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Exhibit 10.1
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NORTHWESTERN CORPORATION
COMPREHENSIVE
EMPLOYMENT AGREEMENT
AND
INVESTMENT PROGRAM
FOR
MERLE D. LEWIS
JUNE 1, 2000
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AGREEMENT
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This COMPREHENSIVE EMPLOYMENT AGREEMENT AND INVESTMENT PROGRAM
("Agreement"), dated as of June 1, 2000, is entered into by and between Merle D.
Lewis, an individual ("EXECUTIVE"), and NorthWestern Corporation
("NorthWestern") and supersedes any prior Employment Agreement between Executive
and NorthWestern.
AGREEMENT:
1. EMPLOYMENT BY NORTHWESTERN AND DURATION.
a. FULL TIME AND BEST EFFORTS. Subject to the terms set forth herein,
NorthWestern agrees to employ Executive to provide management services for
NorthWestern as Chairman and Chief Executive Officer, and Executive hereby
accepts such employment. During the term of his employment with NorthWestern,
Executive will devote his best efforts and substantially all of his business
time and attention to the performance of his duties hereunder, except for
vacation periods as set forth herein and reasonable absences due to injury,
illness as permitted by NorthWestern's general policies or serving on outside
Boards of Directors and participating in normal civic activities.
b. DUTIES. Executive shall serve as Chairman and Chief Executive
Officer for NorthWestern and shall perform such duties as are customarily
associated with his current title, consistent with the By-Laws of NorthWestern
and as required by NorthWestern's Board of Directors (the "Board").
c. NORTHWESTERN POLICIES. The employment relationship between the
parties shall be governed by the general employment policies and practices of
NorthWestern, including, but not limited to, those relating to protection of
confidential information,
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except that when the terms of this Agreement differ from or are in conflict with
NorthWestern's general employment policies or practices, this Agreement shall
control.
d. DURATION. The term of employment hereunder shall commence June 1,
2000, and end on May 31, 2005, subject to the provisions for termination set
forth herein.
e. LOCATIONS OF PERFORMANCE. Executive shall be domiciled in the
vicinity of Sioux Falls, South Dakota. The parties acknowledge, however, that
the Executive will be required to undertake reasonable travel to NorthWestern's
market areas in connection with the performance of his duties hereunder.
2. COMPENSATION AND BENEFITS.
a. SALARY. Executive shall receive for services to be rendered
hereunder, annual base compensation included in Schedule A hereto.
b. BONUS. Executive shall receive such discretionary bonuses, if any,
as the Board in its sole discretion and from time to time may deem appropriate.
c. ANNUAL INCENTIVE PLANS. Executive shall be eligible to participate
in the Annual Incentive Plans on the terms and conditions set forth in Schedule
B attached hereto.
d. LONG-TERM EQUITY PLANS. Executive shall be eligible to participate
in the Long-Term Equity Plans for NorthWestern on the terms and conditions set
forth in Schedule C attached hereto.
e. PARTICIPATION IN BENEFIT PLANS. During the term hereof, Executive
shall be entitled to participate in the plans and programs as set forth in
Schedule D attached hereto, or those established by NorthWestern hereafter as a
substitute for or alternative to one or more Schedule D plans so long as any
such plan provides the Executive (and covered family members or dependants) with
substantially equivalent benefits in all
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material respects (hereinafter, "Equivalent Coverage"). Executive shall be
eligible to participate in only one, not both, of the plans in question.
NorthWestern may, in its sole discretion and from time to time, establish
additional senior management benefit programs as it deems appropriate.
f. PARTICIPATION IN CHANGE OF CONTROL PLAN. Executive shall participate
in NorthWestern's Change of Control Plan as set forth on Schedule E attached
hereto (herein referred to as Change of Control Agreement).
g. WITHHOLDING. All payments and benefits under this Section 2 for
which withholding is required under applicable law will be made subject to the
required withholding.
3. REASONABLE BUSINESS EXPENSES AND SUPPORT.
Executive shall be reimbursed for documented and reasonable business
expenses in connection with the performance of his duties hereunder.
4. TERMINATION OF EMPLOYMENT.
The date on which Executive's employment by NorthWestern ceases, under
any of the following circumstances, shall be defined herein as the "Termination
Date."
a. TERMINATION WITHOUT CAUSE.
i. TERMINATION PAYMENT. Upon notice to Executive,
NorthWestern's Board may terminate Executive's employment with NorthWestern at
will at any time for any reason and without "cause," as defined below. In the
event Executive's employment is terminated by NorthWestern without cause,
Executive shall receive payment for all accrued salary and vacation time through
the Termination Date, and NorthWestern shall pay to the Executive within 90 days
of the Termination Date a lump sum, in cash, equal to the sum of:
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(1) the "Term Factor" multiplied by the sum of (i) the Executive's
annual base salary in effect as of the Termination Date, (ii) the higher of the
most recent annual bonuses and incentive compensation provided under Sections
2.b. and 2.c. and the average of the annual bonuses and incentive compensation
provided under Section 2.b. and 2.c. with respect to the three years preceding
the Termination Date, all as if fully vested, and (iii) an amount equal to the
higher of the fair market value of the most recent annual stock option grants
and provided under Schedule C-1 of Section 2.d. and the average of the fair
market value of the annual stock option grants provided under Schedule C-1 of
Section 2.d. with respect to the three years preceding the Termination Date (in
each case, as determined in connection with the analysis of the Executive's
compensation program by William M. Mercer Incorporated or other qualified
consultant selected by the Board's Nominating and Compensation Committee), all
as if fully vested; PLUS
(2) an amount equal to the sum of: (i) the "Term Factor" multiplied by
the higher of the fair market value of the most recent acquisition return and
improved return private equity interests provided under Schedules C-2 and C-3 of
Section 2.d. and the average of the fair market value of the acquisition return
and improved return private equity interests provided under Schedules C-2 and
C-3 of Section 2.d. with respect to the three years preceding the Termination
Date (including for purposes of this calculation amounts allocated to Executive
in respect of annual acquisition returns, annual appreciation from improved
returns or similar items under any private equity investment partnership,
limited liability company or other entity that has invested in NorthWestern or
any of its affiliates (collectively, a "Private Equity Entity")), all as if
fully vested; and (ii) an amount equal to the fair market value of all long term
private equity interests
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provided under Schedule C-4 of Section 2.d. (without duplication for long-term
private equity interests held by Executive in any Private Equity Entity) all as
if fully vested.
(3) for purposes of the foregoing calculations: (i) the "Term Factor"
shall equal the number of years in the original term of this Agreement as
specified in paragraph 1.d. plus one year; (ii) the determination of fair market
value of any interest or amount shall be determined in each case, without a
discount for minority interest, lack of liquidity or other factor by a
nationally recognized investment banking firm reasonably acceptable to
NorthWestern and the Executive at the cost of NorthWestern, (iii) the most
recent annual amount or the average amount of any item calculated, as the case
may be, shall include the amounts payable in respect of, or the fair market
value of the private equity interests created with respect to, the acquisitions
and investments made in the current year, assuming the immediate and full
vesting thereof, if the inclusion of such amounts or fair market value would
result in a higher payment; and (iv) any amounts payable under sub-paragraph (2)
above shall be grossed-up to such higher amount that results in the net amount
retained by Executive being equivalent to the amount that Executive would have
retained had such payments been subject to the then applicable income tax rate
on long-term capital gains (an example of the method of calculation of these
amounts is set forth on Schedule G).
ii. FUNDAMENTAL CHANGES. In the event of the occurrence of a
fundamental change as defined herein below, Executive may at any time thereafter
terminate his employment, provided, however that Executive shall provide
NorthWestern ten (10) days notice prior to any such termination, and
NorthWestern shall have a reasonable period of time not to exceed thirty (30)
days to cure such fundamental change. "Fundamental change" shall be defined as
any of the following:
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(a) Diminution in the Executive's duties, authority, responsibilities,
compensation and/or benefits as provided herein, or a significant adverse change
in the nature of the Executive's reporting responsibilities;
(b) NorthWestern moves Executive's primary office from Sioux Falls,
South Dakota or requires Executive to travel for business to an extent
materially greater than Executive's customary travel obligations, without
Executive's consent;
(c) A Change of Control or Major Transaction as defined in the Change
of Control Agreement; or
(d) A material breach of this Agreement by NorthWestern.
