SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by registrant X
Filed by a party other than the registrant ___
Check the appropriate box:
X Preliminary proxy statement
___ Definitive proxy statement
___ Definitive additional materials
___ Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
The Montana Power Company
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
X $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
___ $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
___ Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transactions
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction: N/A
<PAGE>
___ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
form or schedule and the date of its filing.
N/A = NOT APPLICABLE
(1) Amount previously paid:
____________________________________________________________
(2) Form, schedule or registration statement no.:
____________________________________________________________
(3) Filing party:
____________________________________________________________
(4) Date filed:
___________________________________________________________
<PAGE>
March 23, 1995
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of
Shareholders of The Montana Power Company. The meeting will be
held at the Civic Center, 1340 Harrison Avenue, Butte, Montana,
on Tuesday, May 9, 1995, at 10:00 a.m.
At this meeting, you will be asked to elect four persons to
the Board of Directors; and to authorize an amendment to the
Articles of Incorporation.
We hope that you will be able to attend the meeting. To
make certain your vote is counted, please sign and date the
enclosed proxy card and return it in the envelope provided. No
postage is required. Sending in your proxy at this time will not
affect your right to vote in person, should you be present at the
meeting.
We look forward to seeing you on May 9. Thank you for your
continued confidence and support.
Sincerely,
Daniel T. Berube
Chairman of the Board of Directors
<PAGE>
THE MONTANA POWER COMPANY
_____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
40 East Broadway
Butte, Montana 59701-9394
March 23, 1995
To the Shareholders of
THE MONTANA POWER COMPANY
You are invited to attend the Annual Meeting of the
Shareholders of The Montana Power Company which will be held at
the Civic Center, 1340 Harrison Avenue, Butte, Montana, on
Tuesday, May 9, 1995 at 10:00 a.m. for the following purposes:
1. To elect four Directors for a term of three years;
2. To consider an amendment to the Articles of
Incorporation which would require the affirmative vote
of two-thirds of the outstanding shares of the Company
in order to change the current staggered board
structure or the number of directors.
3. To transact such other business as may properly come
before the meeting.
The Board of Directors has fixed the close of business on
March 6, 1995, as the record date for the determination of
shareholders entitled to vote at this meeting.
Your attention is directed to the Proxy Statement and Proxy
enclosed herewith.
By Order of the Board of Directors
Pamela K. Merrell
Vice President and Secretary
The interest and cooperation of all shareholders in the
affairs of The Montana Power Company are considered to be of the
greatest importance by your Company's Board of Directors. If you
do not expect to attend the annual meeting, it is urgently
requested that you promptly mark, sign, date and return the
enclosed proxy in the envelope provided herewith. If you do so
now, the Company will be saved the expense of follow-up
solicitations.
<PAGE>
THE MONTANA POWER COMPANY
40 EAST BROADWAY, BUTTE, MONTANA 59701-9394
March 23, 1995
PROXY STATEMENT
The accompanying proxy is solicited by the Board of
Directors of The Montana Power Company, a Montana corporation,
for use at the Annual Meeting of Shareholders on May 9, 1995, or
at any adjournment thereof.
This proxy statement and the accompanying proxy were mailed
on or about March 23, 1995.
VOTING SECURITIES AND PRINCIPAL HOLDERS:
The outstanding voting securities of the Company on March 6,
1995 were:
(a) _____________ shares of no par value Common Stock.
(b) 1,919,589 shares of no par value Preferred Stock,
$6.00 Series, $4.20 Series, $2.15 Series and $6.875
Series.
Generally, shareholders will vote as a single class and are
entitled to one vote for each share held of Common Stock and
Preferred Stock. With respect to the election of Directors, each
shareholder is entitled to as many votes as equals the number of
shares held of Common Stock and Preferred Stock multiplied by the
number of Directors to be elected, and may cast all of such votes
in person or by proxy for a single candidate or may distribute
them among any two or more of them, as he or she may see fit.
Directors are elected by a plurality of the votes cast by the
shares entitled to vote at a meeting in which a majority of the
shares entitled to vote are present in person or by proxy. You
may withhold your vote from any nominee for Director by writing
his or her name in the appropriate space on the proxy card.
Where proxies are marked "withhold authority," these shares are
included in the determination of the number of shares present and
voting. Broker non-votes are counted in determining the presence
of a quorum, but will not be counted as a vote in favor of the
Proposal set forth in Item 2. If you return a signed proxy card
that does not indicate your voting preferences, your shares will
be voted for both the election of the nominated Directors
(cumulatively or otherwise) and the Item 2 Proposal. The
affirmative vote of the holders of at least two-thirds of the
outstanding shares will be required for the approval of the
Item 2 Proposal.
A shareholder giving a proxy has the power to revoke it at
any time before it is exercised. A proxy may be revoked by
filing with the Secretary of the Company a revoking instrument or
a duly executed proxy bearing a later date. The powers of the
proxy holders with respect to any proxy will be suspended if the
person executing the proxy is present at the meeting and elects
to vote in person.
Only shareholders of record at the close of business on
March 6, 1995 are entitled to vote at the meeting.
If you do not expect to be present at the meeting, kindly
mark, sign and date the accompanying proxy and return it promptly
in the enclosed envelope so that your shares may be represented
at the meeting.
ITEM 1. ELECTION OF DIRECTORS
Four Directors will be elected at the meeting for terms of
three years and until the election and qualification of their
respective successors. The four nominees for election are, at
present, members of the Board of Directors of the Company. The
names and certain information with respect to the nominees and
the ten other Directors whose terms do not expire this year are
as follows:
NOMINEES FOR ELECTION FOR TERMS OF THREE YEARS EXPIRING IN 1998
R. D. Corette - Mr. Corette, 54, a Director of the Company
since July 1, 1990. He has been an Attorney and an owner in the
law firm of Corette, Pohlman, Allen, Black, and Carlson, Butte,
MT since 1966.
Beverly D. Harris - Ms. Harris, 61, a Director of the
Company since December 1, 1992. She has been President since
January 1971 and Director since January 1972 of Empire Federal
Savings & Loan Association, Livingston, MT.
Arthur K. Neill - Mr. Neill, 57, a Director of the Company
since January 1, 1990. He has been Executive Vice President -
Generation and Transmission since January 1, 1994 and was
Executive Vice President - Utility Services of the Company from
January 1987 to January 1994.
Noble E. Vosburg - Mr. Vosburg, 53, a Director of the
Company since October 25, 1988. He has been President and Chief
Executive Officer of Pacific Steel & Recycling, Great Falls, MT,
a steel service center and recycling business, since May 1982.
DIRECTORS TO CONTINUE IN OFFICE WITH TERMS EXPIRING IN 1997
Kay Foster - Ms. Foster, 53, a Director of the Company since
January 1, 1992. She has been the owner of Planteriors
Unlimited, Billings, MT, an interior foliage plant sales and
maintenance business, since December 1980.
Chase T. Hibbard - Mr. Hibbard, 46, a Director of the
Company since October 1, 1993. He has been a Montana State
Representative since January 1, 1993. He has been President of
the Sieben Live Stock Co., MT, a sheep and cattle ranch, since
January 1981 and President of Hibbard Management Company, Helena,
MT, which provides consulting services to agriculture, since
January 1984.
Daniel P. Lambros - Mr. Lambros, 63, a Director of the
Company since November 24, 1987. He has been President of
Lambros Realty, Missoula, MT, a real estate firm, since August
1961.
