NORTHWESTERN PUBLIC SERVICE COMPANY
Huron, South Dakota
NOTICE OF
ANNUAL MEETING
AND PROXY STATEMENT
Annual Meeting
of Stockholders
May 4, 1994
NORTHWESTERN PUBLIC SERVICE COMPANY
Corporate Office
33 Third St. SE
P. O. Box 1318
Huron, South Dakota 57350-1318
March 15, 1994
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of
Northwestern Public Service Company, which will be held at the Crossroads
Convention Center, 100 Fourth Street S.W., in Huron, South Dakota on May 4,
1994, at 11:00 a.m., local time. Enclosed is a formal Notice of Annual
Meeting and Proxy Statement, together with a proxy and return envelope for
use of stockholders who are unable to be present in person at the meeting.
As disclosed in the formal Notice and Proxy Statement, the only matter
scheduled to be acted upon at the meeting is the election of three
directors in Class III of the Board of Directors. The election of
directors will be by a plurality of the votes cast by the holders of the
outstanding shares of Common Stock of the Company. Only holders of Common
Stock are entitled to vote for election of directors.
Regardless of the size of your holdings, please make certain that your
shares are represented at the meeting, whether or not you are personally
able to attend. We will sincerely appreciate your signing, dating, and
returning the enclosed proxy card at this time. A postage-paid envelope is
enclosed for your convenience.
If, after returning your proxy, you find that you are able to attend
the meeting in person and wish to personally vote your shares, you may
revoke your proxy at that time and personally vote your shares at the
meeting. In either event, it is important that your shares are voted at
this Annual Meeting.
Very truly yours,
/s/ M. D. Lewis
M. D. Lewis
President and Chief Executive Officer
VOTING YOUR PROXY IS IMPORTANT
Northwestern Public Service Company has over 8,000
holders of its Common Stock. TO INSURE THAT YOUR SHARES ARE
REPRESENTED AT THIS MEETING, HOWEVER SMALL YOUR HOLDINGS, IT
IS ESSENTIAL THAT YOU SIGN, DATE, AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY.
A self-addressed envelope, which requires no postage if
mailed in the United States, is enclosed for your convenience.
NORTHWESTERN PUBLIC SERVICE COMPANY
Corporate Office
33 Third St. SE
P. O. Box 1318
Huron, South Dakota 57350-1318
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE HOLDERS OF COMMON STOCK OF
NORTHWESTERN PUBLIC SERVICE COMPANY:
The Annual Meeting of Stockholders of Northwestern Public Service
Company (the "Company") will be held at the Crossroads Convention Center,
100 Fourth Street S.W., Huron, South Dakota, on Wednesday, May 4, 1994, at
11:00 a.m., local time, for the following purposes:
(1) To elect three members of Class III of the Board of Directors of
the Company to hold office until the Annual Meeting of Stockholders in
1997, and until their successors are duly elected and have qualified; and
(2) To transact such other business as may properly come before the
meeting.
The Board of Directors of the Company has fixed the close of business
on March 7, 1994, as the record date for determining the holders of Common
Stock entitled to notice of and to vote at the meeting or any adjournment
thereof. The stock transfer books of the Company will not be closed. A
list of stockholders entitled to vote at the meeting will be maintained at
the corporate office of the Company, and such list will be open to
examination by stockholders for a period of ten days prior to the meeting.
Only the holders of Common Stock will be entitled to vote upon the
foregoing proposals.
You are encouraged to sign, date and return your proxy in the enclosed
self-addressed postage-paid envelope. If you are able to attend the Annual
Meeting and wish to vote in person, you may do so whether or not you have
returned your proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Alan D. Dietrich
ALAN D. DIETRICH
Vice President - Legal & Corporate Secretary
March 15, 1994
NORTHWESTERN PUBLIC SERVICE COMPANY
Corporate Office
33 Third St. SE
P. O. Box 1318
Huron, South Dakota 57350-1318
Proxy Statement for Annual Meeting of Stockholders
To be held May 4, 1994
This statement is expected to be mailed to stockholders on March 15,
1994, and is furnished in connection with the solicitation by the Board of
Directors of the Company of proxies to be voted at the Annual Meeting of
Stockholders to be held on May 4, 1994. The Company will bear all costs of
the solicitation. In addition to solicitation by mail, officers and
employees of the Company may solicit proxies by telephone or in person.
McCormick & Pryor, Ltd. has been retained by the Company to assist in the
solicitation of proxies at an anticipated cost to the Company of $4,250,
plus out-of-pocket expenses. Also, the Company will, upon request,
reimburse brokers or other persons holding stock in their names or in the
names of their nominees for reasonable expenses in forwarding proxies and
proxy material to the beneficial owners of stock.
Holders of Common Stock of record at the close of business on March 7,
1994, will be entitled to one vote for each share of Common Stock held by
them on all matters to be voted upon at the meeting. As of March 7, 1994,
there were outstanding 7,677,232 shares of Common Stock.
