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):  February 10, 2011

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):

[ ] 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))

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 February 10, 2011, 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, established the Company’s 2011 Annual Incentive Plan for officers and other eligible employees of the Company (the “2011 AI Plan”). The 2011 AI Plan provides for a payment of incentive compensation to officers and other eligible employees for the performance period of January 1, 2011 through December 31, 2011.  To be eligible to receive a payout under the 2011 AI Plan, employees must be employed on December 31, 2011, 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 for the Company's principal executive officer, principal financial officer and the other remaining named executive officers in the Company’s proxy statement for its 2011 annual meeting of shareholders (the “2011 Proxy Statement”) are as follows:  Robert C. Rowe, President & Chief Executive Officer, 80%; Brian B. Bird, Vice President, Chief Financial Officer & Treasurer, 50%; Heather H. Grahame, Vice President & General Counsel, 40%; David G. Gates, Vice President – Wholesale Operations, 40%; and Curtis T. Pohl, Vice President – Retail Operations, 40%.

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 2011:  net income targets, weighted at 55%; lost work day incident target rate, a measurement of safety based on OSHA definitions, weighted at 15%; reliability, using two system reliability indices which measure the total duration of interruption for the average customer on our system during a predefined period of time, weighted at 15%; and a customer satisfaction measurement as determined by an independent survey, weighted at 15%; provided, however, tha t no awards will be paid out unless at least 90% of the net income target is met. In the event that a work-related fatality occurs during the year, the safety portion of the AI Plan will be forfeited for all 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. 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.  In no case will the total payouts in the Performance Pool exceed the total dollars available for the Performance Pool.  The Performance Pool then will be allocated to each officer 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. The Performance Pool will be divided into two pools: a “Fixed Pool” and a “Discretionary Pool.”  Fifty percent (50%) of the Performance Pool will be allocated to the Fixed Pool; the remaining fifty percent (50%) will be allocated to the Discretionary Pool. Each Eligible Employee that has a performance rating of “met expectations” or “exceeded expectations” will receive a distribution from the Fixed Pool calculated as follows:

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Employee’s target incentive amount  x  performance funding level achieved  x  50%

As part of the Fixed Pool calculation, the maximum percentage that can be attributed to the “performance funding level achieved” is 150%.

Each officer will then allocate the Discretionary Pool to the respective department supervisors, as appropriate, for further distribution based on either attainment of team or individual performance goals.  Supervisors will submit recommended distributions for 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.

Awards will be paid out to employees as soon as practicable, but no later than March 31, 2012.  The actual incentive amounts paid under the 2011 AI Plan will be based on the Company’s actual results during 2011 in relation to the established performance objectives, and these payments may be greater or less than the target amounts that have been established.

For further information regarding the 2011 AI Plan, see the copy of the plan that is filed as Exhibit 99.01 hereto and incorporated herein by reference.

(e) Long-Term Incentive Compensation Plan

On February 10, 2011, the Board, based on the recommendation of the Human Resources Committee, approved the 2011 Long-Term Incentive Plan Program (the “Program”) for performance shares to be awarded to specified participants, including all of the executive officers, under the NorthWestern Corporation 2005 Long-Term Incentive Plan (the “2005 LTIP”).  The Board issued the awards under the Program subject to subsequent stockholder approval of the performance measures available under the 2005 LTIP. The Company will be seeking such stockholder approval of the performance measures at its annual meeting on April 27, 2011.

Pursuant to the Program, the Form of NorthWestern Corporation Long-Term Performance Incentive Restricted Stock Award Agreement (the “Award Agreement”) and the 2005 LTIP, a participant, including each executive, will receive a targeted number of performance incentive restricted shares (“performance shares”) based upon a percentage of the participant’s salary divided by the fair market value of the Company’s common stock as of the grant date.  The long-term incentive target opportunities for the Company's principal executive officer, principal financial officer and the other remaining named executive officers in the Company’s 2011 Proxy Statement are as follows:  Robert C. Rowe, President & Chief Executive Officer, 100%; Brian B. Bird, Vice President, Chief Financial Officer & Treasurer, 75%; Heather H. Grahame, Vice President & General Counsel, 55%; David G. Gates, Vice President – Wholesale Operations, 55%; and Curtis T. Pohl, Vice President – Retail Operations, 55%.

