NORTHWESTERN
STOCK OPTION AND INCENTIVE PLAN
(As Amended and Restated by the Board of Directors on May 4, 1999)
Introduction
NorthWestern Corporation (`NorthWestern'), formerly
Northwestern Public Service Company, established the Northwestern
Public Service Company Stock Option and Incentive Plan effective
May 6, 1998. The Plan, now known as the NorthWestern Stock
Option and Incentive Plan (the `Plan') set forth below is an
amendment and restatement of the Plan.
Section 1. Purpose.
The purpose of the Plan is to benefit NorthWestern
Corporation and its Affiliates (as defined in Section 2) by
recognizing the contributions made to NorthWestern by officers
and other key Team Members (including Directors of NorthWestern
who are also Team Members) of NorthWestern and its Affiliates, to
provide such persons with additional incentive to devote
themselves to the future success of NorthWestern, and to improve
the ability of NorthWestern to attract, retain and motivate
individuals, by providing such persons with a favorable
opportunity to acquire or increase their proprietary interest in
NorthWestern over a period of years through receipt of options
and other awards relating to the common stock of NorthWestern.
In addition, the Plan is intended as an additional incentive to
members of the Board of Directors of NorthWestern (`Board') who
are not Team Members of NorthWestern (`Non-Employee Directors')
to serve on the Board and to devote themselves to the future
success of NorthWestern by providing them with a favorable
opportunity to acquire or increase their proprietary interest in
NorthWestern through receipt of options to acquire common stock
of NorthWestern.
NorthWestern may grant stock options that constitute
`incentive stock options' (`ISOs') within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the
`Code'), stock options that do not constitute ISOs (`NSOs') (ISOs
and NSOs being hereinafter collectively referred to as
`Options'), Restricted Stock Awards, Stock Appreciation Rights
(`SARs'), Limited Stock Appreciation Rights and Phantom Stock
Units (Options and other types of specified grants being
hereinafter collectively referred to as `Awards').
Section 2. Eligibility.
Non-Employee Directors shall participate in the Plan only in
accordance with the provisions of Sections 5 and 9 of the Plan.
The Committee (as defined in Section 3) shall initially, and from
time to time thereafter, select those officers and other key Team
Members (including Directors of NorthWestern who are also Team
Members) (collectively referred to herein as `Key Team Members')
of NorthWestern or any affiliated entity of NorthWestern, as
shown on the attached Exhibit 1 to the Plan, as it may be amended
from time to time by action of the Committee (`Affiliate'), to
participate in the Plan on the basis of the special importance of
their services in the management, development and operations of
NorthWestern or its Affiliates (each such Director and Key Team
Member receiving Awards granted under the Plan is referred to
herein as a `Participant'); provided, however, that the Committee
may delegate, in writing and subject to terms and conditions
which it deems appropriate, to the Chief Executive Officer of
NorthWestern the ability to make Awards to Key Team Members who
are not officers of NorthWestern or its Affiliates.
Section 3. Administration.
3.1 The Committee. The Plan shall be administered by the
Nominating and Compensation Committee of the Board (the
`Committee'). The Committee is comprised solely of `nonemployee
directors' within the meaning of Rule 16b-3 of the Securities
Exchange Act of 1934 (`Exchange Act') and `outside directors'
within the meaning of Section 162(m) of the Code.
3.2 Authority of the Committee. Except as provided in
Section 2, no person, other than members of the Committee, shall
have any authority concerning decisions regarding the Plan.
Subject to the express provisions of the Plan, including but not
limited to Sections 5 and 9, the Committee (or the Chief
Executive Officer, to the extent the Committee delegates
authority to him pursuant to Section 2) shall have sole
discretion concerning all matters relating to the Plan and Awards
granted hereunder. The Committee (or the Chief Executive
Officer, to the extent the Committee delegates authority to him
pursuant to Section 2) in its sole discretion, shall determine
the Key Team Members of NorthWestern and its Affiliates to whom,
and the time or times at which, Awards will be granted, the type
of Award to be granted, the number of shares to be subject to
each Award, the expiration date of each Award, the time or times
within which the Award may be exercised, the cancellation of the
Award (with the consent of the holder thereof), and the other
terms and conditions of the grant of the Award. The terms and
conditions of the Awards need not be the same with respect to
each Participant or with respect to each Award.
The Committee may, subject to the provisions of the Plan,
establish such rules and regulations as it deems necessary or
advisable for the proper administration of the Plan, and may make
determinations and may take such other action in connection with
or in relation to the Plan as it deems necessary or advisable.
Each determination or other action made or taken pursuant to the
Plan, including interpretation of the Plan and the specific terms
and conditions of the Awards granted hereunder by the Committee
(or the Chief Executive Officer, to the extent the Committee
delegates authority to him pursuant to Section 2) shall be final
and conclusive for all purposes and upon all persons including,
but without limitation, NorthWestern, its Affiliates, the
Committee, the Board, officers and the affected Team Members of
NorthWestern and/or its Affiliates and their respective
successors in interest.
No member of the Committee shall, in the absence of bad
faith, be liable for any act or omission with respect to service
on the Committee. Service on the Committee shall constitute
service as a Director of NorthWestern so that members of the
Committee shall be entitled to indemnification pursuant to
NorthWestern's Certificate of Incorporation and By-Laws.
Section 4. Shares of Common Stock Subject to Plan.
4.1 The total number of shares of common stock, par value
$1.75 per share, of NorthWestern (the `Common Stock'), that may
be issued and sold under the Plan initially shall be 2,750,000.
