Document:

exhibit10a.htm

    

      MDU
RESOURCES GROUP, INC.

      

      EXECUTIVE
INCENTIVE COMPENSATION PLAN

      ____________________________________________________________

      

      I.         PURPOSE

                 The
purpose of the Executive Incentive Compensation Plan (the "Plan") is to provide
an incentive for key executives of MDU Resources Group, Inc. (the "Company") to
focus their efforts on the achievement of challenging and demanding corporate
objectives.  The Plan is designed to reward successful corporate
performance as measured against specified performance goals as well as
exceptional individual performance.  When corporate performance
reaches or exceeds the performance targets and individual performance is
exemplary, incentive compensation awards, in conjunction with salaries, will
provide a level of compensation which recognizes the skills and efforts of the
key executives.

      

      II.       DEFINITIONS

                 Capitalized
terms not otherwise defined herein shall have the meanings given them in the
Company’s Executive Incentive Compensation Plan Rules and
Regulations.

      

      III.      BASIC PLAN
CONCEPT

                 The
Plan provides an opportunity to earn annual incentive compensation based on the
achievement of specified annual performance objectives.  A target
incentive award for each individual within the Plan is established based on the
position level and actual base salary, provided, however, that the Compensation
Committee of the Board of Directors (the “Committee”) in its sole discretion,
may, instead of actual base salary, use the assigned salary grade market value
(midpoint) (“Salary”).  The target incentive award represents the
amount to be paid, subject to the achievement of the performance objective
targets established each year.  Larger incentive awards
than

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      target
may be authorized when performance exceeds targets; lesser or no amounts may be
paid when performance is below target.

                 It
is recognized that during a Plan Year major unforeseen changes in economic and
environmental conditions or other significant factors beyond the control of
management may substantially affect the ability of the Plan Participants to
achieve the specified performance goals.  Therefore, in its review of
corporate performance the Committee, in consultation with the Chief Executive
Officer of the Company, may modify the performance targets.  However,
it is contemplated that such target modifications will be necessary only in
years of unusually adverse or favorable external conditions.

      

      IV.      ADMINISTRATION

                 The
Plan shall be administered by the Committee with the assistance
of the Chief Executive Officer of the Company.  The Committee shall
approve annually, prior to the beginning of each Plan Year, the list of eligible
Participants, and the target incentive award level for each position within the
Plan.  The Plan’s performance targets for the year shall be approved
by the Committee no later than its regularly scheduled February meeting during
that Plan Year.  The Committee shall have final discretion to
determine actual award payment levels, method of payment, and whether or not
payments shall be made for any Plan Year.

                 The
Board of Directors of the Company may, at any time and from time to time, alter,
amend, supersede or terminate the Plan in whole or in part, provided that no
termination, amendment or modification of the Plan shall adversely affect in any
material way an award that has met all requirements for payment without the
written consent of the Participant holding such award, unless such termination,
modification or amendment is required by applicable law.

      
        
           

        

        
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      V.       ELIGIBILITY

                 Executives
who are determined by the Committee to have a key role in both the establishment
and achievement of Company objectives shall be eligible to participate in the
Plan.

                 Nothing
in the Plan shall interfere with or limit in any way the right of the Company to
terminate any Participant’s employment at any time, for any reason or no reason
in the Company’s sole discretion, or confer upon any Participant any right to
continue in the employment of the Company.  No executive shall have
the right to be selected to receive an award under the Plan, or, having been so
selected, to be selected to receive a future award.

      

      
        	
                VI.

              	
                PLAN PERFORMANCE
      MEASURES

              

      

                 Performance
measures shall be established that consider shareholder and customer
interests.  These measures shall be evaluated annually based on
achievement of specified goals.

                
The performance measure reflective of shareholder’s interest will be the
percentage attainment of corporate goals, as determined each year by the
Committee.  This measure may be applied at the corporate level for
individuals, such as the Chief Executive Officer, or at the business unit level
for individuals whose major or sole impact is on business unit
results.

             Individual
performance will be assessed based on the achievement of annually established
individual objectives.

                
Threshold, target and maximum award levels will be established annually for each
performance measure and business unit.  The Committee will retain the
right to make all interpretations as to the actual attainment of the desired
results and will determine whether any circumstances beyond the control of
management need to be considered.

      
        
           

        

        
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      VII.     TARGET INCENTIVE
AWARDS

                 Target
incentive awards will be expressed as a percentage of each Participant’s
Salary.  These percentages shall vary by position and reflect larger
reward opportunity for positions having greater effect on the establishment and
accomplishment of the Company’s or business unit’s objectives.  An
exhibit showing the target awards as a percentage of Salary for eligible
positions will be attached to this Plan at the beginning of each Plan
Year.

      

      VIII.   INCENTIVE FUND
DETERMINATION

                 The
target incentive fund is the sum of the individual target
incentive awards for all eligible Participants.  Once the incentive
targets have been determined by the Committee, a target incentive fund shall be
established and accrued ratably by the Company.  The incentive fund
and accruals may be adjusted during the year.

                 At
the close of each Plan Year, the Chief Executive Officer
of the Company will prepare an analysis showing the Company's or business unit's
performance in relation to each of the performance measures
employed.  This will be provided to the Committee for review and
comparison to threshold, target and maximum performance levels.  In
addition, any recommendations of the Chief Executive Officer will be presented
at this time.  The Committee will then determine the amount of the
target incentive fund earned.

      

      IX.     
INDIVIDUAL AWARD
DETERMINATION

                 Each
individual Participant's award will be based first upon the level of performance
achieved by the Company or business unit and secondly based upon the
individual's performance.  The performance measures applicable for
assessing individual performance will be established at the beginning of each
Plan

      
        
           

        

        
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      Year.  The
assessment by the Committee, after consultation with the Chief Executive
Officer, of achievement relative to the established performance measures, as
determined by a percentage from 0 percent to 200 percent, will be applied to the
Participant's target incentive award which has been first adjusted for Company
or business unit performance.

      

      X.       PAYMENT OF
AWARDS

                 Except
as provided below or as otherwise determined by the Committee, in order to
receive an award under the Plan, the Participant must remain in the employment
of the Company or business unit for the entire Service Year.  If a
Participant terminates employment with the Company pursuant to Section 5.01 of
the Company’s Bylaws which provides for mandatory retirement for certain
officers on their 65th
birthday (or terminates employment with a subsidiary of the Company pursuant to
a similar subsidiary Bylaw provision) and if the Participant’s 65th birthday occurs during the
Service Year, determination of whether the performance measures have been met
will be made at the end of the Service Year, and to the extent met, payment of
the award will be made to the Participant, prorated.  Proration of
awards shall be based upon the number of full months elapsed from and including
January to and including the month in which the Participant’s 65th birthday
occurs.  The prorated award shall be paid as soon as practicable in
the year following the Service Year, but in all events between January 1 and
March 10.