Stockholders who execute proxies may revoke them at any time prior to
the exercise thereof by giving written notice of such revocation to the
Corporate Secretary of the Company or by filing another proxy with him.
Shares of Common Stock which are represented at the Annual Meeting by
the holders of record in person or by their proxies will be counted as
present for quorum purposes. This will include shares represented by
proxies who have been instructed to abstain from voting for the election of
directors and shares held of record by nominees who are present in person
or by proxies but do not have authority to vote the shares for the election
of directors. However, if a quorum is present, directors are elected by a
plurality of votes actually cast in the election.
ELECTION OF DIRECTORS
In accordance with the Company's Restated Certificate of Incorporation
and By-laws, the Company's directors are elected to staggered terms on a
classified Board of Directors. At this Annual Meeting of Stockholders,
three directors will be elected to Class III of the Board of Directors, to
hold office for a term of three years, until the Annual Meeting of
Stockholders in 1997, and until their respective successors are duly
elected and have qualified. The election of each director is to be by a
plurality of the votes cast in each case by holders of Common Stock.
Proxies which the Company receives will be voted as directed on the proxy,
and if no direction is given, proxies will be voted for the election of the
three nominees in Class III named below as directors.
In the event of the inability or unwillingness of one or more of these
nominees to serve as a director at the time of said meeting, or of any
adjournment thereof, the shares represented by the proxies may (in the
discretion of the holders of said proxies) be voted for other nominees not
named herein, in lieu of those unable or unwilling to serve. Each of the
nominees has consented to be named and to serve if elected. Management is
not aware that any of the nominees will be unable to serve.
Two of the nominees as directors in Class III, Mr. Lewis and Mr.
Wilkens, are presently serving as directors. Mr. Wilkens has done so for
more than ten years. Mr. Lewis was elected in 1993 by the Board of
Directors to complete the unexpired term of Mr. E. H. Dickol, who retired.
The Board has proposed Dr. Aelred J. Kurtenbach for election as Director to
succeed Calvin Vaudrey, who is retiring from the Board.
The following information, including principal occupation or
employment for the past five or more years, is furnished with respect to
each director whose term of office will continue after this Annual Meeting
and to the following nominees to Class III of the Board of Directors:
Period Age on
Principal Occupation Served as March 1,
Nominee or Employment Director 1994
- ---------------- ------------------------ ---------- --------
Aelred J. Kurtenbach President and Chief Executive -- 60
Officer of Daktronics, Inc.,
manufacturer and seller of
information display systems,
Brookings, South Dakota.
M. D. Lewis President and Chief February 46
Executive Officer since 1993 to
February 1994; Formerly date
Executive Vice President
from May 1993 to February
1994; Executive Vice
President-Corporate
Services from November
1992 to May 1993; Assistant
Secretary from May 1982 to
May 1993; Vice President-
Corporate Services from
1987 to 1992 of the Company,
Huron, South Dakota.
R. A. Wilkens Chairman since February May 1980 65
1994; Formerly President to date
and Chief Executive
Officer from December 1990
to February 1994; President
and Chief Operating Officer
from 1980 to 1990 of the
Company, Huron, South Dakota.
The following information, including principal occupation or
employment for the past five or more years, is furnished with respect to
directors in Class I whose terms expire in 1995:
Period Age on
Principal Occupation Served as March 1,
Director or Employment Director 1994
- ----------------- ------------------------ ---------- --------
Herman Lerdal Banking and Business April 1975 65
Consultant; formerly to date
Banker and College
Development Officer,
Sioux Falls, South Dakota.
Raymond M. Schutz Attorney and partner in October 1990 64
the law firm of Siegel, to date
Barnett & Schutz since
1963, Aberdeen, South
Dakota.
Bruce I. Smith Attorney and partner in May 1989 52
the law firm of Luebs, to date
Leininger, Smith, Busick
& Johnson since 1978,
Grand Island, Nebraska.
The following information, including principal occupation or
employment for the past five or more years, is furnished with respect to
directors in Class II whose terms expire in 1996:
Period Age on
Principal Occupation Served as March 1,
Director or Employment Director 1994
- ---------------- ------------------------ ---------- --------
Larry F. Ness President and Chief August 1991 48
Executive Officer of to date
Dakota Financial Corp.
and Vice Chairman and
Chief Executive Officer
of First Dakota National
Bank, Yankton, South Dakota.
A. D. Schmidt* Formerly Chairman of the April 1965 68
Board from 1980 to to date
February 1994, Chief
Executive Officer from
1965 to December 1990,
and President from 1965
to 1980 of the Company,
Sioux Falls, South Dakota.
W. W. Wood President of W/3 Company, April 1968 67
a diversified investment to date
firm, North Platte,
Nebraska.
