8-K

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): August 21, 2008

NorthWestern Corporation

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation)		1-10499 (Commission File Number)	46-0172280 (IRS Employer Identification No.)
3010 W. 69th Street Sioux Falls, South Dakota (Address of principal executive offices)			57108 (Zip Code)
	(605) 978-2900 (Registrant’s telephone number, including area code)

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):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of

Certain Officers.

In an 8-K filed on August 18, 2008, which is hereby incorporated by reference, NorthWestern Corporation d/b/a NorthWestern Energy (the “Company”) announced that Michael J. Hanson had resigned as President and Chief Executive Officer of the Company and described the benefits Mr. Hanson is entitled to receive upon the execution of a Waiver and Release Agreement (“Waiver and Release”).

On August 21, Mr. Hanson executed the Waiver and Release, and in accordance with the requirements of the Age Discrimination in Employment Act of 1967, as amended by the Older Workers Benefit Protection Act, Mr. Hanson has the right to revoke the Waiver and Release at any time prior to seven days following executing the agreement. The revocation period expires on August 28, and Mr. Hanson’s separation from the Company will be complete. The foregoing description of the Waiver and Release is qualified in its entirety by reference thereto, a copy of which is attached to this current report on Form 8-K as Exhibit 10.1 and incorporated herein by reference.

The following benefits that Mr. Hanson will receive, upon expiration of the revocation period, were described in detail in the 8-K filed on August 18. Mr. Hanson will receive (i) a lump-sum payment of $536,900, which equals Mr. Hanson’s current base salary, (ii) a pro-rata annual short-term incentive bonus, calculated at the end of the 2008 fiscal year, (iii) reimbursement of any COBRA premiums paid by Mr. Hanson during the 12-month period following his separation from the Company, and (iv) outplacement services up to a maximum of $12,000 over the 12-month period following Mr. Hanson’s separation from the Company. Mr. Hanson will have access to office space for a six-month period at a cost to the Company of approximately $5,000. 6,414 restricted shares, which were previously granted to Mr. Hanson and scheduled to vest on November 1, 2008, will vest effective August 28, 2008.

Also, as previously reported in the 8-K filed on August 18, the Company entered into a Consulting Agreement with Mr. Hanson on August 21, 2008 (the “Agreement”), under which Mr. Hanson will provide consulting services to the Company. Under this agreement Mr. Hanson will receive $22,371 for August 2008 and a monthly fee of $44,742 thereafter through the term of the Agreement which expires in February 2009. The foregoing description of the Consulting Agreement is qualified in its entirety by reference thereto, a copy of which is attached to this current report on Form 8-K as Exhibit 10.2 and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

EXHIBIT NO.	DESCRIPTION OF DOCUMENT
10.1*	Waiver and Release of Michael J. Hanson Executed August 21, 2008
10.2*	Consulting Agreement with Michael J. Hanson Executed August 21, 2008

* filed herewith

2

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/ Miggie E. Cramblit
	Miggie E. Cramblit
	Vice President, General Counsel and Corporate Secretary

Date: August 26, 2008

3

Index to Exhibits

EXHIBIT NO.	DESCRIPTION OF DOCUMENT
10.1*	Waiver and Release of Michael J. Hanson Executed August 21, 2008
10.2*	Consulting Agreement with Michael J. Hanson Executed August 21, 2008

* filed herewith

4

EX-10

WAIVER AND RELEASE

This Waiver and Release, (“Release”, undersigned and dated as of August 12, 2008, (“Release”), is entered into by and between NorthWestern Corporation, d/b/a NorthWestern Energy, a Delaware corporation with its principal place of business located at 3010 West 69^th Street, Sioux Falls, South Dakota, 57108, its officers, agents, directors, employees, successors, subsidiaries, insurers, parents and/or affiliated companies, and assigns (“NWEC or Company”) and Michael J. Hanson (“Hanson”), a South Dakota resident, to settle all issues between us in connection with Hanson's severance of employment. NWEC and Hanson are collectively referred to herein as the “Parties”.