Carl Lehrkind, III - Mr. Lehrkind, 56, a Director of the
Company since July 1, 1984. He has been President of Lehrkind's,
Inc., Bozeman, MT, a beverage bottler and distributor, since
February 1970, and President, Owner and Operator of Yellowstone
Country Food and Beverage, a restaurant, Livingston, MT and Miles
City, MT, since February 1993.
Jerrold P. Pederson - Mr. Pederson, 52, a Director of the
Company since July 1, 1993. He has been Vice President and Chief
Financial Officer of the Company since May 14, 1991, and was Vice
President of Corporate Finance and Controller from June 1, 1990
to May 14, 1991 and Controller from August 1, 1982 to June 1,
1990.
DIRECTORS TO CONTINUE IN OFFICE WITH TERMS EXPIRING IN 1996
Daniel T. Berube - Mr. Berube, 61, a Director of the Company
since January 1, 1992. He has been Chief Executive Officer of
the Company since January 1, 1992 and Chairman of the Board since
July 1, 1992. He was President and Chief Executive Officer of
Entech, Inc., the Company's subsidiary, from January 1, 1990 to
December 31, 1991, President and Chief Operating Officer of
Entech, Inc. from January 8, 1988 to December 31, 1989.
Alan F. Cain - Mr. Cain, 55, a Director of the Company since
March 28, 1989. He has been President and Chief Executive
Officer of Blue Cross/Blue Shield of Montana, Helena, MT, a
health insurance company, since March, 1986.
Robert P. Gannon - Mr. Gannon, 50, a Director of the Company
since January 1, 1990. He has been President and Chief
Operating Officer of the Company, responsible for utility
operations, since January 1, 1990, and was Vice President and
General Counsel from December 28, 1984 to December 31, 1989.
Mr. Gannon also has been a Director of Buttrey Food and Drug
Stores Company, a food and drug retailer, since May, 1992.
James P. Lucas - Mr. Lucas, 67, a Director of the Company
since March 1, 1982. He has been President of and the Senior
Attorney in Lucas and Monaghan, P.C., a law firm, Miles City, MT,
since January 1977.
George H. Selover - Mr. Selover, 65, a Director of the
Company since 1986. He has been President of Selover Buick,
Inc., Billings, MT, an auto sales and service business, since
November 6, 1961. Until January 20, 1994, Mr. Selover was a
Director of Big Sky Airlines, Billings, MT, a commuter airline,
doing business as Big Sky Transportation Company of which
Mr. Selover was the Director, Vice Chairman and Corporate
Secretary.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The table below and information following set forth the
number of shares beneficially owned on February 7, 1995, by each
of the directors and each of the named executive officers in the
Summary Compensation Table and all of the directors and all
executive officers as a group. The shares beneficially owned by
any director or named executive officer, or by all directors and
executive officers as a group, do not exceed one percent of the
Common and Preferred Stock outstanding.
Shares of
Name of Common Stock
Beneficial Owner Beneficially Owned
Daniel T. Berube 26,728 (1) (10)
Alan F. Cain 414 (2)
R. D. Corette 2,024 (3)
Richard F. Cromer 15,553 (1) (4) (10)
Kay Foster 1,312
Robert P. Gannon 15,563 (1) (10)
Beverly D. Harris 1,671
Chase T. Hibbard 1,400 (5)
Daniel P. Lambros 1,000
Carl Lehrkind, III 2,881 (6)
James P. Lucas 1,319
James J. Murphy 26,475 (1) (10)
Arthur K. Neill 20,395 (1) (10)
Jerrold P. Pederson 14,605
George H. Selover 700 (7)
Noble E. Vosburg 1,035 (8)
All Directors and
Executive Officers
as a group (26 in
number) 247,760 (9)
<PAGE>
(1) Includes shares in the Deferred Savings and Employee Stock
Ownership Plan attributable to the Company's and the
employee's contributions as follows: Mr. Berube -
8,029 shares, Mr. Cromer - 3,874 shares, Mr. Gannon -
5,497 shares, Mr. Murphy - 4,052 shares, and Mr. Neill -
4,441 shares.
(2) Includes 9 shares owned by Mr. Cain's spouse of which
Mr. Cain disclaims beneficial ownership.
(3) Includes 68 shares of Common Stock owned by the estate of
Mr. Corette's deceased father (which also owns 1 share of
the $6.00 Series Preferred Stock) of which estate
Mr. Corette is Personal Representative and of which shares
Mr. Corette disclaims beneficial ownership; 200 shares owned
by Mr. Corette's mother for whom Mr. Corette is Conservator
and of which he disclaims beneficial ownership.
(4) Includes 966 shares held by Mr. Cromer's spouse of which he
disclaims beneficial ownership; and 51 shares held in a
custodian account for his granddaughter of which Mr. Cromer
is the custodian and with respect to which he has voting and
investment power.
(5) Includes 1,200 shares held by Margaret Sieben Hibbard Trust
of which Mr. Hibbard has one-third beneficial ownership.
Mr. Hibbard has neither voting nor investment power.
(6) Includes 600 shares of Common Stock held by the Trustee for
Lehrkind's, Inc. Profit Sharing Plan #2 of which
Mr. Lehrkind is a beneficiary and with respect to which he
has shared voting and investment power; and 1,781 shares of
Common Stock held by Lehrkind's Inc., with respect to which
he has shared voting and investment power.
(7) Includes 300 shares held in Selover Buick profit sharing
plan, of which Mr. Selover is a beneficiary and with respect
to which he has shared voting and investment power.
(8) Includes 134 shares held by Mr. Vosburg's spouse of which
Mr. Vosburg disclaims beneficial ownership.
(9) Includes 67,033 shares held for Executive Officers in the
Deferred Savings and Employee Stock Ownership Plan described
on page ___ hereof, 129,604 option shares exercisable within
60 days of the date as to which ownership is stated, and
12,992 shares of restricted stock, awarded on January 10,
1994, under the Long-Term Incentive Plan described, on
page __.
(10) Includes, option shares exercisable within 60 days of the
date as to which ownership is stated in the following
amounts: 13,933 for Mr. Berube, 8,414 for Mr. Cromer,
10,066 for Mr. Gannon, 11,425 for Mr. Murphy, 15,466 for
Mr. Neill, and 8,296 of restricted stock awarded to
Mr. Murphy on January 10, 1994 under the Long-Term Incentive
Plan described on page __ hereof.
MEETINGS AND STANDING COMMITTEES OF THE BOARD OF DIRECTORS
There were nine Board of Directors meetings in 1994. Each
Director attended 75 percent or more of the aggregate of the
meetings of the Board and the Board Committees of which he/she
was a member.
AUDIT COMMITTEE
The Audit Committee is composed of Vosburg
(Chairman), Corette, Harris, Lucas and Selover, none of whom are
employees of the Company. The Audit Committee met four times
during 1994. The duties of the Audit Committee include
recommending to the Board of Directors a firm of independent
certified public accountants to audit the books and records of
the Company, reviewing the audit with the independent accounting
firm and recommending its approval to the Board of Directors.
The Committee also reviews and approves major accounting
policies, reviews the adequacy of principal internal controls,
reviews the adequacy of disclosure of information essential to a
fair presentation of the financial affairs of the Company and
provides an avenue of communications between the Board of
Directors and accounting and financial personnel, both external
and internal. The Committee also reviews the scope and content
of the Company's Code of Business Conduct, and considers any
significant irregularities or exceptions reported to it.
