8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

______________

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  February 15, 2011

MDU Resources Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware	1-3480	41-0423660
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
1200 West Century Avenue P.O. Box 5650 Bismarck, North Dakota  58506-5650 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (701) 530-1000

______________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 5.02                      Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

2011 Annual Incentive Awards

On February 15, 2011, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of MDU Resources Group, Inc. (the “Company”) established 2011 annual incentive award opportunities for the executive officers including those officers who were the named executive officers in the Company’s proxy statement for the 2010 Annual Meeting of Stockholders (the “NEOs”), except for Vernon A. Raile who retired on February 16, 2010.  The Board approved the award opportunities at its meeting on February 17, 2011.  The 2011 annual incentive award opportunities for the NEOs are set forth in the 2011 Annual Award Opportunity Chart, which is filed as Exhibit 10.1 and incorporated herein by reference.

The 2011 awards for Messrs. Hildestad, Harp, Schneider and Bietz were made pursuant to the Long-Term Performance-Based Incentive Plan (the “LTIP”).  Mr. Schwartz’s award was made pursuant to the MDU Resources Group, Inc. Executive Incentive Compensation Plan.

Except as the Committee may otherwise determine, in order to be eligible to receive an annual incentive award payment under the LTIP, participants must remain employed by the Company through December 31, 2011.  The Committee has full discretion to determine the extent to which goals have been achieved, the payment level and whether any final payment will be made.  Unless otherwise determined and established in writing by the Committee within 90 days of the beginning of the performance period, no adjustment shall be made to the performance goals if the adjustment would increase the annual incentive award payment.

With respect to annual incentive awards granted pursuant to an Executive Incentive Compensation Plan, participants who retire at age 65 during the year remain eligible to receive an award.  Subject to the Committee’s discretion, participants who terminate employment for other reasons are not eligible for an award.  The Committee has full discretion to determine the extent to which goals have been achieved, the payment level and whether any final payment will be made.  Once performance goals are approved by the Committee for Executive Incentive Compensation Plan awards, the Committee generally does not modify the goals.  However, if major unforeseen changes in economic and environmental conditions or other significant factors beyond the control of management substantially affected management 217;s ability to achieve the specified performance goals, the Committee, in consultation with the chief executive officer, may modify the performance goals.  Such goal modifications will only be considered in years of unusually adverse or favorable external conditions.

Payments are based upon achievement of annual performance goals with a threshold, target and maximum level.  The target incentive award was established based upon the officer’s position and base salary.  Payment will range from zero to 200% of the target based upon achievement of performance goals.  The performance goals for 2011 are (i) budgeted earnings per share (“EPS”) achieved (weighted 50%) and (ii) budgeted return on invested capital (“ROIC”) achieved (weighted 50%).  The goals are measured at the business unit level, as allocated, for Mr. Harp (MDU Construction Services Group, Inc.), Mr. Schneider (Knife River Corporation) and Mr.

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Bietz (WBI Holdings, Inc.).  In addition to these performance goals, Mr. Bietz also has five individual performance goals relating to WBI Holdings, Inc.’s safety results, and each goal that is not met will reduce his annual incentive award payment by 1%.

Achievement of budgeted EPS and ROIC would result in payment of 100% of the target amount.  Achievement of less than 85% of budgeted EPS and ROIC would result in no payment, while achievement of 115% of budgeted EPS and an ROIC equal to or greater than the business unit’s weighted average cost of capital (“WACC”) would result in payment of 200% of the target amount for Messrs. Harp, Schneider and Bietz.

Annual incentive award payments for executives at the MDU Resources Group level, including Messrs. Hildestad and Schwartz, will be determined based on the annual incentive award payments made to the president and chief executive officers of the four business units – Knife River Corporation, MDU Construction Services Group, Inc., WBI Holdings, Inc. and Combined Utility Group, which is comprised of Montana-Dakota Utilities Co., Great Plains Natural Gas Co., Cascade Natural Gas Corporation and Intermountain Gas Company – and will be calculated as follows.  Each business unit president and chief executive officer’s annual incentive award payment, expressed as a percentage of his annual target award, will be multiplied by that business unit’s percentage share of average invested capital for 2011.  Th ese four products will be added together, and the sum will be multiplied by the MDU Resources Group, Inc. executive’s 2011 target incentive.

