MDU RESOURCES GROUP, INC.
LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

PERFORMANCE SHARE AWARD AGREEMENT

 
[Date]

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In accordance with the terms of the MDU Resources Group, Inc. Long-Term
Performance-Based Incentive Plan (the “Plan”), pursuant to action of the
Compensation Committee of the Board of Directors of MDU Resources Group, Inc.
(the “Committee”), MDU Resources Group, Inc. (the “Company”) hereby grants to
you (the “Participant”) Performance Shares (the “Award”), subject to the terms
and conditions set forth in this Award Agreement (including Annexes A and B
hereto and all documents incorporated herein by reference), as set forth below:

Target Award:
«shares» Performance Shares (the “Target Award”)
Performance Period:
[          ] through
[          ] (the “Performance Period”)
Date of Grant:
[          ]
Dividend Equivalents:
Yes

 
THESE PERFORMANCE SHARES ARE SUBJECT TO FORFEITURE AS PROVIDED HEREIN. THIS
AWARD AND AMOUNTS RECEIVED IN CONNECTION WITH THIS AWARD ARE ALSO SUBJECT TO
FORFEITURE, RECAPTURE OR OTHER ACTION IN THE EVENT OF AN ACCOUNTING RESTATEMENT,
AS PROVIDED IN ARTICLE 19 OF THE PLAN. ADDITIONALLY, BY SIGNING THIS AWARD
AGREEMENT YOU ARE ACKNOWLEDGING AND AGREEING THAT ANY PERFORMANCE SHARE AWARD
GRANTED TO YOU IN 2005 AND ANY AMOUNTS PAID OR PAYABLE OR DISTRIBUTED OR
DISTRIBUTABLE PURSUANT TO ANY SUCH PRIOR 2005 AWARD SHALL ALSO BE SUBJECT TO
FORFEITURE, RECAPTURE OR OTHER ACTION IN THE EVENT OF AN ACCOUNTING RESTATEMENT,
AS PROVIDED IN ARTICLE 19 OF THE PLAN.

Further terms and conditions of the Award are set forth in Annexes A and B
hereto, which are integral parts of this Award Agreement.

All terms, provisions and conditions applicable to the Award set forth in the
Plan and not set forth in this Award Agreement are hereby incorporated herein by
reference. To the extent any provision hereof is inconsistent with a provision
of the Plan; the provisions of the Plan will govern. The Participant hereby
acknowledges receipt of a copy of this Award Agreement, including Annexes A and
B hereto, and a copy of the Plan and agrees to be bound by all the terms and
provisions hereof and thereof.

MDU RESOURCES GROUP, INC.
 
By: /s/ Martin A. White
Martin A. White
Chairman of the Board and
Chief Executive Officer

Agreed:
 
___________________
Participant
 

Attachments: Annex A
        Annex B

--------------------------------------------------------------------------------

 
ANNEX A

TO

MDU RESOURCES GROUP, INC.
LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

PERFORMANCE SHARE AWARD AGREEMENT

It is understood and agreed that the Award of Performance Shares evidenced by
the Award Agreement to which this is annexed is subject to the following
additional terms and conditions.

1. Nature of Award. The Target Award represents the opportunity to receive
shares of Company common stock, $1.00 par value ("Shares") and Dividend
Equivalents on such Shares. The number of Shares that may be earned under this
Award shall be determined pursuant to Section 2 hereof. The amount of Dividend
Equivalents that may be earned under this Award shall be determined pursuant to
Section 4 hereof. Except for Dividend Equivalents, which are paid in cash,
Awards will be paid in Shares.

2. Determination of Number of Shares Earned.
 
                    The number of Shares earned, if any, for the Performance
Period shall be determined in accordance with the following formula:
 
# of Shares = Payout Percentage X Target Award

The “Payout Percentage” is based on the Company’s total shareholder return
("TSR") relative to that of the Peer Group listed on Annex B (the “Percentile
Rank”) for the Performance Period, determined in accordance with the following
table:

Percentile Rank
Payout Percentage
(% of Target Award)
100th
200%
75th
150%
50th
100%
40th
10%
less than 40th
0%

If the Company achieves a Percentile Ranking between the 40th and 50th
percentiles, the Payout Percentage shall be equal to 10%, plus 9% for each
Percentile Rank whole percentage above the 40th percentile. If the Company
achieves a Percentile Ranking between the 50th and 100th percentiles, the Payout
Percentage shall be equal to 100%, plus 2% for each Percentile Rank whole
percentage above the 50th percentile.

The Percentile Rank of a given company's TSR is defined as the percentage of the
Peer Group companies' returns falling at or below the given company's TSR. The
formula for calculating the Percentile Rank follows:

Percentile Rank = (n - r + 1)/n x 100
 
Where:
 

 
n =
total number of companies in the Peer Group, including the Company

 

 
r =
the numeric rank of the Company's TSR relative to the Peer Group, where the
highest return in the group is ranked number 1

 
To illustrate, if the Company's TSR is the third highest in the Peer Group
comprised of 26 companies, its Percentile Rank would be 92. The calculation is:
(26 - 3 + 1)/26 x 100 = 92.
 
The Percentile Rank shall be rounded to the nearest whole percentage.
 
If the common stock of a company in the Peer Group ceases to be traded during
the Performance Period, the company will be deleted from the Peer Group.
Percentile Rank will be calculated without regard to the return of the deleted
company.
 
Total shareholder return is the percentage change in the value of an investment
in the common stock of a company from the initial investment made on the last
trading day in the calendar year preceding the beginning of the performance
period through the last trading day in the final year of the performance period.
It is assumed that dividends are reinvested in additional shares of common stock
at the frequency paid.
 
All Performance Shares that are not earned for the Performance Period shall be
forfeited.

