Exhibit 10.1(i)

NORTHWESTERN ENERGY

2008 EMPLOYEE INCENTIVE PLAN

 

 

I.

Introduction

 

NorthWestern Energy (NWE) utilizes this Incentive Plan (Plan) to communicate
desired business results and to reward employees for their contributions toward
achieving those business results.

 

II.

Plan Objectives

 

This Plan is designed to achieve the following objectives:

 

 

•

Align the interests of shareholders, customers and employees.

 

•

Create incentives for employees to achieve financial and operating results.

 

•

Reward employees individually and as a team by providing compensation
opportunities consistent with company financial and operating performance.

 

The Plan is funded through achievement of targeted results on key organizational
performance objectives, inclusive of costs associated with the Plan. After
implementation, the Plan will be reviewed periodically to ensure that the
desired results are being achieved.

 

III.

Plan Administration

 

The Plan is approved by the NWE's Board of Directors (Board) and administered by
the NWE Incentive Plan Administration Committee (Officer Committee) consisting
of the NWE President and CEO, CFO, and Vice President – Administrative Services.
The Officer Committee is responsible for all aspects of administration of the
Plan, and is responsible for resolving any conflicts or discrepancies that
arise. The Officer Committee’s decision on any matter associated with this Plan
is final, subject to approval by the Board's Human Resources Committee.

 

IV.

Performance Period and Effective Date

 

The Plan’s performance period is for the calendar year 2008. The Plan becomes
effective January 1, 2008, and will continue until December 31, 2008, subject to
suspension and/or termination by NWE, at any time, without prior notice and at
its sole discretion, subject to approval by the Board.

 

V.

Participation and Eligibility

 

All nonunion regular full-time, regular part-time, limited part-time and
supplemental employees of NWE employed on the last business day of the plan year
are eligible to receive payments under the Plan provided they are actively
employed by NWE for at least one full quarter of the plan year. Eligibility for
represented employees to participate

 

 

2008 NorthWestern Energy Employee Incentive Plan

 

in the Plan will be determined by the Officer Committee annually and NWE
reserves the right to include or exclude represented employees on a year-by-year
basis. To participate in the plan, employees must have written goals and
objectives consistent with NWE’s goals and objectives. These employee goals must
target results that meet or exceed the normal requirements of the position and
that contribute to meeting the goals and objectives of the company. Goals and
objectives can be based on either individual or group performance; however, each
employee must have at least one goal that contributes to cost reduction or
process improvement.

 

VI.

Individual Awards

 

Awards to plan participants from the Performance Pool will be determined based
on individual performance ratings that evaluate achievement against established
goals and objectives as well as overall job performance. Leaders will evaluate
individual employee’s overall performance during the period covered by the plan
to determine individual awards. Participating employees must meet acceptable
performance standards, as defined and approved by the Officer Committee, to be
eligible for an award. Employees who are under an active step of Progressive
Discipline or employees whose performance is not at an acceptable level are not
eligible for an award unless permitted in the approved performance standards.

 

Employees are eligible for a prorated incentive award based upon the amount of
time served in an eligible status with NorthWestern Energy during the
performance period if they:

 

(1)

are classified as seasonal supplemental (except first-year),

 

(2)

were under an active step of Progressive Discipline for a portion of the
performance period,

 

(3)

work on a part-time basis,

 

(4)

are granted unpaid leave, including military leave, that is nonmedical in nature
and that exceeds 80 hours,

 

(5)

retired, provided they worked at least one full quarter during the performance
period, or

 

(6)

were terminated other than for cause and received severance benefits, except
change of control benefits, under the Employee or Officer Severance Plans
currently in effect for the Plan Year.

 

Temporary, summer and first-year seasonal supplemental employees, as well as
independent contractors, are not eligible to participate in the Plan.

 

Distributions under the Plan are at the discretion of the Officer Committee,
subject to approval of the Board's Human Resources Committee.

 

Distributions from the Plan do not guarantee any right to continued employment,
and NWE reserves the right to terminate the plan at any time with or without
notice. The Plan does not create any expectation or right to employment. A
distribution from the Plan in

 

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2008 NorthWestern Energy Employee Incentive Plan

 

any one performance period does not guarantee the participant a distribution or
the right to participate in any subsequent performance period.

