SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES ACT OF 1934
For the transition period from ___________ to __________
Commission File No. 0-692
NORTHWESTERN CORPORATION
Delaware 46-0172280
(State of Incorporation) (IRS Employer Identification No.)
125 South Dakota Avenue
Suite 1100
Sioux Falls, South Dakota 57104
(Address of principal office) (Zip Code)
605-978-2908
(Registrant's telephone number)
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by
Section 13 or 15 (D) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to
file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[X ] Yes [ ] No
Indicate the number of shares outstanding of each
of the registrant's classes of common stock, as of
the latest practicable date:
Common Stock, Par Value $1.75
23,107,096 shares outstanding at May 10, 1999
Corporation-Obligated Mandatorily Redeemable
Preferred Securities
of Subsidiary Trusts, Liquidation Amount $25.00
3,500,000 shares outstanding at May 10, 1998
Index
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998...............
Consolidated Statements of Income -
Three months ended
March 31, 1999 and 1998............................
Consolidated Statements of Cash Flows
Three months ended
March 31, 1999 and 1998............................
Notes to Consolidated Financial Statements
Item 2. Management's Discussion of Financial
Condition and Results of Operations............
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of matters to a vote of security holders
Item 5. Other Information
Item 6. Exhibits and reports on Form 8-K
a. Exhibits
b. Reports on 8-K
SIGNATURES .............................................
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NORTHWESTERN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
March 31, December 31,
1999 1998
ASSETS
Current Assets
Cash and Cash Equivalents $ 26,107 $ 30,865
Accounts Receivable, Net 136,639 131,541
Inventories 70,534 72,805
Other 35,541 31,957
-------- --------
268,821 267,168
-------- --------
Property, Plant and Equipment, Net 637,276 629,278
-------- --------
Goodwill and Other Intangible Assets, Net 645,055 631,029
-------- --------
Other Assets
Investments 159,048 152,470
Other 95,380 56,271
-------- --------
$ 254,428 $ 208,741
-------- --------
$ 1,805,580 $ 1,736,216
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities
Current Maturities of Long-Term Debt $ 8,419 $ 20,060
Short-Term Debt - Nonrecourse 13,019 11,554
Accounts Payable 116,104 113,036
Accrued Expenses 55,091 64,779
--------- ---------
192,633 209,429
--------- ---------
Long-term Debt 256,350 256,350
Long-term Debt of Subsidiaries - Nonrecourse 374,887 332,525
Deferred Income Taxes and Other 73,969 74,072
Other Noncurrent Liabilities 128,439 101,787
--------- --------
833,645 764,734
--------- --------
Minority Interests 397,271 388,702
--------- --------
Preferred stock, Preference Stock and Preferred
Securities
Preferred Stock - 4 1/2% Series 2,600 2,600
Redeemable Preferred Stock - 6 1/2% Series 1,150 1,150
Preference Stock - -
Corporation Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary Trusts 87,500 87,500
------- -------
91,250 91,250
------- -------
Shareholders' Equity
Common Stock 40,386 40,279
Paid-in Capital 159,539 158,530
Retained earnings 88,344 81,100
Accumulated Other Comprehensive Income 2,512 2,192
------- -------
290,781 282,101
------- -------
$ 1,805,580 $ 1,736,216
=========== ===========
The accompanying notes to consolidated financial
statements are an integral part of these statements.
NORTHWESTERN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except for Per Share Amounts)
Three Months Ended
March 31
1999 1998
--------- ---------
Operating Revenues $ 509,354 $ 298,964
Cost of Sales 364,888 218,391
------- --------
Gross Margin 144,466 80,573
------- --------
Operating Expenses:
Selling, General and Administrative Expenses 87,086 41,925
Depreciation and Amortization 15,246 8,812
------- --------
102,332 50,737
------- --------
Operating Income 42,134 29,836
Interest Expense (11,931) (7,709)
Investment Income and Other 3,317 2,745
------- -------
Income Before Income Taxes and Minority Intersts 33,520 24,872
Provision for Income Taxes (7,460) (4,750)
------- --------
Income Before Minority Interests 26,060 20,122
Minority Interests (11,180) (9,118)
-------- -------
Net Income 14,880 11,004
Minority Interest on Preferred Securities of
Subsidiary Trusts (1,650) (660)
Dividends on Cumulative Preferred Stock (48) (48)
------- --------
Earnings on Common Stock $ 13,182 $ 10,296
======== ========
Average Common Shares Outstanding 23,051 17,843
Earnings Per Average Common Share
Basic $ 0.57 $ 0.58
Diluted $ 0.56 $ 0.58
Dividends Declared Per Common Share $ 0.2575 $ 0.2425
The accompanying notes to consolidated financial
statements are an integral part of these statements.
NORTHWESTERN CORPORATON
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Three Months Ended
March 31
--------
1999 1998
------ ------
Operating Activities:
Net Income $ 14,880 $ 11,004
Items not Affecting Cash
Depreciation and Amortization 15,246 8,812
Deferred Income Taxes (103) (550)
Minority Interests in Net Income of
Consolidated Subsidiaries 11,180 9,118
Investment Tax Credits (140) (140)
Changes in Current Assets and
Liabilities,
Net of Acquisitions:
Accounts Receivable (1,479) 17,717
Inventories 13,691 7,979
Other Current Assets (8,173) 1,439
Accounts Payable 1,244 (34,715)
Accrued Expenses (13,637) 4,083
Other, Net (3,458) (3,646)
-------- --------
Cash Flows Provided by Operating
Activities 29,251 21,101
-------- --------
Investment Activities:
Property, Plant and Equipment Additions (6,467) (5,420)
Sale (Purchase) of Noncurrent
Investments, Net (6,288) 44,687
Acquisitions and Growth Expenditures (31,977) (64,556)
-------- --------
Cash flows Used in Investing Activities (44,732) (25,289)
-------- --------
Financing Activities:
Dividends on Common and Preferred Stock (5,986) (4,375)
Minority Interest on Preferred Securities of
Subsidiary Trusts (1,650) (660)
Proceeds From Exercise of Warrants 1,116 -
Subsidiary Payment of Common Unit
Distributions (9,247) (7,067)
Proceeds From Issuance of Common Units - 40,700
Issuance of Nonrecourse Subsidiary Debt 38,338 -
Repayment of Nonrecourse Subsidiary Debt (13,278) (32,499)
Short-Term Borrowings 1,430 -
Commercial Paper Issuances - 14,000
------- -------
Cash Flows Provided by Financing
Activities 10,723 10,099
------- --------
Increase (Decrease) in Cash and Cash
Equivalents (4,758) 5,911
Cash and Cash Equivalents, Beginning of Period 30,865 14,309
Cash and Cash Equivalents, End of Period $ 26,107 $ 20,220
========= =========
Supplemental Cash Flow Information
Cash Paid During the Period For
Income Taxes $ 1,486 $ 27
Interest $ 11,984 $ 6,465
The accompanying notes to consolidated financial
statements are an integral part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Reference is made to Notes to Financial Statements
included in the Company's Annual Report)
(1) Management's Statement -
The financial statements included herein have been prepared by NorthWestern
Corporation (the Corporation), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion
of the Corporation, all adjustments necessary for a fair presentation of the
results of operations for the interim periods have been included. It is
suggested that these financial statements be read in conjunction with the
financial statements and the notes thereto included in the Corporation's latest
annual report to shareholders.
(2) Subsidiaries and Principles of Consolidation -
The accompanying consolidated financial statements include the accounts of the
Corporation and all wholly, majority-owned, and controlled subsidiaries,
including CornerStone Propane Partners, L.P. (NYSE:CNO), the nation's fourth
largest retail propane distributor; Blue Dot Services, Inc., a national
provider of air conditioning, heating, plumbing and related services (HVAC),
and Expanets, Inc., a national provider of integrated communication and data
solutions and network services. All significant intercompany balances and
transactions have been eliminated from the consolidated financial statements.
The Corporation's regulated businesses are subject to various state and federal
agency regulation. The public unitholders' interest in CornerStone's net
assets subsequent to the Partnership Formation is reflected as minority
interests in the consolidated financial statements. Equity interests of the
former owners of companies acquired by Blue Dot. and Expanets who continue to
hold an interest in Blue Dot. and Expanets are also reflected as minority
interests in the consolidated financial statements.
(3) Comprehensive Income -
In 1998, the Corporation adopted SFAS No. 130 'Reporting Comprehensive Income.'
This statement requires the reporting of comprehensive income in addition to
net income from operations. Comprehensive income is a more inclusive financial
reporting methodology that includes disclosure of certain financial information
that historically has not been recognized in the calculation of net income.
Comprehensive income for the three months ended March 31, 1999 and 1998, was
$15.2 million and $9.4 million.
(4) Segment Information -
In 1998, the Corporation adopted Statement of Financial Accounting Standards
No. 131 (SFAS 131), 'Disclosures About Segments of an Enterprise and Related
Information,' which requires the reporting of certain financial information by
business segment. For the purpose of providing segment information, the
Corporation's principal business segments are its electric, natural gas,
retail propane, wholesale propane, HVAC and communications operations. All
other includes other service businesses, the results of manufacturing
operations (only in 1998), activities and assets of the parent, any reconciling
or eliminating amounts and amortization of purchase accounting adjustments
related to the acquisitions of HVAC and communication companies.
The accounting policies of the operating segments are the same as the parent
except that the parent allocates some of its operating expenses and interest
expense to the operating segments according to a methodology designed by
management for internal reporting purposes and involves estimates and
assumptions. Financial data for the business segments are as follows
(in thousands): Three Months Ended March 31, 1999
Total
Electric Total Communi- All
& Natural Propane HVAC cations Other Total
Gas
---------- ------- ----- -------- ------ ------
Operating
Revenues $ 50,598 $340,328 $ 52,619 $ 62,768 $ 3,041 $ 509,354
Cost of Sales 26,405 270,068 32,620 34,505 1,290 364,888
------ ------- ------ ------ ----- -------
Gross Margin 24,193 70,260 19,999 28,263 1,751 144,466
Selling,
general & 10,168 34,318 17,682 20,980 3,938 87,086
Administrative
Depreciation
& amortization 3,737 7,848 943 707 2,011 15,246
------ ----- ----- ------ ----- ------
Operating
Income 10,288 28,094 1,374 6,576 (4,198) 42,134
Interest
Expense (2,179) (6,863) - (283) (2,606) (11,931)
Investment
Income & Other 53 - 88 (539) 3,715 3,317
------ ------ ------ ------ ------ ------
Income
before taxes
and minority
interests 8,162 21,231 1,462 5,754 (3,089) 33,520
Provision
for income
taxes (2,700) (2,693) (580) (2,542) 1,055 (7,460)
Income
before
minority
interests $ 5,462 $ 18,538 $ 882 $ 3,212 $ (2,034) $ 26,060
======= ======== ===== ======= ========= ========
Total
Assets $ 310,871 $ 784,630 $ 50,904 $ 75,357 $ 583,818 $ 1,805,580
========= ========= ======== ======== ========= ===========
Maintenance
Capital
Expenditures $ 3,231 $ 2,002 $ 548 $ 648 $ 38 $ 6,467
======= ========= ======== ======== ========= ===========
Three Months Ended March 31, 1998
Total
Electric
& Natural Total Communi- All
Gas Propane HVAC cations Other Total
---------- -------- ------ --------- ------- -----
Operating
Revenues $ 48,984 $ 229,331 $ 10,582 $ 4,184 $5,883 $ 298,964
Cost of Sales 26,113 179,362 6,615 2,626 3,675 218,391
------- ------- ------ ------ ------ -------
Gross Margin 22,871 49,969 3,967 1,558 2,208 80,573
Selling,
general &
Administrative 10,049 25,472 3,465 1,260 1,679 41,925
Depreciation
& amoritization 3,635 4,715 221 77 164 8,812
------ ------ ----- ------ ------ -------
Operating
Income 9,187 19,782 281 221 365 29,836
Interest
Expense (2,815) (4,824) (8) (25) (37) (7,709)
Investment
Income & Other 339 - 3 5 2,398 2,745
------ ------- ---- ----- ----- -------
Income
before taxes
and minority
interests 6,711 14,958 276 201 2,726 24,872
Provision
for income
taxes (2,757) (1,785) (181) (94) 67 (4,750)
------- ------- ----- ------- ------ -------
Income
before
minority
Interest $ 3,954 $ 13,173 $ 95 $ 107 $ 2,793 $ 20,122
======== ======== ===== ===== ======= ========
Total Assets $ 303,517 $ 600,423 $ 21,845 $ 17,263 $ 215,213 $ 1,158,261
========= ========= ======== ======== ========= ===========
Maintenance
Capital
Expenditures $ 2,377 $ 2,997 $ - $ - $ 46 $ 5,420
========= ========= ======== ========= ======== ==========
1999 1998
Electric Natural Gas Electric Natural Gas
-------------------------- ---------------------------
Operating
Revenues $ 20,475 $ 30,123 $ 18,963 $30,021
Cost of Sales 4,431 21,974 3,816 22,297
-------- ------- ------- --------
Gross Margin 16,044 8,149 15,147 7,724
Selling, general
& administrative 6,617 3,551 6,536 3,513
Depreciation and
amortization 3,002 735 2,922 713
------ ----- ------- ------
$ 6,425 $ 3,863 $ 5,689 $ 3,498
======= ======= ======= ========
1999 1998
Retail Wholesale Retail Wholesale
Propane Propane Propane Propane
----------------------- ----------------------
Operating
Revenues $ 108,206 $ 232,122 $ 84,479 $ 144,852
Cost of Sales 44,438 225,630 39,970 139,392
--------- --------- -------- ---------
Gross Margin $ 63,768 $ 6,492 $ 44,509 $ 5,460
========= ========= ======== ==========
(5) New Accounting Standards -
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for
Derivative Instruments and Hedging Activities." The Statement establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments imbedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The Statement requires changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met. SFAS 133 is effective for fiscal years beginning after June 15, 1999.
