false0000073088 0000073088 2019-12-23 2019-12-23
 
 
 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 23, 2019 (December 18, 2019)
A2INCOLORA02.JPG

NorthWestern Corp
(Exact name of registrant as specified in its charter)
Delaware
1-10499
46-0172280
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)
(I.R.S. Employer Identification No.)
3010 W. 69th Street
Sioux Falls
South Dakota
 
57108
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: 605-978-2900
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock
NWE
NYSE
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
 
 
 
 
 


Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
 
(e) Short-Term Incentive Compensation Plan
On December 19, 2019, the Board of Directors (the "Board") of NorthWestern Corporation d/b/a NorthWestern Energy (NYSE: NWE) (the "Company"), based on the recommendation of the Human Resources Committee (the "Committee") of the Board, established the Company's 2020 Annual Incentive Plan for officers and other eligible employees of the Company (the "2020 AI Plan").
The 2020 AI Plan provides for a payment of incentive compensation to officers and other eligible employees for the performance period of January 1, 2020, through December 31, 2020. To be eligible to receive a payout under the 2020 AI Plan, employees must be employed on December 31, 2020, and have been employed actively for at least one full quarter of the plan year.
A target incentive level for each participating employee is set by position and is expressed as a percentage of base salary. The short-term incentive target opportunities under the 2020 AI Plan for the Company's principal executive officer, principal financial officer and the other remaining named executive officers in the Company's proxy statement filed for its 2019 annual meeting of shareholders (the "2019 Proxy Statement") are as follows:
Name
Title
Short-Term Incentive Target Opportunity (as a percentage of base salary)
Robert C. Rowe (1)
President and Chief Executive Officer
100%
Brian B. Bird
Chief Financial Officer
60%
Heather H. Grahame
General Counsel and Vice President - Reguatory and Federal Government Affairs
55%
Curtis T. Pohl
Vice President - Retail Operations
40%
Bobbi L. Schroeppel
Vice President - Customer Care, Communications and Human Resources
40%
(1) Mr. Rowe, a member of the Board, abstains from voting on all Board matters concerning executive compensation.
The performance measures for the 2020 AI Plan are substantially the same as under the Company's prior plan.
Payouts of awards to plan participants from the performance pool (as discussed below) will be determined based on a combination of:
(i)
individual performance ratings that evaluate achievement against established goals and objectives as well as overall job performance; and


(ii)
company performance based on the achievement of the following specified performance metrics during 2020:
a.
Financial Performance, weighted at 55%, based on achieving targeted net income;
b.
Safety, weighted at 15%, using three equally weighted measurements, two based on OSHA definitions – lost time incident target rate and total recordable incident rate – and the third based on 100% completion of safety and security training by active employees;
c.
Reliability, weighted at 15%, consisting of two electric system reliability indices (each weighted at 5%), which measure the total duration of interruption for the average customer on our system during a predefined period of time, and two natural gas system reliability indices (each weighted at 2.5%), which measure damage per 1,000 locates and leaks per 100 miles on our system during a predefined period of time; and
d.
Customer Satisfaction, weighted at 15%, consisting of performance as determined by an independent survey conducted by J.D. Power & Associates (5%) and, operational performance (5%) and reputational perception (5%) pursuant to a separate independent survey conducted by Flynn Wright.

No awards will be paid out under the 2020 AI Plan unless at least 90% of the net income target is met. In the event that a work-related fatality occurs during the year, the lost time incident rate portion of of safety performance metric will be forfeited for all employees unless it is determined by the Committee that no actions on the part of the employee or the Company contributed to the incident. In calculating performance against target, the Board may make adjustments either positively or negatively for one-time events and extraordinary non-budgeted items.
A performance pool will be created and funded based on the level of achievement of the four company performance factors described above. The performance pool then will be allocated to each executive using total target incentive dollars at the end of the performance period for eligible employees in each functional unit, division or department, as adjusted based on the performance funding level achieved.
Allocations of the performance pool will be based on the recommendation of an employee's supervisor. In no case will the total payouts in a given performance pool exceed the total dollars available for that performance pool.

Awards will be paid out to employees as soon as practicable after year-end results are known, but no later than March 31, 2021. The actual incentive amounts paid under the 2020 AI Plan will be based on the Company's actual results during 2020 in relation to the established performance objectives, and these payments may be greater or less than the target amounts that have been established.


