NORTHWESTERN PUBLIC SERVICE COMPANY
Huron, South Dakota
NOTICE OF
ANNUAL MEETING
AND PROXY STATEMENT
Annual Meeting
of Stockholders
May 1, 1996
NORTHWESTERN PUBLIC SERVICE COMPANY
Corporate Office
33 Third St. SE
P. O. Box 1318
Huron, South Dakota 57350-1318
March 15, 1996
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of
Northwestern Public Service Company, which will be held at the Company's
Operations Center, 600 Market Street, Huron, South Dakota on May 1, 1996,
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.
The formal Notice and Proxy Statement describe the matters scheduled
to be acted upon at the meeting. In addition to the election of directors
on which only the holders of the Common Stock of the Company will be
entitled to vote, five very important amendments to the Company's Restated
Certificate of Incorporation will be considered and voted upon. Of the
five amendments, only the holders of the Common Stock of the Company will
be entitled to vote on the amendment to increase the authorized number of
shares of the Company's Preference Stockholders. The remaining four
amendments involve the Company's Cumulative Preferred Stock and the holders
of the Cumulative Preferred Stock, as well as the holders of the Common
Stock, will be entitled to vote on each of those amendments.
It has been a number of years since there has been a matter to be
voted on by the holders of the Company's Cumulative Preferred Stock. At
this annual meeting, there will be four very important matters to be voted
on by the Cumulative Preferred Stockholders. Because the Cumulative
Preferred Stock will vote as a separate class at the Annual Meeting and
because the stock is held by relatively few holders, a special request is
made to each of the holders of the Cumulative Preferred Stock, regardless
of the size of your holdings, to date, sign and return your blue proxy card
to assure that there will be a quorum of the Cumulative Preferred Stock
present at the meeting to vote on the adoption of the four amendments for
which the approval of the Cumulative Preferred Stock must be obtained.
Please note that if a white proxy card is enclosed, it is to be used
only by the holders of Common Stock. If a blue proxy card is enclosed, it
is to be used only by the holders of Cumulative Preferred Stock. If you
hold both Common Stock and Cumulative Preferred Stock, you should sign,
date and return BOTH proxy cards in order to vote your shares of each of
the two classes of stock.
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 OR CARDS PROMPTLY. A white
proxy card is for use only by holders of Common Stock; a blue
proxy card is for use only by holders of Cumulative Preferred
Stock.
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 CUMULATIVE PREFERRED STOCK and
COMMON STOCK OF NORTHWESTERN PUBLIC SERVICE COMPANY:
The Annual Meeting of Stockholders of Northwestern Public Service
Company (the "Company") will be held at the Company's Operations Center,
600 Market Street, Huron, South Dakota, on Wednesday, May 1, 1996, at 11:00
a.m., local time, for the following purposes:
(1) To elect three members of Class II of the Board of Directors of
the Company to hold office until the Annual Meeting of Stockholders in
1999, and until their successors are duly elected and have qualified.
(2) To consider and act separately on each of two proposals to amend
the Company's Restated Certificate of Incorporation as follows:
(i) A proposed amendment to increase to 1,000,000 the number of
authorized shares of the Company's Preference Stock, par value $50 per
share.
(ii) A proposed amendment to eliminate the ability of
stockholders or a vice president or the secretary of the Company to
call a special meeting of stockholders (as currently provided in
Section 1 of Division B of Article Fourth of the Company's Restated
Certificate of Incorporation).
(3) To consider and act separately on each of four proposals to amend
the Company's Restated Certificate of Incorporation as follows:
(i) A proposed amendment to increase to 1,000,000 the number of
authorized shares of the Company's Cumulative Preferred Stock, par
value $100 per share;
(ii) A proposed amendment to eliminate the so-called income
coverage requirement (subparagraph (c)(i) in subdivision 6-I of
Division A of Article Fourth of the Company's Restated Certificate of
Incorporation) which must be satisfied in order to issue additional
Cumulative Preferred Stock without obtaining approval by the holders
of two-thirds of the outstanding Cumulative Preferred Stock; and
(iii) A proposed amendment to eliminate the requirement (in
subparagraph (a) in subdivision 6-II of Division A of Article Fourth
of the Company's Restated Certificate of Incorporation) that the
approval of the holders of a majority of the outstanding shares of
Cumulative Preferred Stock be obtained in order for the Company to
issue or assume unsecured notes, debentures or other securities
representing unsecured indebtedness in the aggregate exceeding 25% of
the Company's capitalization (as defined in such provision).
(iv) A proposed amendment to eliminate the restrictions (in
Section 2 of Division B of Article Fourth of the Company's Restated
Certificate of Incorporation) which apply to dividends or other
distributions on, and to purchases or other acquisitions of, the
Company's Common Stock when the Company's Common stock equity is less
than prescribed percentages of the Company's total capitalization,
unless approval of at least two-thirds of the outstanding shares of
the Cumulative Preferred Stock is obtained.
(4) To transact such other business as may properly come before the
meeting.
The Common Stockholders will be entitled to vote upon each of the
foregoing proposals. The Cumulative Preferred Stockholders, voting as a
separate class, will be entitled to vote only upon proposals 3(i), 3(ii),
3(iii), and 3(iv) above.
The Board of Directors of the Company has fixed the close of business
on March 4, 1996, as the record date for determining the holders of
Cumulative Preferred Stock and 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.
You are encouraged to sign, date and return your proxy in the enclosed
self-addressed postage-paid envelope (a white card for Common Stock, a blue
card for Cumulative Preferred Stock). 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 15, 1996
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 1, 1996
This statement is expected to be mailed to stockholders on March 15,
1996, 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 1, 1996. 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 4,
1996, 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 4, 1996,
there were outstanding 8,920,122 shares of Common Stock.
Holders of Cumulative Preferred Stock of record at the close of
business on March 4, 1996, will be entitled to one vote for each share of
Cumulative Preferred Stock held by them on the four matters to be voted
upon at the meeting by such Cumulative Preferred Stockholders (i.e.,
proposals 3(i), 3(ii), 3(iii), and 3(iv) in the preceding Notice of Annual
Meeting of Stockholders). As of March 4, 1996, there were outstanding
37,600 shares of Cumulative Preferred 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.
