Document:

1997 Non-Employee Director Long-Term Incentive Plan

    MDU
      RESOURCES GROUP, INC.

    1997
      NON-EMPLOYEE DIRECTOR LONG-TERM INCENTIVE PLAN

    

    Article
      1. Establishment, Purpose and Duration

    

    1.1 Establishment
      of the Plan. MDU
      Resources Group, Inc., a Delaware corporation (hereinafter referred to as the
      "Company"), hereby establishes an incentive plan to be known as the "MDU
      Resources Group, Inc. 1997 Non-Employee Director Long-Term Incentive Plan"
      (hereinafter referred to as the "Plan"), as set forth in this document. The
      Plan
      permits the grant of Nonqualified Stock Options (NQSO), Stock Appreciation
      Rights (SAR), Restricted Stock, Performance Units, Performance Shares and other
      awards.

    

    The
      Plan
      shall become effective when approved by the stockholders at the annual meeting
      on April 22, 1997, (the "Effective Date"), and shall remain in effect as
      provided in Section 1.3 herein.

    

    1.2 Purpose
      of the Plan.
      The
      purpose of the Plan is to promote the success and enhance the value of the
      Company by linking the personal interests of Participants to those of Company
      stockholders and customers. The Plan is further intended to assist the Company
      in its ability to motivate, attract and retain highly qualified individuals
      to
      serve as directors of the Company.

    

    1.3 Duration
      of the Plan.
      The Plan
      shall commence on the Effective Date, as described in Section 1.1 herein, and
      shall remain in effect, subject to the right of the Board of Directors to
      terminate the Plan at any time pursuant to Article 14 herein, until all Shares
      subject to it shall have been purchased or acquired according to the Plan's
      provisions.

    

    Article
      2. Definitions

    

    Whenever
      used in the Plan, the following terms shall have the meanings set forth below
      and, when such meaning is intended, the initial letter of the word is
      capitalized:

    

    2.1 "Award"
      means,
      individually or collectively, a grant under the Plan of NQSOs, SARs, Restricted
      Stock, Performance Units, Performance Shares or any other type of award
      permitted under Article 10 of the Plan.

    

    2.2 "Award
      Agreement"
      means an
      agreement entered into by each Participant and the Company, setting forth the
      terms and provisions applicable to an Award granted to a Participant under
      the
      Plan.

    

    2.3 "Base
      Value"
      of an
      SAR shall have the meaning set forth in Section 7.1 herein.

    

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

    

    2.5 "Change
      in Control" means
      the
      earliest of the following to occur: (a) the public announcement by the Company
      or by 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") that such Person, who or which, together with all Affiliates
      and Associates (within the meanings ascribed to such terms in the Rule 12b-2
      of
      the General Rules and Regulations under the Exchange Act) of such Person, shall
      be the beneficial owner of twenty percent (20%) or more of the voting stock
      of
      the Company outstanding; (b) the commencement of, or after the first public
      announcement of any Person to commence, a tender or exchange offer the
      consummation of which would result in any Person becoming the beneficial owner
      of voting stock aggregating thirty percent (30%) or more of the then outstanding
      voting stock of the Company; (c) the announcement of any transaction relating
      to
      the Company required to be described pursuant to the requirements of Item 6(e)
      of Schedule 14A of Regulation 14A under the Exchange Act; (d) a proposed change
      in constituency of the Board such that, during any period of two (2) consecutive
      years, individuals who at the beginning of such period constitute the Board
      cease for any reason to constitute at least a majority thereof, unless the
      election or nomination for election by the stockholders of the Company of each
      new Director was approved by a vote of at least two-thirds (2/3) of the
      Directors then still in office who were members of the Board at the beginning
      of
      the period; or (e) any other event which shall be deemed by a majority of the
      Committee to constitute a "change in control."

    

    2.6 "Code"
      means
      the Internal Revenue Code of 1986, as amended from time to time.

    

    2.7 "Committee"
      means
      the Committee, as specified in Article 3, appointed by the Board to administer
      the Plan with respect to Awards.

    

    2.8 "Company"
      means
      MDU Resources Group, Inc., a Delaware corporation, or any successor thereto
      as
      provided in Article 15 herein.

    

    2.9 "Director"
      means
      any individual who is a member of the Board of Directors of the
      Company.

    

    2.10 "Dividend
      Equivalent"
      means,
      with respect to Shares subject to an Award, a right to be paid an amount equal
      to dividends declared on an equal number of outstanding Shares.

    

    2.11 "Employee"
      means
      any full-time or regularly-scheduled part-time employee of the Company or of
      the
      Company's Subsidiaries, who is not covered by any collective bargaining
      agreement to which the Company or any of its Subsidiaries is a
      party.

    

    2.12 "Exchange
      Act"
      means
      the Securities Exchange Act of 1934, as amended from time to time, or any
      successor act thereto.

    

    2.13 "Exercise
      Period"
      means
      the period during which an SAR or Option is exercisable, as set forth in the
      related Award Agreement.

    

    2.14 "Fair
      Market Value"
      shall
      mean the average of the high and low sale prices as reported in the
      consoli-dated transaction reporting system or, if there is no such sale on
      the
      relevant date, then on the last previous day on which a sale was
      reported.

    

    2.15 "Freestanding
      SAR"
      means
      an SAR that is granted independently of any Option. 

    

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

    

    2.17 "Nonqualified
      Stock Option" or "NQSO"
      means an
      option to purchase Shares, granted under Article 6 herein, which is not intended
      to be an Incentive Stock Option under Section 422 of the Code.

    

    2.18 "Option"
      means a
      Nonqualified Stock Option.

    

    2.19 "Option
      Price"
      means
      the price at which a Share may be purchased by a Participant pursuant to an
      Option, as determined by the Committee and set forth in the Option Award
      Agreement.

    

    2.20 "Participant"
      means a
      Non-Employee Director who has an outstanding Award granted under the
      Plan.

    

    2.21 "Performance
      Unit"
      means an
      Award granted to a Participant, as described in Article 9 herein.

    

    2.22 "Performance
      Share"
      means an
      Award granted to a Participant, as described in Article 9 herein.

    

    2.23 "Period
      of Restriction"
      means
      the period during which the transfer of Restricted Stock is limited in some
      way,
      as provided in Article 8 herein.

    

    2.24 "Person"
      shall
      have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act,
      as used in Sections 13(d) and 14(d) thereof, including usage in the definition
      of a "group" in Section 13(d) thereof.

    

    2.25 "Restricted
      Stock"
      means an
      Award of Shares granted to a Participant pursuant to Article 8
      herein.

    

    2.26 "Shares"
      means
      the shares of common stock of the Company.

    

    2.27 "Stock
      Appreciation Right" or "SAR"
      means a
      right, granted alone or in connection with a related Option, designated as
      an
      SAR, to receive a payment on the day the right is exercised, pursuant to the
      terms of Article 7 herein. Each SAR shall be denominated in terms of one
      Share.

    

    2.28 "Subsidiary"
      means
      any corporation that is a "subsidiary corporation" of the Company as that term
      is defined in Section 424(f) of the Code.

    

    2.29 "Tandem
      SAR"
      means an
      SAR that is granted in connection with a related Option, the exercise of which
      shall require forfeiture of the right to purchase a Share under the related
      Option (and when a Share is purchased under the Option, the Tandem SAR shall
      be
      similarly canceled).

    

    Article
      3. Administration

    

    3.1 The
      Committee.
      The Plan
      shall be administered by any committee appointed by the Board or by the Board
      of
      Directors (the "Committee").

    

    3.2 Authority
      of the Committee.
      The
      Committee shall have full power except as limited by law, the Articles of
      Incorporation and the Bylaws of the Company, subject to such other restricting
      limitations or directions as may be imposed by the Board and subject to the
      provisions herein, to determine the size and types of Awards; to determine
      the
      terms and conditions of such Awards in a manner consistent with the Plan; to
      construe and interpret the Plan and any agreement or instrument entered into
      under the Plan; to establish, amend or waive rules and regulations for the
      Plan's administration; and (subject to the provisions of Article 14 herein)
      to
      amend the terms and conditions of any outstanding Award. Further, the Committee
      shall make all other determinations which may be necessary or advisable for
      the
      administration of the Plan. As permitted by law, the Committee may delegate
      its
      authorities as identified hereunder.

    

    3.3 Restrictions
      on Share Transferability.
      The
      Committee may impose such restrictions on any Shares acquired pursuant to Awards
      under the Plan as it may deem advisable, including, without limitation,
      restrictions to comply with applicable Federal securities laws, with the
      requirements of any stock exchange or market upon which such Shares are then
      listed and/or traded and with any blue sky or state securities laws applicable
      to such Shares.