PERSONNEL COMMITTEE
The Personnel Committee is composed of Directors Lucas
(Chairman), Cain, Corette, Foster, Harris, Hibbard, Lambros,
Lehrkind, Selover and Vosburg, all of whom are non-employee
Directors. The Personnel Committee met six times during 1994.
The duties of the Personnel Committee include recommending to the
Board of Directors a slate of Officers for election for the
ensuing year, the administration of all employee retirement and
welfare plans and programs, and the compensation of Officers of
the Company. The Personnel Committee's report on Executive
Compensation is on page __.
NOMINATING COMMITTEE
The Committee on Directors' Affairs, which serves as a
Nominating Committee, is composed of non-employee Directors
Lambros (Chairman), Cain, Corette, Lehrkind, Lucas and Berube,
the Company's CEO and Chairman of the Board. The Committee on
Directors' Affairs met three times during 1994. The purpose of
the Committee is to recommend to the Board of Directors persons
to be elected to the Board when vacancies exist or when any
additions to the Board may be authorized. The Committee will
consider as potential nominees persons recommended by
shareholders. Recommendations should be submitted to the
Committee in care of the Secretary of the Company.
The Board of Directors also has an Executive Committee, a
Contributions Committee, a Public Policy Committee, a Finance
Committee and a Special Committee on Mergers and Acquisitions.
NON-EMPLOYEE DIRECTOR COMPENSATION
Non-employee Directors of the Company are paid $18,500 per
year plus $500 for each meeting of a Committee of the Board
attended, except those held in conjunction with regular Board
meetings. They also receive $850 for attending each special
meeting of the Board held in addition to the regularly scheduled
Board meeting.
Non-employee Directors who serve on the Board of Entech,
Inc., the Company's subsidiary, are paid $18,500 per year plus
$500 for each committee meeting attended, except those held in
conjunction with regular Board meetings. They also receive $850
for attending each special meeting of the Board held in addition
to the regularly scheduled Board meeting.
The Company and Entech, Inc. have Deferred Compensation
Plans for non-employee Directors which permits such directors to
defer their compensation until their retirement from the Boards
of Directors. During 1994, Mr. Vosburg deferred $9,167,
Mr. Lambros $17,833 and Mr. Lehrkind $16,085. The deferred
compensation earns interest at the rate determined by the Company
based on Moody's Average Baa Corporate Bond rates. In addition,
all Company and Entech Directors are eligible to participate in
the Non-Qualified Benefit Restoration Plan described on page ___.
PERSONNEL COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
Under rules of the Securities and Exchange Commission (SEC),
the Company is required to provide certain information concerning
compensation to the Company's Chairman and Chief Executive
Officer and its four other most highly compensated executive
officers. The disclosure requirements for these individuals
(named executive officers) includes the use of tables and a
report of the committee responsible for compensation decisions
for the named executive officers, explaining the rationale and
considerations that led to those compensation decisions.
Therefore, the Personnel Committee of the Board of Directors has
prepared the following report for inclusion in this Proxy
Statement.
PERSONNEL COMMITTEE REPORT
The Personnel Committee of the Board of Directors is
responsible for making recommendations to the Board of Directors
concerning the salaries of officers. The Committee is also
responsible for overseeing other forms of compensation and
benefits to officers as well as for the employees of the Company
generally. The Personnel Committee was in 1994 and is now
comprised of all non-employee directors.
COMPENSATION PHILOSOPHY
The compensation philosophy for executive officers conforms
to the compensation philosophy of the Company generally for all
employees. The Company endeavors to:
- - provide compensation comparable to that offered by companies
with similar businesses, allowing the Company to
successfully attract and retain the employees necessary to
its long-term success;
- - provide compensation which relates to the performance of the
individual and differentiates based upon individual
performance;
- - provide an appropriate linkage between compensation and the
creation of shareholder value through awards tied to the
Company's performance and through facilitating employee
stock ownership; and
- - provide internal equity among employees, assuring reasonable
relationship between salaries for positions and positional
relationships.
EXECUTIVE OFFICERS' COMPENSATION
The Personnel Committee made a comprehensive review of
executive compensation in 1994. The Committee engaged Towers
Perrin, a compensation consultant, to conduct a competitive total
compensation review of utility companies covering 13 utility
officers and the President of the Independent Power Group,
including all of the named executive officers except James J.
Murphy, whose compensation was addressed separately, as he is the
President of a wholly-owned non-utility subsidiary. Towers
Perrin reviewed base salaries, total cash compensation (base
salary plus annual bonus) and total compensation (base salary,
annual bonus and long-term incentive opportunity).
Towers Perrin used the Edison Electric Institute (EEI)
survey as its primary data base for comparisons. The EEI survey
data of 95 electric utilities was adjusted for company revenue
size using regression analysis. Many of the companies in the
Peer Group shown in the Performance Graph, the Standard and
Poor's 24 Electric Company Index, are included in this EEI data
base. Additionally, Towers Perrin used a peer group of 20
electric utilities similar to the surveys which had been used
historically by the Company for executive compensation
comparisons. Data for this second group was also taken from the
EEI survey data base. This group of 20 utilities was chosen on
the basis of its revenue comparability to the Company. Other
survey data, including private Towers Perrin surveys of gas
companies and independent power producers, were also used in a
few instances where the EEI survey and the 20 electric utility
survey data did not have adequate position comparisons.
Comparisons for each position were made to the median
compensation for the EEI revenue adjusted data base, the 20
electric utility survey, and for the other surveys where
necessary.
Towers Perrin concluded from this analysis that, overall,
the Company's base salaries were approximately 10% below
competitive levels; that the absence of an annual bonus
opportunity resulted in total cash compensation which was 26%
below competitive practices; and, that because the Company had
not made any long-term incentive awards for several years, total
compensation was, on average, 35% below competitive practices.
Finally, Towers Perrin concluded that the absence of annual
incentive and current long-term incentive grants resulted in
total compensation to executives that was substantially below
competitive practices and which was not sufficiently objectively
related to the Company's performance.
As a result of these conclusions Towers Perrin made
recommendations concerning adjustment to base salaries and awards
of long-term incentive compensation opportunities. Based upon
these recommendations, as well as considerations of other
subjective factors such as the performance of the individual
officer, an assessment of the officer's value to the Company,
internal equity among officers and employees, and the Company's
recent performance, the Committee adjusted base salaries to bring
them closer to competitive levels. However, with only one
exception, even the adjusted base salaries remain below median
base salary levels in the surveys. The exception was a salary
which was at the median after adjustment.
In addition to adjusting salaries in 1994, the Committee
made awards of long-term incentive opportunities. The Committee
made the awards based upon the Towers Perrin recommendations and
its compensation philosophy of providing an appropriate linkage
between compensation and the creation of shareholder value and of
providing compensation comparable to that offered by similar
companies as determined by the compensation surveys. The
Committee awarded options and the right to receive the
equivalent, in cash, of the dividends on the options. The
dividend equivalent awards are subject to the achievement of
certain performance criteria over the three years from January 1,
1994 to December 31, 1996. The amount of the awards for each
officer was determined by comparison of the value of the awards
to the survey information, with the goal of bringing total
compensation closer to the median for the survey groups.