Executive's right to terminate Executive's employment due to a
fundamental change shall not be affected by Executive's incapacity due to
physical or mental illness, and Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any fundamental
change. A termination by Executive in the event of a fundamental change shall be
treated as a NorthWestern termination without cause, and Executive shall be
entitled to the termination payments as provided in paragraph 4.a.i. of this
Agreement, or the payments provided in the Change of Control Agreement as if
there had been a termination following the occurrence of a Change of Control,
whichever is greater.
b. TERMINATION FOR CAUSE.
i. TERMINATION PAYMENTS. NorthWestern's Board may terminate
Executive's employment with NorthWestern at any time for "cause" as defined
below, upon notice to Executive in the manner set forth below in Section 4.b.ii.
In the event that Executive's employment is terminated for cause, Executive
shall receive payment for all accrued salary and vacation time through the
Termination Date, which in this event shall be the date upon which notice of
termination is given. Executive shall also
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receive any vested compensation benefits or incentives as provided under the
benefit programs provided pursuant paragraphs 2.c., 2.d. and 2.e. hereof.
NorthWestern shall pay all amounts due under this paragraph 4.b.i. within 90
days of the Termination Date and shall have no further obligation to pay
severance of any kind nor to make any payment in lieu of notice.
ii. DEFINITION OF CAUSE. For purposes of this Agreement, the
termination of the Executive's employment shall be deemed to have been for
"cause" only if termination of his employment shall have been the result of: (i)
the willful engaging by the Executive in dishonest or fraudulent conduct
intended to result, directly or indirectly, in demonstrable and material
financial or economic harm to NorthWestern, or (ii) gross negligence by the
Executive in the performance of the Executive's duties with NorthWestern.
Notwithstanding the foregoing, for purposes hereof (A) the Executive shall not
be deemed to have been terminated for cause under either clause (i) or (ii)
above unless and until there shall have been delivered to the Executive a notice
of termination and a certified copy of a resolution of the Board duly adopted by
not less than three-quarters (3/4) of the entire membership of the Board (other
than the Executive if he is a member of the Board at the time) at a meeting
called and held for that purpose and at which the Executive, together with the
Executive's counsel, was given the opportunity to be heard, finding that, in the
good faith opinion of the Board, the Executive was guilty of conduct set forth
above based on reasonable evidence, specifying the particulars thereof in
detail, and no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's act, or failure to act, was
in the best interest of the Corporation.
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c. TERMINATION UPON DISABILITY. NorthWestern may terminate Executive's
employment in the event Executive suffers a disability that renders Executive
unable to perform the essential functions of his position, even with reasonable
accommodation, for nine (9) months within any twelve (12) month period and
within thirty (30) days after written notice of termination is thereafter given
by NorthWestern the Executive shall not have returned to substantially full-time
performance of the Executive's duties. Commencing on the Termination Date, which
in this event shall be the date upon which notice of termination is given,
NorthWestern shall pay Executive within 90 days of the Termination Date an
amount that is equal to all compensation, incentive and private equity programs
and other benefit programs of Executive under Section 2 of this Agreement for
the remaining term of employment under this Agreement plus one year (prorated
for any partial year) calculated in the same fashion as the calculation of
termination benefits provided under section 4.a.i. (an example of the method of
calculation of these amounts is set forth on Schedule G).
d. TERMINATION UPON DEATH. If Executive dies prior to the expiration of
the term of this Agreement, NorthWestern shall pay Executive's representative
within 90 days of the Termination Date an amount that is equal to the
termination benefits payable to the Executive as provided under section 4.c. (an
example of the method of calculation of these amounts is set forth on Schedule
G).
e. BENEFITS UPON TERMINATION. Upon the termination of this Agreement,
except in the event of a termination for cause described in paragraph 4.b., all
benefits provided under paragraph 2.e. hereof shall be extended, to the extent
permitted by NorthWestern's insurance policies and benefit plans, for, in the
case of a termination under paragraph 4.a., a period equal to the original term
of this Agreement plus one year, and in the case of a termination under
paragraphs 4.c. and 4.d., a period equal to
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the remaining term of this Agreement plus one year (in each case, the
"Measurement Period"). If NorthWestern is unable to continue Executive's
benefits (including covered family members and dependents) as required,
NorthWestern will promptly purchase Equivalent Coverage. In each such case, for
purposes of determining the amount of benefit payable to the Executive under any
such plan, the Executive shall be given credit for additional years of service
equal to the relevant Measurement Period at the compensation level in effect
immediately prior to the Termination Date.
f. DEFERRAL. The Executive may, by delivery of written notice to
NorthWestern, elect to defer all or any portion of any payment to be made by
NorthWestern to the Executive under the terms of this Agreement over a period
not to exceed ten (10) years from the Termination Date. In the event that the
Executive makes any such deferral election, NorthWestern shall be obligated,
upon written request of Executive (delivered at any time during the period of
deferral), to secure the financial performance of the deferred obligation by
delivering to the Executive a fully paid and non-cancelable annuity, irrevocable
letter of credit or other financial instrument bearing financial, interest rate
return and payment terms acceptable to the Executive in his sole discretion
(collectively, a "Performance Guaranty"). In addition, NorthWestern shall be
required, upon written request of Executive (delivered at any time during the
period of deferral), to deliver to the Executive a Performance Guaranty in
respect of any payment obligation to the Executive pursuant to this Agreement
which by its terms is payable on a deferred or delayed basis without a formal
election (e.g., retirement, pension, supplemental pension and related benefits).
g. SUBSEQUENT CHANGES. Reference herein to the terms or provisions of
any compensation, bonus, incentive, private equity, benefit or other
arrangement, plan or program in which the Executive is participating under this
Agreement shall be without
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regard to any proposed amendment, modification or termination to such
arrangement, plan or program made subsequent to the Termination Date which would
adversely affect the Executive's rights thereunder, and the obligations of
NorthWestern hereunder with respect to such arrangement, plan or program shall
continue as to Executive (and covered family members and dependents) in full
force and effect. In all such cases, if NorthWestern is unable to continue
Executive's benefits (including covered family members and dependents) as
required, NorthWestern will promptly purchase Equivalent Coverage.
5. PROPRIETARY INFORMATION OBLIGATIONS. During the duration of
employment under this Agreement, Executive will have access to and become
acquainted with confidential and proprietary information of NorthWestern and its
affiliates, including but not limited to information or plans regarding customer
relationships, personnel, sales, marketing, and financial operations and
methods, trade secrets, formulas, devices, secret inventions, processes, and
other compilations of information, records, and specifications (collectively,
except to the extent it was already known from other sources, or is or becomes
general knowledge, in each case without known violation of any confidentiality
obligation, "Proprietary Information"). Executive shall not disclose any of the
Proprietary Information, directly or indirectly, or use it in any way, either
during the term of this Agreement or at any time thereafter, except as required
in the course of his employment with NorthWestern or as authorized in writing by
NorthWestern. All files, records, documents, computer-recorded information,
drawings, specifications, equipment and similar items relating to the business
of NorthWestern, whether prepared by Executive or otherwise coming into his
possession, shall remain the exclusive property of NorthWestern, respectively,
and shall not be removed under any circumstances
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whatsoever without the prior written consent of NorthWestern, except when (and
only for the period) necessary to carry out Executive's duties hereunder, and if
removed shall be immediately returned to NorthWestern upon any termination of
his employment and no copies thereof shall be kept by Executive; provided,
however, that Executive shall be entitled to retain documents that were
personally owned or that reflect personal notes that do not contain Proprietary
Information. Executive shall disclose promptly to NorthWestern any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by
Executive, solely or jointly with another, during the period of employment or
within one (1) year thereafter, and which are related to the business or
activities of NorthWestern, and which Executive conceives as a result of or in
connection with his employment with NorthWestern. Executive hereby assigns and
agrees to assign all his interests therein to NorthWestern or its nominee.
