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 differ