The number of shares of Common Stock and Cumulative Preferred Stock
represented at the Annual Meeting by the holders in person or by their
proxies will be tabulated by the election inspectors appointed for the
meeting which will determine whether or not a quorum for each class of
stock is present. The election inspectors will also tabulate the votes
cast at the Annual Meeting for each matter voted upon by the Common Stock
and the Cumulative Preferred Stock. The election inspectors will treat
shares of stock represented by proxies who have been instructed to abstain
from voting on a particular matter as being present for quorum purposes but
as unvoted for purposes of determining approval of the particular matter.
If a broker holding shares of either class of record indicates on its proxy
card that it does not have discretionary authority to vote on a particular
matter, those shares will not be considered as present and entitled to vote
with respect to that matter.
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 II of the Board of Directors, to
hold office for a term of three years, until the Annual Meeting of
Stockholders in 1999, 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 or the vote withheld as
directed on the proxy, and if no direction is given, proxies will be voted
for the election of the three nominees in Class II 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 II are presently serving as
directors. Current Class II Director W. W. Wood has indicated his
intention to retire from the Board of Directors, effective May 1, 1996.
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 II of the Board of Directors:
Period Age on
Principal Occupation Served as March 1,
Nominee or Employment Director 1996
- ------------------ ------------------------- ----------- --------
Larry F. Ness President and Chief August 1991 50
Executive Officer of to date
First 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 55
Business, University of to date
South Dakota, since 1990,
Vermillion, South Dakota.
R. R. Hylland Executive Vice President- November 1995 36
Strategic Development to date
of the Company since
November 1995; President
and Chief Operating Officer
of Northwestern Growth
Corporation since September
1994; Formerly Vice President-
Strategic Development from
August 1995 to November
1995; Vice President-Corporate
Development from May 1993 to
August 1995; Vice President-
Finance from April 1991 to
August 1995; Treasurer from
December 1990 to November 1994,
Sioux Falls, 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 III whose terms expire in 1997:
Principal Occupation Served as March 1,
Director or Employment Director 1996
- ------------------ ------------------------- ----------- --------
Aelred J. Kurtenbach President and Chief May 1994 62
Executive Officer of to date
Daktronics, Inc.,
manufacturer of large
computer programmable
displays, Brookings,
South Dakota.
M. D. Lewis President and Chief February 1993 48
Executive Officer of the to date
Company since February 1994
Chairman and Chief Executive
Officer of Northwestern
Growth Corporation since
September 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, Huron,
South Dakota.
R. A. Wilkens Chairman since February May 1980 67
1994; Formerly President to date
and Chief Executive
Officer of the Company
from December 1990 to
February 1994; President
and Chief Operating Officer
from 1980 to 1990, 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 1998:
Period Age on
Principal Occupation Served as March 1,
Director or Employment Director 1996
- ------------------ ------------------------- ----------- --------
Herman Lerdal Banking and Business April 1975 67
Consultant; formerly to date
Banker and College
Development Officer,
Sioux Falls, South Dakota.
Raymond M. Schutz Attorney and partner in October 1990 66
the law firm of Siegel, to date
Barnett & Schutz since
1963, Aberdeen, South
Dakota.
Bruce I. Smith Attorney and partner in May 1989 54
the law firm of Luebs, to date
Leininger, Smith, Busick
& Johnson since 1978,
Grand Island, Nebraska.
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 four special
meetings during 1995. 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, Jerry W. Johnson,
Raymond M. Schutz and Bruce I. Smith. The Audit Committee held two
meetings during 1995. 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 Aelred J. Kurtenbach, Herman Lerdal, Larry F.
Ness and W. W. Wood. The Nominating and Compensation Committee held three
meetings during 1995. 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 Secretary of the Company.
SECURITIES OWNERSHIP BY MANAGEMENT
The following table sets forth information, as of January 1, 1996,
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
- ---------------------- -------------- --------- ------------
R. R. Hylland 397 *
Aelred J. Kurtenbach 585 *
Jerry W. Johnson 612 *
Herman Lerdal 2,562 *
M. D. Lewis 6,848 1,807 *
Larry F. Ness 512 *
Raymond M. Schutz 1,232 *
Bruce I. Smith 1,444 *
R. A. Wilkens 12,320 *
W. W. Wood 2,669 *
A. R. Donnell 4,720 (4) 3,771 *
R. F. Leyendecker 5,671 *
A. D. Dietrich 2,580 570 *
------ ------
All directors &
executive officers 42,785 12,743 *
*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 and shares held as part of the employee
savings plan.
(3) Shares held jointly owned with spouse or other family member(s).
(4) Included are 327 shares that Mr. Donnell holds as custodian for his
grandchildren.
With the exception of Thomas A. Gulbranson, Vice President-Energy
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. Director Herman Lerdal owns, in a trust where
he and his wife are joint trustees, 200 shares (0.0002%) of NWPS Capital
Financing 8 1/8% Trust Preferred Capital Securities.
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 to
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 Phantom Stock Unit Plan and approves
any awards made under the Company's NorthSTAR 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.
In determining Mr. Lewis's salary as President and Chief Executive
Officer, the Committee considered his individual performance as leader of
the Company and his contributions to the long-term success of the
organization. In particular, the Committee cites the many initiatives that
have been undertaken successfully by the Company, the significant growth of
the Company through service expansions and non-utility acquisitions, and
the increases in earnings during the year. The Committee also compared his
salary to that of the other ten midwestern utility companies used in the
NorthSTAR Plan. At the present time his salary is in the lower range of
such companies. Similar factors are used to determine the compensation of
the other executive officers.
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 further
Company goals and to increase shareholder value. In February, 1989, the
Board of Directors adopted a Performance Incentive Plan (now know as the
NorthSTAR Plan) which is an incentive compensation plan, which, with later
amendments, has been broadened to involve all employees of the Company.
The purpose of the plan is to motivate and reward outstanding performance
by the employees of the Company in meeting short-term goals which support
long-term objectives important to the Company's success. Awards under the
plan are based upon three factors measuring annual performance: (1) a
ranking of the Company's performance in relation to a pre-selected
comparison group of ten midwestern utilities in change in average rates and
change in total operating expenses per unit of energy furnished to
customers, (2) the Company's achievement of its budgeted earnings per
share, as proposed by the Board of Directors, 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 two to thirty 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. Awards under the
NorthSTAR Plan are made by the Nominating and Compensation Committee of the
Board of Directors annually.