However, even after the awards, total compensation remains below
competitive practices as determined by Towers Perrin. The
options, granted under the Company's Long-Term Incentive Plan
described below, were granted at 100% of the closing price on the
New York Stock Exchange - Composite Transaction on the date of
grant. One-third of the options are exercisable on March 31,
1995, one-third on December 31, 1995 and one-third on
December 31, 1996; all have an exercise period of ten years from
the date of grant. The dividend equivalent performance criteria
for officers with responsibilities for the utility and the
non-utility subsidiaries is a comparison of the performance of
the Company to the same Peer Group used in the performance graph
in this Proxy Statement--the Standard and Poor 24 Electric
Company Index. For these officers, in order to receive maximum
payout (125%) of the dividend equivalent opportunity, the
Company's total shareholder return (TSR) for the years 1994
through 1996 must be in at least the 90th percentile of the TSR
for the Standard and Poor's 24 Electric Companies. Payout
decreases proportionately with the Company's decrease in TSR
performance and no payout will be made if the Company's TSR is
less than the 50th percentile of the Index companies. Officers
responsible only for the utility have two additional performance
measures: predetermined return on equity and utility rate
competitiveness goals for the 1994-1996 time period. Richard F.
Cromer, President of the Independent Power Group, also has two
additional performance measures: predetermined return on equity
and net income for the same period. Each performance measure
accounts for one-third of the total measures. Payout of any of
the dividend equivalents will not be determined or made until
after the 1994-1996 period is over and the Committee determines
the extent to which the goals have been achieved. The option
grants to the named executive officers are shown on the Option
Grant Table, infra, and the dividend equivalent awards are shown
on the Long-Term Incentive Plan Table, infra.
The Personnel Committee did not consider the salary of
Mr. Murphy, as Mr. Murphy is President of Entech, Inc., a
wholly-owned subsidiary of the Company. However, the Committee,
in its capacity as the administrator of the Company's Long-Term
Incentive Plan, did make grants of restricted stock to Mr. Murphy
in 1994.
Mr. Murphy's salary was reviewed by the Personnel Committee
of the Entech Board of Directors (a non-employee director
committee) in 1994. His salary was adjusted using the same
criteria and procedure as described above for the Company's
officers, except that Towers Perrin did not perform the
competitive analysis and the survey information was gleaned from
companies similar to Entech, Inc.--that is, coal and natural
resource companies. Hay executive compensation surveys were also
used for comparison. His salary was lower than the median for
comparable positions and, thus, it was increased to bring it
closer to the market, although it remains below the median.
The Company's Personnel Committee, in its role as
administrator of the Company's Long-Term Incentive Plan described
below, did consider incentive compensation for Entech Officers
and also hired a consultant, Howard Johnson & Company, to examine
compensation to Entech, Inc. officers. The consultant determined
that the absence of any short or long-term incentive compensation
caused these officers' salaries to be substantially below the
market and that compensation needed to be more closely and
objectively tied to performance, similar to the Towers Perrin
conclusions concerning the Company's officers. Therefore, grants
of restricted stock were awarded to Entech, Inc. officers in 1994
which had performance and time restrictions. The performance
restriction for Mr. Murphy for 1994 was the achievement of a
predetermined net income for Entech, Inc. The 1995 and 1996
performance measures will be established by the Personnel
Committee. In order to have the performance restrictions removed
on all of the restricted stock, the performance targets, must be
met. The amounts of restricted stock which can be earned is
reduced proportionately with reductions in the performance
actually achieved and none of the award is earned if actual
performance is less than 85% of the target. To the extent
performance targets are met, there is an additional three year
restriction which must pass before unrestricted stock is issued.
To the extent performance measures are not met, restricted shares
are cancelled. The Long-Term Incentive Plan Table shows the
amount of restricted stock granted in 1994. Regular dividends
are paid on the outstanding, uncancelled restricted stock.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation of the Chief Executive Officer was also the
subject of the Towers Perrin analysis and the conclusions
described above were also applicable to the CEO's compensation.
His base salary was below the median in the salary surveys and
his total compensation was substantially below the market. The
Committee adjusted his base salary, increasing it by four
percent. Although the Committee considered that a greater
adjustment would bring his salary closer to the market and
reflect the Committee's high evaluation of his performance, the
Committee deferred to his recommendation that his base salary be
adjusted consistent with other salary adjustments. The Committee
evaluated Mr. Berube's performance as high because of several
factors: management's attention to short and long-term strategic
planning as well as to successive planning; continuation of good
earnings given slow growth and increasing competition; providing
timely information to Board members concerning trends in the
industry and other matters necessary for the proper execution of
their duties; and the maintenance of good relationships with key
regulators of the Company. Additionally, as described above,
Berube was given an award of options and the right to receive the
equivalent of dividends on the options if the TSR performance
measure is achieved over the three years 1994 through 1996. The
purpose of the award was the same as described above for the
officers generally: to tie his compensation more closely to the
creation of shareholder value and to provide compensation
comparable to that offered by similar companies. The amount of
his award was determined based upon the goal of bringing his
total compensation closer to total compensation as determined in
the market survey. Even after his base salary increase and the
option and dividend equivalent award, his total compensation
remains below the market.
LONG-TERM INCENTIVE PLAN
The Long-Term Incentive Plan approved by the shareholders in
May 1992 is intended to reward employees who make important
contributions to the continued growth, development and financial
success of the Company, or its subsidiaries, and to attract and
retain such employees. It is the vehicle used for making the
awards of restricted stock and options described above.
The Plan also includes stock options granted under a prior
plan which were outstanding at the time the Plan became
effective. Grants of options under that prior Plan were made to
executive officers and other key employees at 100% of the closing
price on the New York Stock Exchange Composite Transactions at
the date of grant and the options could not be exercised for two
years from the date of grant.
BENEFITS ENCOURAGING OWNERSHIP OF COMPANY STOCK
The executive officers also receive other benefits which are
designed to facilitate stock ownership and which are available to
all employees. The Company's Deferred Savings and Employee Stock
Ownership (401(K)) Plan is available to all regular employees of
the Company including officers. A member may elect to contribute
a maximum of 4% or 6% of qualifying pay, depending on years of
service, which is invested, at the member's election, in a bond
fund, Common Stock fund or fixed rate income fund for the
employee's benefit. Depending on the employee's years of
service, the Company contributes 60% to 70% of the employee's
contribution. The Company's contribution is invested in the
Company Common Stock Fund. Thus, all participating employees,
including executive officers, are beneficial owners of Company
Common Stock.
The Company also has an Employee Stock Purchase Plan which
allows employees, including executive officers, to purchase
Company Common Stock at market prices regularly through payroll
deduction and directly without incurring brokerage fees. This
Plan also facilitates employee stock ownership.
Personnel Committee
J. P. Lucas, Chairman A. F. Cain
R. D. Corette K. Foster
B. D. Harris C. T. Hibbard
C. Lehrkind, III D. P. Lambros
G. H. Selover N. E. Vosburg
PERFORMANCE GRAPH
The following performance graph shows the five-year
cumulative total return for the Company, the Standard &
Poor's 500 and a group of utilities which are included in the
Standard & Poor's 24 Electric Power Company Index:
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG MONTANA POWER COMPANY (MPC), THE S & P 500 INDEX AND
THE S & P ELECTRIC CO. INDEX
Indexed\Cumulative Returns
Base
Period Return Return Return Return Return
Company\Index Name 1989 1990 1991 1992 1993 1994
- ------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
MONTANA POWER CO 100 103.05 153.64 152.28 157.59 150.40
S&P 500 INDEX 100 96.89 126.42 136.05 149.76 151.74
ELECTRIC COMPANIES 100 102.61 133.58 141.43 159.26 138.44
*$100 INVESTED ON 12/31/89 IN STOCK OR INDEX, INCLUDING
REINVESTMENT OF DIVIDENDS, FISCAL YEAR ENDING DECEMBER 31.
