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): September 26, 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.

On September 26, 2008, the Board of Directors (“Board”) of NorthWestern Corporation (the “Company”) adopted the 2008 Key Employee Severance Plan (the “Key Employee Plan”), effective October 1, 2008, which supersedes the 2006 Officer Severance Plan which expired on September 30, 2008.

In establishing the Key Employee Plan, the Human Resources Committee of the Board of Directors engaged outside consultants to determine the appropriate level of benefits payable to officer-level employees of the Company and the appropriate program design. The objective of the Human Resources Committee was to provide severance benefits that are conservatively competitive with other utility companies. The new plan constitutes “welfare benefit plans” under section 3(1) of the Employee Retirement Income Security Act, as amended (“ERISA”).

The provisions of the Key Employee Plan provide for the payment of severance benefits in the event an “eligible employee” (as defined in section 1.6 of the Key Employee Plan) is involuntarily terminated without “cause,” where “cause” is defined in section 1.4 of the Key Employee Plan. For this purpose, involuntary termination does not include a termination resulting from a participant’s death or disability. The severance benefits payable under the severance plan provisions include: (i) a lump-sum cash payment equal to one times annual base pay, (ii) reimbursement of COBRA premiums paid by the participant during the 12-month period following the participant’s termination date, and (iii) $12,000 of outplacement services during the 12-month period following the participant’s termination date.

To eliminate any conflict between the NorthWestern Energy 2008 Employee Incentive Plan ("Incentive Plan") and the 2008 Key Employee Severance Plan for the remainder of 2008, the Board also approved a provision that will allow an eligible employee who is severed under the Key Employee Plan, from October 1, 2008 through December 31, 2008, to receive a prorated bonus, if any, in accordance with the Incentive Plan. The Key Employee Plan is in compliance with ERISA and Code section 409A.

The Key Employee Plan is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits

EXHIBIT NO.	DESCRIPTION OF DOCUMENT
10.1*	NorthWestern Corporation 2008 Key Employee Severance Plan

* filed herewith

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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: October 2, 2008

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Index to Exhibits

EXHIBIT NO.	DESCRIPTION OF DOCUMENT
10.1*	NorthWestern Corporation 2008 Key Employee Severance Plan

* filed herewith

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EX-10

NORTHWESTERN CORPORATION

2008 KEY EMPLOYEE SEVERANCE PLAN

_______________________________

Effective October 1, 2008

_______________________________

Approved by the Board of Directors

September 26, 2008

TABLE OF CONTENTS				Page
Article 1			DEFINITIONS	2
Article 2			SEVERANCE PLAN PROVISIONS	3
	2.1	Eligibility for Severance Benefits		3
	2.2	Severance Benefits		4
Article 3			ADDITIONAL PROVISIONS	4
	3.1	Ineligibility for Severance Benefits		4
	3.2	Re-employment		4
	3.3	Taxes		4
	3.4	Relation to Other Plans		5
	3.5	Amendment or Termination		5
ARTICLE 4			SUPERIOR PLAN PROVISIONS	5
	4.1	Surviving Plan		5
ARTICLE 5			ADMINISTRATIVE PROVISIONS	5
	5.1	General		5
	5.2	Costs and Indemnification		6
	5.3	Limitation on Employee Rights		6
	5.4	Governing Law		6
	5.5	Miscellaneous		6
	6.6	ERISA Rights		7
	5.7	Claims Procedures		8

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NORTHWESTERN CORPORATION

2008 KEY EMPLOYEE SEVERANCE PLAN

Effective October 1, 2008

NorthWestern Corporation (the “Company”), a Delaware corporation, by resolution of its Human Resources Committee (“Committee”) and Board of Directors (“Board”) dated September 19 and September 26, 2008, respectively, effective as of October 1, 2008 (“Effective Date”) has adopted this NorthWestern Corporation 2008 Key Employee Severance Plan (the “Plan”), for the benefit of key employees of the Company. The severance provisions of this Plan are an “employee welfare benefit plan” as defined in Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and are not intended to be a “pension plan” as defined in Section 3(2)(A) of ERISA, and shall be administered so as not to be an ERISA pension plan.

ARTICLE 1

DEFINITIONS

Whenever the following terms are used in the Plan with the first letter capitalized, they shall have the meaning specified below unless the context clearly indicates to the contrary.