Whenever requested to do so by NorthWestern, Executive shall execute any and all
applications, assignments or other instruments that NorthWestern shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect NorthWestern's interest therein.
6. COVENANT NOT TO COMPETE. Executive shall be subject to the covenant
not to compete and noninterference terms as provided in the noncompetition
agreement set forth in Schedule F attached hereto.
7. ARBITRATION OF DISPUTES.
a. SCOPE. Any disputes of any kind regarding this Agreement, including,
but not limited to, its termination shall be subject to final and binding
arbitration, to the extent permitted by law, pursuant to the Employment Dispute
Resolution Rules and Regulations of the American Arbitration Association. Such
disputes shall include, but
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are not limited to, claims for breach of contract (express or implied), tort
claims, claims for discrimination, and claims for violation of any federal or
state law or regulation.
b. REQUEST. Any request for arbitration must be made in writing within
365 calendar days of the occurrence giving rise to the dispute.
c. APPLICABLE LAW. The arbitrator shall apply the substantive law (and
the law of remedies, if applicable) of the State of Delaware, or federal law, or
both, as applicable to the claim or claims asserted.
d. FINAL AND BINDING. The arbitration shall be final and binding upon
all of the parities and shall be enforceable to the extent permitted by law.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction. The Executive shall be entitled to seek specific performance of
the Executive's right to be paid through the Termination Date during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
8. INDEMNIFICATION. NorthWestern shall, to the fullest extent to which
it is empowered to do so by the General Corporation Law of Delaware, or any
other applicable laws, as from time to time in effect, and in the manner therein
provided, indemnify Executive if Executive is a party or is threatened to be
made a party to any threatened, pending or completed action, suite or
proceeding, whether civil, criminal, administrative, investigative or otherwise,
by reason of the fact that he is or was a director, officer, employee or agent
of NorthWestern, or is or was serving at the request of NorthWestern as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against all expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding. Such
indemnification shall survive the termination of this Agreement and shall extend
to the
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end of any applicable statute of limitations and to any claims made prior to the
end of such applicable statute of limitations.
Expenses incurred by Executive in defending a civil, criminal,
administrative, investigative or other action, suit or proceeding shall be paid
by NorthWestern in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of Executive to repay
such amount if it shall ultimately be determined that Executive is not entitled
to be indemnified as authorized by the General Corporation Law of the State of
Delaware or pursuant to this Agreement. The indemnification and advancement
provisions set forth in this Agreement shall not be deemed exclusive but shall
be cumulative with all other rights to indemnification or expense advancement
which Executive may be entitled.
9. MISCELLANEOUS.
a. NOTICES. Any notices provided hereunder must be in writing and shall
be deemed effective upon the earlier of personal delivery (including personal
delivery by fax) or the third day after mailing by first class mail to the
recipient at the address indicated below:
To Executive:
Merle D. Lewis
To NorthWestern:
Corporate Secretary
NorthWestern Corporation
125 S. Dakota Ave.
Sioux Falls, SD 57104
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or to such other address or to the attention of such other person as the
recipient party shall have specified by prior written notice to the sending
party.
b. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, and the parties shall endeavor in
good faith negotiations to replace such invalid, illegal or unenforceable
provision with one or more provisions that faithfully reflect the original
economic intent of the parties as manifested in the invalid, illegal or
unenforceable provision.
c. ENTIRE AGREEMENT. This document constitutes the final, complete, and
exclusive embodiment of the entire agreement and understanding between the
parties related to the subject matter hereof and supersedes and preempts any
prior or contemporaneous understandings, agreements, or representations by or
between the parties, written or oral. The schedules, appendices and agreements
attached hereto or referenced herein are hereby incorporated by this reference
into this Agreement and made a part hereof as though the terms thereof were
fully set forth herein.
d. COUNTERPARTS. This Agreement may be executed on separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
agreement.
e. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive and NorthWestern, and their
respective successors and assigns, except that Executive may not assign any of
his duties
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hereunder and he may not assign any of his rights under without the written
consent of NorthWestern, which shall not be withheld unreasonably.
f. ATTORNEYS' FEES. If any proceeding is necessary to enforce or
interpret the terms of this Agreement, or to recover damages for breach hereof,
the prevailing party shall be entitled to recover reasonable legal and
accounting fees, as well as costs and disbursements, in addition to any other
relief to which he or it may be entitled.
g. AMENDMENTS. No amendments or other modifications to this Agreement
may be made except by a writing signed by both parties. Nothing in this
Agreement, express or implied, is intended to confer upon any third person any
rights or remedies under or by reason of this Agreement. No amendment or waiver
of this Agreement requires the consent of any individual, partnership,
corporation or other entity not a party to this Agreement.
h. CHOICE OF LAW. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by the internal law, and
not the law of conflicts, of the State of Delaware.
i. REFERENCES. The words "herein," "hereof" and "hereunder"' and other
words of similar import refer to this Agreement as a whole, including the
schedules, appendices and agreements attached hereto. Wherever from the context
it appears appropriate, each term stated in either the singular or plural shall
include the other, and pronouns stated in the masculine, feminine or neuter
gender shall include the others.
10. EFFECTIVE DATE. This Agreement shall be effective for the term
referred to in Section 1.d. hereof.
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NORTHWESTERN CORPORATION "EXECUTIVE"
By: /s/ Larry F. Ness /S/ Merle D. Lewis
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Chairman, Nominating & Merle D. Lewis
Compensation Committee
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SCHEDULE A
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SALARY. Executive shall receive for services to be rendered hereunder annual
base compensation as follows:
Year Ended May 31, 2001 $786,000
Years Ended May 31, Base compensation for the years 2002, 2003,
2002-2005 2004 and 2005 shall be set within a range
around the median of comparable companies as
determined by William M. Mercer Incorporated
or other qualified consultant selected by
the NOR Board Nominating and Compensation
Committee (but not less than the base
compensation for the year ended May 31,
2001).
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SCHEDULE B
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ANNUAL INCENTIVE PLANS. Executive shall be eligible to participate in Annual
Incentive Plans on the terms and conditions approved by NorthWestern's Board of
Directors on May 2-3, 2000, and in such additional plans as may be adopted or
implemented consistent with such authorization, and as described in further
detail in the attached sub-schedules (if any) to this SCHEDULE B.
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SCHEDULE C
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LONG-TERM EQUITY PLANS - Executive shall participate in the Long-Term Equity
Plans (including stock options) for NorthWestern and the Private Equity Plans
for NorthWestern Growth Corporation and other entities on the terms and
conditions approved by NorthWestern's Board of Directors on May 2-3, 2000, and
in such additional long-term private equity plans as may be adopted or
implemented consistent with such authorization, and as described in further
detail in the attached sub-schedules (if any) to this SCHEDULE C. It is
understood and agreed by NorthWestern and Executive that, subject to their
mutual consent, Executive's participation in one or more of such long-term
private equity plans referred to above may be effected through equity ownership
interests (or securities exercisable for, convertible into or exchangeable for
such interests) in one or more Private Equity Entities either now existing or to
be formed by NorthWestern for such purposes.