*Mr. Schmidt has resigned from the Board, effective April 30, 1994. At the
February 1994 meeting of the Board of Directors, Jerry W. Johnson, who is
53 years old, was elected to complete Mr. Schmidt's unexpired term. Mr.
Johnson, has served as Dean of the School of Business at the University of
South Dakota, Vermillion, SD, since 1990. Prior to being named Dean, Mr.
Johnson was a Professor of Economics at the USD School of Business.
INFORMATION CONCERNING BOARD OF DIRECTORS
There is no family relationship among any of the directors, nominees
or executive officers of the Company.
The preceding information relative to the principal occupation or
employment of each of the nominees, as well as the information hereinafter
set forth as to beneficial ownership of securities of the Company by
directors, nominees and officers of the Company, is based on information
furnished to the Company by such persons.
Meetings of the Board of Directors
The Board of Directors held four regular meetings and two special
meetings during 1993. Each director attended more than 75 percent of the
aggregate of the meetings of the Board of Directors and the committee on
which he served.
Audit Committee
The Board of Directors has a standing Audit Committee which is
composed of not less than three directors who are not employees of the
Company. The present members of the Audit Committee are Larry F. Ness,
Herman Lerdal, and W. W. Wood. The Audit Committee held three meetings
during 1993. The principal functions of the Audit Committee are to
recommend to the Board of Directors the appointment of independent public
accountants to conduct the annual audit of the Company's financial
statements, to review the scope of the annual audit, to approve services
performed by the independent public accountants, considering the possible
effect thereof on their independence, to review the report of the
independent public accountants relating to the annual audit, and to review
the Company's internal financial and accounting controls.
Nominating and Compensation Committee
The Board of Directors also has a standing Nominating and Compensation
Committee which is composed of not less than three directors who are not
employees of the Company. The present members of the Nominating and
Compensation Committee are Bruce I. Smith, Raymond M. Schutz, and Calvin
Vaudrey. The Nominating and Compensation Committee held four meetings
during 1993. The function of the Nominating and Compensation Committee is
to recommend to the Board of Directors the nominees to be presented by the
Board of Directors to the stockholders for election to the Company's Board
of Directors, to recommend to the Board of Directors the persons to be
elected as officers of the Company, and to recommend compensation of
directors and officers of the Company. The Nominating and Compensation
Committee will consider nominees for directors recommended by stockholders.
Such recommendations may be addressed to the Committee, in care of the
corporate office of the Company.
SECURITIES OWNERSHIP BY MANAGEMENT
The following table sets forth information, as of January 1, 1994,
with respect to shares of the Common Stock owned by the directors, nominees
for director, certain executive officers of the Company and by all
directors and officers of the Company as a group:
Amount & Nature
of Beneficial Ownership (1)
Name of ----------------------------- Percent of
Beneficial Owner Individual (2) Joint (3) Common Stock
- ---------------- -------------- --------- ------------
Aelred J. Kurtenbach
Herman Lerdal 608 *
Larry F. Ness 220 *
A. D. Schmidt 9,584 *
Raymond M. Schutz 235 *
Bruce I. Smith 550 *
Calvin Vaudrey 703 *
W. W. Wood 2,127 *
R. A. Wilkens 7,667 4,375 *
M. D. Lewis 4,022 (5) 76 *
A. R. Donnell 3,745 (4) 3,666 *
W. D. Craig 492 276 *
R. R. Hylland 171 *
----- -----
All directors & 53,895 *
executive officers
*Less than 1%.
(1) Shares shown represent both record and beneficial ownership. None of
such shares is subject only to a right to acquire beneficial
ownership.
(2) Shares held individually by employees include shares held by the
Trustee of the Company's Employee Stock Ownership Plan for the benefit
of participating employees.
(3) Shares held jointly owned with spouse or other family member(s) or in
trust with spouse as co-trustee.
(4) Included are 72 shares that Mr. Donnell holds as custodian for his
grandchildren.
(5) Included are 2 shares that Mr. Lewis holds as custodian for his
daughter.
With the exception of Thomas A. Gulbranson, Vice President-Corporate
Services of the Company, none of the directors, nominees and executive
officers of the Company beneficially owns any of the Company's Cumulative
Preferred Stock ($100 par value). Mr. Gulbranson, together with other
family members, jointly owns 13 shares (0.0005%) of the Company's 4 1/2%
Cumulative Preferred Stock.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Executive Management Compensation
The Nominating and Compensation Committee of the Board of Directors
consists of not less than three directors who are not officers or employees
of the Company. It has overall responsibility to nominate persons to serve
as executive officers of the Company and to review and recommend
compensation for the members of the Board of Directors and for the
executive officers. The Committee also reviews and recommends to the full
Board of Directors any benefit plans for officers and employees and any
awards made under the Company's Performance Incentive Plan and Phantom
Stock Unit Plan.
The Nominating and Compensation Committee and the management of the
Company are committed to the principle that compensation should be
commensurate with performance. Base salary compensation is determined by
the potential impact the individual has on the Company, the skills and
experiences required by the job, and the performance and potential of the
incumbent in the job.