The Corporation is evaluating the impacts of adopting SFAS 133 on its
financial statements. The impact of SFAS 133 will likely depend upon the
extent of use of derivative instruments and their designation and effectiveness
as hedges of market risk.
(6) Reclassification and Restatements
Certain 1998 amounts have been reclassified to conform to the 1999
presentation. Operating results for 1998 have been restated to reflect the
consolidation of Blue Dot. and Expanets effective January 1, 1998. Such
reclassifications and restatements had no impact on net income and common
stock equity as previously reported.
(7) Earnings Per Share
In 1998, the Corporation adopted SFAS No. 128, "Earnings Per Share," which
establishes two methods for calculating earnings per share, basic and
diluted, and simplifies the previous standards for computing earnings per
share. Basic earnings per share is computed on the basis of the weighted
average number of common shares outstanding. Diluted earnings per share is
computed on the basis of the weighted average number of common shares
outstanding plus the effect of the outstanding stock options and warrants.
The following table presents the shares used in computing the basic and
diluted earnings per share for 1999 and 1998 (in thousands):
Three Months Ended
March 31
1999 1998
------- -------
Average common
Shares outstanding for 23,051 17,843
Basis computation
Dilutive effect of:
Stock Options 18
Stock Warrants 303
-------- --------
Average common
Shares outstanding for
Diluted computation 23,372 17,843
-------- --------
Item 2. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NorthWestern Corporation ('NorthWestern' or 'Corporation') and its partner
entities are providers of value-added services and solutions to residential
and business customers nationwide. The Corporation provides electric and
natural gas service to Midwestern customers through our energy division,
NorthWestern Public Service. In addition, the Corporation holds interests in
Cornerstone Propane Partners, L.P. (NYSE:CNO), the nation's fourth largest
retail propane distributor; Expanets, Inc., a national provider of integrated
communication and data solutions and network services; and Blue Dot Services,
Inc., a national provider of air conditioning, heating, plumbing and related
services (HVAC). The Corporation is also engaged in other service and
nonenergy related businesses. NorthWestern was incorporated under the laws of
the state of Delaware in 1923. Our executive offices are located at 125 S.
Dakota Avenue, Suite 1100, Sioux Falls, South Dakota 57104, and our telephone
number is 605-978-2908. Our website is located at www.northwestern.com.
Weather
Weather patterns have a material impact on the Corporation's operating
performance for all three segments of its energy business. This impact is
particularly relevant for natural gas and propane. Because propane and natural
gas are heavily used for residential and commercial heating, the demand for
these products depends heavily upon weather patterns throughout the
Corporation's market areas. With a larger proportion of its operations
related to seasonal propane and natural gas sales, a significantly greater
portion of the Corporation's operating income is recognized in the first and
fourth quarters related to higher revenues from the heating season.
RESULTS OF OPERATIONS:
Consolidated Earnings Comparisons -
Diluted earnings per share for the quarters ended March 31, 1999 and 1998,
were $.56 and $.58. Excluding a nonrecurring investment gain of $.07 related
to a sale of stock in a nonstrategic investment, March 31, 1998, ongoing
diluted earnings were $.51 per share. The increase in ongoing earnings was due
to increased operating income from the propane operations resulting from
acquired retail propane distribution centers and increased operating income
from HVAC and communications operations resulting from internal growth and
acquired companies, offset by decreases due to significantly warmer than normal
weather in the Corporation's propane, natural gas and electric operating areas.
Propane
Retail propane sales for the three months ended March 31 increased 28% from
$84.5 million in 1998 to $108.2 million in 1999. Gross margins also
increased 43% from $44.5 million in 1998 to $63.8 million in 1999. The
increases are due to internal growth combined with the acquisition of retail
propane centers including a large retail propane distribution company in late
1998. These increases were negatively impacted by weather that has been
substantially warmer than normal. Wholesale propane sales increased 62% from
$144.9 million in 1998 to $232.1 million in 1999. Wholesale propane margins
also increased 19% from $5.5 million in 1998 to $6.5 million in 1999. The
increases in wholesale sales and margins are due to acquisitions in late 1998
offset by warmer than normal weather. Propane operating income for the
three months ended March 31 increased 42% from $19.8 million in 1998 to $28.1
million in 1999. The increase in operating income is due to the acquisitions
of retail and wholesale service centers partially offset by the negative impact
from warmer than normal weather.
Electric
Electric revenues for the three months ended March 31 increased 8% from $19.0
million in 1998 to $20.5 million in 1999. The increase in revenues is due to
internal growth and increased wholesale sales offset by warmer than normal
weather. Weather in 1999, while similar to the prior year, was still warmer
than normal negatively impacting electric operations. Operating income from
electric operations increased 13% from $5.7 million in 1998 to $6.4 million in
1999. The increase in operating income is due to higher revenues and margins
in 1999 partially offset by normal inflationary increases in operating
expenses and warmer than normal weather.
HVAC
HVAC revenues for the three months ended March 31 increased from $10.6 million
in 1998 to $52.6 million in 1999. Margins increased from $4.0 million in 1998
to $20.0 million in 1999. Operating income increased from $.3 million in 1998
to $1.4 million in 1999. The increases are due to internal growth combined
with acquisitions of companies throughout 1998 and continuing into 1999.
Communications
Communications revenues for the three months ended March 31 increased from
$4.2 million in 1998 to $62.8 million in 1999. Margins increased from $1.6
million in 1998 to $28.3 million in 1999. Operating income increased from
$.2 million in 1998 to $6.6 million in 1999. The increases are due to
internal growth combined with acquisitions of companies throughout
1998 and continuing into 1999.
Natural Gas
Natural gas revenues for the three months ended March 31 increased from $30.0
million in 1998 to $30.1 million in 1999. The increase in revenues is due to
internal growth offset by warmer than normal weather. Weather in 1999, while
similar to the prior year, was still warmer than normal which negatively
impacted natural gas operations. Operating income from natural gas operations
increased 10% from $3.5 million in 1998 to $3.9 million in 1999. The increase
in operating income is due to higher revenues and margins in 1999 offset by
normal inflationary increases in operating expenses and warmer than normal
weather.
Other Income Statement Items
Other operating revenues for 1998 consists principally of manufacturing
revenues (related to the Corporation's former ownership interest in Lucht Inc.
which was sold in 1998) and in 1999 consists of other service businesses.
Other income increased during the three months ended March 31, from $2.7
million in 1998 to $3.3 million in 1999 principally due to the investment of
additional funds which are a result of the excess proceeds from the debt and
equity offerings completed by the Corporation in November 1998. Interest
expense increased from $7.7 million to $11.9 million resulting from debt
issued by the Corporation in November 1998 and Cornerstone in December 1998.
Minority interests increased from $9.1 million in 1998 to $11.2 million in 1999
due to growth within the propane, HVAC and communications businesses. Income
taxes increased from $4.8 million in 1998 to $7.5 million in 1999 due to
increased consolidated taxable income.
Liquidity and Capital Resources -
The Corporation believes it has adequate long-term liquidity through the
generation of operating cash flows, the availability of substantial marketable
securities, and a sound capital structure. In addition, the Corporation has
adequate capacity for additional financing and continues to maintain this
strong position through favorable bond ratings.
The Corporation has generated significant operating cash flows while
continuing to maintain substantial cash and investment balances in the form of
marketable securities. Cash flows from operating activities during the three
months ended March 31, 1999 and 1998 were $29.3 million and $21.1 million.
The increase is primarily due to increased cash flow from propane, HVAC and
communication operations. Cash equivalents and investment securities totaled
$170.1 million and $87.5 million at March 31, 1999 and 1998.
Working capital and other financial resources are also provided by lines of
credit, which are generally used to support commercial paper borrowings, a
primary source of short-term financing. At March 31, 1999, available short
term lines of credit totaled $75 million. In addition, the Corporation's
nonregulated subsidiaries maintain nonrecourse credit agreements with various
banks for revolving and term loans.
Capital Requirements -
The Corporation's primary capital requirements include the funding of its
energy business construction, maintenance and expansion programs, the
funding of debt and preferred stock retirements, sinking fund requirements and
the funding of its corporate development and investment activities.
Maintenance capital expenditure plans are subject to continual review and may
be revised as a result of changing economic conditions, variations in sales,
environmental requirements, investment opportunities and other ongoing
considerations. Capital expenditures for maintenance activities during the
three months ended March 31, 1999 and 1998 were $6.5 million and $5.4 million.
Estimated annual maintenance capital expenditures for 1999 and 2000 are
estimated to be $27.3 million and $26.2 million.
Capital requirements for the mandatory retirement of long-term debt including
nonrecourse debt of subsidiaries will be $8.4 million in 1999. The Corporation
anticipates that future capital requirements will be met by existing
investments and marketable securities, internally generated cash flows and
available external financing.
The Corporation will continue to review economics of retiring or refunding
remaining long-term debt and preferred stock to minimize long-term financing
costs. At March 31. 1999, the Corporation had invested $215.5 million in Blue
Dot. and Expanets. The Corporation will continue to make other significant
acquisition investments in related industries that would require the
Corporation to raise additional equity and/or incur debt financing,
which are therefore subject to certain risks and uncertainties. The
Corporation's financial coverages are at levels in excess of those required for
the issuance of additional debt and preferred stock.
COMPETITION AND BUSINESS RISK
NorthWestern's strategy centers upon the development, acquisition and
expansions of operations offering integrated services and solutions within the
NorthWestern partner entities. In addition to maintaining a strong competitive
position in its electric, natural gas and propane distribution businesses, the
Corporation intends to pursue strategic development and acquisitions that have
long-term growth potential. While these strategic development and acquisition
activities can involve increased risk in comparison to the Corporation's
energy distribution businesses, they offer the potential for enhanced
investment returns. The Corporation's strategy to continue strategic
development through acquisitions will be subject to future availability of
market capital to fund such acquisitions. The NorthWestern strategy of
integrating products and services and acquired companies have other factors
which may also increase the risks of the Corporation. These factors include
the adequacy and efficiency of its information systems, business processes,
related support functions and the ability to attract and retain quality team
members. The Corporation has taken and continues to take steps to refine,
improve and scale up its back-office support systems and processes. There are
no assurances that such efforts will be sufficient to meet the future needs of
the Corporation's operations. Future changes in accounting rules and
regulations could have a material impact upon the Corporation's future
financial statement presentation, results from operations and financial
position.
PROPANE
The retail propane business is a margin-based business in which gross profits
depend on the excess of sales prices over propane supply costs. Consequently,
CornerStone's profitability will be sensitive to changes in wholesale propane
prices. Propane is a commodity, the market price of which can be subject to
volatile changes in response to changes in supply or other market conditions.
As it may not be possible to immediately pass on to customers rapid increases
in the wholesale cost of propane, such increases could reduce CornerStone's
gross profits.
Weather conditions have a significant impact on propane demand for both heating
and agricultural purposes. The majority of CornerStone's customers rely
heavily on propane as a heating fuel. Actual weather conditions can vary
substantially from year to year, significantly affecting CornerStone's
financial performance. Furthermore, variations in weather in one or more
regions in which CornerStone operates can significantly affect the total
volumes sold by CornerStone and the margins realized on such sales and,
consequently, CornerStone's results of operations. These conditions may also
impact CornerStone's ability to meet various debt covenant requirements and
affect CornerStone's ability to pay common and subordinated unit
distributions.
Propane competes with other sources of energy, some of which are less costly
for equivalent energy value. Propane distributors compete for customers against
suppliers of electricity, fuel oil and natural gas, principally on the basis of
price, service, availability and portability. Electricity is a competitor of
propane, but propane generally enjoys a competitive price advantage over
electricity for space heating, water heating and cooking. Propane serves as
an alternative to natural gas in rural and suburban areas where natural gas is
unavailable or portability of product is required. Natural gas is generally a
less expensive source of energy than propane although in areas where natural
gas is available, propane is used for certain industrial and commercial
applications. The gradual expansion of the nation's natural gas distribution
systems has resulted in the availability of natural gas in some areas that
previously depended upon propane. However, natural gas pipelines are not
present in many regions of the country where propane is sold for heating and
cooling purposes.
CornerStone's profitability is affected by the competition for customers among
all participants in the retail propane business. Some of CornerStone's
competitors are larger or have greater financial resources than CornerStone.
Should a competitor attempt to increase market share by reducing prices,
CornerStone's financial condition and results of operations could be materially
adversely affected. In addition, propane competes with other sources of energy,
some of which may be less costly per equivalent energy value.
ELECTRIC AND NATURAL GAS
The electric and natural gas industries continue to undergo numerous
transformations, and the Corporation is operating in an increasingly
competitive marketplace. The Federal Energy Regulatory Commission (FERC),
which regulates interstate and wholesale electric transmissions, opened up
transmission grids and mandated that utilities must allow others equal access
to utility transmission systems. Various state regulatory bodies are
supporting initiatives to redefine the electric energy market and are
experimenting with retail wheeling, which gives some retail customers the
ability to choose their supplier of electricity. Traditionally, utilities have
been vertically integrated, providing bundled energy services to customers. The
potential for continued unbundling of customer service exists, allowing
customers to buy their own electricity and natural gas on the open market and
having it delivered by the local utility.
The growing pace of competition in the energy industry has been a primary
focus of management over the last few years. The Corporation's future
financial performance will be dependent on the effective execution of
operating strategies to address a more competitive and changing energy
marketplace. Business strategies focus on enhancing the Corporation's
competitive position, on expanding energy sales and markets with new products
and services for customers, and increasing shareholder value. The Corporation
has realigned various areas of its business to support customer services and
marketing functions. A new marketing plan, an expanded line of integrated
customer products and services, additional staff and new technologies are
part of the Corporation's strategy for providing responsive and superior
customer service. To strengthen the Corporation's competitive position, new
technologies have and will be added that enable team members to better serve
customers. The Corporation is centralizing activities to improve efficiency,
and customer responsiveness and business processes are being reengineered to
apply best-practices methodologies. Long-term supply contracts have been
renegotiated to lower customers' energy costs and new alliances help reduce
expenses and add innovative work approaches.