                 An
individual Participant who transfers between the Company and business units may
receive a prorated award at the discretion of the Committee.  Payments
made under this Plan will not be considered part of compensation for pension
purposes.  Payments will be made in cash as soon as practicable in the
year following the Service Year, but in all events between January 1 and
March 10.

      
        
           

        

        
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                 Incentive
awards may be deferred if the appropriate elections have been executed prior to
the beginning of the Service Year.  A deferral election will be
effective only for the incentive award earned in the Service Year following the
Plan Year in which the election is made.  Deferral elections may not
be changed or revoked after the Service Year begins.  Deferred amounts
shall be subject to the terms of the Plan and the Rules and Regulations as
amended, and, to the extent not inconsistent therewith, the deferral election
forms pursuant to which the amounts were deferred.  Deferred amounts
will accrue interest at a rate determined annually by the Committee and
specified in the Rules and Regulations.

                 In
the event of a "Change in Control" (as defined by the Committee in its Rules and
Regulations) then any award deferred by each Participant shall become
immediately payable to the Participant in cash, together with accrued interest
thereon to the date of payment.  In the event the Participant files
suit to collect the Participant's deferred award then all of the court costs,
other expenses of litigation, and attorneys' fees shall be paid by the Company
in the event the Participant prevails upon any of the Participant's claims for
payment of a deferred award.

      

      XI.      ACCOUNTING
RESTATEMENTS

      This
Section XI shall apply to incentive awards granted to all Participants in the
Plan.  Notwithstanding anything in the Plan or the Plan's Rules and
Regulations to the contrary, if the Company's audited financial statements are
restated, the Committee may, in accordance with the Company's Guidelines for Repayment of
Incentives Due to Accounting Restatements, take such actions as it deems
appropriate (in its sole discretion) with respect to

      (a)           unpaid
incentive awards under the Plan (including incentive awards relating to
completed Plan Years, but with

      
        
           

        

        
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      respect
to which payments have not yet been made or deferred) ("Outstanding Awards")
and

      (b)           prior
incentive awards that were paid (or deferred) within the three-year period
preceding the restatement ("Prior Awards"), provided such Prior Awards were not
paid prior to the date the Plan was amended to add this
Section XI,

      if the
calculation of the amounts payable, paid or deferred under such awards are, or
would have been, directly impacted by the restatement, including, without
limitation, (i) securing (or causing to be secured) repayment of some or all
payments made pursuant to (or deferrals relating to) Prior Awards, (ii) making
(or causing to be made) additional payments (or crediting additional deferrals),
(iii) reducing or otherwise adjusting the amount payable pursuant to Outstanding
Awards and/or (iv) causing the forfeiture of Outstanding Awards.  The
Committee may, in its sole discretion, take different actions pursuant to this
Section XI with respect to different awards, different Participants (or
beneficiaries) and/or different classes of awards or Participants (or
beneficiaries).  The Committee has no obligation to take any action
permitted by this Section XI.  The Committee may consider any factors
it chooses in taking (or determining whether to take) any action permitted by
this Section XI, including, without limitation, the following:

      (A)           The
reason for the restatement of the financial statements;

      (B)           The
amount of time between the initial publication and subsequent restatement of the
financial statements; and

      (C)           The
Participant's current employment status, and the viability of successfully
obtaining repayment.

                 If
the Committee requires repayment of all or part of a Prior Award, the amount of
repayment may be based on, among other things, the difference between the amount
paid to the individual

      
        
           

        

        
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      and the
amount that the Committee determines in its sole discretion should have been
paid based on the restated results.  The Committee shall determine
whether repayment shall be effected (i) by seeking repayment from the
Participant, (ii) by reducing (subject to applicable law and the terms and
conditions of the applicable plan, program or arrangement) the amount that would
otherwise be provided to the Participant under any compensatory plan, program or
arrangement maintained by the Company or any of its affiliates, (iii) by
withholding payment of future increases in compensation (including the payment
of any discretionary bonus amount) or grants of compensatory awards that would
otherwise have been made in accordance with the Company's otherwise applicable
compensation practices, or (iv) by any combination of the
foregoing.  Additionally, by accepting an incentive award under the
Plan, Participants acknowledge and agree that the Committee may take any actions
permitted by this Section XI with respect to Outstanding Awards to the extent
repayment is to be made pursuant to another plan, program or arrangement
maintained by the Company or any of its affiliates.

      
        
           

        

        
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      MDU
RESOURCES GROUP, INC.

       

      EXECUTIVE
INCENTIVE COMPENSATION PLAN

       

      RULES AND
REGULATIONS

      

      The Compensation Committee of the Board
of Directors of MDU Resources Group, Inc. (the "Company") adopted Rules and
Regulations for the administration of the Executive Incentive Compensation Plan
(the "Plan") on February 9, 1983, following adoption of the Plan by the Board of
Directors of the Company on November 4, l982.

      

      
        	
                I.

              	
                DEFINITIONS

              

      

       

      The following definitions shall be used
for purposes of these Rules and Regulations and for the purposes of
administering the Plan:

       

      
        	
                 
      

              	
                1.

              	
                The
      "Committee" shall be the Compensation Committee of the Board of Directors
      of the Company.

              

      

       

      
        	
                 
      

              	
                2.

              	
                The
      "Company" shall refer to MDU Resources Group, Inc. alone and shall not
      refer to its utility division or to any of its subsidiary
      corporations.

              

      

       

      
        	
                 
      

              	
                3.

              	
                "Participants"
      for any Plan Year shall be those executives who have been approved by the
      Committee as eligible for participation in the Plan for such Plan
      Year.

              

      

       

      
        	
                 
      

              	
                4.

              	
                "Payment
      Date" shall be the date set by the Committee for payment of awards
      pursuant to Section X of the Plan, other than those awards deferred
      pursuant to Section X of the Plan and Section VII of these Rules and
      Regulations.

              

      

       

      
        	
                 
      

              	
                5.

              	
                The
      "Plan" shall refer to the Executive Incentive Compensation
      Plan.

              

      

       

      6.            
The "Plan Year" shall be the calendar year.

       

      
        	
                 
      

              	
                7.