    

    3.4 Approval.
      The
      Committee or the Board shall approve all Awards made under the Plan and all
      elections made by Participants, prior to their effective date, to the extent
      necessary to comply with Rule 16b-3 under the Exchange Act.

    

    3.5 Decisions
      Binding.
      All
      determinations and decisions made by the Committee pursuant to the provisions
      of
      the Plan and all related orders or resolutions of the Board shall be final,
      conclusive and binding on all persons, including the Company, its stockholders,
      Participants and their estates and beneficiaries.

    

    3.6 Costs.
      The
      Company shall pay all costs of administration of the Plan.

    

    Article
      4. Shares Subject to the Plan

    

    4.1 Number
      of Shares.
      Subject
      to Section 4.2 herein, the maximum number of Shares that may be issued pursuant
      to Awards under the Plan shall be 595,125. Shares underlying lapsed or forfeited
      Awards of Restricted Stock shall not be treated as having been issued pursuant
      to an Award under the Plan. Shares that are potentially deliverable under an
      Award that expires or is canceled, forfeited, settled in cash or otherwise
      settled without the delivery of Shares shall not be treated as having been
      issued under the Plan. Shares that are withheld to satisfy the Option Price
      related to an Option, SAR or other Award pursuant to which the Shares withheld
      have not yet been issued shall not be deemed to be Shares issued under the
      Plan.

    

    Shares
      issued pursuant to the Plan may be (i) authorized but unissued Shares of Common
      Stock, (ii) treasury shares, or (iii) shares purchased on the open
      market.

    

    4.2 Adjustments
      in Authorized Shares.
      In the
      event of any merger, reorganization, consolidation, recapitalization,
      separation, liquidation, stock split, reverse stock split, stock dividend,
      split-up, spin-off, share combination, share exchange, extraordinary dividend
      or
      any change in the corporate structure of the Company affecting the Shares,
      such
      adjustment shall be made to the number and kind of Shares which may be delivered
      under the Plan, and the number, kind and/or price of Shares subject to
      outstanding Awards granted under the Plan, as may be determined to be
      appropriate and equitable by the Committee, in its sole discretion, to prevent
      dilution or enlargement of rights; provided, however, that unless otherwise
      determined by the Committee, the number of Shares subject to any Award shall
      always be rounded down to a whole number.

    

    Article
      5. Eligibility and Participation

    

    5.1 Eligibility.
      Persons
      eligible to participate in the Plan are any persons elected or appointed to
      the
      Board who are not Employees.

    

    5.2 Actual
      Participation.
      Subject
      to the provisions of the Plan, the Committee may, from time to time, select
      from
      all eligible Non-Employee Directors those to whom Awards shall be granted and
      shall determine the nature and amount of each Award.

    

    Article
      6. Stock Options

    

    6.1 Grant
      of Options. Subject
      to the terms and conditions of the Plan, Options may be granted to a
      Non-Employee Director at any time and from time to time, as shall be determined
      by the Committee.

    

    The
      Committee shall have complete discretion in determining the number of Shares
      subject to Options granted to each Participant (subject to Article 4 herein)
      and, consistent with the provisions of the Plan, in determining the terms and
      conditions pertaining to such Options.

    

    6.2 Option
      Award Agreement.
      Each
      Option grant shall be evidenced by an Option Award Agreement that shall specify
      the Option Price, the term of the Option, the number of Shares to which the
      Option pertains, the Exercise Period and such other provisions as the Committee
      shall determine, including but not limited to any rights to Dividend
      Equivalents.

    

    6.3 Exercise
      of and Payment for Options.
      Options
      granted under the Plan shall be exercisable at such times and be subject to
      such
      restrictions and conditions as the Committee shall in each instance
      approve.

    

    A
      Participant may exercise an Option at any time during the Exercise Period.
      Options shall be exercised by the delivery of a written notice of exercise
      to
      the Company or its designee, setting forth the number of Shares with respect
      to
      which the Option is to be exercised, accompanied by provisions for full payment
      for the Shares.

    

    The
      Option Price upon exercise of any Option shall be payable either: (a) in cash
      or
      its equivalent, (b) by tendering previously acquired Shares having an aggregate
      Fair Market Value at the time of exercise equal to the total Option Price
      (provided that Shares which are tendered must have been held by the Participant
      for at least six (6) months prior to their tender to satisfy the Option Price),
      (c) by Share withholding, (d) by cashless exercise or (e) by a combination
      of
      (a),(b),(c), and/or (d).

    

    As
      soon
      as practicable after receipt of a written notification of exercise of an Option
      and provisions for full payment therefor, the Company shall (i) deliver to
      the
      Participant, in the Participant's name or the name of the Participant's
      designee, a Share certificate or certificates in an appropriate aggregate amount
      based upon the number of Shares purchased under the Option, or (ii) cause to
      be
      issued in the Participant's name or the name of the Participant's designee,
      in
      book-entry form, an appropriate number of Shares based upon the number of Shares
      purchased under the Option.

    

    6.4 Termination
      of Director Status.
      Each
      Option Award Agreement shall set forth the extent to which the Participant
      shall
      have the right to exercise the Option following termination of the Participant's
      position on the Board of the Company. Such provisions shall be determined in
      the
      sole discretion of the Committee, shall be included in the Option Award
      Agreement entered into with Participants, need not be uniform among all Options
      granted pursuant to the Plan or among Participants and may reflect distinctions
      based on the reasons for termination of director status.

    

    6.5 Transferability
      of Options.
      Except
      as otherwise determined by the Committee and set forth in the Option Award
      Agreement, no Option granted under the Plan may be sold, transferred, pledged,
      assigned, or otherwise alienated or hypothecated, other than by will or by
      the
      laws of descent and distribution, and all Options granted to a Participant
      under
      the Plan shall be exercisable during his or her lifetime only by such
      Participant or his or her legal representative.

    

    Article
      7. Stock Appreciation Rights

    

    7.1 Grant
      of SARs. Subject
      to the terms and conditions of the Plan, an SAR may be granted to a Non-Employee
      Director at any time and from time to time as shall be determined by the
      Committee. The Committee may grant Freestanding SARs, Tandem SARs or any
      combination of these forms of SAR.

    

    The
      Committee shall have complete discretion in determining the number of SARs
      granted to each Participant (subject to Article 4 herein) and, consistent
      with the provisions of the Plan, in determining the terms and conditions
      pertaining to such SARs.

    

    The
      Base
      Value of a Freestanding SAR shall equal the Fair Market Value of a Share on
      the
      date of grant of the SAR. The Base Value of Tandem SARs shall equal the Option
      Price of the related Option.

    

    7.2 SAR
      Award Agreement. Each
      SAR
      grant shall be evidenced by an SAR Award Agreement that shall specify the number
      of SARs granted, the Base Value, the term of the SAR, the Exercise Period and
      such other provisions as the Committee shall determine.

    

    7.3 Exercise
      and Payment of SARs.
      Tandem
      SARs may be exercised for all or part of the Shares subject to the related
      Option upon the surrender of the right to exercise the equivalent portion of
      the
      related Option. A Tandem SAR may be exercised only with respect to the Shares
      for which its related Option is then exercisable.

    

    Freestanding
      SARs may be exercised upon whatever terms and conditions the Committee, in
      its
      sole discretion, imposes upon them.

    

    A
      Participant may exercise an SAR at any time during the Exercise Period. SARs
      shall be exercised by the delivery of a written notice of exercise to the
      Company, setting forth the number of SARs being exercised. Upon exercise of
      an
      SAR, a Participant shall be entitled to receive payment from the Company in
      an
      amount equal to the product of:

    

    
      	 	
              (a)

            	
              the
                excess of (i) the Fair Market Value of a Share on the date of exercise
                over (ii) the Base Value multiplied
                by

            

    

    

    
      	 	
              (b)

            	
              the
                number of Shares with respect to which the SAR is
                exercised.

            

    

    

    At
      the
      sole discretion of the Committee, the payment to the Participant upon SAR
      exercise may be in cash, in Shares of equivalent value, or in some combination
      thereof.

    

    7.4 Termination
      of Director Status.
      Each SAR
      Award Agreement shall set forth the extent to which the Participant shall have
      the right to exercise the SAR following termination of the Participant's
      position on the Board of the Company. Such provisions shall be determined in
      the
      sole discretion of the Committee, shall be included in the SAR Award Agreement
      entered into with Participants, need not be uniform among all SARs granted
      pursuant to the Plan or among Participants and may reflect distinctions based
      on
      the reasons for termination of director status.

