NORTHWESTERN PUBLIC SERVICE COMPANY
Huron, South Dakota
NOTICE OF
ANNUAL MEETING
AND PROXY STATEMENT
Annual Meeting
of Stockholders
May 3, 1995
NORTHWESTERN PUBLIC SERVICE COMPANY
Corporate Office
33 Third St. SE
P. O. Box 1318
Huron, South Dakota 57350-1318
March 24, 1995
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 3,
1995, 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 I 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 of the
Company 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
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 3, 1995, at
11:00 a.m., local time, for the following purposes:
(1) To elect three members of Class I of the Board of Directors of the
Company to hold office until the Annual Meeting of Stockholders in 1998,
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 6, 1995, 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-Corporate Services
and Corporate Secretary
March 24, 1995
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 3, 1995
This statement is expected to be mailed to stockholders on March 24,
1995, 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 3, 1995. 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 6,
1995, 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 6, 1995,
there were outstanding 7,677,232 shares of Common Stock. The only person
known to the Company to own beneficially (as defined by the Securities and
Exchange Commission for proxy statement purposes) more than 5% of the
outstanding Common Stock of the Company is the Northwestern Public Service
Company Employee Stock Ownership Plan and Trust (ESOP), whose Trustee is a
committee of employees of the Company, 33 3rd Street SE, Huron, South
Dakota 57350. The ESOP is beneficial owner of 622,063 shares (8.10%) of
the outstanding Common Stock of the Company. The Common Shares owned by
the ESOP are held in trust for the benefit of participants in the ESOP, and
the Trustee has sole investment power over the Common Shares held in trust.
Employee participants are entitled to instruct the Trustee on how to vote
all Company Common Shares allocated to their accounts (presently 423,272)
and will receive a separate Proxy for voting such shares. All Common
Shares held by the ESOP (presently 198,791 shares) will be voted by the
Trustee.
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 I of the Board of Directors, to
hold office for a term of three years, until the Annual Meeting of
Stockholders in 1998, 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 I 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.
All of the nominees as directors in Class I are presently serving as
directors and have done so for more than four years.
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 I of the Board of Directors:
Period Age on
Principal Occupation Served as March 1,
Nominee or Employment Director 1995
---------------- ------------------------ ---------- --------
Herman Lerdal Banking and Business April 1975 66
Consultant; formerly to date
Banker and College
Development Officer,
Sioux Falls, South Dakota.
Raymond M. Schutz Attorney and partner in October 1990 65
the law firm of Siegel, to date
Barnett & Schutz since
1963, Aberdeen, South
Dakota.
Bruce I. Smith Attorney and partner in May 1989 53
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 1995
----------------- ------------------------ ---------- --------
Larry F. Ness President and Chief August 1991 49
Executive Officer of to date
Dakota Financial Corp.
and Vice Chairman and
Chief Executive Officer
of First Dakota National
Bank, Yankton, South Dakota.
Jerry W. Johnson Dean of the School of May 1994 54
Business, University of to date
South Dakota, Vermillion,
South Dakota since 1990;
formerly Professor of
Economics of USD School of
Business.
W. W. Wood President of W/3 Company, April 1968 68
a diversified investment to date
firm, North Platte,
Nebraska.
The following information, including principal occupation or
employment for the past five or more years, is furnished with respect to
directors in Class III whose terms expire in 1997:
Period Age on
Principal Occupation Served as March 1,
Director or Employment Director 1995
---------------- ------------------------ ---------- --------
Aelred J. Kurtenbach President and Chief May 1994 61
Executive Officer of to date
Daktronics, Inc.,
manufacturer of large
computer programmable
displays, Brookings,
South Dakota.
M. D. Lewis President and Chief February 1993 47
Executive Officer since to date
February 1994; Formerly
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 66
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.