The annual incentive awards are governed by the terms of the 2020 AI Plan. For further information regarding the 2020 AI Plan, see the copy of the plan that is filed as Exhibit 99.1 hereto and incorporated herein by reference.
(e) Executive Retirement/Retention Program
On December 19, 2019, the Board, based on the recommendation of the Committee, also approved grants of performance-based restricted share units to each of the Company's eight executive officers under the Company's Executive Retirement/Retention Program (the "Program"). These grants are made on an annual basis under the NorthWestern Corporation Amended and Restated Equity Compensation Plan (the "Equity Compensation Plan").
The purpose of the Program is to reward the Company's executives when they retire for their years of service with the Company and to provide the Company's executives an incentive to continue their employment with, and to advance the interests of, the Company. The Company does not provide its executives with a traditional supplemental executive retirement plan, or SERP. As described in more detail below, executives receive these awards only if the Company satisfies a financial performance measure and they remain employed with the Company through the vesting period.
Summary of Program Provisions
Under the terms of the grants, each participant received an award of restricted share units ("RSUs") based upon a percentage of the participant's base salary divided by the fair market value of the Company's common stock as of the grant date. Each of the Company's executive officers received awards under the Program. The awards for the Company's principal executive officer, principal financial officer and the other named executive officers in the 2019 Proxy Statement are set forth in the table below.



Named Executive Officer
 
Program Target Opportunity (as a percentage of base salary)
 
Number of
RSUs Awarded (1)
Robert C. Rowe (2)
President & Chief Executive Officer
 
60%
 
6,414
Brian B. Bird
Chief Financial Officer
 
25%
 
1,849
Heather H. Grahame
General Counsel and Vice President - Regulatory and Federal Government Affairs
 
20%
 
1,395
Curtis T. Pohl
Vice President - Distribution
 
20%
 
1,005
Bobbi L. Schroeppel
Vice President - Customer Care, Communications and Human Resources
 
15%
 
710
(1) Based on a grant date fair value of $60.73, which was calculated using the closing stock price of $72.20 on December 18, 2019, less the present value of expected dividends, calculated using a 1.74% five-year Treasury rate and assuming quarterly dividends of $0.60 for the five-year vesting period.
(2) Mr. Rowe, a member of the Board, abstains from voting on all Board matters concerning executive compensation.

Vesting of the RSUs to each participant is conditioned on the Company achieving net income that exceeds the Company's net income for 2019 for three of the five calendar years 2020 through 2024. For purposes of the award, “net income” means net income, as reflected in the Company's audited consolidated financial statements. In determining whether the performance measure has been satisfied, the Board may make discretionary adjustments either positively or negatively for one-time events and extraordinary non-budgeted items.
Vesting of the RSUs also generally is contingent upon the participant remaining in the continuous employ of the Company through the end of the performance period; however, as discussed below, vesting also would occur earlier upon the death or disability of the participant, or upon a change of control of the Company. Upon vesting, RSUs will be credited to an account for the participant. The participant's account will be credited for the payment of cash or stock dividends related to the vested RSUs for dividends declared after the date that the RSUs become vested and until the RSUs are paid. Cash dividend equivalents will be credited as additional vested RSUs.
If the participant retires before vesting, a pro rata portion of the RSUs (based on the number of months of service during the performance period) will vest and will be paid as described in the following paragraph. If the participant dies or becomes disabled prior to vesting, the RSUs will become vested and will be paid as soon as practicable after such death or disability. Upon a change of control, the performance measure will be deemed


satisfied and awards will be deemed vested, but will not be paid until the participant's departure from the Company as described in the following paragraph.
Following the participant's departure from the Company, except as described above in the event of death or disability, payout of the earned and vested RSUs will be made in equal annual installments over a five-year period. Payout will be made in shares of common stock of the Company, with one RSU vested and earned equal to one share of the Company's common stock. Awards under the Program may be canceled by the Board at any time.
The terms of the awards are governed by the Form of NorthWestern Corporation Executive Retirement/Retention Program Restricted Share Unit Award Agreement (the "Award Agreement") and the Equity Compensation Plan. For further information regarding the Award Agreement, see the copy of the Award Agreement that is filed as Exhibit 99.2 hereto and incorporated herein by reference. For further information regarding the Equity Compensation Plan, see Appendix A of the Company's 2014 Proxy Statement, dated March 7, 2014 (Commission File No. 1-10499), which is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