NOW, THEREFORE, in consideration of the foregoing premises and further in consideration of the mutual covenants, conditions and agreements contained in this Release and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto do hereby agree as follows:

1. Benefits Payable. In exchange for this Release, Hanson will receive a severance payment of $536,900.00 (Five Hundred Thirty-six Thousand Nine Hundred Dollars and no cents) less all applicable taxes and deductions to be paid in the next regularly scheduled payroll cycle occurring seven (7) days after signing this Release. In his last regularly scheduled payroll check, Hanson shall receive his accrued but unpaid vacation.

You will be eligible for a pro-rated 2008 incentive award based on the amount of time served in an eligible status during the performance period to be calculated at the end of the performance period and payable in accordance with the terms of the 2008 Employee Incentive Plan.

You will be reimbursed for any COBRA premiums paid during the twelve (12) month period following the date employment is terminated.

Outplacement services will be provided up to $12,000 (Twelve thousand dollars) during the twelve (12) month period following the date employment is terminated.

2. Employment Severance. Hanson’s last date of employment shall be August 12, 2008 (the “Severance Date”), contingent upon signing this Waiver and Release.

3. Claims Released. In exchange for the benefits payable, Hanson for himself, his heirs, executors, administrators, successors, assigns and trustees irrevocably and unconditionally releases NWEC, its current, former and future, parent, subsidiary and related companies, its directors, trustees, officers, employees, agent, attorneys, successors, and assigns, and all persons acting by, through, under, or in concert with any of them (the “Released Parties”), from all actions, causes of action, suits, debts, charges, complaints, claims, obligations, promises, contracts, agreements, controversies, damages, judgments, rights, costs, losses, expenses, liabilities and demands of any nature, whether known or unknown, whether actual or potential, whether specifically mentioned herein or not, in law or equity, whether statutory or common law, whether federal, state, local, or otherwise, as a result of any act that has heretofore occurred, including, without limitation

/s/ MJH Initials

that Hanson may have arising out of or related to his employment with or separation from, NWEC (“Claims”). Hanson is releasing the following claims which include, without limitation, claims under his original employment terms, which are canceled as of the Severance Date with no further benefits or payments to be provided thereunder, the WARN Act, as amended, any and all claims of wrongful discharge or breach of contract, any and all claims for equitable estoppel, any and all claims for employee benefits, including, but not limited to, any and all claims under the Employee Retirement Income Security Act of 1974, as amended, and any and all claims of employment discrimination on any basis, including, but not limited to, any and all claims under Title VII of the Civil Rights Act of 1964, as amended, under the Age Discrimination in Employment Act of 1967, as amended, under the Civil Rights Act of 1866, 42 U.S.C. §1981, under the Civil Rights Act of 1991, as amended, under the Americans with Disabilities Act of 1990, as amended, under the Family and Medical Leave Act of 1993, under the Immigration Reform and Control Act of 1986, as amended, under the Fair Labor Standards Act, as amended, 29 U.S.C. §201 et seq., the Older Workers Benefit Protection Act, as amended, the Wrongful Discharge from Employment Act, 39-2-901 et seq., MCA, any federal, state or local law enforcing express or implied employment contracts or requiring an employer to deal with employees fairly or in good faith including 27-1-221, MCA, any federal, state, or local laws prohibiting employment discrimination, such as in the State of South Dakota, any claim filed in NWEC's bankruptcy proceedings, and any and all claims under any other federal, state, or local labor law, civil rights law, fair employment practices law, or human rights law, any and all claims of slander, libel, defamation, invasion of privacy, intentional or negligent infliction of emotional distress, intentional or negligent misrepresentation, fraud, and prima facie tort, any and all claims for monetary recovery, including but not limited to, back pay, front pay, liquidated, compensatory, and punitive damages, and attorneys’ fees, experts’ fees, disbursements and costs which against the Released Parties, that Hanson ever had, now have, or hereafter can, shall, or may have, for, upon, or by reason of any matter, cause, or thing whatsoever from the beginning of time to the date of Hanson’s execution of this Release. Hanson will never file any lawsuit, complaint or claim based on any Claims, and Hanson will withdraw with prejudice any such lawsuit, complaint, or claim that may already be pending in any court or administrative agency. Hanson promises never to seek any damages, remedies, or other relief for himself personally (any right to which Hanson hereby waives) by filing or prosecuting a charge with any administrative agency with respect to the Claims purportedly released by this Release. This subsection shall not apply to challenges to the ADEA release, to the extent, if any, prohibited by applicable law.