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Payment of the performance shares to each participant, including each executive, is conditioned on the maintenance of investment grade ratings for the Company during the performance period and the attainment of certain performance measures established by the Human Resources Committee.  The performance measures are weighted as follows: 50% to a matrix composed of the three-year average of both return on average equity and net income growth, and 50% to relative total shareholder return as measured against total shareholder return for the members of the Company’s peer group.  Such performance measures could result in payment of an award ranging from 0% to 200% of a participant’s target.  However, if total shareholder return is negative, then the maximum payout for the total shareholder return compon ent is limited to 100%.

Payment of the performance shares also generally is contingent upon the participant remaining in the continuous employ of the Company through the end of the performance period; however, acceleration can occur upon the death or disability of the participant or a change of control of the Company.  The Human Resources Committee will have the discretion to include or exclude the impact of specified unusual or extraordinary events from the calculation of the performance measures.  Payout of the earned and vested performance shares will be made in shares of common stock of the Company, with one performance share vested and earned equal to one share of the Company’s common stock, except, upon a change of control, awards either will be deemed vested and satisfied at 100% of target or will be paid out in cash.   ;A participant will be able to elect to defer receipt of all or any portion of the earned performance shares, which may help an officer meet the Company’s stock ownership guidelines.

For further information regarding the Award Agreement, see the copy of the Award Agreement that is filed as Exhibit 99.02 hereto and incorporated herein by reference.  For further information regarding the 2005 LTIP, see Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q, dated October 30, 2008 (Commission File No. 1-10499), which is incorporated herein by reference.

Item 9.01        Financial Statements and Exhibits.

EXHIBIT NO.	DESCRIPTION OF DOCUMENT
99.01*	NorthWestern Energy 2011 Annual Incentive Plan
99.02*	Form of NorthWestern Corporation Long-Term Performance Incentive Restricted Stock Award Agreement

* 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/ Timothy P. Olson
	Timothy P. Olson
	Corporate Secretary

Date: February 16, 2011

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Index to Exhibits

EXHIBIT NO.	DESCRIPTION OF DOCUMENT
99.01*	NorthWestern Energy 2011 Annual Incentive Plan
99.02*	Form of NorthWestern Corporation Long-Term Performance Incentive Restricted Stock Award Agreement

* filed herewith

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EX-99.01

NORTHWESTERN ENERGY

2011 ANNUAL INCENTIVE PLAN

I.           Introduction

NorthWestern Energy (NWE) utilizes the 2011 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 NWE's Board of Directors (Board) and administered by the NWE Incentive Plan Administration Committee (Administration Committee) consisting of the President and CEO, and 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, 2011, and will continue until December 31, 2011, 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.

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.

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NorthWestern Energy 2011 Annual Incentive Plan

VI.           Participation and Eligibility

All non-represented regular full-time, regular part-time, limited part-time and supplemental employees of NWE employed on the last business day of the plan year are eligible to receive payment under the Plan provided they are actively employed by NWE for at least one full quarter of the plan year. To participate in the Plan, employees must have written goals and objectives consistent with NWE’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 the company. Goals and objectives can be based on either individual or team performance; however, each employee must have at least one goal that contributes to cost reduction or process improvement.

Employees must meet acceptable performance standards, as defined and approved by the Administration Committee, to be eligible for an award. Employees who are under an active step of Progressive Discipline or employees whose performance is rated “unsatisfactory” are not eligible for an award. Employees whose performance is rated “partially met expectations” may, at the discretion of their supervisor, be eligible for an award from the discretionary pool.

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 supplemental

(2)   Were under an active step of Progressive Discipline for a portion of the performance period,

(3)   Work on a part-time basis,

(4)   Are granted 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 day of the Plan year.

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 period covered by the Plan to determine individual awards.

