Document:

10.2 RYN-FirstAmendmentAgreement-TermLoan-Execution

Exhibit 10.2

FIRST AMENDMENT AGREEMENT

This FIRST AMENDMENT AGREEMENT, dated as of May 6, 2014 (this “Agreement”), is entered into by and among RAYONIER INC., a North Carolina corporation (“Rayonier”), RAYONIER TRS HOLDINGS INC., a Delaware corporation (“TRS”) and RAYONIER OPERATING COMPANY LLC, a Delaware limited liability company (“ROC”; each of Rayonier, TRS and ROC being referred to herein individually as a “Borrower”, and collectively as the “Borrowers”), the several banks, financial institutions and other institutional lenders party hereto and COBANK, ACB (“CoBank”), as administrative agent (in such capacity, the “Administrative Agent”).
PRELIMINARY STATEMENTS:

(1)The Borrowers, the Lenders party thereto and the Administrative Agent entered into that certain Credit Agreement, dated as of December 17, 2012 (as amended, supplemented or otherwise modified, the “Credit Agreement”);
(2)The Borrowers have requested to amend the Credit Agreement as set forth below; and
(3)The Administrative Agent and the Lenders party hereto are willing to amend the Credit Agreement, upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and in order to induce the parties hereto to enter into the transactions described herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the Administrative Agent, the Lenders party hereto and the Borrowers hereby covenant and agree as follows:
SECTION 1.Definitions.  All capitalized terms not otherwise defined herein shall have the meanings attributed thereto in the Credit Agreement.
SECTION 2.Amendments to Credit Agreement.  The Credit Agreement is hereby amended as follows:
(a)The following definitions are hereby added to Section 1.01 of the Credit Agreement in the appropriate alphabetical order:
“Commitment Reduction Date” means the date that is five (5) Business Days after the Distribution Date.

“Distribution” means the distribution, on a pro rata basis, of all the outstanding common shares of SpinCo owned by Rayonier to holders of common shares of Rayonier on the Record Date.

“Distribution Date” means the date of the consummation of the Distribution, which shall be determined by the board of directors of Rayonier in its sole and absolute discretion.

“Effective Time” means 11:59 p.m., New York City time, on the Distribution Date.

“Group Subsidiary” means, with respect to any Person, any corporation, limited liability company, joint venture or partnership of which such Person (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities, (ii) the total combined equity interests or (iii) the capital or profit interests, in the 

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case of a partnership, or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

“Products” means Rayonier A.M. Products, LLC, a Delaware limited liability company, and its successors and assigns.

“Rayonier Business” means all businesses, operations and activities (whether or not such businesses, operations or activities are or have been terminated, divested or discontinued) conducted at any time prior to the Effective Time by Rayonier or SpinCo or any of their respective Group Subsidiaries, other than the SpinCo Business.

“Record Date” means the close of business on the date to be determined by the board of directors of Rayonier as the record date for determining holders of common shares of Rayonier entitled to receive shares of common stock of SpinCo pursuant to the Distribution.

“Separation” means the separation of the SpinCo Business from the Rayonier Business.

“SpinCo” means Rayonier Advanced Materials Inc., a Delaware corporation, and its successors and assigns.  

“SpinCo Business” means (a) the business, operations and activities of the Performance Fibers segment of Rayonier conducted at any time prior to the Effective Time by Rayonier, SpinCo or any of their current or former respective Group Subsidiaries and (b) any terminated, divested or discontinued businesses, operations and activities that, at the time of termination, divestiture or discontinuation, primarily related to the business, operations or activities described in clause (a) as then conducted.

“SpinCo Transaction Debt” means Debt incurred by SpinCo, Products and/or one or more of their respective Group Subsidiaries, in each case, in contemplation of, and in connection with, the proposed Separation and Distribution, in an aggregate principal amount not to exceed $1,025,000,000,  and any Guarantees issued by SpinCo, Products or any of their respective Group Subsidiaries in respect of all or any portion of such Debt, so long as such Debt is non-recourse to Rayonier (other than with respect to any guarantee by Rayonier in respect of all or any portion of such Debt which is in the form of unsecured senior notes, which guarantee shall terminate and be released no later than the Distribution Date) and its Group Subsidiaries (other than SpinCo, Products and their respective Group Subsidiaries) and to the assets of the Rayonier Business (other than on the terms and for the period of time described above).  