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SCHEDULE D
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PARTICIPATION IN BENEFIT PLANS - During the term hereof, Executive shall be
entitled to participate in the plans and programs of NorthWestern available to
employees of Executive's level as generally listed below (copies or summaries of
the plans are incorporated by reference and are available to Executive upon
request):
o Health Plans
o 401(K) and Supplemental 401(K) Plan
o ESOP Plan
o Pension Plan (and related Supplemental Pension)
o Family Protector Plan
o Supplemental Income Security Plan
o Short-Term and Long-Term Disability Plans
o Standard Life Insurance Plan
o Standard Vacation Plan
o Standard Executive Reimbursement Program for Business Expenses
o Association Dues, Automobile Allowance (including insurance,
gas & maintenance costs), Country Club and Service Club Dues
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SCHEDULE E
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CHANGE OF CONTROL
AGREEMENT
BETWEEN
NORTHWESTERN CORPORATION
AND
MERLE D. LEWIS
JUNE 1, 2000
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TABLE OF CONTENTS
Page
1 Defined Terms 3
2. Term of Agreement 3
3 Corporation's Covenants Summarized 4
4. The Executive's Covenants 5
5. Compensation Other Than Severance Payments 5
6. Severance Payments 7
7. Termination Procedures and Compensation During Dispute 15
8. No Mitigation 17
9. Successors; Binding Agreement 17
10. Notices 18
11. Miscellaneous 19
12. Validity 20
13. Counterparts 20
14. References 20
15. Settlement of Disputes; Arbitration 20
16. Definitions 21
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AGREEMENT
THIS AGREEMENT, dated June 1, 2000, is made by and between NorthWestern
Corporation, a Delaware Corporation (the "Corporation"), and Merle D. Lewis (the
"Executive"), and supersedes any prior Change of Control Agreement between the
parties to this Agreement.
WHEREAS, the Corporation considers it essential to the best interests of
its shareholders to foster the continuous employment of key management
personnel; and
WHEREAS, the Board of Directors of the Corporation (the "Board")
recognizes that, as is the case with many publicly-held companies, the
possibility of a Change in Control or a Major Transaction (as defined in Section
16 hereof) exists and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of the Corporation and its
shareholders; and
WHEREAS, the Board has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of members of
the management of the Corporation, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control or a Major Transaction;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Corporation and the Executive hereby agree as
follows:
1. DEFINED TERMS. The definition of capitalized terms used in this
Agreement is provided in Section 16 hereof.
2. TERM OF AGREEMENT. This Agreement shall commence on the date hereof
and shall continue in effect through May 31, 2004; provided, however, that
commencing on June 1, 2000, and each June 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, not
later than March 30 of such year, the Corporation or the Executive shall have
given notice not to extend this Agreement or a Change in Control or a Major
Transaction shall have occurred prior to June 1 of such year; provided, however,
if a Change in Control or a Major Transaction shall have occurred during the
term of this Agreement, this Agreement shall continue in effect for a term equal
to the original term of this Agreement plus one year (hereinafter, the
"Measurement Period") from the month in which such Change in Control or Major
Transaction occurred.
3. CORPORATION'S COVENANTS SUMMARIZED. In order to induce the Executive
to remain in the employ of the Corporation and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Corporation agrees,
under the conditions described herein, to pay the Executive the compensation set
forth in Section 5 hereof and the "Severance Payments" described in Section 6
hereof and the other payments and benefits described herein in the event the
Executive's employment with the Corporation is terminated by the Corporation or
by the Executive for Good Reason (determined by treating a Potential Change in
Control or Potential Major Transaction as a Change in Control or a Major
Transaction, as applicable, in applying the definition of Good Reason) following
a Change in Control or a Major Transaction and during the term of this
Agreement. No amount or benefit shall be payable under this Agreement unless
there shall have been (or, under the terms hereof, there shall be deemed to have
been) a termination of the Executive's employment with the Corporation following
a Change in Control or a Major Transaction. This Agreement shall not be
construed as creating an express or implied contract of employment and, except
as otherwise agreed in writing between the Executive and the Corporation, the
Executive shall not have any right to be retained in the employ of the
Corporation.
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4. THE EXECUTIVE'S COVENANTS. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Potential Change in
Control or a Potential Major Transaction during the term of this Agreement, the
Executive will remain in the employ of the Corporation until the earliest of (i)
a date which is six (6) months from the date of such Potential Change of Control
or Potential Major Transaction, (ii) the date of a Change in Control or a Major
Transaction, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason (determined by treating the Potential Change in
Control or Potential Major Transaction as a Change in Control or a Major
Transaction, as applicable, in applying the definition of Good Reason), by
reason of death or Disability or Retirement, or (iv) the termination by the
Corporation of the Executive's employment for any reason.
5. COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
5.1 Following a Change in Control or a Major Transaction (or, under the
terms hereof, the deemed occurrence of such event) and during the term of this
Agreement, during any period that the Executive fails to perform the Executive's
full-time duties with the Corporation as a result of incapacity due to physical
or mental illness, the Corporation shall provide the Executive with short-term
disability, long-term disability and all other benefits equivalent to those
available to the Executive prior to such Change in Control or a Major
Transaction under the Employment Agreement until the Executive's employment is
terminated by the Employer for Disability.
5.2 If the Executive's employment shall be terminated for any reason
following a Change in Control or a Major Transaction (or, under the terms
hereof, the deemed occurrence of such event) and during the term of this
Agreement, the Corporation shall pay to the Executive the Executive's full
salary through the Date of Termination at the rate in effect under Section 2.a.
of the Employment Agreement at the time the Notice of Termination is given,
together with all compensation, incentive programs and other benefits payable to
the Executive through the Date of Termination under Sections 2.b., 2.c., 2.d.
and 2.e. of the Employment Agreement during such period; except to the extent
that the Executive is receiving such payments with respect to such period in
accordance with Section 5.1 hereof.
5.3 If the Executive's employment shall be terminated for any reason
following a Change in Control or a Major Transaction (or, under the terms
hereof, the deemed occurrence of such event) and during the term of this
Agreement, the Corporation shall pay to the Executive in the manner provided in
this Agreement all of the post-termination compensation, retirement and other
benefits due the Executive under the terms of the Employment Agreement
(including, without limitation, the pension, supplemental pension and
supplemental income plans set forth on Schedule D of the Employment Agreement,
whether or not any such plan is a qualified plan or is a fully, partially or
unfunded plan). If the Corporation is unable to continue Executive's benefits
(including covered family members and dependents) as required, the Corporation
will promptly purchase insurance and/or benefits substantially equivalent in all
material respects ("Equivalent Coverage"). In each such case, for purposes of
determining the amount of benefit payable to the Executive under any such plan,
program or benefit, the Executive shall be given credit for additional years of
service equal to the Measurement Period at the compensation level in effect
immediately prior to the Change in Control or Major Transaction (or, under the
terms hereof, the deemed occurrence of such event).
6. SEVERANCE PAYMENTS.
6.1 The Corporation shall pay the Executive the payments described in
this Section 6.1 (the "Severance Payments") upon the termination of the
Executive's employment by the Corporation or by the Executive for Good Reason
following a Change in Control or a Major Transaction and during the term of this
Agreement, in addition to the payments and benefits described in Section 5
hereof, unless such termination is (i) by the Corporation for Cause, (ii) by
reason of death, Disability or Retirement, or (iii) by the Executive without
Good Reason. The Executive's employment shall be deemed to have been terminated
following a Change in Control or a Major Transaction by the Employer without
Cause or
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by the Executive with Good Reason if: (i) the Executive's employment is
terminated prior to a Change in Control or a Major Transaction without Cause at
the direction of a Person who has entered into an agreement, arrangement or
understanding with the Corporation or another Person the consummation of which
would constitute (or which is contingent upon or entered into in connection
with) a Change in Control or a Major Transaction, (ii) if the Executive
terminates his employment with Good Reason prior to a Change in Control or a
Major Transaction (determined by treating a Potential Change in Control or
Potential Major Transaction as a Change in Control or a Major Transaction, as
applicable, in applying the definition of Good Reason) if the circumstance or
event which constitutes Good Reason occurs at the direction of such Person, or
(iii) the Executive's employment is terminated without cause or for a
fundamental change (as defined in the Employment Agreement) that follows or is
followed within six months by a Change of Control or Major Transaction (or
Potential Change in Control or Potential Major Transaction).
(a) In lieu of any further compensation payments to the Executive
for periods subsequent to the Date of Termination, the Corporation shall pay to
the Executive a lump sum severance payment, in cash, equal to the total amounts
that would be payable to Executive under Section 4-a.1 of the Employment
Agreement following a termination without cause.