The base salary paid to Mr. Wilkens as President and Chief Executive
Officer of the Company was increased in 1993 by $14,097 (8%). In
determining his base salary in 1993, the Committee considered his
individual performance as leader of the Company and his contributions to
the long-term success of the organization. The Committee also compared his
base salary to that of the other midwestern utility companies used in the
management incentive compensation plan.
The philosophy for incentive compensation is to provide rewards when
financial objectives are achieved, and provide reduced or no benefits when
the objectives are not achieved. These objectives are designed to increase
shareholder value. In February, 1989, the Board of Directors adopted a
management incentive compensation plan involving certain eligible employees
of the Company. The purpose of the plan is to motivate and reward
outstanding performance by the executive officers of the Company in meeting
short-term goals which support long-term objectives important to
stockholders and ratepayers. Awards under the plan are based upon the
ranking of the Company's annual performance in four areas of measurement in
relation to a pre-selected comparison group of ten midwestern utilities.
Comparisons are made of four statistical items, two of which are important
to stockholders and two of which are important to ratepayers. If the
Company's annual results in a measured performance area exceed the results
of at least five of the comparison utilities, performance points are
awarded for that performance area. If the total performance points for the
four measured areas exceed a minimum threshold, cash incentive awards
varying from five to twenty-five percent of annual salary will be paid to
the executive officers, unless their employment with the Company has been
terminated for any reason other than death, disability or retirement at age
65 or such earlier date as the Board of Directors designates. The Chief
Executive Officer may increase or decrease the award percentage to certain
officers by as much as 5%, depending on individual performance. The
aggregate amount of annual incentive compensation awards is limited to one
and one-half percent of the net after-tax income of the Company during the
calendar year upon which the awards are based. Awards under the management
incentive compensation plan are made by the Board of Directors, upon
recommendation by the Nominating and Compensation Committee, at the annual
meeting in May of each year.
As a complement to the management incentive compensation plan, the
Board of Directors in 1989 also adopted a long-term incentive compensation
plan which is intended to create incentives for participants relating to
the long-term performance of the Company's Common Stock, to encourage
continued employment with the Company or service on the Board of Directors,
and to promote awareness of the performance of the Company's Common Stock.
All officers and directors of the Company are eligible to participate in
the long-term incentive plan. The Board of Directors determines the
recipients, if any, and the amount of the awards, upon the recommendation
of the Nominating and Compensation Committee. Under the long-term
incentive compensation plan, an annual award of performance units may be
made to any or all directors or officers. A performance unit is equal in
value to the fair market value of one share of the Company's Common Stock.
Because the value of the performance units at any point in time is
established by reference to the fair market value of the Company's Common
Stock, the performance units are sometimes referred to as "phantom stock
units." The annual award of the performance units is held in an account
for the participant for a period of five years, during which time units
equal in value to the dividends paid on the Company's Common Stock are
added to the account. At the end of each five-year rolling period, the
value of the matured account for one year is paid in cash to the recipient
if at that time an officer or director of the Company. If the recipient is
not an officer or director of the Company at the end of the five-year
period, the performance unit award is forfeited unless there has been
death, disability or retirement of the recipient. The value of the award
at maturity is determined by multiplying the accumulated performance units
which have matured by the average of the closing prices of the Company's
Common Stock for the ten days preceding such event. Individual annual
awards may not exceed 200 performance units for directors, 750 units for
the vice presidents of electric and gas operations, 500 units for the other
vice presidents, the controller, or the chairman, or 1200 units for the
chief executive officer. The maximum number of performance units which may
be awarded under the plan is an aggregate of 50,000 units. Awards under
the long-term incentive compensation plan are considered by the Board of
Directors during their annual meeting in May each year. Incentive
compensation awards made in 1993 were consistent with this philosophy and
were based on 1992 results after comparison with ten peer companies.
In 1993 the Board of Directors retained the consulting firm Hewitt
Associates to review its employee and director compensation plans and to
make recommendations to the Board for consideration in 1994.
NOMINATING AND COMPENSATION COMMITTEE
Bruce I. Smith, Chairman Raymond M. Schutz Calvin Vaudrey
The following table sets forth the cash compensation paid by the
Company during the fiscal years indicated for services in all capacities to
the five most highly compensated executive officers whose total cash
compensation exceeded $100,000:
Summary Compensation Table
Annual Compensation(1)
Name and ---------------------- All Other
Principal Position Year Salary($) Bonus(2)($) Compensation(4)($)
- ------------------------ ---- --------- ----------- ------------------
R. A. Wilkens 1993 180,814 (3) 15,369
Former President & 1992 166,717 0 16,594
Chief Executive Officer 1991 154,713 32,040
M. D. Lewis 1993 98,771 (3) 6,634
President & Chief 1992 82,412 0 6,667
Executive Officer 1991 76,208 13,430
A. R. Donnell 1993 93,332 (3) 7,937
Vice President- 1992 89,208 0 6,652
Electric Operations 1991 84,208 14,790
W. D. Craig 1993 89,979 (3) 6,125
Vice President- 1992 84,479 0 4,887
Gas Operations 1991 79,896 15,580
R. R. Hylland 1993 84,458 20,000 (3) 4,102
Vice President-Finance 1992 76,208 0 2,658
& Corporate Development 1991 71,333 14,060
& Treasurer
(1) Certain employee benefits are not reported as compensation in this
table, when by reason of their nature or amount, they are not required
to be set forth herein under applicable rules of the Securities
Exchange Commission.