1.1 “Administrator” shall mean NorthWestern Corporation or certain officer or officers of the Company as designated by the Board.

1.2 “Board” shall mean the Board of Directors of NorthWestern Corporation. The Board may delegate its power or duty over this Plan to any other person or persons, including a committee or sub-committee.

1.3 “Cause” under the provisions of this Plan shall mean any of the following:

1.3.1 Fraud, misappropriation of corporate property or funds, or embezzlement;

1.3.2 Malfeasance in office, misfeasance in office which is willful or grossly negligent, or nonfeasance in office which is willful or grossly negligent;

1.3.3 Failure to comply with the Company’s Code of Conduct;

1.3.4 Illegal conduct, gross misconduct or dishonesty, in each case which is willful and results (or is reasonably likely to result) in substantial damage to the company; or

1.3.5 Willful and continued failure by the employee to perform substantially his/her duties with the Company (other than any such failure resulting from his/her incapacity due to physical or mental illness) after receiving written demand for substantial performance from his/her

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immediate supervisor and after having been provided a reasonable period to correct the same. The written demand will specifically identify the manner in which such immediate supervisor believes the employee has not substantially performed his/her duties.

1.4 “Company” shall mean NorthWestern Corporation and all of its affiliates, and any entity, which is a successor in interest to the Company.

1.5 “Disability” shall mean that a Participant is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident or health plan covering employees of the Participant’s Employer.

1.6 “Eligible Employee” shall mean all employees of the Company who hold the title of “Officer” or “Assistant Officer” or who are otherwise classified by the Company as an “Officer” or “Assistant Officer” of the Company, who are not ineligible to receive severance benefits under this Plan based on a provision in an employment agreement with the Company and are not ineligible under Section 3.1.

1.7 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, together with regulations there under.

1.8 “Participant” shall mean each Eligible Person.

1.9 “Plan” shall mean the NorthWestern Corporation 2008 Key Employee Severance Plan.

1.10 “Retirement” shall mean the same definition provided under the Company sponsored pension /retirement plan in which each Eligible Employee participates.

ARTICLE 2

SEVERANCE PLAN PROVISIONS

2.1 Eligibility for Severance Benefits

You will be eligible to receive Severance Benefits pursuant to Section 2.2 of the Plan only if (i) you are an Eligible Employee and (ii) you execute the No Solicitation, Waiver and Release Agreement provided to you by the Company upon your termination of employment.

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2.2 Severance Benefits

If the Company terminates the employment of an Eligible Employee without Cause (as defined in Section 1.3), the Company, upon receipt of a properly executed No Solicitation, Waiver and Release Agreement, shall pay to such Eligible Employee the following:

2.2.1 a lump sum cash severance payment in an amount equal to one (1) times the Eligible Employee’s annual base pay in effect on the date of termination of employment, generally payable within the payroll cycle following the termination date but in no event later than thirty (30) days from the date of termination of employment;

2.2.2 reimbursement of any premiums paid by an Eligible Employee for COBRA coverage for twelve (12) months following such Eligible Employee’s termination of employment. Notwithstanding the foregoing, an Eligible Employee shall no longer be entitled to reimbursement of COBRA premiums under this Section 2.2.2 if such Eligible Employee becomes eligible for medical coverage under another employer’s group medical plans; and

2.2.3 outplacement services provided by a Company selected provider limited to $12,000 per Eligible Employee over a period not to exceed twelve (12) months following the date employment is terminated.

ARTICLE 3

ADDITIONAL PROVISIONS

3.1 Ineligibility for Severance Benefits

3.1.1 Persons Who Resign, etc., persons whose employment terminates voluntarily, or due to Cause, Retirement, death or Disability.

3.1.2 Changed Decisions, at the discretion of the Administrator, persons for whom NorthWestern cancels a pending termination of employment at any time before employment actually terminates may also be deemed ineligible for Severance Benefits.

3.2 Re-employment

If you are re-employed by NorthWestern or a Successor Employer while Severance Benefits are being paid to you under the Plan, all such benefits will cease, except as otherwise agreed by NorthWestern or the Successor Employer, as the case may be.

3.3 Taxes

Taxes will be withheld from Severance Benefits to the extent required by law.