EXHIBIT NO.
DESCRIPTION OF DOCUMENT
99.1*
2020 Annual Incentive Plan
99.2*
Form of NorthWestern Corporation Executive Retirement/Retention Program Restricted Share Unit Award Agreement
 
 
* filed herewith




Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
NORTHWESTERN CORPORATION
 
 
 
 
 
 
By:
/s/ Timothy P. Olson
 
 
 
Timothy P. Olson
 
 
 
Corporate Secretary
 

Date: December 23, 2019




NORTHWESTERN ENERGY
2020 ANNUAL INCENTIVE PLAN



I.    Introduction

NorthWestern Energy (NorthWestern) utilizes the 2020 Annual Incentive Plan (Plan) to reward non-represented employees for their contributions toward achieving desired business results.

II.    Plan Objectives

This Plan is designed to achieve the following objectives:

▪
Align the interests of shareholders, customers and employees.
▪
Create incentives for employees to achieve financial and operating results.
▪
Reward employees individually, and as a team, by providing compensation opportunities consistent with company financial and operating performance.

III.    Plan Administration

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

IV.    Performance Period and Effective Date

The Plan becomes effective January 1, 2020, and will continue until December 31, 2020, which is the Performance Period. The Plan may be suspended and/or terminated by the Administration Committee, subject to approval by the Board, at any time, without prior notice and at its sole discretion.

V.    Other Considerations

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

Distributions under the Plan are at the discretion of the Administration Committee, subject to approval of the Board's Human Resources Committee. Awards will not be made under the Plan if, in the sole and final judgment of the Board, the overall financial condition of the Company is insufficient to support awards.

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Distributions from the Plan do not provide any rights to continued employment. A distribution from the Plan in any one performance period does not guarantee the participant a distribution, or the right to participate, in any subsequent performance period.

Employees have the right to report work-related injuries and illnesses. This Plan is not intended to interfere with that right and will not be applied in any manner that interferes with that right. NorthWestern Energy is prohibited from discharging or in any manner discriminating against employees for reporting work-related injuries or illnesses.

VI.    Participation and Eligibility

All non-represented regular full-time, regular part-time, limited part-time and seasonal employees of NorthWestern and telecommunication technicians covered under a collective bargaining agreement between NorthWestern and International Brotherhood of Electrical Workers Local Union No. 44 employed on the last business day of the plan year are eligible to receive payment under the Plan provided they are actively employed by NorthWestern for at least one full quarter of the Plan year. To participate in the Plan, employees must have written goals and objectives consistent with NorthWestern’s goals and objectives. These employee goals must target results that meet or exceed the normal requirements of the position, and that contribute to meeting the goals and objectives of NorthWestern. Goals and objectives can be based on individual and team performance.

An employee must meet acceptable performance standards, as defined and approved by the Administration Committee, to be eligible for an award. An employee who was under a formal disciplinary action during the Performance Period is not eligible for an award during the disciplinary period. An employee whose performance is rated “unsatisfactory” is not eligible for an award. An employee whose performance is rated “partially met expectations” may, at the discretion of their supervisor, be eligible for an award within established guidelines.

Employees are eligible for a prorated incentive award based upon the amount of time served in an eligible status with NorthWestern Energy during the Performance Period if they:
(1)
Are classified as seasonal,
(2)
Were under a formal disciplinary action for a portion of the Performance Period,
(3)
Work on a part-time basis,
(4)
Take unpaid leave, including military leave, that is nonmedical in nature and that exceeds 80 hours, or
(5)
Retired, provided they worked at least one full quarter during the Performance Period, even though the retired employee was not employed on the last business day of the Plan year. For purposes of this incentive Plan, retirement shall mean the termination of an employee’s continuous service with NorthWestern after the employee has attained at least age 65 or attained at least age 55 with a minimum of 5 years of service. Retirement shall exclude any termination for cause. Proration for retirement will be based on an employee’s last day actually working, even

2


though an employee may receive approval to extend their actual termination date by using accrued paid leave (i.e., PTO).

Temporary and summer employees, as well as independent contractors, are not eligible to participate in the Plan.

VII.      Individual Awards

Awards to Plan participants from the Performance Pool (Section IX) will be determined based on individual performance ratings that evaluate achievement against established goals and objectives, as well as overall job performance. Supervisors will evaluate individual employee performance during the Performance Period covered by the Plan to determine individual awards.