    

    7.5 Transferability
      of SARs.
      Except
      as otherwise determined by the Committee and set forth in the SAR Award
      Agreement, no SAR granted under the Plan may be sold, transferred, pledged,
      assigned, or otherwise alienated or hypothecated, other than by will or by
      the
      laws of descent and distribution, and all SARs granted to a Participant under
      the Plan shall be exercisable during his or her lifetime only by such
      Participant or his or her legal representative.

    

    Article
      8. Restricted Stock

    

    8.1 Grant
      of Restricted Stock. Subject
      to the terms and conditions of the Plan, Restricted Stock may be granted to
      a
      Non-Employee Director at any time and from time to time, as shall be determined
      by the Committee.

    

    The
      Committee shall have complete discretion in determining the number of shares
      of
      Restricted Stock granted to each Participant (subject to Article 4 herein)
      and,
      consistent with the provisions of the Plan, in determining the terms and
      conditions pertaining to such Restricted Stock.

    

    8.2 Restricted
      Stock Award Agreement.
      Each
      Restricted Stock grant shall be evidenced by a Restricted Stock Award Agreement
      that shall specify the Period or Periods of Restriction, the number of
      Restricted Stock Shares granted and such other provisions as the Committee
      shall
      determine.

    

    8.3 Transferability.
      Restricted Stock granted hereunder may not be sold, transferred, pledged,
      assigned, or otherwise alienated or hypothecated until the end of the applicable
      Period of Restriction established by the Committee and specified in the
      Restricted Stock Award Agreement. All rights with respect to the Restricted
      Stock granted to a Participant under the Plan shall be available during his
      or
      her lifetime only to such Participant or his or her legal
      representative.

    

    8.4 Certificate
      Legend.
      Each
      certificate representing Restricted Stock granted pursuant to the Plan may
      bear

    a
      legend
      substantially as follows:

    

    
      	 	
              "The
                sale or other transfer of the shares of stock represented by this
                certificate, whether voluntary, involuntary or by operation of law,
                is
                subject to certain restrictions on transfer as set forth in MDU Resources
                Group, Inc. 1997 Non-Employee Director Long-Term Incentive Plan,
                and in a
                Restricted Stock Award Agreement. A copy of such Plan and such Agreement
                may be obtained from MDU Resources Group,
                Inc."

            

    

    

    The
      Company shall have the right to retain the certificates representing Restricted
      Stock in the Company's possession until such time as all restrictions applicable
      to such Shares have been satisfied.

    

    8.5 Removal
      of Restrictions.
      Restricted Stock shall become freely transferable by the Participant after
      the
      last day of the Period of Restriction applicable thereto. Once Restricted Stock
      is released from the restrictions, the Participant shall be entitled to have
      the
      legend referred to in Section 8.4 removed from his or her stock
      certificate.

    

    8.6 Voting
      Rights. During
      the Period of Restriction, Participants holding Restricted Stock may exercise
      full voting rights with respect to those Shares.

    

    8.7 Dividends
      and Other Distributions.
      Subject
      to the Committee's right to determine otherwise at the time of grant, during
      the
      Period of Restriction, Participants holding Restricted Stock shall receive
      all
      regular cash dividends paid with respect to all Shares while they are so held.
      All other distributions paid with respect to such Restricted Stock shall be
      credited to Participants subject to the same restrictions on transferability
      and
      forfeitability as the Restricted Stock with respect to which they were paid
      and
      shall be paid to the Participant within forty-five (45) days following the
      full
      vesting of the Restricted Stock with respect to which such distributions were
      made.

    

    8.8 Termination
      of Director Status. Each
      Restricted Stock Award Agreement shall set forth the extent to which the
      Participant shall have the right to receive unvested Restricted Stock following
      termination of the Participant's position on the Board of the Company. Such
      provisions shall be determined in the sole discretion of the Committee, shall
      be
      included in the Restricted Stock Award Agreement entered into with Participants,
      need not be uniform among all grants of Restricted Stock or among Participants
      and may reflect distinctions based on the reasons for termination of director
      status.

    

    Article
      9. Performance Units and Performance Shares

    

    9.1 Grant
      of Performance Units and Performance Shares. Subject
      to the terms and conditions of the Plan, Performance Units and/or Performance
      Shares may be granted to a Non-Employee Director at any time and from time
      to
      time, as shall be determined by the Committee.

    

    The
      Committee shall have complete discretion in determining the number of
      Performance Units and/or Performance Shares granted to each Participant (subject
      to Article 4 herein) and, consistent with the provisions of the Plan, in
      determining the terms and conditions pertaining to such Awards.

    

    9.2 Performance
      Unit/Performance Share Award Agreement.
      Each
      grant of Performance Units and/or Performance Shares shall be evidenced by
      a
      Performance Unit and/or Performance Share Award Agreement that shall specify
      the
      number of Performance Units and/or Performance Shares granted, the initial
      value
      (if applicable), the Performance Period, the performance goals and such other
      provisions as the Committee shall determine, including but not limited to any
      rights to Dividend Equivalents.

    

    9.3 Value
      of Performance Units/Performance Shares.
      Each
      Performance Unit shall have an initial value that is established by the
      Committee at the time of grant. The value of a Performance Share shall be equal
      to the Fair Market Value of a Share. The Committee shall set performance goals
      in its discretion which, depending on the extent to which they are met, will
      determine the number and/or value of Performance Units/Performance Shares that
      will be paid out to the Participants. The time period during which the
      performance goals must be met shall be called a "Performance
      Period."

    

    9.4 Earning
      of Performance Units/Performance Shares.
      After
      the applicable Performance Period has ended, the holder of Performance
      Units/Performance Shares shall be entitled to receive a payout with respect
      to
      the Perfor-mance Units/Performance Shares earned by the Participant over the
      Performance Period, to be determined as a function of the extent to which the
      corresponding performance goals have been achieved.

    

    9.5 Form
      and Timing of Payment of Performance Units/Performance Shares.
      Payment
      of earned Performance Units/Performance Shares shall be made following the
      close
      of the applicable Performance Period. The Committee, in its sole discretion,
      may
      pay earned Performance Units/Performance Shares in cash or in Shares (or in
      a
      combination thereof), which have an aggregate Fair Market Value equal to the
      value of the earned Performance Units/Performance Shares at the close of the
      applicable Performance Period. Such Shares may be granted subject to any
      restrictions deemed appropriate by the Committee.

    

    9.6 Termination
      of Director Status.
      Each
      Performance Unit/Performance Share Award Agreement shall set forth the extent
      to
      which the Participant shall have the right to receive a Performance
      Unit/Performance Share payment following termination of the Participant's
      position on the Board of the Company during a Performance Period. Such
      provisions shall be determined in the sole discretion of the Committee, shall
      be
      included in the Award Agreement entered into with Participants, need not be
      uniform among all grants of Performance Units/Performance Shares or among
      Participants and may reflect distinctions based on reasons for termination
      of
      director status.

    

    9.7 Transferability.
      Except
      as otherwise determined by the Committee and set forth in the Performance
      Unit/Performance Share Award Agreement, Performance Units/Performance Shares
      may
      not be sold, transferred, pledged, assigned or otherwise alienated or
      hypothecated, other than by will or by the laws of descent and distribution,
      and
      a Participant's rights with respect to Performance Units/Performance Shares
      granted under the Plan shall be available during the Participant's lifetime
      only
      to such Participant or the Participant's legal representative.

    

    Article
      10. Other Awards

    

    The
      Committee shall have the right to grant other Awards which may include, without
      limitation, the grant of Shares based on certain conditions, the payment of
      Shares in lieu of cash, or the payment of cash based on performance criteria
      established by the Committee. Payment under or settlement of any such Awards
      shall be made in such manner and at such times as the Committee may
      determine.

    

    Article
      11. Beneficiary Designation

    

    Each
      Participant under the Plan may, from time to time, name any beneficiary or
      beneficiaries (who may be named contingently or successively) to whom any
      benefit under the Plan is to be paid in case of his or her death before he
      or
      she receives any or all of such benefit. Each such designation shall revoke
      all
      prior designations by the same Participant, shall be in a form prescribed by
      the
      Company, and will be effective only when filed by the Participant in writing
      with the Company during the Participant's lifetime. In the absence of any such
      designation, benefits remaining unpaid at the Participant's death shall be
      paid
      to the Participant's estate.

    

    The
      spouse of a married Participant domiciled in a community property jurisdiction
      shall join in any designation of beneficiary or beneficiaries other than the
      spouse.

    

    Article
      12. Deferrals

    

    The
      Committee may permit a Participant to defer the Participant's receipt of the
      payment of cash or the delivery of Shares that would otherwise be due to such
      Participant under the Plan. If any such deferral election is permitted, the
      Committee shall, in its sole discretion, establish rules and procedures for
      such
      payment deferrals.

