NORTHWESTERN CORPORATION

2008 KEY EMPLOYEE SEVERANCE PLAN

_______________________________

Effective October 1, 2008

_______________________________

 

 

 

 

 

 

 

 

Approved by the Board of Directors

September 26, 2008

 

 

 

TABLE OF CONTENTS

Page

Article 1

DEFINITIONS

2

Article 2

SEVERANCE PLAN PROVISIONS

3

 

2.1

Eligibility for Severance Benefits

3

 

2.2

Severance Benefits

4

Article 3

ADDITIONAL PROVISIONS

4

 

3.1

Ineligibility for Severance Benefits

4

 

3.2

Re-employment

4

 

3.3

Taxes

4

 

3.4

Relation to Other Plans

5

 

3.5

Amendment or Termination

5

ARTICLE 4

SUPERIOR PLAN PROVISIONS

5

 

4.1

Surviving Plan

5

ARTICLE 5

ADMINISTRATIVE PROVISIONS

5

 

5.1

General

5

 

5.2

Costs and Indemnification

6

 

5.3

Limitation on Employee Rights

6

 

5.4

Governing Law

6

 

5.5

Miscellaneous

6

 

6.6

ERISA Rights

7

 

5.7

Claims Procedures

8

 

 

 

 

-i-

 

 

 

 

 

NORTHWESTERN CORPORATION

2008 KEY EMPLOYEE SEVERANCE PLAN

Effective October 1, 2008

NorthWestern Corporation (the “Company”), a Delaware corporation, by resolution
of its Human Resources Committee (“Committee”) and Board of Directors (“Board”)
dated September 19 and September 26, 2008, respectively, effective as of October
1, 2008 (“Effective Date”) has adopted this NorthWestern Corporation 2008 Key
Employee Severance Plan (the “Plan”), for the benefit of key employees of the
Company. The severance provisions of this Plan are an “employee welfare benefit
plan” as defined in Section 3(1) of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”), and are not intended to be a “pension plan” as
defined in Section 3(2)(A) of ERISA, and shall be administered so as not to be
an ERISA pension plan.

ARTICLE 1

 

DEFINITIONS

Whenever the following terms are used in the Plan with the first letter
capitalized, they shall have the meaning specified below unless the context
clearly indicates to the contrary.

 

1.1

“Administrator” shall mean NorthWestern Corporation or certain officer or
officers of the Company as designated by the Board.

 

1.2

“Board” shall mean the Board of Directors of NorthWestern Corporation. The Board
may delegate its power or duty over this Plan to any other person or persons,
including a committee or sub-committee.

 

1.3

“Cause” under the provisions of this Plan shall mean any of the following:

 

1.3.1

Fraud, misappropriation of corporate property or funds, or embezzlement;

 

1.3.2

Malfeasance in office, misfeasance in office which is willful or grossly
negligent, or nonfeasance in office which is willful or grossly negligent;

 

1.3.3

Failure to comply with the Company’s Code of Conduct;

 

1.3.4

Illegal conduct, gross misconduct or dishonesty, in each case which is willful
and results (or is reasonably likely to result) in substantial damage to the
company; or

 

1.3.5

Willful and continued failure by the employee to perform substantially his/her
duties with the Company (other than any such failure resulting from his/her
incapacity due to physical or mental illness) after receiving written demand for
substantial performance from his/her

 

 

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immediate supervisor and after having been provided a reasonable period to
correct the same. The written demand will specifically identify the manner in
which such immediate supervisor believes the employee has not substantially
performed his/her duties.

 

1.4

“Company” shall mean NorthWestern Corporation and all of its affiliates, and any
entity, which is a successor in interest to the Company.

 

1.5

“Disability” shall mean that a Participant is (i) unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than twelve (12) months, or (ii) by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, receiving income replacement benefits for a
period of not less than three (3) months under an accident or health plan
covering employees of the Participant’s Employer.

 

1.6

“Eligible Employee” shall mean all employees of the Company who hold the title
of “Officer” or “Assistant Officer” or who are otherwise classified by the
Company as an “Officer” or “Assistant Officer” of the Company, who are not
ineligible to receive severance benefits under this Plan based on a provision in
an employment agreement with the Company and are not ineligible under Section
3.1.