VIII.    Target Funding Level

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

IX.    Performance Pool

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

The Performance Pool will be created based on four factors: net income, system performance comprised of electric and natural gas service reliability, customer satisfaction, and employee safety. Each of these measures will be calculated at the conclusion of the Performance Period. Periodic accruals will be made to provide for the Performance Pool at year-end. The Performance Pool will be funded in accordance with Table 1 below; however, no awards will be made unless at least 90% of the net income target is met. Officer awards will be modified based on each officer’s goal performance during the Performance Period.



3


Table 1 - 2020 Plan Performance Metrics
 
 
Threshold
Target
Maximum
Incentive Metric
Weight
50%
100%
150%
FINANCIAL
 
 
 
 
Net Income (GAAP)1
55%
-10%
Budget
+10%
SAFETY2
 
 
 
 
Lost Time Incident Rate
5%
0.60
0.48
0.25
Total Recordable Incident Rate
5%
1.85
1.55
1.2
Safety and Security Training Completion3
5%
--
100%
--
RELIABILITY4
 
 
 
 
System Avg Interruption Duration Index (SAIDI excluding MEDs)
5%
118
104
89
System Avg Interruption Duration Index (SAIDI including MEDs)
5%
170
125
94
Gas - Damages per 1000 Locates
2.5%
3.2
2.2
1.60
Gas - Leaks per 100 Miles of Distribution Pipe
2.5%
15.5
10.0
8.1
CUSTOMER SATISFACTION5
 
 
 
 
JD Power Residential Electric and Gas Survey Performance
5%
694
720
724
Operational Performance - Customer Survey by Flynn Wright
5%
35.22
39.13
43.05
Reputational Perceptions - Customer Survey by Flynn Wright
5%
34.55
38.39
42.23

Footnotes: 1) The net income financial target is based on Board-approved budget for 2020; 2) If a work-related fatality occurs, the lost time incident rate portion of the safety performance metric of the Annual Incentive Plan will be forfeited for all NorthWestern employees unless it is determined by the Human Resources Committee that no actions on the part of the employee or the Company contributed to the incident. 3) Funding for Safety and Security Training requires achieving Target level. 4) The Reliability results will be adjusted for planned outages and catastrophic events. 5) Customer satisfaction results are based on independent JD Power residential electric and gas survey results, and data collected by third-party consultant Flynn-Wright via a longitudinal customer tracking study.

Funding levels are computed by prorating if actual results lie between Threshold (50%) through Maximum (150%).


In calculating performance against target, adjustments may be made either positively or negatively for one-time events and extraordinary nonbudgeted items as approved by the Board. This plan is subjected to any “clawback” provisions accepted by the Company in the future.
 
As soon as possible after the end of the Performance Period, NorthWestern will calculate the actual performance as compared against the established performance targets. Such calculations shall be finally determined at the sole discretion of the Board's Human Resources Committee or an appointed designee. Employees shall have no recourse, appeal or challenge available from this final determination. Summary results will be provided to employees.




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X.    Performance Pool Distribution and Incentive Pay Calculation

Individual employee performance is a key consideration in distributing incentive pay. The Performance Pool will be allocated to each officer using total target funding level at the end of the Performance Period for eligible employees in each functional unit, division or department, adjusted based on the performance funding level achieved. Each officer will then allocate the Performance Pool to the respective department supervisors, as appropriate, for further distribution based on attainment of either team or individual performance goals. Supervisors will submit recommended distributions to individual employees subject to the functional officer’s and Administration Committee approval. In no case will the total payouts in a given Performance Pool exceed the total dollars available for that Performance Pool.


XI.    Payment of Awards

Cash awards will be made in the same manner as each employee’s normal payroll processing, either in the form of Company check or direct deposit. Awards will be paid to employees in March 2021. Awards are considered ordinary income and subject to all applicable taxes.






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NORTHWESTERN ENERGY
2020 ANNUAL INCENTIVE PLAN
ADDENDUM 1


UDefinitions

FINANCIAL

The Net Income target is based upon the Board approved budget for the plan year, and is determined by what is reported in the SEC Form 10k filed mid-February of the year following the plan year.

ELECTRIC SYSTEM RELIABILITY

Electric system reliability (MT and SD Electric Distribution System) is calculated by NorthWestern Energy and participating Institute of Electrical and Electronic Engineers, Inc. (IEEE) benchmarking utilities and is determined as follows:

System Average Interruption Duration Index (SAIDI) indicates, in minutes, the total duration of interruption for the average customer during a predefined period of time.