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NorthWestern Energy 2011 Annual Incentive Plan

VIII.           Target Incentives

Target incentive level for each participating employee is set by position and will be expressed as a percentage of base salary. Each participant's target incentive 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 incentive 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, electric 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; 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.

Table 1 – 2011 Plan Performance Metrics

		Threshold	Target	Maximum
Incentive Metric	Weight	50%	100%	150%
FINANCIAL1
Net Income	55%	-10%	Budget	+10%
SAFETY2
Lost Time Incident Rate	15%	1.0	0.8	0.6
RELIABILITY
System Avg Interruption Duration Index (SAIDI excluding MEDs)	7.5%	114.0	102.0	88.0
System Avg Interruption Duration Index (SAIDI including MEDs)	7.5%	165.0	132.0	114.0
CUSTOMER SATISFACTION3
Favorable Opinion Rating	15%	69.5%	72.6%	74.1%

Footnotes: 1) The financial target is based on Board-approved budget for 2011; 2) If a work-related fatality occurs, the safety portion of the Annual Incentive Plan will be forfeited for all NWE 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) Customer satisfaction results are based on independent third party (RKS) survey and calculations.

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.  In addition, for the 2011 plan management has agreed that any QF adjustment associated with the CELP arbitration will be excluded from the incentive calculation since this potential adjustment was not included in the 2011 budget. This plan is subjected to any “clawback” provisions accepted by the Company in the future.

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NorthWestern Energy 2011 Annual Incentive Plan

As soon as possible after the end of the Performance Period, NWE will calculate the actual performance as compared against the performance targets. Such calculations shall be finally determined in 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.

X.           Performance Pool Distribution and Incentive Pay Calculation

Individual employee performance is a key consideration in calculating distribution of incentive pay. The Performance Pool will be allocated to each officer using total target incentive dollars 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. The Performance Pool will be divided into two pools: a “Fixed Pool” and a “Discretionary Pool.”   Fifty percent (50%) of the Performance Pool will be allocated to the Fixed Pool; the remaining fifty percent (50%) will be allocated to the Discretionary Pool. Each Eligible Employee that has a performance rating of met or exceeded expectations will receive a distribution from the Fixed Pool calculated as follows:

Employee’s target incentive amount x performance funding level achieved x 50%

Each officer will then allocate the Discretionary Pool to the respective department supervisors, as appropriate, for further distribution based on either attainment of 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 out to employees in March 2012. Awards are considered ordinary income and subject to all appropriate taxes.

­­­­­­­­­­____________________________

Recommended by the Human Resources Committee on February 10, 2011

Approved by the Board of Directors on February 10, 2011

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EX-99.02

NORTHWESTERN CORPORATION

LONG-TERM PERFORMANCE INCENTIVE

RESTRICTED STOCK AWARD AGREEMENT

(Granted Under the 2005 Long-Term Incentive Plan)

WHEREAS, the Board of Directors of NorthWestern Corporation (the “Company”) has duly adopted the 2005 Long-Term Incentive Plan (the “Plan”), which authorizes the Company to grant to “Eligible Persons”, Restricted Shares which upon vesting, are equivalent to one share of NorthWestern Corporation’s common stock (the “Common Shares” or “Shares”); and

WHEREAS, the Human Resources Committee of the Board of Directors of the Company has determined that it is desirable and in the best interests of the Company and its shareholders to approve a long-term incentive program for the Performance Period 2011 through 2013 and, in connection therewith, to award the Grantee a certain number of Restricted Shares (“Performance Shares”), in order to provide the Grantee with an incentive to advance the interests of the Company, all according to the terms and conditions set forth herein and in the Plan and contingent upon stockholder approval of the performance measures available under the Plan at the 2011 annual meeting of stockholders on April 27, 2011.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties hereto do hereby agree as follows:

ARTICLE I — GRANT OF PERFORMANCE SHARES

Section 1.1 Performance Shares Granted. Subject to the terms of the Plan and contingent upon stockholder approval of the performance measures available under the Plan at the 2011 annual meeting of stockholders on April 27, 2011, the Company hereby grants to <<Proper Name>> (the “Grantee”) a targeted number of Performance Shares equal to <<Shares>> (the “Target Performance Shares”) on February 10, 2011 (the “Grant Date”), payment of which depends on the Company’s performance as set forth in this Agreement and in the matrix on Addendum A as approved by the Human Resources Committee and the Company’s Board of Directors (the ̶ 0;Committee”).  The Target Performance Shares will be determined based upon a percentage of the approved budgeted salary for each Grantee divided by the Fair Market Value of the Company’s common stock as of the grant date.  For this purpose, Fair Market Value shall be determined as specified in the Plan.