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3.4 Relation to Other Plans

This Plan is in lieu of any prior severance plans, policies or programs that might apply to you. Severance Benefits under this Plan will be counted as “compensation” for purposes of determining benefits under any other supplemental pension plan or similar arrangement.

3.5 Amendment or Termination

This Plan may be amended, revised, changed, terminated or cancelled at any time to eliminate, decrease or increase the Severance Benefits payable to Eligible Employees. The Company has complete and absolute discretion to terminate, amend, modify or enhance the Plan at any time as it deems appropriate. Nothing in this Plan precludes an Eligible Employee from waiving his/her rights and/or entitlements to any benefits under this Plan in exchange for alternative severance benefits payable by the Company under a separate agreement.

ARTICLE 4

SUPERIOR PLAN PROVISIONS

4.1 Surviving Plan  

This Plan shall control the terms and amounts of Severance Benefits payable to Eligible Employees regardless of any severance benefits policies, plans or programs of the Company established prior to the adoption of this Plan. Accordingly, this Plan in its entirety shall supersede all Company adopted policies, plans or programs of the Company that provide severance or change of control benefits to Eligible Employees. This Plan shall be binding upon any successor organization of the Company and shall inure to the benefit of the Plan Participants. Notwithstanding the foregoing, nothing in this Plan precludes an Eligible Employee from waiving his/her rights and/or entitlements to any benefits under this Plan in exchange for alternative severance benefits payable by the Company under a separate agreement.

ARTICLE 5

ADMINISTRATIVE PROVISIONS

5.1 General

5.1.1 Discretion. The Administrator is responsible for the general administration and management of the Plan and shall have all powers and duties necessary to fulfill its responsibilities, including, but not limited to, the discretion to interpret and apply the Plan and to determine all questions relating to eligibility for benefits. The Administrator shall have the discretion to interpret or construe ambiguous, unclear or implied (but omitted) terms as it deems appropriate in its sole discretion. The validity of any such interpretation, construction, decision or finding of fact shall not be given de novo review if challenged in court, by arbitration, or in any other forum, and shall be upheld unless clearly arbitrary or capricious.

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5.1.2 Finality of Determinations. All actions taken and all determinations made in good faith by the Administrator will be final and binding on all persons claiming any interest in or under the Plan. To the extent the Administrator has been granted discretionary authority under the Plan, the Administrator’s prior exercise of such authority shall not obligate it to exercise its authority in a like fashion thereafter.

5.1.3 Drafting Errors. If, due to errors in drafting, any Plan provision does not accurately reflect its intended meaning, as demonstrated by consistent interpretations or other evidence of intent, or as determined by the Administrator in its sole discretion, the provision shall be considered ambiguous and shall be interpreted by the Administrator in a fashion consistent with the evidenced intent.

5.2 Costs and Indemnification

All costs of administering the Plan and providing Plan benefits will be paid by the Company. To the extent permitted by applicable law and in addition to any other indemnities or insurance provided by the Company, the Company shall indemnify and hold harmless its (and its affiliates) current and former officers, directors, and employees against all expenses, liabilities and claims (including legal fees incurred to defend against such liabilities and claims) arising out of their discharge in good faith of their administrative and fiduciary responsibilities with respect to the Plan. Expenses and liabilities arising out of willful misconduct will not be covered under this indemnity.

5.3 Limitation on Employee Rights

This Plan shall not give any employee the right to be retained in the service of the Company or interfere with or restrict the right of the Company to discharge or retire the employee. This Plan shall not constitute a contract of employment of any kind.

5.4 Governing Law

This Plan is a welfare benefit plan subject to ERISA, and it shall be interpreted, administered, and enforced in accordance with that law. To the extent that state law is applicable, the statutes and common law of the State of Delaware (excluding any that mandate the use of another jurisdiction’s laws) shall apply.

5.5 Miscellaneous

Where the context so indicates, the singular will include the plural and vice versa. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan. Unless the context clearly indicates to the contrary, a reference to a statute or document shall be construed as referring to any subsequently enacted, adopted or executed counterpart.

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5.6 ERISA Rights

The following information required by ERISA is furnished by the Administrator.