4. No admission of Liability. This Release is not an admission of guilt or wrongdoing by any released party. Hanson acknowledges that he has not suffered any age or other discrimination or wrongful treatment by any released party.

5. Consideration of Release. NWEC advised Hanson to take this Release home, read it, and carefully consider all of its terms before signing it. NWEC gave Hanson at least twenty-one (21) days in which to consider this Release. Hanson waives any right he may have to additional time beyond this consideration period within which to consider this Release. Hanson understands that he has seven (7) days after signing this Release to revoke it. If Hanson chooses to revoke this Release, Hanson agrees to provide such revocation in writing, accompanied by any sums received pursuant to this Release, to be

2

/s/ MJH Initials

received by the Vice President, General Counsel and Corporate Secretary by the end of the seven (7) day period. NWEC, in writing, advised Hanson to discuss this Release with his own attorney (at Hanson’s own expense) during this period if Hanson wished to do so. Hanson has carefully read this Release, fully understands what it means, and is entering into it voluntarily. Hanson is receiving valuable consideration in exchange for his execution of this Release that he would not otherwise be entitled to receive.

6. Company Property. Hanson agrees to return to NWEC, by his Severance Date, all files, memoranda, documents, records, copies of the foregoing, credit cards, and any other property of NWEC or its affiliates in his possession. Hanson will permanently retain his BlackBerry and laptop computer. NWEC will provide Hanson will office space through February 2009.

7. False Claims Representations and Promises. Hanson has disclosed to NWEC any information he has concerning any conduct involving NWEC or any affiliate that he has any reason to believe may be unlawful or that involves any false claims to the United States. Hanson promises to cooperate fully in any investigation NWEC or any affiliate undertakes into matters occurring during his employment with NWEC or any affiliate. Hanson understands that nothing in this Release prevents his from cooperating with any U.S. government investigation. In addition, to the fullest extent permitted my law, Hanson hereby irrevocably assigns to the U.S. government any right he may have to any proceeds or awards in connection with any false claims proceedings against NWEC or any affiliate.

8. Non-Disclosure, Return of Proprietary Information, and Inventions and Patents. NWEC and Hanson agree that during his employment with NWEC, Hanson has received and become acquainted with confidential, proprietary, and trade secret information of NWEC including, but not limited to, information regarding NWEC business programs, plans, and strategies; finances; customers and prospective customers; suppliers and vendors; marketing plans and results; personnel matters regarding NWEC employees, officers, directors, and owners; manners of operation and services provided; negotiating positions and strategies; legal arguments, theories, claims, investigations, and audits; or information regarding the operation and business of NWEC. Hanson acknowledges that such information has been developed or acquired by NWEC through the expenditure of substantial time, effort, and money, that such information provides NWEC with strategic and business advantages over others who do not know or use such information, and that NWEC has implemented specific policies and practices to keep such information secret. Hanson agrees that he shall not during the term of employment or at any time thereafter, directly or indirectly:

A. Use for his own purpose or for the benefit of any person or entity other than NWEC, or otherwise disclose or permit others to obtain access to, any proprietary of confidential information to any individual or entity unless such disclosure has been authorized in writing by NWEC or is otherwise required by law. Information or material that is not novel or copyrighted or patented may nonetheless be proprietary information. Proprietary information shall not include, however, any information that is or becomes generally known to the industries in which NWEC competes through sources independent of NWEC or Hanson or through authorized publication by NWEC to persons other than NWEC employees.