(2) The amounts in the bonus column for 1991 are cash awards pursuant to
the Company's Performance Incentive Plan, which is described under
Executive Management Compensation. During 1993 no awards were made to
employees for the 1992 plan year. The Company did award a cash bonus
to Mr. Hylland as shown in the table for his efforts related to the
LodgeNet Entertainment Corporation initial public offering in 1993.
(3) The award earned by the executives in 1993, if any is to be paid under
the Performance Incentive Plan, will be determined in May 1994.
(4) The amounts in this column include the Company's contributions to the
Employee Savings Plan (described below) for the executives and to the
Employee Stock Ownership Plan (described below) as well as the amounts
paid by the Company with respect to term life insurance for the
benefit of the executives. For the executives named in this table,
for 1993 such amounts under the Employee Savings Plan, ESOP Plan, and
life insurance respectively, were as follows: Mr. Wilkens: $4,497,
$7,357, and $3,515; Mr. Lewis: $2,963, $2,823, and $848; Mr. Donnell:
$2,800, $3,691, and $1,446; Mr. Craig: $2,699, $1,507, and $1,919;
and Mr. Hylland: $2,534, $1,176, and $392.
Long-Term Incentive Plan
Performance or Other
Period Until
Name Number of Units* Maturation or Payout
- ----------------- --------------- --------------------
R. A. Wilkens 1,080 5 years
M. D. Lewis 900 5 years
A. R. Donnell 675 5 years
W. D. Craig 675 5 years
R. R. Hylland 450 5 years
*The amounts in this column represent the phantom stock awards made
during 1993 pursuant to the Company's Long-Term Incentive Compensation
Plan, which is described under Executive Management Compensation.
No Stock Option or SAR Tables
Tables showing grants or exercises of stock option grants or stock
appreciate rights are not included in this report because the Company does
not provide these benefits as compensation to its directors or executive
officers.
Director Compensation
Directors who are not officers of the Company are paid $2,600 each
quarter for serving on the Board of Directors and an attendance fee of
$1,100 for attendance at each regular or special meeting of the Board of
Directors. Directors are also paid $700 for each meeting of the committee
on which such director serves and $300 for each quarter during which they
serve as chairman of a committee of the Board of Directors. Directors may
elect to defer receipt of their compensation as directors until they cease
to be directors. The deferred compensation may be invested in an account
which earns interest at the same rate as accounts in the employee savings
plan or in a deferred compensation unit account in which the deferred
compensation is converted into deferred compensation units on the basis
that each unit is at the time of investment equal in value to the fair
market value of one share of the Company's Common Stock, sometimes referred
to as "phantom stock units." Additional units based on the dividends paid
on the Company's Common Stock are added to the directors' deferred
compensation unit account. Following the director's retirement, the value
of the deferred compensation units is paid in cash in an amount determined
by multiplying the accumulated deferred compensation units by the average
of the closing prices of the Company's Common Stock for the ten days
preceding such event. Directors who are also officers are not separately
compensated for services as a director. Mr. A. D. Schmidt, as Chairman of
the Board, has been paid an annual fee of $84,150, payable monthly, in lieu
of the normal director's fees. In addition, the Board of Directors awarded
Mr. Schmidt a bonus of $10,000 for his efforts related to the LodgeNet
Entertainment Corporation initial public offering. Mr. Schmidt, who
resigned as Chairman, effective February 1, 1994, and who announced his
intention to resign as a member of the Board, effective April 30, 1994,
also received a cash distribution of $28,065 for his account balance under
the long-term incentive compensation plan.
In 1987, directors approved a retirement plan for outside (non-
employee) directors who have served as an outside director of the Company
for at least five years. Upon retiring as a director, the retired director
is entitled to receive retirement benefits equal to the quarterly retainer
fee then paid to active outside directors of the Company. If the outside
director retires before reaching age seventy, the retirement benefit to be
paid upon retirement is reduced by five per cent for each year of age less
than age seventy at the time of retirement. In no event is any retirement
benefit paid to any retired director prior to age sixty-five or after the
death of the retired director.
