dir-comp_policy.htm


    

      


      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 Non-Employee Director Long-Term Incentive
Compensation Plan.

      


      Annual Retainers and Stock
Compensation

      


      The Board service annual cash retainer
shall be $30,000.  The Lead Director, if any, shall receive an
additional $33,000 of compensation.  This is in addition to the annual
Director cash retainer of $30,000.  The non-executive Chairman of the
Board, if any, shall receive an additional $100,000 of compensation, consisting
of 50 percent cash and 50 percent equity compensation.  This is
in addition to the annual Director cash compensation of $30,000.  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 MDU Resources Group, Inc. Deferred
Compensation Plan for Directors (as amended and restated effective May 15, 2008)
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 by 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  Non-Employee Director
Long-Term Incentive Compensation 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.

       


      
        
           


        

        
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        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 incurred while
serving as a Director, 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.  See the paragraph below entitled
"Code Section 409A" for further rules relating to travel expense
reimbursements.

      


      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.


      
        
           


        

        
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      Insurance
Coverages

      


      The Company maintains the following
insurance for protection of its Directors as they carry out the business of MDU
Resources Group, Inc., which shall be provided while serving as a
Director:

      


      
        	
                 
      

              	
                1.

              	
                General
      liability and automobile liability
insurance:

              


      

      


      The
Directors are afforded general and automobile liability coverage under a
combination of policies with program limits to $100 million after a self-insured
retention of $500,000.

      


      
        	
                 
      

              	
                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 $30
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.

      



      
        
           


        

        
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                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.

      


      Hedging Stock
Ownership

       

      Directors are not permitted to hedge
their ownership of Company common stock.  Hedging strategies include
but are not limited to zero-cost collars, equity swaps, straddles, prepaid
variable forward contracts, security futures contracts, exchange funds, forward
sale contracts and other financial transactions that allow the Director to
benefit from devaluation of the Company's stock.  Hedging strategies
may allow Directors to own stock technically but without the full benefits and
risks of such ownership.  Therefore, Directors are prohibited from
engaging in any such transactions.

      


      Code Section
409A

       

      To the extent any reimbursements or
in-kind benefits provided to a Director pursuant to this policy constitute
“deferred compensation” under Internal Revenue Code Section 409A, any such
reimbursement or in-kind benefit shall be paid in a manner consistent with
Treasury Regulation Section 1.409A-3(i)(1)(iv), including the requirements that
the amount of reimbursable expenses or in-kind benefits provided during a year
may not affect the expenses eligible for reimbursement or in-kind benefits
provided in any other year and that any reimbursement be made on
or before the last day of the calendar year following the calendar year in which
the expense was incurred.

       

      
         

        
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