The Committee may use negative discretion and adjust any annual incentive award payment downward, using any subjective or objective measures as it shall determine, including but not limited to the 20% limitation described in the following sentence.  The 20% limitation means that no more than 20% of after-tax earnings that are in excess of planned earnings at the business unit level for operating company executives, which include Messrs. Harp, Schneider and Bietz, and at the MDU Resources Group level for corporate executives, which include Messrs. Hildestad and Schwartz, will be paid in annual incentives to executives.  The application of this limitation or any other reduction, and the methodology used in determining any such reduction, is in the sole discretion of the Committee.

Annual Incentive Award Agreement under the LTIP

On February 22, 2011, the Committee approved a revised form of Annual Incentive Award Agreement under the LTIP to be used for the annual incentive awards described above and future awards.  The revisions clarify that the Committee may not exercise positive discretion, unless determined otherwise and established in writing by the Committee within 90 days of the beginning of the performance period.  The revised form of Annual Incentive Award Agreement is filed as Exhibit 10.2 hereto.

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2011 Long-Term Incentive Awards

On February 15, 2011, the Committee recommended long-term incentive awards in the form of performance shares pursuant to the LTIP for the executive officers including the NEOs, except for Mr. Raile who retired on February 16, 2010.  The Board approved the awards at its meeting on February 17, 2011.  The 2011 long-term incentive award opportunities for the NEOs are set forth in the 2011 Performance Share Award Opportunity Chart, which is filed as Exhibit 10.3 and incorporated herein by reference.

From 0% to 200% of the target award will be paid out, depending on the Company’s 2011-2013 total stockholder return (“TSR”) compared to the TSRs of companies in the Company’s performance graph peer group (the “Peer Group”) over the 2011-2013 performance period. The payout percentage is determined as follows:

The Company’s Percentile Rank	Payout Percentage of Performance Share Grant
90th or higher		200%
70th		150%
50th		100%
40th		10%
Less than 40th		0%

If the Company achieves a percentile rank between the 40th and 50th percentiles, the payout percentage will be equal to 10%, plus 9% for each percentile rank whole percentage above the 40th percentile.  If the Company achieves a percentile rank between the 50th and 90th percentiles, the payout percentage will be equal to 100%, plus 2-1/2% for each percentile rank whole percentage above the 50th percentile.

The Company also will pay dividend equivalents in cash on the number of shares actually earned for the performance period.  The dividend equivalents will be paid at the same time as the performance share awards are paid.

If the common stock of a company in the Peer Group ceases to be traded during the 2011-2013 performance period, the company will be deleted from the Peer Group.  Percentile rank will be calculated without regard to the return of the deleted company.  If the Company or a company in the Peer Group spins off a segment of its business, the shares of the spun-off entity will be treated as a cash dividend that is reinvested in the Company or the company in the Peer Group.

If the Company’s TSR for the 2011-2013 performance period is negative, the number of shares and dividend equivalents otherwise earned, if any, for the performance period will be reduced in accordance with the following table:

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TSR	Reduction In Award
0% through -5%	50%
-5.01% through -10%	60%
-10.01% through -15%	70%
-15.01% through -20%	80%
-20.01% through -25%	90%
-25.01% or below	100%

Executives must retain 50% of the net after-tax shares that are earned pursuant to this long-term incentive award until the earlier of (i) the end of the two-year period commencing on the date any shares earned under the award are issued and (ii) the executive’s termination of employment.

Performance Share Award Agreement under the LTIP

On February 15, 2011, the Committee approved a revised form of Performance Share Award Agreement under the LTIP to be used for the performance share awards described above and future awards.  The revisions (i) reflect the modified Peer Group that the Committee approved on February 15, 2011, (ii) clarify that if the Company or a company in the Peer Group spins off a segment of its business, the shares of the spun-off entity would be treated as a cash dividend that is reinvested in shares of the Company or the company in the Peer Group, (iii) establish the schedule of mandatory reductions in shares otherwise earned if the Company’s TSR is negative as described above and (iv) impose a mandatory holding requirement on 50 percent of the net after-tax shares earned as described above.  The Committee modified the Peer G roup to replace four companies with five new companies for a better fit with the Company’s size and lines of business.  The revised form of Performance Share Award Agreement is filed as Exhibit 10.4 hereto.