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 1994. 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 Herman Lerdal,
Jerry W. Johnson and Bruce I. Smith. The Audit Committee held two meetings
during 1994. 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 Raymond M. Schutz, Aelred J. Kurtenbach, Larry
F. Ness and W. W. Wood. The Nominating and Compensation Committee held
four meetings during 1994. 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, 1995,
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 executive 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 206 *
Jerry W. Johnson 250 *
Herman Lerdal 751 *
Larry F. Ness 234 *
Raymond M. Schutz 847 *
Bruce I. Smith 1,108 *
W. W. Wood 2,258 *
R. A. Wilkens 8,422 3,845 *
M. D. Lewis 4,422 388 *
A. R. Donnell 4,182 (4) 3,563 *
R. F. Leyendecker 5,276 *
W. D. Craig 661 293 *
R. R. Hylland 281 *
------ ------
All directors &
executive officers 38,022 10,872 *
*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).
(4) Included are 129 shares that Mr. Donnell holds as custodian for his
grandchildren.
With the exception of Thomas A. Gulbranson, Vice President 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. The Committee 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.
Mr. Lewis was paid $140,000 as a transitional base salary as the
incoming President and Chief Executive Officer of the Company until May,
1994 when his base salary was set at $184,000. In determining his base
salary, the Committee considered his responsibilities as leader of the
Company and 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, and his base
salary is in the low end of the range of chief executive officers compared.
For the other named executive officers of the Company, their base salaries
are also based upon their respective responsibilities in the organization,
and when compared to the other midwestern utility companies, are in the low
end of the range of similar positions with such companies.
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 the
Company's Performance Incentive Plan which is 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 and managers 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 three factors measuring
annual performance: (1) a ranking of the Company's performance in four
areas of measurement in relation to a pre-selected comparison group of ten
midwestern utilities in four statistical areas (the comparison group is
made up of neighboring utility companies, some of which are combination gas
and electric utilities and some of which are electric utilities), (2) the
Company's achievement of two overall objectives established at the
beginning of the year by the Nominating and Compensation Committee, and (3)
an individual employee's achievement of management-established individual
or department goals. At the end of the year, a percentage is computed and
totaled for each eligible employee for each of the factors, with the first
factor carrying 50% of the weight, and the other factors each carrying 25%.
If the eligible employee's composite level is 25% or greater, a cash
incentive award varying from five to twenty-five percent of annual salary
will be paid to the employee, unless 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. 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.
In August 1994, the Board of Directors adopted an incentive
compensation plan for the officers and directors of Northwestern Growth
Corporation (NGC), the Company's wholly owned subsidiary which manages
its nonutility investments. Under the plan, the NGC officers and directors
may receive incentive compensation awards based upon improvements in the
after-tax investment returns above the returns previously achieved in such
investments. Mr. Hylland as NGC President and Chief Operating Officer
shall be excluded from the Company's Performance Incentive Plan to the
extent awards are made under the NGC plan, and other NGC officers,
directors, or employees shall have any awards under the Company's
Performance Incentive Plan reduced by up to 50% for awards made under this
plan.
As a complement to the Company's Performance Incentive 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 he or she at that time is 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 a termination due to 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 are set at 200 performance units for
directors. For executive officers, individual annual awards are considered
by the Board of Directors during their annual meeting in May each year.
Incentive compensation awards made in 1994 were based upon the Company's
Common Stock performance and the Board's evaluation of the individual
executives' contributions to the Company's success.