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 NorthSTAR 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 NorthSTAR Plan reduced
by up to 50% for awards made under this plan. Awards made in 1995 were
consistent with this philosophy and were based on NGC investment
performance.
As a complement to the Company's NorthSTAR 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 is made
to all directors and may be made to any or all 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 and for executive officers are considered
by the Board of Directors during their annual meeting in May each year.
Incentive compensation awards made in 1995 were based upon the performance
of the Company's Common Stock in the market and upon the contributions of
the individual executive officer to the long-term success of the Company,
as measured by the Board of Directors.
NOMINATING AND COMPENSATION COMMITTEE
Larry F. Ness, Chairman Aelred J. Kurtenbach
Herman Lerdal 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
chief executive officer and to the four most highly compensated of the
other executive officers:
Summary Compensation Table
Long- All
Annual Compensation(1) Term Other
---------------------- Compen- Compen-
Name and Salary Bonus(2) sation sation(5)
Position Year ($) ($) Payout(4) ($)
- --------------- ---- --------- ----------- --------- ----------
M. D. Lewis 1995 187,758 (3) 18,507 14,349
President & 1994 157,000 65,231 11,171 14,312
Chief Execu- 1993 98,771 15,900 0 6,634
tive Officer
R. R. Hylland 1995 115,077 (3) 18,507 6,029
Executive 1994 95,242 52,505 0 5,516
Vice President- 1993 84,458 33,500 0 4,102
Strategic
Development
A. R. Donnell 1995 109,416 (3) 27,761 11,475
Vice President- 1994 99,829 19,631 16,757 13,380
Energy 1993 93,332 14,460 0 7,937
Operations
R.F. Leyendecker 1995 104,375 (3) 18,507 13,343
Vice President- 1994 90,708 25,195 11,171 12,664
Market 1993 86,215 23,850 0 8,616
Development
A. D. Dietrich 1995 92,071 (3) 18,507 7,822
Vice President- 1994 80,808 17,577 0 7,904
Corporate 1993 72,979 11,550 0 5,457
Services &
Corporate
Secretary
(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 NorthSTAR Plan and the Northwestern Growth Corporation
Incentive Compensation Plan, which are described under Executive
Management Compensation. For 1993 the amounts represent cash awards
pursuant to the Company's NorthSTAR Plan, and in addition, special
cash bonuses awarded to Mr. Hylland and to Mr. Leyendecker of $20,000
and $15,000, respectively, related to the LodgeNet Entertainment Corp.
initial public offering.
(3) The award earned by the executives in 1995, if any is to be paid under
the NorthSTAR Plan and/or the NGC Incentive Compensation Plan, will be
determined in May 1996.
(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 1990.
(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. Lewis: $4,259,
$5,739. and $4,351; Mr. Hylland: $3,452, $1,433, and $1,144; Mr.
Donnell: $3,282, $4,568, and $3,625; ; Mr. Leyendecker: $3,131,
$5,514, and $2,698; and Mr. Dietrich: $2,762, $2,931, and $2,129.
Long-Term Incentive Plan
Performance or Other
Period Until
Name Number of Units* Maturation or Payout
- ----------------- --------------- --------------------
M. D. Lewis 1,560 5 years
R. R. Hylland 524 5 years
A. R. Donnell 542 5 years
R. F. Leyendecker 480 5 years
A. D. Dietrich 445 5 years
*The amounts in this column represent the phantom stock awards made
during 1995 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
officers.
Director Compensation
Directors who are not officers of the Company annually receive 250
shares of common stock of the Company and are paid $1,250 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 a 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 receive one-
half of the meeting fee for telephonic conference board or committee
meetings. 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 $52,000 payable
monthly, in lieu of the normal directors' fees.
In 1987, the Board of Directors approved a retirement plan for non-
employee directors who have served 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 $9,500, 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 1996 based on the provisions of the
Pension Plan as it existed on December 31, 1995, would be:
Average Years of Service
Annual ----------------------------------------------------------
Earnings 15 20 25 30 35 40
- -------- ------- ------- ------- -------- -------- --------
$ 25,000... $ 4,867 $ 6,489 $ 8,111 $ 9,733 $ 11,355 $ 12,978
50,000... 11,429 15,239 19,048 22,858 26,668 30,478
75,000... 17,992 23,989 29,986 35,983 41,980 47,978
100,000... 24,554 32,739 40,923 49,108 57,293 65,478
125,000... 31,117 41,489 51,861 62,233 72,605 82,978
150,000... 37,679 50,239 62,798 75,358 87,918 100,478
175,000... 44,242 58,989 73,736 88,483 103,230 117,978
200,000... 50,804 67,739 84,673 101,608 118,543 135,478
225,000 57,367 76,489 95,611 114,733 133,855 152,978
250,000 63,929 85,239 106,548 127,858 149,168 170,478
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, 20 years; R. R. Hylland, 6 years; A. R. Donnell, 25 years; R.
F. Leyendecker, 21 years; A. D. Dietrich, 17 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.
Salary Continuation Plan
In 1983, the Company implemented a non-qualified salary continuation
plan for directors and selected management employees. In 1995 a total of
74 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, Hylland, Donnell,
Leyendecker, Dietrich, and five other officers which provide termination
benefits if their employment by the Company terminates for any reason
(other than death, disability, retirement at age 65 or such earlier age
that the Board of Directors approves, or discharge for gross misconduct in
the performance of employment duties that materially injures the Company)
within thirty-six months after a "change in control" or "major transaction"
event. A change in control event occurs if a person acquires 20% or more
of the voting power of the Company's securities. A major transaction event
occurs if the stockholders of the Company approve a merger or consolidation
in which less that two-thirds of the Board of Directors of the Company
continue to serve, the stockholders of the Company approve a plan of
liquidation of the Company, or the stockholders of the Company approve a
sale or disposition of all or substantially all of the Company's assets.
As part of the termination benefits, the Company must pay the executive
officer a lump sum payment equal to three times the person's base salary
and average NorthSTAR Plan or NGC Incentive Compensation Plan payment. The
Company must also 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. To
the extent that such benefits are 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 Company
will be responsible for such tax. 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.