3

/s/ MJH Initials

B. Except as required by law, give or disclose any records containing confidential information or material to, or permit any inspection or copying of such records by, any individual or entity other than in the authorized course and scope of such individual’s or entity’s employment or retention by NWEC. In addition, Hanson shall promptly return to NWEC all such records upon resignation hereunder and shall not use or retain any such records thereafter. Records subject to this subsection shall include, but not be limited to, all correspondence, memoranda, files, analyses, studies, reports, notes, documents, manuals, books, lists, financial, operating, or marketing records, computer software, magnetic tape, or electronic or other media or equipment of any kind that may be in the my possession or under Hanson’s control or accessible to his which contain or may be derived from proprietary or confidential information covered by this section. All such records are and will remain the sole property of NWEC.

9. Confidentiality. Hanson agrees that he will keep confidential the existence and terms of this Release; provided, however, that nothing herein shall prevent Hanson from disclosing the fact and terms of this Release to his attorney, accountant, or financial advisor for the purposes of receiving professional advice from such individual in that capacity. Hanson will advise those individuals that the existence and terms of this Agreement shall be kept confidential.

10. Public Statements. Except as necessary to secure other employment or for other necessary reasons, Hanson agrees that he will make no public statements concerning his employment or the severance thereof with NWEC. NWEC by its senior management and Hanson also agree neither party will make any disparaging remarks to any third parties concerning the other party. Hanson further agrees that he will not disparage NWEC’s business capabilities, products, plans, or management to any customer, potential customer, vendor, suppler, contractor or subcontractor of NWEC so as to affect adversely the good will or business of NWEC. NWEC by and through its senior management agrees that it will refrain from making any adverse, derogatory or disparaging comments or statements about Hanson or his performance during his employment with NWEC and will be supportive of Hanson’s attempts to secure future employment. If either party is contacted by the media concerning Hanson’s departure from NWEC, either party may explain that Hanson left NWEC to pursue other business opportunities.

11. Consequences of Violating Promises:

A. General Consequences. In addition to any other remedies or relief that may be available, Hanson agrees to pay the reasonable attorneys’ fees and any damages Released Parties may incur as a result of his breaching a promise he made in this Release (such as by suing a Released Party over a released Claim) or if any representation he made in this Release was false when made. Hanson agrees that the minimum damages for each breach will be half of the attorney’s fees each Released Party incurs as a result of the breach, which is a reasonable estimate of the value of the time the Released Party is likely to have to spend seeking a remedy for the breach. Hanson further agrees that NWEC would be irreparably harmed by any actual or threatened violation of any paragraph of this Waiver and Release that involves Release-related disclosures or disclosure or use of confidential information

4

/s/ MJH Initials

or trade secrets, and that NWEC will be entitled to an injunction prohibiting Hanson from committing any such violation.

B. Challenges to Validity. Should Hanson attempt to challenge the enforceability of this Release, Hanson agrees first (1) to deliver a certified check to NWEC for all amounts he has received because he signed this Release (2) to direct in writing that all future benefits or payments Hanson is to receive because he signed this Release be suspended, and (3) to invite NWEC to cancel this Release. If NWEC accepts Hanson’s offer, this Release will be canceled. If it rejects Hanson’s offer, NWEC will notify Hanson and deposit the amount Hanson repaid, plus all suspended future benefits and payments, in an interest-bearing account pending a determination of the enforceability of this Release. If the Release is determined to be enforceable, NWEC is to pay Hanson the amount in the account, less any amounts Hanson owes NWEC. If the Release is determined to be unenforceable, the amount credited to the account shall be paid to the entities that paid the consideration for this Release in proportion to their payments, and the suspension of future benefits or payments shall become permanent.

C. ADEA Claims. This section shall not apply to ADEA Claims to the extent, if any, prohibited by applicable law.

12. Successors and Assigns. This Release shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors, legal representatives, and assigns. However, neither this Release nor any right or interest hereunder shall be assignable by Hanson, Hanson’s beneficiaries, or legal representatives, except as provided by law or pursuant to referenced benefit policy documents.

