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mondakeicp.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 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
            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.

           

          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.

                     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 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:

          (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.

        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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 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.

            

    

     

    
      	
               

            	
              9.

            	
              The
                "Prime Rate" shall be the base rate on corporate loans posted by
                at least
                75 percent of the nation's largest banks as reported in The Wall
                Street Journal.

            

    

     

    
      	
               

            	
              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.

            	
              Prior
                to the beginning of each 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 following 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 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 at the
                beginning of each Plan Year.

            

    

     

    
      	
               

            	
              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.

            

    

     

    
      	
               

            	
              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
                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.

            

    

     

    
      	
               

            	
              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, 2008, the
                rate of interest shall be the Prime Rate as reported on the last
                business
                day of the preceding year to be effective on January 1 of each new
                Plan
                Year.

            

    

     

    
      	
               

            	
              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 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 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.perfshareagreement.htm

     

     

    MDU
      RESOURCES GROUP, INC.

    LONG-TERM
      PERFORMANCE-BASED INCENTIVE PLAN

    

    PERFORMANCE
      SHARE AWARD AGREEMENT

    
 

    

    {              }

    

     

    

    In
      accordance with the terms of the MDU
      Resources Group, Inc. Long-Term Performance-Based Incentive Plan (the "Plan"),
      pursuant to action of the Compensation Committee of the Board of Directors
      of
      MDU Resources Group, Inc. (the "Committee"), MDU Resources Group, Inc. (the
      "Company") hereby grants to you (the "Participant") Performance Shares (the
      "Award"), subject to the terms and conditions set forth in this Award Agreement
      (including Annexes A and B hereto and all documents incorporated herein by
      reference), as set forth below:

    

    
      	
              Target
                Award:

               

            	
              {          }
                Performance Shares (the "Target Award")

               

            
	
              Performance
                Period:

               

            	
              {               }
                through

              {               }
                (the "Performance Period")

               

            
	
              Date
                of Grant:

               

            	
              {          }

            
	
              Dividend
                Equivalents:

            	
              Yes

            

    

    

    THESE
      PERFORMANCE SHARES ARE SUBJECT TO FORFEITURE AS PROVIDED HEREIN.  THIS
      AWARD AND AMOUNTS RECEIVED IN CONNECTION WITH THIS AWARD ARE ALSO SUBJECT TO
      FORFEITURE, RECAPTURE OR OTHER ACTION IN THE EVENT OF AN ACCOUNTING RESTATEMENT,
      AS PROVIDED IN ARTICLE 19 OF THE PLAN.  ADDITIONALLY, BY SIGNING THIS
      AWARD AGREEMENT YOU ARE ACKNOWLEDGING AND AGREEING THAT ANY PERFORMANCE SHARE
      AWARD GRANTED TO YOU IN 2005 AND ANY AMOUNTS PAID OR PAYABLE OR DISTRIBUTED
      OR
      DISTRIBUTABLE PURSUANT TO ANY SUCH PRIOR 2005 AWARD SHALL ALSO BE SUBJECT TO
      FORFEITURE, RECAPTURE OR OTHER ACTION IN THE EVENT OF AN ACCOUNTING RESTATEMENT,
      AS PROVIDED IN ARTICLE 19 OF THE PLAN.

    

    Further
      terms and conditions of the
      Award are set forth in Annexes A and B hereto, which are integral parts of
      this
      Award Agreement.

    

    All
      terms, provisions and conditions
      applicable to the Award set forth in the Plan and not set forth in this Award
      Agreement are hereby incorporated herein by reference.  To the extent
      any provision hereof is inconsistent with a provision of the Plan; the
      provisions of the Plan will govern.  The Participant hereby
      acknowledges receipt of a copy of this Award Agreement, including Annexes A
      and
      B hereto, and a copy of the Plan and agrees to be bound by all the terms and
      provisions hereof and thereof.

    

    MDU
      RESOURCES GROUP, INC.

    

    

    By:                                                      

    Terry
      D. Hildestad

    President
      and

    Chief
      Executive Officer

    

    

    Agreed:

    

    

    ___________________

    Participant

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      A

    

    TO

    

    MDU
      RESOURCES GROUP, INC.

    LONG-TERM
      PERFORMANCE-BASED INCENTIVE PLAN

    

    PERFORMANCE
      SHARE AWARD AGREEMENT

    

    It
      is
      understood and agreed that the Award of Performance Shares evidenced by the
      Award Agreement to which this is annexed is subject to the following additional
      terms and conditions.

    

    1.           Nature
      of Award.  The Target Award represents the opportunity to receive
      shares of Company common stock, $1.00 par value ("Shares") and Dividend
      Equivalents on such Shares.  The number of Shares that may be earned
      under this Award shall be determined pursuant to Section 2
      hereof.  The amount of Dividend Equivalents that may be earned under
      this Award shall be determined pursuant to Section 4 hereof.  Except
      for Dividend Equivalents, which are paid in cash, Awards will be paid in
      Shares.

