been
executed prior to the beginning of the Service Year. A
deferral election will be effective only for the
incentive
award
earned in the Service Year following the Plan Year in which the
election is made. Deferral elections may not be changed
or revoked after the Service Year begins. Deferred
amounts shall be subject to the terms of the Plan and the Rules and
Regulations, as amended, and, to the extent not inconsistent
therewith, the deferral election forms pursuant to which the
amounts were deferred. Deferred amounts will accrue interest at a
rate determined annually by the Committee and specified in the
Rules and Regulations.
In
the event of a "Change in Control" (as defined by the Committee in
its Rules and Regulations), any award deferred by a Participant
shall become immediately payable to the Participant in cash,
together with accrued interest thereon to the date of
payment. In the event the Participant files suit to
collect the Participant's deferred award, all of the court costs,
other expenses of litigation, and attorneys' fees shall be paid by
the Company in the event the Participant prevails upon any of the
Participant's claims for payment of a deferred award.
XI.
ACCOUNTING RESTATEMENTS
This
Section XI shall apply only to incentive awards granted to
Participants in the Plan who are employees of the
Company. Notwithstanding anything in the Plan or the
Plan's Rules and Regulations to the contrary, if the Company's
audited financial statements are restated, the Committee may, in
accordance with the Company's Guidelines for Repayment of
Incentives Due to Accounting Restatements , take such actions
as it deems appropriate (in its sole discretion) with respect
to
(a)
unpaid incentive awards under the Plan (including incentive awards
relating to completed Plan Years, but with
respect
to which payments have not yet been made or deferred) ("Outstanding
Awards") and
(b)
prior incentive awards that were paid (or deferred) within the 3
year period preceding the restatement ("Prior Awards"), provided
such Prior Awards were not paid prior to the date the Plan was
amended to add this Section XI,
if
the calculation of the amounts payable, paid or deferred under such
awards are, or would have been, directly impacted by the
restatement, including, without limitation, (i) securing (or
causing to be secured) repayment of some or all payments made
pursuant to (or deferrals relating to) Prior Awards, (ii) making
(or causing to be made) additional payments (or crediting
additional deferrals), (iii) reducing or otherwise adjusting the
amount payable pursuant to Outstanding Awards and/or (iv) causing
the forfeiture of Outstanding Awards. The Committee may,
in its sole discretion, take different actions pursuant to this
Section XI with respect to different awards, diffe