“Term Loan Commitment Reduction” means the permanent pro rata reduction of the respective Commitment of each of the Lenders such that the aggregate amount of the Commitments of all Lenders after giving effect to such reduction equals $100,000,000 on the Commitment Reduction Date.

“Term Loan Prepayment” means the prepayment of the amount of Advances, if any, in excess of $100,000,000 on the Commitment Reduction Date, together with the payment of accrued interest to the date of such prepayment on the principal amount (if any) prepaid. 

(b)    Section 2.05 of the Credit Agreement is amended in its entirety to read as follows:

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SECTION 2.05.     Termination or Reduction of the Commitments. Rayonier shall have the right, upon at least three Business Days' notice to the Administrative Agent, to terminate in whole or permanently reduce ratably in part the unused portions of the respective Commitments of the Lenders, provided that each partial reduction shall be in the aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof.  Notwithstanding the foregoing, the Commitments of the Lenders shall automatically be reduced pursuant to the Term Loan Commitment Reduction on the Commitment Reduction Date.

(c)    Section 2.11 of the Credit Agreement is amended in its entirety to read as follows:

SECTION 2.11.     Prepayments of Advances. Any Borrower may, upon notice to the Administrative Agent no later than 11:00 a.m. (New York City time) on the Business Day of the proposed date of the prepayment in the case of Alternate Base Rate Advances and on the third Business Day prior to the proposed date of the prepayment in the case of Eurodollar Rate Advances or Quoted Rate Advances, in each case stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given such Borrower shall, prepay the outstanding principal amount of the Advances owed by such Borrower comprising part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof, (y) in the event of any such prepayment of a Eurodollar Rate Advance, such Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 2.23 and (z) such Borrower shall not be required to comply with the notice requirements set forth above or clause (x) of this proviso, in each case, with respect to Advances prepaid in connection with the Term Loan Prepayment.

(d)    Section 5.03(a) of the Credit Agreement is amended in its entirety to read as follows:

(a) Dividends. If any Default (other than an Event of Default under Section 6.01(a)) shall have occurred and be continuing or would immediately result therefrom, make, or permit any of its Subsidiaries to make, any Restricted Payments, other than Restricted Payments necessary for each of Rayonier and any of its Subsidiaries that are REITs to maintain their respective tax status as a REIT and other than, so long as no Event of Default has occurred and is then continuing or would result immediately therefrom, Restricted Payments by Rayonier on the Distribution Date constituting the Distribution. If an Event of Default under Section 6.01(a) shall have occurred and be continuing, Rayonier shall not make, and shall not permit any of its Subsidiaries to make, any Restricted Payments whatsoever. Notwithstanding anything to the contrary contained in this Section, any Subsidiary of Rayonier can make at any time Restricted Payments to Rayonier, any other Subsidiary of Rayonier or any other Person that owns Capital Stock in such Subsidiary of Rayonier, ratably according to their respective equity ownership of the type of Capital Stock in respect of which such Restricted Payment is being made.

(e)    The preamble to Section 5.03(d) of the Credit Agreement is amended in its entirety to read as follows:

(d) Asset Sales. Convey, transfer, sell, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or any part of its assets (whether now owned or hereafter acquired), or issue, sell, transfer or otherwise dispose of any Capital Stock of 