5.6.1 General Plan Information.

Name of Plan:	NorthWestern Corporation 2008 Key Employee Severance Plan
Plan Administrator’s Name: Address and Phone Number:	NorthWestern Corporation 3010 West 69th Street Sioux Falls, South Dakota 57104 Telephone: 605-978-2902
Employer Identification Number assigned by IRS:	46-0172280
Plan Number of the Plan:	TBD
Type of Plan:	Severance Pay Plan
Type of Administration:	Employer Administration
Name and Address of Registered Agent for Service of Legal Process:	Plan Administrator
Source of Contribution to the Plan:	General assets of NorthWestern Corporation
Funding Medium:	General assets of NorthWestern Corporation
Plan Fiscal Year Ends On:	December 31

5.6.2 Plan Modification, Amendment, and Termination. The Administrator has the right to amend or terminate the Plan only in accordance with Section 3.5 and 5.7.5.

5.6.3 Your Rights under ERISA. As an Eligible Employee in the Plan, you are entitled to certain rights and protections under ERISA. Your rights include the following:

(a) Right to Examine Plan Documents. You have the right to examine all plan documents. The Administrator will tell you where the plan documents are available for examination. There will be no charge for examining plan documents.

(b) Right to Obtain Copies of Plan Documents. You have the right to obtain copies of all plan documents. You should make your request in writing to the Administrator. There may be a reasonable charge for the copies.

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(c) Right to Written Explanation of Denial. If your claim for benefits under the plan is denied in whole or in part, you must be given a written explanation of the reason for denial.

(d) Right to Review. You have the right to request a review and reconsideration of any denial of your claim for plan benefits.

(e) Other ERISA Rights. You can protect your rights under ERISA. For example, ERISA gives you the right to file suit in a state or federal court if your claim for benefits under the plan is denied or ignored. You also can file suit in a federal court if you request plan documents and do not receive them within thirty (30) days. In such a case, the court will require the Administrator to give you the plan documents you requested. In some cases, the court could also require the Administrator to pay you up to $110 a day until you receive the requested materials.

If you have any questions about your plan, you should contact the Administrator. If you have any questions about this statement of your rights under ERISA, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration.

5.7 Claims Procedures

5.7.1 Claims Normally Not Required. Normally, you do not need to present a formal claim to receive benefits payable under this Plan.

5.7.2 Disputes. If any person (Claimant) believes that benefits are being denied improperly, that the Plan is not being operated properly, that fiduciaries of the Plan have breached their duties, or that the Claimant's legal rights are being violated with respect to the Plan, the Claimant must file a formal claim with the Administrator. This requirement applies to all claims that any Claimant has with respect to the Plan, including claims against fiduciaries and former fiduciaries, except to the extent the Administrator determines, in its sole discretion, that it does not have the power to grant all relief reasonably being sought by the Claimant.

5.7.3 Time for Filing Claims. A formal claim must be filed within 90 days after the date the Claimant first knew or should have known of the facts on which the claim is based, unless the Administrator in writing consents otherwise.

5.7.4 Arbitration. The Participants and Company agree that any and all disputes, controversies or claims of any kind or nature, including but not limited to any arising out of or in any related to the interpretation of this Plan or to the employment or separation of an Eligible Employee from the Company that have not been resolved by the Company within 90 days of the filing of a formal claim by Participant under Section 5.7.3, shall be submitted to binding arbitration under the auspices and rules of the American Arbitration Association located nearest to where the Eligible Employee resides. Judgment upon an award rendered by the arbitrator may be entered in any competent court having jurisdiction over the dispute. The Participants and Company agree that arbitration is in lieu of any and all other civil legal proceedings and that all rights to resolve disputes through court or trial by jury are hereby waived. Furthermore, the Company agrees that it will reimburse an Eligible Employee for any legal costs arising from an Arbitration proceeding that results in a favorable outcome for such Eligible Employee.

5.7.5 Procedures. The Administrator has adopted the procedures for considering and adjudicating claims, which it may amend from time to time, as it sees fit. These procedures shall comply with all applicable legal requirements. The right to receive benefits under this Plan is contingent on a Claimant using the prescribed claims procedures to resolve any claim. Therefore, if a Claimant (or his or her successor or assign) seeks to resolve any claim by any means other than the prescribed claims provisions, he or she must repay all benefits received under this Plan and shall not be entitled to any further Plan benefits.

Adopted and Approved

NORTHWESTERN CORPORATION

By:	/s/ Robert C. Rowe	September 26, 2008
	Robert C. Rowe	Date

Title: President and Chief Executive Officer

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