Exhibit 10.1





Cascade Natural Gas
Corporation


Cascade Incentive Plan


2007


Cascade Natural Gas
Corporation (“Company”) has an incentive plan designed to reward non-bargaining
unit employees for outstanding, company performance. The objectives of this
plan are to:


·                  Reward
for Company performance


·                  Shift
to a performance-based, financially-driven organization


·                  Emphasize
performance in critical areas such as safety and customer satisfaction


·                  Establish
a link between pay and Company performance


·                  Establish
a profitable customer focus


·                  Encourage
team building


·                  Link
to Company’s objectives


·                  Attract,
retain and motivate teams and employees


·                  Motivate
higher levels of performance


·                  Focus
employees on Company direction (in their actions)


CASCADE
INCENTIVE PLAN


The purpose of the plan
is to provide a financial incentive for non-bargaining unit employees to
perform at high levels, both with regard to non-financial and financial
measures.  All non-bargaining unit
employees in the Company are eligible to participate in this plan.


Plan Funding


The threshold for
establishing funding for the plan is based on two factors:  1) Earnings per share (EPS) of $1.20 (NOTE:
This EPS target was devised assuming a rate case outcome of the stipulated
settlement and an implementation of 1/1/07. 
In the event the ultimate rate case outcome is less than the stipulated
settlement or the implementation is later than 1/1/07, the Governance,
Nominating and Compensation Committee of the Board of Directors of Cascade may
elect to alter the EBT target.  The
assumed average tax rate is 36.5%.  In
addition, the EPS and determination of plan funding does not include the impact
of merger-related expenses); and 2) the Company comes in below its capital
budget target of $24.3MM.  Once the
threshold is attained, any additional earnings are shared with 50% going to the
incentive plan and 50% going to shareholders (retained earnings).  Funding for incentive plans shall go to this
incentive plan first and the 401(k) Profit Sharing Plan and incentive plan once
the midpoint payout is attained in



 1
 






 



the incentive plan.  Funding shall also include Company
contributions to the 401(k) and payroll taxes that occur due to payouts of the
incentive plan.


Funding
for Non-financial measures — Funding for non-financial measures
at mid-point award levels will be 30% of the total potential mid-point
payout.  All funding for the incentive
plan up to 30% of the total potential mid-point payout will be used for payouts
for achievement of non-financial measures.


Funding
for Financial measures — Funding for performance for
financial measures begins after the payout for non-financial measures is
funded.  (Above 30% of total potential
mid-point payout.)


Non-Financial Performance Measures


Payouts
for performance in non-financial measures shall be based on the following
measures:


1.               Safety (15%) The safety measure is based on three separate
measurements each worth 5%.  They are the
recordable injury rate, locate accuracy rate and vehicle accident rate.  Each measurement will have a threshold
requirement.


2.               Customer Satisfaction (15%) Customer satisfaction is determined by customer’s
responses to the annual customer satisfaction survey performed the end of the
fiscal year.


Other non-financial
measures may be tracked, and may be critical to overall company performance,
but will not be factored into any payouts achieved under the plan.


Award Potentials


Employees participating
in the plan are eligible for an incentive payout. The payout is calculated as a
percentage of the employee’s base pay and is dependent upon the achievement of
the incentive plan goals and Company performance. The details of this target
payout are described below:


·                  The
incentive payout at midpoint performance varies depending on level in the
Company.


·                  The
plan outlines three levels of performance:


·                  Threshold:
represents the minimum acceptable level of performance for the measure; funding
for the plan begins at the threshold level.


·                  Plan
Mid Point: represents the level of performance that generates an incentive payout
of 100% of plan mid point.


·                  Outstanding:
represents the maximum level of performance for the measure; this level of
performance generates an incentive payout of 200% of target.


·                  The
level of achievement in the earnings per share measure will determine the
funding level of the plan.  Payouts
cannot exceed the funding pool.