Weather conditions have a significant impact on electric and natural gas demand
for heating and cooling purposes. Actual weather conditions can vary
substantially from year to year, significantly affecting the Corporation's
financial performance.
As described in Note 1 to the 1998 audited annual consolidated financial
statements, the Corporation complies with the provisions of Statement of
Financial Accounting Standards No. 71 (SFAS 71), 'Accounting for the Effects
of Certain Types of Regulation'. SFAS 71 provides for the financial
reporting requirements of the Corporation's regulated electric and natural gas
operations, which requires specific accounting treatment of certain costs and
expenses that are related to the Corporation's regulated operations.
Criteria that could give rise to the discontinuance of SFAS 71 include 1)
increasing competition that restricts the Corporation's ability to establish
prices to recover specific costs and 2) a significant change in the manner in
which rates are set by regulators from cost-based regulation to another form
of regulation. The Corporation periodically reviews these criteria to
ensure the continuing application of SFAS 71 is appropriate. Based on a
current evaluation of the various factors and conditions that are expected to
impact future cost recovery, the Corporation believes that its regulatory
assets, including those related to generation, are probable of future recovery.
This evaluation of recovery must be updated for any change, which might occur
in the Corporation's c urrent regulatory environment.
HVAC
The markets served by Blue Dot. for residential and commercial heating,
ventilating, air conditioning, plumbing and other related services are highly
competitive. The principal competitive factors in these segments of the
industry are 1) timeliness, reliability and quality of services provided, 2)
range of products and services provided, 3) name recognition and market share
and 4) pricing. Many of Blue Dot's competitors in the HVAC business are small
owner-operated companies typically located and operated in a single geographic
area. There are a small number of larger national companies engaged in
providing residential and commercial services in the service lines in which
the Corporation intends to focus. Future competition in both the residential
and commercial service lines may be encountered from other newly formed or
existing public or private service companies with aggressive acquisition
programs, from the unregulated business segments of regulated gas and electric
utilities, or from newly deregulated utilities in those industries entering
into various service areas.
COMMUNICATIONS
The market served by Expanets in the communications and data services industry
is also highly competitive. The Corporation believes that 1) market acceptance
of the products, services and technology advances the Corporation provides, 2)
pending and future legislation affecting the communications and data industry,
3) name recognition and market share, 4) larger competitors and 5) the
Corporation's ability to provide integrated communication and data solutions
for customers in a dynamic industry are all factors that could affect the
Corporation's future operating results. Many of Expanet's competitors in the
communications business are generally small, owner-operated companies typically
located and operated in a single geographical area. There are a number of
large, integrated national companies engaged in providing commercial services
in the service lines in which the Corporation intends to focus and also
manufacture and sell directly the products that the Corporation services and
sells. Future competition may be encountered from other newly formed or
existing public or private service companies with aggressive acquisition
programs.
YEAR 2000 READINESS
The Corporation utilizes software and various technologies throughout its
businesses that might be impacted by the date change in the year 2000. The
year 2000 issue is a result of computer programs which were written using two
digits (rather than the actual four) to identify the year in the date field.
This old approach was intended to saving processing time and storage space
within computers and was continued in use until the mid 1990's. If not
corrected, affected systems and devices containing computer chips or clocks
could roll back to 1900 instead of moving forward to 2000. Some systems and
devices may continue to function even if this occurs. Others may experience
interruptions in service, processes or obtain erroneous results.
In an effort to recognize these critical systems or devices with potential
business consequences, the Corporation is utilizing internal and external
resources to conduct detailed assessments of critical systems and devices.
To ensure a thorough approach to the year 2000, the Corporation has assembled a
diverse oversight and advisory team from all businesses with experienced
information systems, legal, communications and operating leadership to
work on our enterprise-wide year 2000 program. This initiative covers not only
the Corporation's information technology systems and computer applications, but
also considers hardware, embedded systems and components internal and external
to our organizations. The Corporation's program considers not only our
businesses and technology areas but also those of our customers and suppliers.
The Corporation's operations are dependent upon complex computer systems for
many aspects of its businesses. These different computer information
systems include AS/400, client server and distributed systems. The
Corporation's goal is to have mission critical systems or devices that are
required to maintain operations ready for the year 2000. Year 2000 ready
means that the system or device has been deemed suitable to operate after
December 31, 1999. Many of the Corporation's mission-critical systems
have been replaced or will be replaced in advance of the year 2000.
Remediation plans include prioritizing our efforts based on when the systems
might first experience malfunctions as well as possible impact on our
customers. The Corporation is on target to remediate all critical applications
early in 1999 and then will devote the remainder of 1999 to work on final
interface issues, remediation, testing and fine-tuning critical items.
The Corporation's costs to prepare for the year 2000 were approximately $2
million during 1998 and an estimated additional $2 million will be incurred
during 1999. These costs have been expensed as incurred or capitalized in
accordance with our accounting policy for software development costs.
The Corporation's systems and operations with respectto the year 2000 issue
may also be affected by other third parties with which the Corporation
transacts business. We rely upon other companies to supply us with products
and services necessary to operate our businesses. If key third parties cannot
provide us with products and services as a result of their own year 2000
problem, it could have a material adverse effect upon our operations. The
extent of such impact would depend upon the duration of such interruption and
our costs and ability to find alternative sources of products and services. The
Corporation is currently working with third parties to determine the potential
adverse consequences, if any, that could result from such entities' failure
to effectively address the year 2000 issue. The Corporation's primary focus
has been directed at resolving the year 2000 problem. While the Corporation
expects that the majority of its systems and devices to be year 2000 ready, the
Corporation is developing a contingency plan specifying what will be done if
the Corporation or important third parties are not year 2000 ready. The
Corporation anticipates that the majority of the contingency plan will be
based on manual backup systems, procedures and practices, as well as the
identification of alternative suppliers for key products or services.
The contingency plan is expected to be completed by June 30, 1999.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q constitute 'forward-looking statements'
within the meaning of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended. When used in the this Form 10-Q,
the words 'expects', 'anticipates', 'estimates', 'believes', 'no assurance' and
similar expressions are intended to identify such forward-looking statements
that involve risks and uncertainties. Such forwardlooking statements involve
known and unknown risks, uncertainties and other factors, which may cause the
Corporation's actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed
or implied by such forward-looking statements. In addition to the risks and
uncertainties discussed in the foregoing sections, actual results or outcomes
could differ materially as a result of such important factors including, among
others, the following: the impact of competition and changes to the competitive
environment for the Corporation's products and services; changes in technology;
reliance on strategic partners; weather, regional, commercial, industrial and
residential growth in the geographic areas served by Corporation and its
partner entities; customers' usage patterns and preferences; the speed
and degree to which competition enters the Corporation's industries; the
timing and extent of changes in commodity prices; uncertainty of
litigation; changes in government regulation; changes in the capital and
equity markets; changes in market interest or currency exchange rates; new
or increased environmental liabilities; the effects of the year 2000 Issue;
other unforeseen events; and other factors detailed, from time to time, in the
Corporation's filings with the Securities and Exchange Commission. These
forward-looking statements speak only as of the date of this Form 10-Q.
NorthWestern Corporation expressly disclaims any obligation or undertakings
to release publicly any updated or revisions to any forward-looking statements
contained herein to reflect any change in the Corporation's expectations with
regard thereto or any change in events, conditions or circumstances on
which any such statement is based.
NORTHWESTERN CORPORATION
PART II
ITEM 1. LEGAL PROCEEDINGS
The Corporation is not currently involved
in any pending major litigation.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
The election of three directors to Class II
of the Board of Directors was submitted to
stockholders in the Corporation's proxy
statement. At the annual meeting of common
stockholders held on May 5, 1999, the three
nominees were elected, receiving the
following votes: Richard H. Hylland
22,200,458; Jerry W. Johnson 22,226,673;
Larry F. Ness 22,217,269. Also submitted to
the common and preferred stockholders were
two proposals. The results of the voting
were as follows:
1. To approve a Team Member Stock Purchase Plan.
19,182,020 For 2,774,368 Against 562,665 Abstain
2. To amend the NorthWestern Stock Option andIncentive Plan.
13,353,559 For 3,676,682 Against 532,071 Abstain
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
UT (SEC only) (10) MATERIAL CONTRACTS
(b) Reports on Form 8-K
None
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 thereunto duly authorized.
NORTHWESTERN CORPORATION
------------------------
(Registrant)
Date: May 14, 1999 /s/ David A. Monaghan
---------------------------------
Controller and Treasurer
1
NORTHWESTERN TEAM MEMBER
STOCK PURCHASE PLAN MAY 1999
TABLE OF CONTENTS
Page
Section 1 Establishment of the Plan & Purpose . . . . 3
Section 2 Definitions . . . . . . . . . . . 3
Section 3 Administration . . . . . . . . . . 5
Section 4 Eligibility and Participation . . . . . . 6
Section 5 Participant Contributions . . . . . . 7
Section 6 Purchase Price . . . . . . . . . 8
Section 7 Purchase & Sale of Common Stock . . . . . 9
Section 8 Number of Shares Purchased . . . . . . . 12
Section 9 Withdrawal . . . . . . . . . . 13
Section 10 Beneficiaries . . . . . . . . 15
Section 11 Rights as Shareholders . . . . . . 16
Section 12 Conditions Subsequent to Effective Date . . 17
Section 13 Limitations on Common Stock . . . . . 17
Section 14 Amendment & Termination . . . . . . 19
Section 15 Statements & Withholding . . . . . . 20
Section 16 Right to Terminate Employment . . . . . 20
Section 17 Notices . . . . . . . . . . 20
Section 18 Indemnification of Committee and the
Administrator . . . . . . . . . 21
Section 19 Applicable Law . . . . . . . . 21
Section 20 Gender . . . . . . . . . . 22
Exhibit 1 Affiliates . . . . . . . . . . . 23
Section 1. Establishment of the Plan and Purpose
- ---------------------------------------------------
NorthWestern hereby establishes the NorthWestern Team Member Stock
Purchase Plan (the `Plan') to provide Eligible Team Members who are employed
by NorthWestern or its Affiliates on a regular full-time basis the opportunity
to purchase Common Stock of NorthWestern so that they may obtain and increase
an equity interest in and share in the success of NorthWestern and its
Affiliates. The Plan is intended to promote the best interests of NorthWestern
and its Affiliates and to enhance their long-term performance. The Plan is
intended to qualify under Section 423 of the Code.
Section 2. Definitions
- -----------------------
Wherever used herein, the following words and phrases shall have the meanings
stated below unless a different meaning is plainly required by the context:
(a)`Administrator' means the person or persons
(who may be Eligible Team Members) selected
by the Committee to operate the Plan,
perform day-to-day administration of the
Plan, and maintain records of the Plan.
(b)`Affiliate' or `Affiliates' means an
affiliated entity of NorthWestern, shown on
the attached Exhibit 1 to the Plan, as may
be amended from time to time by action of
the Committee.
(c)`Board' means the Board of Directors of
NorthWestern.
(d)`Code' means the Internal Revenue Code of 1986,
as amended.
(e)`Common Stock' means shares of the common stock of
NorthWestern, $1.75 par value.
(f)`Committee' means the Nominating and Compensation
Committee appointed by the Board and composed of not
less than three members of the Board. The Committee
is comprised solely of `nonemployee directors' within the
meaning of Rule 16b-3 of the Securities Exchange Act
of 1934 and `outside directors' within the meaning of
Section 162(m) of the Code.
(g)`Compensation' means a Participant's base
salary or wages as of July 1st of each year,
before any deductions for 401(k)
contributions.
(h)`Eligible Team Member' means each person
employed by NorthWestern or an Affiliate on
a regular full-time basis for at least
thirty (30) days. A person shall be
considered employed on a regular full-time
basis if he is customarily employed at least
20 hours per week.
(i)`Enrollment Form' means the form used by an
Eligible Team Member to elect to participate
or to change the level of participation in
the Plan.
(j)`Fair Market Value of Common Stock as of the
applicable Investment Date' for shares
purchased on the open market shall mean the
price paid for such shares, and for shares
purchased from NorthWestern shall mean the
average of the closing price for Common
Stock as reported on the New York Stock
Exchange for the 10 business days ending on
the third business day preceding the date
with respect to which such Common Stock is
being valued, for which trades in Common
Stock were reported on the New York Stock
Exchange. If no trades occur on a certain
day, the closing price for the last
preceding day on which trading occurred will
be used as the closing price for that day.
Notwithstanding any provision of the Plan to
the contrary, no determination made with
respect to the Fair Market Value of Common
Stock acquired pursuant to the Plan shall be
inconsistent with Section 423 of the Code or
regulations thereunder.
(k)`Investment Date' means the business day or
days of each month in which purchases are
made under the Plan. One or more Investment
Dates per month will be established
from time to time by the Administrator.
(l)`NorthWestern' means NorthWestern
Corporation, a Delaware corporation.
(m)`Participant' means an Eligible Team Member
who has elected to participate in the Plan
through a making a lump-sum contribution or
authorizing payroll deductions pursuant to
the provisions of the Plan.
(n)`Plan' means the NorthWestern Team Member
Stock Purchase Plan as set forth herein.
Section 3. Administration
- ---------------------------
(a) The Plan shall be administered by the
Committee. Subject to the express provisions
of the Plan, the Committee may interpret the
Plan, proscribe, amend and rescind rules and
regulations relating to it, determine the
terms and provisions of the Common Stock
acquired hereunder and make all other determinations
necessary or advisable for administration of the Plan.