(b) In addition to the retirement benefits to which the Executive
is entitled under each Pension Plan or any successor plan thereto, the
Corporation shall pay the Executive a lump sum amount, in cash, equal to the
excess of (x) the actuarial equivalent of the retirement pension (taking into
account any early retirement subsidies associated therewith and determined as a
straight life annuity commencing at Normal Retirement Age or any earlier date,
but in no event earlier than the expiration of the Measurement Period following
the Date of Termination, whichever annuity the actuarial equivalent of which is
greatest) which the Executive would have accrued under the terms of each such
Pension Plan, determined as if the Executive were fully vested thereunder and
had accumulated (after the Date of Termination) additional years of service
thereunder equal to the Measurement Period and had been credited under each such
Pension Plan during such period with compensation at the higher of (a)
Executive's compensation (as defined in such Pension Plan) during the twelve
(12) months immediately preceding the Date of Termination or (b) Executive's
compensation (as defined in such Pension Plan) during the twelve (12) months
immediately preceding the Change in Control or Major Transaction, over (y) the
actuarial equivalent of the retirement pension (taking into account any early
retirement subsidies associated therewith and determined as a straight life
annuity commencing at Normal Retirement Age or any earlier date, but in no event
earlier than the Date of Termination, whichever annuity the actuarial equivalent
is greatest) which the Executive had accrued pursuant to the provisions of each
such Pension Plan as of the Date of Termination. For purposes of this Section
6.1 (B), "actuarial equivalent" shall be determined using the same methods and
assumptions utilized under each of the Pension Plans, as applicable, immediately
prior to the Date of Termination (without regard to any amendment of such
methods and assumptions made subsequent to a Change in Control or a Major
Transaction, which amendment results in a lower payment under this Section 6.1
(B)). To the extent additional actuarial assumptions are required for the
purpose of calculating benefits under this Section 6.1 (B), such assumptions
shall be as reasonably agreed by the parties.
(c) If the Executive would have become entitled to benefits under
the Corporation's post-retirement health care or life insurance plans had his
employment terminated at any time during the Measurement Period following the
Date of Termination, the Corporation shall pay such benefits to the Executive
commencing on the later of (a) the date that such coverage would have first
become available and (b) the date the benefits described in (D) below terminate.
(d) During the Measurement Period immediately following the Date
of Termination, the Corporation shall continue to provide the Executive (and
covered family members and dependents) with benefits substantially similar in
all material respects to those which the Executive is receiving immediately
prior to the Notice of Termination, including, without limitation the benefit
plans and arrangements set forth on Schedule D of the Employment Agreement. If
the Corporation is unable to continue Executive's benefits (including covered
family members and dependents) as required, the Corporation will promptly
purchase Equivalent Coverage. Benefits otherwise receivable by the Executive
pursuant to this Section 6.1 (D) shall be reduced to the extent comparable
benefits are actually received by or made available to the Executive without
cost during the Measurement Period following the Executive's termination of
employment (and any such benefits actually received by the Executive shall be
reported to the Corporation by the Executive). If the benefits
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provided to the Executive under this Section 6.1 (D) shall result in a decrease,
pursuant to Section 6.2(b), in the Severance Payments and these Section 6.1 (D)
benefits are thereafter reduced pursuant to the immediately preceding sentence
because of the receipt of comparable benefits, the Corporation shall, at the
time of such reduction, pay to the Executive the lesser of (a) the amount of the
decrease made in the Severance Payments pursuant to Section 6.2(b), or (b) the
maximum amount which can be paid to the Executive without being, or causing any
other payment to be, nondeductible by reason of section 28OG of the Code.
(e) Any outstanding options to purchase the capital stock of the
Corporation held by the Executive shall immediately become fully vested without
change to the remaining term for the exercise of such options.
6.2 (a) In the event that any payment or benefit received or to be
received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Corporation, any
Person whose actions result in a Change in Control or any Person affiliated with
the Corporation or such Person) (all such payments and benefits, including the
Severance Payments, being hereinafter called "Total Payments") will be subject
(in whole or part) to the Excise Tax, then, subject to the provisions of
subsection (b) of this Section 6.2, the Corporation shall pay to the Executive
an additional amount (the "Gross-Up Payment") such that the net amount retained
by the Executive, after deduction of any Excise Tax on the Total Payments and
any federal, state and local income tax and Excise Tax upon the payment provided
for by this Section 6.2, shall be equal to the Total Payments. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to
pay federal income taxes at the highest marginal rate of federal income taxation
in the calendar year in which the Gross-Up Payment is to be made and state and
local Income taxes at the highest marginal rate of taxation in the state and
locality of the Executive's residence on the Date of Termination, net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes.
(b) In the event that, after giving effect to any redeterminations
described in subsection (d) below, a reduction in the Severance Payments, to the
largest amount that would result in no portion of the Total Payments being
subject to the Excise Tax (after taking into account any reduction in the Total
Payments provided by reason of section 28OG of the Code in such other plan,
arrangement or agreement), would produce a net amount (after deduction of the
net amount of federal, state and local income tax on such reduced Total
Payments) that would be greater than the net amount of unreduced Total Payments
(after deduction of the net amount of federal, state and local income tax and
the amount of Excise Tax to which the Executive would be subject in respect of
such Total Payments), then subsection (a) of this Section 6.2 shall not apply
and the Severance Payments shall be so reduced.
(c) For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the
Total Payments shall be treated as "parachute payments" within the meaning of
section 28OG(b)(2) of the Code, unless in the opinion of tax counsel selected by
the Corporation's independent auditors and reasonably acceptable to the
Executive ("Tax Counsel"), such other payments or benefits (in whole or in part)
do not constitute parachute payments, including by reason of section
28OG(b)(4)(A) of the Code, (ii) all excess parachute payments" within the
meaning of section 28OG(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of Tax Counsel such excess parachute payments
(in whole or in Part) represent reasonable compensation for services actually
rendered, within the meaning of section 28OG(b)(4)(B) of the Code, in excess of
the Base Amount allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Corporation's independent
auditors in accordance with the principles of sections 28OG(d)(3) and (4) of the
Code. Prior to the payment date set forth in Section 6.3 hereof, the Corporation
shall provide the Executive with its calculation of the amounts referred to in
this Section 6.2(b) and such supporting materials as are reasonably necessary
for the Executive to evaluate the Corporation's calculations. If the Executive
disputes the Corporation's calculations (in whole or in part), the reasonable
opinion of Tax Counsel with respect to the matter in dispute shall prevail.
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(d)In the event that (i) the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of the Executive's employment and (ii) after giving effect to
such redetermination, the Severance Payments are not reduced pursuant to Section
6.2(b) hereof, the Executive shall repay to the Corporation, at the time that
the amount of such reduction in Excise Tax is finally determined, the portion of
the Gross-Up Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by the Executive to the
extent that such repayment results in a reduction in the Excise Tax and/or a
federal, state or local income tax deduction) plus interest on the amount of
such repayment at the rate provided in section 1274(b)(2)(B) of the Code. in the
event that (x) the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment) and (y) after giving effect to
such redetermination, the Severance Payments are not reduced pursuant to Section
6.2(b) hereof, the Corporation shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or additions payable by the
Executive with respect to such excess) at the time that the amount of such
excess is finally determined.
6.3 The payments provided for in Section 6.1 (other than Section 6.1
(C) and Section 6.1 (D)) and Section 6.2 hereof shall be made not later than the
fifth day following the Date of Termination, provided, however, that if the
amounts of such payments, and the limitation on such payments set forth in
Section 6.2(b) hereof, cannot be finally determined on or before such day, the
Corporation shall pay to the Executive on such day an estimate, as determined in
good faith by the Executive, of the minimum amount of such payments to which the
Executive is clearly entitled and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Corporation to the
Executive, payable on the fifth (5th) business day after demand by the
Corporation (together with interest at the rate provided in section
1274(b)(2)(B) of the Code).