Reports to the Securities and Exchange Commission
The report on United States Securities and Exchange Commission Form 3
for Vice President-Finance D. K. Newell was inadvertently filed twelve days
after the reporting date for the form. Mr. Newell's Form 3, which was
filed on August 24, 1995, indicated that he owned no securities of the
Company at the time he was elected to be an officer of the Company.
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 41 combination gas and
electric utility companies** for a five year period:
(GRAPH)
NWPS S&P 500 EEI Peer
---- ------- --------
Base 12/30/90 $100 $100 $100
1991 133.59 130 129.68
1992 153.97 140 142.72
1993 166.66 155 159.45
1994 164.67 157 138.93
1995 183.74 215 176.64
*Cumulative total return assumes quarterly reinvestment of dividends.
**Baltimore Gas & Electric Co.; Central Hudson Gas & Elec. Corp.; CILCORP
Inc.; CINERGY Corp.; CIPSCO, Inc.; CMS Energy Corp.; Commonwealth Energy
System; Consolidated Edison Co. of N.Y.; Delmarva Power & Light Co.;
DPL, Inc.; Enova; IES Industries, Inc.; Illinova Corp.; Interstate Power
Co.; LG&E Energy Corp.; Long Island Lighting Co.; Madison Gas & Electric
Co.; MidAmerican Energy; 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.; PECO Energy; Public Service Co. of
Colo.; Public Service Co. of New Mexico; Public Service Enterprise
Group; Rochester Gas & Electric Corp.; 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.; WPS Resources; and WPL Holdings, Inc.
AMENDMENTS TO AUTHORIZE ADDITIONAL STOCK, TO LIMIT
THE ABILITY TO CALL SPECIAL MEETINGS OF STOCKHOLDERS,
TO MODIFY TERMS OF THE CUMULATIVE PREFERRED STOCK,
AND TO REMOVE RESTRICTION ON DECLARATION OF DIVIDENDS
Your Board of Directors has proposed and recommends the adoption of
six amendments to the Company's Restated Certificate of Incorporation.
These amendments will (1) increase from 200,000 to 1,000,000 the number of
authorized shares of the Company's Preference Stock, par value $50 per
share; (2) eliminate the ability of shareholders or a vice president or the
secretary of the Company to call a special meeting of stockholders; (3)
increase from 300,000 to 1,000,000 the number of authorized shares of the
Company's Cumulative Preferred Stock, par value $100 per share; (4)
eliminate the so-called income coverage requirement which heretofore has
had to be satisfied in order to issue additional Cumulative Preferred Stock
without obtaining approval by the holders of at least two-thirds of the
outstanding shares of Cumulative Preferred Stock; (5) eliminate the
requirement that approval by the holders of a majority of the Cumulative
Preferred Stock be obtained in order for the Company to issue or assume
notes, debentures or other securities representing unsecured indebtedness
of the Company in excess of 25% of the Company's total capitalization (as
defined in the Restated Certificate of Incorporation); and (6) eliminate
the restrictions which apply to dividends on other distributions on, and to
purchases or other acquisitions of, the Company's Common Stock when the
Company's Common Stock equity is less than prescribed percentages of the
Company's total capitalization (as defined in the Restated Certificate of
Incorporation), unless approval of a least two-thirds of the outstanding
shares of the Cumulative Preferred Stock is obtained. The text of each of
these amendments appears in Exhibit A to this Proxy Statement.
The purpose of these amendments is to make additional shares of
capital stock available for financing the future business needs of the
Company, to limit the ability to call a special meeting of stockholders to
the Chairman of the Board or the President, and to increase the flexibility
which the Board of Directors of the Company will have in selecting the
means of financing a particular need when it arises.
If the additional shares of Preference Stock and Cumulative Preferred
Stock are authorized, they may be issued from time to time for such
consideration (not less than the par value thereof) and under such
circumstances as the Board of Directors of the Company may determine,
without further action by the stockholders. The terms of the Company's
Common Stock, Preference Stock and Cumulative Preferred Stock do not grant
to the holders of such stock preemptive rights to subscribe to or acquire
any additional stock which the Company may issue.
If the amendment to eliminate the ability of stockholders or a vice
president or the secretary of the Company to call a special meeting of
stockholders is authorized, special meetings of stockholders could be
called at the request of the Chairman of the Board or the President, but
not at the request of a vice president, the secretary, or stockholders
holding a majority of outstanding shares entitled to vote.
This amendment, when coupled with the requirement that voting
stockholders act only at meetings and not by written consent, will have the
effect of limiting voting on matters initiated by stockholders to the
Company's annual meetings. This would limit the ability of stockholders to
remove the Board of Directors prior to an annual meeting. In addition,
this amendment, when coupled with the requirement that voting stockholders
act only at meetings and not by written consent, could have the effect of
enabling a majority of the incumbent Board of Directors to delay until the
annual meeting any action that required stockholder approval, even if the
proponents of the action had sufficient stockholder votes to obtain
approval of the action at a special meeting of stockholders. It is the
Company's intention that the elimination of the ability of stockholders to
call a special meeting, in conjunction with the existing restriction on the
use of the written consent procedure, will encourage persons seeking to
acquire control of the Company to initiate such an acquisition through
arm's-length negotiations with the Company's management and Board of
Directors.
If the terms of the Cumulative Preferred Stock are modified as
proposed, additional shares of Cumulative Preferred Stock could be issued
from time to time as the Board of Directors of the Company may determine,
without further action by the stockholders, in excess of what would have
been permitted under the income coverage formula that will be deleted.
Similarly, securities evidencing unsecured indebtedness of the Company
could be issued from time to time as the Board of Directors of the Company
may determine, without further action by the stockholders, in excess of
what would have been permitted under the 25% of capitalization limitation
that will be deleted.
If the restrictions on paying dividends on the Company's Common Stock are
eliminated as provided for in the above-mentioned sixth proposed amendment
to the Company's Restated Certificate of Incorporation, the Board of
Directors of the Company will have increased flexibility to determine the
amount of dividends to be paid on the Company's Common Stock, without being
subject to the present restrictions which depend on the ratio of the
Company's "Common Stock equity" to the Company's "total capitalization."