Employee Savings Plan
In 1984, the Company adopted and implemented an employee savings plan
which permits all employees to defer receipt of compensation as provided in
Section 401(k) of the Internal Revenue Code. Under the provisions of this
savings plan, any employee may elect to direct that up to twelve percent
(12%) of his or her gross compensation be paid to the plan administrator
for the employee's account. Any amount so deferred by the employee, up to
a present maximum of $8,994, is exempt from current federal income tax.
Directors who are not employees are not eligible to participate in this
plan. To encourage participation in this employee savings plan, the
Company contributes to the account of participating employees 50 cents for
each one dollar contributed by the employee, up to a maximum Company contri
bution of three percent (3%) of the employee's gross compensation. Upon
retirement from the Company, employees may receive distributions from their
savings accounts held by the plan administrator.
Employee Stock Ownership Plan
In 1976, the Board of Directors adopted the Company's Employee Stock
Ownership Plan ("ESOP") pursuant to the provisions of the Tax Reduction Act
of 1975 and the Tax Reform Act of 1976. All full-time employees who are at
least 21 years old and have one year of service with the Company are
eligible to participate in the ESOP, but directors who are not also full-
time employees of the Company do not qualify to participate. The ESOP is
funded entirely with federal income tax savings which result from tax laws
applicable to such employee benefit plans. Shares of stock acquired by the
ESOP as a result of the federal income tax savings are allocated to
participants' accounts in proportion to the compensation of employees
during the particular year for which allocation is made. Under the
provisions of the ESOP, shares held for a participant's account may be
distributed to the participant or sold on behalf of the participant upon
retirement from employment with the Company. Prior to distribution,
dividends paid on shares in the participant's account are reinvested in
additional shares.
Pension Plan
The Company has a Pension Plan in which all employees 21 years of age
and over are eligible to participate after one year of service. Directors
who are not employees are not eligible to participate in the Pension Plan.
The Pension Plan is a non-contributory funded plan providing an annual
pension benefit upon normal retirement at age 62 or early retirement to
those employees meeting the eligibility requirements under the Pension
Plan. The amount of the annual pension is based upon average annual
earnings for the five consecutive highest paid calendar years during the 10
years immediately preceding retirement. Upon retirement on the normal
retirement date, the annual pension to which an eligible employee becomes
entitled under the present Pension Plan amounts to 1.34% of average annual
earnings up to the Covered Compensation base plus 1.75% of such earnings in
excess of the Covered Compensation base, multiplied by all years of
credited service. Covered Compensation is determined for each employee as
the average of the taxable wage bases for Social Security tax purposes in
each of the calendar years during the period beginning with the later of
the year in which the employee reached 30 or 1961 and ending with the
calendar year in which the employee reaches age 64. The annual pension
benefit is not subject to any deduction for Social Security Benefits or
other offset amounts.
Based upon average annual compensation and years of credited service
as illustrated in the table below, the annual pension commencing at normal
retirement for retirements processed in 1994 based on the provisions of the
Pension Plan as it existed on December 31, 1993, would be:
Average Years of Service
Annual ----------------------------------------------------------
Earnings 15 20 25 30 35 40
- -------- ------- ------- ------- -------- -------- --------
$ 25,000... $ 5,067 $ 6,756 $ 8,446 $ 10,135 $ 11,824 $ 13,513
50,000... 11,630 15,506 19,383 23,260 27,136 31,013
75,000... 18,192 24,256 30,321 36,385 42,449 48,513
100,000... 24,755 33,006 41,258 49,510 57,761 66,013
125,000... 31,317 41,756 52,196 62,635 73,074 83,513
150,000... 37,880 50,506 63,133 75,760 88,386 101,013
175,000... 44,442 59,256 74,071 88,885 103,699 118,513
200,000... 51,005 68,006 85,008 102,010 119,011 136,013
The years of credited service under the Pension Plan for the executive
officers shown in the preceding summary compensation table are as follows:
R. A. Wilkens, 40 years; M. D. Lewis, 18 years; A. R. Donnell, 23 years;
W. D. Craig, 10 1/2 years; R. R. Hylland, 4 years.
The Employee Retirement Income Security Act of 1974 ("ERISA"), as
amended, places limitations on the amount of the annual pension which can
be paid from a tax-qualified pension plan. Under certain circumstances,
the pension benefit to which an employee of the Company is entitled under
the Company's Pension Plan may exceed the limitations under ERISA. In
1987, the Board of Directors adopted a Pension Equalization Plan, as
permitted by ERISA, which provides for payment to retired employees of the
amount by which the normal pension benefit determined in accordance with
the formula provided in the Pension Plan exceeds the ERISA limitations. In
this manner, all employees are treated equally in accordance with the terms
of the Pension Plan.
In 1989, the Board of Directors agreed to assure Mr. Craig a pension
benefit equivalent to that which would be provided by the Company's Pension
Plan if he were given credit for his 5 1/2 years of prior service with
another utility company in addition to his years of service with the
Company. As a result, Mr. Craig presently has 10 1/2 years of credited
service for the purpose of determination of retirement benefits.
