CONSULTING AGREEMENT

This Consulting Agreement, dated as of September 5, 2008, (the "Agreement"), is
entered into by and between NorthWestern Energy ("NWEC" or "Company"), a
Delaware corporation with its principal place of business located at 3010 West
69th Street, Sioux Falls, South Dakota, 57108 and Thomas J. Knapp ("Knapp" or
"Consultant"), a Maryland resident. NWEC and Knapp are collectively referred to
herein as the "Parties."

WHEREAS, Knapp was employed with NWEC through August 29, 2008; and

WHEREAS, the Company and Knapp amicably agree to terminate his employment; and

WHEREAS, NWEC is agreeable to ending Knapp's employment with NWEC and entering
into a agreement with Knapp with agreed upon consulting services to NWEC for the
period September 1, 2008 through December 31, 2008, unless terminated by NWEC,
by Knapp or on the date Knapp has secured other employment unless extended by
mutual agreement; and

WHEREAS, Knapp desires to provide certain consulting services;

NOW, THEREFORE, in consideration of the mutual promises made herein, and for
other good and valuable consideration, the parties hereby agree as follows:

1. Engagement.

a. NWEC agrees to engage Knapp, and Knapp agrees to provide certain agreed upon
consulting services on behalf of NWEC as more fully described in Exhibit A
attached hereto and incorporated herein by reference (hereinafter "Consulting
Services.") It is the intent of the Parties and it is understood and agreed
that, in the performance of such Consulting Services under the terms of this
Agreement, and any amendments thereto, Knapp shall perform such Consulting
Services as an independent contractor with respect to NWEC, and not as an
employee of NWEC, it being specifically agreed that the relationship is and
shall remain that of independent parties to a contractual relationship as set
forth in this Agreement.

b. The Parties agree that NWEC shall determine the Consulting Services to be
performed by Knapp under this Agreement, subject to the conditions set forth
within this Agreement. Knapp understands and agrees that in performing such
Consulting Services. Knapp agrees that he may not transfer, assign or
subcontract his obligations under this Agreement without the express written
consent of NWEC.

c. For the purposes of this Agreement, it is understood and agreed by the
Parties that Knapp shall perform the Consulting Services from 7116 Darby Road,
Bethesda, Maryland 20817 or such other location as Knapp determines or the
Company requires. Knapp may be required to travel in performance of the
Consulting Services but only upon approval by NWEC.

d. NWEC is not responsible for payroll withholdings, and shall not withhold FICA
or taxes of any kind from any payments that it owes Knapp.

e. Knapp agrees that neither Knapp his employees, employees of a business entity
for which Knapp serves as an employee, partner or other type of owner, shall be
entitled to receive any benefits which employees of NWEC are entitled to
receive. Further, Knapp agrees that he is not eligible to receive and is not
covered by NWEC workers' compensation, unemployment compensation, health
insurance, life insurance, paid vacations, paid holidays, incentive
compensation, pension, or profit sharing, or any similar employee benefit.

f. Knapp shall be solely responsible for paying his employees, if any, and shall
be solely responsible for paying any and all taxes, FICA, workers' compensation,
unemployment compensation, health insurance, life insurance, paid vacations,
paid holidays, pension, profit sharing and other similar benefits for Knapp and
his employees, servants and agents. Knapp shall also be responsible for likewise
paying any employees of a business entity for whom Knapp serves as an employee,
partner or other type of owner as well as any third party entities or
individuals with whom he may contract. Knapp will indemnify and hold harmless
NWEC from any and all loss or liability, including attorney's fees, arising from
his failure to make any of these payments or withholdings, or provide these
benefits, if any.

g. If the Internal Revenue Service or any other governmental agency should
question or challenge Knapp's independent consulting status, Knapp and NWEC
shall have the right to participate in any discussion or negotiation occurring
with any agency or agencies, regardless of with whom or by whom these
discussions or negotiations are initiated.