              	
                "Change
      in Control" shall mean the occurrence of any of the following transactions
      or events: (a) any person (which shall not include the Company, any
      subsidiary of the Company or any employee
  benefit

              

      

       

      
        
           

        

        
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      plan of
the Company or of any subsidiary of the Company) ("Person") or group (as that
term is defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), acquires
(or has acquired during the 12-month period ending on the date of the most
recent acquisition by such Person or Persons) ownership of stock of the Company
possessing 30% or more of the total voting power of the stock of the Company;
(b) any Person or group (as that term is defined in Treasury Regulation Section
1.409A-3(i)(5)(v)(B)), acquires ownership of the stock of the Company that,
together with stock held by such Person or group, constitutes more than 50% of
the total fair market value or total voting power of the stock of the Company
(this part (b) applies only when there is a transfer of stock of the Company and
the Company's stock remains outstanding after the transaction); (c) a majority
of the members of the Board of Directors of the Company is replaced during any
12-month period by directors whose appointment or election is not endorsed by a
majority of the members of the Board of Directors of the Company; or (d) any
Person or group (as that term is defined in Treasury Regulation Section
1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the 12-month period
ending on the date of the most recent acquisition by such Person or Persons)
assets from the Company that have a gross fair market value equal to or more
than 40% of the total gross fair market value of all of the assets of the
Company immediately before such acquisition or acquisitions.

       

      Notwithstanding
anything contained herein to the contrary, no transaction or event shall
constitute a Change in Control for purposes of the Plan unless the transaction
or event constitutes a change in the ownership of a corporation (as defined in
Treasury Regulation Section 1.409A-3(i)(5)(v)), a change in effective control of
a corporation (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)) or
a change in the ownership of a substantial portion of the assets of a
corporation (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)) and
the term Change in Control shall be interpreted in a manner consistent with the
proper interpretation of the similar provisions in the Section 409A Treasury
Regulations.

       

      
        
           

        

        
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                8.

              	
                The
      “Code” shall mean the Internal Revenue Code of 1986, as
      amended.

              

      

       

      
        	
                 
      

              	
                9.

              	
                The
      "Moody's Rate" shall be the number that results from adding the daily
      Moody's Long-Term Corporate Bond Yield Average for "A" rated companies as
      of the last business day of each month for the 12-month period ending on
      October 31 of the prior Plan Year and dividing by
  12.

              

      

       

      
        	
                 
      

              	
                10.

              	
                “Retirement”
      means the later of the day the Participant attains age 55 or the day the
      Participant ceases to be an employee of the Company, its utility division
      or any of its subsidiary
corporations.

              

      

       

      
        	
                 
      

              	
                11.

              	
                “Service
      Year” means the Plan Year during which the services giving rise to the
      incentive award are performed.

              

      

      

      
        	
                 
      

              	
                12.

              	
                “Specified
      Employee” means an employee who, as of the date the employee separates
      from service, is a “specified employee” (as that term is used in Section
      409A(a)(2)(B) of the Code), as determined under the Company's policy for
      determining specified employees.

              

      

      

       

      
        	
                II.

              	
                ADMINISTRATION

              

      

       

      
        	
                 
      

              	
                1.

              	
                The
      Committee shall have the full power to construe and interpret the Plan and
      to establish and to amend these Rules and Regulations for its
      administration.

              

      

       

      
        	
                 
      

              	
                2.

              	
                No
      member of the Committee shall participate in a decision as to their own
      eligibility for, or award of, an incentive award
  payment.

              

      

       

      
        	
                 
      

              	
                3.

              	
                Prior
      to the beginning of each Plan Year, the Committee shall approve a list of
      eligible executives and notify those so approved that they are eligible to
      participate in the Plan for such Plan
Year.

              

      

       

      
        	
                 
      

              	
                4.

              	
                No
      later than its regularly scheduled February meeting during the Plan Year,
      the Committee shall approve an Annual Operating Plan.  The
      Annual Operating Plan shall include the Plan’s performance measures and
      target incentive award levels for each salary grade covered by the Plan
      for the Plan Year.

              

      

       

      
        
           

        

        
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      The
Plan’s performance targets for the year shall be approved by the Committee no
later than its regularly scheduled February meeting during the Plan
Year.  The Annual Operating Plan, insofar as it is relevant to each
individual Participant, shall be made available by the Committee to each
Participant in the Plan.

       

      
        	
                 
      

              	
                5.

              	
                The
      Committee shall have final discretion to determine actual award payment
      levels, method of payment, and whether or not payments shall be made for
      any Plan Year.  However, unless the Plan's performance
      objectives are met for the Plan Year, no award shall be made for that Plan
      Year.  Performance targets modified pursuant to Section III of
      the Plan will be deemed performance targets for purposes of determining
      whether or not these targets have been
met.

              

      

       

      

      III.           PLAN PERFORMANCE
MEASURES

       

      
        	
                 
      

              	
                1.

              	
                The
      Committee shall establish the percentage attainment of corporate
      performance measure and the percentage attainment of individual goals
      measure.  The Committee may establish more or fewer performance
      measures as it deems necessary.

              

      

       

      
        	
                 
      

              	
                2.

              	
                The
      corporate performance measure may be set by reference to earnings, return
      on invested capital or any other measure or combination of measures deemed
      appropriate by the Committee.  It may be established for the
      Company or for the individual business
unit.

              

      

       

      
        	
                 
      

              	
                3.

              	
                Individual
      performance will be assessed based on the achievement of annually
      established individual objectives.

              

      

       

      
        	
                 
      

              	
                4.

              	
                Plan
      performance measures may be applied at the corporate level for individuals
      such as the Chief Executive Officer whose major or sole impact is
      Company-wide, or at the business unit level for individuals whose major or
      sole impact is on the business unit results.  The Annual
      Operating Plan shall contain a list of individuals to whom the Plan
      performance measures will be applied at the corporate level and a list of
      those individuals for whom the Plan performance measures will be
      applied

              

      

       

      
        
           

        

        
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      at the
business unit level.  The relevant business unit for each individual
will be identified.

       

      
        	
                 
      

              	
                5.

              	
                The
      Committee shall set threshold, target and maximum award levels for the
      performance measures, for each business unit, and for the
      Company.  Those levels shall be included in the Annual Operating
      Plan.

              

      

       

      
        	
                 
      

              	
                6.

              	
                The
      Committee will retain the authority to determine whether or not the actual
      attainment of these measures has been
made.

              

      

       

      

      IV.           TARGET INCENTIVE
AWARDS

       

      
        	
                 
      

              	
                1.

              	
                Target
      incentive awards will be a percentage of each Participant’s Salary, as
      defined in the Plan.

              

      

       

      
        	
                 
      

              	
                2.

              	
                Target
      incentive awards shall be set by the Committee annually and will be
      included in the Annual Operating
Plan.

              

      

       

      

      V.            
INCENTIVE FUND
DETERMINATION

       

      
        	
                 
      

              	
                1.

              	
                The
      target incentive fund is the sum of the individual target incentive awards
      for all eligible Participants.

              

      

       

      
        	
                 
      

              	
                2.

              	
                Once
      individual incentive targets have been determined, a target incentive fund
      shall be established and accrued ratably by the Company.  The
      incentive fund and accruals may be adjusted during the
    year.

              

      

       

      
        	
                 
      

              	
                3.

