Document:

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, Stock Compensation and Stock Option Grants

     The Board service annual cash retainer shall be $20,000.
The Lead Director shall receive an annual retainer of $33,000.
The annual retainer for service as Chairman of the Audit,
Compensation, Finance and Nominating Committees shall be $4,000.
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 1,800 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 Fee

     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 (providing the spouse
participates in ALL business, community, spouse-specific and
social events), 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.

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 $100,000,000 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 $75,000,000 in excess of self-
          insured retentions of $500,000 per
          occurrence for general liability and $250,000
          per occurrence for automobile liability; or
          $1,000,000 per occurrence/$2,000,000
          aggregate for general liability and
          $1,000,000 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 employee benefits
          liability insurance of the Company.  The
          policy has a $35,000,000 limit with no
          deductible applicable to the Director.

     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 $200,000,000.

          *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.MDU RESOURCES GROUP, INC.
         NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN

I.   Purpose

     The purpose of the MDU Resources Group, Inc. Non-Employee
Director Stock Compensation Plan is to provide ownership of the
Company's stock to non-employee members of the Board of Directors
in order to improve the Company's ability to attract and retain
highly qualified individuals to serve as directors of the Company
and to strengthen the commonality of interest between directors
and stockholders.

II.  Definitions

     When used herein, the following terms shall have the
     respective meanings set forth below:

     "Agent" means a securities broker-dealer selected by the
     Company and registered under the Exchange Act.

     "Annual Retainer" means the annual retainer payable by the
     Company to Non-Employee Directors and shall include, for
     purposes of this Plan, meeting fees, cash retainers and any
     other cash compensation payable to Non-Employee Directors by
     the Company for services as a Director.

     "Annual Meeting of Stockholders" means the annual meeting of
     stockholders  of  the  Company at  which  directors  of  the
     Company are elected.

     "Board" or "Board of Directors" means the Board of Directors
     of the Company.

     "Committee" means a committee whose members meet the
     requirements of Section IV(A) hereof, and who are appointed
     from time to time by the Board to administer the Plan.

     "Common Stock" means the common stock, $1.00 par value, of
     the Company.

     "Company" means MDU Resources Group, Inc., a Delaware
     corporation, and any successor corporation.

     "Effective Date" means the date as of which the Plan is
     approved by the stockholders of the Company.

     "Employee" means any officer or other common law employee of
     the Company or of any of its business units or divisions or
     of any Subsidiary.

     "Exchange Act" means the Securities Exchange Act of 1934, as
     amended.

     "Non-Employee Director" or "Participant" means any person
     who is elected or appointed to the Board of Directors of the
     Company and who is not an Employee.

     "Plan" means the Company's Non-Employee Director Stock
     Compensation Plan, adopted by the Board on February 9, 1995,
     and approved by the stockholders on April 25, 1995, as it
     may be amended from time to time.

     "Plan Year" means the period commencing on the Effective
     Date of the Plan and ending the next following December 31
     and, thereafter, the calendar year.

     "Stock Payment" means that portion of the Annual Retainer to
     be paid to Non-Employee Directors in shares of Common Stock
     rather than cash for services rendered as a director of the
     Company, as provided in Section V hereof, including that
     portion of the Stock Payment resulting from any election
     specified in Section VI hereof.

     "Subsidiary" means any corporation that is a "subsidiary
     corporation" of the Company, as that term is defined in
     Section 424(f) of the Internal Revenue Code of 1986, as
     amended.

III. Shares of Common Stock Subject to the Plan

     Subject to Section VII below, the maximum aggregate number
of shares of Common Stock that may be delivered under the Plan is
112,500 shares.  The Common Stock to be delivered under the Plan
will be made available from authorized but unissued shares of
Common Stock, treasury stock or shares of Common Stock purchased
on the open market.  Shares of Common Stock purchased on the open
market shall be purchased by the Agent in compliance with Rule
10b-18 under the Exchange Act to the extent compliance shall be
required.  Shares of Common Stock purchased on the open market by
the Agent shall be purchased and held in such manner that such
shares are not returned to the status of treasury stock or
authorized but unissued shares of Common Stock.

