MONTANA-DAKOTA UTILITIES CO.
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 Montana-Dakota Utilities Co. to focus
their efforts on the achievement of challenging and demanding corporate
objectives. The Plan is designed to reward successful corporate performance as
measured against specified performance goals as well as exceptional individual
performance. When utility 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. In this Plan, MDU Resources Group,
Inc. is defined as the "Company" while Montana-Dakota Utilities Co. is defined
as the "Utility Company."

II.     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 of the Company (the “Committee”) 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
the Company, 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.

III.     ADMINISTRATION
The Plan shall be administered by the Committee with the assistance of the Chief
Executive Officer 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.

IV.     ELIGIBILITY
Executives who are determined by the Committee to have a key role in both the
establishment and achievement of Utility Company 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
Utility Company to terminate any Participant’s employment at any time, for any
reason or no reason in the Utility Company’s sole discretion, or confer upon any
Participant any right to continue in the employment of the Utility Company. 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.

V.     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 corporate level for individuals
whose major or sole impact is Utility Company-wide, or at the business unit
level for individuals whose major or sole impact is on business unit 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 and business unit. 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.

VI.     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 Utility Company’s or business unit’s objectives. An
exhibit showing the target awards as a percentage of Salary for eligible
positions will be attached to this Plan at the beginning of each Plan Year.

VII.    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 Utility Company. The incentive fund and accruals may be adjusted
during the year.
At the close of each Plan Year, the Chief Executive Officer of the Company will
prepare an analysis showing the Utility Company's and business unit'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 Chief
Executive Officer will be presented at this time. The Committee will then
determine the amount of the target incentive fund earned.

VIII.   INDIVIDUAL AWARD DETERMINATION
Each individual Participant's award will be based first upon the level of
performance achieved by the Utility Company or business unit and secondly based
upon the individual's performance. The performance measures applicable for
assessing individual performance will be established at the beginning of each
Plan Year. The assessment by the Committee, after consultation with the Chief
Executive Officer, of achievement relative to the established performance
measures, 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 Utility Company or business unit performance.

IX. 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 Utility Company or business unit for the entire Plan Year. If
a Participant terminates employment with the Utility Company pursuant to a
mandatory retirement provision in the Utility Company’s Bylaws that provides for
mandatory retirement of certain officers on their 65th birthday (or terminates
employment with a subsidiary of the Company pursuant to a similar subsidiary
Bylaw provision), and if the Participant's 65th birthday occurs during the Plan
Year, determination of whether the performance measures have been met will be
made at the end of the Plan 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. An
individual Participant who transfers between the Utility Company and the Company
or any business unit of the Company 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 when made will be
in cash. Incentive awards may be deferred if the appropriate elections have been
executed prior to the end of the Plan Year. Deferred amounts will accrue
interest at a rate determined annually by the Committee.
In the event of a "Change in Control" (as defined by the Committee in its Rules
and Regulations) then any award deferred by each 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 then all of the court costs, other
expenses of litigation, and attorneys' fees shall be paid by the Utility Company
in the event the Participant prevails upon any of the Participant's claims for
payment of a deferred award.

X.      ACCOUNTING RESTATEMENTS 
This Section X shall apply to incentive awards granted to all Participants in
the Plan. Notwithstanding anything in the Plan or the Plan's Rules and
Regulations to the contrary, if the Utility 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 X,
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 X with respect to different awards, different Participants (or
beneficiaries) and/or different classes of awards or Participants (or
beneficiaries). The Committee has no obligation to take any action permitted by
this Section X. The Committee may consider any factors it chooses in taking (or
determining whether to take) any action permitted by this Section X, including,
without limitation, the following:
(A) The reason for the restatement of the financial statements;
(B) The amount of time between the initial publication and subsequent
restatement of the financial statements; and
(C) The Participant's current employment status, and the viability of
successfully obtaining repayment.
If the Committee requires repayment of all or part of a Prior Award, the amount
of repayment may be based on, among other things, the difference between the
amount paid to the individual and the amount that the Committee determines in
its sole discretion should have been paid based on the restated results. The
Committee shall determine whether repayment shall be effected (i) by seeking
repayment from the Participant, (ii) by reducing (subject to applicable law and
the terms and conditions of the applicable plan, program or arrangement) the
amount that would otherwise be provided to the Participant under any
compensatory plan, program or arrangement maintained by the Company or any of
its affiliates, (iii) by withholding payment of future increases in compensation
(including the payment of any discretionary bonus amount) or grants of
compensatory awards that would otherwise have been made in accordance with the
Company's otherwise applicable compensation practices, or (iv) by any
combination of the foregoing. Additionally, by accepting an incentive award
under the Plan, Participants acknowledge and agree that the Committee may take
any actions permitted by this Section X with respect to Outstanding Awards to
the extent repayment is to be made pursuant to another plan, program or
arrangement maintained by the Company or any of its affiliates.