              	
                As
      soon as practicable following the close of each Plan Year, the Chief
      Executive Officer will provide the Committee with an analysis showing the
      Company's and each relevant business unit's performance in relation to the
      performance measures.  The Committee will review the analysis
      and determine, in its sole discretion, the amount of the actual incentive
      fund.

              

      

       

      
        	
                 
      

              	
                4.

              	
                In
      determining the actual incentive fund, the Committee may consider any
      recommendations of the Chief Executive
Officer.

              

      

       

      
        
           

        

        
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      VI.           INDIVIDUAL AWARD
DETERMINATION

       

      
        	
                 
      

              	
                1.

              	
                The
      Committee shall have the sole discretion to determine each individual
      Participant's award. The Committee's decision will be based first upon the
      level of performance achieved by the Company or business unit and second
      upon the individual's performance.

              

      

      
        
           

          2.            
The Committee, after consultation with the Chief Executive Officer, shall
set the award as a percentage from 0 percent to 200 percent of the Participant's
target incentive award, adjusted for Company or business unit
performance.

        

      

      

      VII.          PAYMENT OF
AWARDS

       

      
        	
                 
      

              	
                1.

              	
                On
      the date the Committee determines the awards to be made to individual
      Participants, it shall also establish the Payment
  Date.

              

      

       

      
        	
                 
      

              	
                2.

              	
                Except
      as provided below or as the Committee otherwise determines, in order to
      receive an award under the Plan, a Participant must remain in the
      employment of the Company for the entire Service
  Year.

              

      

       

      
        	
                 
      

              	
                3.

              	
                If
      a Participant terminates employment with the Company pursuant to Section
      5.01 of the Company’s Bylaws, which provides for mandatory retirement for
      certain officers on their 65th
      birthday (or terminates employment with a subsidiary of the Company
      pursuant to a similar subsidiary Bylaw provision), and if the
      Participant’s 65th
      birthday occurs during the Service Year, determination of whether the
      performance measures have been met will be made at the end of the Service
      Year, and to the extent met, payment of the award will be made to the
      Participant, prorated.  Proration of awards shall be based upon
      the number of full months elapsed from and including January to and
      including the month in which the Participant’s 65th
      birthday occurs.

              

      

       

      
        	
                 
      

              	
                4.

              	
                Payment
      of the awards shall be made in cash.  Payments shall be made on
      the Payment Date unless the Participant has deferred, in whole or in part,
      the receipt of the award by making an election on the deferral form
      attached hereto, prior to the

              

      

       

      
        
           

        

        
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      beginning
of the Service Year.  Deferral elections may not be changed or revoked
after the Service Year begins.

       

      
        	
                 
      

              	
                5.

              	
                In
      the event a Participant has elected to defer receipt of all or a portion
      of the award, the Company shall set up an account in the Participant's
      name. The amount of the Participant's award to the extent deferred will be
      credited to the Participant's account on the Payment
  Date.

              

      

       

      
        	
                 
      

              	
                6.

              	
                The
      balance credited to an account of a Participant who has elected to defer
      receipt of an award will be an unsecured, unfunded obligation of the
      Company.

              

      

       

      
        	
                 
      

              	
                7.

              	
                Interest
      shall accrue on the balance credited to a Participant's account from the
      date the balance is credited.  Effective January 1, 2009, the
      rate of interest for each Plan Year shall be the Moody’s
    Rate.

              

      

       

      
        	
                 
      

              	
                8.

              	
                Interest
      shall be compounded and credited to the account
  monthly.

              

      

       

      
        	
                 
      

              	
                9.

              	
                A
      Participant may elect to defer any percentage, not to exceed l00, of an
      annual award.

              

      

       

      
        	
                 
      

              	
                10.

              	
                A
      Participant electing to defer any part of an award must elect one of the
      following dates on which (a) payment will be made, if payment will be made
      in a lump sum or (b) payments will commence, if payment will be made in
      monthly installments:

              

      

       

      
        	
                 
      

              	
                (1)

              	
                Between
      January 1 and March 10 next following termination of employment with the
      Company or an affiliated company;
or

              

      

      

      
        	
                 
      

              	
                (2)

              	
                Between
      January 1 and March 10 of the fifth year following the year in which the
      award would have been paid had it not been
  deferred.

              

      

      

      For
Participants who previously elected to have payments made or commence on the
Payment Date next following termination of employment, their payments will be
made or commence between January 1 and March 10 next following their termination
of employment with the Company or an affiliated company.  For
Participants who elected to have payments made or

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

      commence
on the Payment Date of the fifth year following the year in which the award may
be made, their payments will be made or commence between January 1 and March 10
of the fifth year following the year in which the award would have been paid had
it not been deferred.

       

      
        	
                 
      

              	
                11.

              	
                A
      Participant may elect to receive the deferred amounts accumulated in the
      Participant's account in monthly installments, not to exceed
      120.  In the event the Participant elects to receive the amounts
      in the Participant's account in more than one installment, interest shall
      continue to accrue on the balance remaining in their account at the
      applicable rate or rates determined annually by the
    Committee.

              

      

       

      
        	
                 
      

              	
                12.

              	
                Notwithstanding
      anything contained in the Plan or these Rules and Regulations to the
      contrary, if a Specified Employee's employment terminates, to the extent
      required by Section 409A(a)(2)(B) of the Code, except as otherwise
      provided in paragraph 13 below of this Section VII of these Rules and
      Regulations, payment of any deferred amounts under the Plan that are to be
      paid during the 6-month period following the Specified Employee's
      termination of employment shall not be paid or provided until the first
      business day after the date that is 6 months following the Specified
      Employee's termination of employment.  Any payment that is made
      pursuant to the prior sentence shall include the cumulative amount of any
      amounts that could not be paid during the 6-month period following the
      Specified Employee's termination of employment.  To the extent
      payments are deferred pursuant to the prior sentence, such deferred
      amounts shall continue to accrue interest pursuant to Section VII of these
      Rules and Regulations until payment
occurs.

              

      

       

      For all
purposes under the Plan and these Rules and Regulations, references to
termination of employment and similar terms shall be interpreted to mean
“separation from service,” as that term is used in Section 409A of the Code, and
the Participant's employment shall not be deemed to have terminated for purposes
of the Plan or these Rules and Regulations unless and until a separation from
service shall have occurred for purposes of Section 409A of the
Code.

       

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                13.

              	
                In
      the event of the death of a Participant in whose name a deferred account
      has been set up, the Company shall, within 90 days thereafter, pay to the
      Participant's estate or the designated beneficiary the entire amount in
      the deferred account.

              

      

       

      14.           In
the event of a "Change in Control" then any award deferred by each Participant
shall become immediately payable to the Participant.  In the event the
Participant files suit to collect a deferred award then all of the Participant's
court costs, other expenses of litigation, and attorneys' fees shall be paid by
the Company in the event the Participant prevails upon any of the Participant's
claims for payment.