The total number of shares of Common Stock that may be available
for ISOs under the Plan shall be 2,750,000 and the total number
of shares of Common Stock and units subject to Restricted Stock
Awards and Phantom Stock Unit Awards shall be 2,750,000. The
total number of shares of Common Stock that may be available for
Awards (other than ISOs) under the Plan shall be adjusted on
January 1 of each calendar year, within the Applicable Period (as
defined below), so that the total number of shares of Common
Stock that may be issued and sold under the Plan for Awards
(other than ISOs) as of January 1 of each calendar year within
the Applicable Period shall be equal to, on an aggregate basis
from the inception of the Plan, twelve and one-half percent
(12.5%) of the outstanding shares of Common Stock of NorthWestern
on such date; provided, however, that no such adjustment shall
reduce the total number of shares of Common Stock that may be
issued and sold under the Plan below 2,750,000. For purposes of
the preceding sentence, Applicable Period shall be the ten-year
period commencing on May 6, 1998 and ending May 5, 2008. The
aforementioned total number of shares of Common Stock shall be
adjusted in accordance with the provisions of Section 4.2 hereof.
Any shares of Common Stock subject to issuance upon exercise of
Awards but which are not issued because of a surrender (other
than pursuant to Sections 7.2 or 16 of the Plan), forfeiture,
expiration, termination or cancellation of any such Award, shall
once again be available for issuance pursuant to subsequent
Awards. If either the purchase price of the shares of Common
Stock upon exercise of any Award or the tax withholding
requirement is satisfied by tendering or withholding of shares of
Common Stock or by tendering exercisable Awards, only the number
of shares of Common Stock issued net of the shares of Common
Stock tendered or withheld shall be deemed delivered for purposes
of determining the number of shares of Common Stock available for
Awards under the Plan.
4.2 The number of shares of Common Stock and Phantom Stock
Units subject to the Plan and to Awards granted under the Plan,
the exercise price with respect to Options, Tandem SARs and
Tandem Limited SARs, and the base price with respect to Nontandem
SARs and Nontandem Limited SARS shall be adjusted as follows:
(a) in the event that the number of outstanding shares of Common
Stock is changed by any stock dividend, stock split or
combination of shares, the number of shares subject to the Plan
and to Awards previously granted thereunder shall be
proportionately adjusted; (b) in the event of any merger,
consolidation or reorganization of NorthWestern with any other
corporation or corporations, there shall be substituted on an
equitable basis as determined by the Board, in its sole
discretion, for each share of Common Stock then subject to the
Plan and for each share of Common Stock then subject to an Award
granted under the Plan, the number and kind of shares of stock,
other securities, cash or other property to which the holders of
Common Stock of NorthWestern are entitled pursuant to the
transaction; and (c) in the event of any other change in the
capitalization of NorthWestern, the Committee, in its sole
discretion, shall provide for an equitable adjustment in the
number of shares of Common Stock then subject to the Plan and to
each share of Common Stock then subject to an Award granted under
the Plan. In the event of any such adjustment, the exercise
price per share shall be proportionately adjusted. Adjustments
to this Section 4.2 shall be made by the Committee whose decision
as to the amount and timing of any such adjustment shall be
conclusive and binding on all persons.
4.3 Subject to Section 4.2, the maximum number of Options
and SARs granted to any Key Team Member shall be 500,000 Options
and SARs with respect to Common Stock per year. The maximum
number of shares of Common Stock subject to Restricted Stock
Awards granted to any Key Team Member shall be 500,000 shares of
Common Stock per year, and the maximum number of Phantom Stock
Units granted to any Team Member shall be 500,000 Units per year.
Section 5. Grant of Options to Non-Employee Directors.
5.1 Grants. Each individual who is a Non-Employee Director
on the effective date of the Plan was granted automatically a NSO
to purchase 1200 shares of Common Stock on May 6, 1998, the
effective date of the Plan. Non-Employee Directors shall also be
eligible to receive discretionary grants of NSOs as determined by
the Committee from time to time.
5.2 Exercise Price and Period. The per share exercise
price of each NSO granted to a Non-Employee Director shall be the
`Fair Market Value,' on the date on which the NSO is granted, of
the Common Stock subject to the NSO. For purposes of the Plan,
`Fair Market Value' shall mean the average of the closing price
for Common Stock as reported on the New York Stock Exchange for
the 10 business days ending on the third business day preceding
the date with respect to which such Common Stock is being valued,
for which trades in Common Stock were reported on the New York
Stock Exchange. If no trades occur on a certain day, the closing
price for the last preceding day on which trading occurred will
be used as the closing price for that day. Notwithstanding any
provision of the Plan to the contrary, no determination made with
respect to the Fair Market Value of Common Stock subject to an
ISO shall be inconsistent with Section 422 of the Code or
regulations issued thereunder.
In addition to the terms and conditions set forth in this
Section 5, NSOs also shall be subject to such terms and
conditions applicable to Options according to Sections 6.2, 6.3,
6.4, 6.5 and 7, provided, however, such additional terms and
conditions are not inconsistent with the terms and conditions set
forth in this Section 5.
Section 6. Grants of Options to Employees.
6.1 Grant. Subject to the terms of the Plan, the Committee
(or the Chief Executive Officer, to the extent the Committee
delegates authority to him pursuant to Section 2) may from time
to time grant Options, which may be ISOs or NSOs, to Key Team
Members of NorthWestern or any of its Affiliates. Unless
otherwise expressly provided at the time of the grant, Options
granted under the Plan to Key Team Members will be ISOs.
6.2 Option Agreement. Each Option shall be evidenced by a
written Option Agreement specifying the type of Option granted,
the exercise price, the terms for payment of the exercise price,
the expiration date of the Option, the number of shares of Common
Stock to be subject to each Option, the time frame in which an
Option shall become vested and exercisable, the circumstances
under which an Option which has not become vested and exercisable
can be forfeited, the circumstances under which an Option which
has not become vested and exercisable can become immediately
vested and exercisable, the effect on any outstanding Options of
a Key Team Member's termination of employment with NorthWestern
and all Affiliates, and such other terms and conditions
established by the Committee, in its sole discretion, not
inconsistent with the Plan.
