THE BAUERLY BROTHERS, INC DEFERRED COMPENSATION PLAN

 

 

 

                   THE BAUERLY BROTHERS, INC.

 

                  DEFERRED COMPENSATION PLAN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                    Effective April 19, 2001

 

 

                     BAUERLY BROTHERS, INC.

                   DEFERRED COMPENSATION PLAN

 

     This is the Bauerly Brothers, Inc. Deferred Compensation

Plan (the "Plan"), and is adopted by BAUERLY BROTHERS, INC., a

Minnesota corporation (the "Company"), for the purpose of

providing an inducement for continued service by designated key

employees of the Company following the merger of the Company with

MDU RESOURCES GROUP, INC., a Delaware corporation ("MDU").

Benefits due under the Plan constitute a mere promise by the

Company to pay benefits as the Plan provides.  Accordingly,

Participants are general unsecured creditors of the Company with

respect to their benefit, and the Plan is unfunded for tax

purposes.  This document contemplates the establishment of a

trust after the Acquisition for the purpose of holding MDU Shares

under this Plan, subject to the claims of the general creditors

of MDU and the Company.

 

                            ARTICLE I

                 ADOPTION OF PLAN; PARTICIPATION

 

     The Plan is adopted effective this 19th day of April, 2001;

provided, however, that the Plan shall automatically terminate

(and any Account balances shall be forfeited entirely) on the

30th day thereafter if the Acquisition has not then occurred.

Each individual listed on Schedule A shall be a Participant,

provided that such individual is an employee of the Company in

good standing on the Effective Date.

 

                           ARTICLE II

                             VESTING

 

     2.1  Vesting. A Participant who has not incurred a Termination before a

Distribution Date will become vested in that percentage of his or

her  Account  remaining on that Distribution  Date  as  specified

below:

 

          First Distribution Date           25.00%

          Second Distribution Date          33.33%

          Third Distribution Date           50.00%

          Fourth Distribution Date         100.00%

 

     A Participant who incurs a Termination shall forfeit any

remaining unvested portion of his or her Account on the date of

such Termination; provided, however, that a Participant who dies

or becomes totally disabled before having incurred a Termination

shall fully vest in his or her Account.

 

     2.2  Forfeitures. The MDU Shares forfeited under Section 2.1 shall be

reallocated among the Accounts of Participants immediately before

the next following Distribution Date in proportion to the Account

balances that have not been forfeited as of that Distribution

Date.  A Participant's allocation under this section shall

include any fractional MDU Share that results from the pro rata

computation.

 

                           ARTICLE III

                 CREDITS AND CHARGES TO ACCOUNTS

 

     3.1  Account.  An Account shall be established and maintained for each

Participant, which Account shall be credited initially with the

number of MDU Shares set forth opposite the Participant's name on

Schedule A.  Subject to all of the terms and conditions of this

Plan, each Participant shall be entitled to receive the MDU

Shares credited to his or her Account.  Each Account shall be

charged with distributions, income taxes and any other amounts

required to be withheld under Section 4.6, and credited with

forfeitures as described in Section 2.2.

 

     3.2  Earnings.  Dividends paid on MDU Shares held by the Trust shall be

accumulated in the Trust and allocated to Accounts as of the next

following Distribution Date in proportion to the Account balances

that have not been forfeited as of that Distribution Date.

 

                           ARTICLE IV

                          DISTRIBUTIONS

 

     4.1  No Withdrawals. Except as otherwise provided in this article,

withdrawals are not available from an Account.

 

     4.2  Timing of Distribution.  On each Distribution Date (or as soon

as is practicable thereafter), and subject to the fractional share rule

in Section 4.7, the Participant shall receive a distribution of the portion

of his or her Account that became vested on that date under

Section 2.1, plus cash in the amount of any dividends credited to

the Account under Section 3.2 (regardless of whether the

dividends were paid on vested or unvested MDU Shares), all

appropriately adjusted for withholding taxes under Section 4.6.

 

     4.3    Death or Disability.  Should a Participant die or become

totally disabled before incurring a Termination, the Participant's Account

shall vest in full and be paid to his or her Beneficiary under Article

V, or to the Participant, on the next Distribution Date (or as

soon as is practicable thereafter).

 

     4.4  Limitation on Distributions to Covered Employee.  Notwithstanding

any other provision of this article, if a Participant is a "covered

employee" as defined in Code Section162(m)(3) at the time of any

distribution, the maximum amount which may be distributed from such a

Participant's Account in any Plan Year shall not exceed $1,000,000, less

the amount of compensation paid to the Participant by the Company in such Plan

Year which is not "performance-based" (as defined in Code Section

162(m)(4)(C)).  Such amount shall be reasonably determined by the

Administrator at the time of the proposed distribution.  Any

amount not distributed to a Participant in a Plan Year as a

result of the limitation set forth in this section shall be

distributed in the next Plan Year, which may again be subject to

the limitation of this section.

 

     4.5  Payments to Minors and Incompetents.  If any person entitled to

any payment under this Plan is, in the judgment of the Administrator,

incapable of giving receipt for such payment because of minority, illness,

infirmity or other incapacity, the Administrator may pay the amount due such

person to a duly appointed legal representative, if there is one, or, if

none, to the spouse, children, dependents, or such other persons

with whom the person entitled to payment resides.  Any such

payment shall be a complete discharge of the liability of the

Company, its Affiliates, and the Plan with respect to such

payment.

 

     4.6  Tax Withholding.  The Company (or Trustee, as the case may be)

shall deduct from any payment or share delivery made under this Plan an amount

equal to, or shares having a value equal to, all or part of any

taxes required by law to be withheld by the Company (including

withholding and employment taxes), and any other amounts required

to be withheld by applicable law or court order.  The Company or

Trustee may sell, on the Participant's behalf, shares that would

otherwise be distributed if the proceeds are used to satisfy the

Participant's tax withholding and other obligations described in

this section.

 

     4.7  Fractional Shares.  In general, fractional MDU Shares shall not be

distributed under the Plan, and the fractional MDU Share that

would otherwise be distributed shall instead remain in the

Participant's Account.  Immediately before the fourth and final

Distribution Date, any fractional MDU Share in an Account, that

is at least one-half of one share, shall be rounded up to a whole

share, and all other fractional MDU Shares in an Account shall be

forfeited without compensation; provided, however, that the

Administrator may make an appropriate adjustment to this

calculation to eliminate any rounding errors and ensure that all

MDU Shares in the Trust are allocated to Accounts.

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