Salary Continuation Plan
In 1983, the Company implemented a non-qualified salary continuation
plan for directors and selected management employees. In 1993 a total of
58 directors and eligible employees participated in this plan. The plan
provides for certain amounts of salary continuation in the event of death
before or after retirement, or in the alternative, certain supplemental
retirement benefits in lieu of any death benefits after age 65. Generally,
death benefits will vary from 45% to 75% of salary for up to 15 years, and
supplemental retirement benefits from 25% to 40% of current salary. Life
insurance is carried on each plan participant in favor of the Company to
indirectly fund future benefit payments. Part of the cost of the life
insurance carried by the Company is allocated to participants in the plan.
The program is designed so that if assumptions made as to mortality
experience, policy dividends or credits, and other actuarial factors are
realized, the Company will more than recover its cost of this program.
Consequently, the cost of any one individual participant cannot be properly
allocated or determined because of the overall actuarial plan assumptions
and the cost recovery feature of the plan. Therefore, no amount
attributable to this plan has been included in the summary compensation
table above.
Termination Benefit Agreements
The Company has agreements with Messrs. Lewis, Donnell, Craig,
Hylland, and five other officers which provide termination benefits to
those officers if their employment by the Company terminates for any reason
(other than death, disability, retirement at 65 or discharge for gross
misconduct in the performance of employment duties that materially injures
the Company) within one year after a change-of-control event. A "change-of-
control" event occurs either (i) if the Company is acquired, or if 20% of
its outstanding Common Stock is acquired, by a party who does not obtain
the approval of the Company's Board of Directors prior to the transaction
and prior to acquiring as much as 5% of the Company's Common Stock or (ii)
if such an acquisition occurs with the approval of the Company's Board but
only after some other party has acquired, or disclosed its intention to
attempt to acquire, at least 20% of the Company's Common Stock without the
Board's approval having been obtained before such other party has acquired
as much as 5% of the Company's Common Stock. As part of the termination
benefits, for 36 months following such termination, or, if earlier, until
he attains age 65 or dies, the Company must pay the officer a cash amount
per month equal to 1/12th of his highest annual salary during the three
years preceding the termination and must provide the officer with health,
disability and life insurance coverages in amounts substantially equal to
those he was receiving at the time of the termination. Also, on his normal
retirement date, the Company must pay the officer, or his estate in the
event of his death, a lump sum amount equal to the actuarial equivalent of
the additional retirement benefits that would have been due under the
Company's pension plans, if his employment had continued for the period for
which the benefits referred to in the preceding sentence are payable. All
of the foregoing benefits are subject to reduction to the extent necessary
to avoid being subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1954, as amended, with respect to excess
"parachute payments" under Section 180G of such Code. The termination
benefits under each of the agreements are to be provided regardless of
whether the officer is able to obtain other employment. Each agreement is
in effect for a term of three years, provided that another year is
automatically added to the term on each anniversary date unless either
party has given the other notice that it does not wish to extend the term.
In each agreement, the officer agrees not to voluntarily terminate his
employment with the Company without giving at least 60 days prior notice
and to assist in training his successor during such 60 days. Further, the
officer agrees that, during the period termination benefits are provided,
he will hold in confidence confidential Company information, consult with
the Company on matters pertaining to the Company's business, be a witness
for the Company in litigation arising out of pre-termination events and
refrain from competition with any business in which the Company or a
subsidiary was engaged at the time of termination.
PERFORMANCE GRAPH
The following Stock Price Performance Graph compares the cumulative
total return* on the Company's Common Stock, the S&P Stock Index and an
Edison Electric Institute peer group index of 42 combination gas and
electric utility companies** for a five year period:
(graph)
NWPS S&P 500 EEI Peer
---- ------- --------
Base 12/30/88 $100 $100 $100
1989 123.200 131.69 129.123
1990 136.202 127.60 127.505
1991 181.975 166.47 165.346
1992 209.776 179.15 180.435
1993 227.068 197.21 201.409
*Cumulative total return assumes quarterly reinvestment of dividends.
**Baltimore Gas & Electric Co., Central Hudson Gas & Elec. Corp., Cilcorp
Inc., Cincinnati Gas & Electric, Cipsco Inc., CMS Energy Corp.,
Commonwealth Energy System, Consolidated Edison Co. of N.Y., Delmarva
Power & Light Co., DPL Inc., IES Industries Inc., Illinois Power Co.,
Interstate Power Co., Iowa-Illinois Gas & Elec. Co., LG&E Energy Corp.,
Long Island Lighting Co., Madison Gas & Electric Co., Midwest Resources
Inc., Montana Power Co., New York State Elec. & Gas Corp., Niagara
Mohawk Power, Nipsco Industries Inc., Northern States Power Co.,
Northwestern Public Service Co., Orange & Rockland Utilities, Inc.,
Pacific Gas & Electric Co., Philadelphia Electric Co., Public Service
Co. of Colo., Public Service Co. of New Mexico, Public Service
Enterprise Group, Rochester Gas & Electric Corp., San Diego Gas &
Electric Co., Scana Corp., Sierra Pacific Resources, Southern Indiana
Gas & Elec. Co., St Joseph Light & Power Co., Utilicorp United,
Washington Water Power Co., Western Resources, Wisconsin Energy Corp.,
Wisconsin Public Service, and WPL Holdings Inc.