Under the provisions in the Company's Restated Certificate of Incorporation
which are proposed to be deleted by the amendment, approval by the holders
of at least two-thirds of the outstanding shares of the Company's
Cumulative Preferred Stock (of all series) is required before dividends or
other distributions (other than in shares of Common Stock) on the Common
Stock maybe declared and paid, or before the Company may purchase or
otherwise acquire for value shares of its Common Stock (such dividends,
distributions, purchases and other acquisitions being collectively called
"dividends on its Common Stock" in the Restated Certificate of
Incorporation and herein) if the following limitations are exceeded:
-if the Company's Common Stock equity at the end of the month
preceding the date on which the dividend, distribution, purchase or
acquisition is declared is less than (or as a result of such action
would become less than) 20% of the Company's total capitalization, the
dividends on its Common Stock declared during the 12 months ending
with the current declaration may not exceed 50% of the net income of
the Company available for dividends on its Common Stock for the 12
months immediately preceding the month in which such dividend is
declared, without first obtaining such approval of the Preferred
Stockholders; and
-such restriction is fixed at 75% of such net income of the Company
available for dividends on its Common Stock if the Company's Common
Stock equity is 20% or more, but less than 25% of "total
capitalization"; but
-no such dividend restriction applies if the Company's Common Stock
equity is 25% or more of the Company's total capitalization if the
declaration of the dividend, distribution, purchase or other
acquisition will not reduce such Common Stock equity below the 25%
level.
For purposes of the above restrictions, "total capitalization" of the
Company is the total of its Common Stock equity, plus the par or stated
value of all the Company's outstanding stock having a preference as to
dividends or liquidation rights over the Company's Common Stock, plus the
total of all of the Company's evidences of indebtedness maturing one year
or more after the date of issue.
By eliminating the foregoing formula, the Board of Directors will have
the authority and responsibility for determining the amount of dividends or
other distributions and of purchases or other acquisitions for value with
respect to the Company's Common Stock, based upon all relevant
considerations and not just the particular level of the Company's Common
Stock equity. These restrictions have not previously operated to restrict
dividends or other distributions, or stock purchases or other acquisitions
for value, nor does the Company have any present plan to operate at
capitalization ratios that would cause such restrictions to apply.
Nevertheless, this amendment is recommended for adoption by your Board of
Directors to provide the requested flexibility should the situation ever
arise in the future in which the deleted provisions might have applied.
The Company does not now have any present plan to issue any shares of
Preference Stock or any additional shares of Cumulative Preferred Stock or
to issue securities evidencing unsecured indebtedness of the Company in
excess of 25% of the Company's total capitalization. Although the
presently authorized shares of Cumulative Preferred Stock and Preference
Stock, and the limitations on issuing additional shares of Cumulative
Preferred Stock or securities evidencing unsecured indebtedness of the
Company, which are presently in the terms of the Cumulative Preferred
Stock, have been sufficient and adequate for the Company, the Board of
Directors believes that it is desirable to make the proposed changes so
that the Board of Directors of the Company will have the flexibility in
raising capital for the Company's possible future needs without further
stockholder action. The proposed amendments will enhance the flexibility
in connection with possible future actions, such as acquisitions of other
businesses and properties (whether in the public utility field or
otherwise), funding future construction programs of the Company and
possible future business development activities, and funding stock
repurchases if and when it should become advisable to revise the
capitalization structure of the Company. With the proposed amendments, the
Board of Directors of the Company will determine whether, when and on what
terms the issuance of shares of Cumulative Preferred Stock and Preference
Stock, and the issuance of securities evidencing unsecured indebtedness,
may be warranted in connection with any of the foregoing purposes, and
without the delay that could be involved in seeking stockholder approval
for the specific issuances.
The availability for issuance of the additional shares of Cumulative
Preferred Stock and Preference Stock, and the greater flexibility for
issuing additional shares of Cumulative Preferred Stock and securities
evidencing unsecured indebtedness of the Company, could enable the Board of
Directors to render more difficult or discourage an attempt to obtain
control of the Company. The Company is not aware of any pending or
threatened efforts by any party to obtain control of the Company.
Proposed Amendment to Increase
Authorized Shares of Preference Stock
The first of the proposed amendments to the Company's Restated
Certificate of Incorporation will increase to 1,000,000 the authorized
number of shares of the Company's Preference Stock, par value $50 per
share. (See amendment proposal 1 in Exhibit A to this Proxy Statement.)
At present, 200,000 shares are authorized, none of which have been issued.
The terms and conditions of the Preference Stock are summarized in
Exhibit B to this Proxy Statement. Adoption of this proposed amendment
requires the favorable vote of the holders of a majority of the outstanding
shares of Common Stock of the Company. Proxies of the holders of such
stock will be voted on this amendment as specified thereon, but in the
absence of such a specification, the proxies will be voted in favor of the
proposed amendment.
----------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSED
AMENDMENT. UNLESS INDICATED OTHERWISE ON THE PROXY, THE SHARES OF
COMMON STOCK WILL BE VOTED FOR THIS AMENDMENT.
----------------------------------------------------------------------
Proposed Amendment to Eliminate the Ability
of Stockholders or a Vice President or the
Secretary of the Company to Call a Special
Meeting of Stockholders
The second of the proposed amendments to the Company's Restated
Certificate of Incorporation will eliminate the ability of stockholders or
a vice president or the secretary of the Company, leaving the ability of
the Chairman of the Board or the President, to call a special meeting of
stockholders. (See amendment A proposal 2 in Exhibit A to this Proxy
Statement.)
This proposed amendment has been unanimously recommended by the Board
of Directors. Accordingly, adoption of this proposed amendment requires
the favorable vote of the holders of a majority of the outstanding shares
of Common Stock of the Company. Proxies of the holders of such stock will
be voted on this amendment as specified thereon, but in the absence of such
a specification, the proxies will be voted in favor of the proposed
amendment.
----------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSED
AMENDMENT. UNLESS INDICATED OTHERWISE ON THE PROXY, THE SHARES OF
COMMON STOCK WILL BE VOTED FOR THIS AMENDMENT.