13. Severability and Reformation. The provisions of this Release are severable. If any provision of this Release shall be determined to be invalid, illegal, or unenforceable, in whole or in part, neither the validity of the remaining parts of such provision nor the validity of any other provision of this Release shall in any way be affected thereby. In lieu of such invalid, illegal, or unenforceable provision, there shall be added automatically as part of this Release a provision as similar in terms to such invalid, illegal, or unenforceable provision as may be possible and be valid, legal, and enforceable. Each party also agrees that, without receiving further consideration, it will sign and deliver such documents and do anything else necessary in the future to make the provisions of this Release effective.

14. Taxes. Hanson understands that he will withhold all applicable income and payroll taxes. Hanson understands that he will be responsible for paying any additional taxes that may become due on any of the payments provided herein. If Hanson fails to pay any taxes due and owing on any of the payments, or any taxing authority alleges that Hanson has failed to do so or that NWEC is responsible for the payment of these taxes, for any reason, Hanson agrees to be fully responsible for any judgments or orders, fines and penalties, and that he will indemnify NWEC including, but not limited to, the satisfaction of judgments, orders, fines or penalties in the payment of NWEC’s defense by counsel of its choice in such proceedings. The taxability of the amounts contained herein shall not affect the validity of this Release.

15. Governing Law and Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of South Dakota, without reference to conflict of

5

/s/ MJH Initials

laws principles thereof. The Parties also hereby irrevocably and unconditionally submit to the jurisdiction of any South Dakota state court or federal court sitting in South Dakota and any appellate court from any such court, in any suit, action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment resulting from any such suit, action or proceeding, and each party hereby irrevocably and unconditionally agrees that all claims in respect of any such suit, action or proceeding may be heard and determined in such South Dakota state court or, to the extent permitted by law, by removal or otherwise, in such federal court.

16. Further Assurances. Each party agrees to take all further actions and to execute and deliver all further documents and instruments that are reasonably necessary or appropriate in order to effectuate the purposes of this Agreement and the transactions contemplated hereby.

17. Waiver. Any failure by a party hereto to comply with any obligation, agreement or condition contained herein may only be waived in a writing executed by the party granting the waiver, but such waiver or failure to insist upon strict compliance with such obligation, agreement or condition shall not operate as a waiver of, or estoppel with respect to, such failure or any subsequent or other failure. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.

18. Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter hereof, and supersedes all prior agreements and arrangements, written or oral, relating to the subject matter hereof.

19. Amendment. This Agreement may be amended only by a written instrument executed by both of the parties hereto.

20. Successors or Survivors and Assigns. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors. NWEC may assign this Agreement without the prior consent of Executive or his/her successors and assigns. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto and the Released Parties, or their respective successors or permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

21. Notice. Any notice required or permitted by this Agreement shall be in writing and shall be deemed delivered when delivered personally or by overnight courier or sent by telegram, fax, or email, or forty-eight (48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party’s address or fax number set forth on the signature page hereto, as appropriate, which address or fax number may be subsequently modified by a written notice delivered in accordance with this section.

TAKE THIS RELEASE HOME, READ IT, AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING IT: IT INCLUDES A RELEASE OF KNOWN AND UNKNOWN CLAIMS. IF YOU WISH, YOU SHOULD TAKE ADVANTAGE OF THE FULL CONSIDERATION PERIOD AFFORDED BY SECTION 5 AND YOU SHOULD CONSULT YOUR ATTORNEY.

