Document:

Long Term Performance Plan

     

    MDU
      RESOURCES GROUP, INC.

    LONG-TERM
      PERFORMANCE-BASED 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 compensation plan to be known as
      the
      "MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan"
      (hereinafter referred to as the "Plan"), as set forth in this document. The
      Plan
      permits the grant of Nonqualified Stock Options (NQSO), Incentive Stock Options
      (ISO), Stock Appreciation Rights (SAR), Restricted Stock, Performance Units,
      Performance Shares and other awards.

    

    The
      Plan
      first became effective when approved by the stockholders at the annual meeting
      on April 22, 1997. The Plan, as amended, will become effective on April 25,
      2006
      if it is approved by the stockholders at the 2006 annual meeting. The Plan
      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 provide flexibility to the Company in its ability to
      motivate, attract and retain the services of Participants upon whose judgment,
      interest and special effort the successful conduct of its operations is largely
      dependent.

    

    1.3 Duration
      of the Plan.
      The Plan
      shall remain in effect, subject to the right of the Board of Directors to
      terminate the Plan at any time pursuant to Article 15 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, ISOs, 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
      Compensation 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 18 herein.

    

    2.9 "Covered
      Employee"
      means
      any Participant who would be considered a "Covered Employee" for purposes of
      Section 162(m) of the Code.

    

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

    

    2.11 "Disability"
      means
      "permanent and total disability" as defined under Section 22(e)(3)of the
      Code.

    

    2.12 "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.

    

    2.13 "Eligible
      Employee" means
      an
      Employee who is eligible to participate in the Plan, as set forth in Section
      5.1
      herein.

    

    2.14 "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. Directors
      who are not otherwise employed by the Company shall not be considered Employees
      for purposes of the Plan. For purposes of the Plan, transfer of employment
      of a
      Participant between the Company and any one of its Subsidiaries (or between
      Subsidiaries) shall not be deemed a termination of employment.

    

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

    

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

    

    2.17 "Fair
      Market Value"
      shall
      mean the average of the high and low sale prices as reported in the consolidated
      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.

    

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

    

    2.19
      "Full Value Award"
      means an
      Award pursuant to which Shares may be issued, other than an Option or an
      SAR.

    

    2.20 "Incentive
      Stock Option" or
      "ISO"
      means
      an option to purchase Shares, granted under Article 6 herein, which is
      designated as an Incentive Stock Option and satisfies the requirements of
      Section 422 of the Code.

    

    2.21 "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.

    

    2.22 "Option"
      means an
      Incentive Stock Option or a Nonqualified Stock Option.

    

    2.23 "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.

    

    2.24 "Participant"
      means
      an
      Employee of the Company who has outstanding an Award granted under the
      Plan.

    

    2.25 "Performance
      Goals"
      means
      the performance goals established by the Committee, which shall be based on
      one
      or more of the following measures: sales or revenues, earnings per share,
      shareholder return and/or value, funds from operations, operating income, gross
      income, net income, cash flow, return on equity, return on capital, earnings
      before interest, operating ratios, stock price, customer satisfaction,
      accomplishment of mergers, acquisitions, dispositions or similar extraordinary
      business transactions, profit returns and margins, financial return ratios
      and/or market performance. Performance goals may be measured solely on a
      corporate, subsidiary or business unit basis, or a combination thereof.
      Performance goals may reflect absolute entity performance or a relative
      comparison of entity performance to the performance of a peer group of entities
      or other external measure.

    

    2.26 "Performance
      Unit" means
      an
      Award granted to an Employee, as described in Article 9 herein.

    

    2.27 "Performance
      Share" means
      an
      Award granted to an Employee, as described in Article 9 herein.

    

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

    

    2.29 "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.

    

    2.30 "Qualified
      Restricted Stock"
      means an
      Award of Restricted Stock designated as Qualified Restricted Stock by the
      Committee at the time of grant and intended to qualify for the exemption from
      the limitation on deductibility imposed by Section 162(m) of the Code that
      is set forth in Section 162(m)(4)(C).

