Directors' Compensation Policy


    

      


      MDU
        RESOURCES GROUP, INC.

      


      DIRECTORS'
        COMPENSATION POLICY

      


      Each
        Director who is not a full-time employee of the Company shall receive
        compensation made up of annual cash retainers, common stock and meeting fees.
        Each
        Director is also eligible for awards under the 1997 Non-Employee Director
        Long-Term Incentive Plan.

      


      Annual
        Retainers and Stock Compensation

      


      The
        Board
        service annual cash retainer shall be $30,000. The Lead Director, if any,
        shall
        receive an annual retainer of $63,000. The non-executive Chairman of the
        Board,
        if any, shall receive an annual retainer of $100,000. The annual retainers
        for
        service as Chairman of the Compensation, and Nominating and Governance
        Committees shall be $5,000. The annual retainer for service as Chairman of
        the
        Audit Committee shall be $10,000. Such retainers shall be paid in monthly
        installments.

      


      The
        Amended and Restated Deferred Compensation Plan for Directors adopted on
        February 13, 1992, and effective January 1, 1992, as amended, permits a Director
        to defer all or any portion of the annual cash retainer, as well as meeting
        fees
        and any other cash compensation paid for service as a Director. The amount
        deferred is recorded in each participant's deferred compensation account
        and
        credited with income in the manner prescribed in the Plan. For further details,
        reference is made to the Plan, a copy of which is attached.

      


      Each
        Director shall receive 4,050 shares of Common Stock on or about the 15th
        business day following the annual meeting of stockholders, pursuant to the
        Non-Employee Director Stock Compensation Plan, effective April 25, 1995,
        as
        amended, or the 1997 Non-Employee Director Long-Term Incentive Plan. A Director
        may decline a stock payment for any plan year, in writing in advance of the
        plan
        year to which stock payment relates. No cash compensation shall be paid in
        lieu
        thereof. By written election a Director may reduce the cash portion of the
        annual retainer and have that amount applied to the purchase of additional
        shares. The election must be made on a form provided by the administrative
        committee and returned to the committee by the last business day of the year
        prior to the year in which the election is to be effective. The election
        remains
        in effect until changed or revoked. No election may be changed or revoked
        for
        the current year, but may be changed for a subsequent year. For further details,
        reference is made to the Non-Employee Director Stock Compensation Plan, a
        copy
        of which is attached. 

      


      Board
        and Committee Meeting Fees

      


      The
        fee
        for each Board meeting attended shall be $1,500 and for each meeting attended
        of
        each Committee of which the Director is a member, and for attendance at the
        Strategic Planning meeting, shall be $1,500, payable only to Directors who
        are
        not full-time employees of the Company.

      


      Travel
        Expense Reimbursement

      


      All
        Directors will be reimbursed for reasonable travel expenses including spouse’s
        expenses, in connection with attendance at meetings of the Company’s Board of
        Directors and its committees. If the travel expense is related to the
        reimbursement of commercial airfare, such reimbursement will not exceed
        full-coach rate. If the travel expense is related to reimbursement of
        non-commercial airfare, such reimbursement will not exceed the rate for
        comparable travel by means of commercial airline at the first-class rate.
        Spousal travel expenses paid by the Company are treated as taxable income
        to the
        Director. 

      


      Directors'
        Liability

      


      Article
        Seventeenth of the Company's Restated Certificate of Incorporation provides
        that
        no Director of the Company shall be liable to the Company or its stockholders
        for breach of fiduciary duty as a Director, with certain exceptions stated
        below. Section 7.07 of the Company's Bylaws requires the Company to indemnify
        fully a Director against expenses, attorneys fees, judgments, fines and amounts
        paid in settlement of any suit, action or proceeding, whether civil or criminal,
        arising from an action of a Director by reason of the fact that the Director
        was
        a Director of MDU Resources Group, Inc.