6

/s/ MJH Initials

Michael J. Hanson		NorthWestern Corporation
/s/ Michael J. Hanson		By:	/s/ Miggie E. Cramblit
Address:	47258 272nd Street	Its:	Vice President, General Counsel and
	Sioux Falls, South Dakota 57108		Corporate Secretary
Date:	August 21, 2008	Date:	August 22, 2008

7

/s/ MJH Initials

EX-10

CONSULTING AGREEMENT

This Consulting Agreement, dated as of August 12, 2008, (the “Agreement”), is entered into by and between NorthWestern Energy (“NWEC” or “Company”), a Delaware corporation with its principal place of business located at 3010 West 69^th Street, Sioux Falls, South Dakota, 57108 (“Hanson” or “Consultant”), a South Dakota resident. NWEC and Hanson are collectively referred to herein as the “Parties.”

WHEREAS, Hanson is currently employed with NWEC and will be through August 12, 2008; and

WHEREAS, the Company and Hanson amicably agree to terminate his employment; and

WHEREAS, NWEC is agreeable to ending Hanson’s employment with NWEC and entering into a agreement with Hanson with agreed upon consulting services to NWEC for the period August 13, 2008 through February 27, 2009, unless terminated by NWEC, by Hanson or on the date Hanson has secured other employment unless extended by mutual agreement; and

WHEREAS, Hanson desires to provide certain consulting services;

NOW, THEREFORE, in consideration of the mutual promises made herein, and for other good and valuable consideration, the parties hereby agree as follows:

1. Engagement.

a. NWEC agrees to engage Hanson, and Hanson agrees to provide certain agreed upon consulting services on behalf of NWEC as more fully described in Exhibit A attached hereto and incorporated herein by reference (hereinafter “Consulting Services.”) It is the intent of the Parties and it is understood and agreed that, in the performance of such Consulting Services under the terms of this Agreement, and any amendments thereto, Hanson shall perform such Consulting Services as an independent contractor with respect to NWEC, and not as an employee of NWEC, it being specifically agreed that the relationship is and shall remain that of independent parties to a contractual relationship as set forth in this Agreement.

b. The Parties agree that NWEC shall determine the Consulting Services to be performed by Hanson under this Agreement, subject to the conditions set forth within this Agreement. Hanson understands and agrees that in performing such Consulting Services. Hanson agrees that he may not transfer, assign or subcontract his obligations under this Agreement without the express written consent of NWEC.

c. For the purposes of this Agreement, it is understood and agreed by the Parties that Hanson shall perform the Consulting Services from 47258 272^nd Street, Sioux Falls, South Dakota, 57108 or such other location as Hanson determines or the Company requires. Hanson may be required to travel in performance of the Consulting Services but only upon approval by NWEC.

d. NWEC is not responsible for payroll withholdings, and shall not withhold FICA or taxes of any kind from any payments that it owes Hanson.

e. Hanson agrees that neither Hanson his employees, employees of a business entity for which Hanson serves as an employee, partner or other type of owner, shall be entitled to receive any benefits which employees of NWEC are entitled to receive. Further, Hanson agrees that he is not eligible to receive and is not covered by NWEC workers’ compensation, unemployment compensation, health insurance, life insurance, paid vacations, paid holidays, incentive compensation, pension, or profit sharing, or any similar employee benefit.

f. Hanson shall be solely responsible for paying his employees, if any, and shall be solely responsible for paying any and all taxes, FICA, workers’ compensation, unemployment compensation, health insurance, life insurance, paid vacations, paid holidays, pension, profit sharing and other similar benefits for Hanson and his employees, servants and agents. Hanson shall also be responsible for likewise paying any employees of a business entity for whom Hanson serves as an employee, partner or other type of owner as well as any third party entities or individuals with whom he may contract. Hanson will indemnify and hold harmless NWEC from any and all loss or liability, including attorney’s fees, arising from his failure to make any of these payments or withholdings, or provide these benefits, if any.

g. If the Internal Revenue Service or any other governmental agency should question or challenge Hanson’s independent consulting status, Hanson and NWEC shall have the right to participate in any discussion or negotiation occurring with any agency or agencies, regardless of with whom or by whom these discussions or negotiations are initiated.