    

    Article
      13. Change in Control

    

    The
      terms
      of this Article 13 shall immediately become operative, without further action
      or
      consent by any person or entity, upon a Change in Control, and once operative
      shall supersede and take control over any other provisions of this Plan.

    

    Upon
      a
      Change in Control

    

    
      	 	
              (a)

            	
              Any
                and all Options and SARs granted hereunder shall become immediately
                exercisable;

            

    

    

    
      	 	
              (b)

            	
              Any
                restriction periods and restrictions imposed on Restricted Stock
                or Awards
                granted pursuant to Article 10 (if not performance-based) shall be
                deemed
                to have expired and such Restricted Stock or Awards shall become
                immediately vested in full; and

            

    

    

    
      	 	
              (c)

            	
              The
                target payout opportunity attainable under all outstanding Awards
                of
                Performance Units, Performance Shares and Awards granted pursuant
                to
                Article 10 (if performance-based) shall be deemed to have been fully
                earned for the entire Performance Period(s) as of the effective date
                of
                the Change in Control, and shall be paid out promptly in Shares or
                cash
                pursuant to the terms of the Award Agreement, or in the absence of
                such
                designation, as the Committee shall determine.

            

    

    

    Article
      14. Amendment, Modification and Termination

    

    14.1 Amendment,
      Modification and Termination.
      The
      Board may, at any time and from time to time, alter, amend, suspend or terminate
      the Plan in whole or in part. 

    

    14.2 Awards
      Previously Granted.
      No
      termination, amendment or modification of the Plan shall adversely affect in
      any
      material way any Award previously granted under the Plan, without the written
      consent of the Participant holding such Award, unless such termination,
      modification or amendment is required by applicable law.

    

    Article
      15. Successors

    

    All
      obligations of the Company under the Plan, with respect to Awards granted
      hereunder, shall be binding on any successor to the Company, whether the
      existence of such successor is the result of a direct or indirect purchase,
      merger, consolidation or otherwise, of all or substantially all of the business
      and/or assets of the Company.

    

    Article
      16. Legal Construction

    

    16.1 Gender
      and Number.
      Except
      where otherwise indicated by the context, any masculine term used herein also
      shall include
      the feminine, the plural shall include the singular and the singular shall
      include the plural.

    

    16.2 Severability.
      In the
      event any provision of the Plan shall be held illegal or invalid for any reason,
      the illegality or invalidity shall not affect the remaining parts of the Plan,
      and the Plan shall be construed and enforced as if the illegal or invalid
      provision had not been included.

    

    16.3 Requirements
      of Law.
      The
      granting of Awards and the issuance of Shares under the Plan shall be subject
      to
      all applicable laws, rules and regulations, and to such approvals by any
      governmental agencies or national securities exchanges as may be
      required.

    

    16.4 Governing
      Law.
      To the
      extent not preempted by Federal law, the Plan, and all agreements hereunder,
      shall be construed in accordance with, and governed by, the laws of the State
      of
      Delaware.

    

    Article
      17. Code Section 409A Compliance

    

    To
      the
      extent applicable, it is intended that this Plan and any Awards granted
      hereunder comply with the requirements of Section 409A of the Code and any
      related regulations or other guidance promulgated with respect to such Section
      by the U.S. Department of the Treasury or the Internal Revenue Service ("Section
      409A"). Any provision that would cause the Plan or any Award granted hereunder
      to fail to satisfy Section 409A shall have no force or effect until amended
      to
      comply with Section 409A, which amendment may be retroactive to the extent
      permitted by Section 409A.John Harp Change of Control

    CHANGE
      OF CONTROL

     

    EMPLOYMENT
      AGREEMENT

     

    AGREEMENT
      by and between MDU Resources Group, Inc., a Delaware corporation (the "Company")
      and John G. Harp (the "Executive"), dated as of the
      11th
      day of
      August, 2005.

     

    The
      Board
      of Directors of the Company (the "Board"), has determined that it is in the
      best
      interests of the Company and its shareholders to assure that the Company will
      have the continued dedication of the Executive, notwithstanding the possibility,
      threat or occurrence of a Change of Control (as defined below) of the Company.
      The Board believes it is imperative to diminish the inevitable distraction
      of
      the Executive by virtue of the personal uncertainties and risks created by
      a
      pending or threatened Change of Control and to encourage the Executive's full
      attention and dedication to the Company currently and in the event of any
      threatened or pending Change of Control, and to provide the Executive with
      compensation and benefits arrangements upon a Change of Control which ensure
      that the compensation and benefits expectations of the Executive will be
      satisfied and which are competitive with those of other corporations. Therefore,
      in order to accomplish these objectives, the Board has caused the Company to
      enter into this Agreement.

    

    NOW,
      THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

     

    1.  Certain
      Definitions.
      (a) The
      "Effective Date" shall mean the first date during the Change of Control Period
      (as defined in Section 1(b)) on which a Change of Control (as defined in Section
      2) occurs. Anything in this Agreement to the contrary notwithstanding, if a
      Change of Control occurs and if the Executive's employment with the Company
      is
      terminated prior to the date on which the Change of Control occurs, and if
      it is
      reasonably demonstrated by the Executive that such termination of employment
      (i)
      was at the request of a third party who has taken steps reasonably calculated
      to
      effect a Change of Control or (ii) otherwise arose in connection with or
      anticipation of a Change of Control, then for all purposes of this Agreement
      the
      "Effective Date" shall mean the date immediately prior to the date of such
      termination of employment.

     

    (b)  The
      "Change of Control Period" shall mean the period commencing on the date hereof
      and ending on the third anniversary of the date hereof; provided, however,
      that
      commencing on the date one year after the date hereof, and on each annual
      anniversary of such date (such date and each annual anniversary thereof shall
      be
      hereinafter referred to as the "Renewal Date"), unless previously terminated,
      the Change of Control Period shall be automatically extended so as to terminate
      three years from such Renewal Date, unless at least 60 days prior to the Renewal
      Date the Company shall give notice to the Executive that the Change of Control
      Period shall not be so extended.

     

    2.  Change
      of Control.
      For the
      purpose of this Agreement, a "Change of Control" shall mean:

     

    (a)  The
      acquisition by any individual, entity or group (within the meaning of Section
      13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
      "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of
      Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i)
      the
      then outstanding shares of common stock of the Company (the "Outstanding Company
      Common Stock") or (ii) the combined voting power of the then outstanding voting
      securities of the Company entitled to vote generally in the election of
      directors (the "Outstanding Company Voting Securities"); provided, however,
      that
      for purposes of this subsection (a), the following acquisitions shall not
      constitute a Change of Control: (i) any acquisition directly from the Company,
      (ii) any acquisition by the Company, (iii) any acquisition by any employee
      benefit plan (or related trust) sponsored or maintained by the Company or any
      corporation controlled by the Company or (iv) any acquisition by any corporation
      pursuant to a transaction which complies with clauses (i), (ii) and (iii) of
      subsection (c) of this Section 2; or

     

    (b)  Individuals
      who, as of the date hereof, constitute the Board (the "Incumbent Board") cease
      for any reason to constitute at least a majority of the Board; provided,
      however, that any individual becoming a director subsequent to the date hereof
      whose election, or nomination for election by the Company's shareholders, was
      approved by a vote of at least a majority of the directors then comprising
      the
      Incumbent Board shall be considered as though such individual were a member
      of
      the Incumbent Board, but excluding, for this purpose, any such individual whose
      initial assumption of office occurs as a result of an actual or threatened
      election contest with respect to the election or removal of directors or other
      actual or threatened solicitation of proxies or consents by or on behalf of
      a
      Person other than the Board; or

     

    (c)  Consummation
      of a reorganization, merger or consolidation or sale or other disposition of
      all
      or substantially all of the assets of the Company (a "Business Combination"),
      in
      each case, unless, following such Business Combination, (i) all or substantially
      all of the individuals and entities who were the beneficial owners,
      respectively, of the Outstanding Company Common Stock and Outstanding Company
      Voting Securities immediately prior to such Business Combination beneficially
      own, directly or indirectly, more than 60% of, respectively, the then
      outstanding shares of common stock and the combined voting power of the then
      outstanding voting securities entitled to vote generally in the election of
      directors, as the case may be, of the corporation resulting from such Business
      Combination (including, without limitation, a corporation which as a result
      of
      such transaction owns the Company or all or substantially all of the Company's
      assets either directly or through one or more subsidiaries) in substantially
      the
      same proportions as their ownership, immediately prior to such Business
      Combination of the Outstanding Company Common Stock and Outstanding Company
      Voting Securities, as the case may be, (ii) no Person (excluding any corporation
      resulting from such Business Combination or any employee benefit plan (or
      related trust) of the Company or such corporation resulting from such Business
      Combination) beneficially owns, directly or indirectly, 20% or more of,
      respectively, the then outstanding shares of common stock of the corporation
      resulting from such Business Combination or the combined voting power of the
      then outstanding voting securities of such corporation except to the extent
      that
      such ownership existed prior to the Business Combination and (iii) at least
      a
      majority of the members of the board of directors of the corporation resulting
      from such Business Combination were members of the Incumbent Board at the time
      of the execution of the initial agreement, or of the action of the Board,
      providing for such Business Combination; or 

     

    (d)  Approval
      by the shareholders of the Company of a complete liquidation or dissolution
      of
      the Company.