Section 1.2 Performance Measures. Payment of Performance Share Awards to Grantee are conditioned on the maintenance of investment grade ratings during the Performance Period and the attainment of Performance Measures as established by the Committee. Performance Measures applicable to Performance Periods are established by the Committee and are measured against the performance of the Company’s Peer Group listed on Addendum B. The resulting performance measures are weighted:

·   50% weighting to the matrix composed of both the three-year average Return on Average Equity (ROAE) and Net Income growth per Addendum A;  and

·   50% to the Relative Total Shareholder Return (TSR) per Addendum A.

If however, the TSR is negative then the maximum payout for the TSR component is limited to100%. Performance metrics as established by the Committee for each of the above Performance Measures during the Performance Period are described on the Addendum A. Performance Measures as set forth in Addendum A for this grant will be measured over the period 2011 through 2013 (“Performance Period”).  All Performance Measures on Addendum A shall be determined using USA GAAP.

ARTICLE II — EARNING OF PERFORMANCE SHARES

Section 2.1 Determination of Earned Performance Shares. Upon the conclusion of the Performance Period, Performance Measures for that Performance Period will be determined and the amount of Performance Shares earned under this Award will be calculated in accordance with Addendum A.

Section 2.2 Conditions; Vesting of Earned Award. Except as otherwise provided in Articles III, IV and V herein, the Grantee’s right to receive any Performance Shares is contingent upon his or her remaining in the continuous employ of the Company or a Subsidiary through the end of the Performance Period. For purposes of this Agreement, the continuous employ of the Grantee shall not be considered interrupted or terminated in the case of sick leave, military leave or any other leave of absence approved by the Company or in the case of transfers between locations of the Company and its Subsidiaries. Following the Performance Period, the Committee shall determine whether and shall recommend to th e Board the extent that the Performance Measures have been satisfied for the Performance Period and shall determine the number of Performance Shares that have been earned.

Section 2.3 Other Factors in Determination of Earned Award. Notwithstanding the established Performance Measures, in determining attainment of any such Performance Measures, the Committee may include or exclude the impact of specified objective events, including, but not limited to, any of the following except where the action would result in the loss of an otherwise available exemption under Section 162(m): expenses as a result of restructuring or productivity initiatives, non-operating items; acquisition expenses; and any other items of gain, loss or expense that are determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or to a change of accounting principles.

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ARTICLE III — CHANGE IN CONTROL

As provided in Section 13 of the Plan, if a “Change in Control”, as defined in Appendix A of the Plan, occurs prior to the end of the Performance Period, either 1) the Performance Measures on Addendum A shall be deemed to be satisfied at 100% for the Performance Period and all Target Performance Shares will vest as of the closing date of the Change of Control or 2) the Committee shall arrange or provide for the payment of cash or other consideration in exchange for cancellation of outstanding non-vested Performance Shares. In the event that due to the acceleration of vesting, Grantee would, but for this Article III, be subject to the excise tax provisions of Code Section 4999 as a result of “parachute payments” described in Code Section 280G, the number of Performance Shares otherwise payable shall be reduced, e liminated or postponed in such amount that is required to reduce the aggregate present value of such payments to a dollar less than an amount equal to three times Grantee’s “base amount” (as such term is defined in Code Sections 280G(b)(3)(A) and 280G(d)(1) and (2)) so that Grantee is not subject to the tax under Code Section 4999 and no tax deduction is disallowed by reason of Code Section 280G.