2. Work. Hanson shall perform the work as more particularly described in Exhibit A.

a. Hanson agrees to comply with all applicable laws, codes and regulations and other instructions, standards of conduct, policies and procedures established and/or promulgated by NWEC, orally or in written or electronic form, which may be amended from time to time.

b. Hanson shall report to the Vice President, General Counsel and Corporate Secretary of NorthWestern Energy, unless otherwise instructed.

c. Hanson shall have access to only the following NWEC property: Company email system, computer equipment, cellular phone, corporate jet and other resources mutually agreed upon for business purposes.

2

3. Compensation. For the performance of the Consulting Services, NWEC agrees to pay Hanson according to the schedule attached hereto as Exhibit B and incorporated herein by reference. A Form 1099 shall be issued each year for all payments made. No deductions will be made from these checks.

4. Intellectual Property. Hanson shall make no use of NWEC trademarks, trade names, service marks, copyrights or other intellectual property of NWEC, NWEC engage in any program or activity that makes use of or contains any reference to NWEC, its trademarks, trade names, service marks, or copyrights except with written consent of NWEC, expressed in a duly executed license agreement or otherwise. By executing this Agreement, NWEC hereby grants Hanson its written consent to refer to NWEC in discussions and through forms, correspondence or other documentation provided and/or approved by NWEC. Hanson shall report to NWEC all violations of NWEC’s intellectual property and other proprietary rights and other works immediately upon discovery of such violations by Hanson.

5. Covenants of Hanson. Hanson covenants as follows:

a. Hanson shall exercise reasonable efforts to not at any time, during or after the term of this Agreement, directly or indirectly divulge or otherwise disclose to anyone other than an employee of NWEC the procedures and policies of NWEC, or other information which is confidential or proprietary to NWEC, unless NWEC gives its prior written consent to such disclosure.

b. All books, records, notes, reports, copies, advertising, contracts, documents and other information or writings relating to NWEC’s business or its customers, employees, contractors, or agents, whether prepared by Hanson or otherwise coming into the possession of Hanson, are and shall remain the exclusive property of NWEC and shall be returned to NWEC upon termination of this Agreement or upon demand. No copies shall be retained by Hanson.

c. Hanson acknowledges that each of the foregoing matters is important and material to the business and success of NWEC and agrees that any breach of this paragraph 5 is a material breach of this Agreement, from which Hanson may be enjoined and for which Hanson shall also pay NWEC all damages (including but not limited to compensatory, incidental, consequential, and punitive damages), which arise from the breach, together with interest, costs and NWEC’s attorneys’ fees.

6. Non-Exclusive Agreement. The work performed for NWEC under this Agreement is not intended to be exclusive. Hanson shall be free to undertake additional consulting activities for another party provided that such activities do not interfere with the timely execution of the Work set forth in this Agreement. Hanson agrees to request the consent of NWEC for any consulting activities with any entity in order to insure that a material conflict does not exist. To the extent such conflict involves the provision of legal services, NWEC's Law Department will in its sole discretion determine if the conflict can be waived. To the extent such conflict involves the

3

provision of non-legal services, NWEC shall not unreasonably withhold such consent.

7. Indemnification. To the maximum extent permitted by law, Hanson shall defend, indemnify and hold harmless NWEC and its related and affiliated companies and all divestitures, directors, officers and employees, and hold them from all obligations, costs, fees, losses, liabilities, claims, judgments, actions, damages and expenses suffered, incurred or sustained by NWEC, its related and affiliated companies and all their respective directors, officers and employees which arise out of or are related to (a) Hanson’s actual errors, omissions, negligence, intentional wrongdoing, breach of duty and/or any violation of any applicable laws, rules and regulations of federal or state governmental and regulatory agencies; (b) any activity by Hanson outside the scope of this Agreement; or (c) claims for benefits, compensation, damages or other amounts by any individual employed or retained by Hanson.

8. Expenses. Hanson shall be reimbursed by NWEC for reasonable and verifiable expenses within thirty (30) days of presentation.