      
        
           

        

        
          17exhibit10b.htm

    MONTANA-DAKOTA
UTILITIES CO.

    

    EXECUTIVE
INCENTIVE COMPENSATION PLAN

    ____________________________________________________________

    

    I.         PURPOSE

               The
purpose of the Executive Incentive Compensation Plan (the "Plan") is to provide
an incentive for key executives of Montana-Dakota Utilities Co. to focus their
efforts on the achievement of challenging and demanding corporate
objectives.  The Plan is designed to reward successful corporate
performance as measured against specified performance goals as well as
exceptional individual performance.  When utility performance reaches
or exceeds the performance targets and individual performance is exemplary,
incentive compensation awards, in conjunction with salaries, will provide a
level of compensation which recognizes the skills and efforts of the key
executives.  In this Plan, MDU Resources Group, Inc. is defined as the
“Company” while Montana-Dakota Utilities Co. is defined as the “Utility
Company.”

    

    II.        DEFINITIONS

               Capitalized
terms not otherwise defined herein shall have the meanings given them in the
Utility Company’s Executive Incentive Compensation Plan Rules and
Regulations.

    

    III.       BASIC PLAN
CONCEPT

               The
Plan provides an opportunity to earn annual incentive compensation based on the
achievement of specified annual performance objectives.  A target
incentive award for each individual within the Plan is established based on the
position level and actual base salary, provided, however, that the Compensation
Committee of the Board of Directors of the Company (the “Committee”) in its sole
discretion, may, instead of actual base salary, use the assigned salary grade
market value (midpoint) (“Salary”).  The target incentive award
represents the amount to be paid, subject to the achievement of the
performance

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    objective
targets established each year.  Larger incentive awards than target
may be authorized when performance exceeds targets; lesser or no amounts may be
paid when performance is below target.

               It
is recognized that during a Plan Year major unforeseen changes in economic and
environmental conditions or other significant factors beyond the control of
management may substantially affect the ability of the Plan Participants to
achieve the specified performance goals.  Therefore, in its review of
corporate performance the Committee, in consultation with the Chief Executive
Officer of the Company, may modify the performance targets.  However,
it is contemplated that such target modifications will be necessary only in
years of unusually adverse or favorable external conditions.

    

    IV.       ADMINISTRATION

               The
Plan shall be administered by the Committee with the assistance
of the Chief Executive Officer of the Company.  The Committee shall
approve annually, prior to the beginning of each Plan Year, the list of eligible
Participants, and the target incentive award level for each position within the
Plan.  The Plan’s performance targets for the year shall be approved
by the Committee no later than its regularly scheduled February meeting during
that Plan Year.  The Committee shall have final discretion to
determine actual award payment levels, method of payment, and whether or not
payments shall be made for any Plan Year.

               The
Board of Directors of the Company may, at any time and from time to time, alter,
amend, supersede or terminate the Plan in whole or in part, provided that no
termination, amendment or modification of the Plan shall adversely affect in any
material way an award that has met all requirements for payment without the
written consent of the Participant holding such award, unless

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    such
termination, modification or amendment is required by applicable
law.

    

    V.        ELIGIBILITY

               Executives
who are determined by the Committee to have a key role in both the establishment
and achievement of Utility Company objectives shall be eligible to participate
in the Plan.

               Nothing
in the Plan shall interfere with or limit in any way the right of the Utility
Company to terminate any Participant’s employment at any time, for any reason or
no reason in the Utility Company’s sole discretion, or confer upon any
Participant any right to continue in the employment of the Utility
Company.  No executive shall have the right to be selected to receive
an award under the Plan, or, having been so selected, to be selected to receive
a future award.

    

    
      	
              VI.

            	
              PLAN PERFORMANCE
      MEASURES

            

    

               Performance
measures shall be established that consider shareholder and customer
interests.  These measures shall be evaluated annually based on
achievement of specified goals.

              
The performance measure reflective of shareholder’s interest will be the
percentage attainment of corporate goals, as determined each year by the
Committee.  This measure may be applied at the corporate level for
individuals whose major or sole impact is Utility Company-wide, or at the
business unit level for individuals whose major or sole impact is on business
unit results.

            Individual
performance will be assessed based on the achievement of annually established
individual objectives.

              
Threshold, target and maximum award levels will be established annually for each
performance measure and business unit.  The Committee will retain the
right to make all interpretations as to the actual attainment of the
desired

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    results
and will determine whether any circumstances beyond the control of management
need to be considered.

    

    VII.     TARGET INCENTIVE
AWARDS

               Target
incentive awards will be expressed as a percentage of each Participant’s
Salary.  These percentages shall vary by position and reflect larger
reward opportunity for positions having greater effect on the establishment and
accomplishment of the Utility Company’s or business unit’s
objectives.  An exhibit showing the target awards as a percentage of
Salary for eligible positions will be attached to this Plan at the beginning of
each Plan Year.

    

    VIII.    INCENTIVE FUND
DETERMINATION

               The
target incentive fund is the sum of the individual target incentive awards for
all eligible Participants.  Once the incentive targets have been
determined by the Committee, a target incentive fund shall be established and
accrued ratably by the Utility Company.  The incentive fund and
accruals may be adjusted during the year.

               At
the close of each Plan Year, the Chief Executive

    Officer
of the Company will prepare an analysis showing the Utility Company's and
business unit's performance in relation to each of the performance measures
employed.  This will be provided to the Committee for review and
comparison to threshold, target and maximum performance levels.  In
addition, any recommendations of the Chief Executive Officer will be presented
at this time.  The Committee will then determine the amount of the
target incentive fund earned.

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    IX.      INDIVIDUAL AWARD
DETERMINATION

               Each
individual Participant's award will be based first upon the level of performance
achieved by the Utility Company or business unit and secondly based upon the
individual's performance.  The performance measures applicable for
assessing individual performance will be established at the beginning of each
Plan Year.  The assessment by the Committee, after consultation with
the Chief Executive Officer, of achievement relative to the established
performance measures, as determined by a percentage from 0 percent to 200
percent, will be applied to the Participant's target incentive award which has
been first adjusted for Utility Company or business unit
performance.

    

    X.        PAYMENT OF
AWARDS

               Except
as provided below or as otherwise determined by the Committee, in order to
receive an award under the Plan, the Participant must remain in the employment
of the Utility Company or business unit for the entire Service
Year.  If a Participant terminates employment with the Utility Company
pursuant to a mandatory retirement provision in the Utility Company’s Bylaws
that provides for mandatory retirement of certain officers on their 65th birthday (or terminates
employment with a subsidiary of the Company pursuant to a similar subsidiary
Bylaw provision), and if the Participant’s 65th birthday occurs during the
Service Year, determination of whether the performance measures have been met
will be made at the end of the Service Year, and to the extent met, payment of
the award will be made to the Participant, prorated.  Proration of
awards shall be based upon the number of full months elapsed from and including
January to and including the month in which the Participant’s 65th birthday
occurs.  The prorated award shall be paid as soon as practicable in
the year following the Service Year, but in all events between January 1
and March 10.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

               An
individual Participant who transfers between the Utility Company and the Company
or any business unit of the Company may receive a prorated award at the
discretion of the Committee.  Payments made under this Plan will not
be considered part of compensation for pension purposes.  Payments
will be made in cash as soon as practicable in the year following the Service
Year, but in all events between January 1 and March 10.