6.3 Expiration. Except to the extent otherwise provided in
an Option Agreement, each Option shall expire, and all rights to
purchase shares of Common Stock shall expire, on the tenth
anniversary of the date on which the Option was granted.
6.4 Required Terms and Conditions of ISOs. Each ISO
granted to a Key Team Member shall be in such form and subject to
such restrictions and other terms and conditions as the Committee
(or the Chief Executive Officer, to the extent the Committee
delegates authority to him pursuant to Section 2) may determine,
in its sole discretion, at the time of grant, subject to the
general provisions of the Plan, the applicable Option Agreement,
and the following specific rules:
(a) Except as provided in Section 6.4(d), the per
share exercise price of each ISO shall be the Fair
Market Value of the shares of Common Stock on the date
such ISO is granted.
(b) The aggregate Fair Market Value (determined
with respect to each ISO at the time such Option is
granted) of the shares of Common Stock with respect to
which ISOs are exercisable for the first time by an
individual during any calendar year (under all
incentive stock option plans of NorthWestern and its
parent and subsidiary corporations) shall not exceed
$100,000. If the aggregate Fair Market Value
(determined at the time of grant) of the Common Stock
subject to an Option, which first becomes exercisable
in any calendar year exceeds the limitation of this
Section 6.4(b), so much of the Option that does not
exceed the applicable dollar limit shall be an ISO and
the remainder shall be a NSO; but in all other
respects, the original Option Agreement shall remain in
full force and effect.
(c) As used in this Section 6, the words `parent'
and `subsidiary' shall have the meanings given to them
in Section 424(e) and 424(f) of the Code.
(d) Notwithstanding anything herein to the
contrary, if an ISO is granted to an individual who
owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock
of NorthWestern or of its parent or subsidiary
corporations, within the meaning of Section 422(b)(6)
of the Code, (i) the exercise price of each share of
Common Stock subject to the ISO shall be not less than
one hundred ten percent (110%) of the Fair Market Value
of the Common Stock on the date the ISO is granted, and
(ii) the ISO shall expire and all rights to purchase
shares thereunder shall cease no later than the fifth
anniversary of the date the ISO was granted.
(e) No ISOs may be granted under the Plan after
May 5, 2008.
6.5 Required Terms and Conditions of NSOs. Each NSO
granted to a Key Team Member shall be in such form and subject to
such restrictions and other terms and conditions as the Committee
(or the Chief Executive Officer, to the extent the Committee
delegates authority to him pursuant to Section 2) may determine,
in its sole discretion, at the time of grant, subject to the
general provisions of the Plan and the applicable Option
Agreement; provided, however, that the per share exercise price
of each NSO shall be the Fair Market Value of the shares of
Common Stock on the date such NSO is granted.
Section 7. Exercise of Options.
7.1 Notice. A person entitled to exercise an Option may do
so by delivery of a written notice to that effect specifying the
number of shares of Common Stock with respect to which the Option
is being exercised and any other information the Committee may
prescribe. The notice shall be accompanied by payment as
described in Section 7.2. The notice of exercise shall be
accompanied by the Optionee's copy of the writing or writings
evidencing the grant of the Option. All notices or requests
provided for herein shall be delivered to the Corporate Secretary
of NorthWestern.
7.2 Exercise Price. Except as otherwise provided in the
Plan or in any Option Agreement, the Participant shall pay the
exercise price of the shares of Common Stock upon exercise of any
Option: (a) in cash; (b) in cash received from a broker-dealer
to whom the Participant has submitted an exercise notice
consisting of a fully endorsed Option (however, in the case of an
Participant subject to Section 16 of the 1934 Act, this payment
option shall only be available to the extent such person complies
with Regulation T issued by the Federal Reserve Board); (c) by
delivering (either actual delivery or by attestation procedures
established by NorthWestern) previously owned shares of Common
Stock (which the Participant has held for at least six months
prior to the delivery of such shares or which the Participant
purchased on the open market and in each case for which the
Participant has good title, free and clear of all liens and
encumbrances) having an aggregate Fair Market Value on the date
of exercise equal to the exercise price; (d) by directing
NorthWestern to withhold such number of shares of Common Stock
otherwise issuable upon exercise of such Option having an
aggregate Fair Market Value on the date of exercise equal to the
exercise price; (e) by agreeing to surrender Options then
exercisable valued at the excess of the aggregate Fair Market
Value of the shares of Common Stock subject to such Options on
the date of exercise over the aggregate exercise price of such
shares; (f) by such other medium of payment as the Committee, in
its discretion, shall authorize at the time of grant; or (g) by
any combination of (a), (b), (c), (d) (e) and (f). In the case
of an election pursuant to (a) or (b) above, cash shall mean cash
or a check issued by a federally insured bank or savings and
loan, and made payable to NorthWestern. NorthWestern shall
issue, in the name of the Participant, stock certificates
representing the total number of shares of Common Stock issuable
pursuant to the exercise of any Option as soon as reasonably
practicable after such exercise, provided that any shares of
Common Stock purchased by an Participant through a broker-dealer
pursuant to clause (b) above shall be delivered to such
broker-dealer in accordance with 12 C.F.R. 220.3(e)(4) or other
applicable provision of law.
Section 8. Stock Appreciation Rights.
If deemed by the Committee (or the Chief Executive Officer,
to the extent the Committee delegates authority to him pursuant
to Section 2) to be in the best interests of NorthWestern, a Key
Team Member who receives an Option may also be granted an SAR.