9. Term and Termination. This Agreement is effective as of August 13, 2008 and shall continue in effect through February 27, 2009. NWEC may terminate this Agreement for cause upon written notice to Hanson. Cause shall be defined as the failure of Hanson to cure after being provided written notification of a breach of the terms of this Agreement, failure to fulfill the duties and conditions of this Agreement, violation of NorthWestern’s Code of Business Conduct and Ethics, a violation of any of the laws and regulations applicable to the Work within this Agreement. If NWEC terminates for cause, no payments will be due Hanson under this Agreement. In the event NWEC elects to terminate this Agreement for convenience, NWEC shall pay Hanson a termination fee equal to $290,823.00 (Two Hundred Ninety Thousand, Eight Hundred Twenty-three Dollars) less the cumulative amount of all fees paid to Hanson prior to the termination date. In the event that Hanson secures other employment, Hanson agrees to use his best efforts to negotiate terms that would allow him to fulfill the terms of this Agreement. All such notices shall be delivered via email or US mail to NWEC’s Vice President, General Counsel and Corporate Secretary or Hanson at the address indicated herein or to such other place as designated in writing by the Parties.

10. Assignment. Hanson may not assign his rights or delegate his duties under this Agreement without the prior written consent of NWEC. However, NWEC’s rights and obligations under this Agreement may be assigned and delegated upon written notice to Hanson.

11. Waiver. Waiver by NWEC of any breach by Hanson shall not operate or be construed as a waiver of any subsequent breach by Hanson.

12. Law, Jurisdiction and Venue. The validity, interpretation, and performance of this Agreement shall be controlled by and construed in accordance with the laws of the State of South Dakota.

4

13. Arbitration of Disputes. NWEC and Hanson agree to resolve any claims they may have with each other through final and binding arbitration in accordance with the then current arbitration rules and procedures for disputes governing arbitrations administered by the Judicial Arbitration and Mediation Service (JAMS).

14. Entire Agreement. This Agreement constitutes the entire Agreement between the parties and respect to the subject matter hereof and supersedes all prior agreements, oral or written, between the parties hereto to the extent such agreements are inconsistent herewith, including but not limited to, any prior agreements with respect to severance benefits. This Agreement may be modified or amended only by an instrument in writing signed by both parties hereof.

15. Captions. The captions stated herein are for convenience only and are not intended to alter any of the provisions of this Agreement.

Michael J. Hanson		NorthWestern Corporation
/s/ Michael J. Hanson		By:	/s/ Miggie E. Cramblit
Address:	47258 272nd Street	Its:	Vice President, General Counsel and
	Sioux Falls, South Dakota 57108		Corporate Secretary
Date:	August 21, 2008	Date:	August 22, 2008

5

EXHIBIT A

All requests for service by Hanson from NWEC will be communicated through Miggie E. Cramblit.

Initial Services include, but are not limited to, the following:

• Witness training to be held September 2, 2008 through September 5, 2008

• Witness for Colstrip Rate Base docket and Investigation docket if required

• Provide transition experience as needed

6

EXHIBIT B

Hanson shall be paid for work rendered to NWEC as follows:

1. A retainer fee of $22,371.00 (Twenty-two Thousand Three Hundred Seventy-one Dollars) to be paid within the first five (5) working days after acceptance of this agreement by both parties.

2. A retainer fee of $44,742.00 (Forty-four Thousand Seven Hundred Forty Dollars) to be paid within the first five (5) days of each subsequent month thereafter covered by this agreement.

3. Reimbursement of legitimate and verifiable business travel expenses incurred as a direct result of performing Work. Such expenses in excess of $500 shall be authorized prior to incurrence. Hanson will be allowed access to the company jet for business related purposes as appropriate.

NorthWestern will supply Hanson with office space, a lap top computer, access to the Company’s e-mail and required shared drives, and Blackberry during the term of this agreement. The Company will provide administrative support as needed to facilitate Hanson providing these services such as scheduling, making hotel or travel arrangements, etc. Following this Consulting Agreement, Hanson will keep his BlackBerry and laptop computer.

7