IV.  Administration

     A.   The Plan will be administered by a committee appointed
by the Board, consisting of two or more persons who are not
eligible to participate in the Plan.  Members of the Committee
need not be members of the Board.  The Company shall pay all
costs of administration of the Plan.

     B.   Subject to and not inconsistent with the express
provisions of the Plan, the Committee has and may exercise such
powers and authority of the Board as may be necessary or
appropriate for the Committee to carry out its functions under
the Plan.  Without limiting the generality of the foregoing, the
Committee shall have full power and authority (i) to determine
all questions of fact that may arise under the Plan, (ii) to
interpret the Plan and to make all other determinations necessary
or advisable for the administration of the Plan and (iii) to
prescribe, amend and rescind rules and regulations relating to
the Plan, including, without limitation, any rules which the
Committee determines are necessary or appropriate to ensure that
the Company and the Plan will be able to comply with all
applicable provisions of any federal, state or local law.  All
interpretations, determinations and actions by the Committee will
be final and binding upon all persons, including the Company and
the Participants.

V.   Determination of Annual Retainer and Stock Payments

     A.   The Board shall determine the Annual Retainer payable
to all Non-Employee Directors of the Company.

     B.   Each director who is a Non-Employee Director
immediately following the date of the Company's Annual Meeting of
Stockholders shall receive on the fifteenth business day
following the Annual Meeting a Stock Payment of 1,800 shares of
Common Stock as a portion of the Annual Retainer payable to such
director for the Plan Year in which such date occurs.
Certificates evidencing the shares of Common Stock constituting
Stock Payments shall be registered in the respective names of the
Participants and shall be issued to each Participant.  The cash
portion of the Annual Retainer shall be paid to Non-Employee
Directors at such times and in such manner as may be determined
by the Board of Directors.

     C.   Any director may decline a Stock Payment for any Plan
Year; provided, however, that no cash compensation shall be paid
in lieu thereof.  Any director who declines a Stock Payment must
do so in writing prior to the performance of any services as a
Non-Employee Director for the Plan Year to which such Stock
Payment relates.

     D.   No Non-Employee Director shall be required to forfeit
or otherwise return any shares of Common Stock issued as a Stock
Payment pursuant to the Plan (including any shares of Common
Stock received as a result of an election under Section VI)
notwithstanding any change in status of such Non-Employee
Director which renders him ineligible to continue as a
Participant in the Plan.  Any person who is a Non-Employee
Director immediately following the Company's Annual Meeting of
Stockholders shall be entitled to receive a Stock Payment as a
portion of the applicable Annual Retainer.

VI.  Election to Increase Amount of Stock Payment

     In lieu of receiving the cash portion of the Annual Retainer
for any Plan Year, a Participant may make a written election to
reduce the cash portion of such Annual Retainer by a specified
dollar amount and have such amount applied to purchase additional
shares of Common Stock of the Company.  The election shall be
made on a form provided by the Committee and must be returned to
the Committee on or before the last business day of the year
prior to the year in which the election is to be effective.  The
election form shall state the amount by which the Participant
desires to reduce the cash portion of the Annual Retainer, which
shall be applied toward the purchase of Common Stock; provided,
however, that no fractional shares may be purchased.  Stock to be
delivered to Participants pursuant to this election shall be
delivered in December of each year.  Cash in lieu of any
fractional share shall be paid to the Participant.  An election
shall continue in effect until changed or revoked by the
Participant.  No Participant shall be allowed to change or revoke
any election for the then current year, but may change an
election for any subsequent Plan Year.  All shares of Common
Stock received pursuant to an election under this Article VI must
be held by a Participant for six months after receipt thereof.