Each SAR shall be granted subject to such restrictions and
conditions and other terms as the Committee may specify in the
Option Agreement at the time the Option is granted, or as the
Committee may determine at the time of grant, subject to the
general provisions of the Plan, and the following specific rules:
8.1 Grant of SARs. SARs will be granted, if at all, at the
time of granting of an Option and may be granted either in
addition to the related Option (`Nontandem SAR') or in tandem
with the related Option (`Tandem SAR'). At the time of grant of
a Nontandem SAR, the Committee shall specify the base price of
Common Stock to be used in connection with the calculation
described in Section 8.3(a) below. The base price of a Nontandem
SAR shall be 100% of the Fair Market Value of a share of Common
Stock on the date of grant. The number of shares of Common Stock
subject to a Tandem SAR shall be one for each share of Common
Stock subject to the Option. The number of shares of Common
Stock subject to a Nontandem SAR shall be one for each share of
Common Stock subject to the Option. No Tandem SAR may be granted
to a Key Team Member in connection with an ISO in a manner that
will disqualify the ISO under Section 422 of the Code unless the
Key Team Member consents thereto.
8.2 Grant of Limited SARs. (a) A `Limited SAR' is an SAR
that becomes exercisable only following the occurrence of any of
the events provided in paragraph (b) next below. Limited SARs
will be granted, if at all, at the time of granting of an Option
and may be granted either in addition to the related Option
(`Nontandem Limited SAR') or in tandem with the related Option
(`Tandem Limited SAR'). At the time of grant of a Nontandem
Limited SAR, the Committee shall specify the base price of Common
Stock to be used in connection with the calculation described in
Section 8.3(a) below. The base price of a Nontandem Limited SAR
shall be 100% of the Fair Market Value of a share of Common Stock
on the date of grant. The number of shares of Common Stock
subject to a Tandem Limited SAR shall be one for each share of
Common Stock subject to the Option. The number of shares of
Common Stock subject to a Nontandem Limited SAR shall be one for
each share of Common Stock subject to the Option. No Tandem
Limited SAR may be granted to a Key Team Member in connection
with an ISO in a manner that will disqualify the ISO under
Section 422 of the Code unless the Key Team Member consents
thereto.
(b) Change in Control. The events required for
purposes of Section 8.2 include the following:
(i) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of
NorthWestern (not including in the securities
beneficially owned by such Person any securities
acquired directly from NorthWestern or any Subsidiary
or Affiliate) representing 20% or more of the combined
voting power of NorthWestern's then outstanding Common
Stock;
(ii) during any period of not more than two
consecutive years (not including any period prior to
the effective date of the Plan), individuals who at the
beginning of such period constitute the Board and any
new director (other than a director whose original
assumption of office is in connection with an actual or
threatened election of directors, as such terms are
used in Rule 14(a)-11 of Regulation 14A under the
Exchange Act) whose election by the Board or nomination
for election by NorthWestern's shareholders was
approved or recommended by a vote of at least two-
thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or
whose election or nomination for election was
previously so approved or recommended, cease for any
reason to constitute a majority thereof;
(iii) the shareholders of NorthWestern approve
a merger or consolidation of NorthWestern with any
corporation or business trust, other than (i) a merger
or consolidation which would result in the individuals
who prior to such merger or consolidation constitute
the Board constituting at least two-thirds (2/3) of the
board of directors of NorthWestern or the surviving or
succeeding entity immediately after such merger or
consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization of
NorthWestern (or similar transaction) in which no
Person acquires more than 20% of the combined voting
power of NorthWestern's then outstanding Common Stock;
(iv) the shareholders of NorthWestern approve a
plan of complete liquidation of NorthWestern; or
(v) the shareholders of NorthWestern approve an
agreement for the sale or disposition of all or
substantially all NorthWestern's assets, other than a
sale or disposition which would result in the
individuals who prior to such sale or disposition
constitute the Board constituting at least two-thirds
(2/3) of the board of directors of the Person
purchasing such assets immediately after such sale or
disposition.
For purposes of this paragraph: Person shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) NorthWestern, (ii) a
trustee or other fiduciary holding securities under an
employee benefit plan of NorthWestern, (iii) an underwriter
temporarily holding securities pursuant to an offering of
such securities, or (iv) a corporation owned, directly or
indirectly, by the shareholders of NorthWestern in
substantially the same proportions as their ownership of
shares of NorthWestern and Beneficial Owner shall have the
meaning defined in Rule 13d-3 under the Exchange Act.
On the basis of information known to NorthWestern, the
Committee shall make all determinations relating to the
applicability and interpretation of this Section 8.2(b) and
all such determinations shall be conclusive and binding.
8.3 Value of SARs and Limited SARs. Upon exercise, an SAR
or Limited SAR shall entitle the Key Team Member to receive from
NorthWestern the number of shares of Common Stock having an
aggregate Fair Market Value equal to the following:
(a) in the case of a Nontandem SAR or Nontandem
Limited SAR, the excess of the Fair Market Value of one
share of Common Stock as of the date on which the SAR or
Limited SAR is exercised over the base price specified in
such SAR or Limited SAR, multiplied by the number of shares
of Common Stock then subject to the SAR or Limited SAR, or
the portion thereof being exercised.
(b) in the case of a Tandem SAR or Tandem Limited SAR,
the excess of the Fair Market Value of one share of Common
Stock as of the date on which the SAR or Limited SAR is
exercised over the exercise price per share specified in
such Option, multiplied by the number of shares then subject
to the Option, or the portion thereof as to which the SAR or
Limited SAR is being exercised.
Cash shall be delivered in lieu of any fractional shares.
The Committee, in its discretion, shall be entitled to cause
NorthWestern to elect to settle any part or all of its obligation
arising out of the exercise of an SAR by the payment of cash in
lieu of all or part of the shares of Common Stock it would
otherwise be obligated to deliver in an amount equal to the Fair
Market Value of such shares on the date of exercise.
8.4 Exercise of Tandem SARs. A Tandem SAR shall be
exercisable during such time, and be subject to such restrictions
and conditions and other terms, as the Committee shall specify in
the applicable Option Agreement at the time such Tandem SAR is
granted. Notwithstanding the preceding sentence, the Tandem SAR
shall be exercisable only at such time as the Option to which it
relates is exercisable and shall be subject to the restrictions
and conditions and other terms applicable to such Option. Upon
the exercise of a Tandem SAR, the unexercised Option, or the
portion thereof to which the exercised portion of the Tandem SAR
is related, shall expire. The exercise of any Option shall cause
the expiration of the Tandem SAR related to such Option, or
portion thereof, that is exercised.