Item 9.01                      Financial Statements and Exhibits

(d) Exhibits.

Exhibit Number	Description of Exhibit
10.1	MDU Resources Group, Inc. 2011 Annual Award Opportunity Chart
10.2	Form of Annual Incentive Award Agreement under the Long-Term Performance-Based Incentive Plan, as amended February 22, 2011
10.3	MDU Resources Group, Inc. 2011 Performance Share Award Opportunity Chart
10.4	Form of Performance Share Award Agreement under the Long-Term Performance-Based Incentive Plan, as amended February 15, 2011

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:  February 22, 2011

MDU Resources Group, Inc.
By:	/s/ Paul K. Sandness
	Paul K. Sandness
	General Counsel and Secretary

6

EXHIBIT INDEX

Exhibit Number	Description of Exhibit
10.1	MDU Resources Group, Inc. 2011 Annual Award Opportunity Chart
10.2	Form of Annual Incentive Award Agreement under the Long-Term Performance-Based Incentive Plan, as amended February 22, 2011
10.3	MDU Resources Group, Inc. 2011 Performance Share Award Opportunity Chart
10.4	Form of Performance Share Award Agreement under the Long-Term Performance-Based Incentive Plan, as amended February 15, 2011

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EX-10.1

Exhibit 10.1

Exhibit 10.1

MDU Resources Group, Inc.

2011 Annual Award Opportunity Chart

Name	Title	2011 Base Salary ($)	Threshold ($)	Target ($)	Maximum ($)
Terry D. Hildestad	President and Chief Executive Officer MDU Resources Group, Inc.	750,000	187,500	750,000	1,500,000
Doran N. Schwartz	Vice President and Chief Financial Officer MDU Resources Group, Inc.	273,000	34,125	136,500	273,000
John G. Harp	President and Chief Executive Officer MDU Construction Services Group, Inc.	450,000	73,125	292,500	585,000
William E. Schneider	President and Chief Executive Officer Knife River Corporation	447,400	72,703	290,810	581,620
Steven L. Bietz1	President and Chief Executive Officer WBI Holdings, Inc.	360,500	58,581	234,325	468,650

(1) Mr. Bietz also has five individual performance goals relating to WBI Holdings, Inc.’s safety results, and each goal that is not met will reduce his annual incentive award payment by 1%.

EX-10.2

Exhibit 10.2

Exhibit 10.2

MDU RESOURCES GROUP, INC.

LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

ANNUAL INCENTIVE AWARD AGREEMENT

                                    {}

In accordance with the terms of the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan (the “Plan”), pursuant to action of the Compensation Committee of the Board of Directors of MDU Resources Group, Inc. (the “Committee”), MDU Resources Group, Inc. (the “Company”) hereby grants to you (the “Participant”) an opportunity to receive an annual incentive award for calendar year 20[  ] (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:	$[  ] (the “Target Award”)
Performance Goals:	Described in Annex B
Performance Period:	January 1, 20[ ] through December 31, 20[ ] (the "Performance Period")

THE AWARD IS SUBJECT TO FORFEITURE AS PROVIDED HEREIN.  THIS AWARD AND AMOUNTS RECEIVED IN CONNECTION WITH THIS AWARD ARE ALSO SUBJECT TO FORFEITURE, RECAPTURE OR OTHER ACTION IN THE EVENT OF AN ACCOUNTING RESTATEMENT, AS PROVIDED IN THE PLAN.

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

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

MDU RESOURCES GROUP, INC.
By:
	Thomas Everist Chairman of the Compensation Committee

Agreed:

______________________________________________

Participant

Attachments:	Annex A
	Annex B

ANNEX A

TO

MDU RESOURCES GROUP, INC.

LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

ANNUAL INCENTIVE AWARD AGREEMENT

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

1.Nature of Award.  The Award represents the opportunity to receive an annual incentive award if the Performance Goals are achieved during the Performance Period.