    

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

    

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

    

    2.33 "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.

    

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

    

    2.35 "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 the Compensation Committee of the Board, or by any
      other Committee appointed by the Board. The members of the Committee shall
      be
      appointed from time to time by, and shall serve at the discretion of, the Board
      of Directors.

    

    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 15 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
      Board or the Committee 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,
      Employees, 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 9,242,806. 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 withheld from an Award of Restricted
      Stock to satisfy tax withholding obligations shall be counted as Shares 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
      or tax withholding obligations 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, the individual limitations set forth in Section 4.3, 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.
      Notwithstanding the foregoing, (i) each such adjustment with respect to an
      Incentive Stock Option shall comply with the rules of Section 424(a) of the
      Code
      and (ii) in no event shall any adjustment be made which would render any
      Incentive Stock Option granted hereunder to be other than an incentive stock
      option for purposes of Section 422 of the Code.

    

    4.3
      Individual
      Limitations.
      Subject
      to Section 4.2 herein, (i) the total number of Shares with respect to which
      Options or SARs may be granted in any calendar year to any Covered Employee
      shall not exceed 2,250,000 Shares; (ii) the total number of shares of Qualified
      Restricted Stock that may be granted in any calendar year to any Covered
      Employee shall not exceed 2,250,000 Shares; (iii) the total number of
      Performance Shares or Performance Units that may be granted in any calendar
      year
      to any Covered Employee shall not exceed 2,250,000 Performance Shares or
      Performance Units, as the case may be; (iv) the total number of Shares that
      are
      intended to qualify for deduction under Section 162(m) of the Code granted
      pursuant to Article 10 herein in any calendar year to any Covered Employee
      shall
      not exceed 2,250,000 Shares; (v) the total cash Award that is intended to
      qualify for deduction under Section 162(m) of the Code that may be paid pursuant
      to Article 10 herein in any calendar year to any Covered Employee shall not
      exceed $6,000,000; and (vi) the aggregate number of Dividend Equivalents that
      are intended to qualify for deduction under Section 162(m) of the Code that
      a
      Covered Employee may receive in any calendar year shall not exceed
      $6,000,000.

    

    Article
      5. Eligibility and Participation

    

    5.1 Eligibility.
      Persons
      eligible to participate in the Plan include all officers and key employees
      of
      the Company and its Subsidiaries, as determined by the Committee, including
      Employees who are members of the Board, but excluding Directors 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 Employees 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 an Eligible
      Employee 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. The Committee may grant ISOs, NQSOs,
      or a
      combination thereof.

    

    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. The Option Award Agreement shall also specify whether the Option
      is
      intended to be an ISO or an NQSO.

    

    The
      Option Price for each Share purchasable under any Incentive Stock Option granted
      hereunder shall be not less than one hundred percent (100%) of the Fair Market
      Value per Share at the date the Option is granted; and provided, further, that
      in the case of an Incentive Stock Option granted to a person who, at the time
      such Incentive Stock Option is granted, owns shares of stock of the Company
      or
      of any Subsidiary which possess more than ten percent (10%) of the total
      combined voting power of all classes of shares of stock of the Company or of
      any
      Subsidiary, the Option Price for each Share shall be not less than one hundred
      ten percent (110%) of the Fair Market Value per Share at the date the Option
      is
      granted. The Option Price will be subject to adjustment in accordance with
      the
      provisions of Section 4.2 of the Plan.

    

    No
      Incentive Stock Option by its terms shall be exercisable after the expiration
      of
      ten (10) years from the date of grant of the Option; provided, however, in
      the
      case of an Incentive Stock Option granted to a person who, at the time such
      Option is granted, owns shares of stock of the Company or of any Subsidiary
      possessing more than ten percent (10%) of the total combined voting power of
      all
      classes of shares of stock of the Company or of any Subsidiary, such Option
      shall not be exercisable after the expiration of five (5) years from the date
      such Option is granted.