The determination of the Committee on all matters
regarding the Plan shall be conclusive. No member of
the Committee shall, in the absence of bad faith, be
liable for any act or omission with respect to service
on the Committee. Service on the Committee shall
constitute service as a director of NorthWestern so
that members of the Committee shall be entitled to
indemnification pursuant to NorthWestern's Certificate
of Incorporation and By-Laws. The Committee may
delegate all or any of its functions to the
Administrator.
(b) All costs and expenses incurred in
administering the Plan shall be paid by
NorthWestern. The Committee may request
advice or assistance or employ such other
persons as are necessary for proper
administration of the Plan.
(c) The proceeds received by NorthWestern from
the sale of Common Stock pursuant to the
Plan will be used for general corporate
purposes.
Section 4. Eligibility and Participation
- -------------------------------------------------------
(a) Each Eligible Team Member, on June 1, 1999, may
participate in the Plan during the remainder
of calendar year 1999. Thereafter, each
Eligible Team Member on the first day of
each subsequent month, may participate in
the Plan for the remainder of the applicable
calendar year.
(b) An Eligible Team Member may become a
Participant in the Plan on June 1, 1999, and
on the first day of any subsequent month, by
filing an Enrollment Form with the
Administrator at least 10 days prior to such
date. Participation shall occur pursuant to
either of the two following methods: (1)
receipt by the Administrator of a completed
Enrollment Form approving payroll deductions
or (2) receipt by the Administrator of a
completed Enrollment Form accompanying a
lump-sum contribution.
Section 5. Participant Contributions
- -------------------------------------
(a) In order to purchase Common Stock under the
Plan by payroll deductions, an Eligible Team
Member must complete an Enrollment Form
indicating the amount NorthWestern is to
withhold each pay period from the Eligible
Team Member's paychecks during the
applicable calendar year and directing
NorthWestern to use such amounts to purchase
shares of Common Stock. Deductions
may be authorized in even multiples of $5.00
from a minimum of $10.00 per month to a
maximum that does not exceed either the
annual aggregate amount for contributions
allowed under Section 423 of the Code
(currently $25,000) or the maximum amount
set forth in the next paragraph.
(b) In no event may the aggregate amount of such
payroll deductions and lump-sum
contributions made to the Plan by any
Participant in any calendar year exceed the
lesser of ten percent (10%) of Compensation
in such calendar year or $3,000.
(c) After an Enrollment Form has been received
by the Administrator and the authority for
the payroll deductions has been noted on
NorthWestern's payroll records, NorthWestern
or the Affiliate will withhold from a
Participant's paychecks the amount
authorized by the Participant. The
withholding will be made each pay period
from the paycheck for such period. The
amounts withheld from all Participants'
paychecks during each month, and any lump-
sum contributions made to the Plan, will be
pooled and used to buy shares of Common
Stock for the accounts of all Participants
under the Plan who have authorized payroll
deductions or have made a lumpsum
contribution on the Investment Date
immediately following the date on which such
payments are made, or deemed made, to the
Plan.
(d) The amount of a Participant's payroll
deductions can be revised, changed or
terminated by the Participant at any time by
written notice to the Administrator and
completion of a new Enrollment Form.
Commencement, revision or termination of
payroll deductions will become effective as
soon as practicable after a Participant's
new Enrollment Form is received by the
Administrator.
(e) An Eligible Team Member may also purchase
Common Stock under the Plan by making a lump-
sum payment to the Plan and completing an
Enrollment Form, not more frequently than
once each month during a calendar year in
which he is an Eligible Team Member.
(f) An Enrollment Form is effective until the
earlier to occur of (1) the date the
Participant elects to cease participation in
the Plan, (2) the date an individual ceases
to be an Eligible Team Member, or (3) the
date of the termination of the Plan.
Section 6. Purchase Price
- ---------------------------
The price of the shares of Common Stock purchased
with a Participant's payroll deductions and/or lump-sum
contributions will be a percentage as determined, in
good faith by the Committee, that is at least 85% of
the Fair Market Value per share of Common Stock on each
applicable Investment Date. The current purchase price
shall be 85% of the Fair Market Value per share of
Common Stock on each applicable Investment Date,
subject to adjustment from time to time by the
Committee in its sole discretion.
Section 7. Purchase and Sale of Common Stock
- ----------------------------------------------
(a) Common Stock shall be acquired by
NorthWestern, as agent for the Participants,
either through open market purchases by an
independent administrator selected by the
Committee or through the issuance of newly
authorized and unissued shares of Common
Stock or Common Stock held in the treasury
of NorthWestern.
Participants shall incur no brokerage
commissions or service charges for the
purchase of Common Stock under
the Plan. If the Plan acquires shares of
Common Stock by open market purchase,
NorthWestern shall pay for the amount of the
discount between the amount paid for the
Common Stock on the open market and the
amount paid by the Participant.
(b) A certificate representing the shares of
Common Stock purchased pursuant to the Plan
by a Participant shall be issued in the name
of the Participant (or his beneficiary or
legal representative in the event of death),
and shall be delivered to the Participant
(or to his beneficiary or legal
representative in the event of death) upon
the first to occur of (1) the receipt of a
written request executed by the Participant
and delivered to the Administrator, (2) the
date of his death, retirement on or after
age 62, or disability and (3) the date of
his withdrawal from the Plan pursuant to
Section 9 of the Plan. Notwithstanding the
preceding sentence, before a certificate
representing Common Stock purchased pursuant
to the Plan within the two year period
provided in subsection (c) of this Section 7
shall be delivered to a Participant prior to
retirement on or after age 62, death or
disability, a number of shares of Common
Stock with a current Fair Market Value equal
to the applicable discount used to determine
the purchase price will be deducted from the
number of shares represented by such
certificate.(c) During the period following the
date of purchase of Common Stock pursuant to the
Plan, and prior to the occurrence of any of
the delivery events provided in subsection (b) the
certificate representing such shares of Common
Stock shall be held by NorthWestern as custodian,
and during such period shall bear a legend disclosing
the restrictions of this subsection. (c) If a Participant
terminates employment with NorthWestern and all Affiliates
(except as set forth in the next following sentence),
withdraws shares of Common Stock from the Plan pursuant to
Section 9, or directs the sale or other transfer of
Common Stock pursuant to subsection (d) of this Section 7,
within two years following the date of purchase of such
Common Stock, a number of shares of Common Stock with a
current Fair Market Value equal to the applicable discount
used to determine the purchase price of such shares of Common
Stock will be deducted from the number of shares
represented by the certificate to be issued to Participant.
No relinquishment of shares is required in the event of the
Participant's death, retirement (on or after age 62),
disability (as determined by the Committee), or upon the
dissolution or liquidation of NorthWestern, or upon a merger
or consolidation of NorthWestern in which NorthWestern is not
the surviving corporation.
(d) A Participant may at any time sell all or a
specified number of shares of Common Stock held in his
account under the Plan that are not subject to the
restrictions set forth in subsection (c) of this
Section. To sell shares, a Participant may (i) request
a certificate pursuant to Section 7(b) for the
specified number of shares and sell such shares through
his own broker or (ii) request the Administrator to
sell the shares on his behalf; provided, however, that
the Administrator reserves the right to refuse a
Participant's request to sell 200 or more shares
through the Plan at any time. To sell shares through
the Plan, a Participant must notify the Administrator
in writing of his request to sell a specified number of
shares. The Administrator shall sell the specified
number of shares through an independent broker engaged
by the Committee for that purpose following its receipt
of the Participant's written request. The proceeds
from the sale, less any brokerage commissions and any
transfer taxes, will be remitted to the applicable Participant
as soon as reasonably practicable after his sale request is
received by the Administrator and such sale is
consummated. Sale requests may be accumulated and
sales transactions, if necessary, will occur at least
once during each calendar month. Shares sold through
the Plan shall be sold (i) on the New York Stock
Exchange at the price prevailing in the market at the
time of the sale; or (ii) upon election of the
Committee, to NorthWestern for the Plan. In the event
that the shares are purchased by the Plan, the price
for the shares shall be the price prevailing in the
market for the shares on the date of sale.
Section 8. Number of Shares Purchased
- --------------------------------------
(a) On each Investment Date, accumulated payroll
deductions and lump-sum contributions from
all Participants will be pooled and used to
purchase shares of Common Stock for the
accounts of Participants. The maximum
number of whole shares shall be purchased
with such deductions and contributions.
(b) NorthWestern shall then contribute to the
Plan an amount sufficient to supplement the
total of (1) any payroll deductions and lump-
sum contributions remaining after purchase
of such maximum number of whole shares in
accordance with the preceding sentence, less
(2) the value of any fractional shares
remaining in the suspense account described
below from the prior Investment Date, so
that an additional whole share of Common
Stock can be purchased on such Investment
Date.
(c) Each Participant's account shall be credited
with his pro rata share (computed to four
decimal places) of the shares of Common
Stock purchased on such Investment Date.
(d) The number of shares credited to each Participant's account
will depend on the amount of the Participant's payroll
deductions and lump-sum contributions and the purchase
price of the shares determined as provided under
Section 7. Any fractional share remaining after the
purchase of Common Stock for Participants shall be
held in a suspense account for the benefit of
NorthWestern and used to offset the number of shares of
Common Stock needed to fill purchases for Participants
on the next Investment Date.
Section 9. Withdrawal
- -----------------------
(a) A Participant may withdraw from the Plan at any time.
To withdraw from the Plan, a Participant
must notify the Administrator in writing of
his withdrawal. In the event a Participant
withdraws shares of Common Stock from the
Plan within two years from the date of
purchase of such Common Stock, the
Participant must repay the applicable
discount from the Fair Market Value of the
Common Stock as of the applicable Investment
Date on which such shares were purchased as
provided in subsection (c) of Section 7.
(b) In the event of (i) the termination of the
Plan or (ii) the withdrawal of shares of
Common Stock from the Plan more than two
years from the date of purchase, or
following the repayment of the applicable
discount by a Participant withdrawing as
provided above, within a reasonable time
following the withdrawal or the termination
of the Plan, certificates for whole shares
of Common Stock credited to the account of
the withdrawing Participant, or all
Participants in the case of a termination of
the Plan, will be delivered by NorthWestern
and a cash payment will be made for the sale
price (less brokerage commission and transfer
taxes, if any) of any fractional share
interest and any additional payroll
deductions or lump-sum contributions
credited to the account of the withdrawing
Participant, or all Participants in the case
of a termination of the Plan. NorthWestern
may establish such equitable arrangements
for the sale of fractional share interests
as it shall deem appropriate.
(c) As an alternative to receiving certificates
for whole shares, a Participant may request
NorthWestern to sell all of the shares held
in his account under the Plan as provided in
Section 7(d). Shares sold through the Plan
shall be sold (i) on the New York Stock
Exchange at the price prevailing in the
market at the time of the sale; or (ii) upon
election of the Committee, to the Committee
as agent for the Plan. In the event that
the shares are purchased by the Plan, the
price for the shares shall be the price
prevailing in the market for the shares on
the date of sale.
(d) The proceeds from the sale, less any brokerage
commissions and any transfer taxes, will be
remitted to the applicable Participant as
soon as reasonably practicable after his
withdrawal request is received. Sale
requests may be accumulated and sales
transactions, if necessary, will occur at
least once during each calendar month.
(e) If a request to withdraw is received by the
Administrator at least five business days
prior to any Investment Date, the amount of
the Participant's payroll deductions and/or
lump-sum contributions which would otherwise
have been invested on such Investment Date
will be repaid to him as soon as
practicable. If a request to withdraw is
received by the Administrator within five
business days prior to any Investment Date,
the amount of the payroll deductions and
lump-sum contributions scheduled to be
invested on such Investment Date will be so
invested. In either event, no subsequent
payroll deductions will be made from the
paychecks of the Participant, and no lump
sum contributions will be accepted from the
Participant, unless he completes a new
Enrollment Form providing for such
deductions or contributions.
(f) Each July, shares of Common Stock purchased
for a Participant under the Plan which have
met the two-year holding requirements of
subsection (a) of this Section will
automatically be transferred to an account
maintained for such Participant under the
NorthWestern Corporation Dividend
Reinvestment and Direct Stock Purchase Plan
(DRIP) and will be subject to all of the
terms and provisions thereof.
Notwithstanding the preceding sentence,
however, a Participant, by written notice
delivered to the Plan Administrator at least
10 days prior to the first business day in
July, may elect to have a certificate issued
for such shares. A Participant who does not
have an account in the DRIP, as of any
investment date, will have a certificate
issued to him for such shares which then
meet this 2 year holding period.
Section 10. Beneficiaries
- -----------------------------
(a) In the event of the death of a Participant prior to
receipt of all payments and distributions to
be made to him under the Plan, payments and
distributions shall be made to his
beneficiary last designated by written
instrument delivered to the Administrator.
(b) If the Participant has not designated a beneficiary or
if the designated beneficiary is not living
at such time, then such payments and
distributions shall be made to the
Participant's spouse, or if none, to his
lawful descendants, per stirpes (by
representation), or if none, to the legally
appointed representative of his estate.
Section 11. Rights as Shareholders
- ------------------------------------
(a) Except to the extent limited by the
repayment requirement set forth in
subsections 7(b) and (c), a Participant
shall have all rights as a shareholder with
respect to shares of Common Stock held for
his account under the Plan.
(b) Each Participant will have the authority to
direct NorthWestern in the manner of voting
the number of shares held in his account.
The shares of Common Stock in the suspense
account created pursuant to Section 8 shall
be voted by NorthWestern in its sole
discretion.