----------------------------------------------------------------------
Proposed Amendment to Increase Authorized
Shares of Cumulative Preferred Stock
The third of the proposed amendments to the Company's Restated
Certificate of Incorporation will increase to 1,000,000 the authorized
number of shares of the Company's Cumulative Preferred Stock, par value
$100 per share. (See amendment proposal 3 in Exhibit A to this Proxy
Statement.) At present, 300,000 shares of Cumulative Preferred Stock are
authorized, of which 37,900 shares are now issued and outstanding, leaving
262,100 shares currently available for future issuance.
The terms and conditions of the Cumulative Preferred Stock are
summarized in Exhibit C to this Proxy Statement. Adoption of this proposed
amendment requires the favorable vote of the holders of a majority of the
outstanding shares of Cumulative Preferred Stock, voting as a separate
class, and the holders of a majority of the outstanding shares of Common
Stock. Proxies of the holders of each such class of stock will be voted on
the amendment as specified thereon, but in the absence of such
specification, the proxies will be voted in favor of the proposed
amendment.
----------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSED
AMENDMENT. UNLESS INDICATED OTHERWISE ON THE PROXY, THE SHARES OF
COMMON STOCK AND CUMULATIVE PREFERRED STOCK WILL BE VOTED FOR THIS
AMENDMENT.
----------------------------------------------------------------------
Proposed Amendment to Eliminate Income Coverage
Requirement For Issuance Of Cumulative Preferred Stock
The fourth of the proposed amendments to the Company's Restated
Certificate of Incorporation will eliminate the income coverage requirement
for issuing Cumulative Preferred Stock without obtaining approval of the
outstanding shares of Cumulative Preferred Stock. (See amendment proposal
4 in Exhibit A to this Proxy Statement.)
This amendment will delete subparagraph (c)(i) in subdivision 6-I of
Division A of Article Fourth of the Company's Restated Certificate of
Incorporation which requires approval by the holders of at least two-thirds
of the outstanding shares of Cumulative Preferred Stock, voting separately
as a class, in order to authorize the issuance of additional Cumulative
Preferred Stock (or securities convertible into such stock) whenever the
Company's gross income for any 12 consecutive months period within the 15
calendar months preceding the month of issuance (after deducting
depreciation expense and taxes) available for payment of interest shall not
have been at least one and one-half times the sum of (i) the interest
expense on all interest bearing indebtedness of the Company (including
amortization of debt discount and expense or premium on debt in such 12
month period) which will be outstanding at the date of issue of such stock
or convertible securities and (ii) the annual dividend requirements on the
Cumulative Preferred Stock that will be outstanding on the date of issue,
after giving effect to the stock or securities to be issued. In the
absence of such provision, the amount of Cumulative Preferred Stock that
could be issued by the Company at a given time will be determined by the
Board of Directors based on market conditions.
Adoption of this proposed amendment requires the favorable vote of the
holders of at least two-thirds of the outstanding shares of Cumulative
Preferred Stock, voting as a separate class, and the holders of a majority
of the outstanding shares of Common Stock of the Company. Proxies of the
holders of each such class of stock will be voted on the amendment as
specified thereon, but in the absence of such specification, the proxies
will be voted in favor of the proposed amendment.
----------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSED
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.
UNLESS INDICATED OTHERWISE ON THE PROXY, THE SHARES OF COMMON STOCK
AND CUMULATIVE PREFERRED STOCK WILL BE VOTED FOR THIS AMENDMENT.
----------------------------------------------------------------------
Proposed Amendment to Eliminate Limit
On Unsecured Indebtedness Securities
The fifth of the proposed amendments to the Company's Restated
Certificate of Incorporation will eliminate the present requirement for
obtaining approval by the holders of a majority of the outstanding shares
of Cumulative Preferred Stock before the Company can issue or assume
unsecured indebtedness securities in excess of 25% of the Company's
aggregate capitalization. (See amendment proposal 5 in Exhibit A to this
Proxy Statement).
Adoption of this proposed amendment requires the favorable vote of the
holders of at least a majority of the outstanding shares of Cumulative
Preferred Stock, voting as a separate class, and the holders of a majority
of the outstanding shares of Common Stock of the Company. Proxies of the
holders of each such class of stock will be voted as specified thereon, but
in the absence of such specification, the proxies will be voted in favor of
the proposed amendment.
As of January 31, 1996, the Company had outstanding $9,800,000 of
unsecured indebtedness securities, consisting of commercial paper.
Historically, the Company has utilized unsecured indebtedness financing as
an interim means of financing its business needs until it can be refunded
by funds generated by operations or funds obtained from longer-term
financings. The Company presently expects to continue such use of
unsecured indebtedness financing. However, the Board of Directors believes
such future use, in addition to the development in the financial markets of
other uses of unsecured indebtedness financing, makes it advisable to
provide more flexibility for such financing. For example, financing
techniques currently in use in the financial markets, such as for pollution
control financing, medium term note financing and monthly income preferred
securities, could broaden the need for unsecured borrowing authority. If
the proposed amendment is adopted and made effective, the use of unsecured
indebtedness financing would be determined by the Board of Directors, based
on market conditions and the needs of the Company from time to time.
----------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSED
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.
UNLESS INDICATED OTHERWISE ON THE PROXY, THE SHARES OF COMMON STOCK
AND CUMULATIVE PREFERRED STOCK WILL BE VOTED FOR THIS AMENDMENT.
----------------------------------------------------------------------
Proposed Amendment to Delete Restrictions on
Dividends on Common Stock
The sixth of the proposed amendments to the Company's Restated
Certificate of Incorporation will delete paragraph 2 in Division B of
Article Fourth therein in its entirety.(See amendment proposal 6 in Exhibit
A to this Proxy Statement). Such paragraph 2 requires approval by the
holders of at least two-thirds of the outstanding shares of Cumulative
Preferred Stock, voting separately as a class, before dividends or other
distributions (except in shares of Common Stock) or purchases or other
acquisitions for value with respect to the Company's Common Stock may be
authorized when the Common Stock equity is at, or below, prescribed
percentages of the Company's total capitalization. In the absence of such
provisions, the amount and timing of such dividends or other distributions
and purchases or other acquisitions for value will be determined by the
Board of Directors of the Company, according to its judgment as to what
should be done under the circumstances existing at the time the Board takes
action.