8.5 Exercise of Tandem Limited SARs. A Tandem Limited SAR
shall be exercisable following the occurrence of any of the
events described in paragraph (b) of Section 8.2, and be subject
to such restrictions and conditions and other terms, as the
Committee shall specify in the applicable Option Agreement at the
time such Tandem Limited SAR is granted. Notwithstanding the
preceding sentence, the Tandem Limited SAR shall be exercisable
only at such time as the Option to which it relates is
exercisable and shall be subject to the restrictions and
conditions and other terms applicable to such Option. Upon the
exercise of a Tandem Limited SAR, the unexercised Option, or the
portion thereof to which the exercised portion of the Tandem
Limited SAR is related, shall expire. The exercise of any Option
shall cause the expiration of the Tandem Limited SAR related to
such Option, or portion thereof, that is exercised.
8.6 Exercise of Nontandem SARs.
(a) A Nontandem SAR granted under the Plan shall be
exercisable during such time, and be subject to such
restrictions and conditions and other terms, as the
Committee shall specify in the Option Agreement at the time
the Nontandem SAR is granted, which restrictions and
conditions and other terms need not be the same for all Key
Team Members. Without limiting the generality of the
foregoing, the Committee may specify a minimum number of
full shares with respect to which any exercise of a
Nontandem SAR must be made.
(b) A Nontandem SAR granted under the Plan shall
expire on the date specified by the Committee in the Option
Agreement, provided that such date shall not be more than
ten years after the date of grant. The Committee shall
specify in the Option Agreement at the time each Nontandem
SAR is granted, the time during which the Nontandem SAR may
be exercised prior to its expiration and other provisions
relevant to the SAR. The Committee, in its discretion,
shall have the power to accelerate the dates for exercise of
any or all Nontandem SARs or any part thereof, granted under
the Plan.
8.7 Exercise of Nontandem Limited SARs.
(a) A Nontandem Limited SAR granted under the Plan
shall be exercisable following the occurrence of any of the
events described in paragraph (b) of Section 8.2, and be
subject to such restrictions and conditions and other terms,
as the Committee shall specify in the Option Agreement at
the time the Nontandem Limited SAR is granted, which
restrictions and conditions and other terms need not be the
same for all Key Team Members. Without limiting the
generality of the foregoing, the Committee may specify a
minimum number of full shares with respect to which any
exercise of a Nontandem Limited SAR must be made.
(b) A Nontandem Limited SAR granted under the Plan
shall expire on the date specified by the Committee in the
Option Agreement, provided that such date shall not be more
than ten years after the date of grant. The Committee shall
specify in the Option Agreement at the time each Nontandem
Limited SAR is granted, the time during which the Nontandem
Limited SAR may be exercised prior to its expiration and
other provisions relevant to the Limited SAR. The
Committee, in its discretion, shall have the power to
accelerate the dates for exercise of any or all Nontandem
Limited SARs or any part thereof, granted under the Plan
pursuant to Section 4.3.
8.8 Parties Entitled to Exercise SARs and Limited SARs. An
SAR or Limited SAR may be exercised only by the Key Team Member
(or by a legatee or legatees of such SAR under his last will, by
his executors, personal representatives or distributees, or by an
assignee or assignees pursuant to Section 12 below).
8.9 Settlement of SARs and Limited SARs. As soon as is
reasonably practicable after the exercise of an SAR or a Limited
SAR, NorthWestern shall (i) issue, in the name of the Key Team
Member, stock certificates representing the total number of full
shares of Common Stock to which the Key Team Member is entitled
pursuant to Section 8.3 hereof and cash in an amount equal to the
Fair Market Value, as of the date of exercise, of any resulting
fractional shares, and (ii) if the Committee causes NorthWestern
to elect to settle all or part of its obligations arising out of
the exercise of the SAR or Limited SAR in cash, deliver to the
Key Team Member an amount in cash equal to the Fair Market Value,
as of the date of exercise, of the shares of Common Stock it
would otherwise be obligated to deliver.
Section 9. Restricted Stock Awards To Key Team Members and
Non-Employee Directors.
The Committee (or the Chief Executive Officer, to the extent
the Committee delegates authority to him pursuant to Section 2)
may from time to time cause NorthWestern to grant shares of
Restricted Stock under the Plan to such Key Team Members and Non-
Employee Directors, and subject to such restrictions and
conditions and other terms, as the Committee may determine at the
time of grant, subject to the general provisions of the Plan, the
applicable Restricted Stock Agreement, and the following specific
rules:
9.1 Performance or Employment Standards. The restrictions
applicable to Restricted Stock may be based either on performance
or employment or Board service standards. If the restrictions
are based upon the performance of NorthWestern, the performance
standards shall relate to corporate or business segment
performance and may be established in terms of growth and gross
revenue, cash flow, earnings per share, return on assets, or
return on investment or utilization of assets. Multiple
standards may be used and may have the same or different
weighting and may relate to absolute performance or relative
performance as measured against comparable companies.
9.2 Restricted Stock Agreements. Shares of Restricted
Stock issued to a Key Team Member or Non-Employee Director under
the Plan shall be governed by a Restricted Stock Agreement which
shall set forth the restrictions applicable to the Award of
Restricted Stock and such other provisions as the Committee shall
determine.
9.3 Issuance of Restricted Stock. NorthWestern shall
issue, in the name of the Key Team Member or Non-Employee
Director, stock certificates representing the total number of
shares of Restricted Stock granted to the Key Team Member or Non-
Employee Director, as soon as may be reasonably practicable after
such grant, which shall be held by the Corporate Secretary of
NorthWestern as provided in Section 9.7 hereof.