 2
 






 



Timing of Payout


Awards will be paid out annually based upon the fiscal year results.
Payments will be made to employees by December 1st, 2007.  Notwithstanding anything to the contrary
contained herein, should the Company consummate the merger with MDU Resources
Group, Inc. prior to the end of fiscal 2007, (i) the cumulative amount of
calculated incentive as of the latest closed financial month prior to that date
will be construed as earned once approved by the Company’s Board of Directors;
(ii) any non-financial incentives calculated based upon the latest information
available and prorated for the amount of the fiscal year completed will be
construed as earned once approved by the Company’s Board of Directors; and
(iii) for the period relating to the end of the last closed financial month
prior to the merger (in the case of the calculated incentive) and the date any
non-financial incentive was approved by the Board (in the case of the
non-financial incentives) until the end of the fiscal year, MDU will make the
decisions on the amount of additional incentive to accrue in accordance with
this plan, but in no event will any incentives previously approved by the
Company’s Board of Directors as set forth above be reduced or the payment
thereof be delayed.


Eligibility


Employee’s performance must meet expectations
for their job and they must be an “employee in good standing.”  An employee in good standing is defined as
not having received any discipline at the written warning level or above from
the inception of the plan until payout.


All awards will be pro-rated based on the
length of service in that plan year. 
Employees must have a minimum of three months of service with the
Company in order to be eligible to participate in the plan.


Base Pay Definition


For the purposes of calculating incentive
awards, earned base pay and actual overtime earnings will be used for
non-exempt employees and earned annual base pay will be used for exempt employees.
Base pay calculations do not included bonuses, merit awards, incentive earnings
or other pay that would be reflected in W-2 earnings.  In the event a payout occurs due to
consummation of the merger, base pay will be annualized pay plus any actual
overtime earnings.



 3
 






 



Benefits


Incentive pay is included
in the definition of pay for the purpose of matching and employer contributions
in the 401(k).


Terminations


Individuals must be
employed at the end of the fiscal year or at the time the merger with MDU is consummated,
whichever is earlier, in order to be eligible to receive a payout; provided
that if an employment agreement with a particular employee states otherwise,
such employment agreement will supersede the foregoing. Pro-rated awards will
be paid to those who terminate due to retirement, disability or death.


The
Company reserves the right to alter, amend or cancel this program at any time.



 4
 






 



Cascade Natural Gas
Corporation


401(k) Profit Sharing
Plan


2007


Cascade Natural Gas
Corporation (“Company”) has a 401(k) profit sharing plan designed to reward
employees for outstanding Company performance and help fund their
retirement.  All non-bargaining unit
employees in the Company are eligible to participate in this plan.  Plan funding is described below.  Payouts at midpoint are 4% for all
non-bargaining unit employees.


Plan Funding


The 401(k) Profit Sharing
Plan is funded consistent with the Cascade Incentive Plan for 2007.


The threshold for initial
funding for the Cascade Incentive Plan is based on two factors:  1) Earnings per share are greater than $1.20;
and 2) the Company comes in below its $24.3MM capital budget.  Once the threshold is attained, any
additional earnings are shared with 50% going to the incentive plan and 50%
going to shareholders (retained earnings).  
Funding for incentive plans shall go to both the Cascade Incentive Plan
and the 401(k) Profit Sharing Plan once the midpoint funding of the incentive
plan is achieved.


	
  401(k) Profit Sharing

  	
   

  	
   

  
	
  Threshold

  	
   

  	
  Midpoint of

  the Cascade

  Incentive Plan

  
	
  Mid-point

  	
   

  	
  Level where

  midpoint

  payouts are

  funded

  
	
  Maximum

  	
   

  	
  Level where

  2X midpoint

  payouts are

  funded

  



 



 5
 






 



Base Pay Definition


For the purposes of
calculating incentive awards, earned base pay and actual overtime earnings will
be used for non-exempt employees and earned annual base pay will be used for
exempt employees. Base pay calculations do not include bonuses, merit awards,
incentive earnings or other pay that would be reflected in W-2 earnings.


Plan Limitations


Notwithstanding anything
to the contrary contained in the 401(k) Profit Sharing Plan for 2007 or the
Cascade Incentive Plan for 2007, in the event an employee is precluded from all
of a portion of their 401(k) profit sharing payment due to plan or regulatory
limitations, the amount that exceeds the plan limits be paid in cash to the
employee.


Terminations


Individuals must be
employed at the end of the calendar year or at the time the merger with MDU is
consummated, whichever, is earlier, in order to be eligible to receive a
payout. Pro-rated awards will be paid to those who terminate due to retirement,
disability or death.


The
Company reserves the right to alter, amend or cancel this program at any time.



 6