               Incentive
awards may be deferred if the appropriate elections have been executed prior to
the beginning of the Service Year.  A deferral election will be
effective only for the incentive award earned in the Service Year following the
Plan Year in which the election is made.  Deferral elections may not
be changed or revoked after the Service Year begins.  Deferred amounts
shall be subject to the terms of the Plan and the Rules and Regulations, as
amended, and, to the extent not inconsistent therewith, the deferral election
forms pursuant to which the amounts were deferred.  Deferred amounts
will accrue interest at a rate determined annually by the Committee and
specified in the Rules and Regulations.

               In
the event of a "Change in Control" (as defined by the Committee in its Rules and
Regulations) then any award deferred by each Participant shall become
immediately payable to the Participant in cash, together with accrued interest
thereon to the date of payment.  In the event the Participant files
suit to collect the Participant's deferred award then all of the court costs,
other expenses of litigation, and attorneys' fees shall be paid by the Utility
Company in the event the Participant prevails upon any of the Participant's
claims for payment of a deferred award.

    

    XI.          
ACCOUNTING
RESTATEMENTS

    This
Section XI shall apply to incentive awards granted to all Participants in the
Plan.  Notwithstanding anything in the

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    Plan or
the Plan's Rules and Regulations to the contrary, if the Utility Company's
audited financial statements are restated, the Committee may, in accordance with
the Company's Guidelines for
Repayment of Incentives Due to Accounting Restatements, take such actions
as it deems appropriate (in its sole discretion) with respect to

    (a)           unpaid
incentive awards under the Plan (including incentive awards relating to
completed Plan Years, but with respect to which payments have not yet been made
or deferred) ("Outstanding Awards") and

    (b)           prior
incentive awards that were paid (or deferred) within the three-year period
preceding the restatement ("Prior Awards"), provided such Prior Awards were not
paid prior to the date the Plan was amended to add this
Section XI,

    if the
calculation of the amounts payable, paid or deferred under such awards are, or
would have been, directly impacted by the restatement, including, without
limitation, (i) securing (or causing to be secured) repayment of some or all
payments made pursuant to (or deferrals relating to) Prior Awards, (ii) making
(or causing to be made) additional payments (or crediting additional deferrals),
(iii) reducing or otherwise adjusting the amount payable pursuant to Outstanding
Awards and/or (iv) causing the forfeiture of Outstanding Awards.  The
Committee may, in its sole discretion, take different actions pursuant to this
Section XI with respect to different awards, different Participants (or
beneficiaries) and/or different classes of awards or Participants (or
beneficiaries).  The Committee has no obligation to take any action
permitted by this Section XI.  The Committee may consider any factors
it chooses in taking (or determining whether to take) any action permitted by
this Section XI, including, without limitation, the following:

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    (A)           The
reason for the restatement of the financial statements;

    (B)           The
amount of time between the initial publication and subsequent restatement of the
financial statements; and

    (C)           The
Participant's current employment status, and the viability of successfully
obtaining repayment.

               If
the Committee requires repayment of all or part of a Prior Award, the amount of
repayment may be based on, among other things, the difference between the amount
paid to the individual and the amount that the Committee determines in its sole
discretion should have been paid based on the restated results.  The
Committee shall determine whether repayment shall be effected (i) by seeking
repayment from the Participant, (ii) by reducing (subject to applicable law and
the terms and conditions of the applicable plan, program or arrangement) the
amount that would otherwise be provided to the Participant under any
compensatory plan, program or arrangement maintained by the Company or any of
its affiliates, (iii) by withholding payment of future increases in compensation
(including the payment of any discretionary bonus amount) or grants of
compensatory awards that would otherwise have been made in accordance with the
Company's otherwise applicable compensation practices, or (iv) by any
combination of the foregoing.  Additionally, by accepting an incentive
award under the Plan, Participants acknowledge and agree that the Committee may
take any actions permitted by this Section XI with respect to Outstanding Awards
to the extent repayment is to be made pursuant to another plan, program or
arrangement maintained by the Company or any of its
affiliates.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    MONTANA-DAKOTA
UTILITIES CO.

    

    EXECUTIVE
INCENTIVE COMPENSATION PLAN

    

    RULES AND
REGULATIONS

    

    The
Compensation Committee of the Board of Directors of MDU Resources Group, Inc.
(the "Company") adopted Rules and Regulations for the administration of the
Executive Incentive Compensation Plan (the "Plan") on February 9, 1983,
following adoption of the Plan by the Board of Directors of the Company on
November 4, l982.

    

    
      	
              I.

            	
              DEFINITIONS

            

    

     

    The following definitions shall be used
for purposes of these Rules and Regulations and for the purposes of
administering the Plan:

     

    
      	
               
      

            	
              1.

            	
              The
      "Committee" shall be the Compensation Committee of the Board of Directors
      of the Company.

            

    

     

    
      	
               
      

            	
              2.

            	
              The
      "Utility Company" shall refer to Montana-Dakota Utilities Co., a Division
      of MDU Resources Group, Inc.

            

    

    

    
      	
               
      

            	
              3.

            	
              "Participants"
      for any Plan Year shall be those executives who have been approved by the
      Committee as eligible for participation in the Plan for such Plan
      Year.

            

    

     

    
      	
               
      

            	
              4.

            	
              "Payment
      Date" shall be the date set by the Committee for payment of awards
      pursuant to Section X of the Plan, other than those awards deferred
      pursuant to Section X of the Plan and Section VII of these Rules and
      Regulations.

            

    

     

    
      	
               
      

            	
              5.

            	
              The
      "Plan" shall refer to the Executive Incentive Compensation
      Plan.

            

    

     

    6.            The
"Plan Year" shall be the calendar year.

     

    
      	
               
      

            	
              7.

            	
              “Change
      in Control” shall mean the occurrence of any of the following transactions
      or events: (a) any person (which shall not include the Company, any
      subsidiary of the Company or any employee benefit plan of the Company or
      of any subsidiary of the

            

    

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    Company)
("Person") or group (as that term is defined in Treasury Regulation Section
1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the 12-month period
ending on the date of the most recent acquisition by such Person or Persons)
ownership of stock of the Company possessing 30% or more of the total voting
power of the stock of the Company; (b) any Person or group (as that term is
defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), acquires ownership
of the stock of the Company that, together with stock held by such Person or
group, constitutes more than 50% of the total fair market value or total voting
power of the stock of the Company (this part (b) applies only when there is a
transfer of stock of the Company and the Company's stock remains outstanding
after the transaction); (c) a majority of the members of the Board of Directors
of the Company is replaced during any 12-month period by directors whose
appointment or election is not endorsed by a majority of the members of the
Board of Directors of the Company; or (d) any Person or group (as that term is
defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such Person or Persons) assets from the Company that have a gross
fair market value equal to or more than 40% of the total gross fair market value
of all of the assets of the Company immediately before such acquisition or
acquisitions.