9.4 Rights of Stockholders. Subject to the provisions of
Sections 9.3 and 9.5 hereof and Section 12.2, and the
restrictions set forth in the related Restricted Stock Agreement,
the Key Team Member or Non-Employee Director receiving a grant
shall thereupon be a stockholder with respect to all of the
shares represented by such certificate or certificates and shall
have the rights of a stockholder with respect to such shares,
including the right to vote such shares and to receive dividends
and other distributions paid with respect to such shares.
9.5 Restrictions; Forfeiture. Any share of Restricted
Stock granted to a Key Team Member or Non-Employee Director
pursuant to the Plan shall be forfeited, and such shares shall
revert to NorthWestern, if (i) the Key Team Member or Non-
Employee Director violates a non-competition or confidentiality
agreement or other condition set forth in the Restricted Stock
Agreement, (ii) the Key Team Member's employment with
NorthWestern or its Affiliates, or the service of the Non-
Employee Director on the Board, terminates prior to a date or
dates for expiration of the forfeiture, (iii) the date on which
performance standards set forth in the Restricted Stock Agreement
fail to be satisfied, or (iv) the date there occurs a violation
of any provision of the Restricted Stock Agreement. NorthWestern
shall require a forfeiture of Restricted Stock pursuant to this
Section 9.5, by giving notice to the Key Team Member or Non-
Employee Director at any time within the 30-day period following
the applicable date of forfeiture. Upon receipt of such notice,
the Corporate Secretary of NorthWestern shall promptly cancel
shares of Restricted Stock that are forfeited to NorthWestern.
9.6 Acceleration. The Committee, in its discretion, shall
have the power to accelerate the date on which the restrictions
of this Section 9 or contained in any Restricted Stock Agreements
shall lapse with respect to any or all shares of Restricted Stock
granted under the Plan.
9.7 Restricted Stock Certificates. The Corporate Secretary
of NorthWestern shall hold the certificate or certificates
representing shares of Restricted Stock issued under the Plan on
behalf of each Participant who holds such shares until such time
as the Restricted Stock is forfeited or the restrictions lapse.
9.8 Terms and Conditions. The Committee may prescribe such
other restrictions and conditions and other terms applicable to
the shares of Restricted Stock issued to a Key Team Member or Non-
Employee Director under the Plan that are neither inconsistent
with nor prohibited by the Plan or any Restricted Stock
Agreement, including, without limitation, terms providing for a
lapse of the restrictions of this Section 9 or in any Restricted
Stock Agreement, in installments.
Section 10. Phantom Stock Units.
10.1 Grant of Phantom Stock Units. If deemed by the
Committee (or the Chief Executive Officer, to the extent the
Committee delegates authority to him pursuant to Section 2) to be
in the best interests of NorthWestern, Phantom Stock Units, the
value of which is related to the appreciation in the value of the
Common Stock, may be granted to such Key Team Members of
NorthWestern as the Committee shall determine. If any Phantom
Stock Units awarded under the Plan shall be forfeited or
canceled, such Phantom Stock Units may again be awarded under the
Plan. Phantom Stock Units shall be granted at such time or times
and shall be subject to such terms and conditions, in addition to
the terms and conditions set forth in the Plan, as the Committee
shall determine.
The receipt of the value of Phantom Stock Units may be
contingent upon either performance or employment standards. If
the Phantom Stock Units are contingent upon the performance of
NorthWestern, the performance standards shall relate to corporate
or business segment performance and may be established in terms
of growth and gross revenue, cash flow, earnings per share,
return on assets, or return on investment or utilization of
assets. Multiple standards may be used and may have the same or
different weighting and may relate to absolute performance or
relative performance as measured against comparable companies.
10.2 Phantom Stock Unit Agreements. Phantom Stock Units
issued to a Key Team Member under the Plan shall be governed by a
Phantom Stock Unit Agreement that shall set forth the performance
or employment standards applicable to the award of Phantom Stock
Units and such other provisions as the Committee shall determine.
10.3 Payment for Phantom Stock Units. Except as otherwise
set forth in a Phantom Stock Unit Agreement, upon termination of
employment of a Key Team Member with NorthWestern and all
Affiliates for any reason, the Key Team Member shall be entitled
to receive an amount in a lump sum cash payment equal to the
number of Phantom Stock Units granted to him with respect to
which the applicable employment and/or performance standards have
been satisfied, multiplied by the Fair Market Value of a share of
Common Stock of NorthWestern determined pursuant to the
provisions of Section 5.2.
Section 11. Terms and Conditions of Awards.
11.1 Each Participant shall agree to such restrictions and
conditions and other terms in connection with the grant and
exercise of an Award, including restrictions and conditions on
the disposition of the Common Stock acquired upon the exercise,
grant or sale thereof, as the Committee may deem appropriate and
as is set forth in the applicable Award Agreement. The
certificates delivered to a Participant or to the Corporate
Secretary of NorthWestern evidencing the shares of Common Stock
acquired upon exercise of an Award may, and upon the grant of
Restricted Stock to a Key Team Member or Non-Employee Director
shall, bear a legend referring to the restrictions and conditions
and other terms contained in the respective Award Agreement and
the Plan, and NorthWestern may place a stop transfer order with
its transfer agent against the transfer of such shares. If
requested to do so by the Committee at the time of exercise of an
Option or sale of Restricted Stock, each Participant shall
execute a written instrument stating that he is purchasing the
Common Stock for investment and not with any present intention to
sell the same.
11.2 The obligation of NorthWestern to sell and deliver
Common Stock under the Plan shall be subject to all applicable
laws, regulations, rules and approvals, including, but not by way
of limitation, the effectiveness of a registration statement
under the Securities Act of 1933, if deemed necessary or
appropriate by the Committee, of the Common Stock, Options, SARs,
Limited SARs, Restricted Stock, and other securities reserved for
issuance or that may be offered under the Plan.
Section 12. Nontransferability.