6.4 The Corporation also shall pay to the Executive all legal and
accounting fees and expenses incurred by the Executive in disputing in good
faith any termination of his employment hereunder, in seeking in good faith to
dispute any valuation conducted hereunder, to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder. Such payments shall be made
within five (5) business days after delivery of the Executive's written requests
for payment accompanied with such evidence of fees and expenses incurred as the
Corporation reasonably may require.
6.5 The Executive may, by delivery of written notice to the Corporation
in accordance with Section 1 0 hereof, elect to defer all or any portion of any
payment to be made by the Corporation to the Executive under the terms of this
Agreement over a period not to exceed ten (i 0) years from the Date of
Termination. In the event that the Executive makes any such deferral election,
upon written request of Executive (delivered at any time during the deferral
period, the Corporation shall be obligated to guaranty the financial performance
of the deferred obligation by delivering to the Executive a fully paid and
non-cancelable annuity, irrevocable letter of credit or other financial
instrument bearing financial, interest rate return and payment terms acceptable
to the Executive in his sole discretion (collectively, a "Performance
Guaranty"). In addition, the Corporation shall be required, upon written request
of Executive (delivered at any time during the deferral period), to deliver to
the Executive a Performance Guaranty in respect of any payment obligation to the
Executive pursuant to this Agreement which by its terms is payable on a deferred
or delayed basis without a formal election (e.g., retirement, pension,
supplemental pension and related benefits).
6.6 Reference herein to the terms or provisions of any compensation,
bonus, incentive, private equity, benefit or other arrangement, plan or program
in which the Executive is participating under the Employment Agreement or this
Agreement shall be without regard to any proposed amendment, modification or
termination to such arrangement, plan or program made subsequent to the Date of
Termination which would adversely affect the Executive's rights thereunder, and
the obligations of the Corporation hereunder with respect to such arrangement,
plan or program shall continue as
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to Executive (and covered family members and dependents) in full force and
effect. In all such cases, if the Corporation is unable to continue Executive's
benefits (including covered family members and dependents) as required, the
Corporation will promptly purchase Equivalent Coverage.
7. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1 NOTICE OF TERMINATION. After a Change in Control or a Major
Transaction and during the term of this Agreement, any purported termination of
the Executive's employment (other than by reason of death) shall be communicated
by written Notice of Termination from one party hereto to the other party hereto
in accordance with Section 1 0 hereof. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
Further, a Notice of Termination for Cause is required to include a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board (other than the Executive if he is a
member of the Board at such time) at a meeting of the Board which was called and
held for the purpose of considering such termination (after reasonable notice to
the Executive and an opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board) finding that, in the good
faith opinion of the Board, the Executive was guilty of conduct set forth in
clause (i) or (ii) of the definition of Cause herein, and specifying the
particulars thereof in detail.
7.2 DATE OF TERMINATION. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control or
a Major Transaction and during the term of this Agreement, shall mean (i) if the
Executive's employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that the Executive shall not have
returned to the substantially full-time performance of the Executive's duties
during such thirty (30) day period), and (ii) if the Executive's employment is
terminated for any other reason, the date specified in the Notice of Termination
(which, in the case of a termination by the Corporation, shall not be less than
thirty (30) days (except in the case of a termination for Cause) and, in the
case of a termination by the Executive, shall not be less than fifteen (15) days
nor more than sixty (60) days, respectively, from the date such Notice of
Termination is given).
7.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final and binding arbitration as set forth in Section 14 hereof;
provided further that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
7.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control or a Major Transaction (or, under the terms
hereof, the deemed occurrence of such event) and during the term of this
Agreement, and such termination is disputed in accordance with Section 7.3
hereof, the Corporation shall pay the Executive the full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited
to, salary, bonus, incentive and private equity plans) and continue the
Executive on an equivalent basis as a participant in all compensation, benefit,
insurance and other plans or benefits in which the Executive was participating
when the notice giving rise to the dispute was given, until the dispute is
finally resolved in accordance with Section 7.3 hereof. Amounts paid under this
Section 7.4 are in addition to all other amounts due under this Agreement (other
than those due under Section 5.2 hereof) and shall not be offset
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against or reduce any other amounts due under this Agreement. The Corporation
agrees that it shall not assert any breach or alleged breach by the Executive of
any provision of this Agreement, the Employment Agreement, the NonCompetition
Agreement or any other agreement between the Corporation and the Executive as a
defense or off-set to the Corporation's obligation to make any payment under
this Agreement.
8. NO MITIGATION. The Corporation agrees that, if the Executive's
employment with the Corporation terminates during the term of this Agreement,
the Executive is not required to seek other employment or to attempt in any way
to reduce any amounts payable to the Executive by the Corporation pursuant to
this Agreement. Further, the amount of any payment or benefit provided for in
this Agreement (other than in Section 6.1 (D) hereof) shall not be reduced by
any compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Corporation, or otherwise.
9. SUCCESSORS; BINDING AGREEMENT.
9.1 In addition to any obligations imposed by law upon any successor to
the Corporation, the Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to expressly
assume and agree in writing to perform this Agreement in the same manner and to
the same extent that the Corporation would be required to perform it if no such
succession had taken place. Failure of the Corporation to obtain such assumption
and agreement on terms reasonable acceptable to Executive and deliver same to
the Executive prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Executive to compensation from
the Corporation in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control or a Major Transaction,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive's
estate.
10. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To Executive:
Merle D. Lewis
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To NorthWestern:
Corporate Secretary
NorthWestern Corporation
125 S. Dakota Ave.
Sioux Falls, SD 57104
11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. This Agreement supersedes any other agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of Delaware. All
references to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Corporation and the Executive under
Sections 6 and 7 shall survive the expiration of the term of this Agreement.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect, and
the parties shall endeavor in good faith negotiations to replace such invalid,
illegal or unenforceable provision with one or more provisions that faithfully
reflect the original economic intent of the parties as manifested in the
invalid, illegal or unenforceable provision.
13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. REFERENCES. The words "herein," "hereof'and "hereunder' and other
words of similar import refer to this Agreement as a whole, including the
schedules, appendices and agreements attached hereto. Wherever from the context
it appears appropriate, each term stated in either the singular or plural shall
include the other, and pronouns stated in the masculine, feminine or neuter
gender shall include the others.
15. SETTLEMENT OF DISPUTES; ARBITRATION. All claims by the Executive for
benefits under this Agreement shall be directed to and determined by the Board
and shall be in writing. Any denial by the Board of a claim for benefits under
this Agreement shall be delivered to the Executive in writing and shall set
forth the specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Board shall afford a reasonable opportunity to the
Executive for a review of the decision denying a claim and shall further allow
the Executive to appeal to the Board a decision of the Board within sixty (60)
days after notification by the Board that the Executive's claim has been denied.
Any further dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by binding arbitration in Sioux Falls,
South Dakota, in accordance with the Employment Dispute Resolution Rules and
Regulations of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having jurisdiction; provided,
however, that the Executive shall be entitled to seek specific performance of
the Executive's right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement. The Corporation shall be obligated to advance the filing fees and
other costs of
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arbitration. The prevailing party shall be entitled to recover its reasonable
costs incurred in connection with any such proceeding, including the fees and
expenses of attorneys, accountants and consultants.
16. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(A) "Base Amount" shall have the meaning defined in section
28OG(b)(3) of the Code.
(B) "Beneficial Owner" shall have the meaning defined in Rule
13d-3 under the Exchange Act (except that a Person shall be deemed the
beneficial owner of all securities which such Person may have the right
to acquire, whether or not such right is presently exercisable or is
subject to a contingency).
(C) "Board" shall mean the Board of Directors of the
Corporation.
(D) "Cause" for termination by the Corporation of the
Executive's employment, after any Change in Control or Major
Transaction, shall mean: (i) the willful engaging by the Executive in
dishonest or fraudulent conduct intended to result, directly or
indirectly, in demonstrable and material financial or economic harm to
the Corporation, or (ii) gross negligence by the Executive in the
performance of the Executive's duties with the Corporation.