     

    3.  Employment
      Period.
      The
      Company hereby agrees to continue the Executive in its employ, and the Executive
      hereby agrees to remain in the employ of the Company subject to the terms and
      conditions of this Agreement, for the period commencing on the Effective Date
      and ending on the third anniversary of such date (the "Employment
      Period").

     

    4.  Terms
      of Employment.
      (a)
Position
      and Duties.
      (i)
      During the Employment Period, (A) the Executive's position (including status,
      offices, titles and reporting requirements), authority, duties and
      responsibilities shall be at least commensurate in all material respects with
      the most significant of those held, exercised and assigned at any time during
      the 120-day period immediately preceding the Effective Date and (B) the
      Executive's services shall be performed at the location where the Executive
      was
      employed immediately preceding the Effective Date or any office or location
      less
      than 35 miles from such location.

     

    (ii)  During
      the Employment Period, and excluding any periods of vacation and sick leave
      to
      which the Executive is entitled, the Executive agrees to devote reasonable
      attention and time during normal business hours to the business and affairs
      of
      the Company and, to the extent necessary to discharge the responsibilities
      assigned to the Executive hereunder, to use the Executive's reasonable best
      efforts to perform faithfully and efficiently such responsibilities. During
      the
      Employment Period it shall not be a violation of this Agreement for the
      Executive to (A) serve on corporate, civic or charitable boards or committees,
      (B) deliver lectures, fulfill speaking engagements or teach at educational
      institutions and (C) manage personal investments, so long as such activities
      do
      not significantly interfere with the performance of the Executive's
      responsibilities as an employee of the Company in accordance with this
      Agreement. It is expressly understood and agreed that to the extent that any
      such activities have been conducted by the Executive prior to the Effective
      Date, the continued conduct of such activities (or the conduct of activities
      similar in nature and scope thereto) subsequent to the Effective Date shall
      not
      thereafter be deemed to interfere with the performance of the Executive's
      responsibilities to the Company.

     

    (b)  Compensation.
      (i)
Base
      Salary.
      During
      the Employment Period, the Executive shall receive an annual base salary
      ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal
      to
      twelve times the highest monthly base salary paid or payable, including any
      base
      salary which has been earned but deferred, to the Executive by the Company
      and
      its affiliated companies in respect of the twelve-month period immediately
      preceding the month in which the Effective Date occurs. During the Employment
      Period, the Annual Base Salary shall be reviewed no more than 12 months after
      the last salary increase awarded to the Executive prior to the Effective Date
      and thereafter at least annually. Any increase in Annual Base Salary shall
      not
      serve to limit or reduce any other obligation to the Executive under this
      Agreement. Annual Base Salary shall not be reduced after any such increase
      and
      the term Annual Base Salary as utilized in this Agreement shall refer to Annual
      Base Salary as so increased. As used in this Agreement, the term "affiliated
      companies" shall include any company controlled by, controlling or under common
      control with the Company.

     

    (ii)  Annual
      Bonus.
      In
      addition to Annual Base Salary, the Executive shall be awarded, for each fiscal
      year ending during the Employment Period, an annual bonus (the "Annual Bonus")
      in cash at least equal to the Executive's highest bonus under the Company's
      Executive Incentive Compensation Plan, or any comparable bonus under any
      predecessor or successor plan, for the last three full fiscal years prior to
      the
      Effective Date (annualized in the event that the Executive was not employed
      by
      the Company for the whole of such fiscal year) (the "Recent Annual Bonus").
      Each
      such Annual Bonus shall be paid no later than the end of the third month of
      the
      fiscal year next following the fiscal year for which the Annual Bonus is
      awarded, unless the Executive shall elect to defer the receipt of such Annual
      Bonus.

     

    (iii)  Incentive,
      Savings and Retirement Plans.
      During
      the Employment Period, the Executive shall be entitled to participate in all
      incentive, savings and retirement plans, practices, policies and programs
      applicable generally to other peer executives of the Company and its affiliated
      companies, but in no event shall such plans, practices, policies and programs
      provide the Executive with incentive opportunities (measured with respect to
      both regular and special incentive opportunities, to the extent, if any, that
      such distinction is applicable), savings opportunities and retirement benefit
      opportunities, in each case, less favorable, in the aggregate, than the most
      favorable of those provided by the Company and its affiliated companies for
      the
      Executive under such plans, practices, policies and programs as in effect at
      any
      time during the 120-day period immediately preceding the Effective Date or
      if
      more favorable to the Executive, those provided generally at any time after
      the
      Effective Date to other peer executives of the Company and its affiliated
      companies.

     

    (iv)  Welfare
      Benefit Plans.
      During
      the Employment Period, the Executive and/or the Executive's family, as the
      case
      may be, shall be eligible for participation in and shall receive all benefits
      under welfare benefit plans, practices, policies and programs provided by the
      Company and its affiliated companies (including, without limitation, medical,
      prescription, dental, disability, employee life, group life, accidental death
      and travel accident insurance plans and programs) to the extent applicable
      generally to other peer executives of the Company and its affiliated companies,
      but in no event shall such plans, practices, policies and programs provide
      the
      Executive with benefits which are less favorable, in the aggregate, than the
      most favorable of such plans, practices, policies and programs in effect for
      the
      Executive at any time during the 120-day period immediately preceding the
      Effective Date or, if more favorable to the Executive, those provided generally
      at any time after the Effective Date to other peer executives of the Company
      and
      its affiliated companies.

     

    (v)  Expenses.
      During
      the Employment Period, the Executive shall be entitled to receive prompt
      reimbursement for all reasonable expenses incurred by the Executive in
      accordance with the most favorable policies, practices and procedures of the
      Company and its affiliated companies in effect for the Executive at any time
      during the 120-day period immediately preceding the Effective Date or, if more
      favorable to the Executive, as in effect generally at any time thereafter with
      respect to other peer executives of the Company and its affiliated
      companies.

     

    (vi)  Fringe
      Benefits.
      During
      the Employment Period, the Executive shall be entitled to fringe benefits,
      including, without limitation, tax and financial planning services, payment
      of
      club dues, and, if applicable, use of an automobile and payment of related
      expenses, in accordance with the most favorable plans, practices, programs
      and
      policies of the Company and its affiliated companies in effect for the Executive
      at any time during the 120-day period immediately preceding the Effective Date
      or, if more favorable to the Executive, as in effect generally at any time
      thereafter with respect to other peer executives of the Company and its
      affiliated companies.

     

    (vii)  Office
      and Support Staff.
      During
      the Employment Period, the Executive shall be entitled to an office or offices
      of a size and with furnishings and other appointments, and to exclusive personal
      secretarial and other assistance, at least equal to the most favorable of the
      foregoing provided to the Executive by the Company and its affiliated companies
      at any time during the 120-day period immediately preceding the Effective Date
      or, if more favorable to the Executive, as provided generally at any time
      thereafter with respect to other peer executives of the Company and its
      affiliated companies.

     

    (viii)  Vacation.
      During
      the Employment Period, the Executive shall be entitled to paid vacation in
      accordance with the most favorable plans, policies, programs and practices
      of
      the Company and its affiliated companies as in effect for the Executive at
      any
      time during the 120-day period immediately preceding the Effective Date or,
      if
      more favorable to the Executive, as in effect generally at any time thereafter
      with respect to other peer executives of the Company and its affiliated
      companies.

     

    5.  Termination
      of Employment.
      (a)
Death
      or Disability.
      The
      Executive's employment shall terminate automatically upon the Executive's death
      during the Employment Period. If the Company determines in good faith that
      the
      Disability of the Executive has occurred during the Employment Period (pursuant
      to the definition of Disability set forth below), it may give to the Executive
      written notice in accordance with Section 12(b) of this Agreement of its
      intention to terminate the Executive's employment. In such event, the
      Executive's employment with the Company shall terminate effective on the 30th
      day after receipt of such notice by the Executive (the "Disability Effective
      Date"), provided that, within the 30 days after such receipt, the Executive
      shall not have returned to full-time performance of the Executive's duties.
      For
      purposes of this Agreement, "Disability" shall mean the absence of the Executive
      from the Executive's duties with the Company on a full-time basis for 180
      consecutive business days as a result of incapacity due to mental or physical
      illness which is determined to be total and permanent by a physician selected
      by
      the Company or its insurers and acceptable to the Executive or the Executive's
      legal representative.