MONTANA-DAKOTA UTILITIES CO.
EXECUTIVE INCENTIVE COMPENSATION PLAN
RULES AND REGULATIONS

The Compensation Committee of the Board of Directors of MDU Resources Group,
Inc. (the "Company") adopted Rules and Regulations for the administration of the
Executive Incentive Compensation Plan (the "Plan") on February 9, 1983,
following adoption of the Plan by the Board of Directors of the Company on
November 4, l982.

I. DEFINITIONS
The following definitions shall be used for purposes of these Rules and
Regulations and for the purposes of administering the Plan:

 
1.
The "Committee" shall be the Compensation Committee of the Board of Directors of
the Company.

 
2.
The "Company" shall refer to MDU Resources Group, Inc. alone and shall not refer
to its utility division or to any of its subsidiary corporations.

 
3.
The "Utility Company" shall refer to Montana-Dakota Utilities Co., a Division of
MDU Resources Group, Inc.

 
4.
"Participants" for any Plan Year shall be those executives who have been
approved by the Committee as eligible for participation in the Plan for such
Plan Year.

 
5.
"Payment Date" shall be the date set by the Committee for payment of awards,
other than those awards deferred pursuant to Section IX of the Plan and Section
VII of these Rules and Regulations.

 
6.
The "Plan" shall refer to the Executive Incentive Compensation Plan.

 
7.
The "Plan Year" shall be the calendar year.

 
8.
"Change in Control" shall mean the earlier of the following to occur: (a) the
public announcement by the Company or by any person (which shall not include the
Company, any subsidiary of the Company or any employee benefit plan of the
Company or of any subsidiary of the Company) ("Person") that such Person, who or
which, together with all Affiliates and Associates (within the meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (17 C.F.R. 240.12b-2)) of such
Person, shall be the beneficial owner of twenty percent (20%) or more of the
voting stock of the Company then outstanding; (b) the commencement of, or after
the first public announcement of any Person to commence, a tender or exchange
offer the consummation of which would result in any Person becoming the
beneficial owner of voting stock aggregating thirty percent (30%) or more of the
then outstanding voting stock of the Company; (c) the announcement of any
transaction relating to the Company required to be described pursuant to the
requirements of Item 6(e) of Schedule 14A of Regulation 14A of the Securities
and Exchange Commission under the Securities Exchange Act of 1934 (17 C.F.R.
240.14a-101, item 6(e)); (d) a proposed change in the constituency of the Board
of Directors of the Company such that, during any period of two (2) consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute at least a majority
thereof, unless the election or nomination for election by the shareholders of
the Company of each new Director was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who were members of the Board of
Directors of the Company at the beginning of the period; (e) the sale or other
disposition of all or substantially all of the assets of the Utility Company,
other than to a subsidiary of the Company; or (f) any other event which shall be
deemed by a majority of the Compensation Committee of the Board of Directors of
the Company to constitute a "Change in Control."

 
9.
The "Prime Rate" shall be the base rate on corporate loans posted by at least 75
percent of the nation's largest banks as reported in The Wall Street Journal.

 
10.
“Retirement” means the later of the day the Participant attains age 55 or the
day the Participant ceases to be an employee of the Company, its utility
division or any of its subsidiary corporations.

II.     ADMINISTRATION

 
1.
The Committee shall have the full power to construe and interpret the Plan and
to establish and to amend these Rules and Regulations for its administration.

 
2.
No member of the Committee shall participate in a decision as to their own
eligibility for, or award of, an incentive award payment.

 
3.
Prior to the beginning of each Plan Year, the Committee shall approve a list of
eligible executives and notify those so approved that they are eligible to
participate in the Plan for such Plan Year.

 
4.
Prior to the beginning of each Plan Year, the Committee shall approve an Annual
Operating Plan. The Annual Operating Plan shall include the Plan's performance
measures and target incentive award levels for each salary grade covered by the
Plan for the following Plan Year. The Plan’s performance targets for the year
shall be approved by the Committee no later than its regularly scheduled
February meeting during the Plan Year. The Annual Operating Plan, insofar as it
is relevant to each individual Participant, shall be made available by the
Committee to each Participant in the Plan at the beginning of each Plan Year.

 
5.
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. However, unless the Plan's performance objectives are met for the
Plan Year, no award shall be made for that Plan Year. Performance targets
modified pursuant to Section II of the Plan will be deemed performance targets
for purposes of determining whether or not these targets have been met.

III.   PLAN PERFORMANCE MEASURES

   
1.
The Committee shall establish the percentage attainment of corporate performance
measure and the percentage attainment of individual goals measure. The Committee
may establish more or fewer performance measures as it deems necessary.

   
2.
The corporate performance measure may be set by reference to earnings, return on
invested capital or any other measure or combination of measures deemed
appropriate by the Committee. It may be established for the Utility Company or
for the individual business unit.