 

2. Work. Knapp shall perform the work as more particularly described in Exhibit
A.

a. Knapp agrees to comply with all applicable laws, codes and regulations and
other instructions, standards of conduct, policies and procedures established
and/or promulgated by NWEC, orally or in written or electronic form, which may
be amended from time to time.

b. Knapp shall report on legal matters to the Vice President, General Counsel
and Corporate Secretary and on governmental affairs matters to the Vice
President, Government and Regulatory Affairs of NorthWestern Energy, unless
otherwise instructed.

c. Knapp shall have access to only the following NWEC property: Company email
system, computer equipment, cellular phone, corporate jet and other resources
mutually agreed upon for business purposes.

 

3. Compensation. Knapp shall be paid a retainer fee for work rendered to NWEC in
the amount of $15,000.00 (Fifteen Thousand Dollars) to be paid within the first
five (5) working days after acceptance of this agreement by both parties and
thereafter the same amount to be paid within the first five (5) days of each
subsequent month covered by this Agreement. A Form 1099 shall be issued each
year for all payments made. No deductions will be made from these checks.

 

4. Intellectual Property. Knapp shall make no use of NWEC trademarks, trade
names, service marks, copyrights or other intellectual property of NWEC, NWEC
engage in any program or activity that makes use of or contains any reference to
NWEC, its trademarks, trade names, service marks, or copyrights except with
written consent of NWEC, expressed in a duly executed license agreement or
otherwise. By executing this Agreement, NWEC hereby grants Knapp its written
consent to refer to NWEC in discussions and through forms, correspondence or
other documentation provided and/or approved by NWEC. Knapp shall report to NWEC
all violations of NWEC's intellectual property and other proprietary rights and
other works immediately upon discovery of such violations by Knapp.

 

5. Covenants of Knapp. Knapp covenants as follows:

a. Knapp shall exercise reasonable efforts to not at any time, during or after
the term of this Agreement, directly or indirectly divulge or otherwise disclose
to anyone other than an employee of NWEC the procedures and policies of NWEC, or
other information which is confidential or proprietary to NWEC, unless under
legal obligation to do so or unless NWEC gives its prior written consent to such
disclosure.

b. All books, records, notes, reports, copies, advertising, contracts, documents
and other information or writings relating to NWEC's business or its customers,
employees, contractors, or agents, whether prepared by Knapp or otherwise coming
into the possession of Knapp, are and shall remain the exclusive property of
NWEC and shall be returned to NWEC upon termination of this Agreement or upon
demand. No copies shall be retained by Knapp.

c. Knapp acknowledges that each of the foregoing matters is important and
material to the business and success of NWEC and agrees that any breach of this
paragraph 5 is a material breach of this Agreement, from which Knapp may be
enjoined and for which Knapp shall be liable for to NWEC for appropriate
compensatory damages which arise from the breach, together with interest and
costs.

 

6. Non-Exclusive Agreement. The work performed for NWEC under this Agreement is
not intended to be exclusive. Knapp shall be free to undertake additional
consulting activities for another party provided that such activities do not
interfere with the timely execution of the Work set forth in this Agreement.
Knapp agrees to request the consent of NWEC for any consulting activities with
any entity in order to insure that a material conflict does not exist. To the
extent such conflict involves the provision of legal services, NWEC's Law
Department will determine if the conflict can be waived. To the extent such
conflict involves the provision of non-legal services, NWEC shall not
unreasonably withhold such consent.