NOMINATING AND COMPENSATION COMMITTEE
Raymond M. Schutz, Chairman Aelred J. Kurtenbach
Larry F. Ness W. W. Wood
The following table sets forth the compensation paid by the Company
during the fiscal years indicated for services in all capacities to the two
officers who served as chief executive officer during 1994 and to the four
most highly compensated of the other executive officers whose total salary
and bonus exceeded $100,000:
Summary Compensation Table
Long-
Term All
Annual Compensation(1) Compen- Other
Name and ---------------------- sation Compen-
Salary Bonus(2) Payout(4) sation(5)
Position Year ($) ($) ($) ($)
--------------- ---- --------- ----------- --------- ----------
R. A. Wilkens 1994 23,375 (3) (6) 17,458
President & 1993 180,814 28,500 0 15,369
Chief Execu- 1992 166,717 0 0 16,594
tive Officer
until February,
1994; Chairman
of the Board
thereafter
M. D. Lewis 1994 157,000 (3) 11,171 14,312
President & 1993 98,771 15,900 0 6,634
Chief Execu- 1992 82,412 0 0 6,667
tive Officer
A. R. Donnell 1994 99,829 (3) 16,757 13,380
Vice President- 1993 93,332 14,460 0 7,937
Energy 1992 89,208 0 0 6,652
Operations
R. R. Hylland 1994 95,242 (3) 0 5,516
Vice President- 1993 84,458 33,500 0 4,102
Finance & 1992 76,208 0 0 2,658
Corporate
Development
W. D. Craig 1994 94,667 (3) 16,757 7,295
Vice President 1993 89,979 11,100 0 6,125
1992 84,479 0 0 4,887
R.F. Leyendecker 1994 90,708 (3) 11,171 12,664
Vice President- 1993 86,215 23,850 0 8,616
Energy Services 1992 82,667 0 0 8,343
(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 1993 are cash awards pursuant to
the Company's Performance Incentive Plan, which is described under
Executive Management Compensation, and in addition, the Company
awarded special cash bonuses to Mr. Hylland and to Mr. Leyendecker of
$20,000 and $15,000, respectively, which sums are included in the 1993
total. No awards were made to executive officers for the 1992 plan
year.
(3) The award earned by the executives in 1994, if any is to be paid under
the Performance Incentive Plan, will be determined in May 1995.
(4) The amounts in this column represent the cash payout from the
Company's Long-Term Incentive Compensation Plan at the end of the five-
year period since the award was made in 1989.
(5) 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 1994 such amounts under the Employee Savings Plan, ESOP Plan, and
life insurance respectively, were as follows: Mr. Wilkens: $561,
$13,382, and $3,515; Mr. Lewis: $4,620, $7,241, and $2,451; Mr.
Donnell: $2,995, $6,614, and $3,771; Mr. Hylland: $2,857, $1,298,
and $1,361; Mr. Craig: $2,840, $1,934, and $2,521; and Mr.
Leyendecker: $2,721, $8,229, and $1,714.
(6) The payout of Mr. Wilkens' accumulated performance units is discussed
below in Director Compensation.
Long-Term Incentive Plan
Performance or Other
Period Until
Name Number of Units* Maturation or Payout
----------------- --------------- --------------------
M. D. Lewis 1,250 5 years
A. R. Donnell 516 5 years
R. R. Hylland 482 5 years
W. D. Craig 496 5 years
R. F. Leyendecker 474 5 years
*The amounts in this column represent the phantom stock awards made
during 1994 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
appreciation 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 $2,800 each
quarter for serving on the Board of Directors and an attendance fee of
$1,000 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. R. A. Wilkens, as Chairman of
the Board, has been paid an annual fee of $50,000 payable monthly, in lieu
of the normal director's fees. Upon Mr. Wilkens' retirement as Chief
Executive Officer and Mr. Vaudrey's retirement as a director, they were
paid their accumulated performance units: $163,616 and $28,668,
respectively, under the Company's 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
or that director's surviving spouse is entitled to receive retirement
benefits equal to the quarterly retainer fee then paid to active outside
directors of the Company for the same number of months as he served as a
director. If the outside director retires before reaching age sixty-five,
the retirement benefit to be paid upon retirement is reduced by five per
cent for each year of age less than age sixty-five at the time of
retirement. In no event is any retirement benefit paid to any retired
director prior to age sixty-five.