2.Determination of Annual Incentive Award Earned.  The amount of the annual incentive award earned, if any, pursuant to this Award Agreement shall range from zero to 200% of the Target Award based upon achievement of the Performance Goals, with such percentage determined by the Committee in accordance with Annex B hereto.

3.Payment.  Payment of any annual incentive award earned pursuant to this Agreement shall be made in cash in a lump sum.  Unless the Participant has elected to defer receipt of the annual incentive award in accordance with an applicable deferral arrangement, payment will be made as soon as practicable (but not later than the next March 10th) following the Committee's certification of the achievement of the Performance Goals and determination of the Participant's annual incentive payment pursuant to Section 2 hereof.

4.Termination of Employment.  Notwithstanding anything contained herein to the contrary, except as the Committee may otherwise determine, in order to be eligible to receive an annual incentive award under this Award Agreement, the Participant must remain in the employ of the Company through the Performance Period.

5.Discretion

(a)  No Positive Discretion.  Unless otherwise determined and established in writing by the Committee within 90 days of the beginning of the Performance Period, no adjustment

shall be made to the Performance Goals if the adjustment would increase the annual incentive award payment.

(b)  Negative Discretion.  The Committee may use negative discretion and adjust any annual incentive award payment downward, using any subjective or objective measures as it shall determine, including but not limited to the 20% limitation described in the following sentence.  The 20% limitation means that no more than 20% of after-tax earnings that are in excess of planned earnings at the business unit level for operating company executives and at the MDU Resources Group level for corporate executives will be paid in annual incentives to executives.  The application of this limitation or any other reduction, and the methodology used in determining any such reduction, is in the sole discretion of the Committee.

6.Tax Withholding.  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.

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.  This Award Agreement is not a contract of employment.  Nothing in the Plan or in this 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 - Business Units

TO

MDU RESOURCES GROUP, INC.

LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

ANNUAL INCENTIVE AWARD AGREEMENT

[Attach Business Unit [2011] Approved Performance Goals]

ANNEX B – MDU Resources Group, Inc.

TO

MDU RESOURCES GROUP, INC.

LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

ANNUAL INCENTIVE AWARD AGREEMENT

Determination of Annual Incentive Award Earned and Performance Goals.

The amount of the annual incentive award earned, if any, for the Performance Period shall be determined in accordance with the following formula:

Annual Incentive Award Earned = Payout Percentage X Target Award

The Payout Percentage is determined based on the annual incentive award payments made to the president and chief executive officers of the four business units – Knife River Corporation, MDU Construction Services Group, Inc., WBI Holdings, Inc. and Combined Utility Group (collectively, the "Business Units") – and will be calculated as follows.  Each business unit president and chief financial officer's annual incentive award payment, expressed as a percentage of his annual target award, will be multiplied by that business unit's percentage share of average invested capital for [2011].  These four products will be added together, and the sum will be multiplied by the Participant's Target Award.

Performance Goals

The Performance Goals for the Business Units are as follows: [Attach [2011] Approved Performance Goals for Knife River Corporation, MDU Construction Services Group, Inc., WBI Holdings, Inc. and Combined Utility Group]

EX-10.3

Exhibit 10.3

Exhibit 10.3

MDU Resources Group, Inc.

2011 Performance Share Award Opportunity Chart

		Threshold		Target		Maximum
Name	Title	Shares (#)	Dividend Equivalents ($)	Shares (#)	Dividend Equivalents ($)	Shares (#)	Dividend Equivalents ($)
Terry D. Hildestad	President and Chief Executive Officer MDU Resources Group, Inc.	5,424	10,577	54,243	105,774	108,486	211,548
Doran N. Schwartz	Vice President and Chief Financial Officer MDU Resources Group, Inc.	987	1,925	9,872	19,250	19,744	38,501
John G. Harp	President and Chief Executive Officer MDU Construction Services Group, Inc.	1,953	3,808	19,527	38,078	39,054	76,155
William E. Schneider	President and Chief Executive Officer Knife River Corporation	1,941	3,785	19,414	37,857	38,828	75,715
Steven L. Bietz	President and Chief Executive Officer WBI Holdings, Inc.	1,564	3,050	15,643	30,504	31,286	61,008

EX-10.4

Exhibit 10.4

Exhibit 10.4

MDU RESOURCES GROUP, INC.

LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

PERFORMANCE SHARE AWARD AGREEMENT

                                                                                                {    }

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

Target Award:	{    }Performance Shares (the "Target Award")
Performance Period:	{    } through {    } (the "Performance Period")
Date of Grant:	{    }
Dividend Equivalents:	Yes

THESE PERFORMANCE SHARES ARE SUBJECT TO FORFEITURE AS PROVIDED HEREIN.  THIS AWARD AND AMOUNTS RECEIVED IN CONNECTION WITH THIS AWARD ARE ALSO SUBJECT TO FORFEITURE, RECAPTURE OR OTHER ACTION IN THE EVENT OF AN ACCOUNTING RESTATEMENT, AS PROVIDED IN THE PLAN.

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

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

MDU RESOURCES GROUP, INC.
By:
	Terry D. Hildestad
	President and
	Chief Executive Officer

Agreed:

___________________

Participant

ANNEX A

TO

MDU RESOURCES GROUP, INC.

LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

PERFORMANCE SHARE AWARD AGREEMENT

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

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

2.           Determination of Number of Shares Earned.

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

# of Shares = Payout Percentage X Target Award

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

Percentile Rank	Payout Percentage (% of Target Award)
90th or higher	200%
70th	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 90th percentiles, the Payout Percentage shall be equal to 100%, plus 2-1/2% for each Percentile Rank whole percentage above the 50th percentile.

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

TSR	Reduction In Award
0% through -5%	50%
-5.01% through -10%	60%
-10.01% through -15%	70%
-15.01% through -20%	80%
-20.01% through -25%	90%
-25.01% or below	100%

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

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

Where:

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

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

To illustrate, if the Company's TSR is the third highest in the Peer Group comprised of 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.

If the Company or a company in the Peer Group spins off a segment of its business, the shares of the spun-off entity will be treated as a cash dividend that is reinvested in the Company or the company in the Peer Group.

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

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

3.           Issuance of Shares and Mandatory Holding Period. Subject to any restrictions on distributions of Shares under the Plan, and subject to Section 6 of this Annex A, the Shares earned under the Award, if any, shall be issued to the Participant as soon as practicable (but no later than the next March 10) following the close of the Performance Period.  The Participant shall retain 50% of the net after-tax Shares that are earned under this Award until the earlier of (i) the end of the two-year period commencing on the date any Shares earned under this Award are issued and (ii) the Participant’s termination of employment.

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

5.           Termination of Employment.

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

(b)           If the Participant's employment with the Company is terminated for any reason other than "Cause" after the Participant, as of the effective date of termination, has reached age 55 and completed 10 "Years of Service" (1) during the first year of the Performance Period, all Performance Shares (and related Dividend Equivalents) shall be forfeited; (2) during the second year of the Performance Period, determination of the Company's Percentile Rank for the Performance Period will be made by the Committee at the end of the Performance Period, and Shares (and related Dividend Equivalents) earned, if any, will be paid based on the Payout Percentage, prorated for the number of full months elapsed from and including the month in whi ch the Performance Period began to and including the month in which the termination of employment occurs; and (3) during the third year of the Performance Period, determination of the Company's Percentile Rank for the Performance Period will be made by the Committee at the end of the Performance Period, and Shares (and related Dividend Equivalents) earned, if any, will be paid based on the Payout Percentage without prorating.

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

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

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

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

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

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

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

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

ANNEX B

TO

MDU RESOURCES GROUP, INC.

LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

PERFORMANCE SHARE AWARD AGREEMENT

PEER GROUP COMPANIES

Alliant Energy Corporation

Atmos Energy

Berry Petroleum Company

Black Hills Corporation

Comstock Resources, Inc.

EMCOR Group Inc.

EQT Corporation

Granite Construction Incorporated

Martin Marietta Materials, Inc.

National Fuel Gas Company

Northwest Natural Gas Company

Pike Electric Corporation

Quanta Services, Inc.

Questar Corporation

SCANA Corporation

Southern Union Company

Southwest Gas Corporation

Sterling Construction Company

SM Energy Company

Swift Energy Company

Texas Industries

Vectren Corporation

Vulcan Materials Company

Whiting Petroleum Corporation