SAIDI = Usum of the customer interruption durations
total number of customers served

    
Major Event Days (MEDs) is defined as a day that SAIDI value exceeds a statistically derived threshold value (Tmed) that nominally represents “stresses beyond that normally expected (such as during severe weather).”

SAIDI results will be adjusted to exclude planned outages and catastrophic events. A catastrophic event is defined as an event that has an overall impact of 7 times an MED.


GAS SYSTEM RELIABILITY

Gas system reliability is calculated by NorthWestern Energy through participation in the American Gas Association benchmarking survey for gas distribution system performance.

Damages per 1000 Locates is calculated as the total number of 3rd party damages experienced on NorthWestern Energy’s system divided by the total number of locate tickets divided by 1000.

Damages per 1000 Locates = total 3rd party damages to the system
total locate tickets / 1000


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Leaks per 100 miles of distribution pipe is calculated as the total number of leaks recorded on NorthWestern’s system caused by something other than 3rd party damage divided by the total miles of distribution pipe divided by 100.

Leaks per 100 miles of distribution pipe =

total leaks (other than 3rd party damages)
total miles of distribution pipe / 100


SAFETY

Proposed Maximum, Target and Threshold Performance for corporate wide safety and security training completion is based on three quarters of 2019 with the fourth quarter estimated that includes “Not-Complete” courses added to the completion status.

Safety performance is calculated by NorthWestern Energy and participating Edison Electric Institute (EEI) benchmarking utilities as defined by OSHA. OSHA recordable incident rates and lost time incident rates are the most common method of determining relative safety performance. OSHA has specifically defined what injuries and illnesses should be recorded, and of those recorded cases, which must be considered lost time. By utilizing the "total manhours worked" of a specific work group in the denominator, the resulting rate from the calculation can be used to compare different size departments, divisions, companies, etc. The 200,000 number and the total manhours worked number "normalize" the rate so comparisons can be made.

Lost time incident rate is calculated by taking the total number of all OSHA lost time cases, multiplying the number by 200,000, and dividing the number by the total number of manhours worked by a specific group.

Lost Time Incident Rate = total lost time cases x 200,000
total manhours worked

Total recordable incident rate is calculated by taking the total number of all OSHA recordable cases, multiplying the number by 200,000, and dividing the number by the total number of manhours worked by a specific group.

Total Recordable Incident Rate = total recordable cases x 200,000
total manhours worked

Safety and Security training completion includes “completion” of assigned safety and security training for all Northwestern Energy employees through iLearn by taking the total courses assigned less total courses overdue and dividing by the total courses assigned. The calculation shall exclude any courses that are assigned to be completed after the Performance Period, and a course that is assigned to be completed before the end of the

7


Performance Period will be considered “overdue” if it is not completed by the end of the Performance Period.
Total % Completion = total courses assigned - total courses overdue
total courses assigned

*Calculation excludes inactive employees at year-end, such as those on disability or using accrued time off to retirement.

CUSTOMER SATISFACTION

Customer satisfaction utilizes operational and reputational inputs designed to provide actionable insight into customer sentiment throughout the service territory. Customer satisfaction is measured by the annual JD Power residential electric and gas survey, and the longitudinal customer tracking study conducted by a third party consultant.

JD Power is a global marketing information services company providing performance improvement, social media and customer satisfaction insights and solutions. JD Power results are measured against a peer group of combination electric and gas utilities. Results are weighted by residential customer count by energy source utilizing FERC data.

The JD Power model includes the following six components:
1.
Communications
2.
Corporate Citizenship
3.
Billing and Payment
4.
Price
5.
Power Quality and Reliability (electric) or Field Services (gas)
6.
Customer Service

JD Power metrics are established as follows:
1.
Threshold: NorthWestern’s five-year average score
2.
Target: one point improvement over previous year actual score
3.
Maximum: five point improvement over previous year actual score

The custom customer tracking study is a longitudinal study designed to evaluate customer perception regarding operational and reputational performance. The study is fielded in the Spring and Fall with a total annual sample size of approximately 2,400. Results are weighted 75 percent Montana and 25 percent South Dakota & Nebraska.