</TABLE>
SUMMARY COMPENSATION TABLE
The following table shows compensation paid by the Company
for services rendered during the fiscal years 1994, 1993 and 1992
for named executive officers.
<TABLE>
<CAPTION>
All
Name and Principal Annual Long-Term Other
Position Year Compensation Compensation Comp(3)
Securities LTIP ($)
Salary ($)(1) Underlying Payouts
Options (#) ($)(2)
<S> <C> <C> <C> <C> <C>
D. T. Berube 1994 305,100 26,800 6,300
CEO & Chairman of 1993 274,100 6,296
the Board 1992 232,000 6,110
R. P. Gannon 1994 237,800 16,700 6,300
President & 1993 225,000 5,846
COO - Utility 1992 205,923 5,673
J. J. Murphy 1994 211,543 0 22,704 5,850
President - 1993 188,307 5,846
Entech 1992 178,846 5,674
A. K. Neill 1994 156,800 8,300 6,300
Executive V. P. - 1993 148,000 6,177
Utility 1992 140,962 5,837
R. F. Cromer
President and COO - 1994 152,000 9,700 6,219
Independent Power 1993 136,000 5,439
Group 1992 100,769 4,028
</TABLE>
_________________
(1)The salary reported includes the executive's annual base federally
taxable earnings, pretax contributions to the Company's Deferred Savings
and Employee Stock Ownership (401(K)) Plan, tax deferred Executive Benefit
Restoration Plan contributions, pretax Section 125 flexible spending
account contributions and pretax medical premium contributions.
(2)Mr. Murphy's payout under the restricted stock plan, results from
the calculation of the extent to which 1994 performance measures were met.
Note that the value shown is about one-third of the estimated 1994 payout
opportunity shown on the Long-Term Incentive Plan Table, infra. This
payout is subject to approval by the Personnel Committee.
(3)All Other Compensation for the named executive officers is the
value of the Company's matching contribution of stock made to the
executives' accounts under the Deferred Savings and Employee Stock
Ownership (401(K)) Plan sponsored by the Company. Mr. Murphy also received
awards of restricted stock pursuant to the Long-Term Incentive Plan (LTIP)
as described in the LTIP Table, infra.
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to the
named executive officers, concerning individual grants of stock
options at fiscal year-end.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
Number of Percent of
Securities Total Option
Underlying Granted to Grant Date
Options Employees in Exercise or Expiration Present
Name Granted(1) Fiscal Year Base Price(2) Date
Value(3)
(#) (%) ($/SH) ($)
<S> <C> <C> <C> <C> <C>
D. T. Berube 26,800 22.9 22.625 09-16-2004 72,823(4)
R. P. Gannon 16,700 14.3 22.625 09-16-2004 45,378
A. K. Neill 8,300 7.1 22.625 09-16-2004 22,553
R. F. Cromer 9,700 8.3 22.625 09-16-2004 26,357
</TABLE>
(1)The options granted will be exercisable as follows:
one-third on March 31, 1995, one-third on December 31, 1995 and
one-third on December 31, 1996, and thereafter for a period of
ten years from the date of grant.
(2)The Exercise price based on the closing price as reported
in The Wall Street Journal as New York Stock Exchange - Composite
Transaction, on date of grant.
(3)The Black-Scholes option pricing model was used to
determine the options granted present value. The assumptions
used in the Black-Scholes equation to determine the present value
are as follows: market price of stock - $22.625, exercise price
of option - $22.625, stock volatility - .1316, annualized risk
free interest rate - 7.55%, 10-year option term and a stock
dividend yield of 6.100%.
(4)The exercise period for the options granted is ten years
from the date of grant, however Mr. Berube's normal retirement
will occur approximately four years from the date of grant, and
the option must be exercised within three months of retirement.
Therefore the Black-Scholes value calculated for Mr. Berube for
this shorter exercise period, with all other assumptions the
same, is $57,058.
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information with respect to the
named executive officers, concerning exercise of stock options at
fiscal year-end.
<TABLE>
<CAPTION>
Value
Realized
(Market
Price at
Shares Exercise Number of Securities
Acquired Less Underlying Unexercised Value of Unexercised
on Exercise Options at Fiscal Year-End in-the-Money Options at
Exercise Price(1) (#) Fiscal Year-End ($23.00(2))
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
D. T. Berube 0 0 5,000 26,800 $ 0 $ 10,050
R. P. Gannon 0 0 4,500 16,700 $ 3,938 $ 6,263
J. J. Murphy 1,408 8,638 11,797 0 $ 51,359 $ 0
A. K. Neill 0 0 12,700 8,300 $ 40,206 $ 3,113
R. F. Cromer 50 197 5,181 9,700 $ 10,475 $ 3,638
</TABLE>
(1)Based on the closing price as reported in The Wall Street Journal as
New York Stock Exchange - Composite Transactions, of the Corporation's Common
Stock on date of stock option exercise.
(2)Based on the closing price as reported in The Wall Street Journal as
New York Stock Exchange - Composite Transactions, of the Corporation's Common
Stock on December 31, 1994.
<PAGE>
<TABLE>
The following table provides information with respect to the named
executive officers, regarding each award made in the last completed fiscal
year.
<CAPTION>
Long-Term Incentive Plan ("LTIP") - Awards In Last Fiscal Year
Performance Estimated Future Payouts Under
or Other Non-Stock Price Based Plans(3)
Name Number of Period Until
Shares, Units Maturation Threshold Target Maximum
or Rights or Payout $ $ $
(#)
<S> <C> <C> <C> <C> <C>
01/01/94
thru
D. T. Berube(1) 26,800 12/31/96 57,888 128,640 160,800
01/01/94
thru
R. P. Gannon(1) 16,700 12/31/96 36,339 80,160 100,200
J. J. Murphy(2) 2,606 12/31/97 6,678 66,779 66,779
2,762 12/31/98 7,078 70,776 70,776
2,928 12/31/99 7,503 75,030 75,030
01/01/94
thru
A. K. Neill(1) 8,300 12/31/96 18,061 39,840 49,800
01/01/94
thru
R. F. Cromer(1) 9,700 12/31/96 20,952 46,560 58,200
</TABLE>
(1)Messrs. Berube, Gannon, Neill and Cromer were awarded the right to
receive the equivalent, in cash, of the value of the dividends on the number
of options granted in 1994 for the period January 1, 1994 through December 31,
1996, to the extent that certain performance criteria are achieved as
described under the Executive Officers Compensation in the Personnel Committee
Report on Executive Compensation, supra.
(2)In 1994, Mr. Murphy was awarded restricted stock which contain both
performance and time restrictions as described under Executive Officers
Compensation in the Personnel Committee Report on Executive Compensation,
supra.
(3)The dividend equivalent estimates for Messers. Berube, Gannon, Neill
and Cromer are based upon the current $1.60 per share annual dividend.
<PAGE>
RETIREMENT BENEFITS
The Pension Plan table illustrates the estimated annual benefits payable
to executives under the Company's Retirement Plan (a qualified defined benefit
plan) and under the Company's Benefit Restoration Plan for Senior Management
Executives (a non-qualified defined benefit plan for senior management
executives).
The table shows the estimated annual benefits payable upon retirement at
age 65 based on the listed remuneration and years of service classifications
calculated upon accrued benefits to January 1995.
These benefits may be reduced if such persons retire before reaching
age 65. The amounts presented in the table are based upon single life annuity
calculations notwithstanding the availability of joint and survivor provisions
provided by the qualified pension plan.