     

    (b)  Cause.
      The
      Company may terminate the Executive's employment during the Employment Period
      for Cause. For purposes of this Agreement, "Cause" shall mean:

     

    (i)  the
      willful and continued failure of the Executive to perform substantially the
      Executive's duties with the Company or one of its affiliates (other than any
      such failure resulting from incapacity due to physical or mental illness),
      after
      a written demand for substantial performance is delivered to the Executive
      by
      the Board or the Chief Executive Officer of the Company which specifically
      identifies the manner in which the Board or Chief Executive Officer believes
      that the Executive has not substantially performed the Executive's duties,
      or

     

    (ii)  the
      willful engaging by the Executive in illegal conduct or gross misconduct which
      is materially and demonstrably injurious to the Company.

     

    
      For
        purposes of this provision, no act or failure to act, on the part of the
        Executive, shall be considered "willful" unless it is done, or omitted to
        be
        done, by the Executive in bad faith or without reasonable belief that the
        Executive's action or omission was in the best interests of the Company.
        Any
        act, or failure to act, based upon authority given pursuant to a resolution
        duly
        adopted by the Board or upon the instructions of the Chief Executive Officer
        or
        a senior officer of the Company or based upon the advice of counsel for the
        Company shall be conclusively presumed to be done, or omitted to be done,
        by the
        Executive in good faith and in the best interests of the Company. The cessation
        of employment of the Executive shall not be deemed to be for Cause unless
        and
        until there shall have been delivered to the Executive a copy of a resolution
        duly adopted by the affirmative vote of not less than three-quarters of the
        entire membership of the Board at a meeting of the Board called and held
        for
        such purpose (after reasonable notice is provided to the Executive and the
        Executive is given an opportunity, together with counsel, to be heard before
        the
        Board), finding that, in the good faith opinion of the Board, the Executive
        is
        guilty of the conduct described in subparagraph (i) or (ii) above, and
        specifying the particulars thereof in detail.

       

    

    (c)  Good
      Reason.
      The
      Executive's employment may be terminated by the Executive for Good Reason.
      For
      purposes of this Agreement, "Good Reason" shall mean:

     

    (i)  the
      assignment to the Executive of any duties inconsistent in any respect with
      the
      Executive's position (including status, offices, titles and reporting
      requirements), authority, duties or responsibilities as contemplated by Section
      4(a) of this Agreement, or any other action by the Company which results in
      a
      diminution in such position, authority, duties or responsibilities, excluding
      for this purpose an isolated, insubstantial and inadvertent action not taken
      in
      bad faith and which is remedied by the Company promptly after receipt of notice
      thereof given by the Executive;

     

    (ii)  any
      failure by the Company to comply with any of the provisions of Section 4(b)
      of
      this Agreement, other than an isolated, insubstantial and inadvertent failure
      not occurring in bad faith and which is remedied by the Company promptly after
      receipt of notice thereof given by the Executive;

     

    (iii)  the
      Company's requiring the Executive to be based at any office or location other
      than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the
      Executive to travel on Company business to a substantially greater extent than
      required immediately prior to the Effective Date;

     

    (iv)  any
      purported termination by the Company of the Executive's employment otherwise
      than as expressly permitted by this Agreement; or

     

    (v)  any
      failure by the Company to comply with and satisfy Section 11(c) of this
      Agreement.

    

      For
        purposes of this Section 5(c), any good faith determination of "Good Reason"
        made by the Executive shall be conclusive. Anything in this Agreement to
        the
        contrary notwithstanding, a termination by the Executive for any reason during
        the 30-day period immediately following the first anniversary of the Effective
        Date shall be deemed to be a termination for Good Reason for all purposes
        of
        this Agreement.

    

     

    (d)  Notice
      of Termination.
      Any
      termination by the Company for Cause, or by the Executive for Good Reason,
      shall
      be communicated by Notice of Termination to the other party hereto given in
      accordance with Section 12(b) of this Agreement. For purposes of this Agreement,
      a "Notice of Termination" means a written notice which (i) indicates the
      specific termination provision in this Agreement relied upon, (ii) to the extent
      applicable, sets forth in reasonable detail the facts and circumstances claimed
      to provide a basis for termination of the Executive's employment under the
      provision so indicated and (iii) if the Date of Termination (as defined below)
      is other than the date of receipt of such notice, specifies the termination
      date
      (which date shall be not more than thirty days after the giving of such notice).
      The failure by the Executive or the Company to set forth in the Notice of
      Termination any fact or circumstance which contributes to a showing of Good
      Reason or Cause shall not waive any right of the Executive or the Company,
      respectively, hereunder or preclude the Executive or the Company, respectively,
      from asserting such fact or circumstance in enforcing the Executive's or the
      Company's rights hereunder.

     

    (e)  Date
      of Termination.
      "Date
      of Termination" means (i) if the Executive's employment is terminated by the
      Company for Cause, or by the Executive for Good Reason, the date of receipt
      of
      the Notice of Termination or any later date specified therein, as the case
      may
      be, (ii) if the Executive's employment is terminated by the Company other than
      for Cause or Disability, the Date of Termination shall be the date on which
      the
      Company notifies the Executive of such termination and (iii) if the Executive's
      employment is terminated by reason of death or Disability, the Date of
      Termination shall be the date of death of the Executive or the Disability
      Effective Date, as the case may be.

     

    6.  Obligations
      of the Company upon Termination.
      (a)
Good
      Reason; Other Than for Cause, Death or Disability.
      If,
      during the Employment Period, the Company shall terminate the Executive's
      employment other than for Cause or Disability or the Executive shall terminate
      employment for Good Reason:

     

    (i)  the
      Company shall pay to the Executive in a lump sum in cash within 30 days after
      the Date of Termination the aggregate of the following amounts:

     

    A.  the
      sum
      of (1) the Executive's Annual Base Salary through the Date of Termination to
      the
      extent not theretofore paid, (2) the product of (x) the higher of (I) the Recent
      Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus
      or
      portion thereof which has been earned but deferred (and annualized for any
      fiscal year consisting of less than twelve full months or during which the
      Executive was employed for less than twelve full months), for the most recently
      completed fiscal year during the Employment Period, if any (such higher amount
      being referred to as the "Highest Annual Bonus") and (y) a fraction, the
      numerator of which is the number of days in the current fiscal year through
      the
      Date of Termination, and the denominator of which is 365 and (3) any
      compensation previously deferred by the Executive (together with any accrued
      interest or earnings thereon) and any accrued vacation pay, in each case to
      the
      extent not theretofore paid (the sum of the amounts described in clauses (1),
      (2), and (3) shall be hereinafter referred to as the "Accrued Obligations");
      and

     

    B.  the
      amount equal to the product of (1) three and
      (2)
      the sum of (x) the Executive's Annual Base Salary and (y) the Highest Annual
      Bonus; and

     

    C.  an
      amount
      equal to the excess of (a) the actuarial equivalent of the benefit under the
      Company's Pension Plan for Non-Bargaining Unit Employees and/or any other
      Company-sponsored qualified defined benefit retirement plan in which the
      Executive participates (collectively, the "Retirement Plan") (utilizing
      actuarial assumptions no less favorable to the Executive than those in effect
      under the Company's Retirement Plan immediately prior to the Effective Date),
      and the Company's Supplemental Income Security Plan and/or any other
      Company-sponsored excess or supplemental defined benefit retirement plan in
      which the Executive participates (collectively, the "SISP") which the Executive
      would receive if the Executive's employment continued for three years after
      the
      Date of Termination assuming for this purpose that all accrued benefits are
      fully vested, and, assuming that the Executive's compensation in each of the
      three years is that required by Section 4(b)(i) and Section 4(b)(ii), over
      (b)
      the actuarial equivalent of the Executive's actual benefit (paid or payable),
      if
      any, under the Retirement Plan and the SISP as of the Date of Termination;
      

     

    (ii)  for
      three
      years after the Executive's Date of Termination, or such longer period as may
      be
      provided by the terms of the appropriate plan, program, practice or policy,
      the
      Company shall continue benefits to the Executive and/or the Executive's family
      at least equal to those which would have been provided to them in accordance
      with the plans, programs, practices and policies described in Section 4(b)(iv)
      of this Agreement if the Executive's employment had not been terminated or,
      if
      more favorable to the Executive, as in effect generally at any time thereafter
      with respect to other peer executives of the Company and its affiliated
      companies and their families, provided, however, that if the Executive becomes
      reemployed with another employer and is eligible to receive medical or other
      welfare benefits under another employer provided plan, the medical and other
      welfare benefits described herein shall be secondary to those provided under
      such other plan during such applicable period of eligibility. For purposes
      of
      determining eligibility (but not the time of commencement of benefits) of the
      Executive for retiree benefits pursuant to such plans, practices, programs
      and
      policies, the Executive shall be considered to have remained employed until
      three years after the Date of Termination and to have retired on the last day
      of
      such period; 

     

    (iii)  the
      Company shall, at its sole expense as incurred, provide the Executive with
      outplacement services the scope and provider of which shall be selected by
      the
      Executive in his sole discretion; and 

     

    (iv)  to
      the
      extent not theretofore paid or provided, the Company shall timely pay or provide
      to the Executive any other amounts or benefits required to be paid or provided
      or which the Executive is eligible to receive under any plan, program, policy
      or
      practice or contract or agreement of the Company and its affiliated companies
      (such other amounts and benefits shall be hereinafter referred to as the "Other
      Benefits").