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Operational Inputs
Reputational Inputs
Overall satisfaction with NorthWestern Energy
Sets the standard of excellence for delivery
Reliable service
Prepared
Responsiveness
Trustworthy
Involved in community
Community-focused
Visible employees
Customers first


The custom customer tracking study metrics are established as follows:
1.
Threshold: - 10 percent below Target
2.
Target: three-wave average that includes a Fall, Spring and Fall wave of data collection
3.
Maximum: + 10 percent above Target



9
Exhibit 99.2



NorthWestern Corporation
Executive Retirement/Retention Program
Restricted Share Unit Award Agreement
(Granted Under the Amended and Restated Equity Compensation Plan)
The Executive Retirement/Retention Program is designed to provide the executives of NorthWestern Corporation (together with its subsidiaries, the “Company”) with a reward for their years of service with the Company when they retire. This program is in lieu of a comprehensive supplemental retirement/pension plan for executives as provided by other companies, as well as a retention incentive to continue their employment with, and to advance the interests of, the Company. This award to Grantee will be governed by this Agreement and the Company's Amended and Restated Equity Compensation Plan (the “Plan”).
In consideration of the mutual promises and covenants contained in this Agreement, the Grantee and the Company each agree as follows:
ARTICLE I - Grant of Restricted Share Units

Subject to the terms of the Plan, the Company hereby grants to [___Individual_____] (the “Grantee”) [___#____] Restricted Stock Units (“RSUs”) on December 18, 2019 (the “Grant Date”), payment of which depends on the continued service of the Grantee and the achievement of certain performance objectives as set forth in this Agreement.
ARTICLE II - Vesting of Restricted Share Units

Section 2.1    Conditions; Vesting. Except as otherwise provided in ARTICLE III, ARTICLE IV and ARTICLE V of this Agreement, the RSUs covered by this Agreement shall become vested and non-forfeitable on December 31, 2024 (the “Vesting Date”), provided that (a) the Grantee's “Continuous Service,” as defined in Appendix A of the Plan, with the Company continues through the Vesting Date and (b) the Company meets or exceeds the Performance Measure set forth in Section 2.3 below.

Section 2.2    Performance Period. The Performance Period for which the Performance Measure is applicable is five calendar years beginning on January 1, 2020, and ending on December 31, 2024.

Section 2.3    Performance Measure. The Performance Measure applicable to the Performance Period is established by the Human Resources Committee (the “Committee”) of the Board of Directors of the Company (the “Board”) and requires the Company's net income for the calendar year of at least three of the five full calendar years during the Performance Period to exceed the Company's net income for the calendar year 2019. For purposes of the Performance Measure, “net income” shall be as reflected in the Company's audited consolidated financial statements for the applicable calendar year. Following the Performance Period, the Committee shall determine whether the Performance Measure has been satisfied for the Performance Period and shall recommend that the Board approve the vesting of the RSUs. In calculating the Performance Measure, the Committee may make adjustments, as approved by the Board, either positively or negatively for one-time events and extraordinary non-budgeted items. Upon vesting pursuant to this ARTICLE II, the RSUs shall be paid as provided in ARTICLE VII.


1
Exhibit 99.2

ARTICLE III - Change in Control

In accordance with Section 13 of the Plan, if a “Change in Control,” as defined in Appendix A of the Plan, occurs prior to the Vesting Date at a time when the RSUs have not been forfeited, the Performance Measure shall be deemed to be satisfied, and the RSUs will vest as of the closing date of the Change in Control. Upon vesting pursuant to this ARTICLE III, the RSUs shall be paid as provided in ARTICLE VII. In the event that due to the acceleration of vesting of the RSUs upon a Change in Control, Grantee would, but for this ARTICLE III, be subject to the excise tax provisions of Internal Revenue Code (“Code”) Section 4999 as a result of “parachute payments” described in Code Section 280G (whether pursuant to the terms of this Agreement or any other plan, program, agreement or arrangement), the number of RSUs with respect to which vesting is accelerated pursuant to this ARTICLE III (the “Payments”) shall be reduced in such amount that is required to reduce the aggregate present value of such parachute payments to a dollar less than an amount equal to three times the Grantee's “base amount” (as such term is defined in Code Sections 280G(b)(3)(A) and 280G(d)(1) and (2)) so that the Grantee is not subject to the tax under Code Section 4999 and no tax deduction is disallowed by reason of Code Section 280G, provided that the reduction described herein shall be made only after all reductions are made under other plans, programs or agreements applicable to the Grantee that provide for similar reductions; and provided further that the reduction described herein shall only be made if the net amount of the Payments, as so reduced (and after subtracting the net amount of federal, state, municipal and local income taxes on such reduced Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Payments), is greater than or equal to the net amount of the Payments without such reduction (but after subtracting the net amount of federal, state, municipal and local income taxes on such Payments and the amount of excise tax to which the Grantee would be subject in respect of such unreduced Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Payments).
ARTICLE IV - Disability or Death