ANNUAL REPORT
A copy of the Company's Annual Report for the year ended December 31,
1993, has been sent to all stockholders of record as of March 7, 1994, the
record date for the determination of stockholders entitled to vote at the
Annual Meeting of Stockholders.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen & Co. has served as the Company's independent public
accountants continuously since 1932. Upon the recommendation of the Audit
Committee, the Board of Directors have selected Arthur Andersen & Co. to
serve as the Company's independent public accountants during the current
year. Representatives of Arthur Andersen & Co. will attend the Annual
Meeting of Stockholders and will have the opportunity to make a statement
if they desire to do so and to respond to appropriate questions.
During 1993, the Company also engaged Arthur Andersen & Co. to render
certain non-audit professional services. The Audit Committee of the Board
of Directors approved the audit and non-audit services and considered the
possible effect of the non-audit services on the independence of the
accountants prior to the time the services were rendered.
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholders who wish to present proposals for consideration at the
1995 Annual Meeting of Stockholders must submit their proposals, together
with any supporting statements, to the Company on or before November 15,
1994. Proposals should be sent to the Corporate Secretary at the corporate
office of the Company.
OTHER MATTERS
The management does not know of any matter to be brought before the
meeting, other than the matters described in the Notice of Annual Meeting
accompanying this Proxy Statement. The persons named in the form of proxy
solicited by the Board of Directors will vote all proxies which have been
properly executed, and if any matters not set forth in the Notice of Annual
Meeting are properly brought before the meeting, such persons will vote
thereon in accordance with their best judgment.
By order of the Board of Directors
/s/ Alan D. Dietrich
ALAN D. DIETRICH
Vice President - Legal
& Corporate Secretary
Northwestern Public Service Company
March 15, 1994
PLEASE COMPLETE, SIGN, AND RETURN PROMPTLY THE ENCLOSED PROXY SO THAT
YOUR STOCK MAY BE REPRESENTED AND VOTED AT THE ANNUAL MEETING.
MANAGEMENT HEREBY UNDERTAKES TO PROVIDE TO EACH STOCKHOLDER WHOSE
PROXY IS SOLICITED FOR THE 1994 ANNUAL MEETING, UPON WRITTEN REQUEST AND
WITHOUT CHARGE, A COPY OF THE COMPANY'S 1993 ANNUAL REPORT (FORM 10-K) TO
THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS SHOULD BE DIRECTED TO
ALAN D. DIETRICH, VICE PRESIDENT - LEGAL & CORPORATE SECRETARY,
NORTHWESTERN PUBLIC SERVICE COMPANY, 33 THIRD ST. SE, P. O. BOX 1318,
HURON, SOUTH DAKOTA 57350-1318.
IMPORTANT:
PLEASE SIGN AND
RETURN THE ENCLOSED
PROXY PROMPTLY.
(PROXY CARD)
NORTHWESTERN PUBLIC SERVICE COMPANY
Huron, South Dakota 57350
PROXY FOR 1994 ANNUAL MEETING OF STOCKHOLDERS
Solicited on behalf of the Board of Directors
The undersigned hereby appoints R. A. Wilkens and M. D. Lewis, or
either of them, proxies of the undersigned, each with the power of
substitution, to represent and vote all shares of Common Stock of
Northwestern Public Service Company held of record by the undersigned on
March 7, 1994, at the Annual Meeting of the Stockholders of the Company to
be held on May 4, 1994, and at any adjournments thereof, in accordance with
the Notice and Proxy Statement received, as follows:
1. ELECTION OF CLASS III DIRECTORS
(Mark only one box) FOR all nominees listed below
(except as marked to the contrary)
WITHHOLD AUTHORITY
to vote for all nominees listed below
Nominees: Aelred J. Kurtenbach
M. D. Lewis
R. A. Wilkens
(Instruction: To withhold authority to vote for any individual
nominee, print that nominee's name on the line provided below.)
--------------------------------------------------------------------
2. Upon such other matters as may come before said meeting or any
adjournments thereof.
(Please sign on reverse side)
(continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES NAMED IN ITEM 1.
Dated , 1994
- ------------------------------------ ----------------------------------
(Signature) (Signature)
Please sign above exactly as your name appears on this card. Joint owners
should each sign personally. Corporation proxies should be signed by
authorized officer. Executors, administrators, trustees, etc., should so
indicate when signing.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
