Document:

Long-Term Performance-Based Incentive 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 6,625,581.
        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 1,500,000 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 1,500,000 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 1,500,000
      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 1,500,000 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.Performance Share Award Agreement

    MDU
      RESOURCES GROUP, INC.

    LONG-TERM
      PERFORMANCE-BASED INCENTIVE PLAN

    

    PERFORMANCE
      SHARE AWARD AGREEMENT

    

     

    [Date]

    

    «name»

    «streetaddress»

    «citystzip»

     

    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:

            	
              «shares»
                Performance Shares (the “Target Award”)

            
	
              Performance
                Period:

            	
              [          ]
                through

              [          ]
                (the “Performance Period”)

            
	
              Date
                of Grant:

            	
              [          ]

            
	
              Dividend
                Equivalents:

            	
              Yes

            

    

     

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

    

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

    

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

    

    MDU
      RESOURCES GROUP, INC.

     

    By:
      /s/
      Martin A. White

    Martin
      A.
      White

    Chairman
      of the Board and

    Chief
      Executive Officer

    

    

    Agreed:

     

    ___________________

    Participant

     

    

    Attachments: Annex
      A

            Annex
      B

    
      
        
        

      

      
        
          

        

      

       

    

    ANNEX
      A

    

    TO

    

    MDU
      RESOURCES GROUP, INC.

    LONG-TERM
      PERFORMANCE-BASED INCENTIVE PLAN

    

    PERFORMANCE
      SHARE AWARD AGREEMENT

    

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

    

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

    

    2. Determination
      of Number of Shares Earned.

     

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

     

    #
      of Shares = Payout Percentage X Target Award

    

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

    

    
      	
              Percentile
                Rank

            	
              Payout
                Percentage 

              (%
                of Target Award)

            
	
              100th

            	
              200%

            
	
              75th

            	
              150%

            
	
              50th

            	
              100%

            
	
              40th

            	
              10%

            
	
              less
                than 40th

            	
              0%

            

    

    

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

    

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

    

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

     

    Where:

     

    
      	 	
              n
                =

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

            

    

     

    
      	 	
              r
                =

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

            

    

     

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

     

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

     

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

     

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

     

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

    

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

    

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

    

    5. Termination
      of Employment.

     

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

     

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

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    ANNEX
      B

    

    TO

    

    MDU
      RESOURCES GROUP, INC.

    LONG-TERM
      PERFORMANCE-BASED INCENTIVE PLAN

    

    PERFORMANCE
      SHARE AWARD AGREEMENT

    

    PEER
      GROUP COMPANIES

    

    Allegheny
      Energy, Inc.

    ALLETE,
      Inc.

    Alliant
      Energy Corporation

    Black
      Hills Corporation

    Comstock
      Resources, Inc.

    Equitable
      Resources, Inc.

    Florida
      Rock Industries, Inc.

    Hanson
      PLC ADR

    KeySpan
      Corporation

    Kinder
      Morgan, Inc.

    Martin
      Marietta Materials, Inc.

    Newfield
      Exploration Company

    NICOR,
      Inc.

    OGE
      Energy Corp.

    ONEOK,
      Inc.

    Peoples
      Energy Corporation

    Pogo
      Producing Company

    Quanta
      Services, Inc.

    Questar
      Corporation

    SCANA
      Corporation

    Stone
      Energy Corporation

    TECO
      Energy, Inc.

    UGI
      Corporation

    Vectren
      Corporation

    Vulcan
      Materials Company

    XTO
      Energy, Inc.

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