(c) A Participant shall have the right, by
written notice delivered to the
Administrator within 15 days prior to the
payment of any cash dividend on shares of
Common Stock purchased for him pursuant to
the Plan, whether or not a certificate for
such shares has been delivered to the
Participant, to elect to receive such cash
dividends, or to use such cash dividends to
purchase additional shares of Common Stock
for his account pursuant to the Plan on the
next succeeding Investment Date, provided
that the shares will be purchased at Fair
Market Value as of such Investment Date
without a discount. Shares of Common Stock
purchased with dividends shall not be
considered for purposes of the limitation
set forth in paragraph (b) of Section 5. If
such notice is not delivered to the
Administrator on a timely basis, then such
dividends shall be reinvested in additional
shares.
(d) Any shares distributed by NorthWestern as a
stock dividend on shares of Common Stock
credited to a Participant's account under
the Plan, or upon any split of such shares,
will be credited to his account. In a
rights offering, NorthWestern will sell the
rights to which a Participant is entitled by
virtue of the shares of Common Stock
allocated to his account under the Plan and
the proceeds will be credited to his account
and applied to the purchase of shares on the
next Investment Date.
(e) The aggregate number of shares of Common
Stock held by NorthWestern under the Plan on
behalf of Participants may be appropriately
adjusted as the Committee may determine for
any increase or decrease in the number of
shares of issued Common Stock resulting from
a subdivision or consolidation of shares,
whether through reorganization,
recapitalization, stock split-up, stock
distribution or combination of shares, or
the payment of a share dividend or other
increase or decrease in the number of such
shares outstanding effected without receipt
of consideration by NorthWestern.
Adjustments under this section shall be made
according to the sole discretion of the
Committee, and its decision shall be binding
and conclusive.
Section 12. Conditions Subsequent to Effective Date
- ---------------------------------------------------
The Plan is subject to the approval of the Plan by
the holders of a majority of the outstanding shares of
Common Stock of NorthWestern within 12 months before or
after the date of adoption of the Plan by the Board.
The Plan shall be null and void and of no effect if the
foregoing condition is not fulfilled.
Section 13. Limitations on Common Stock
- -----------------------------------------
Notwithstanding any other provisions of the Plan:
(a) NorthWestern intends that Common Stock
acquired under the Plan shall be treated for
all purposes as issued under an employee
stock purchase plan within the meaning of
Section 423 of the Code and regulations
issued thereunder. Any provisions required
to be included in the Plan under said
Section and regulations issued thereunder
are hereby included as fully as though set
forth in the Plan at length.
(b) All Eligible Team Members shall have the
same rights and privileges under the Plan,
except that the amount of Common Stock which
may be purchased on any Investment Date,
pursuant to Section 7, shall bear a uniform
relationship to the Compensation of Eligible
Team Members. All rules and determinations
of the Committee and the Administrator in
the administration of the Plan shall be
uniformly and consistently applied to all
persons in similar circumstances, and the
annual rate of Compensation of an Eligible
Team Member shall be determined by the
Committee in a nondiscriminatory manner.
(c) No interest shall be paid with respect to
any amounts deducted from the Compensation
of a Participant, or lump sum contributions
made, pursuant to the Plan.
(d) The obligations of NorthWestern to sell and deliver
Common Stock under the Plan shall be subject
to all applicable laws, regulations, rules
and approvals, including, but not by way of
limitation, the effectiveness of a
registration statement under the Securities
Act of 1933 if deemed necessary or
appropriate by NorthWestern. Certificates
for shares of Common Stock issued hereunder
may be legended as the Committee shall deem
appropriate.
(e) The rights or interests of a Participant in
the Plan, or in any Common Stock or moneys
to which he may be entitled under the Plan,
shall not be transferable by voluntary or
involuntary assignment or by operation of
law, or by any other manner other than as
permitted by the Code or by will or the laws
of descent and distribution. If a
Participant in any manner attempts to
transfer, assign or otherwise encumber his
rights or interest under the Plan, other
than as permitted by the Code or by will or
the laws of descent or distribution, such
act shall be treated as an automatic
withdrawal under Section 9.
Section 14. Amendment and Termination
- ---------------------------------------
(a) NorthWestern reserves the right to suspend,
modify or terminate the Plan at any time.
(b) Any such suspension, modification or
termination shall not affect a Participant's
right to shares of Common Stock already
purchased for him (except that NorthWestern
may take any action necessary to comply with
applicable law).
(c) Upon the termination of the Plan,
NorthWestern shall return to Participants
any accumulated payroll deductions and lump-
sum contributions that have not been used to
purchase Common Stock as soon as
practicable. Any Common Stock held in the
suspense account created pursuant to Section
8 shall be distributed to NorthWestern.
Section 15. Statements and Witholding
- ---------------------------------------
(a) Each Participant will receive a statement of
his Account for each month in which a
purchase of Common Stock for his account
takes place.
(b) Participants will also receive
communications sent to other stockholders,
including the Annual Report of NorthWestern,
and its Notice of Annual Meeting and Proxy
Statement.
(c) Participants will receive information
necessary for reporting income, if any,
realized by them under the Plan to the
Internal Revenue Service.
(d) All taxes subject to withholding payable
with respect to the amount of each
Participant's payroll deductions under the
Plan will be deducted from the Participant's
Compensation and will not reduce the amounts
to be paid to NorthWestern.
Section 16. Right To Terminate Employment
- ---------------------------------------------
Nothing in the Plan or any agreement entered into
pursuant to the Plan shall confer upon any Eligible
Team Member the right to continue in the employment of
NorthWestern or any Affiliate or affect any right which
NorthWestern or any Affiliate may have to terminate the
employment of such Eligible Team Member.
Section 17. Notices
- ---------------------
Every Enrollment Form, direction, revocation or
notice authorized or required by the Plan shall be
deemed delivered to the Administrator (1) on the date
it is personally delivered to the Administrator at the
principal executive offices of NorthWestern, or (2)
three business days after it is sent by registered or
certified mail, postage prepaid, addressed to the
Administrator at such offices; and shall be deemed
delivered to a Participant (1) on the date it is
personally delivered to him, or (2) three business days
after it is sent by registered or certified mail,
postage prepaid, addressed to him at the last address
shown for him on the records of NorthWestern or of any
Subsidiary.
Section 18. Indemnification of the Committee and the Administrator
- -------------------------------------------------------------------
In addition to such other rights of indemnification as they
may have as members of the Board, or as members of the
Committee, or as its delegatees, the members of the
Committee and the Administrator shall be indemnified by
NorthWestern against (a) the reasonable expenses (as
such expenses are incurred), including attorneys' fees
actually and necessarily incurred in connection with
the defense of any action, suit or proceeding (or in
connection with any appeal therein), to which they or
any of them may be a party by reason of any action
taken or failure to act under or in connection with the
Plan, and (b) against all amounts paid by them in
settlement thereof (provided such settlement is
approved by independent legal counsel selected by
NorthWestern) or paid by them in satisfaction of a
judgment in such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Committee
member or Administrator is liable for gross negligence
or misconduct in the performance of his duties;
provided that within 60 days after institution of such
action, suit or proceeding a Committee member or
Administrator shall in writing offer NorthWestern the
opportunity, at its own expense, to handle and defend
the same.
Section 19. Applicable Law
- ---------------------------
All questions pertaining to the validity, construction and
administration of the Plan and Common Stock acquired
hereunder shall be determined in conformity with the
laws of South Dakota, to the extent not inconsistent
with Section 423 of the Code and regulations thereunder.
Section 20. Gender
- --------------------
Except when otherwise required by the context,
any masculine terminology in this document shall
include the feminine, and any singular terminology
shall include the plural.
IN WITNESS WHEREOF, NorthWestern has caused the
Plan to be executed on its behalf by its duly
authorized officer on May 5, 1999, effective as of
that date.
NORTHWESTERN
CORPORATION
By: /s/ M.D. Lewis
-----------------------
Its: Chairman & Chief Executive
Officer
Attest:
/s/ A.D. Dietrich
- ------------------------
Corporate Secretary
Exhibit 1
Affiliates
Blue Dot Services Inc.
CornerStone Propane
Partners, LLP
Expanets, Inc.
NorCom Advanced Technologies, Inc.
NorthWestern Energy Corporation
NorthWestern Growth Corporation
NorthWestern Services Corporation
/TEXT>
NORTHWESTERN
STOCK OPTION AND INCENTIVE PLAN
(As Amended and Restated by the Board of Directors on May 4, 1999)
Introduction
NorthWestern Corporation (`NorthWestern'), formerly
Northwestern Public Service Company, established the Northwestern
Public Service Company Stock Option and Incentive Plan effective
May 6, 1998. The Plan, now known as the NorthWestern Stock
Option and Incentive Plan (the `Plan') set forth below is an
amendment and restatement of the Plan.
Section 1. Purpose.
The purpose of the Plan is to benefit NorthWestern
Corporation and its Affiliates (as defined in Section 2) by
recognizing the contributions made to NorthWestern by officers
and other key Team Members (including Directors of NorthWestern
who are also Team Members) of NorthWestern and its Affiliates, to
provide such persons with additional incentive to devote
themselves to the future success of NorthWestern, and to improve
the ability of NorthWestern to attract, retain and motivate
individuals, by providing such persons with a favorable
opportunity to acquire or increase their proprietary interest in
NorthWestern over a period of years through receipt of options
and other awards relating to the common stock of NorthWestern.
In addition, the Plan is intended as an additional incentive to
members of the Board of Directors of NorthWestern (`Board') who
are not Team Members of NorthWestern (`Non-Employee Directors')
to serve on the Board and to devote themselves to the future
success of NorthWestern by providing them with a favorable
opportunity to acquire or increase their proprietary interest in
NorthWestern through receipt of options to acquire common stock
of NorthWestern.
NorthWestern may grant stock options that constitute
`incentive stock options' (`ISOs') within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the
`Code'), stock options that do not constitute ISOs (`NSOs') (ISOs
and NSOs being hereinafter collectively referred to as
`Options'), Restricted Stock Awards, Stock Appreciation Rights
(`SARs'), Limited Stock Appreciation Rights and Phantom Stock
Units (Options and other types of specified grants being
hereinafter collectively referred to as `Awards').
Section 2. Eligibility.
Non-Employee Directors shall participate in the Plan only in
accordance with the provisions of Sections 5 and 9 of the Plan.
The Committee (as defined in Section 3) shall initially, and from
time to time thereafter, select those officers and other key Team
Members (including Directors of NorthWestern who are also Team
Members) (collectively referred to herein as `Key Team Members')
of NorthWestern or any affiliated entity of NorthWestern, as
shown on the attached Exhibit 1 to the Plan, as it may be amended
from time to time by action of the Committee (`Affiliate'), to
participate in the Plan on the basis of the special importance of
their services in the management, development and operations of
NorthWestern or its Affiliates (each such Director and Key Team
Member receiving Awards granted under the Plan is referred to
herein as a `Participant'); provided, however, that the Committee
may delegate, in writing and subject to terms and conditions
which it deems appropriate, to the Chief Executive Officer of
NorthWestern the ability to make Awards to Key Team Members who
are not officers of NorthWestern or its Affiliates.
Section 3. Administration.
3.1 The Committee. The Plan shall be administered by the
Nominating and Compensation Committee of the Board (the
`Committee'). The Committee is comprised solely of `nonemployee
directors' within the meaning of Rule 16b-3 of the Securities
Exchange Act of 1934 (`Exchange Act') and `outside directors'
within the meaning of Section 162(m) of the Code.
3.2 Authority of the Committee. Except as provided in
Section 2, no person, other than members of the Committee, shall
have any authority concerning decisions regarding the Plan.
Subject to the express provisions of the Plan, including but not
limited to Sections 5 and 9, the Committee (or the Chief
Executive Officer, to the extent the Committee delegates
authority to him pursuant to Section 2) shall have sole
discretion concerning all matters relating to the Plan and Awards
granted hereunder. The Committee (or the Chief Executive
Officer, to the extent the Committee delegates authority to him
pursuant to Section 2) in its sole discretion, shall determine
the Key Team Members of NorthWestern and its Affiliates to whom,
and the time or times at which, Awards will be granted, the type
of Award to be granted, the number of shares to be subject to
each Award, the expiration date of each Award, the time or times
within which the Award may be exercised, the cancellation of the
Award (with the consent of the holder thereof), and the other
terms and conditions of the grant of the Award. The terms and
conditions of the Awards need not be the same with respect to
each Participant or with respect to each Award.
The Committee may, subject to the provisions of the Plan,
establish such rules and regulations as it deems necessary or
advisable for the proper administration of the Plan, and may make
determinations and may take such other action in connection with
or in relation to the Plan as it deems necessary or advisable.
Each determination or other action made or taken pursuant to the
Plan, including interpretation of the Plan and the specific terms
and conditions of the Awards granted hereunder by the Committee
(or the Chief Executive Officer, to the extent the Committee
delegates authority to him pursuant to Section 2) shall be final
and conclusive for all purposes and upon all persons including,
but without limitation, NorthWestern, its Affiliates, the
Committee, the Board, officers and the affected Team Members of
NorthWestern and/or its Affiliates and their respective
successors in interest.
No member of the Committee shall, in the absence of bad
faith, be liable for any act or omission with respect to service
on the Committee. Service on the Committee shall constitute
service as a Director of NorthWestern so that members of the
Committee shall be entitled to indemnification pursuant to
NorthWestern's Certificate of Incorporation and By-Laws.
Section 4. Shares of Common Stock Subject to Plan.
4.1 The total number of shares of common stock, par value
$1.75 per share, of NorthWestern (the `Common Stock'), that may
be issued and sold under the Plan initially shall be 2,750,000.