<TABLE>
<CAPTION>
PENSION PLAN PLUS BENEFIT RESTORATION
Years
<S> <C> <C> <C> <C> <C>
Remuneration 15 20 25 30 35
150,000 92,612 103,149 113,686 124,223 134,760
175,000 108,237 120,649 133,061 145,473 157,885
200,000 123,862 138,149 152,436 166,723 181,010
225,000 139,487 155,649 171,811 187,973 204,135
250,000 155,112 173,149 191,186 209,223 227,260
275,000 170,737 190,649 210,561 230,473 250,385
300,000 186,362 208,149 229,936 251,723 273,510
325,000 201,987 225,649 249,311 272,973 296,635
350,000 217,612 243,149 268,686 294,223 319,760
375,000 233,237 260,649 288,061 315,473 342,885
400,000 248,862 278,149 307,436 336,723 366,010
</TABLE>
<PAGE>
QUALIFIED PENSION PLAN
The Retirement Plan (Plan) of the Company applies to all eligible
regular employees including officers. Benefits are computed for all eligible
employees by using the following formula: .95 of 1% of the highest
consecutive three year average annual base compensation within the last ten
years (Final Average Compensation) up to the appropriate Social Security
Integration Level, plus 1.5 of 1% of the Final Average Compensation in excess
of the Social Security Integration Level ($25,920 for a normal retiree
(age 65) in 1995) times the number of credited years of service up to 35 years
maximum. Remuneration covered by the Plan corresponds to that reported in the
Cash Compensation Column of the Annual Compensation Table less payments in
lieu of vacation and payments made to the non-qualified retirement plan. As
of March 1, 1995, credited years of service under the Plan are: 30 years for
Mr. Berube, 28 years for Mr. Cromer, 21 years for Mr. Gannon, 17 years for
Mr. Murphy, and 36 years for Mr. Neill.
NON-QUALIFIED BENEFIT RESTORATION PLAN FOR SENIOR MANAGEMENT EXECUTIVES
Executive officers also participate in a non-qualified Benefit
Restoration Plan for executive officers and certain other key employees
implemented in December 1986. In 1994, the named executive officers
participated in the Plan. This Plan provides for annual benefit payments upon
retirement to the participant over the participant's lifetime or, in the event
of the participant's death, to the participant's beneficiary for the remainder
of a 15-year period commencing on the date of the participant's retirement.
This benefit is in addition to the pension plan benefit.
Life insurance is carried on Plan participants in favor of the Company
to enable the Company to help fund the Plan. Participants in the Plan
contribute to the cost of life insurance carried by the Company. All death
proceeds are specifically directed to the Plan trust for the sole purpose of
paying for Plan benefits and premium costs.
NON-QUALIFIED BENEFIT RESTORATION PLAN FOR DIRECTORS
All Company and Entech Directors participated in a non-qualified
retirement plan (the Benefit Restoration Plan for Directors). The Plan was
implemented in 1986 for all eligible Directors. This Plan provides for annual
benefit payments to vested participants upon retirement. It is intended to
allow for supplemental income to the Director at the time of retirement or to
beneficiaries in the event of the Director's death. The duration of the
benefit payments will be over the lifetime of the participant or, in the event
of the participant's death, the participant's designated beneficiary will be
paid for the remainder of a 15-year period commencing on the date of the
participant's retirement. A schedule of Director's benefits is as follows:
Years of Annual Years of Annual
Service Benefit Service Benefit
1 $ 1,200 6 $ 8,400
2 $ 2,400 7 $10,200
3 $ 3,600 8 $12,000
4 $ 5,100 9 $14,100
5 $ 6,600 10 $16,500
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Berube,
Cromer, Gannon, Murphy, and Neill to provide benefits under certain
circumstances after a change of control of the Company if their employment is
subsequently terminated without cause by the Company or with good reason by
the employee. The agreements provide that each such employee shall be
employed by the Company in a position comparable to his current position with
compensation and benefits which are at least equal to his then current
compensation and benefits through December 31, 1995 (subject to extension by
the Board of Directors or earlier termination due to voluntary termination by
the employee or termination by the Company for cause).
The agreements with Messrs. Berube, Cromer, Gannon, Murphy, and Neill
provide that if, after a change of control, the employee's employment is
terminated by the Company without cause, or if the employee terminates his
employment for good reason, the employee is entitled to (i) a lump sum payment
in the amount of 299.9 percent of the base amount of his compensation, (ii)
calculation of retirement benefits as if the employee had continued employment
to Normal Retirement Date (as defined in the Retirement Plan for Employees of
The Montana Power Company) subject to certain reductions and (iii) continued
participation in the Company's (or substantially equal substitute) life
insurance, health insurance, dental insurance and disability insurance plan
and other welfare benefit plans for a period of three years following
termination. In the event that any amounts paid to Messrs. Berube, Cromer,
Gannon, Murphy, or Neill under their agreements are subject to excise tax
imposed under the Internal Revenue Code of 1986, the Company shall pay an
additional amount (the "Gross-Up Payment") equal to the amount of any excise
taxes and any state or federal taxes on the Gross-Up Payment.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Express Personnel Services, a temporary employment agency owned by David
Verbael (the son of W. C. Verbael, Vice President of Accounting, Finance and
Information Services) and his wife provides the Company with temporary
personnel for which it was paid approximately $200,000 in 1994.
Blue Cross/Blue Shield of Montana, a health insurance company of which
Alan F. Cain, a director of the Company, is CEO and President, administers the
Company's and its subsidiaries' health plan for which it was paid $585,855 in
1994.
SECTION 16(a) COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and
Securities and Exchange Commission ("SEC") regulations, the Company's
directors, certain officers, and greater than 10 percent shareholders are
required to file reports of ownership and changes in ownership with the SEC
and the New York Stock Exchange and to furnish the Company with copies of all
such reports they file.
To the Company's knowledge, based solely on review of copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1994, all
Section 16(a) filing requirements were complied with.
ITEM 2.
PROPOSED AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
INTRODUCTION
The Board of Directors of the Company unanimously recommends that the
shareholders vote in favor of amending the Company's Restated Articles of
Incorporation ("Articles"), as proposed here. The purpose of the amendment is
to prevent a purchaser of a majority of the Company's voting power from
circumventing the Company's staggered Board structure and/or increasing the
number of directors to seize immediate control of the Board. These board
structures were established to make it more difficult and time-consuming to
change majority control of the Board, reducing the vulnerability of the
Company to (1) an unsolicited takeover that does not contemplate the
acquisition of all the Company's outstanding shares, or (2) an unsolicited
proposal for the restructuring or sale of all or part of the Company. As more
fully described below, the Board believes that, as a general rule, such
proposals are not in the best interest of the Company and its shareholders
insofar as they do not permit the Board to negotiate with a potential acquiror
from the strongest practical position.
For these reasons, on January 24, 1995, the Board of Directors of the
Company unanimously adopted and declared advisable and in the best interests
of the Company, and recommends that the shareholders of the Company adopt at
the meeting, an amendment to the Articles described in detail below.