 

7. Indemnification. To the maximum extent permitted by law, Knapp shall defend,
indemnify and hold harmless NWEC and its related and affiliated companies and
all divestitures, directors, officers and employees, and hold them from all
obligations, costs, fees, losses, liabilities, claims, judgments, actions,
damages and expenses suffered, incurred or sustained by NWEC, its related and
affiliated companies and all their respective directors, officers and employees
which, in connection with this Agreement, arise out of or are related to (a)
Knapp's intentional wrongdoing, intentional breach of duty, fraud, and/or
intentional violation of any applicable laws, rules and regulations of federal
or state governmental and regulatory agencies; (b) any activity by Knapp outside
the scope of this Agreement; or (c) claims for benefits, compensation, damages
or other amounts by any individual employed or retained by Knapp. Nothing about
this provision shall in any way diminish or restrict any rights or claims Knapp
may have for indemnification, including any under the Indemnification Agreement
dated April 11, 2006 between the parties, or under any other agreement, statute,
or common law theory.

 

8. Expenses. Knapp shall be reimbursed by NWEC for reasonable and verifiable
expenses within thirty (30) days of presentation.

 

9. Term and Termination. This Agreement is effective as of September 1, 2008 and
shall continue in effect through December 31, 2008. NWEC may terminate this
Agreement for cause upon written notice to Knapp. Cause shall be defined as the
failure of Knapp to cure after being provided written notification of a breach
of the terms of this Agreement, failure to fulfill the duties and conditions of
this Agreement, violation of NorthWestern's Code of Business Conduct and Ethics,
or a violation of any of the laws and regulations applicable to the Work within
this Agreement. If NWEC terminates for cause, no payments will be due Knapp
under this Agreement. In the event NWEC elects to terminate this Agreement for
convenience, NWEC shall pay Knapp a termination fee equal to $60,000.00 (Sixty
Thousand Dollars) less the cumulative amount of all fees paid to Knapp prior to
the termination date. In the event that Knapp secures other employment, Knapp
agrees to use his best efforts to negotiate terms that would allow him to
fulfill the terms of this Agreement. All such notices shall be delivered via
email or US mail to NWEC's Vice President, General Counsel and Corporate
Secretary or Knapp at the address indicated herein or to such other place as
designated in writing by the Parties.

 

10. Assignment. Knapp may not assign his rights or delegate his duties under
this Agreement without the prior written consent of NWEC. However, NWEC's rights
and obligations under this Agreement may be assigned and delegated upon written
notice to Knapp.

11. Waiver. Waiver by NWEC of any breach by Knapp shall not operate or be
construed as a waiver of any subsequent breach by Knapp.

12. Law, Jurisdiction and Venue. The validity, interpretation, and performance
of this Agreement shall be controlled by and construed in accordance with the
laws of the State of South Dakota..

13. Arbitration of Disputes. NWEC and Knapp agree to resolve any claims they
may have with each other through final and binding arbitration in accordance
with the then current arbitration rules and procedures for disputes governing
arbitrations administered by the Judicial Arbitration and Mediation Service
(JAMS).

14. Entire Agreement. This Agreement constitutes the entire Agreement between
the parties with respect to the consulting arrangement between the parties
hereof and supersedes any other agreement relating to any consulting
arrangement. It specifically does not supersede and has no effect on the Waiver
and Release between the parties, any of Knapp's rights to severance benefits
under that agreement, or the Indemnification Agreement between the parties dated
April 11, 2006. This Agreement may be modified or amended only by an instrument
in writing signed by both parties hereof.

15. Captions. The captions stated herein are for convenience only and are not
intended to alter any of the provisions of this Agreement.

 

Thomas J. Knapp NorthWestern Corporation By: /s/ THOMAS J. KNAPP By: /s/ MIGGIE
CRAMBLIT Address: 7116 Darby Road Its: Vice President, General Counsel

 

Bethesda, Maryland 20817

 

and Corporate Secretary

Date: September 13 ,2008 Date: September 5, 2008

 

 

 

 

EXHIBIT A

All requests for service by Knapp from NWEC will be communicated from NWEC
officers or NWEC outside counsel.

Initial Services include, but are not limited to, the following:

 

•

Continued work on Colstrip 4 Rate Base Docket and Investigation

 

 

•

Continued work to finalize the Touch America settlement

 

 

•

Continued work to build relationships with NWEC's congressional delegations