    

    2.           Determination
      of Number of Shares Earned.

    

    The
      number of Shares earned, if any,
      for the Performance Period shall be determined in accordance with the following
      formula:

    

    #
      of Shares = Payout Percentage X Target Award

    

    The
      "Payout Percentage" is based on the Company's total shareholder return ("TSR")
      relative to that of the Peer Group listed on Annex B (the "Percentile Rank")
      for
      the Performance Period, determined in accordance with the following
      table:

    

    
      	
              Percentile
                Rank

            	
              Payout
                Percentage

              (%
                of Target Award)

            
	
              100th

            	
              200%

            
	
              75th

            	
              150%

            
	
              50th

            	
              100%

            
	
              40th

            	
              10%

            
	
              less
                than 40th

            	
              0%

            

    

    

    If
      the
      Company achieves a Percentile Ranking between the 40th and 50th percentiles,
      the
      Payout Percentage shall be equal to 10%, plus 9% for each Percentile Rank whole
      percentage above the 40th percentile.  If the Company achieves a
      Percentile Ranking between the 50th and 100th percentiles, the Payout Percentage
      shall be equal to 100%, plus 2% for each Percentile Rank whole percentage above
      the 50th percentile.

    

    The
      Percentile Rank of a given company's TSR is defined as the percentage of the
      Peer Group companies' returns falling at or below the given company's
      TSR.  The formula for calculating the Percentile Rank
      follows:

    

    
      	
               

            	
              Percentile
                Rank = (n - r + 1)/n x 100

            

    

     

    
      	
               

            	
              Where:

            

    

     

    
      	
               

            	
              n
                =

            	
              total
                number of companies in the Peer Group, including the
                Company

            

    

     

    
      	
               

            	
              r
                =

            	
              the
                numeric rank of the Company's TSR relative to the Peer Group, where
                the
                highest return in the group is ranked number
                1

            

    

     

    To
      illustrate, if the Company's TSR is the third highest in the Peer Group
      comprised of 26 companies, its Percentile Rank would be 92.  The
      calculation is: (26 - 3 + 1)/26 x 100 = 92.

     

    The
      Percentile Rank shall be rounded to the nearest whole percentage.

     

    If
      the
      common stock of a company in the Peer Group ceases to be traded during the
      Performance Period, the company will be deleted from the Peer
      Group.  Percentile Rank will be calculated without regard to the
      return of the deleted company.

     

    Total
      shareholder return is the percentage change in the value of an investment in
      the
      common stock of a company from the initial investment made on the last trading
      day in the calendar year preceding the beginning of the performance period
      through the last trading day in the final year of the performance
      period.  It is assumed that dividends are reinvested in additional
      shares of common stock at the frequency paid.

     

    All
      Performance Shares that are not earned for the Performance Period shall be
      forfeited.

    

    3.           Issuance
      of Shares. Subject to any restrictions on distributions of Shares under the
      Plan, and subject to Section 6 of this Annex A, the Shares earned under the
      Award, if any, shall be issued to the Participant as soon as practicable (but
      no
      later than the next March 15) following the close of the Performance
      Period.

    

    4.           Dividend
      Equivalents. Dividend Equivalents shall be earned with respect to any Shares
      issued to the Participant pursuant to this Award.  The amount of
      Dividend Equivalents earned shall be equal to the total dividends declared
      on a
      Share between the Date of Grant of this Award and the last day of the
      Performance Period, multiplied by the number of Shares issued to the Participant
      pursuant to the Award Agreement.  Any Dividend Equivalents earned
      shall be paid in cash to the Participant when the Shares to which they relate
      are issued or as soon as practicable thereafter, but no later than the next
      March 10 following the close of the Performance Period.  If the Award
      is forfeited or if no Shares are issued, no Dividend Equivalents shall be
      paid.

    

    5.           Termination
      of Employment.

    

    (a)           If
      the Participant's employment with the Company is terminated for any reason
      other
      than "Cause" (as defined below) (1) during the first year of the Performance
      Period, all Performance Shares (and related Dividend Equivalents) shall be
      forfeited; (2) during the second year of the Performance Period, determination
      of the Company's Percentile Rank for the Performance Period will be made by
      the
      Committee at the end of the Performance Period, and Shares (and related Dividend
      Equivalents) earned, if any, will be paid based on the Payout Percentage,
      prorated for the number of full months elapsed from and including the month
      in
      which the Performance Period began to and including the month in which the
      termination of employment occurs; and (3) during the third year of the
      Performance Period, determination of the Company's Percentile Rank for the
      Performance Period will be made by the Committee at the end of the Performance
      Period, and Shares (and related Dividend Equivalents) earned, if any, will
      be
      paid based on the Payout Percentage without prorating.