VII. Adjustment For Changes in Capitalization

     If the outstanding shares of Common Stock of the Company are
increased, decreased or exchanged for a different number or kind
of shares or other securities, or if additional shares or new or
different shares or other securities are distributed with respect
to such shares of Common Stock or other securities, through
merger, consolidation, sale of all or substantially all of the
property of the Company, reorganization or recapitalization,
reclassification, stock dividend, stock split, reverse stock
split, combinations of shares, rights offering, distribution of
assets or other distribution with respect to such shares of
Common Stock or other securities or other change in the corporate
structure or shares of Common Stock, the number of shares to be
granted annually, the maximum number of shares and/or the kind of
shares that may be issued under the Plan shall be appropriately
adjusted by the Committee.  Any determination by the Committee as
to any such adjustment will be final, binding and conclusive.
The maximum number of shares issuable under the Plan as a result
of any such adjustment shall be rounded down to the nearest whole
share.

VIII. Amendment and Termination of Plan

     A.   The Board will have the power, in its discretion, to
amend, suspend or terminate the Plan at any time.

     B.   Notwithstanding the foregoing, any provision of the
Plan that either states the amount and price of securities to be
issued under the Plan and specifies the price and timing of such
issuances, or sets forth a formula that determines the amount,
price and timing of such issuances, shall not be amended more
than once every six months, other than to comport with changes in
the Internal Revenue Code, the Employee Retirement Income
Security Act, or the rules thereunder.

IX.  Effective Date and Duration of the Plan

     The Plan will become effective upon the Effective Date, and
shall remain in effect, subject to the right of the Board of
Directors to terminate the Plan at any time pursuant to Section
VIII, until all shares subject to the Plan have been purchased or
acquired according to the Plan's provisions.

X.   Miscellaneous Provisions

     A.   Continuation of Directors in Same Status

     Nothing in the Plan or any action taken pursuant to the Plan
shall be construed as creating or constituting evidence of any
agreement or understanding, express or implied, that the Company
will retain a Non-Employee Director as a director or in any other
capacity for any period of time or at a particular retainer or
other rate of compensation, as conferring upon any Participant
any legal or other right to continue as a director or in any
other capacity, or as limiting, interfering with or otherwise
affecting the right of the Company to terminate a Participant in
his capacity as a director or otherwise at any time for any
reason, with or without cause, and without regard to the effect
that such termination might have upon him as a Participant under
the Plan.

     B.   Compliance with Government Regulations

     Neither the Plan nor the Company shall be obligated to issue
any shares of Common Stock pursuant to the Plan at any time
unless and until all applicable requirements imposed by any
federal and state securities and other laws, rules and
regulations, by any regulatory agencies or by any stock exchanges
upon which the Common Stock may be listed have been fully met.
As a condition precedent to any issuance of shares of Common
Stock and delivery of certificates evidencing such shares
pursuant to the Plan, the Board or the Committee may require a
Participant to take any such action and to make any such
covenants, agreements and representations as the Board or the
Committee, as the case may be, in its discretion deems necessary
or advisable to ensure compliance with such requirements.  The
Company shall in no event be obligated to register the shares of
Common Stock deliverable under the Plan pursuant to the
Securities Act of 1933, as amended, or to qualify or register
such shares under any securities laws of any state upon their
issuance under the Plan or at any time thereafter, or to take any
other action in order to cause the issuance and delivery of such
shares under the Plan or any subsequent offer, sale or other
transfer of such shares to comply with any such law, regulation
or requirement.  Participants are responsible for complying with
all applicable federal and state securities and other laws, rules
and regulations in connection with any offer, sale or other
transfer of the shares of Common Stock issued under the Plan or
any interest therein including, without limitation, compliance
with the registration requirements of the Securities Act of 1933,
as amended (unless an exemption therefrom is available), or with
the provisions of Rule 144 promulgated thereunder, if applicable,
or any successor provisions.  Certificates for shares of Common
Stock may be legended as the Committee shall deem appropriate.

     C.   Nontransferability of Rights

     No Participant shall have the right to assign the right to
receive any Stock Payment or any other right or interest under
the Plan, contingent or otherwise, or to cause or permit any
encumbrance, pledge or charge of any nature to be imposed on any
such Stock Payment (prior to the issuance of stock certificates
evidencing such Stock Payment) or any such right or interest.

     D.   Severability

     In the event that any provision of the Plan is held invalid,
void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of the Plan.

     E.   Governing Law

     To the extent not preempted by Federal law, the Plan shall
be governed by the laws of the State of Delaware.

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