Adoption of this proposed amendment requires the favorable vote of the
holders of two-thirds of the outstanding shares of Cumulative Preferred
Stock, voting as a separate class, and the holders of a majority of the
outstanding shares of Common Stock of the Company. Proxies of the holders
of each such class of stock will be voted as specified thereon, but in the
absence of such specification, the proxies will be voted in favor of the
proposed amendment.
----------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSED
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.
UNLESS INDICATED OTHERWISE ON THE PROXY, THE SHARES OF COMMON STOCK
AND CUMULATIVE PREFERRED STOCK WILL BE VOTED FOR THIS AMENDMENT.
----------------------------------------------------------------------
ANNUAL REPORT
A copy of the Company's Annual Report for the year ended December 31,
1995, has been sent to all stockholders of record as of March 4, 1996, the
record date for the determination of stockholders entitled to vote at the
Annual Meeting of Stockholders. Attention is directed to the financial
statements and Management's Discussion and Analysis in such Annual Report
which are incorporated herein by reference.
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 1995, 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
1997 Annual Meeting of Stockholders should submit their proposals, together
with any supporting statements, to the Company on or before November 15,
1996. No proposal will be considered unless it is received at least ninety
days before the meeting. Proposals should be sent to the Corporate
Secretary 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 15, 1996
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 1996 ANNUAL MEETING, UPON WRITTEN REQUEST AND
WITHOUT CHARGE, A COPY OF THE COMPANY'S 1995 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, 600 MARKET STREET, HURON,
SOUTH DAKOTA 57350-1318.
EXHIBIT A
PROPOSED AMENDMENTS TO
RESTATED CERTIFICATE OF INCORPORATION
OF NORTHWESTERN PUBLIC SERVICE COMPANY
AMENDMENT PROPOSAL 1: INCREASE IN AUTHORIZED PREFERENCE STOCK
RESOLVED that the first paragraph of Article FOURTH of the Restated
Certificate of Incorporation of Northwestern Public Service Company (the
"Company"), as heretofore amended, is hereby amended to increase the total
authorized capital stock of the Company by increasing to 1,000,000 the
number of authorized shares of Preference Stock, of the par value of $50
per share, of the Company.
AMENDMENT PROPOSAL 2: ELIMINATE ABILITY OF STOCKHOLDERS AND COMPANY VICE
PRESIDENT AND SECRETARY TO CALL SPECIAL MEETING
RESOLVED that Section 1 of Division B of Article Fourth of the
Restated Certificate of Incorporation of Northwestern Public Service
Company, as heretofore amended, is hereby amended by deleting therefrom
certain language, italicized below.
Note: The language to be deleted is the italicized portion of the
following excerpt from the Company's Restated Certificate of Incorporation:
The holders of the Common Stock shall be entitled to one vote for each
share of such stock held by them at any meeting of stockholders for
any purpose or matter submitted to a vote at a meeting of the
stockholders. Any action required or permitted to be taken by the
holders of the Common Stock shall be taken only at an annual meeting
or special meeting of such holders and shall not be taken without a
meeting by a consent in writing. Special meetings of stockholders of
the corporation may be called at any time by the Chairman of the Board
of Directors, by the President, by any one of the Vice Presidents, by
the Secretary or upon the written request of the holders of a majority
of the capital stock of the corporation outstanding at the time and
entitled to vote on the matter or matters to be presented at the
meeting, on at least ten days' notice to each stockholder by mail at
such stockholder's last known post office address, specifying the
time, place and object of the special meeting.
AMENDMENT PROPOSAL 3: INCREASE IN AUTHORIZED CUMULATIVE PREFERRED STOCK
RESOLVED that the first paragraph of Article FOURTH of the Restated
Certificate of Incorporation of Northwestern Public Service Company (the
"Company"), as heretofore amended, is hereby amended to increase the total
authorized capital stock of the Company by increasing to 1,000,000 the
number of authorized shares of Cumulative Preferred Stock, of the par value
of $100 per share, of the Company (such Cumulative Preferred Stock being
also called "New Preferred Stock" in said Restated Certificate of
Incorporation).
AMENDMENT PROPOSAL 4: DELETION OF THE INCOME COVERAGE REQUIREMENT
RESOLVED that the Restated Certificate of Incorporation of
Northwestern Public Service Company, as heretofore amended, is hereby
amended by deleting therefrom in its entirety subparagraph (c)(i) in
subdivision 6-I of Division A of Article Fourth therein.
Note: The provision to be deleted is the italicized portion of the
following excerpt from the Company's Restated Certificate of Incorporation:
So long as any shares of New Preferred Stock are
outstanding, the Company shall not, without the affirmative vote
given at a stockholders meeting whereat the New Preferred Stock
shall vote separately as a class, or without the written consent,
of the record holders of two-thirds of the outstanding shares of
New Preferred Stock:
* * *
(c) Issue any shares of New Preferred Stock or shares of
any stock ranking pari passu with the New Preferred Stock as to
dividends or liquidation rights, or any securities convertible
into shares of New Preferred Stock or stock ranking pari passu
with the New Preferred Stock as to dividends or liquidation
rights, otherwise than in exchange for or for the purpose of
effecting the redemption or other retirement of, not less than an
equal number of shares of New Preferred Stock or shares of any
stock ranking pari passu with the New Preferred Stock as to
dividends or liquidation rights, at the time outstanding, unless
(the text in paragraph (i) that follows will be printed in italics)
(i) the gross income of the Company for a period
of twelve consecutive calendar months within the
fifteen calendar months next preceding the month within
which such shares or convertible securities are issued,
determined in accordance with generally accepted
accounting principles (but in any event after deducting
the amount for said period mentioned above charged by
the Company in its income statements to depreciation
expense and taxes) to be available for the payment of
interest shall have been at least one and one-half
times the sum of (A) the interest requirements for a
twelve months' period on all interest bearing
indebtedness of the Company (including amortization of
debt discount and expense or of premium on debt, as the
case may be, applicable to the aforesaid twelve months'
period) which will be outstanding at the date of issue
of such shares or convertible securities and (B) the
dividend requirements for a twelve months' period upon
all shares of New Preferred Stock and on all other
shares of stock, if any, ranking prior to or pari passu
with the New Preferred Stock as to dividends or
liquidation rights, which will be outstanding after the
issue of the shares or convertible securities proposed
to be issued; provided that there may be excluded from
the foregoing computations interest charges on all
indebtedness and dividends on all shares which are to
be retired in connection with the issue of such
additional shares or convertible securities; and
provided, further, that where such additional shares or
convertible securities are to be issued in connection
with the acquisition of new property, the net earnings
of the property to be so acquired may be included on a
pro forma basis in the foregoing computations computed
on the same basis as net earnings of the Company; and
(ii) the Common Stock equity as defined in
subdivision 2 of Division B hereof shall be not less
than the aggregate par value of all shares of New
Preferred Stock and the aggregate par value or stated
value of all other shares of stock, if any, ranking
prior to or pari passu with the New Preferred Stock as
to dividends or liquidation rights, which will be
outstanding after the issue of the shares or
convertible securities proposed to be issued.