     

    Notwithstanding
anything contained herein to the contrary, no transaction or event shall
constitute a Change in Control for purposes of the Plan unless the transaction
or event constitutes a change in the ownership of a corporation (as defined in
Treasury Regulation Section 1.409A-3(i)(5)(v)), a change in effective control of
a corporation (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)) or
a change in the ownership of a substantial portion of the assets of a
corporation (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)) and
the term Change in Control shall be interpreted in a manner consistent with the
proper interpretation of the similar provisions in the Section 409A Treasury
Regulations.

     

    
      	
               
      

            	
              8.

            	
              The
      “Code” shall mean the Internal Revenue Code of 1986, as
      amended.

            

    

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              9.

            	
              The
      “Moody’s Rate” shall be the number that results from adding the daily
      Moody’s Long-Term Corporate Bond Yield Average for “A” rated companies as
      of the last business day of each month for the 12-month period ending on
      October 31 of the prior Plan Year and dividing by
  12.

            

    

     

    
      	
               
      

            	
              10.

            	
              “Retirement”
      means the later of the day the Participant attains age 55 or the day the
      Participant ceases to be an employee of the Company, its utility division
      or any of its subsidiary
corporations.

            

    

     

    
      	
               
      

            	
              11.

            	
              “Service
      Year” means the Plan Year during which the services giving rise to the
      incentive award are performed.

            

    

     

    
      	
               
      

            	
              12.

            	
              “Specified
      Employee” means an employee who, as of the date the employee separates
      from service, is a “specified employee” (as that term is used in Section
      409A(a)(2)(B) of the Code), as determined under the Company's policy for
      determining specified employees.

            

    

    

     

    
      	
              II.

            	
              ADMINISTRATION

            

    

     

    
      	
               
      

            	
              1.

            	
              The
      Committee shall have the full power to construe and interpret the Plan and
      to establish and to amend these Rules and Regulations for its
      administration.

            

    

     

    
      	
               
      

            	
              2.

            	
              No
      member of the Committee shall participate in a decision as to their own
      eligibility for, or award of, an incentive award
  payment.

            

    

     

    
      	
               
      

            	
              3.

            	
              Prior
      to the beginning of each Plan Year, the Committee shall approve a list of
      eligible executives and notify those so approved that they are eligible to
      participate in the Plan for such Plan
Year.

            

    

     

    
      	
               
      

            	
              4.

            	
              No
      later than its regularly scheduled February meeting during the Plan Year,
      the Committee shall approve an Annual Operating Plan.  The
      Annual Operating Plan shall include the Plan’s performance measures and
      target incentive award levels for each salary grade covered by the Plan
      for the Plan Year.  The Plan’s performance targets for the year
      shall be approved by the Committee no later than its regularly scheduled
      February meeting during the Plan

            

    

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    Year.  The
Annual Operating Plan, insofar as it is relevant to each individual Participant,
shall be made available by the Committee to each Participant in the
Plan.

     

    
      	
               
      

            	
              5.

            	
              The
      Committee shall have final discretion to determine actual award payment
      levels, method of payment, and whether or not payments shall be made for
      any Plan Year.  However, unless the Plan's performance
      objectives are met for the Plan Year, no award shall be made for that Plan
      Year.  Performance targets modified pursuant to Section III of
      the Plan will be deemed performance targets for purposes of determining
      whether or not these targets have been
met.

            

    

     

    

    
      	
              III.

            	
              PLAN PERFORMANCE
      MEASURES

            

    

     

    
      	
               
      

            	
              1.

            	
              The
      Committee shall establish the percentage attainment of corporate
      performance measure and the percentage attainment of individual goals
      measure.  The Committee may establish more or fewer performance
      measures as it deems necessary.

            

    

     

    
      	
               
      

            	
              2.

            	
              The
      corporate performance measure may be set by reference to earnings, return
      on invested capital or any other measure or combination of measures deemed
      appropriate by the Committee.  It may be established for the
      Utility Company or for the individual business
  unit.

            

    

     

    
      	
               
      

            	
              3.

            	
              Individual
      performance will be assessed based on the achievement of annually
      established individual objectives.

            

    

     

    
      	
               
      

            	
              4.

            	
              Plan
      performance measures may be applied at the corporate level for individuals
      whose major or sole impact is Utility Company-wide, or at the business
      unit level for individuals whose major or sole impact is on the business
      unit results.  The Annual Operating Plan shall contain a list of
      individuals to whom the Plan performance measures will be applied at the
      corporate level and a list of those individuals for whom the Plan
      performance measures will be applied at the business unit
      level.  The relevant business unit for each individual will be
      identified.

            

    

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              5.

            	
              The
      Committee shall set threshold, target and maximum award levels for the
      performance measures, for each business unit, and for the Utility
      Company.  Those levels shall be included in the Annual Operating
      Plan.

            

    

     

    
      	
               
      

            	
              6.

            	
              The
      Committee will retain the authority to determine whether or not the actual
      attainment of these measures has been
made.

            

    

     

    

    
      	
              IV.

            	
              TARGET INCENTIVE
      AWARDS

            

    

     

    
      	
               
      

            	
              1.

            	
              Target
      incentive awards will be a percentage of each Participant’s Salary, as
      defined in the Plan.

            

    

     

    
      	
               
      

            	
              2.

            	
              Target
      incentive awards shall be set by the Committee annually and will be
      included in the Annual Operating
Plan.

            

    

     

    

    
      	
              V.

            	
              INCENTIVE FUND
      DETERMINATION

            

    

     

    
      	
               
      

            	
              1.

            	
              The
      target incentive fund is the sum of the individual target incentive awards
      for all eligible Participants.

            

    

     

    
      	
               
      

            	
              2.

            	
              Once
      individual incentive targets have been determined, a target incentive fund
      shall be established and accrued ratably by the Utility
      Company.  The incentive fund and accruals may be adjusted during
      the year.

            

    

     

    
      	
               
      

            	
              3.

            	
              As
      soon as practicable following the close of each Plan Year, the Chief
      Executive Officer will provide the Committee with an analysis showing the
      Utility Company's and each relevant business unit's performance in
      relation to the performance measures.  The Committee will review
      the analysis and determine, in its sole discretion, the amount of the
      actual incentive fund.