 

1.7

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with regulations there under.

 

1.8

“Participant” shall mean each Eligible Person.

 

1.9

“Plan” shall mean the NorthWestern Corporation 2008 Key Employee Severance Plan.

 

1.10

“Retirement” shall mean the same definition provided under the Company sponsored
pension /retirement plan in which each Eligible Employee participates.

 

ARTICLE 2

 

SEVERANCE PLAN PROVISIONS

 

2.1

Eligibility for Severance Benefits

You will be eligible to receive Severance Benefits pursuant to Section 2.2 of
the Plan only if (i) you are an Eligible Employee and (ii) you execute the No
Solicitation, Waiver and Release Agreement provided to you by the Company upon
your termination of employment.

 

 

 

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2.2

Severance Benefits

If the Company terminates the employment of an Eligible Employee without Cause
(as defined in Section 1.3), the Company, upon receipt of a properly executed No
Solicitation, Waiver and Release Agreement, shall pay to such Eligible Employee
the following:

 

2.2.1

a lump sum cash severance payment in an amount equal to one (1) times the
Eligible Employee’s annual base pay in effect on the date of termination of
employment, generally payable within the payroll cycle following the termination
date but in no event later than thirty (30) days from the date of termination of
employment;

 

2.2.2

reimbursement of any premiums paid by an Eligible Employee for COBRA coverage
for twelve (12) months following such Eligible Employee’s termination of
employment. Notwithstanding the foregoing, an Eligible Employee shall no longer
be entitled to reimbursement of COBRA premiums under this Section 2.2.2 if such
Eligible Employee becomes eligible for medical coverage under another employer’s
group medical plans; and

 

2.2.3

outplacement services provided by a Company selected provider limited to $12,000
per Eligible Employee over a period not to exceed twelve (12) months following
the date employment is terminated.

ARTICLE 3

 

ADDITIONAL PROVISIONS

 

3.1

Ineligibility for Severance Benefits

 

3.1.1

Persons Who Resign, etc., persons whose employment terminates voluntarily, or
due to Cause, Retirement, death or Disability.

 

3.1.2

Changed Decisions, at the discretion of the Administrator, persons for whom
NorthWestern cancels a pending termination of employment at any time before
employment actually terminates may also be deemed ineligible for Severance
Benefits.

 

3.2

Re-employment

If you are re-employed by NorthWestern or a Successor Employer while Severance
Benefits are being paid to you under the Plan, all such benefits will cease,
except as otherwise agreed by NorthWestern or the Successor Employer, as the
case may be.

 

3.3

Taxes

Taxes will be withheld from Severance Benefits to the extent required by law.

 

 

 

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3.4

Relation to Other Plans

This Plan is in lieu of any prior severance plans, policies or programs that
might apply to you. Severance Benefits under this Plan will be counted as
“compensation” for purposes of determining benefits under any other supplemental
pension plan or similar arrangement.

 

3.5

Amendment or Termination

This Plan may be amended, revised, changed, terminated or cancelled at any time
to eliminate, decrease or increase the Severance Benefits payable to Eligible
Employees. The Company has complete and absolute discretion to terminate, amend,
modify or enhance the Plan at any time as it deems appropriate. Nothing in this
Plan precludes an Eligible Employee from waiving his/her rights and/or
entitlements to any benefits under this Plan in exchange for alternative
severance benefits payable by the Company under a separate agreement.

ARTICLE 4

 

SUPERIOR PLAN PROVISIONS

 

4.1

Surviving Plan  

This Plan shall control the terms and amounts of Severance Benefits payable to
Eligible Employees regardless of any severance benefits policies, plans or
programs of the Company established prior to the adoption of this Plan.
Accordingly, this Plan in its entirety shall supersede all Company adopted
policies, plans or programs of the Company that provide severance or change of
control benefits to Eligible Employees. This Plan shall be binding upon any
successor organization of the Company and shall inure to the benefit of the Plan
Participants. Notwithstanding the foregoing, nothing in this Plan precludes an
Eligible Employee from waiving his/her rights and/or entitlements to any
benefits under this Plan in exchange for alternative severance benefits payable
by the Company under a separate agreement.