    

    (b)           If
      the Participant's employment is terminated for "Cause" (as defined below) during
      the Performance Period, all Performance Shares (and related Dividend
      Equivalents) shall be forfeited.

    

    (c)           For
      purposes of the Award Agreement, the term "Cause" shall mean the Participant's
      fraud or dishonesty that has resulted or is likely to result in material
      economic damage to the Company or a Subsidiary, or the Participant's willful
      nonfeasance if such nonfeasance is not cured within ten days of written notice
      from the Company or a Subsidiary, as determined in good faith by a vote of
      at
      least two-thirds of the non-employee directors of the Company at a meeting
      of
      the Board at which the Participant is provided an opportunity to be
      heard.

    

    6.           Tax
      Withholding. Pursuant to Article 16 of the Plan, the Committee shall have
      the power and the right to deduct or withhold, or require the Participant to
      remit to the Company, an amount sufficient to satisfy any Federal, state and
      local taxes (including the Participant's FICA obligations) required by law
      to be
      withheld with respect to the Award.  The Committee may condition the
      delivery of Shares upon the Participant's satisfaction of such withholding
      obligations.  The Participant may elect to satisfy all or part of such
      withholding requirement by tendering previously-owned Shares or by having the
      Company withhold Shares having a Fair Market Value equal to the minimum
      statutory withholding that could be imposed on the transaction (based on minimum
      statutory withholding rates for Federal, state, and local tax purposes, as
      applicable, including payroll taxes, that are applicable to such supplemental
      taxable income).  Such election shall be irrevocable, made in writing,
      signed by the Participant, and shall be subject to any restrictions or
      limitations that the Committee, in its sole discretion, deems
      appropriate.

    

    7.           Ratification
      of Actions. By accepting the Award or other benefit under the Plan, the
      Participant and each person claiming under or through him or her shall be
      conclusively deemed to have indicated the Participant's acceptance and
      ratification of, and consent to, any action taken under the Plan or the Award
      by
      the Company, its Board of Directors, or the Committee.

    

    8.           Notices.
      Any notice hereunder to the Company shall be addressed to its office, 1200
      West
      Century Avenue, P.O. Box 5650, Bismarck, North Dakota 58506; Attention:
      Corporate Secretary, and any notice hereunder to the Participant shall be
      addressed to him or her at the address specified on the Award Agreement, subject
      to the right of either party to designate at any time hereafter in writing
      some
      other address.

    

    9.           Definitions.
      Capitalized terms not otherwise defined herein or in the Award Agreement shall
      have the meanings given them in the Plan.

    

    10.           Governing
      Law and Severability. To the extent not preempted by Federal law, the Award
      Agreement will be governed by and construed in accordance with the laws of
      the
      State of Delaware, without regard to conflicts of law provisions.  In
      the event any provision of the Award Agreement shall be held illegal or invalid
      for any reason, the illegality or invalidity shall not affect the remaining
      parts of the Award Agreement, and the Award Agreement shall be construed and
      enforced as if the illegal or invalid provision had not been
      included.

     

    11.           No
      Rights to Continued Employment.  The Award Agreement is not a
      contract of employment.  Nothing in the Plan or in the Award Agreement
      shall interfere with or limit in any way the right of the Company or any
      Subsidiary to terminate the Participant's employment at any time, for any reason
      or no reason, or confer upon the Participant the right to continue in the employ
      of the Company or a Subsidiary.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      B

    

    TO

    

    MDU
      RESOURCES GROUP, INC.

    LONG-TERM
      PERFORMANCE-BASED INCENTIVE PLAN

    

    PERFORMANCE
      SHARE AWARD AGREEMENT

    

    

    PEER
      GROUP COMPANIES

    

    Alliant
      Energy Corporation

    Berry
      Petroleum Company – CL A

    Black
      Hills Corporation

    Comstock
      Resources, Inc.

    Dycom
      Industries, Inc.

    EMCOR
      Group Inc.

    Encore
      Acquisition Company

    Equitable
      Resources, Inc.

    Granite
      Construction Incorporated

    Martin
      Marietta Materials, Inc.

    National
      Fuel Gas Company

    Northwest
      Natural Gas Company

    NSTAR

    OGE
      Energy Corp.

    ONEOK,
      Inc.

    Quanta
      Services, Inc.

    Questar
      Corporation

    SCANA
      Corporation

    Southwest
      Gas Corporation

    St.
      Mary
      Land & Exploration Company

    Swift
      Energy Company

    US
      Concrete, Inc.

    Vectren
      Corporation

    Vulcan
      Materials Company

    Whiting
      Petroleum Corporation

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