12.1 Except as provided in Section 12.2 next below, or in
connection with unrestricted Common Stock issued pursuant to an
Award, Awards granted under the Plan and any rights and
privileges pertaining thereto, may not be transferred, assigned,
pledged or hypothecated in any manner, by operation of law or
otherwise, other than by will or by the laws of descent and
distribution and shall not be subject to execution, attachment or
similar process. The granting of an Award shall impose no
obligation upon the applicable Participant to exercise such
Award.
12.2 Notwithstanding the provisions of subsection (a) above,
a Participant, at any time prior to his death, may assign all or
any portion of a NSO granted to him and a related Tandem SAR, if
applicable, to (i) his spouse or lineal descendant, (ii) the
trustee of a trust for the primary benefit of his spouse or
lineal descendant, (iii) a partnership of which his spouse and
lineal descendants are the only partners, or (iv) a tax exempt
organization as described in Section 501(c)(3) of the Code. In
such event, the spouse, lineal descendant, trustee, partnership
or tax exempt organization will be entitled to all of the rights
of the Participant with respect to the assigned portion of such
NSO and SAR, and such portion of the NSO and SAR will continue to
be subject to all of the terms, conditions and restrictions
applicable to the NSO and SAR, as set forth herein and in the
related Option Agreement immediately prior to the effective date
of the assignment. Any such assignment will be permitted only if
(i) the Participant does not receive any consideration therefore,
and (ii) the assignment is expressly permitted by the applicable
Option Agreement as approved by the Committee. Any such
assignment shall be evidenced by an appropriate written document
executed by the Participant, and a copy thereof shall be
delivered to NorthWestern on or prior to the effective date of
the assignment.
Section 13. Rights as Shareholder.
A Participant or an assignee of a Participant pursuant to
Section 12 shall have no rights as a shareholder with respect to
any Common Stock covered by an Award or receivable upon the
exercise of an Award until the Participant or transferee shall
have become the holder of record of such Common Stock, and,
except as provided in Section 14, no adjustments shall be made
for dividends in cash or other property or other distributions or
rights in respect to such Common Stock for which the record date
is prior to the date on which the Participant shall have in fact
become the holder of record of the shares of Common Stock
acquired pursuant to the Award.
Section 14. Dividends and Dividend Equivalents.
An Award under the Plan, other than a Restricted Stock
Award, may, at the discretion of the Committee, contain the right
to receive dividends or dividend equivalents, which may be either
paid currently or credited to a Participant's account under the
Plan and which may be subject to conditions, restrictions and
contingencies established by the Committee, including the
achievement of performance goals as described in Section 10.1.
Section 15. Postponement of Exercise.
The Committee may postpone any exercise of an Award for such
time as the Committee in its sole discretion may deem necessary
in order to permit NorthWestern (a) to effect, amend or maintain
any necessary registration of the Plan or the shares of Common
Stock issuable upon the exercise of an Award under the Securities
Act of 1933, as amended, or the securities laws of any applicable
jurisdiction, (b) to permit any action to be taken in order to
(i) list such shares of Common Stock on a stock exchange if
shares of Common Stock are then listed on such exchange or (ii)
comply with restrictions or regulations incident to the
maintenance of a public market for shares of Common Stock,
including any rules or regulations of any stock exchange on which
the shares of Common Stock are listed, or (c) to determine that
such shares of Common Stock and the Plan are exempt from such
registration or that no action of the kind referred to in (b)(ii)
above needs to be taken; and NorthWestern shall not be obligated
by virtue of any terms and conditions of any Award or any
provision of the Plan to recognize the exercise of an Award or to
sell or issue shares of Common Stock in violation of the
Securities Act of 1933 or the law of any government having
jurisdiction thereof. Any such postponement shall not extend the
term of an Award and neither NorthWestern nor its directors or
officers shall have any obligation or liability to an
Participant, to the Participant's successor or assignee, or any
other person, with respect to any shares of Common Stock as to
which the Award shall lapse because of such postponement.
Section 16. Withholding Taxes.
Whenever NorthWestern proposes or is required to issue or
transfer shares of Common Stock to a Participant under the Plan,
NorthWestern shall have the right to require the Participant to
remit to NorthWestern an amount sufficient to satisfy all
federal, state and local withholding tax requirements prior to
the delivery of any certificate or certificates for such shares.
If such certificates have been delivered prior to the time a
withholding obligation arises, NorthWestern shall have the right
to require the Participant to remit to NorthWestern an amount
sufficient to satisfy all federal, state or local withholding tax
requirements at the time such obligation arises and to withhold
from other amounts payable to the Participant, as compensation or
otherwise, as necessary. Whenever payments under the Plan are to
be made to a Participant in cash, such payments shall be net of
any amounts sufficient to satisfy all federal, state and local
withholding tax requirements. In connection with an Award in the
form of shares of Common Stock, a Participant may elect to
satisfy his tax withholding obligation incurred with respect to
the Taxable Date of the Award by (a) directing NorthWestern to
withhold a portion of the shares of Common Stock otherwise
distributable to the Participant, or (b) by transferring to
NorthWestern a certain number of shares (either subject to a
Restricted Stock Award or previously owned), such shares being
valued at the Fair Market Value thereof on the Taxable Date.
Notwithstanding any provisions of the Plan to the contrary, a
Participant's election pursuant to the preceding sentence (a)
must be made on or prior to the Taxable Date with respect to such
Award, and (b) must be irrevocable. In lieu of a separate
election on each Taxable Date of an Award, a Participant may make
a blanket election with the Committee that shall govern all
future Taxable Dates until revoked by the Participant. If the
holder of shares of Common Stock purchased in connection with the
exercise of an ISO disposes of such shares within two years of
the date such an ISO was granted or within one year of such
exercise, he shall notify NorthWestern of such disposition and
remit an amount necessary to satisfy applicable withholding
requirements including those arising under federal income tax
laws. If such holder does not remit such amount, NorthWestern
may withhold all or a portion of any salary or other amounts then
or in the future owed to such holder as necessary to satisfy such
requirements. Taxable Date means the date a Participant
recognizes income with respect to an Award under the Code or any
applicable state or local income tax law.