    

    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,
      provisions for full payment therefor and satisfaction or provision for
      satisfaction of any tax withholding or other obligations, 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 Employment.
      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
      employment with the Company and its Subsidiaries. Such provisions shall be
      determined in the sole discretion of the Committee (subject to applicable law),
      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 employment. If the employment of a Participant by the Company or by any
      Subsidiary is terminated for any reason other than death, any Incentive Stock
      Option granted to such Participant may not be exercised later than three (3)
      months (one (1) year in the case of termination due to Disability) after the
      date of such termination of employment.

    

    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 Incentive Stock Options granted to
      a
      Participant under the Plan shall be exercisable during his or her lifetime
      only
      by such Participant.

    

    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 an Eligible
      Employee 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.

    

    Notwithstanding
      any other provision of the Plan to the contrary, with respect to a Tandem SAR
      granted in connection with an ISO: (i) the Tandem SAR will expire no later
      than
      the expiration of the underlying ISO; (ii) the value of the payout with respect
      to the Tandem SAR may be for no more than one hundred percent (100%) of the
      difference between the Option Price of the underlying ISO and the Fair Market
      Value of the Shares subject to the underlying ISO at the time the Tandem SAR
      is
      exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market
      Value of the Shares subject to the ISO exceeds the Option Price of the
      ISO.

    

    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 Employment.
      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
      employment with the Company and its Subsidiaries. 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 employment.

    

    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
      Eligible
      Employees 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.

    

    In
      addition, the Committee may, prior to or at the time of grant, designate an
      Award of Restricted Stock as Qualified Restricted Stock, in which event it
      will
      condition the grant or vesting, as applicable, of such Qualified Restricted
      Stock upon the attainment of the Performance Goals selected by the
      Committee.

    

    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. Long-Term Performance-Based 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 Employment.
      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 employment with the Company and its
      Subsidiaries. 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 employment.

    

    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 an Eligible Employee 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 Performance 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 Employment.
      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
      employment with the Company and its Subsidiaries 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
      employment.

    

    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 attainment of Performance Goals
      established by the Committee, the payment of Shares in lieu of cash, the payment
      of cash based on attainment of Performance Goals established by the Committee,
      and the payment of Shares in lieu of cash under other Company incentive or
      bonus
      programs. 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. Rights of Employees

    

    13.1 Employment.
      Nothing
      in the Plan shall interfere with or limit in any way the right of the Company
      to
      terminate any Participant's employment at any time, for any reason or no reason
      in the Company's sole discretion, nor confer upon any Participant any right
      to
      continue in the employ of the Company.

    

    13.2 Participation.
      No
      Employee shall have the right to be selected to receive an Award under the
      Plan,
      or, having been so selected, to be selected to receive a future
      Award.

    

    Article
      14. Change in Control

    

    The
      terms
      of this Article 14 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,
                Qualified Restricted Stock or Awards granted pursuant to Article
                10 (if
                not performance-based) shall be deemed to have expired and such Restricted
                Stock, Qualified 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
      15. Amendment, Modification and Termination

    

    15.1 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, provided that no amendment shall be made which
      shall increase the total number of Shares that may be issued under the Plan,
      materially modify the requirements for participation in the Plan, or materially
      increase the benefits accruing to Participants under the Plan, in each case
      unless such amendment is approved by the stockholders. The Board of Directors
      of
      the Company is also authorized to amend the Plan and the Options granted
      hereunder to maintain qualification as "incentive stock options" within the
      meaning of Section 422 of the Code, if applicable.

    

    15.2 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 and except as otherwise
      provided herein.

    

    Article
      16. Withholding

    

    16.1 Tax
      Withholding. The
      Company shall have the power and the right to deduct or withhold, or require
      a
      Participant to remit to the Company, an amount sufficient to satisfy Federal,
      state and local taxes (including the Participant's FICA obligation) required
      by
      law to be withheld with respect to an Award made under the Plan.