   
3.
Individual performance will be assessed based on the achievement of annually
established individual objectives.

   
4.
Plan performance measures may be applied at the corporate level for individuals
whose major or sole impact is Utility Company-wide, or at the business unit
level for individuals whose major or sole impact is on the business unit
results. The Annual Operating Plan shall contain a list of individuals to whom
the Plan performance measures will be applied at the corporate level and a list
of those individuals for whom the Plan performance measures will be applied at
the business unit level. The relevant business unit for each individual will be
identified.

   
5.
The Committee shall set threshold, target and maximum award levels for the
performance measures, for each business unit, and for the Utility Company. Those
levels shall be included in the Annual Operating Plan.

   
6.
The Committee will retain the authority to determine whether or not the actual
attainment of these measures has been made.

IV.   TARGET INCENTIVE AWARDS

   
1.
Target incentive awards will be a percentage of each Participant’s Salary, as
defined in the Plan.

   
2.
Target incentive awards shall be set by the Committee annually and will be
included in the Annual Operating Plan.

 
V.    INCENTIVE FUND DETERMINATION

 
1.
The target incentive fund is the sum of the individual target incentive awards
for all eligible Participants.

 
2.
Once individual incentive targets have been determined, a target incentive fund
shall be established and accrued ratably by the Utility Company. The incentive
fund and accruals may be adjusted during the year.

 
3.
As soon as practicable following the close of each Plan Year, the Chief
Executive Officer will provide the Committee with an analysis showing the
Utility Company's and each relevant business unit's performance in relation to
the performance measures. The Committee will review the analysis and determine,
in its sole discretion, the amount of the actual incentive fund.

 
4.
In determining the actual incentive fund, the Committee may consider any
recommendations of the Chief Executive Officer.

VI.     INDIVIDUAL AWARD DETERMINATION

 
1.
The Committee shall have the sole discretion to determine each individual
Participant's award. The Committee's decision will be based first upon the level
of performance achieved by the Utility Company or business unit and second upon
the individual's performance.

 
2.
The Committee, after consultation with the Chief Executive Officer, shall set
the award as a percentage from 0 percent to 200 percent of the Participant's
target incentive award, adjusted for Utility Company or business unit
performance.

VII.    PAYMENT OF AWARDS

 
1.
On the date the Committee determines the awards to be made to individual
Participants, it shall also establish the Payment Date.

 
2.
Except as provided below or as the Committee otherwise determines, in order to
receive an award under the Plan, a Participant must remain employed by the
Utility Company or one of its business units for the entire Plan Year.

 
3.
If a Participant terminates employment with the Utility Company pursuant to a
mandatory retirement provision in the Utility Company’s Bylaws that provides for
mandatory retirement of certain officers on their 65th birthday (or terminates
employment with a subsidiary of the Company pursuant to a similar subsidiary
Bylaw provision), and if the Participant’s 65th birthday occurs during the Plan
Year, determination of whether the performance measures have been met will be
made at the end of the Plan 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.

 
4.
Payment of the awards shall be made in cash. Payments shall be made on the
Payment Date unless the Participant has deferred, in whole or in part, the
receipt of the award by making an election on the deferral form attached hereto,
prior to the end of the Plan Year immediately preceding the Payment Date.

 
5.
In the event a Participant has elected to defer receipt of all or a portion of
the award, the Utility Company shall set up an account in the Participant’s
name. The amount of the Participant’s award to the extent deferred will be
credited to the Participant's account on the Payment Date.

 
6.
The balance credited to an account of a Participant who has elected to defer
receipt of an award will be an unsecured, unfunded obligation of the Utility
Company.

 
7.
Interest shall accrue on the balance credited to a Participant's account from
the date the balance is credited. The rate of interest shall be the Prime Rate
plus 1 percentage point as reported on the last business day of the preceding
year to be effective on January 1 of each new Plan Year.

 
8.
Interest shall be compounded and credited to the account monthly.

 
9.
A Participant may elect to defer any percentage, not to exceed l00, of an annual
award.

 
10.
A Participant electing to defer any part of an award must elect one of the
following dates for payment:

   
(1)
Payment Date next following termination of employment with the Utility Company
or an affiliated company; or

   
(2)
Payment Date of the fifth year following the year in which the award may be
made.

 
11.
A Participant may elect to receive the deferred amounts accumulated in the
Participant's account in monthly installments, not to exceed 120. In the event
the Participant elects to receive the amounts in the Participant's account in
more than one installment, interest shall continue to accrue on the balance
remaining in their account at the applicable rate or rates determined annually
by the Committee.

 
12.
In the event of the death of a Participant in whose name a deferred account has
been set up, the Utility Company shall, within six months thereafter, pay to the
Participant's estate or the designated beneficiary the entire amount in the
deferred account.

 
13.
In the event of a "Change in Control" then any award deferred by each
Participant shall become immediately payable to the Participant. In the event
the Participant files suit to collect a deferred award then all of the
Participant's court costs, other expenses of litigation, and attorneys' fees
shall be paid by the Utility Company in the event the Participant prevails upon
any of the Participant's claims for payment.