     

    (b)  Death.
      If the
      Executive's employment is terminated by reason of the Executive's death during
      the Employment Period, this Agreement shall terminate without further
      obligations to the Executive's legal representatives under this Agreement,
      other
      than for payment of Accrued Obligations and the timely payment or provision
      of
      Other Benefits. Accrued Obligations shall be paid to the Executive's estate
      or
      beneficiary, as applicable, in a lump sum in cash within 30 days of the Date
      of
      Termination. With respect to the provision of Other Benefits, the term Other
      Benefits as utilized in this Section 6(b) shall include, without limitation,
      and
      the Executive's estate and/or beneficiaries shall be entitled to receive,
      benefits at least equal to the most favorable benefits provided by the Company
      and affiliated companies to the estates and beneficiaries of peer executives
      of
      the Company and such affiliated companies under such plans, programs, practices
      and policies relating to death benefits, if any, as in effect with respect
      to
      other peer executives and their beneficiaries at any time during the 120-day
      period immediately preceding the Effective Date or, if more favorable to the
      Executive's estate and/or the Executive's beneficiaries, as in effect on the
      date of the Executive's death with respect to other peer executives of the
      Company and its affiliated companies and their beneficiaries.

     

    (c)  Disability.
      If the
      Executive's employment is terminated by reason of the Executive's Disability
      during the Employment Period, this Agreement shall terminate without further
      obligations to the Executive, other than for payment of Accrued Obligations
      and
      the timely payment or provision of Other Benefits. Accrued Obligations shall
      be
      paid to the Executive in a lump sum in cash within 30 days of the Date of
      Termination. With respect to the provision of Other Benefits, the term Other
      Benefits as utilized in this Section 6(c) shall include, and the Executive
      shall
      be entitled after the Disability Effective Date to receive, disability and
      other
      benefits at least equal to the most favorable of those generally provided by
      the
      Company and its affiliated companies to disabled executives and/or their
      families in accordance with such plans, programs, practices and policies
      relating to disability, if any, as in effect generally with respect to other
      peer executives and their families at any time during the 120-day period
      immediately preceding the Effective Date or, if more favorable to the Executive
      and/or the Executive's family, as in effect at any time thereafter generally
      with respect to other peer executives of the Company and its affiliated
      companies and their families.

     

    (d)  Cause;
      Other than for Good Reason.
      If the
      Executive's employment shall be terminated for Cause during the Employment
      Period, this Agreement shall terminate without further obligations to the
      Executive other than the obligation to pay to the Executive (x) his Annual
      Base
      Salary through the Date of Termination, (y) the amount of any compensation
      previously deferred by the Executive, and (z) Other Benefits, in each case
      to
      the extent theretofore unpaid. If the Executive voluntarily terminates
      employment during the Employment Period, excluding a termination for Good
      Reason, this Agreement shall terminate without further obligations to the
      Executive, other than for Accrued Obligations and the timely payment or
      provision of Other Benefits. In such case, all Accrued Obligations shall be
      paid
      to the Executive in a lump sum in cash within 30 days of the Date of
      Termination.

     

    7.  Non-exclusivity
      of Rights.
      Nothing
      in this Agreement shall prevent or limit the Executive's continuing or future
      participation in any plan, program, policy or practice provided by the Company
      or any of its affiliated companies and for which the Executive may qualify,
      nor,
      subject to Section 12(f), shall anything herein limit or otherwise affect such
      rights as the Executive may have under any contract or agreement with the
      Company or any of its affiliated companies. Amounts which are vested benefits
      or
      which the Executive is otherwise entitled to receive under any plan, policy,
      practice or program of or any contract or agreement with the Company or any
      of
      its affiliated companies at or subsequent to the Date of Termination shall
      be
      payable in accordance with such plan, policy, practice or program or contract
      or
      agreement except as explicitly modified by this Agreement.

     

    8.  Full
      Settlement.
      The
      Company's obligation to make the payments provided for in this Agreement and
      otherwise to perform its obligations hereunder shall not be affected by any
      set-off, counterclaim, recoupment, defense or other claim, right or action
      which
      the Company may have against the Executive or others. In no event shall the
      Executive be obligated to seek other employment or take any other action by
      way
      of mitigation of the amounts payable to the Executive under any of the
      provisions of this Agreement and such amounts shall not be reduced whether
      or
      not the Executive obtains other employment. The Company agrees to pay as
      incurred, to the full extent permitted by law, all legal fees and expenses
      which
      the Executive may reasonably incur as a result of any contest (regardless of
      the
      outcome thereof) by the Company, the Executive or others of the validity or
      enforceability of, or liability under, any provision of this Agreement or any
      guarantee of performance thereof (including as a result of any contest by the
      Executive about the amount of any payment pursuant to this Agreement), plus
      in
      each case interest on any delayed payment at the applicable Federal rate
      provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986,
      as
      amended (the "Code").

     

    9.  Certain
      Additional Payments by the Company.

     

    (a)  Anything
      in this Agreement to the contrary notwithstanding and except as set forth below,
      in the event it shall be determined that any payment or distribution by the
      Company or its affiliates to or for the benefit of the Executive (whether paid
      or payable or distributed or distributable pursuant to the terms of this
      Agreement or otherwise, but determined without regard to any additional payments
      required under this Section 9) (a "Payment") would be subject to the excise
      tax imposed by Section 4999 of the Code or any interest or penalties are
      incurred by the Executive with respect to such excise tax (such excise tax,
      together with any such interest and penalties, are hereinafter collectively
      referred to as the "Excise Tax"), then the Executive shall be entitled to
      receive an additional payment (a "Gross-Up Payment") in an amount such that
      after payment by the Executive of all taxes (including any interest or penalties
      imposed with respect to such taxes), including, without limitation, any income
      taxes (and any interest and penalties imposed with respect thereto) and Excise
      Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
      Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
      Notwithstanding the foregoing provisions of this Section 9(a), if it shall
      be
      determined that the Executive is entitled to a Gross-Up Payment, but that the
      Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that
      could be paid to the Executive such that the receipt of Payments would not
      give
      rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive
      and the Payments, in the aggregate, shall be reduced to the Reduced
      Amount.

     

    (b)  Subject
      to the provisions of Section 9(c), all determinations required to be made
      under this Section 9, including whether and when a Gross-Up Payment is required
      and the amount of such Gross-Up Payment and the assumptions to be utilized
      in
      arriving at such determination, shall be made by Ernst & Young or such other
      certified public accounting firm as may be designated by the Executive (the
      "Accounting Firm") which shall provide detailed supporting calculations both
      to
      the Company and the Executive within 15 business days of the receipt of notice
      from the Executive that there has been a Payment, or such earlier time as is
      requested by the Company. In the event that the Accounting Firm is serving
      as
      accountant or auditor for the individual, entity or group effecting the Change
      of Control, the Executive shall appoint another nationally recognized accounting
      firm to make the determinations required hereunder (which accounting firm shall
      then be referred to as the Accounting Firm hereunder). All fees and expenses
      of
      the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
      as determined pursuant to this Section 9, shall be paid by the Company to the
      Executive within five days of the receipt of the Accounting Firm's
      determination. Any determination by the Accounting Firm shall be binding upon
      the Company and the Executive. As a result of the uncertainty in the application
      of Section 4999 of the Code at the time of the initial determination by the
      Accounting Firm hereunder, it is possible that Gross-Up Payments which will
      not
      have been made by the Company should have been made ("Underpayment"), consistent
      with the calculations required to be made hereunder. In the event that the
      Company exhausts its remedies pursuant to Section 9(c) and the Executive
      thereafter is required to make a payment of any Excise Tax, the Accounting
      Firm
      shall determine the amount of the Underpayment that has occurred and any such
      Underpayment shall be promptly paid by the Company to or for the benefit of
      the
      Executive.