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any Subsidiary (excluding any such conveyance, transfer, sale, lease or other disposition or series of related conveyances, transfers, sales, leases or other dispositions (t) constituting the Distribution by Rayonier on the Distribution Date, (u) having an aggregate Fair Market Value not in excess of $500,000, (x) to the extent constituting the issuance of Capital Stock of any Subsidiary of Rayonier to Rayonier or any of its Wholly Owned Subsidiaries, (y) to the extent constituting a casualty event with respect to which Rayonier or any of its Subsidiaries has received cash payments from unaffiliated third party insurance providers at least equal to the Fair Market Value of the asset subject thereto, or (z) to the extent constituting a condemnation event with respect to which Rayonier or any of its Subsidiaries has received cash payments or other property from governmental authorities or other Persons having condemnation power by law at least equal to the Fair Market Value of the asset subject thereto) (each an “ Asset Sale”), other than:

(f)    Clause (vii) of Section 5.03(g) of the Credit Agreement is amended it its entirety to read as follows:
(vii) obligations under any Interest Rate Agreement or any other swap agreement not entered into for speculative purposes;
(g)    Clause (viii) of Section 5.03(g) of the Credit Agreement is deleted in its entirety and replaced with the following:
(viii) the SpinCo Transaction Debt; and
(ix) Debt other than Debt described in clauses (i) through (viii) of this Section 5.03(g); provided that the aggregate principal amount of Debt permitted pursuant to this clause (ix) shall not in the aggregate at any time outstanding exceed 15% of the Consolidated Net Tangible Assets of Rayonier and its Subsidiaries determined as of the most recently ended Fiscal Quarter for which financial statements have been or are required to have been delivered pursuant to Section 5.01(k).
(h)    Clauses (k) and (l) of Section 6.01 of the Credit Agreement are deleted in their entirety and replaced with the following:
(k) Any Borrower or any of its ERISA Affiliates shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization, insolvent or is being terminated, within the meaning of Title IV of ERISA, or has been determined to be “endangered” or “critical” status within the meaning of Section 432 of the Code or Section 305 of ERISA and as a result of such reorganization, insolvency, termination or determination the aggregate annual contributions of such Borrower and its ERISA Affiliates to all Multiemployer Plans that are then in reorganization, insolvent, being terminated or in endangered or critical status have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount exceeding $25,000,000;
(l) The Guarantee Agreement shall cease, for any reason, to be, or shall be asserted in writing by any Loan Party not to be, in full force and effect, other than pursuant to the terms thereof and hereof; or

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(m) The Term Loan Prepayment shall not have occurred on the Commitment Reduction Date;
SECTION 3.Conditions of Effectiveness.  This Agreement shall become effective in the order and in the manner herein described, as of the first date upon which each of the conditions precedent set forth in this Section 3 shall be satisfied or waived in accordance with Section 8.01 of the Credit Agreement:
(a)    The Administrative Agent (or its counsel) shall have received from each Borrower and from each other party hereto (including the Administrative Agent and Lenders and Voting Participants constituting the Required Lenders) an executed signature page counterpart of this Agreement.
(b)    The Administrative Agent shall have received, to the extent invoiced in reasonable detail, reimbursement or payment of all reasonable out of pocket expenses (including reasonable fees, charges and disbursements of Moore & Van Allen PLLC) required to be reimbursed or paid by the Borrowers pursuant to Section 8.04 of the Credit Agreement in connection with the preparation, negotiation, execution and delivery of this Agreement.
SECTION 4.Confirmation of Representations and Warranties.
(c)    Each Borrower hereby represents and warrants, on and as of the date hereof, that (i) the execution, delivery and performance by such Borrower of this Agreement and the transactions contemplated hereby have been duly authorized by all corporate, stockholder, partnership or limited liability company action required to be obtained by such Borrower, and (ii) this Agreement has been duly executed and delivered by such Borrower and constitutes a legal, valid and binding obligation of such Borrower enforceable against such Borrower in accordance with its terms, subject to (1) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors’ rights generally, (2) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), and (3) implied covenants of good faith and fair dealing.
(d)    Each Borrower hereby represents and warrants that, both on and as of the date hereof, both before and after giving effect to this Agreement, no Default or an Event of Default under the Credit Agreement has occurred and is continuing.
SECTION 5.Execution in Counterparts.  This Agreement may be executed in counterparts (and by different parties hereto in separate counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a signature page to this Agreement by facsimile or in electronic format (i.e., “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 6.Governing Law.  This Agreement and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement and the transactions contemplated hereby shall be governed by, and construed in accordance with, the laws of the State of New York.
SECTION 7.WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY 