In the event of the Grantee's Disability (as defined in Appendix A of the Plan) or death prior to the Vesting Date (and at a time when the RSUs have not been forfeited), the RSUs covered by this Agreement will vest as of the date of such Disability or death, and the Company shall pay to the Grantee or his or her executor or administrator, as the case may be, as soon as practicable after such Disability or death (but in any event not later than the 90th day thereafter), a number of Shares equal to the RSUs granted pursuant to this Agreement.
ARTICLE V - Retirement

If the Grantee's Continuous Service with the Company terminates before the end of the Performance Period due to the Grantee's Retirement (and at a time when the RSUs have not otherwise been forfeited), a pro rata portion of the RSUs covered by this Agreement shall be forfeited (based on the number of full months during the Performance Period, minus the number of full months of the Grantee's Continuous Service with the Company during the Performance Period). The vesting of any RSUs covered by this Agreement that are not forfeited by this ARTICLE V shall be determined in accordance with ARTICLE II above as if Grantee had remained employed by the Company through the end of the Performance Period. Notwithstanding the provisions of ARTICLE VII, any RSUs that vest pursuant to this ARTICLE V shall be paid in full in common stock of the Company within a reasonable period following the later to occur of (a) the first business day of the seventh month following the Grantee's Retirement, and (b) the Vesting Date. For purposes of this Agreement, “Retirement” shall mean a termination of the Grantee's Continuous Service with the Company after the Grantee has (y) attained age 50 and completed at least five years of Continuous Service or (z) attained age 65. Further, “Retirement” shall exclude any termination of the Grantee's Continuous Service for Cause.

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Exhibit 99.2

ARTICLE VI - Forfeiting of Restricted Share Units

Except as otherwise provided by ARTICLE III, ARTICLE IV or ARTICLE V of this Agreement, if the Grantee's Continuous Service with the Company terminates before the Vesting Date or the performance objective set forth in ARTICLE II is not satisfied, the RSUs covered by this Agreement will be forfeited in their entirety. In addition, in the event that the Grantee shall intentionally commit an act prior to the Vesting Date that the Board determines to be adverse to the interests of the Company, the RSUs covered by this Agreement shall be forfeited at the time of that determination notwithstanding any other provision of this Agreement. Finally, in the event that the Board determines to cancel the grants made by this Agreement, the RSUs covered by this Agreement shall be forfeited at the time of that determination notwithstanding any other provision of this Agreement.
ARTICLE VII - Deferral and Payment of Restricted Share Units

Section 7.1    Mandatory Deferral of RSUs. Following vesting of the RSUs pursuant to ARTICLE II, ARTICLE III and ARTICLE V, the number of vested RSUs shall be credited to an account for the Grantee as soon as practicable after the last calendar year of the Performance Period and the determination by the Committee (or the independent members of the Board) of satisfaction of the Performance Measure, but in no event shall such crediting occur after two and a half months from the end of the Performance Period. The RSUs credited to the Grantee's account will represent the number of Common Shares that the Company will issue to the Grantee pursuant to Section 7.2 below. The RSUs credited to the Grantee's account shall be treated, solely for purposes of administration and accounting, as the equivalent of Deferred Share Units (as defined in Appendix A of the Plan). For the avoidance of doubt, the RSUs shall not constitute Deferred Share Units for purposes of any provision of the Plan, including, without limitation, any provision regarding the crediting of dividends, participant elections or hardship distributions.

Section 7.2    Payment of RSUs. Subject to ARTICLE V, payment of the vested RSUs will be made in the form of Common Shares and will be made in five substantially equal annual installments, beginning on the first business day of the seventh month following the date on which the Grantee's Continuous Service terminates and continuing on each of the next four anniversaries of such initial payment date (or the next following business day if any such anniversary does not fall on a business day). Distributions shall be subject to withholding for all amounts that the Company is required to withhold under federal, state or local tax law. This tax withholding obligation will be satisfied by the liquidation of Common Shares otherwise payable pursuant to this Award.