            

    

     

    
      	
               
      

            	
              4.

            	
              In
      determining the actual incentive fund, the Committee may consider any
      recommendations of the Chief Executive
Officer.

            

    

     

    
      	
              VI.

            	
              INDIVIDUAL AWARD
      DETERMINATION

            

    

     

    
      	
               
      

            	
              1.

            	
              The
      Committee shall have the sole discretion to determine each individual
      Participant's award. The Committee's decision will be based first upon
      the

            

    

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    level of
performance achieved by the Utility Company or business unit and second upon the
individual's performance.

     

    
      	
               
      

            	
              2.

            	
              The
      Committee, after consultation with the Chief Executive Officer, shall set
      the award as a percentage from 0 percent to 200 percent of the
      Participant's target incentive award, adjusted for Utility Company or
      business unit performance.

            

    

     

    

    
      	
              VII.

            	
              PAYMENT OF
      AWARDS

            

    

     

    
      	
               
      

            	
              1.

            	
              On
      the date the Committee determines the awards to be made to individual
      Participants, it shall also establish the Payment
  Date.

            

    

     

    
      	
               
      

            	
              2.

            	
              Except
      as provided below or as the Committee otherwise determines, in order to
      receive an award under the Plan, a Participant must remain employed by the
      Utility Company or one of its business units for the entire Service
      Year.

            

    

     

    
      	
               
      

            	
              3.

            	
              If
      a Participant terminates employment with the Utility Company pursuant to a
      mandatory retirement provision in the Utility Company's Bylaws that
      provides for mandatory retirement of certain officers on their 65th
      birthday (or terminates employment with a subsidiary of the Company
      pursuant to a similar subsidiary Bylaw provision), and if the
      Participant’s 65th
      birthday occurs during the Service Year, determination of whether the
      performance measures have been met will be made at the end of the Service
      Year, and to the extent met, payment of the award will be made to the
      Participant, prorated.  Proration of awards shall be based upon
      the number of full months elapsed from and including January to and
      including the month in which the Participant’s 65th
      birthday occurs.

            

    

     

    
      	
               
      

            	
              4.

            	
              Payment
      of the awards shall be made in cash.  Payments shall be made on
      the Payment Date unless the Participant has deferred, in whole or in part,
      the receipt of the award by making an election on the deferral form
      attached hereto, prior to the beginning of the Service
      Year.  Deferral elections may not be changed or revoked after
      the Service Year begins.

            

    

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              5.

            	
              In
      the event a Participant has elected to defer receipt of all or a portion
      of the award, the Utility Company shall set up an account in the
      Participant's name. The amount of the Participant's award to the extent
      deferred will be credited to the Participant's account on the Payment
      Date.

            

    

     

    
      	
               
      

            	
              6.

            	
              The
      balance credited to an account of a Participant who has elected to defer
      receipt of an award will be an unsecured, unfunded obligation of the
      Utility Company.

            

    

     

    
      	
               
      

            	
              7.

            	
              Interest
      shall accrue on the balance credited to a Participant's account from the
      date the balance is credited.  Effective January 1, 2009, the
      rate of interest for each Plan Year shall be the Moody’s
    Rate.

            

    

     

    
      	
               
      

            	
              8.

            	
              Interest
      shall be compounded and credited to the account
  monthly.

            

    

     

    
      	
               
      

            	
              9.

            	
              A
      Participant may elect to defer any percentage, not to exceed l00, of an
      annual award.

            

    

     

    
      	
               
      

            	
              10.

            	
              A
      Participant electing to defer any part of an award must elect one of the
      following dates on which (a) payment will be made, if payment will be made
      in a lump sum or (b) payments will commence, if payment will be made in
      monthly installments:

            

    

     

    
      	
               
      

            	
              (1)

            	
              Between
      January 1 and March 10 next following termination of employment with the
      Utility Company or an affiliated company;
or

            

    

    

    
      	
               
      

            	
              (2)

            	
              Between
      January 1 and March 10 of the fifth year following the year in which the
      award would have been paid had it not been
  deferred.

            

    

    

    For
Participants who previously elected to have payments made or commence on the
Payment Date next following termination of employment, their payments will be
made or commence between January 1 and March 10 next following their
termination of employment with the Utility Company.  For Participants
who elected to have payments made or commence on the Payment Date of the fifth
year following the year in which the award may be made, their payments will be
made or commence between

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    January 1
and March 10 of the fifth year following the year in which the award would have
been paid had it not been deferred.

    

    
      	
               
      

            	
              11.

            	
              A
      Participant may elect to receive the deferred amounts accumulated in the
      Participant's account in monthly installments, not to exceed
      120.  In the event the Participant elects to receive the amounts
      in the Participant's account in more than one installment, interest shall
      continue to accrue on the balance remaining in their account at the
      applicable rate or rates determined annually by the
    Committee.

            

    

     

    
      	
               
      

            	
              12.

            	
              Notwithstanding
      anything contained in the Plan or these Rules and Regulations to the
      contrary, if a Specified Employee's employment terminates, to the extent
      required by Section 409A(a)(2)(B) of the Code, except as otherwise
      provided in paragraph 13 below of this Section VII of these Rules and
      Regulations, payment of any deferred amounts under the Plan that are to be
      paid during the 6-month period following the Specified Employee's
      termination of employment shall not be paid or provided until the first
      business day after the date that is 6 months following the Specified
      Employee's termination of employment.  Any payment that is made
      pursuant to the prior sentence shall include the cumulative amount of any
      amounts that could not be paid during the 6-month period following the
      Specified Employee's termination of employment.  To the extent
      payments are deferred pursuant to the prior sentence, such deferred
      amounts shall continue to accrue interest pursuant to Section VII of these
      Rules and Regulations until payment
occurs.

            

    

     

    For all
purposes under the Plan and these Rules and Regulations, references to
termination of employment and similar terms shall be interpreted to mean
“separation from service,” as that term is used in Section 409A of the Code, and
the Participant's employment shall not be deemed to have terminated for purposes
of the Plan or these Rules and Regulations unless and until a separation from
service shall have occurred for purposes of Section 409A of the
Code.

     

    
      	
               
      

            	
              13.

            	
              In
      the event of the death of a Participant in whose name a deferred account
      has been set up, the Utility Company shall, within 90 days thereafter, pay
      to the

            

    

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    Participant's
estate or the designated beneficiary the entire amount in the deferred
account.

     

    
      	
               
      

            	
              14.

            	
              In
      the event of a "Change in Control" then any award deferred by each
      Participant shall become immediately payable to the
      Participant.  In the event the Participant files suit to collect
      a deferred award then all of the Participant's court costs, other expenses
      of litigation, and attorneys' fees shall be paid by the Utility Company in
      the event the Participant prevails upon any of the Participant's claims
      for payment.

            

    

     

    

     

    
      
         

      

      
        17

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