PURPOSE AND EFFECTS OF THE AMENDMENT
The 1980's provide many examples of accumulations of substantial stock
positions in public corporations by third parties as a prelude to proposing a
takeover or a restructuring or sale of all or part of the corporation or other
similar extraordinary corporate action. Such actions were often undertaken by
the third party without advance notice to or consultation with management or
the board of directors of the corporation. In many instances, the purchaser
sought representation on the corporation's board of directors in order to
increase the likelihood that its proposal would be implemented by the
corporation. If the corporation resisted the efforts of the purchaser to
obtain representation on the corporation's board, the purchaser would commence
a proxy contest to have its nominees elected to the board in place of certain
directors or the entire board. In some cases, the purchaser was not truly
interested in taking over the corporation, but used the threat of a proxy
fight and/or a bid to take over the corporation as a means of obtaining for
itself a special benefit, such as a repurchase of its equity position at a
substantial premium over market price, not available to other shareholders.
While the early 1990's witnessed a decline in these types of transactions, the
more recent past has exhibited somewhat of a resurgence of hostile and
unsolicited takeover proposals. The techniques described above remain
available and the Company could find itself subject to abusive tactics of this
nature if the Proposed Amendment is not adopted, as a purchaser could
circumvent certain of the current Bylaw and Articles provisions which were
expressly enacted to frustrate such abusive actions and to allow the Board and
the Company to evaluate and respond to unsolicited takeover proposals from the
strongest position practicable.
The Board believes that the imminent threat of removal of the Company's
management in the aforementioned situations through a change in composition of
the Board would severely curtail the ability of the Board to negotiate
effectively with such purchasers. The Board and management would be deprived
of the time and information necessary to evaluate the takeover proposal, to
study alternative proposals and to help ensure that the best price is obtained
in any transaction involving the Company which may ultimately be undertaken.
If the Proposed Amendment is adopted, it will help ensure that the Board, if
confronted by a proposal from a third party which has acquired a significant
block of voting stock, will have sufficient time to review any proposal and
other alternatives and to take appropriate action.
Takeovers or changes in the Board or management of the Company which are
proposed and effected without prior consultation and negotiation are not
necessarily detrimental to the Company and its shareholders. The Proposed
Amendment, by making it more difficult for a shareholder to circumvent the
staggered board and number of directors protection, may discourage or make
more difficult a proxy contest or the assumption of control by a holder of a
substantial block of the Company's voting stock or the removal of the
incumbent Board and could thus increase the likelihood that incumbent
directors will retain their positions. In addition, if the Proposed Amendment
discourages such takeover attempts, the adoption of the Proposed Amendment
could tend to reduce temporary fluctuations in the market price of the
Company's stock that could result from accumulations of large blocks of stock.
Accordingly, shareholders could be deprived of certain opportunities to sell
their stock at a temporarily higher market price. However, the Board believes
that the benefits in protecting its ability to negotiate with or to resist the
proponent of an unfriendly or unsolicited proposal to take over or restructure
the Company, and to seek out appropriate alternatives, if desirable, outweigh
these disadvantages. The Proposed Amendment is designed to further encourage
those who seek control of the Company to negotiate a transaction with the
Board, thereby giving the Board an opportunity to resist abusive takeover
tactics that might permit a change of control that does not offer appropriate
value to shareholders and to structure a transaction in which all shareholders
are permitted to participate. In this way, the Board believes that adoption
of the Proposed Amendment may ultimately enhance the potential realizable
value of a shareholder's investment.
DESCRIPTION OF THE PROPOSED AMENDMENT
Pursuant to the Articles, the Bylaws, including Section 11 (which
establishes the staggered Board) may be amended by a majority vote of the
outstanding shares of the Company entitled to vote on such amendment.
Article V (which establishes a range for the number of directors) may be
amended, in accordance with the Montana law, if the votes cast favoring such
amendments at a shareholders' meeting exceed the votes cast opposing such
amendment (so long as a quorum exists at such meeting). Therefore, an entity
with a majority of the voting power of the Company could circumvent the
provisions of Section 11 and Article V, which were enacted to frustrate
certain abusive takeover tactics described above. Such an entity could repeal
the staggered Board provisions or simply exercise majority voting power to
increase the number of directors constituting the Board and fill the vacancies
created thereby with its own nominees. Such a scenario would completely
circumvent the purpose of the staggered Board provisions. The Proposed
Amendment, if adopted, would prevent this by providing that Section 11 of the
Bylaws and Article V of the Articles may not be amended, altered, changed, or
repealed, nor may any provision inconsistent therewith be adopted, by the
Company's shareholders without the concurrence of the holders of at least two-
thirds of the outstanding shares of the Company.
VOTE REQUIRED FOR ADOPTION OF THE PROPOSED AMENDMENT
The Montana law provides, in general, that if a quorum exists, an
amendment to a corporation's Articles will be approved if the votes cast
favoring such amendment exceed the votes cast opposing the amendment. Montana
law also permits provisions in a corporation's Articles which require a
greater shareholder vote for any corporate action than the vote otherwise
required by law. It further requires that any Article amendment that seeks to
install any such "supermajority" voting requirements must be approved by the
same supermajority shareholder vote sought to be established by such
amendment. Therefore, in order to adopt the Proposed Amendment, the
concurrence of the holders of at least two-thirds of the outstanding shares of
the Company is required.
SUMMARY OF SECTION 11 OF THE BYLAWS
Section 11 of the Bylaws ("Section 11") provides that the Board shall
consist of 14 directors and shall be divided into three groups, each as nearly
equal in number as possible, with directors serving for three year terms (or,
in all cases, until their respective successors are duly elected and
qualified). The Company has had a staggered Board structure for many years.
This classification of directors makes it more difficult to change the over-
all composition of the Board. At least two shareholders' meetings, instead of
one, are required for shareholders to effect a change in a majority of the
Board. Although the Company has not, in the past, experienced any difficulties
with the continuity or stability of the Board, the Board believes that the
longer time required to elect a majority of a staggered Board helps assure the
continuity and stability of the Company's affairs and policies in the future,
since a majority of the directors at any given time will have prior experience
as directors of the Company. Accordingly, on January 24, 1995, the Board
amended the provisions of Section 11 pertaining to the staggered Board in
order to ensure that such provision complies with applicable statutory
requirements with respect to staggered Boards.
Section 11 further provides, among other things, the procedures for
increasing and decreasing the number of directors constituting the Board
(which may be varied from time to time by majority vote of the Board),
removing directors, filling Board vacancies and indemnifying officers and
directors. These provisions are generally consistent with the provisions of
Montana law governing such matters. The summary description of Section 11 is
not intended to be complete and is qualified in its entirety by reference to
the full text of Section 11 that is set forth in Exhibit B to this Proxy
Statement, which shareholders are urged to read carefully.
SUMMARY OF ARTICLE V
Article V provides that the number of directors serving on the Board
shall be fixed by the Bylaws, but shall not be less than three nor more than
18, and that in the absence of a Bylaw fixing the number of directors, the
number of directors shall be 11. By fixing the maximum number of directors
that may serve on the Board at 18, this provision is intended to prevent a
third-party from gaining control of the Board, as discussed below, by simply
enlarging and increasing the size of the Board and filling the new
directorships created thereby with its own nominees. The full text of Article
V is set forth in Exhibit C to this Proxy Statement, which shareholders are
urged to read carefully.
GENERAL
The Proposed Amendment is not being recommended in response to any
specific effort of which the Company is aware to obtain control of the
Company, but rather is being recommended in order to assure fair treatment of
the shareholders in takeover situations. While the Proposed Amendment is not
part of an integrated plan by management to adopt anti-takeover measures, the
Articles and Bylaws currently contain provisions, other than those discussed
herein, which may make a change of control more difficult to effect.