     

    (c)  The
      Executive shall notify the Company in writing of any claim by the Internal
      Revenue Service that, if successful, would require the payment by the Company
      of
      the Gross-Up Payment. Such notification shall be given as soon as practicable
      but no later than ten business days after the Executive is informed in writing
      of such claim and shall apprise the Company of the nature of such claim and
      the
      date on which such claim is requested to be paid. The Executive shall not pay
      such claim prior to the expiration of the 30-day period following the date
      on
      which it gives such notice to the Company (or such shorter period ending on
      the
      date that any payment of taxes with respect to such claim is due). If the
      Company notifies the Executive in writing prior to the expiration of such period
      that it desires to contest such claim, the Executive shall:

     

    (i)  give
      the
      Company any information reasonably requested by the Company relating to such
      claim,

     

    (ii)  take
      such
      action in connection with contesting such claim as the Company shall reasonably
      request in writing from time to time, including, without limitation, accepting
      legal representation with respect to such claim by an attorney reasonably
      selected by the Company,

     

    (iii)  cooperate
      with the Company in good faith in order effectively to contest such claim,
      and

     

    (iv)  permit
      the Company to participate in any proceedings relating to such
      claim;

     

    provided,
      however, that the Company shall bear and pay directly all costs and expenses
      (including additional interest and penalties) incurred in connection with such
      contest and shall indemnify and hold the Executive harmless, on an after-tax
      basis, for any Excise Tax or income tax (including interest and penalties with
      respect thereto) imposed as a result of such representation and payment of
      costs
      and expenses. Without limitation on the foregoing provisions of this Section
      9(c), the Company shall control all proceedings taken in connection with such
      contest and, at its sole option, may pursue or forgo any and all administrative
      appeals, proceedings, hearings and conferences with the taxing authority in
      respect of such claim and may, at its sole option, either direct the Executive
      to pay the tax claimed and sue for a refund or contest the claim in any
      permissible manner, and the Executive agrees to prosecute such contest to a
      determination before any administrative tribunal, in a court of initial
      jurisdiction and in one or more appellate courts, as the Company shall
      determine; provided, however, that if the Company directs the Executive to
      pay
      such claim and sue for a refund, the Company shall advance the amount of such
      payment to the Executive, on an interest-free basis and shall indemnify and
      hold
      the Executive harmless, on an after-tax basis, from any Excise Tax or income
      tax
      (including interest or penalties with respect thereto) imposed with respect
      to
      such advance or with respect to any imputed income with respect to such advance;
      and further provided that any extension of the statute of limitations relating
      to payment of taxes for the taxable year of the Executive with respect to which
      such contested amount is claimed to be due is limited solely to such contested
      amount. Furthermore, the Company's control of the contest shall be limited
      to
      issues with respect to which a Gross-Up Payment would be payable hereunder
      and
      the Executive shall be entitled to settle or contest, as the case may be, any
      other issue raised by the Internal Revenue Service or any other taxing
      authority.

     

    (d)  If,
      after
      the receipt by the Executive of an amount advanced by the Company pursuant
      to
      Section 9(c), the Executive becomes entitled to receive any refund with
      respect to such claim, the Executive shall (subject to the Company's complying
      with the requirements of Section 9(c)) promptly pay to the Company the
      amount of such refund (together with any interest paid or credited thereon
      after
      taxes applicable thereto). If, after the receipt by the Executive of an amount
      advanced by the Company pursuant to Section 9(c), a determination is made
      that the Executive shall not be entitled to any refund with respect to such
      claim and the Company does not notify the Executive in writing of its intent
      to
      contest such denial of refund prior to the expiration of 30 days after such
      determination, then such advance shall be forgiven and shall not be required
      to
      be repaid and the amount of such advance shall offset, to the extent thereof,
      the amount of Gross-Up Payment required to be paid.

     

    10.  Confidential
      Information.
      The
      Executive shall hold in a fiduciary capacity for the benefit of the Company
      all
      secret or confidential information, knowledge or data relating to the Company
      or
      any of its affiliated companies, and their respective businesses, which shall
      have been obtained by the Executive during the Executive's employment by the
      Company or any of its affiliated companies and which shall not be or become
      public knowledge (other than by acts by the Executive or representatives of
      the
      Executive in violation of this Agreement). After termination of the Executive's
      employment with the Company, the Executive shall not, without the prior written
      consent of the Company or as may otherwise be required by law or legal process,
      communicate or divulge any such information, knowledge or data to anyone other
      than the Company and those designated by it. In no event shall an asserted
      violation of the provisions of this Section 10 constitute a basis for deferring
      or withholding any amounts otherwise payable to the Executive under this
      Agreement.

     

    11.  Successors.
      (a)
      This Agreement is personal to the Executive and without the prior written
      consent of the Company shall not be assignable by the Executive otherwise than
      by will or the laws of descent and distribution. This Agreement shall inure
      to
      the benefit of and be enforceable by the Executive's legal
      representatives.

     

    (b)  This
      Agreement shall inure to the benefit of and be binding upon the Company and
      its
      successors and assigns.

     

    (c)  The
      Company will require any successor (whether direct or indirect, by purchase,
      merger, consolidation or otherwise) to all or substantially all of the business
      and/or assets of the Company to assume expressly and agree to perform this
      Agreement in the same manner and to the same extent that the Company would
      be
      required to perform it if no such succession had taken place. As used in this
      Agreement, "Company" shall mean the Company as hereinbefore defined and any
      successor to its business and/or assets as aforesaid which assumes and agrees
      to
      perform this Agreement by operation of law, or otherwise.

     

    12.  Miscellaneous.
      (a)
      This Agreement shall be governed by and construed in accordance with the laws
      of
      the State of Delaware, without reference to principles of conflict of laws.
      The
      captions of this Agreement are not part of the provisions hereof and shall
      have
      no force or effect. This Agreement may not be amended or modified otherwise
      than
      by a written agreement executed by the parties hereto or their respective
      successors and legal representatives.

     

    (b)  All
      notices and other communications hereunder shall be in writing and shall be
      given by hand delivery to the other party or by registered or certified mail,
      return receipt requested, postage prepaid, addressed as follows: 

     

    If
      to the
      Executive:

    

    John
      G. Harp

    288
      Juniper Springs

    Henderson,
      NV 89052

    

    If
      to the
      Company:

    

    MDU
      Resources Group, Inc.

    Schuchart
      Building

    918
      East
      Divide Avenue

    

    Mailing
      Address:

    P.O.
      Box
      5650

    Bismarck,
      ND 58506-5650

    Attention:
      General Counsel

     

    or
      to
      such other address as either party shall have furnished to the other in writing
      in accordance herewith. Notice and communications shall be effective when
      actually received by the addressee.

     

    (c)  The
      invalidity or unenforceability of any provision of this Agreement shall not
      affect the validity or enforceability of any other provision of this
      Agreement.

     

    (d)  The
      Company may withhold from any amounts payable under this Agreement such Federal,
      state, local or foreign taxes as shall be required to be withheld pursuant
      to
      any applicable law or regulation.

     

    (e)  The
      Executive's or the Company's failure to insist upon strict compliance with
      any
      provision of this Agreement or the failure to assert any right the Executive
      or
      the Company may have hereunder, including, without limitation, the right of
      the
      Executive to terminate employment for Good Reason pursuant to
      Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver
      of such provision or right or any other provision or right of this
      Agreement.

     

    (f)  The
      Executive and the Company acknowledge that, except as may otherwise be provided
      under any other written agreement between the Executive and the Company, the
      employment of the Executive by the Company is "at will" and, subject to Section
      1(a) hereof, prior to the Effective Date, the Executive's employment may
      be
      terminated by either the Executive or the Company at any time prior to the
      Effective Date, in which case the Executive shall have no further rights under
      this Agreement. From and after the Effective Date this Agreement shall supersede
      any other agreement between the parties with respect to the subject matter
      hereof.

     

    
      IN
        WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
        pursuant to the authorization from its Board of Directors, the Company has
        caused these presents to be executed in its name on its behalf, all as of
        the
        day and year first above written.

       

    

     

    /s/
      JOHN G. HARP

    John
      G. Harp

    

    

    

    MDU
      RESOURCES GROUP, INC.

    

    Attest:

    

    /s/
      PAUL K. SANDNESS                  By:
      /s/
      MARTIN A. WHITE 

    Paul
      K.
      Sandness                          
Martin
      A.
      White

    Secretary                               
Chairman
      of the
      Board and

                                    
      Chief Executive Officer

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