Section 17. Leave of Absence.
The Committee shall be entitled to make such rules,
regulations and determinations as it deems appropriate under the
Plan in respect of any leave of absence taken by any Participant.
Without limiting the generality of the foregoing, the Committee
shall be entitled to determine (i) whether or not any such leave
of absence shall constitute a termination of employment or
service on the Board within the meaning of the Plan, and (ii) the
impact, if any, of any such leave of absence on Awards under the
Plan theretofore granted to any Participant who takes such leave
of absence.
Section 18. Trust Agreement.
NorthWestern may enter into a trust agreement (`Trust
Agreement') whereby NorthWestern shall agree to contribute to a
trust (`Trust) for the purpose of accumulating shares of Common
Stock to assist NorthWestern in fulfilling its obligations to
Participants hereunder. Such Trust Agreement shall be
substantially in the form of the model trust agreement set forth
in Internal Revenue Service Revenue Procedure 92-64, or any
subsequent Internal Revenue Service Revenue Procedure, and shall
include provisions required in such model trust agreement that
all assets of the Trust shall be subject to the creditors of
NorthWestern in the event of insolvency.
Section 19. Termination or Amendment of Plan.
The Committee may correct any defect or supply an omission
or reconcile any inconsistency in the Plan or in any Award
granted hereunder in the manner and to the extent it shall deem
desirable, in its sole discretion, to effectuate the Plan. The
Board, without further action on the part of the shareholders of
NorthWestern to the extent permitted by law, regulation and stock
exchange requirements, may from time to time alter, amend or
suspend the Plan or any Award granted hereunder or may at any
time terminate the Plan; provided that with respect to ISOs, the
Board may not effect a change inconsistent with Section 422 of
the Code or regulations issued thereunder.
No amendment or termination of the Plan shall in any manner
affect any Award theretofore granted without the consent of the
Participant, except that the Committee may amend the Plan in a
manner that does affect Awards theretofore granted upon a finding
by the Committee that such amendment is in the best interest of
holders of outstanding Awards affected thereby.
Section 20. Effective Date.
The Plan shall be effective upon the date of approval of the
Plan by an affirmative vote of a majority of the shares of the
voting stock of NorthWestern entitled to be voted by the holders
of stock represented at a duly held shareholders' meeting, within
12 months after the date of adoption of the Plan by the Board.
Section 21. Requirements of Law.
The granting of Awards under the Plan shall be subject to
all applicable laws, rules, and regulations, and to such
approvals by any governmental agencies or national securities
exchanges as may be required.
Section 22. Governing Law.
The Plan and all agreements hereunder shall be construed in
accordance with and governed by the laws of the State of South
Dakota, to the extent not inconsistent with Section 422 of the
Code and regulations thereunder.
Section 23. Notice.
Every direction, revocation or notice authorized or required
by the Plan shall be deemed delivered to NorthWestern (a) on the
date it is personally delivered to the Corporate Secretary of
NorthWestern at its principal executive offices or (b) three
business days after it is sent by registered or certified mail;
postage prepaid, addressed to the Corporate Secretary at such
offices; and shall be deemed delivered to a Participant or
assignee (a) on the date it is personally delivered to him or (b)
three business days after it is sent by registered or certified
mail, postage prepaid, addressed to him at the last address shown
on the records of NorthWestern or of any Subsidiary.
Section 24. Successors.
In the event of a sale of substantially all of the assets of
NorthWestern, or a merger, consolidation or share exchange
involving NorthWestern, all obligations of NorthWestern under the
Plan with respect to Awards granted hereunder shall be binding on
the successor of the transaction. Employment of a Participant
with such a successor shall be considered employment of the
Participant with NorthWestern for purposes of the Plan.
Section 25. Indemnification of the Committee.
In addition to such other rights of indemnification as they
may have as members of the Board, or as members of the Committee,
or as its delegatees, the members of the Committee and its
delegatees shall be indemnified by NorthWestern against (a) the
reasonable expenses (as such expenses are incurred), including
attorneys' fees actually and necessarily incurred in connection
with the defense of any action, suit or proceeding (or in
connection with any appeal therein), to which they or any of them
may be a party by reason of any action taken or failure to act
under or in connection with the Plan, or any Award granted
hereunder; and (b) against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent
legal counsel selected by NorthWestern) or paid by them in
satisfaction of a judgment in such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Committee member or
delegatee is liable for gross negligence or misconduct in the
performance of his duties; provided that within 60 days after
institution of such action, suit or proceeding a Committee member
or delegatee shall in writing offer NorthWestern the opportunity,
at its own expense, to handle and defend the same.
Section 26. No Contract of Employment or Service on the Board.
Neither the adoption of the Plan, nor the amendment and the
restatement of the Plan, nor the grant of any Award shall be
deemed to obligate NorthWestern or any Subsidiary to continue the
employment or service on the Board of any Participant for any
particular period, nor shall the granting of an Award constitute
a request or consent to postpone the retirement date of any
Participant.
Section 27. Gender.
Except when otherwise required by the context, any masculine
terminology in this document shall include the feminine, and any
singular terminology shall include the plural.
IN WITNESS WHEREOF, NorthWestern has caused the Plan to be
executed on its behalf by its duly authorized officer on May 4,
1999.
NORTHWESTERN CORPORATION
By: /s/ M. D. Lewis
-------------------------------
Its: Chairman & Chief Executive Officer
Exhibit 1
Affiliates
Blue Dot Services Inc.
CornerStone Propane Partners, LLP
Expanets, Inc.
NorCom Advanced Technologies, Inc.
NorthWestern Energy Corporation
NorthWestern Growth Corporation
NorthWestern Services Corporation