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 $9,240, 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
contribution 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 with federal income tax savings which result from tax laws
applicable to such employee benefit plans. Shares of stock acquired by the
ESOP are allocated to participants' accounts in proportion to the compensa
tion 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 1995 based on the provisions of the
Pension Plan as it existed on December 31, 1994, would be:
Average Years of Service
Annual ----------------------------------------------------------
Earnings 15 20 25 30 35 40
-------- ------- ------- ------- -------- -------- --------
$ 25,000... $ 4,968 $ 6,625 $ 8,281 $ 9,937 $ 11,593 $ 13,249
50,000... 11,531 15,375 19,218 23,062 26,905 30,749
75,000... 18,093 24,125 30,156 36,187 42,218 48,249
100,000... 24,656 32,875 41,093 49,312 57,530 65,749
125,000... 31,218 41,625 52,031 62,437 72,843 83,249
150,000... 37,781 50,375 62,968 75,562 88,155 100,749
175,000... 44,343 59,125 73,906 88,687 103,468 118,249
200,000... 50,906 67,875 84,843 101,812 118,780 135,749
225,000... 57,468 76,625 95,781 114,937 134,093 153,249
250,000... 64,031 85,375 106,718 128,062 149,405 170,749
The years of credited service under the Pension Plan for the executive
officers shown in the preceding summary compensation table are as follows:
M. D. Lewis, 19 years; A. R. Donnell, 24 years; R. R. Hylland, 5 years; W.
D. Craig, 11 1/2 years; R. F. Leyendecker, 20 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 11 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 1994 a total of
66 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, Hylland,
Craig, Leyendecker, 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 the officer attains age 65 or dies, the Company must pay the
officer a cash amount per month equal to 1/12th of his or her 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 or she was receiving at the time of
the termination. Also, on the officer's normal retirement date, the
Company must pay the officer, or his or her estate in the event of 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 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 12/30/89 $100 $100 $100
1990 110.557 97 98.75
1991 147.702 126 128.05
1992 170.268 136 140.94
1993 184.288 150 157.45
1994 182.061 152 137.19
*Cumulative total return assumes quarterly reinvestment of dividends.
**Baltimore Gas & Electric Co., Central Hudson Gas & Elec. Corp., CILCORP
Inc., CINergy, Inc., CIPSCO Inc., CMS Energy Corp., Commonwealth Energy
System, Consolidated Edison Co. of N.Y., Delmarva Power & Light Co., DPL
Inc., IES Industries, Inc., Illinova Corp., 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 Corp., NIPSCO
Industries, Inc., Northern States Power Co., Northwestern Public Service
Co., Orange & Rockland Utilities, Inc., Pacific Gas & Electric Co., PECO
Energy, Public Service Co. of Colo., Public Service Co. of New Mexico,
Public Service Enterprise Group, Inc., 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, Inc., Washington Water Power Co., Western Resources, Inc.,
Wisconsin Energy Corp., WPS Resources, and WPL Holdings, Inc.
ANNUAL REPORT
A copy of the Company's Annual Report for the year ended December 31,
1994, has been sent to all stockholders of record as of March 6, 1995, the
record date for the determination of stockholders entitled to vote at the
Annual Meeting of Stockholders.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP 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 LLP to
serve as the Company's independent public accountants during the current
year. Representatives of Arthur Andersen LLP 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 1994, the Company also engaged Arthur Andersen LLP 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
1996 Annual Meeting of Stockholders must submit their proposals, together
with any supporting statements, to the Company on or before November 15,
1995. 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-Corporate Services
and Corporate Secretary
Northwestern Public Service Company
March 24, 1995
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 1995 ANNUAL MEETING, UPON WRITTEN REQUEST AND
WITHOUT CHARGE, A COPY OF THE COMPANY'S 1994 ANNUAL REPORT (FORM 10-K) TO
THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS SHOULD BE DIRECTED TO
ALAN D. DIETRICH, VICE PRESIDENT-CORPORATE SERVICES AND 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 1995 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 6, 1995, at the Annual Meeting of the Stockholders of the Company to
be held on May 3, 1995, and at any adjournments thereof, in accordance with
the Notice and Proxy Statement received, as follows:
1. ELECTION OF CLASS I 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: Herman Lerdal
Raymond M. Schutz
Bruce I. Smith
(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 , 1995
------------------------------------ ----------------------------------
(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.