Section 7.3    Dividends. The Grantee's account will be credited with cash or stock dividend equivalents related to the vested RSUs for dividends declared after the date that the RSUs become vested and until the RSUs are paid. Cash dividend equivalents will be credited as additional vested RSUs.

Section 7.4    Unsecured Rights to RSUs. The RSUs shall at all times constitute an unsecured promise of the Company to pay benefits as they come due. The right of the Grantee to receive benefits hereunder shall be solely an unsecured claim against the general assets of the Company. The Grantee shall not have any claim against or rights in any specific assets, share, or other funds of the Company.

Section 7.5    No Deferral Election. The Grantee agrees not to make an election covering this Award under the NorthWestern Corporation 2009 Officers Deferred Compensation Plan.


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Exhibit 99.2

ARTICLE VIII - Non-Assignability

The RSUs and the Common Shares subject to this grant are personal to the Grantee and may not be sold, exchanged, assigned, transferred, pledged, encumbered or otherwise disposed of by the Grantee until they are paid as provided in this Agreement; provided, however, that the Grantee's rights with respect to such RSUs and Common Shares may be transferred by will or pursuant to the laws of descent and distribution. Any purported transfer or encumbrance in violation of the provisions of this ARTICLE VIII shall be void, and the other party to any such purported transaction shall not obtain any rights to or interest in such RSUs or Common Shares.
ARTICLE IX - Adjustments

In the event of any change in the number of outstanding Common Shares by reason of a merger, consolidation, reorganization, recapitalization, or similar transaction, or in the event of a stock dividend, stock split, or distribution to shareholders (other than normal cash dividends), the Committee shall adjust the number and class of shares subject to unvested RSUs. No adjustment provided for in this ARTICLE IX shall require the Company to issue any fractional share.
ARTICLE X - Compliance with Section 409A of the Code

To the extent applicable, it is intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Grantee. This Agreement and the Plan shall be administered in a manner consistent with this intent, and any provision that would cause the Agreement or the Plan to fail to satisfy Section 409A of the Code shall have no force and effect unless and until amended to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted by Section 409A of the Code and may be made by the Company without the consent of the Grantee). References to Section 409A of the Code will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.
ARTICLE XI - Miscellaneous

Section 11.1    Interpretation. The contents of this Agreement are subject in all respects to the terms and conditions of the Plan as approved by the Board, which are hereby incorporated herein by reference. The interpretation and construction by the Board and/or the Committee of any provision of the Plan or this Agreement shall be final and conclusive upon the Grantee, the Grantee's estate, executor, administrator, beneficiaries, personal representative and guardian and the Company and its successors and assigns. Unless otherwise indicated, the capitalized terms used in this Agreement shall have the same meanings as set forth in the Plan.

Section 11.2    Fractional Shares. Any fractional share payable under this Agreement will not be issued, and instead shall be paid out in cash.

Section 11.3    No Right to Employment. The grant of the RSUs is discretionary and will not be considered to be an employment contract or a part of the Grantee's terms and conditions of employment or of the Grantee's salary or compensation.

Section 11.4    Successors and Assigns. This Agreement, and the terms and conditions of the Plan, shall bind, and inure to the benefit of, the Grantee, the Grantee's estate, executor, administrator, beneficiaries, personal representative and guardian and the Company and its successors and assigns.


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Exhibit 99.2

Section 11.5    Governing Law. This Agreement will be governed by and construed in accordance with applicable United States federal law and, to the extent not preempted by such federal law, in accordance with the laws of the State of Delaware, without giving effect to the principles of conflict of laws thereof.

Section 11.6    Amendment or Termination. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto. The terms and conditions of this Agreement may not be modified, amended or waived, except by an instrument in writing signed by a duly authorized executive officer of the Company. Notwithstanding the foregoing, no amendment shall adversely affect the Grantee's rights under this Agreement without the Grantee's consent.

IN WITNESS WHEREOF, the parties hereto have duly executed this Restricted Share Unit Award Agreement, to be duly executed on their behalf, as of the Grant Date.
NORTHWESTERN CORPORATION
By:
 
Name:
[pre-type name]
Title:
[pre-type title]
GRANTEE (signature):
 
Name (print):
 
Employee Number:
 



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