      


      There
        are
        exceptions to these protections: breaches of the Directors' duty of loyalty
        to
        the Company or its stockholders, acts or omissions not in good faith or which
        involve intentional misconduct or a knowing violation of the law, violation
        of
        Section 174 of the Delaware General Corporation Law (relating to unlawful
        declaration of dividends and unlawful purchase of the company's stock), and
        transactions from which the Director derived an improper personal benefit
        (including short-swing profits under Section 16(b) of the Securities Exchange
        Act of 1934).

      


      The
        Company has and does maintain Directors' and Officers' liability insurance
        coverage with a $125 million limit.

      


      Insurance
        Coverages

      


      The
        Company maintains the following insurance for protection of its Directors
        as
        they carry out the business of MDU Resources Group, Inc.

      


      
        	 	
                1.

              	
                General
                  liability and automobile liability
                  insurance:

              


      

      


      
        	 	 	
                The
                  Directors are afforded coverage under the general liability and
                  automobile
                  liability insurance of the Company. The policy limit is $100 million
                  in
                  excess of self-insured retentions of $500,000 per occurrence for
                  general
                  liability and for automobile liability; or $1 million per occurrence/
                  $2 million aggregate for general liability and $1 million per
                  occurrence for automobile liability, where we are carrying primary
                  layer
                  insurance coverage.

              


      

      


      
        	 	
                2.

              	
                Fiduciary
                  and employee benefit liability
                  insurance:

              


      

      


      
        	 	 	
                The
                  Directors are afforded coverage under the fiduciary and crime liability
                  insurance of the Company. The fiduciary policy has a limit of $25
                  million
                  and the crime policy has a limit of $10 million.
                  

              


      

      


      
        	 	
                3.

              	
                Aircraft
                  liability insurance:

              


      

      


      
        	 	 	
                The
                  Company's existing aircraft liability insurance policy extends
                  coverage
                  while a non-owned* aircraft is used by a Director in traveling
                  to and from
                  Director or Board committee meetings. This insurance coverage constitutes
                  excess liability coverage in the amount of $200
                  million.

              


      

      


      
        	 	 	
                *Non-owned
                  aircraft is defined as: 1) any aircraft registered under a “standard”
                  airworthiness certificate issued by the FAA; 2) aircraft with a
                  seating
                  capacity not exceeding 40 seats; 3) aircraft that are not owned
                  by MDU
                  Resources Group, Inc. or any of its subsidiaries; 4) aircraft that
                  are not
                  partly or wholly owned by or registered in the Director’s name or the name
                  of any Director’s household member.

              


      

      


      
        	 	
                4.

              	
                Travel
                  and sojourn insurance:

              


      

      


      
        	 	 	
                All
                  Directors are protected by a group insurance policy with coverage
                  of
                  $250,000 that provides 24-hour accident protection while traveling
                  on
                  Company business.

              


      

      


      
        	 	 	
                Coverage
                  in all instances begins at the actual start of a business trip
                  and ends
                  when the Director returns to his/her home or regular place of
                  employment.

              


      

      


      
        	 	 	
                The
                  beneficiary of the insurance will be that beneficiary recorded
                  on a
                  beneficiary designation card provided by the
                  Company.

              


      

      


      
        	 	
                5.

              	
                Group
                  life insurance:

              


      

      


      
        	 	 	
                All
                  outside Directors are protected by a non-contributory group life
                  insurance
                  policy with coverage of $100,000.

              


      

      


      
        	 	 	
                The
                  coverage begins the day the Director is elected to the Board of
                  Directors
                  and terminates when the Director ceases to be an outside
                  Director.

              


      

      


      
        	 	 	
                A
                  Certificate of Insurance shall be provided to the Director and
                  the
                  beneficiary of the insurance will be that beneficiary recorded
                  on a
                  beneficiary designation card provided by the
                  Company.

              


      

      


      
        	 	 	
                This
                  protection is considered taxable compensation under current tax
                  laws.
                  Consequently, the Company will provide each Director annually on
                  Form 1099
                  the amount of taxable income related to this
                  coverage.