 

VII.

Target Incentives

 

Target incentive level for each participating employee is set by position and
will be expressed as a percentage of base salary. Each participant's target
incentive is subject to approval by the Officer Committee and any changes will
be communicated in writing to participants. Senior executive target incentive
levels will be approved by the Board.

 

VIII.

Performance Pool

 

The Performance Pool will be created based on four factors net income, electric
service reliability, customer satisfaction and employee safety. Each of these
measures will be calculated at the conclusion of the performance period.
Periodic accruals will be made to provide for the Performance Pool at year-end.
The Performance Pool will be funded in accordance with Table 1.

 

Table 1

 

 

Weight

2008 Plan Funding Level

Incentive Metric

Threshold 50%

TARGET

100%

Max

150%

Financial

Net Income

55%

-10%

61.6M

Budget 68.5M

+10%

75.3M

Safety

 

 

 

 

 

Lost Work Day Incident Target Rate

15%

2.60

2.00

1.50

 

Reliability

CAIDI

15%

99.80

94.80

89.80

Customer Satisfaction

 

 

 

 

 

Image

15%

7.50

7.65

7.80

 

Footnotes:

1) All financial targets are based on Board-approved budget for 2008.

2) Net income must be at or greater than the threshold amount (90 percent of
budgeted net income) in order to fund the plan. 3) Funding level is computed by
prorating if actual results lie between Threshold (50%) through Maximum (150%).
4) An employee fatality will result in no incentive award points tired to safety
for the deceased employee’s work group and every supervisor in the chain of
command up to and including the CEO.

 

In calculating performance against target, adjustments will be made either
positively or negatively for one-time events and extraordinary nonbudgeted items
as approved by the Board.

 

As soon as possible after the end of the performance period, NWE will calculate
the actual performance and compare it to the performance targets. Such
calculations shall be finally determined in the sole discretion of Board's Human
Resources Committee or an appointed designee. Employees shall have no recourse,
appeal or challenge available from this final determination. Summary results
will be provided to employees.

 

 

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2008 NorthWestern Energy Employee Incentive Plan

 

 

IX.

Performance Pool Distribution and Incentive Pay Calculation

 

Individual employee performance is a key consideration in calculating
distribution of incentive pay. The Performance Pool will be allocated to each
officer using total target incentive dollars at the end of the Performance
Period for eligible employees in each functional unit, division or department
adjusted based on the performance funding level achieved. The Performance Pool
will be divided into two pools: a “Fixed Pool” and a “Discretionary Pool.” Fifty
percent (50%) of the Performance Pool will be allocated to the Fixed Pool; the
remaining fifty percent (50%) will be allocated to the Discretionary Pool. Each
Eligible Employee that has a performance rating of met or exceeded expectations
will receive a distribution from the Fixed Pool calculated as follows:

 

Employee’s target incentive amount x performance funding level achieved x 50% x
Fixed Percentage based on individual’s performance rating

 

Each officer will then allocate the Discretionary Pool to his or her leaders as
appropriate based on either obtaining department/division performance goals or
individual employee performance for further distribution. Leaders will submit
recommended distributions to individual employees subject to the functional
officer’s and Officer Committee approval. In no case will the total payouts in a
given Performance Pool exceed the total dollars available for that Performance
Pool.

 

X.

Payment of Awards

 

Awards will be made in the same manner as each employee’s normal payroll
processing, either in the form of Company check or direct deposit. Awards will
be paid out to employees as soon as practicable, but no later than March 15,
2009. Awards are considered ordinary income and subject to all appropriate
taxes.

 

Awards may not be made under the Plan if, in the sole and final judgment of the
Board, the overall financial condition of the Company is insufficient to support
awards.

 

XI.

Other Considerations

 

All awards are subject to income tax withholding and garnishment requirements.
No right or interest in the Plan is transferable or assignable.

 

 

____________________________

 

Recommended by the Human Resources Committee on February 27, 2008.

Approved by the Board of Directors on February 27, 2008.

 

 

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