Notwithstanding the foregoing, for purposes hereof (A) the Executive
shall not be deemed to have been terminated for cause under either
clause (i) or (ii) above unless and until there shall have been
delivered to the Executive a Notice of Termination in accordance with
Section 7. 1, and (B) no act, or failure to act, on the Executive's
part shall be deemed "willful" unless done, or omitted to be done, by
the Executive not in good faith and without reasonable belief that the
Executive's act, or failure to act, was in the best interest of the
Corporation.
(E) A "Change in Control" shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall
have been satisfied:
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Corporation (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Corporation or its affiliates) representing 20% or
more of the combined voting power of the Corporation's then outstanding
securities;
(ii) during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute the Board
and any new director (other than a director whose original assumption
of off ice is in connection with an actual or threatened election of
directors, as such terms are used in Rule 14a-1 1 of Regulation 14A
under the Exchange Act) whose election to the Board 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 was previously so approved, cease for any
reason to constitute a majority thereof; or
(iii) the occurrence of any other event that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A of the Exchange Act.
(F) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(G) "Corporation" shall mean NorthWestern Corporation and any
successor to its business and/or assets which assumes and agrees to
perform this Agreement by operation of law, or otherwise
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(except in determining, under the terms hereof, whether or not any
Change in Control or Major Transaction has occurred in connection with
such succession).
(H) "Date of Termination" shall have the meaning stated in
Section 7.2 hereof.
(I) "Disability" shall be deemed the reason for the
termination by the Corporation of the Executive's employment, if, as a
result of the Executive's incapacity due to physical or mental illness,
the Executive shall have been absent from the full-time performance of
the Executive's duties with the Corporation for a period of nine (9)
consecutive months, the Corporation shall have given the Executive a
Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not have
returned to the full-time performance of the Executive's duties.
(J) "Employment Agreement" shall mean the Comprehensive
Employment Agreement and Investment Program for Executive dated as of
June 1, 2000.
(K) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(L) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(M) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(N)
"Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express
written consent) of any one of the following acts by the Corporation,
or failures by the Corporation to act, unless, in the case of any act
or failure to act described in paragraph (V), (VI) or (VII) below, such
act or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(i) significant diminution in the Executive's duties,
authority, responsibility, compensation and/or benefits as provided in
the Employment Agreement (or as the same may be increased from time to
time), or a significant adverse change in the nature of the Executive's
reporting responsibilities;
(ii) the Corporation moves Executive's primary office
from Sioux Falls, South Dakota or requires Executive to travel for business to
an extent materially greater than Executive's customary travel obligations,
without Executive's consent;
(iii) requiring the Executive to be based at a
location more than 50 miles from Sioux Falls, South Dakota, except for required
travel on the Corporation's business to an extent substantially consistent with
the Executive's present business travel obligations;
(iv) the failure by the Corporation, to pay to the
Executive any portion of the Executive's compensation within seven (7) days of
the date such compensation is due or the breach by the Corporation of any other
material provision of this Agreement;
(v) the failure by the Corporation to continue in
effect any compensation plan, private equity plan, arrangement or benefit in
which the Executive participates under the Employment Agreement immediately
prior to the Change in Control or the Major Transaction (or deemed occurrence of
such event), unless an equitable arrangement satisfactory to the Executive
(embodied in an ongoing substitute or alternative
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plan) has been made with respect to such plan, or the failure by the Corporation
to continue the Executive's participation therein (or in such substitute or
alternative plan) on a basis not substantially less favorable, including but not
limited to the nature, amount, vesting and duration of benefits provided and the
level of the Executive's participation relative to other participants, as
existed at the time of the Change in Control or Major Transaction (or deemed
occurrence of such event);
(vi) the failure by the Corporation to continue to
provide the Executive (and any covered family member or dependent) with benefits
substantially similar in all material respects to those which the Executive is
receiving immediately prior to the Change in Control or Major Transaction (or
deemed occurrence of such event), including, without limitation the benefit
plans and arrangements set forth on Schedule D of the Employment Agreement; the
taking of any action by the Corporation which would directly or indirectly
materially reduce any of such benefits or deprive the Executive of any material
fringe benefit enjoyed by the Executive at the time of the Change in Control or
Major Transaction, or the failure by the Corporation to provide the Executive
with the number of paid vacation days to which the Executive is entitled on the
basis of years of service with the Corporation in accordance with the
Corporation's normal vacation policy in effect at the time of the Change in
Control or Major Transaction; or
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 7.1; for purposes of this Agreement, no such
purported termination shall be effective.
The Executive's right to terminate the Executive's employment for Good Reason
shall not be affected by the Executive's incapacity due to physical or mental
illness. The Executive's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act constituting
Good Reason hereunder.
(O) A "Gross-up Payment" shall have the meaning given in Section 6.02
hereof.
(P) A "Major Transaction" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(i) the Board or the shareholders of the Corporation approve a
merger or consolidation of the Corporation with any corporation or other entity,
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 the Corporation or the
surviving or succeeding entity immediately after such merger or consolidation,
or (ii) a merger or consolidation effected to implement a recapitalization of
the Corporation (or similar transaction) in which no Person acquires more than
20% of the combined voting power of the Corporation's then outstanding
securities; or
(ii) (G) the Board or the shareholders of the Corporation
approve a plan of complete liquidation of the Corporation; or
(iii) the Board or the shareholders of the Corporation approve
an agreement or transaction (or series of agreements or transactions) for the
sale or disposition by the Corporation of all or substantially all the
Corporation's assets (meaning assets representing thirty percent (30%) or more
of the net tangible assets of the Corporation or generating thirty percent (30%)
or more of the operating cash flow of the Corporation), 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.
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(Q) "Normal Retirement Age" shall mean the earliest age at which the
Executive may commence Retirement and become entitled to an unreduced pension
under the IRS qualified Pension Plan.
(R) "Notice of Termination" shall have the meaning stated in Section
7.1 hereof.
(S) "Pension Plan" shall mean the Corporation's IRS Qualified Plan and
any successor thereto and any other agreement entered into between the Executive
and the Corporation which is designed to provide the Executive with retirement
and/or supplemental retirement benefits (whether such plan or arrangement is a
qualified plan or a funded, partially funded or unfunded plan).
(T) "Performance Guaranty" shall have the meaning given in Section 6.5
hereof.
(U) "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) the Corporation, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Corporation,
(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 the Corporation in substantially the same proportions as their
ownership of shares of the Corporation prior to the Change in Control or Major
Transaction.
(V) "Potential Change in Control" shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have been
satisfied:
(i) the Corporation enters into an agreement, the consummation
of which would result in the occurrence of a Change in Control;
(ii) the Corporation or any Person publicly announces an
intention to take or to consider taking actions which, if consummated, would
constitute a Change in Control;
(iii) any Person who is or becomes the Beneficial owner,
directly or indirectly, of securities of the Corporation representing 10% or
more of the combined voting power of the Corporation's then outstanding
securities, increases such Person's beneficial ownership of such securities by
5% or more over the percentage so owned by such Person on the date hereof unless
such Person has reported or is required to report such ownership (but less than
20%) on Schedule 13G under the Exchange Act (or any comparable or successor
report) or on Schedule 13D under the Exchange Act (or any comparable or
successor report) which Schedule 13D does not state any intention to or reserve
the right to control or influence the management or policies of the Corporation
or engage in any of the actions specified in Item 4 of such Schedule (other than
the disposition of the common shares) and, within 10 business days of being
requested by the Corporation to advise it regarding the same, certifies to the
Corporation that such Person acquired such securities of the Corporation in
excess of 14.9% inadvertently and who, together with its affiliates, thereafter
does not acquire additional securities while the Beneficial Owner of 15% or more
of the securities then outstanding; provided, however, that if the Person
requested to so certify fails to do so within 1 0 business days, or amends such
filing, publicly announces or otherwise manifests its intention to seek to
control or influence the management or policies of the Corporation, then such
occurrence shall be deemed a Potential Change in Control; or
(iv) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
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(W) "Potential Major Transaction" shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have been
satisfied:
(i) the Corporation enters into an agreement, the consummation
of which would result in the occurrence of a Major Transaction;
(ii) the Corporation or any Person publicly announces an
intention to take or to consider taking actions which, if consummated, would
constitute a Major Transaction; or
(iii) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Major Transaction has occurred.