ARTICLE 5

 

ADMINISTRATIVE PROVISIONS

 

5.1

General

 

5.1.1

Discretion. The Administrator is responsible for the general administration and
management of the Plan and shall have all powers and duties necessary to fulfill
its responsibilities, including, but not limited to, the discretion to interpret
and apply the Plan and to determine all questions relating to eligibility for
benefits. The Administrator shall have the discretion to interpret or construe
ambiguous, unclear or implied (but omitted) terms as it deems appropriate in its
sole discretion. The validity of any such interpretation, construction, decision
or finding of fact shall not be given de novo review if challenged in court, by
arbitration, or in any other forum, and shall be upheld unless clearly arbitrary
or capricious.

 

 

 

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5.1.2

Finality of Determinations. All actions taken and all determinations made in
good faith by the Administrator will be final and binding on all persons
claiming any interest in or under the Plan. To the extent the Administrator has
been granted discretionary authority under the Plan, the Administrator’s prior
exercise of such authority shall not obligate it to exercise its authority in a
like fashion thereafter.

 

5.1.3

Drafting Errors. If, due to errors in drafting, any Plan provision does not
accurately reflect its intended meaning, as demonstrated by consistent
interpretations or other evidence of intent, or as determined by the
Administrator in its sole discretion, the provision shall be considered
ambiguous and shall be interpreted by the Administrator in a fashion consistent
with the evidenced intent.

 

5.2

Costs and Indemnification

All costs of administering the Plan and providing Plan benefits will be paid by
the Company. To the extent permitted by applicable law and in addition to any
other indemnities or insurance provided by the Company, the Company shall
indemnify and hold harmless its (and its affiliates) current and former
officers, directors, and employees against all expenses, liabilities and claims
(including legal fees incurred to defend against such liabilities and claims)
arising out of their discharge in good faith of their administrative and
fiduciary responsibilities with respect to the Plan. Expenses and liabilities
arising out of willful misconduct will not be covered under this indemnity.

 

5.3

Limitation on Employee Rights

This Plan shall not give any employee the right to be retained in the service of
the Company or interfere with or restrict the right of the Company to discharge
or retire the employee. This Plan shall not constitute a contract of employment
of any kind.

 

5.4

Governing Law

This Plan is a welfare benefit plan subject to ERISA, and it shall be
interpreted, administered, and enforced in accordance with that law. To the
extent that state law is applicable, the statutes and common law of the State of
Delaware (excluding any that mandate the use of another jurisdiction’s laws)
shall apply.

 

5.5

Miscellaneous

Where the context so indicates, the singular will include the plural and vice
versa. Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of the Plan. Unless the context clearly
indicates to the contrary, a reference to a statute or document shall be
construed as referring to any subsequently enacted, adopted or executed
counterpart.

 

 

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5.6

ERISA Rights

The following information required by ERISA is furnished by the Administrator.

 

5.6.1

General Plan Information.

Name of Plan:

NorthWestern Corporation 2008 Key Employee Severance Plan

Plan Administrator’s Name:

Address and Phone Number:

NorthWestern Corporation

3010 West 69th Street
Sioux Falls, South Dakota 57104
Telephone: 605-978-2902

Employer Identification
Number assigned by IRS:

46-0172280

Plan Number of the Plan:

TBD

Type of Plan:

Severance Pay Plan

Type of Administration:

Employer Administration

Name and Address of Registered Agent for Service of Legal Process:

Plan Administrator

Source of Contribution to the Plan:

General assets of NorthWestern Corporation

Funding Medium:

General assets of NorthWestern Corporation

Plan Fiscal Year Ends On:

December 31

 

 

5.6.2

Plan Modification, Amendment, and Termination. The Administrator has the right
to amend or terminate the Plan only in accordance with Section 3.5 and 5.7.5.

 

5.6.3

Your Rights under ERISA. As an Eligible Employee in the Plan, you are entitled
to certain rights and protections under ERISA. Your rights include the
following:

 

(a)

Right to Examine Plan Documents. You have the right to examine all plan
documents. The Administrator will tell you where the plan documents are
available for examination. There will be no charge for examining plan documents.