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OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 8.Jurisdiction; Consent to Service of Process.
(a)    Each Borrower irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Administrative Agent, any Lender or any Related Party of the foregoing in any way relating to this Agreement or the transactions relating hereto, in any forum other than the courts of the State of New York sitting in the Borough of Manhattan, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such federal court.  Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against any Borrower or any other Loan Party or its properties in the courts of any jurisdiction.
(b)    Each Borrower irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (a) of this Section 8.  Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first written above.
RAYONIER INC.

By /s/ MICHAEL H. WALSH                                 
    Name: Michael H. Walsh   
    Title: Treasurer          

RAYONIER OPERATING COMPANY LLC

By /s/ MICHAEL H. WALSH                                 
    Name: Michael H. Walsh   
    Title: Treasurer       

RAYONIER TRS HOLDINGS INC. 

By /s/ MICHAEL H. WALSH                                  
    Name: Michael H. Walsh   
    Title: Treasurer  

RAYONIER INC.
FIRST AMENDMENT

COBANK, ACB, as Administrative Agent and a Lender

By  /s/ ZACHARY CARPENTER                                 
    Name: Zachary Carpenter   
    Title: Vice President    

RAYONIER INC.
FIRST AMENDMENT

AGFIRST FARM CREDIT BANK, as a Voting Participant

By /s/ STEVEN J. O'SHEA                               
    Name: Steven J. O'Shea   
    Title: Vice President    

RAYONIER INC.
FIRST AMENDMENT

AGSTAR FINANCIAL SERVICES, FLCA, as a Voting Participant

By /s/ GRAHAM J. DEE                                
    Name: Graham J. Dee   
    Title: AVP Capital Markets    

RAYONIER INC.
FIRST AMENDMENT

FARM CREDIT BANK OF TEXAS, as a Lender

By /s/ LUIS M. H. REQUEJO                                
    Name: Luis M. H. Requejo   
    Title: Director Capital Markets    

RAYONIER INC.
FIRST AMENDMENT

AMERICAN AGCREDIT, PCA, as a Lender

By /s/ MICHAEL J. BALOK                          
    Name: Michael J. Balok   
    Title: Vice President    

RAYONIER INC.
FIRST AMENDMENT

FARM CREDIT EAST, ACA, as a Lender

By /s/ JAMES M. PAPAI                          
    Name: James M. Papai   
    Title: Sr. Vice President    

RAYONIER INC.
FIRST AMENDMENT

FARM CREDIT SERVICES OF AMERICA, PCA,
as a Lender

By /s/ BEN FOGLE                                
    Name: Ben Fogle 
    Title: Vice President

RAYONIER INC.
FIRST AMENDMENT

1ST FARM CREDIT SERVICES, FLCA, as a Lender

By /s/ COREY J. WALDINGER                             
    Name: Corey J. Waldinger 
    Title: Vice President, Capital Markets Group

RAYONIER INC.
FIRST AMENDMENT

Badgerland Financial, FLCA , as a Voting Participant

By /s/ KENNETH H. RUE                             
    Name: Kenneth H. Rue 
    Title: VP, Capital Markets

RAYONIER INC.
FIRST AMENDMENT

FARM CREDIT MID-AMERICA, FLCA, f/k/a FARM CREDIT SERVICES OF MID-AMERICA, FLCA, as a Voting Participant

By /s/ RALPH M. BOWMAN                                
    Name: Ralph M. Bowman 
    Title: Vice President Capital Markets

RAYONIER INC.
FIRST AMENDMENT

FARM CREDIT WEST, FLCA, as a Voting
Participant

By /s/ JOHN BOYES                               
    Name: John Boyes 
    Title: EVP - Capital Markets