ARTICLE IV — DISABILITY OR DEATH

If the Grantee’s employment with the Company or a Subsidiary terminates during the Performance Periods, but before the payment of any Performance Shares as set forth in Article VII below due to (a) “disability” (as defined in Appendix A of the Plan as amended) or (b) death, the Company shall pay to the Grantee or his or her executor or administrator, as the case may be, as soon as practicable following such termination of employment, a pro rata number of the Target Performance Shares based on the number of full months during the Performance Period during which the Grantee was employed by the Company and the remaining Performance Shares will be forfeited.

ARTICLE V — RETIREMENT

If the Grantee’s employment with the Company or a Subsidiary terminates due to retirement after his or her early or normal retirement date as defined in the pension plan in which the Grantee is a participant during the Performance Period, but before the payment of any Performance Shares as set forth in Article VII below, the Company shall pay to the Grantee, at the date provided in Article VII following the end of the Performance Period, the Performance Shares to which the Grantee would have been entitled under Article II above, had the Grantee remained employed by the Company through the end of the Performance Period, but prorated based on the number of full months during the Performance Period during which the Grantee was employed by the Company and Subsidiaries and the remaining Performance Shares will be forfeited. The Committee may, in its discretion, allow Grantee to retire at an earlier age and earn Performance Shares under this Article V so long as the timing and form of distribution are not modified in violation of Code Section 409A.

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ARTICLE VI — FORFEITING OF PERFORMANCE SHARES

Acceleration of vesting of Performance Shares is permitted under Articles II, IV and V above.  If the Grantee’s employment with the Company or a Subsidiary terminates before the end of the Performance Period for any reason other than as set forth in Articles III, IV and V above, the awarded Performance Shares will be forfeited in their entirety.

ARTICLE VII — PAYMENT OF PERFORMANCE SHARES

Payment of any Performance Shares that become earned and vested as set forth herein will be made in the form of Common Shares. Except as otherwise provided in Articles III, IV and V, payment will be made as soon as practicable after the last fiscal year of the Performance Period and the determination by the Committee (or the independent members of the Board of Directors) of the level of attainment of the Performance Measures, but in no event shall such payment occur after two and a half months from the end of the applicable Performance Period. Performance Shares will be forfeited if they are not earned at the end of the Performance Period as provided in Article VI and, except as otherwise provided in this Agreement, if the Grantee ceases to be employed by the Company or a Subsidiary at any time prior to such Performance Shares becomin g earned at the end of the Performance Period. To the extent that the Company or any Subsidiary is required to withhold any federal, state, local or foreign tax in connection with the payment of earned Performance Shares pursuant to this Agreement, it shall be a condition to the receipt of such Performance Shares, that the Grantee make arrangements satisfactory to the Company or such Subsidiary for payment of such taxes required to be withheld. This tax withholding obligation may, at the request of the Grantee, be satisfied by the Company withholding Performance Shares otherwise payable pursuant to this Award.

ARTICLE VIII — DIVIDENDS

No dividends shall be accrued or earned with respect to the Performance Shares until such Performance Shares are vested and earned by the Grantee as provided in Article II hereof.

ARTICLE IX — NON-ASSIGNABILITY

The Performance Shares 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 become earned and payable as provided in this Agreement; provided, however, that the Grantee’s rights with respect to such Performance Shares 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 IX shall be void, and the other party to any such purported transaction shall not obtain any rights to or interest in such Performance Shares or Common Shares.  ; Once Grantee has received earned and vested Performance Shares pursuant to this Award, Grantee may transfer such Shares by sale or gift unless a) Grantee is subject to a Company stock holding requirement and retention of such Shares is necessary to comply with Grantee’s holding requirements, or b) a transfer of Shares is prohibited by federal or state securities laws or regulations.

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ARTICLE X — 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 outstanding Target Performance Shares and other value determinations applicable to outstanding Target Performance Shares. No adjustment provided for in this Article X shall require the Company to issue any fractional share.

ARTICLE XI — DEFERRAL

Section 11.1 Ability to Defer. The Grantee may elect to defer receipt of all or any portion of the earned Performance Shares, in accordance with the Plan procedures.