The total number of shares of Common Stock that may be available
for ISOs under the Plan shall be 2,750,000 and the total number
of shares of Common Stock and units subject to Restricted Stock
Awards and Phantom Stock Unit Awards shall be 2,750,000. The
total number of shares of Common Stock that may be available for
Awards (other than ISOs) under the Plan shall be adjusted on
January 1 of each calendar year, within the Applicable Period (as
defined below), so that the total number of shares of Common
Stock that may be issued and sold under the Plan for Awards
(other than ISOs) as of January 1 of each calendar year within
the Applicable Period shall be equal to, on an aggregate basis
from the inception of the Plan, twelve and one-half percent
(12.5%) of the outstanding shares of Common Stock of NorthWestern
on such date; provided, however, that no such adjustment shall
reduce the total number of shares of Common Stock that may be
issued and sold under the Plan below 2,750,000. For purposes of
the preceding sentence, Applicable Period shall be the ten-year
period commencing on May 6, 1998 and ending May 5, 2008. The
aforementioned total number of shares of Common Stock shall be
adjusted in accordance with the provisions of Section 4.2 hereof.
Any shares of Common Stock subject to issuance upon exercise of
Awards but which are not issued because of a surrender (other
than pursuant to Sections 7.2 or 16 of the Plan), forfeiture,
expiration, termination or cancellation of any such Award, shall
once again be available for issuance pursuant to subsequent
Awards. If either the purchase price of the shares of Common
Stock upon exercise of any Award or the tax withholding
requirement is satisfied by tendering or withholding of shares of
Common Stock or by tendering exercisable Awards, only the number
of shares of Common Stock issued net of the shares of Common
Stock tendered or withheld shall be deemed delivered for purposes
of determining the number of shares of Common Stock available for
Awards under the Plan.
4.2 The number of shares of Common Stock and Phantom Stock
Units subject to the Plan and to Awards granted under the Plan,
the exercise price with respect to Options, Tandem SARs and
Tandem Limited SARs, and the base price with respect to Nontandem
SARs and Nontandem Limited SARS shall be adjusted as follows:
(a) in the event that the number of outstanding shares of Common
Stock is changed by any stock dividend, stock split or
combination of shares, the number of shares subject to the Plan
and to Awards previously granted thereunder shall be
proportionately adjusted; (b) in the event of any merger,
consolidation or reorganization of NorthWestern with any other
corporation or corporations, there shall be substituted on an
equitable basis as determined by the Board, in its sole
discretion, for each share of Common Stock then subject to the
Plan and for each share of Common Stock then subject to an Award
granted under the Plan, the number and kind of shares of stock,
other securities, cash or other property to which the holders of
Common Stock of NorthWestern are entitled pursuant to the
transaction; and (c) in the event of any other change in the
capitalization of NorthWestern, the Committee, in its sole
discretion, shall provide for an equitable adjustment in the
number of shares of Common Stock then subject to the Plan and to
each share of Common Stock then subject to an Award granted under
the Plan. In the event of any such adjustment, the exercise
price per share shall be proportionately adjusted. Adjustments
to this Section 4.2 shall be made by the Committee whose decision
as to the amount and timing of any such adjustment shall be
conclusive and binding on all persons.
4.3 Subject to Section 4.2, the maximum number of Options
and SARs granted to any Key Team Member shall be 500,000 Options
and SARs with respect to Common Stock per year. The maximum
number of shares of Common Stock subject to Restricted Stock
Awards granted to any Key Team Member shall be 500,000 shares of
Common Stock per year, and the maximum number of Phantom Stock
Units granted to any Team Member shall be 500,000 Units per year.
Section 5. Grant of Options to Non-Employee Directors.
5.1 Grants. Each individual who is a Non-Employee Director
on the effective date of the Plan was granted automatically a NSO
to purchase 1200 shares of Common Stock on May 6, 1998, the
effective date of the Plan. Non-Employee Directors shall also be
eligible to receive discretionary grants of NSOs as determined by
the Committee from time to time.
5.2 Exercise Price and Period. The per share exercise
price of each NSO granted to a Non-Employee Director shall be the
`Fair Market Value,' on the date on which the NSO is granted, of
the Common Stock subject to the NSO. For purposes of the Plan,
`Fair Market Value' shall mean the average of the closing price
for Common Stock as reported on the New York Stock Exchange for
the 10 business days ending on the third business day preceding
the date with respect to which such Common Stock is being valued,
for which trades in Common Stock were reported on the New York
Stock Exchange. If no trades occur on a certain day, the closing
price for the last preceding day on which trading occurred will
be used as the closing price for that day. Notwithstanding any
provision of the Plan to the contrary, no determination made with
respect to the Fair Market Value of Common Stock subject to an
ISO shall be inconsistent with Section 422 of the Code or
regulations issued thereunder.
In addition to the terms and conditions set forth in this
Section 5, NSOs also shall be subject to such terms and
conditions applicable to Options according to Sections 6.2, 6.3,
6.4, 6.5 and 7, provided, however, such additional terms and
conditions are not inconsistent with the terms and conditions set
forth in this Section 5.
Section 6. Grants of Options to Employees.
6.1 Grant. Subject to the terms of the Plan, the Committee
(or the Chief Executive Officer, to the extent the Committee
delegates authority to him pursuant to Section 2) may from time
to time grant Options, which may be ISOs or NSOs, to Key Team
Members of NorthWestern or any of its Affiliates. Unless
otherwise expressly provided at the time of the grant, Options
granted under the Plan to Key Team Members will be ISOs.
6.2 Option Agreement. Each Option shall be evidenced by a
written Option Agreement specifying the type of Option granted,
the exercise price, the terms for payment of the exercise price,
the expiration date of the Option, the number of shares of Common
Stock to be subject to each Option, the time frame in which an
Option shall become vested and exercisable, the circumstances
under which an Option which has not become vested and exercisable
can be forfeited, the circumstances under which an Option which
has not become vested and exercisable can become immediately
vested and exercisable, the effect on any outstanding Options of
a Key Team Member's termination of employment with NorthWestern
and all Affiliates, and such other terms and conditions
established by the Committee, in its sole discretion, not
inconsistent with the Plan.
6.3 Expiration. Except to the extent otherwise provided in
an Option Agreement, each Option shall expire, and all rights to
purchase shares of Common Stock shall expire, on the tenth
anniversary of the date on which the Option was granted.
6.4 Required Terms and Conditions of ISOs. Each ISO
granted to a Key Team Member shall be in such form and subject to
such restrictions and other terms and conditions as the Committee
(or the Chief Executive Officer, to the extent the Committee
delegates authority to him pursuant to Section 2) may determine,
in its sole discretion, at the time of grant, subject to the
general provisions of the Plan, the applicable Option Agreement,
and the following specific rules:
(a) Except as provided in Section 6.4(d), the per
share exercise price of each ISO shall be the Fair
Market Value of the shares of Common Stock on the date
such ISO is granted.
(b) The aggregate Fair Market Value (determined
with respect to each ISO at the time such Option is
granted) of the shares of Common Stock with respect to
which ISOs are exercisable for the first time by an
individual during any calendar year (under all
incentive stock option plans of NorthWestern and its
parent and subsidiary corporations) shall not exceed
$100,000. If the aggregate Fair Market Value
(determined at the time of grant) of the Common Stock
subject to an Option, which first becomes exercisable
in any calendar year exceeds the limitation of this
Section 6.4(b), so much of the Option that does not
exceed the applicable dollar limit shall be an ISO and
the remainder shall be a NSO; but in all other
respects, the original Option Agreement shall remain in
full force and effect.
(c) As used in this Section 6, the words `parent'
and `subsidiary' shall have the meanings given to them
in Section 424(e) and 424(f) of the Code.
(d) Notwithstanding anything herein to the
contrary, if an ISO is granted to an individual who
owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock
of NorthWestern or of its parent or subsidiary
corporations, within the meaning of Section 422(b)(6)
of the Code, (i) the exercise price of each share of
Common Stock subject to the ISO shall be not less than
one hundred ten percent (110%) of the Fair Market Value
of the Common Stock on the date the ISO is granted, and
(ii) the ISO shall expire and all rights to purchase
shares thereunder shall cease no later than the fifth
anniversary of the date the ISO was granted.
(e) No ISOs may be granted under the Plan after
May 5, 2008.
6.5 Required Terms and Conditions of NSOs. Each NSO
granted to a Key Team Member shall be in such form and subject to
such restrictions and other terms and conditions as the Committee
(or the Chief Executive Officer, to the extent the Committee
delegates authority to him pursuant to Section 2) may determine,
in its sole discretion, at the time of grant, subject to the
general provisions of the Plan and the applicable Option
Agreement; provided, however, that the per share exercise price
of each NSO shall be the Fair Market Value of the shares of
Common Stock on the date such NSO is granted.
Section 7. Exercise of Options.
7.1 Notice. A person entitled to exercise an Option may do
so by delivery of a written notice to that effect specifying the
number of shares of Common Stock with respect to which the Option
is being exercised and any other information the Committee may
prescribe. The notice shall be accompanied by payment as
described in Section 7.2. The notice of exercise shall be
accompanied by the Optionee's copy of the writing or writings
evidencing the grant of the Option. All notices or requests
provided for herein shall be delivered to the Corporate Secretary
of NorthWestern.
7.2 Exercise Price. Except as otherwise provided in the
Plan or in any Option Agreement, the Participant shall pay the
exercise price of the shares of Common Stock upon exercise of any
Option: (a) in cash; (b) in cash received from a broker-dealer
to whom the Participant has submitted an exercise notice
consisting of a fully endorsed Option (however, in the case of an
Participant subject to Section 16 of the 1934 Act, this payment
option shall only be available to the extent such person complies
with Regulation T issued by the Federal Reserve Board); (c) by
delivering (either actual delivery or by attestation procedures
established by NorthWestern) previously owned shares of Common
Stock (which the Participant has held for at least six months
prior to the delivery of such shares or which the Participant
purchased on the open market and in each case for which the
Participant has good title, free and clear of all liens and
encumbrances) having an aggregate Fair Market Value on the date
of exercise equal to the exercise price; (d) by directing
NorthWestern to withhold such number of shares of Common Stock
otherwise issuable upon exercise of such Option having an
aggregate Fair Market Value on the date of exercise equal to the
exercise price; (e) by agreeing to surrender Options then
exercisable valued at the excess of the aggregate Fair Market
Value of the shares of Common Stock subject to such Options on
the date of exercise over the aggregate exercise price of such
shares; (f) by such other medium of payment as the Committee, in
its discretion, shall authorize at the time of grant; or (g) by
any combination of (a), (b), (c), (d) (e) and (f). In the case
of an election pursuant to (a) or (b) above, cash shall mean cash
or a check issued by a federally insured bank or savings and
loan, and made payable to NorthWestern. NorthWestern shall
issue, in the name of the Participant, stock certificates
representing the total number of shares of Common Stock issuable
pursuant to the exercise of any Option as soon as reasonably
practicable after such exercise, provided that any shares of
Common Stock purchased by an Participant through a broker-dealer
pursuant to clause (b) above shall be delivered to such
broker-dealer in accordance with 12 C.F.R. 220.3(e)(4) or other
applicable provision of law.
Section 8. Stock Appreciation Rights.
If deemed by the Committee (or the Chief Executive Officer,
to the extent the Committee delegates authority to him pursuant
to Section 2) to be in the best interests of NorthWestern, a Key
Team Member who receives an Option may also be granted an SAR.
Each SAR shall be granted subject to such restrictions and
conditions and other terms as the Committee may specify in the
Option Agreement at the time the Option is granted, or as the
Committee may determine at the time of grant, subject to the
general provisions of the Plan, and the following specific rules:
8.1 Grant of SARs. SARs will be granted, if at all, at the
time of granting of an Option and may be granted either in
addition to the related Option (`Nontandem SAR') or in tandem
with the related Option (`Tandem SAR'). At the time of grant of
a Nontandem SAR, the Committee shall specify the base price of
Common Stock to be used in connection with the calculation
described in Section 8.3(a) below. The base price of a Nontandem
SAR shall be 100% of the Fair Market Value of a share of Common
Stock on the date of grant. The number of shares of Common Stock
subject to a Tandem SAR shall be one for each share of Common
Stock subject to the Option. The number of shares of Common
Stock subject to a Nontandem SAR shall be one for each share of
Common Stock subject to the Option. No Tandem SAR may be granted
to a Key Team Member in connection with an ISO in a manner that
will disqualify the ISO under Section 422 of the Code unless the
Key Team Member consents thereto.
8.2 Grant of Limited SARs. (a) A `Limited SAR' is an SAR
that becomes exercisable only following the occurrence of any of
the events provided in paragraph (b) next below. Limited SARs
will be granted, if at all, at the time of granting of an Option
and may be granted either in addition to the related Option
(`Nontandem Limited SAR') or in tandem with the related Option
(`Tandem Limited SAR'). At the time of grant of a Nontandem
Limited SAR, the Committee shall specify the base price of Common
Stock to be used in connection with the calculation described in
Section 8.3(a) below. The base price of a Nontandem Limited SAR
shall be 100% of the Fair Market Value of a share of Common Stock
on the date of grant. The number of shares of Common Stock
subject to a Tandem Limited SAR shall be one for each share of
Common Stock subject to the Option. The number of shares of
Common Stock subject to a Nontandem Limited SAR shall be one for
each share of Common Stock subject to the Option. No Tandem
Limited SAR may be granted to a Key Team Member in connection
with an ISO in a manner that will disqualify the ISO under
Section 422 of the Code unless the Key Team Member consents
thereto.