3. Issuance of Shares. Subject to any restrictions on distributions of Shares
under the Plan, and subject to Section 6 of this Annex A, the Shares earned
under the Award, if any, shall be issued to the Participant as soon as
practicable (but no later than the next March 15) following the close of the
Performance Period.

4. Dividend Equivalents. Dividend Equivalents shall be earned with respect to
any Shares issued to the Participant pursuant to this Award. The amount of
Dividend Equivalents earned shall be equal to the total dividends declared on a
Share between the Date of Grant of this Award and the last day of the
Performance Period, multiplied by the number of Shares issued to the Participant
pursuant to the Award Agreement. Any Dividend Equivalents earned shall be paid
in cash to the Participant when the Shares to which they relate are issued or as
soon as practicable thereafter. If the Award is forfeited or if no Shares are
issued, no Dividend Equivalents shall be paid.

5. Termination of Employment.
 
(a) If the Participant’s employment with the Company is terminated for any
reason other than "Cause" (as defined below) (1) during the first year of the
Performance Period, all Performance Shares (and related Dividend Equivalents)
shall be forfeited; (2) during the second year of the Performance Period,
determination of the Company's Percentile Rank for the Performance Period will
be made by the Committee at the end of the Performance Period, and Shares (and
related Dividend Equivalents) earned, if any, will be paid based on the Payout
Percentage, prorated for the number of full months elapsed from and including
the month in which the Performance Period began to and including the month in
which the termination of employment occurs; and (3) during the third year of the
Performance Period, determination of the Company's Percentile Rank for the
Performance Period will be made by the Committee at the end of the Performance
Period, and Shares (and related Dividend Equivalents) earned, if any, will be
paid based on the Payout Percentage without prorating. 

(b) If the Participant’s employment is terminated for "Cause" (as defined below)
during the Performance Period, all Performance Shares (and related Dividend
Equivalents) shall be forfeited.

(c) For purposes of the Award Agreement, the term "Cause" shall mean the
Participant's fraud or dishonesty that has resulted or is likely to result in
material economic damage to the Company or a Subsidiary, or the Participant's
willful nonfeasance if such nonfeasance is not cured within ten days of written
notice from the Company or a Subsidiary, as determined in good faith by a vote
of at least two-thirds of the non-employee directors of the Company at a meeting
of the Board at which the Participant is provided an opportunity to be heard.

6. Tax Withholding. Pursuant to Article 16 of the Plan, the Committee shall have
the power and the right to deduct or withhold, or require the Participant to
remit to the Company, an amount sufficient to satisfy any Federal, state and
local taxes (including the Participant's FICA obligations) required by law to be
withheld with respect to the Award. The Committee may condition the delivery of
Shares upon the Participant's satisfaction of such withholding obligations. The
Participant may elect to satisfy all or part of such withholding requirement by
tendering previously-owned Shares or by having the Company withhold Shares
having a Fair Market Value equal to the minimum statutory withholding that could
be imposed on the transaction (based on minimum statutory withholding rates for
Federal, state, and local tax purposes, as applicable, including payroll taxes,
that are applicable to such supplemental taxable income). Such election shall be
irrevocable, made in writing, signed by the Participant, and shall be subject to
any restrictions or limitations that the Committee, in its sole discretion,
deems appropriate.

7. Ratification of Actions. By accepting the Award or other benefit under the
Plan, the Participant and each person claiming under or through him or her shall
be conclusively deemed to have indicated the Participant’s acceptance and
ratification of, and consent to, any action taken under the Plan or the Award by
the Company, its Board of Directors, or the Committee.

8. Notices. Any notice hereunder to the Company shall be addressed to its
office, 1200 West Century Avenue, P.O. Box 5650, Bismarck, North Dakota 58506;
Attention: Corporate Secretary, and any notice hereunder to the Participant
shall be addressed to him or her at the address specified on the Award
Agreement, subject to the right of either party to designate at any time
hereafter in writing some other address.

9. Definitions. Capitalized terms not otherwise defined herein or in the Award
Agreement shall have the meanings given them in the Plan.

10. Governing Law and Severability. To the extent not preempted by Federal law,
the Award Agreement will be governed by and construed in accordance with the
laws of the State of Delaware, without regard to conflicts of law provisions. In
the event any provision of the Award Agreement shall be held illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining
parts of the Award Agreement, and the Award Agreement shall be construed and
enforced as if the illegal or invalid provision had not been included.
 
11. No Rights to Continued Employment. The Award Agreement is not a contract of
employment. Nothing in the Plan or in the Award Agreement shall interfere with
or limit in any way the right of the Company or any Subsidiary to terminate the
Participant's employment at any time, for any reason or no reason, or confer
upon the Participant the right to continue in the employ of the Company or a
Subsidiary.

--------------------------------------------------------------------------------

 

ANNEX B

TO

MDU RESOURCES GROUP, INC.
LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

PERFORMANCE SHARE AWARD AGREEMENT

PEER GROUP COMPANIES

Allegheny Energy, Inc.
ALLETE, Inc.
Alliant Energy Corporation
Black Hills Corporation
Comstock Resources, Inc.
Equitable Resources, Inc.
Florida Rock Industries, Inc.
Hanson PLC ADR
KeySpan Corporation
Kinder Morgan, Inc.
Martin Marietta Materials, Inc.
Newfield Exploration Company
NICOR, Inc.
OGE Energy Corp.
ONEOK, Inc.
Peoples Energy Corporation
Pogo Producing Company
Quanta Services, Inc.
Questar Corporation
SCANA Corporation
Stone Energy Corporation
TECO Energy, Inc.
UGI Corporation
Vectren Corporation
Vulcan Materials Company
XTO Energy, Inc.