RAYONIER INC.
FIRST AMENDMENT

UNITED FCS, FLCA D/B/A FCS COMMERCIAL FINANCE GROUP, as a Voting Participant

By /s/ LISA CASWELL                               
    Name: Lisa Caswell 
    Title: Vice President

RAYONIER INC.
FIRST AMENDMENT

Frontier Farm Credit, ACA, as a Voting Participant

By /s/ STUART R. HAYS                             
    Name: Stuart R. Hays 
    Title: Vice President

RAYONIER INC.
FIRST AMENDMENT

GREENSTONE FARM CREDIT SERVICES,
ACA/FLCA, as a Lender

By /s/ ALFRED S. COMPTON JR.                         
    Name: Alfred S. Compton, Jr. 
    Title: SVP/Managing Director

RAYONIER INC.
FIRST AMENDMENT

Northwest Farm Credit Services, FLCA, as a Voting Participant

By /s/ CANDY BOSWELL                         
    Name: Candy Boswell 
    Title: Vice President

RAYONIER INC.
FIRST AMENDMENTWdesk | MDU-3.31.2014Q1 EX 10(a)

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 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:
	 
	 

	 
	 
	David L. Goodin
	 

	 
	 
	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)

	75th or higher
	200%

	50th
	100%

	25th
	20%

	less than 25th
	0%

If the Company achieves a Percentile Rank between the 25th and 50th percentiles, the Payout Percentage shall be equal to 20%, plus 3.2% for each Percentile Rank whole percentage above the 25th percentile.  If the Company achieves a Percentile Ranking between the 50th and 75th percentiles, the Payout Percentage shall be equal to 100%, plus 4.0% for each Percentile Rank whole percentage above the 50th percentile. 

If the Company’s TSR for the Performance Period is negative, the number of shares otherwise earned, if any, for the Performance Period will be reduced in accordance with the following table:

	
			
	TSR
	 
	Reduction In Award

	0% through -5%
	 
	50%

	-5.01% through -10%
	 
	60%

	-10.01% through -15%
	 
	70%

	-15.01% through -20%
	 
	80%

	 -20.01% through -25%
	 
	90%

	-25.01% or below
	 
	100%

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 23 companies, its Percentile Rank would be 91.  The calculation is: (23 - 3 + 1)/23 x 100 = 91.
 
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.
 
If the Company or a company in the Peer Group spins off a segment of its business, the shares of the spun-off entity will be treated as a cash dividend that is reinvested in the Company or the company in the Peer Group.
 
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 and Mandatory Holding Period .  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 10) following the close of the Performance Period.  The Participant shall retain 50% of the net after-tax Shares that are earned under this Award until the earlier of (i) the end of the two-year period commencing on the date any Shares earned under this Award are issued and (ii) the Participant’s termination of employment.

 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 during the Performance Period (1) for "Cause" (as defined below) at any time or (2) for any reason other than "Cause" before the Participant, as of the effective date of termination, has reached age 55 and completed 10 "Years of Service" (as defined below), all Performance Shares (and related Dividend Equivalents) shall be forfeited.

 (b)           If the Participant's employment with the Company is terminated for any reason other than "Cause" after the Participant, as of the effective date of termination, has reached age 55 and completed 10 "Years of Service" (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.

 (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.  For purposes of the 

Award Agreement, the term "Years of Service" shall mean the years a Participant is employed by the Company and/or a Subsidiary.

 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

ALLETE, Inc.
Alliant Energy Corporation
Atmos Energy
Avista Corporation
Bill Barrett Corporation
Black Hills Corporation
Comstock Resources, Inc.
EMCOR Group Inc.
EQT Corporation
Granite Construction Incorporated
Martin Marietta Materials, Inc.
National Fuel Gas Company
Northwest Natural Gas Company
Pike Electric Corporation
Quanta Services, Inc.
Questar Corporation
Sterling Construction Company
SM Energy Company
Swift Energy Company
Texas Industries
Vectren Corporation
Vulcan Materials Company
Whiting Petroleum Corporation

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