(b) Change in Control. The events required for
purposes of Section 8.2 include the following:
(i) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of
NorthWestern (not including in the securities
beneficially owned by such Person any securities
acquired directly from NorthWestern or any Subsidiary
or Affiliate) representing 20% or more of the combined
voting power of NorthWestern's then outstanding Common
Stock;
(ii) during any period of not more than two
consecutive years (not including any period prior to
the effective date of the Plan), individuals who at the
beginning of such period constitute the Board and any
new director (other than a director whose original
assumption of office is in connection with an actual or
threatened election of directors, as such terms are
used in Rule 14(a)-11 of Regulation 14A under the
Exchange Act) whose election by the Board or nomination
for election by NorthWestern's shareholders was
approved or recommended by a vote of at least two-
thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or
whose election or nomination for election was
previously so approved or recommended, cease for any
reason to constitute a majority thereof;
(iii) the shareholders of NorthWestern approve
a merger or consolidation of NorthWestern with any
corporation or business trust, other than (i) a merger
or consolidation which would result in the individuals
who prior to such merger or consolidation constitute
the Board constituting at least two-thirds (2/3) of the
board of directors of NorthWestern or the surviving or
succeeding entity immediately after such merger or
consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization of
NorthWestern (or similar transaction) in which no
Person acquires more than 20% of the combined voting
power of NorthWestern's then outstanding Common Stock;
(iv) the shareholders of NorthWestern approve a
plan of complete liquidation of NorthWestern; or
(v) the shareholders of NorthWestern approve an
agreement for the sale or disposition of all or
substantially all NorthWestern's assets, other than a
sale or disposition which would result in the
individuals who prior to such sale or disposition
constitute the Board constituting at least two-thirds
(2/3) of the board of directors of the Person
purchasing such assets immediately after such sale or
disposition.
For purposes of this paragraph: Person shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) NorthWestern, (ii) a
trustee or other fiduciary holding securities under an
employee benefit plan of NorthWestern, (iii) an underwriter
temporarily holding securities pursuant to an offering of
such securities, or (iv) a corporation owned, directly or
indirectly, by the shareholders of NorthWestern in
substantially the same proportions as their ownership of
shares of NorthWestern and Beneficial Owner shall have the
meaning defined in Rule 13d-3 under the Exchange Act.
On the basis of information known to NorthWestern, the
Committee shall make all determinations relating to the
applicability and interpretation of this Section 8.2(b) and
all such determinations shall be conclusive and binding.
8.3 Value of SARs and Limited SARs. Upon exercise, an SAR
or Limited SAR shall entitle the Key Team Member to receive from
NorthWestern the number of shares of Common Stock having an
aggregate Fair Market Value equal to the following:
(a) in the case of a Nontandem SAR or Nontandem
Limited SAR, the excess of the Fair Market Value of one
share of Common Stock as of the date on which the SAR or
Limited SAR is exercised over the base price specified in
such SAR or Limited SAR, multiplied by the number of shares
of Common Stock then subject to the SAR or Limited SAR, or
the portion thereof being exercised.
(b) in the case of a Tandem SAR or Tandem Limited SAR,
the excess of the Fair Market Value of one share of Common
Stock as of the date on which the SAR or Limited SAR is
exercised over the exercise price per share specified in
such Option, multiplied by the number of shares then subject
to the Option, or the portion thereof as to which the SAR or
Limited SAR is being exercised.
Cash shall be delivered in lieu of any fractional shares.
The Committee, in its discretion, shall be entitled to cause
NorthWestern to elect to settle any part or all of its obligation
arising out of the exercise of an SAR by the payment of cash in
lieu of all or part of the shares of Common Stock it would
otherwise be obligated to deliver in an amount equal to the Fair
Market Value of such shares on the date of exercise.
8.4 Exercise of Tandem SARs. A Tandem SAR shall be
exercisable during such time, and be subject to such restrictions
and conditions and other terms, as the Committee shall specify in
the applicable Option Agreement at the time such Tandem SAR is
granted. Notwithstanding the preceding sentence, the Tandem SAR
shall be exercisable only at such time as the Option to which it
relates is exercisable and shall be subject to the restrictions
and conditions and other terms applicable to such Option. Upon
the exercise of a Tandem SAR, the unexercised Option, or the
portion thereof to which the exercised portion of the Tandem SAR
is related, shall expire. The exercise of any Option shall cause
the expiration of the Tandem SAR related to such Option, or
portion thereof, that is exercised.
8.5 Exercise of Tandem Limited SARs. A Tandem Limited SAR
shall be exercisable following the occurrence of any of the
events described in paragraph (b) of Section 8.2, and be subject
to such restrictions and conditions and other terms, as the
Committee shall specify in the applicable Option Agreement at the
time such Tandem Limited SAR is granted. Notwithstanding the
preceding sentence, the Tandem Limited SAR shall be exercisable
only at such time as the Option to which it relates is
exercisable and shall be subject to the restrictions and
conditions and other terms applicable to such Option. Upon the
exercise of a Tandem Limited SAR, the unexercised Option, or the
portion thereof to which the exercised portion of the Tandem
Limited SAR is related, shall expire. The exercise of any Option
shall cause the expiration of the Tandem Limited SAR related to
such Option, or portion thereof, that is exercised.
8.6 Exercise of Nontandem SARs.
(a) A Nontandem SAR granted under the Plan shall be
exercisable during such time, and be subject to such
restrictions and conditions and other terms, as the
Committee shall specify in the Option Agreement at the time
the Nontandem SAR is granted, which restrictions and
conditions and other terms need not be the same for all Key
Team Members. Without limiting the generality of the
foregoing, the Committee may specify a minimum number of
full shares with respect to which any exercise of a
Nontandem SAR must be made.
(b) A Nontandem SAR granted under the Plan shall
expire on the date specified by the Committee in the Option
Agreement, provided that such date shall not be more than
ten years after the date of grant. The Committee shall
specify in the Option Agreement at the time each Nontandem
SAR is granted, the time during which the Nontandem SAR may
be exercised prior to its expiration and other provisions
relevant to the SAR. The Committee, in its discretion,
shall have the power to accelerate the dates for exercise of
any or all Nontandem SARs or any part thereof, granted under
the Plan.
8.7 Exercise of Nontandem Limited SARs.
(a) A Nontandem Limited SAR granted under the Plan
shall be exercisable following the occurrence of any of the
events described in paragraph (b) of Section 8.2, and be
subject to such restrictions and conditions and other terms,
as the Committee shall specify in the Option Agreement at
the time the Nontandem Limited SAR is granted, which
restrictions and conditions and other terms need not be the
same for all Key Team Members. Without limiting the
generality of the foregoing, the Committee may specify a
minimum number of full shares with respect to which any
exercise of a Nontandem Limited SAR must be made.
(b) A Nontandem Limited SAR granted under the Plan
shall expire on the date specified by the Committee in the
Option Agreement, provided that such date shall not be more
than ten years after the date of grant. The Committee shall
specify in the Option Agreement at the time each Nontandem
Limited SAR is granted, the time during which the Nontandem
Limited SAR may be exercised prior to its expiration and
other provisions relevant to the Limited SAR. The
Committee, in its discretion, shall have the power to
accelerate the dates for exercise of any or all Nontandem
Limited SARs or any part thereof, granted under the Plan
pursuant to Section 4.3.
8.8 Parties Entitled to Exercise SARs and Limited SARs. An
SAR or Limited SAR may be exercised only by the Key Team Member
(or by a legatee or legatees of such SAR under his last will, by
his executors, personal representatives or distributees, or by an
assignee or assignees pursuant to Section 12 below).
8.9 Settlement of SARs and Limited SARs. As soon as is
reasonably practicable after the exercise of an SAR or a Limited
SAR, NorthWestern shall (i) issue, in the name of the Key Team
Member, stock certificates representing the total number of full
shares of Common Stock to which the Key Team Member is entitled
pursuant to Section 8.3 hereof and cash in an amount equal to the
Fair Market Value, as of the date of exercise, of any resulting
fractional shares, and (ii) if the Committee causes NorthWestern
to elect to settle all or part of its obligations arising out of
the exercise of the SAR or Limited SAR in cash, deliver to the
Key Team Member an amount in cash equal to the Fair Market Value,
as of the date of exercise, of the shares of Common Stock it
would otherwise be obligated to deliver.
Section 9. Restricted Stock Awards To Key Team Members and
Non-Employee Directors.
The Committee (or the Chief Executive Officer, to the extent
the Committee delegates authority to him pursuant to Section 2)
may from time to time cause NorthWestern to grant shares of
Restricted Stock under the Plan to such Key Team Members and Non-
Employee Directors, and subject to such restrictions and
conditions and other terms, as the Committee may determine at the
time of grant, subject to the general provisions of the Plan, the
applicable Restricted Stock Agreement, and the following specific
rules:
9.1 Performance or Employment Standards. The restrictions
applicable to Restricted Stock may be based either on performance
or employment or Board service standards. If the restrictions
are based upon the performance of NorthWestern, the performance
standards shall relate to corporate or business segment
performance and may be established in terms of growth and gross
revenue, cash flow, earnings per share, return on assets, or
return on investment or utilization of assets. Multiple
standards may be used and may have the same or different
weighting and may relate to absolute performance or relative
performance as measured against comparable companies.
9.2 Restricted Stock Agreements. Shares of Restricted
Stock issued to a Key Team Member or Non-Employee Director under
the Plan shall be governed by a Restricted Stock Agreement which
shall set forth the restrictions applicable to the Award of
Restricted Stock and such other provisions as the Committee shall
determine.
9.3 Issuance of Restricted Stock. NorthWestern shall
issue, in the name of the Key Team Member or Non-Employee
Director, stock certificates representing the total number of
shares of Restricted Stock granted to the Key Team Member or Non-
Employee Director, as soon as may be reasonably practicable after
such grant, which shall be held by the Corporate Secretary of
NorthWestern as provided in Section 9.7 hereof.
9.4 Rights of Stockholders. Subject to the provisions of
Sections 9.3 and 9.5 hereof and Section 12.2, and the
restrictions set forth in the related Restricted Stock Agreement,
the Key Team Member or Non-Employee Director receiving a grant
shall thereupon be a stockholder with respect to all of the
shares represented by such certificate or certificates and shall
have the rights of a stockholder with respect to such shares,
including the right to vote such shares and to receive dividends
and other distributions paid with respect to such shares.
9.5 Restrictions; Forfeiture. Any share of Restricted
Stock granted to a Key Team Member or Non-Employee Director
pursuant to the Plan shall be forfeited, and such shares shall
revert to NorthWestern, if (i) the Key Team Member or Non-
Employee Director violates a non-competition or confidentiality
agreement or other condition set forth in the Restricted Stock
Agreement, (ii) the Key Team Member's employment with
NorthWestern or its Affiliates, or the service of the Non-
Employee Director on the Board, terminates prior to a date or
dates for expiration of the forfeiture, (iii) the date on which
performance standards set forth in the Restricted Stock Agreement
fail to be satisfied, or (iv) the date there occurs a violation
of any provision of the Restricted Stock Agreement. NorthWestern
shall require a forfeiture of Restricted Stock pursuant to this
Section 9.5, by giving notice to the Key Team Member or Non-
Employee Director at any time within the 30-day period following
the applicable date of forfeiture. Upon receipt of such notice,
the Corporate Secretary of NorthWestern shall promptly cancel
shares of Restricted Stock that are forfeited to NorthWestern.
9.6 Acceleration. The Committee, in its discretion, shall
have the power to accelerate the date on which the restrictions
of this Section 9 or contained in any Restricted Stock Agreements
shall lapse with respect to any or all shares of Restricted Stock
granted under the Plan.
9.7 Restricted Stock Certificates. The Corporate Secretary
of NorthWestern shall hold the certificate or certificates
representing shares of Restricted Stock issued under the Plan on
behalf of each Participant who holds such shares until such time
as the Restricted Stock is forfeited or the restrictions lapse.
9.8 Terms and Conditions. The Committee may prescribe such
other restrictions and conditions and other terms applicable to
the shares of Restricted Stock issued to a Key Team Member or Non-
Employee Director under the Plan that are neither inconsistent
with nor prohibited by the Plan or any Restricted Stock
Agreement, including, without limitation, terms providing for a
lapse of the restrictions of this Section 9 or in any Restricted
Stock Agreement, in installments.
Section 10. Phantom Stock Units.
10.1 Grant of Phantom Stock Units. If deemed by the
Committee (or the Chief Executive Officer, to the extent the
Committee delegates authority to him pursuant to Section 2) to be
in the best interests of NorthWestern, Phantom Stock Units, the
value of which is related to the appreciation in the value of the
Common Stock, may be granted to such Key Team Members of
NorthWestern as the Committee shall determine. If any Phantom
Stock Units awarded under the Plan shall be forfeited or
canceled, such Phantom Stock Units may again be awarded under the
Plan. Phantom Stock Units shall be granted at such time or times
and shall be subject to such terms and conditions, in addition to
the terms and conditions set forth in the Plan, as the Committee
shall determine.
The receipt of the value of Phantom Stock Units may be
contingent upon either performance or employment standards. If
the Phantom Stock Units are contingent upon the performance of
NorthWestern, the performance standards shall relate to corporate
or business segment performance and may be established in terms
of growth and gross revenue, cash flow, earnings per share,
return on assets, or return on investment or utilization of
assets. Multiple standards may be used and may have the same or
different weighting and may relate to absolute performance or
relative performance as measured against comparable companies.
10.2 Phantom Stock Unit Agreements. Phantom Stock Units
issued to a Key Team Member under the Plan shall be governed by a
Phantom Stock Unit Agreement that shall set forth the performance
or employment standards applicable to the award of Phantom Stock
Units and such other provisions as the Committee shall determine.
10.3 Payment for Phantom Stock Units. Except as otherwise
set forth in a Phantom Stock Unit Agreement, upon termination of
employment of a Key Team Member with NorthWestern and all
Affiliates for any reason, the Key Team Member shall be entitled
to receive an amount in a lump sum cash payment equal to the
number of Phantom Stock Units granted to him with respect to
which the applicable employment and/or performance standards have
been satisfied, multiplied by the Fair Market Value of a share of
Common Stock of NorthWestern determined pursuant to the
provisions of Section 5.2.
Section 11. Terms and Conditions of Awards.