    

    16.2 Share
      Withholding.
      With
      respect to withholding required upon the exercise of Options or SARs, upon
      the
      lapse of restrictions on Restricted Stock, or upon any other taxable event
      arising out of or as a result of Awards granted hereunder, Participants may
      elect to satisfy the withholding requirement, in whole or in part, by tendering
      previously-owned Shares or by having the Company withhold Shares having a Fair
      Market Value on the date the tax is to be determined equal to the statutory
      total tax which could be imposed on the transaction. All elections shall be
      irrevocable, made in writing and signed by the Participant.

    

    Article
      17. Minimum Vesting

    

    Notwithstanding
      any other provision of the Plan to the contrary, (a) the minimum vesting period
      for Full Value Awards with no performance-based vesting characteristics must
      be
      at least three years (vesting may occur ratably each month, quarter or
      anniversary of the grant date over such vesting period); (b) the minimum vesting
      period for Full Value Awards with performance-based vesting characteristics
      must
      be at least one year; and (c) the Committee shall not have discretion to
      accelerate vesting of Full Value Awards except in the event of a Change in
      Control or similar transaction, or the death, disability, or termination of
      employment of a Participant; provided, however, that the Committee may grant
      a
      "de minimis" number of Full Value Awards that do not comply with the foregoing
      minimum vesting standards. For this purpose "de minimis" means 331,279 Shares
      available for issuance as Full Value Awards under the Plan, subject to
      adjustment under Section 4.2 herein.

    

    Article
      18. 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
      19. Legal Construction

    

    19.1 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.

    

    19.2 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.

    

    19.3 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.

    

    19.4 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
      20. Accounting Restatements 

    

    This
      Article 20 shall apply to Awards granted to all Participants in the Plan.
      Notwithstanding anything in the Plan or in any Award Agreement to the contrary,
      if the Company's audited financial statements are restated, the Committee may,
      in accordance with the Company's Guidelines
      for Repayment of Incentives Due to Accounting Restatements,
      take
      such actions as it deems appropriate (in its sole discretion) with respect
      to

    

    (a) Awards
      then outstanding (including Awards that have vested or otherwise been earned
      but
      with respect to which payment of cash or distribution of Shares, as the case
      may
      be, has not been made or deferred and also including unvested or unpaid Dividend
      Equivalents attributable to such outstanding Awards) ("Outstanding Awards")
      and

    

    (b) vested,
      earned and/or exercised Awards and any cash or Shares received with respect
      to
      Awards (including, without limitation, dividends and Dividend Equivalents),
      in
      each case to the extent payment of cash or distribution of Shares, as the case
      may be, was received or deferred within the 3 year period preceding the
      restatement ("Prior Awards"), provided such Prior Awards were not vested,
      earned, exercised or paid prior to the date the Plan was amended to add this
      Article 20,

    

    if
      the
      terms of any such Outstanding Awards or Prior Awards or the benefits received
      by
      a Participant with respect to any such Outstanding Awards or Prior Awards
      (including, without limitation, dividends or Dividend Equivalents credited
      or
      distributed to a Participant and/or consideration received upon the sale of
      Shares that were acquired pursuant to the vesting, settlement or exercise of
      a
      Prior Award) are, or would have been, directly impacted by the restatement,
      including, without limitation, (i) securing (or causing to be secured) repayment
      of all or a portion of any amounts paid, distributed or deferred (including,
      without limitation, dividends or Dividend Equivalents and/or consideration
      received upon the sale of Shares that were acquired pursuant to the vesting,
      settlement or exercise of a Prior Award), (ii) granting additional Awards or
      making (or causing to be made) additional payments or distributions (or
      crediting additional deferrals) with respect to Prior Awards, (iii) rescinding
      vesting (including accelerated vesting) of Outstanding Awards and/or (iv)
      causing the forfeiture of Outstanding Awards. The Committee may, in its sole
      discretion, take different actions pursuant to this Article 20 with respect
      to
      different Awards, different Participants (or beneficiaries) and/or different
      classes of Awards or Participants (or beneficiaries). The Committee has no
      obligation to take any action permitted by this Article 20. The Committee may
      consider any factors it chooses in taking (or determining whether to take)
      any
      action permitted by this Article 20, including, without limitation, the
      following:

    

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

    

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

    

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

    

    If
      the
      Committee requires repayment of all or part of a Prior Award, the amount of
      repayment shall be determined by the Committee based on the circumstances giving
      rise to the restatement. The Committee shall determine whether repayment shall
      be effected (i) by seeking repayment from the Participant, (ii) by reducing
      (subject to applicable law and the terms and conditions of the applicable plan,
      program or arrangement) the amount that would otherwise be provided to the
      Participant under any compensatory plan, program or arrangement maintained
      by
      the Company or any of its affiliates, (iii) by withholding payment of future
      increases in compensation (including the payment of any discretionary bonus
      amount) or grants of compensatory awards that would otherwise have been made
      in
      accordance with the Company's otherwise applicable compensation practices,
      or
      (iv) by any combination of the foregoing. Additionally, by accepting an Award
      under the Plan, Participants acknowledge and agree that the Committee may take
      any actions permitted by this Article 20 with respect to Outstanding Awards
      to
      the extent repayment is to be made pursuant to another plan, program or
      arrangement maintained by the Company or any of its affiliates.

    

    Article
      21. 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's Supplemental Executive Retirement Plan

    INTERNAL
      CORRESPONDENCE              LOCATION  
      MDU
      Resources 

    

              DATE       December
      4, 2006

    

              WRITER       
      Terry
      D. Hildestad

    

              SUBJECT      
      Supplemental
      Executive

    Confidential                           Retirement
      Plan

    

    John
      Harp

    MDU
      Construction Services Group, Inc.

    

    This
      is a
      follow-up to the conversation we had in October. Again, I want to congratulate
      you on the outstanding performance of MDU Construction Services Group, Inc.
      (CSG). The turnaround you have accomplished is quite remarkable. I appreciate
      your commitment to remain as the President and CEO of MDU Construction Services
      Group, Inc. (CSG) through January 2, 2008, and to have a succession plan in
      place prior to your departure from the company. 

    

    Given
      your performance and your commitment to remain in your current role through
      January 2, 2008, and to have a succession plan in place prior to your departure
      from the company, the Compensation Committee and Board approved for you a
      supplemental executive retirement plan. The benefit is the cash equivalent
      of an
      additional three years of prior service credit under the MDU Resources Group,
      Inc. Pension Plan for Non-Bargaining Unit Employees (Pension) and the MDU
      Resources Group, Inc. Supplemental Income Security Plan (SISP). The additional
      payments due to the credited service will be made outside (independent of)
      the
      Pension and SISP plans. The payments will be made from the general assets of
      the
      corporation. We are not modifying the Pension or SISP plans to provide these
      additional payments.

     

    
      Payments
        associated with the three-year equivalent of Pension service credit will
        begin
        the first day of the month following six months after your date of employment
        separation and continue for your lifetime. This payment will be made regardless
        of whether or not you are entitled to or receive a payment under the Pension
        Plan. Payments associated with the three-year equivalent of SISP service
        credit
        will be governed by the terms of the SISP Plan. You will begin receiving
        the
        additional payments at age 65 or six months after separation of employment,
        whichever is later. Should you continue to work beyond January 2, 2008, you
        will
        continue to vest under the terms of SISP, but at no point will your SISP
        and
        supplemental benefit exceed an amount that corresponds to 100 percent vesting.
        

       

    

    Thanks
      for your commitment to helping MDU Resources continue in its success.

     

     

                                            /s/
      TERRY D.
      HILDESTAD

    Terry
      D.
      Hildestad 

     

    cc:     Debbie
      Anderson     Craig
      Keller    Paul
      Sandness

    Mark
      Del
      Vecchio   
Cindy
      Redding  Lisa
      Schlafmann

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