 

(b)

Right to Obtain Copies of Plan Documents. You have the right to obtain copies of
all plan documents. You should make your request in writing to the
Administrator. There may be a reasonable charge for the copies.

 

 

 

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(c)

Right to Written Explanation of Denial. If your claim for benefits under the
plan is denied in whole or in part, you must be given a written explanation of
the reason for denial.

 

(d)

Right to Review. You have the right to request a review and reconsideration of
any denial of your claim for plan benefits.

 

(e)

Other ERISA Rights. You can protect your rights under ERISA. For example, ERISA
gives you the right to file suit in a state or federal court if your claim for
benefits under the plan is denied or ignored. You also can file suit in a
federal court if you request plan documents and do not receive them within
thirty (30) days. In such a case, the court will require the Administrator to
give you the plan documents you requested. In some cases, the court could also
require the Administrator to pay you up to $110 a day until you receive the
requested materials.

If you have any questions about your plan, you should contact the Administrator.
If you have any questions about this statement of your rights under ERISA, you
should contact the nearest office of the Employee Benefits Security
Administration, U.S. Department of Labor, listed in your telephone directory or
the Division of Technical Assistance and Inquiries, Employee Benefits Security
Administration, U.S. Department of Labor, 200 Constitution Avenue N.W.,
Washington, D.C. 20210. You may also obtain certain publications about your
rights and responsibilities under ERISA by calling the publications hotline of
the Employee Benefits Security Administration.

 

5.7

Claims Procedures

 

5.7.1

Claims Normally Not Required. Normally, you do not need to present a formal
claim to receive benefits payable under this Plan.

 

5.7.2

Disputes. If any person (Claimant) believes that benefits are being denied
improperly, that the Plan is not being operated properly, that fiduciaries of
the Plan have breached their duties, or that the Claimant's legal rights are
being violated with respect to the Plan, the Claimant must file a formal claim
with the Administrator. This requirement applies to all claims that any Claimant
has with respect to the Plan, including claims against fiduciaries and former
fiduciaries, except to the extent the Administrator determines, in its sole
discretion, that it does not have the power to grant all relief reasonably being
sought by the Claimant.

 

5.7.3

Time for Filing Claims. A formal claim must be filed within 90 days after the
date the Claimant first knew or should have known of the facts on which the
claim is based, unless the Administrator in writing consents otherwise.

 

5.7.4

Arbitration. The Participants and Company agree that any and all disputes,
controversies or claims of any kind or nature, including but not limited to any
arising out of or in any related to the interpretation of this Plan or to the
employment or separation of an Eligible Employee from the Company that have not
been resolved by the Company within 90 days of the filing of a formal claim by
Participant under Section 5.7.3, shall be submitted to binding arbitration under
the auspices and rules of the American Arbitration Association located nearest
to where the Eligible Employee resides. Judgment upon an award rendered by the
arbitrator may be entered in any competent court having jurisdiction over the
dispute. The Participants and Company agree that arbitration is in lieu of any
and all other civil legal proceedings and that all rights to resolve disputes
through court or trial by jury are hereby waived. Furthermore, the Company
agrees that it will reimburse an Eligible Employee for any legal costs arising
from an Arbitration proceeding that results in a favorable outcome for such
Eligible Employee.

 

5.7.5

Procedures. The Administrator has adopted the procedures for considering and
adjudicating claims, which it may amend from time to time, as it sees fit. These
procedures shall comply with all applicable legal requirements. The right to
receive benefits under this Plan is contingent on a Claimant using the
prescribed claims procedures to resolve any claim. Therefore, if a Claimant (or
his or her successor or assign) seeks to resolve any claim by any means other
than the prescribed claims provisions, he or she must repay all benefits
received under this Plan and shall not be entitled to any further Plan benefits.

Adopted and Approved

NORTHWESTERN CORPORATION

 

By:

/s/ Robert C. Rowe

September 26, 2008

 

Robert C. Rowe

Date

 

 

Title:

President and Chief Executive Officer

 

 

 

 

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