Section 11.2 Elections. An election pursuant Section 11.1 must be made in writing and delivered to the Company within 30 days of the date of grant of such Performance Shares, provided that the election is made at least twelve months in advance of the earliest date on which the Performance Shares could be earned based upon achievement of the Performance Measures (disregarding death, disability or a Change in Control). If the Grantee does not file an election form by the specified date, he or she will receive the Performance Shares when they otherwise would have been paid pursuant to Article VII.

Section 11.3 Crediting to Accounts. If a Grantee elects to defer receipt of the earned Performance Shares, there will be credited to the Grantee’s account as of the day such Common Shares underlying the earned Performance Shares would have been paid, a number of deferred units (the “Deferred Share Units”) equal to the number of Common Shares that would otherwise have been delivered to the Grantee pursuant to Article VII on such date. The Deferred Share Units credited to the Grantee’s account plus any stock dividends on the equivalent number of Common Shares declared during the deferral period, will represent the number of Common Shares that the Company will issue to the Gra ntee at the end of the deferral period. All Deferred Share Units will be 100% vested at all times.

Section 11.4 Deferral Period. The Deferred Share Units will be subject to a deferral period beginning on the date of crediting to the Grantee’s account and ending upon such period as the Grantee may have elected. The period of deferral will be for a minimum period of one year, except in the case where the Grantee elects a deferral period determined by reference to his or her termination of employment. The Grantee may elect payment in a lump sum or payment in equal installments. The Grantee may change the period of deferral by filing a subsequent election with the Company at least twelve months before the date of the previously elected payment date and the newly elected payment date (or payme nt commencement date) must be at least five years after the previously elected payment date (or the previously elected payment commencement date); provided, however, that such modification shall not be effective unless the Grantee remains an employee for at least twelve months after the date on which such modification was made. During the deferral period, the Grantee will have no right to transfer any rights under his or her Deferred Share Units and will have no other rights of ownership therein.

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Section 11.5 Dividends. As provided in the Plan, the Grantee’s deferral account will be credited with cash or stock dividend equivalents related to the Shares represented by the Deferred Share Units, for dividends declared after the date that the Performance Shares would otherwise have been released and issued under Article VII above.

ARTICLE XII — 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). In particular, to the extent the Grantee has a right to receive payment pursuant to Article III or IV and the event triggering the right to payment does not consti tute a permitted distribution event under Section 409A(a)(2) of the Code, then notwithstanding anything to the contrary in Article III, IV or VII above, issuance of the Common Shares will be made, to the extent necessary to comply with Section 409A of the Code, to the Grantee on the earlier of (a) the Grantee’s “separation from service” with the Company (determined in accordance with Section 409A); provided, however, that if the Grantee is a “specified employee” (within the meaning of Section 409A), the Grantee’s date of issuance of the Common Shares shall be the date that is six months after the date of the Grantee’s separation of service; (b) the date the payment would otherwise occur under this Agreement (to the extent it constitutes a permitted distribution event); or (c) the Grantee’s death. References to Section 409A of the Cod e 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 XIII — MISCELLANEOUS

Section 13.1 Interpretation. The contents of this Agreement are subject in all respects to the terms and conditions of the Plan as approved by the Board of Directors of the Company, which are incorporated by reference herein. 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.

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Section 13.2 Fractional Shares. Any fractional share earned under this Agreement will be rounded up or down to the nearest whole share.

Section 13.3 No Right to Employment. The grant of the Performance Shares 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 13.4 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.

Section 13.5 Governing Law. This Plan 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 13.6 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 Long Term Incentive Plan — Restricted Stock Award Agreement, to be duly executed on their behalf, as of the day and year first above written.

NORTHWESTERN CORPORATION

By:

Name: Kendall Kliewer

Title: Vice President and Controller

Grantee Name:

Signature:

Employee Number:

Date:

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ADDENDUM B

NorthWestern Energy Peer Companies

ALLETE, Inc.

Avista Corporation

Black Hills Corporation

Empire District Electric Company

IDACORP, Inc.

MGE Energy, Inc.

PNM Resources, Inc.

Portland General Electric Company

UniSource Energy Corporation

Vectren Corporation

Westar Energy, Inc.