Shareholders previously approved Articles provisions which generally require a
supermajority shareholder vote as a condition to the Company engaging in
certain business combinations with a holder of 10% of the Company's
outstanding shares, unless the transaction satisfies certain fair price
criteria. In addition the Company's Bylaws contain a provision requiring
shareholders to provide the Company advance notice of their intention to
nominate persons for election as directors at a shareholder meeting and to
provide certain information about such director candidates. The Board has no
present intention of proposing other anti-takeover measures in future proxy
solicitations.
Adoption of the Proposed Amendment will not affect the listing of the
Company's Common Stock on either the New York or Pacific Stock Exchanges.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSED AMENDMENT.
EXHIBIT A
Article V of the Restated Articles of Incorporation, as amended, shall
be amended so that the following paragraph is added at the end thereof:
"Notwithstanding anything contained in these Articles (including
Article VIII hereof) or in the Bylaws of the Corporation to the contrary
(and notwithstanding the fact that a lesser percentage may be specified
by law, these Articles or the Bylaws of the Corporation), any amendment,
alteration, change or repeal of, or the adoption of any provision
inconsistent with, this Article V or Section 11 of the Bylaws of the
Corporation by shareholders shall require the affirmative vote of the
holders of at least two-thirds of the shares of the Corporation entitled
to vote thereon."
EXHIBIT B
SECTION 11. The affairs of the Corporation shall be managed by a Board
of fourteen (14) Directors. The Directors shall be divided into three groups,
each as nearly equal in number as possible. Each group of Directors shall
stand for election upon expiration of their terms. Directors shall hold
office for a term of three (3) years or until a successor is duly elected and
qualified.
The number of Directors may be increased or decreased from time to time
by amendment to these Bylaws duly adopted by the Directors, but no increase or
decrease shall exceed thirty percent (30%) of the number provided for
immediately before the change if that number was fixed by the shareholders.
No decrease in the number of Directors shall have the effect of shortening the
term of any incumbent Director. The classification and term of Directors may
be changed from time to time by amendment to the Bylaws duly adopted by the
Directors, but no such change shall affect the term of any incumbent director.
The shareholders at any meeting, by the vote of two-thirds of the number
of shares outstanding and entitled to vote for the election of Directors, may
remove any Director and fill the vacancy. If less than the entire Board is to
be removed, no Director may be removed if the votes cast against his removal
would be sufficient to elect him if then cumulatively voted at an election of
the class of Directors of which he is a part.
Vacancies in the Board of Directors may be filled by the Board at any
meeting at which a quorum is present. If the Directors remaining in office
are fewer than a quorum, the vacancy may be filled by the vote of a majority
of the Directors remaining in office. Any Director appointed by the Board to
fill a vacancy created in the Board of Directors by virtue of an increase in
the number of Directors shall hold office until the next regular annual
meeting of the shareholders at which time the shareholders shall elect a
person to fill such office.
The Company shall indemnify each present or future Director and Officer
of the Company in the manner provided in Sections 35-1-451 through 35-1-459,
M.C.A.
The foregoing right of indemnification shall not exclude or restrict any
other rights or actions which any Director or Officer may have, and shall be
available whether or not the Director or Officer continues to hold such office
at the time of incurring such expense or discharging such liability.
EXHIBIT C
ARTICLE V. The number of Directors of this Corporation shall be fixed
by the Bylaws, but shall be not less than three (3) nor more than eighteen
(18). In the absence of a Bylaw fixing the number of directors, the number of
Directors shall be eleven (11).
<PAGE>
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Price Waterhouse has been selected by the Board of Directors upon
recommendation of its Audit Committee as the independent accountants for the
Company and its subsidiaries for the year 1995.
A representative of Price Waterhouse will be present at the shareholders'
meeting and will have the opportunity to make a statement if he/she desires to
do so and will be available to respond to questions. The same firm has
audited the Company's accounts for many years.
GENERAL
The cost of soliciting proxies will be borne by the Company.
Solicitation will be made by mail and may also be made by the Company's
Officers or other regular employees, personally or by telephone. Brokers and
other nominees will be requested to solicit proxies or authorizations from
beneficial owners.
The Company has selected Beacon Hill Partners, Inc. to assist in the
solicitation of proxies by personal interviews and telephone for a fee of
$20,000. The Company will also pay the customary charge of brokers and
nominees for forwarding proxy material to beneficial owners.
Proposals of shareholders intended to be presented at the 1996 Annual
Meeting, including nominations of Directors to be elected at such meeting,
must be received by the Office of the Secretary, The Montana Power Company,
40 East Broadway, Butte, Montana 59701-9394, no later than December 6, 1995.
By Order of the Board of Directors
Pamela K. Merrell
Vice President and Secretary
<PAGE>
MAP TO CIVIC CENTER
1340 Harrison Avenue, Butte, Mt 59701
<PAGE>
PREFERRED STOCK
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting. This proxy when properly
executed will be voted in the manner directed herein by the undersigned
shareholder. If no specification is made, this proxy will be voted "FOR"
Items 1 and 2.
ACCOUNT NUMBER Dated _________________________, 1995
X ___________________________________
X ___________________________________
Signature of Shareholder
Please mark, date, sign and return this proxy in the accompanying envelope.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If stock is registered in joint tenancy, all tenants
must sign the proxy.
THE MONTANA POWER COMPANY - ANNUAL MEETING, MAY 9, 1995
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints D. T. Berube, R. P. Gannon and P. K. Merrell,
and each of them, with power of substitution, proxies to represent, and to
vote all stock of the undersigned at the Annual Meeting of Shareholders of The
Montana Power Company to be held in Butte, Montana, on May 9, 1995 at
10:00 a.m., and at any and all adjournments thereof.
1. ELECTION OF DIRECTORS:
_ FOR all nominees listed below _ WITHHOLD AUTHORITY
(except as marked contrary below) to vote for all nominees
listed below
Corette, Harris, Neill, Vosburg
INSTRUCTION: To withhold authority to vote for any nominee, write that
nominee's name here:
The Board of Directors recommends a vote "For" Item 2.
2. Adopt the Amendment to the Articles of Incorporation.
_ For _ Against _ Abstain
______________________________________________________________________________
(Continued and to be filled in and signed on reverse side)
<PAGE>
COMMON STOCK
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting. This proxy when properly
executed will be voted in the manner directed herein by the undersigned
shareholder. If no specification is made, this proxy will be voted "FOR"
Items 1 and 2.
ACCOUNT NUMBER Dated _________________________, 1995
X ___________________________________
X ___________________________________
Signature of Shareholder
Please mark, date, sign and return this proxy in the accompanying envelope.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If stock is registered in joint tenancy, all tenants
must sign the proxy.
THE MONTANA POWER COMPANY - ANNUAL MEETING, MAY 9, 1995
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints D. T. Berube, R. P. Gannon and P. K. Merrell,
and each of them, with power of substitution, proxies to represent, and to
vote all stock of the undersigned at the Annual Meeting of Shareholders of The
Montana Power Company to be held in Butte, Montana, on May 9, 1995 at
10:00 a.m., and at any and all adjournments thereof.
1. ELECTION OF DIRECTORS:
_ FOR all nominees listed below _ WITHHOLD AUTHORITY
(except as marked contrary below) to vote for all nominees
listed below
Corette, Harris, Neill, Vosburg
INSTRUCTION: To withhold authority to vote for any nominee, write that
nominee's name here:
The Board of Directors recommends a vote "For" Item 2.
2. Adopt the Amendment to the Articles of Incorporation.
_ For _ Against _ Abstain
______________________________________________________________________________
(Continued and to be filled in and signed on reverse side)