(X) "Retirement" shall be deemed the reason for the termination by the
Corporation or the Executive of the Executive's employment if such employment is
terminated in accordance with the Corporation's written mandatory retirement
policy, if any, as in effect immediately prior to the Change in Control or Major
Transaction, or in accordance with any retirement arrangement established with
the Executive's written consent with respect to the Executive.
(Y) "Severance Payments" shall mean those payments described in Section
6.1 hereof.
(Z) "Total Payments" shall have the meaning given in Section 6.2
hereof.
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NORTHWESTERN CORPORATION "EXECUTIVE"
By: /s/ Larry F. Ness /s/ Merle D. Lewis
------------------------------- ------------------------------------
Chairman, Nominating & Merle D. Lewis
Compensation Committee
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SCHEDULE F
----------
NONCOMPETITION AGREEMENT
------------------------
THIS AGREEMENT is made as of June 1, 2000 by and between NorthWestern
Corporation ("Corporation"), and Merle D. Lewis ("Executive").
RECITALS
--------
1. The Corporation and Executive have entered into an Employment
Agreement dated the date hereof ("Employment Agreement"),
2. The Corporation and Executive desire to enter arrangements to
preclude Executive from engaging in activities during his employment and upon
his termination of employment with the Corporation which compete with the
Corporation and its affiliates or any of their predecessors.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Corporation and Executive, each intending
to be legally bound, agree as follows:
1. COVENANTS CONCERNING COMPETITION
-----------------------------------
(a) COVENANT NOT TO COMPETE. During the term of Executive's employment
with the Corporation and for a period of two years thereafter, Executive will
not in any manner, directly or indirectly:
(i) manage, consult, be employed by, operate, join, promote, be
compensated by, render advice to, control or participate in the business of any
individual, firm, corporation, institution or company engaged in the Same or
Similar Activities (as defined below) carried on by the Corporation or its
affiliates or any of their predecessors in the United States; or
(ii) own or have any ownership interest exceeding 5% in any
privately-held corporation, firm, institution or company engaged in the Same or
Similar Activities carried on by the Corporation or its affiliates or any of
their predecessors in the United States; or
(iii) own or have an ownership interest of more than 5% of the
publicly-traded securities of any public corporation, firm, institution or
company engaged in the Same or Similar Activities carried on by the Corporation
or its affiliates or any of their predecessors in the United States.
For purposes of the Agreement, Same or Similar Activities shall mean,
to the extent such activities are then being conducted by the Corporation or its
affiliates, the operation of electric, natural gas and propane distribution;
steel fabrication; energy distribution services; heating, ventilation, air
conditioning, plumbing and related services; and integrated communication and
data services to small and medium sized businesses.
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(b) NON-SOLICITATION. During the term of Executive's employment with
the Corporation and for a period of two years thereafter, Executive will not in
any manner, directly or indirectly, cause, persuade, solicit, induce or attempt
to do any of the foregoing in order to;
(i)cause any person, business or entity which is a supplier or customer
of the Corporation or its affiliates at any time during the term of his
employment to terminate any written or oral agreement or understanding with the
Corporation or its affiliates; or
(ii) cause any person employed by the Corporation or its affiliates at
any time during the term of his employment to terminate their employment with
the Corporation or its affiliates to terminate their employment in order to work
for any individual, firm, corporation, institution or company engaged in the
same or similar Activities carried on by the Corporation or its affiliates in
the United States.
(c) JUDICIAL MODIFICATION OF COVENANTS CONCERNING COMPETITION, If any
provision contained in this Section 1 shall for any reason be held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Section 1, rather
this Section 1 shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. It is the intention of the parties
that if any of the restrictions or covenants contained herein is held to cover a
geographic area or to be of a duration of time which is not permitted by
applicable law, OR in any way construed to be too broad or to any extent
invalid, such provisions shall not be construed to be null, void or of no
effect, but, to the extent such provision would be valid or enforceable under
applicable law if limited in scope or duration, a court of competent
jurisdiction shall construe and interpret or reform this Section 1 to provide
for a covenant having the maximum enforceable geographic area, time period and
other provisions (not greater than those contained herein) as shall be valid and
enforceable under such applicable law.
(d) CORPORATION'S INTEREST. Executive acknowledges that the Corporation
and its affiliates have a legitimate interest which the provisions of this
Section 1 are reasonably necessary to protect, that the restrictions on
competition contained in this Section 1 are reasonable and that the
consideration set forth in Section 2 is sufficient for purposes of this Section
1.
(e) SURVIVAL OF OBLIGATIONS. If Executive's employment with the
Corporation is terminated for any reason, Executive's duties, obligations and
responsibilities under this Agreement shall survive and shall continue as set
forth herein.
2. CONSIDERATION
----------------
In consideration of Executive entering into this Agreement, Executive shall be
paid compensation as defined under the provisions of Employment Agreement
between Corporation and Executive.
3. BREACH
---------
Executive acknowledges that the Corporation would be irreparably harmed
by any breach of Section 1 and that there would be no adequate remedy at law or
in damages to compensate the Corporation for any such breach. Accordingly, the
Corporation will be entitled, in addition to any other rights or remedies it may
have at law or in equity, to apply for an injunction
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enjoining and restraining Executive from doing or continuing to do any such act
or any other.violations or threatened violations of Section 1.
4. NOTICES
----------
Any notice or communication given pursuant to this Agreement must be in
writing and shall be effective only if delivered personally; or sent by
facsimile transmission; or delivered by overnight courier service; or sent by
certified mail, postage paid, return receipt requested, to the recipient at the
address indicated below or to such other address as the party being notified may
have previously furnished to the other party by written notice pursuant to this
Section 4:
To Executive:
Merle D. Lewis
To NorthWestern:
Corporate Secretary
NorthWestern Corporation
125 S. Dakota Ave.
Sioux Falls, SD 57104
Notices under this Agreement shall be effective and deemed received on
the date of personal delivery or facsimile transmission (as evidenced by
facsimile confirmation of transmission); on the day after sending by overnight
courier service (as evidenced by the shipping Invoice signed by a representative
of the recipient); or on the date of actual delivery to the party to whom such
notice or communication was sent by certified mail, postage prepaid, return
receipt requested (as evidenced by the return receipt signed by a representative
of such party).
5. ENTIRE AGREEMENT: AMENDMENT
------------------------------
This Agreement and the Employment Agreement represent the entire
agreement of the Corporation and Executive with respect to the matters set forth
in it. No amendment or modification of the terms of this Agreement shall be
binding upon the parties unless reduced to writing and signed by each of the
parties.
6. SEVERABILITY
---------------
Any provision of this Agreement prohibited by law or deemed
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions.
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7. GOVERNING LAW
----------------
This Agreement shall be interpreted and construed under the laws of the
State of Delaware, and the parties consent to the jurisdiction of Delaware state
and federal courts located in the State of Delaware over all matters relating to
this Agreement.
8. SUCCESSORS AND ASSIGNS
-------------------------
This Agreement shall inure to the benefit of the Corporation and its
successors and assigns.
9. WAIVER
---------
No waiver by any party at any time of any breach by the other party of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of any other provisions or conditions
at the same time or at any prior or subsequent time.
10. SURVIVAL OF AGREEMENT
-------------------------
This Agreement shall survive the termination of Executive's employment with the
Corporation and the expiration or termination of this Agreement.
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11. COUNTERPARTS
----------------
This Agreement may be executed in counterparts, each of which shall be
deemed an original.
NORTHWESTERN CORPORATION "EXECUTIVE"
By: /S/ Larry F. Ness /s/ Merle D. Lewis
------------------------- --------------------------------------------
Chairman, Nominating & Merle D. Lewis
Compensation Committee
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