11.1 Each Participant shall agree to such restrictions and
conditions and other terms in connection with the grant and
exercise of an Award, including restrictions and conditions on
the disposition of the Common Stock acquired upon the exercise,
grant or sale thereof, as the Committee may deem appropriate and
as is set forth in the applicable Award Agreement. The
certificates delivered to a Participant or to the Corporate
Secretary of NorthWestern evidencing the shares of Common Stock
acquired upon exercise of an Award may, and upon the grant of
Restricted Stock to a Key Team Member or Non-Employee Director
shall, bear a legend referring to the restrictions and conditions
and other terms contained in the respective Award Agreement and
the Plan, and NorthWestern may place a stop transfer order with
its transfer agent against the transfer of such shares. If
requested to do so by the Committee at the time of exercise of an
Option or sale of Restricted Stock, each Participant shall
execute a written instrument stating that he is purchasing the
Common Stock for investment and not with any present intention to
sell the same.
11.2 The obligation of NorthWestern to sell and deliver
Common Stock under the Plan shall be subject to all applicable
laws, regulations, rules and approvals, including, but not by way
of limitation, the effectiveness of a registration statement
under the Securities Act of 1933, if deemed necessary or
appropriate by the Committee, of the Common Stock, Options, SARs,
Limited SARs, Restricted Stock, and other securities reserved for
issuance or that may be offered under the Plan.
Section 12. Nontransferability.
12.1 Except as provided in Section 12.2 next below, or in
connection with unrestricted Common Stock issued pursuant to an
Award, Awards granted under the Plan and any rights and
privileges pertaining thereto, may not be transferred, assigned,
pledged or hypothecated in any manner, by operation of law or
otherwise, other than by will or by the laws of descent and
distribution and shall not be subject to execution, attachment or
similar process. The granting of an Award shall impose no
obligation upon the applicable Participant to exercise such
Award.
12.2 Notwithstanding the provisions of subsection (a) above,
a Participant, at any time prior to his death, may assign all or
any portion of a NSO granted to him and a related Tandem SAR, if
applicable, to (i) his spouse or lineal descendant, (ii) the
trustee of a trust for the primary benefit of his spouse or
lineal descendant, (iii) a partnership of which his spouse and
lineal descendants are the only partners, or (iv) a tax exempt
organization as described in Section 501(c)(3) of the Code. In
such event, the spouse, lineal descendant, trustee, partnership
or tax exempt organization will be entitled to all of the rights
of the Participant with respect to the assigned portion of such
NSO and SAR, and such portion of the NSO and SAR will continue to
be subject to all of the terms, conditions and restrictions
applicable to the NSO and SAR, as set forth herein and in the
related Option Agreement immediately prior to the effective date
of the assignment. Any such assignment will be permitted only if
(i) the Participant does not receive any consideration therefore,
and (ii) the assignment is expressly permitted by the applicable
Option Agreement as approved by the Committee. Any such
assignment shall be evidenced by an appropriate written document
executed by the Participant, and a copy thereof shall be
delivered to NorthWestern on or prior to the effective date of
the assignment.
Section 13. Rights as Shareholder.
A Participant or an assignee of a Participant pursuant to
Section 12 shall have no rights as a shareholder with respect to
any Common Stock covered by an Award or receivable upon the
exercise of an Award until the Participant or transferee shall
have become the holder of record of such Common Stock, and,
except as provided in Section 14, no adjustments shall be made
for dividends in cash or other property or other distributions or
rights in respect to such Common Stock for which the record date
is prior to the date on which the Participant shall have in fact
become the holder of record of the shares of Common Stock
acquired pursuant to the Award.
Section 14. Dividends and Dividend Equivalents.
An Award under the Plan, other than a Restricted Stock
Award, may, at the discretion of the Committee, contain the right
to receive dividends or dividend equivalents, which may be either
paid currently or credited to a Participant's account under the
Plan and which may be subject to conditions, restrictions and
contingencies established by the Committee, including the
achievement of performance goals as described in Section 10.1.
Section 15. Postponement of Exercise.
The Committee may postpone any exercise of an Award for such
time as the Committee in its sole discretion may deem necessary
in order to permit NorthWestern (a) to effect, amend or maintain
any necessary registration of the Plan or the shares of Common
Stock issuable upon the exercise of an Award under the Securities
Act of 1933, as amended, or the securities laws of any applicable
jurisdiction, (b) to permit any action to be taken in order to
(i) list such shares of Common Stock on a stock exchange if
shares of Common Stock are then listed on such exchange or (ii)
comply with restrictions or regulations incident to the
maintenance of a public market for shares of Common Stock,
including any rules or regulations of any stock exchange on which
the shares of Common Stock are listed, or (c) to determine that
such shares of Common Stock and the Plan are exempt from such
registration or that no action of the kind referred to in (b)(ii)
above needs to be taken; and NorthWestern shall not be obligated
by virtue of any terms and conditions of any Award or any
provision of the Plan to recognize the exercise of an Award or to
sell or issue shares of Common Stock in violation of the
Securities Act of 1933 or the law of any government having
jurisdiction thereof. Any such postponement shall not extend the
term of an Award and neither NorthWestern nor its directors or
officers shall have any obligation or liability to an
Participant, to the Participant's successor or assignee, or any
other person, with respect to any shares of Common Stock as to
which the Award shall lapse because of such postponement.
Section 16. Withholding Taxes.
Whenever NorthWestern proposes or is required to issue or
transfer shares of Common Stock to a Participant under the Plan,
NorthWestern shall have the right to require the Participant to
remit to NorthWestern an amount sufficient to satisfy all
federal, state and local withholding tax requirements prior to
the delivery of any certificate or certificates for such shares.
If such certificates have been delivered prior to the time a
withholding obligation arises, NorthWestern shall have the right
to require the Participant to remit to NorthWestern an amount
sufficient to satisfy all federal, state or local withholding tax
requirements at the time such obligation arises and to withhold
from other amounts payable to the Participant, as compensation or
otherwise, as necessary. Whenever payments under the Plan are to
be made to a Participant in cash, such payments shall be net of
any amounts sufficient to satisfy all federal, state and local
withholding tax requirements. In connection with an Award in the
form of shares of Common Stock, a Participant may elect to
satisfy his tax withholding obligation incurred with respect to
the Taxable Date of the Award by (a) directing NorthWestern to
withhold a portion of the shares of Common Stock otherwise
distributable to the Participant, or (b) by transferring to
NorthWestern a certain number of shares (either subject to a
Restricted Stock Award or previously owned), such shares being
valued at the Fair Market Value thereof on the Taxable Date.
Notwithstanding any provisions of the Plan to the contrary, a
Participant's election pursuant to the preceding sentence (a)
must be made on or prior to the Taxable Date with respect to such
Award, and (b) must be irrevocable. In lieu of a separate
election on each Taxable Date of an Award, a Participant may make
a blanket election with the Committee that shall govern all
future Taxable Dates until revoked by the Participant. If the
holder of shares of Common Stock purchased in connection with the
exercise of an ISO disposes of such shares within two years of
the date such an ISO was granted or within one year of such
exercise, he shall notify NorthWestern of such disposition and
remit an amount necessary to satisfy applicable withholding
requirements including those arising under federal income tax
laws. If such holder does not remit such amount, NorthWestern
may withhold all or a portion of any salary or other amounts then
or in the future owed to such holder as necessary to satisfy such
requirements. Taxable Date means the date a Participant
recognizes income with respect to an Award under the Code or any
applicable state or local income tax law.
Section 17. Leave of Absence.
The Committee shall be entitled to make such rules,
regulations and determinations as it deems appropriate under the
Plan in respect of any leave of absence taken by any Participant.
Without limiting the generality of the foregoing, the Committee
shall be entitled to determine (i) whether or not any such leave
of absence shall constitute a termination of employment or
service on the Board within the meaning of the Plan, and (ii) the
impact, if any, of any such leave of absence on Awards under the
Plan theretofore granted to any Participant who takes such leave
of absence.
Section 18. Trust Agreement.
NorthWestern may enter into a trust agreement (`Trust
Agreement') whereby NorthWestern shall agree to contribute to a
trust (`Trust) for the purpose of accumulating shares of Common
Stock to assist NorthWestern in fulfilling its obligations to
Participants hereunder. Such Trust Agreement shall be
substantially in the form of the model trust agreement set forth
in Internal Revenue Service Revenue Procedure 92-64, or any
subsequent Internal Revenue Service Revenue Procedure, and shall
include provisions required in such model trust agreement that
all assets of the Trust shall be subject to the creditors of
NorthWestern in the event of insolvency.
Section 19. Termination or Amendment of Plan.
The Committee may correct any defect or supply an omission
or reconcile any inconsistency in the Plan or in any Award
granted hereunder in the manner and to the extent it shall deem
desirable, in its sole discretion, to effectuate the Plan. The
Board, without further action on the part of the shareholders of
NorthWestern to the extent permitted by law, regulation and stock
exchange requirements, may from time to time alter, amend or
suspend the Plan or any Award granted hereunder or may at any
time terminate the Plan; provided that with respect to ISOs, the
Board may not effect a change inconsistent with Section 422 of
the Code or regulations issued thereunder.
No amendment or termination of the Plan shall in any manner
affect any Award theretofore granted without the consent of the
Participant, except that the Committee may amend the Plan in a
manner that does affect Awards theretofore granted upon a finding
by the Committee that such amendment is in the best interest of
holders of outstanding Awards affected thereby.
Section 20. Effective Date.
The Plan shall be effective upon the date of approval of the
Plan by an affirmative vote of a majority of the shares of the
voting stock of NorthWestern entitled to be voted by the holders
of stock represented at a duly held shareholders' meeting, within
12 months after the date of adoption of the Plan by the Board.
Section 21. Requirements of Law.
The granting of Awards under the Plan shall be subject to
all applicable laws, rules, and regulations, and to such
approvals by any governmental agencies or national securities
exchanges as may be required.
Section 22. Governing Law.
The Plan and all agreements hereunder shall be construed in
accordance with and governed by the laws of the State of South
Dakota, to the extent not inconsistent with Section 422 of the
Code and regulations thereunder.
Section 23. Notice.
Every direction, revocation or notice authorized or required
by the Plan shall be deemed delivered to NorthWestern (a) on the
date it is personally delivered to the Corporate Secretary of
NorthWestern at its principal executive offices or (b) three
business days after it is sent by registered or certified mail;
postage prepaid, addressed to the Corporate Secretary at such
offices; and shall be deemed delivered to a Participant or
assignee (a) on the date it is personally delivered to him or (b)
three business days after it is sent by registered or certified
mail, postage prepaid, addressed to him at the last address shown
on the records of NorthWestern or of any Subsidiary.
Section 24. Successors.
In the event of a sale of substantially all of the assets of
NorthWestern, or a merger, consolidation or share exchange
involving NorthWestern, all obligations of NorthWestern under the
Plan with respect to Awards granted hereunder shall be binding on
the successor of the transaction. Employment of a Participant
with such a successor shall be considered employment of the
Participant with NorthWestern for purposes of the Plan.
Section 25. Indemnification of the Committee.
In addition to such other rights of indemnification as they
may have as members of the Board, or as members of the Committee,
or as its delegatees, the members of the Committee and its
delegatees shall be indemnified by NorthWestern against (a) the
reasonable expenses (as such expenses are incurred), including
attorneys' fees actually and necessarily incurred in connection
with the defense of any action, suit or proceeding (or in
connection with any appeal therein), to which they or any of them
may be a party by reason of any action taken or failure to act
under or in connection with the Plan, or any Award granted
hereunder; and (b) against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent
legal counsel selected by NorthWestern) or paid by them in
satisfaction of a judgment in such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Committee member or
delegatee is liable for gross negligence or misconduct in the
performance of his duties; provided that within 60 days after
institution of such action, suit or proceeding a Committee member
or delegatee shall in writing offer NorthWestern the opportunity,
at its own expense, to handle and defend the same.
Section 26. No Contract of Employment or Service on the Board.
Neither the adoption of the Plan, nor the amendment and the
restatement of the Plan, nor the grant of any Award shall be
deemed to obligate NorthWestern or any Subsidiary to continue the
employment or service on the Board of any Participant for any
particular period, nor shall the granting of an Award constitute
a request or consent to postpone the retirement date of any
Participant.
Section 27. Gender.
Except when otherwise required by the context, any masculine
terminology in this document shall include the feminine, and any
singular terminology shall include the plural.
IN WITNESS WHEREOF, NorthWestern has caused the Plan to be
executed on its behalf by its duly authorized officer on May 4,
1999.
NORTHWESTERN CORPORATION
By: /s/ M. D. Lewis
-------------------------------
Its: Chairman & Chief Executive Officer
Exhibit 1
Affiliates
Blue Dot Services Inc.
CornerStone Propane Partners, LLP
Expanets, Inc.
NorCom Advanced Technologies, Inc.
NorthWestern Energy Corporation
NorthWestern Growth Corporation
NorthWestern Services Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Mar-31-1999
<CASH> 26,107,162
<SECURITIES> 0
<RECEIVABLES> 136,637,773
<ALLOWANCES> 0
<INVENTORY> 70,534,258
<CURRENT-ASSETS> 268,820,983
<PP&E> 838,158,749
<DEPRECIATION> (200,883,203)
<TOTAL-ASSETS> 1,805,580,272
<CURRENT-LIABILITIES> 192,633,391
<BONDS> 631,236,954
0
91,250,000
<COMMON> 40,386,361
<OTHER-SE> 250,395,757
<TOTAL-LIABILITY-AND-EQUITY> 1,805,580,272
<SALES> 509,353,953
<TOTAL-REVENUES> 509,353,953
<CGS> 364,887,914
<TOTAL-COSTS> 364,887,914
<OTHER-EXPENSES> 102,332,567
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,930,687
<INCOME-PRETAX> 22,340,139
<INCOME-TAX> 7,459,714
<INCOME-CONTINUING> 14,880,425
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,880,425
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.56
</TABLE>