AMENDMENT PROPOSAL 5: DELETION OF THE UNSECURED INDEBTEDNESS SECURITIES
LIMITATION
RESOLVED that the Restated Certificate of Incorporation of
Northwestern Public Service Company, as heretofore amended, is hereby
amended by deleting therefrom in its entirety subparagraph (a) in
subdivision 6-II of Division A of Article Fourth.
Note: The provision to be deleted is the italicized portion of the
following excerpt from the Company's Restated Certificate of Incorporation:
So long as any shares of New Preferred Stock are
outstanding, the Company shall not, without the affirmative vote
given at a stockholders meeting whereat the New Preferred Stock
shall vote separately as a class, or without the written consent,
of the record holders of a majority of the outstanding shares of
New Preferred Stock:
(the text in paragraph (a) that follows will be printed in italics)
(a) Issue or assume any unsecured notes,
debentures or other securities representing unsecured
indebtedness, other than for the purpose of refunding
secured or unsecured indebtedness theretofore created
or assumed by the Company and then outstanding, or
other than for the purpose of effecting the retirement,
by redemption or otherwise, of shares of New Preferred
Stock, or shares of a class of stock ranking prior to
or pari passu with the New Preferred Stock as to
dividend or liquidation rights, if immediately after
such issue or assumption, the total principal amount of
all unsecured notes, debentures or other securities
representing unsecured indebtedness issued or assumed
by the Company and then outstanding would exceed 25% of
the aggregate of (i) the total principal amount of all
bonds or other securities representing secured
indebtedness issued or assumed by the Company and then
outstanding, and (ii) the total of the capital stocks
and premiums thereon and the surplus (paid-in, earned
and other, if any) of the Company as then to be stated
on its books;
AMENDMENT PROPOSAL 6: ELIMINATION OF RESTRICTION ON DECLARATION OF COMMON
STOCK DIVIDENDS
RESOLVED that the Restated Certificate of Incorporation of
Northwestern Public Service Company, as heretofore amended, is hereby
amended by deleting therefrom in its entirety Section 2 of Division B of
Article Fourth. Note: The provision to be deleted is the following:
So long as any shares of New Preferred Stock are outstanding, the
right of the Company, except as otherwise authorized by the consent (given
by vote in person or by proxy at a meeting called for that purpose or in
writing) of the holders of at least two-thirds of the total number of
shares of New Preferred Stock then outstanding, to pay or declare any
dividends on its Common Stock (other than dividends payable in Common
Stock) or to make any distribution on, or to purchase or otherwise acquire
for value, any shares of its Common Stock (each and all of such actions
being hereafter embraced in the term "dividends on its Common Stock"),
shall be subject to the following limitations:
(a) If and so long as the Common Stock equity (as hereinafter
defined) at the end of the calendar month immediately preceding the
date on which a dividend on its Common Stock is declared is, or as a
result of such dividend would become, less than 20% of total
capitalization (as hereinafter defined), the Company shall not declare
dividends on its Common Stock in an amount which, together with all
other dividends on its Common Stock declared within the year ending
with but including the date of such dividend declaration, exceeds 50%
of the net income of the Company available for dividends on its Common
Stock for the twelve consecutive calendar months immediately preceding
the month in which such dividend is declared; and
(b) If and so long as the Common Stock equity (as hereinafter
defined) at the end of the calendar month immediately preceding the
date on which a dividend on its Common Stock is declared is, or as a
result of such dividend would become, less than 25%, but 20% or more
of total capitalization (as hereinafter defined) the Company shall not
declare dividends on its Common Stock in an amount which, together
with all other dividends on its Common Stock declared within the year
ending with but including the date of such dividend declaration,
exceeds 75% of the net income of the Company available for dividends
on its Common Stock for the twelve consecutive calendar months
immediately preceding the month in which such dividend is declared;
and
(c) At any time when the Common Stock equity is 25% or more of
total capitalization, the Company shall not declare dividends on its
Common Stock which together with all dividends on its Common Stock
declared within the year ending with but including the date of such
dividend declaration exceeds 75% of the net income of the Company
available for dividends on its Common Stock for the twelve consecutive
calendar months immediately preceding the month in which such dividend
is declared, if the declaration of such dividend would reduce the
Common Stock equity below 25% of its total capitalization.
The total capitalization of the Company shall be deemed to consist of
the sum of (a) the principal amount of all outstanding indebtedness of the
Company represented by bonds, notes or other evidences of indebtedness
maturing by their terms one year or more from the date of issue thereof,
(b) the aggregate amount of par or stated value represented by all issued
and outstanding capital stock of all classes of the Company having
preference as to dividends or upon liquidation over its Common Stock, and
(c) the Common Stock equity of the Company (as hereinafter defined).
The Common Stock equity of the Company shall be deemed to consist of
the sum of the amount of the par or stated value represented by all issued
and outstanding Common Stock, including premiums on capital stocks, the
earned surplus and the capital and paid-in, or other, if any, surplus of
the Company, less (i) the amount of recorded value over original cost of
used and useful utility plant, and (ii) any items set forth on the asset
side of the balance sheet merely as a result of accounting conventions
(such as unamortized debt discount and expense and capital stock discount
and expense) and (iii) the excess, if any, of the aggregate amount payable
on involuntary dissolution, liquidation or winding up of the Company on all
outstanding shares of the Company having a preference as to dividends or
upon liquidation over the Common Stock, over the aggregate amount of par or
stated value represented by such outstanding shares; provided that no
deductions shall be made in the determination of Common Stock equity for
any of the amounts or items referred to in clauses (i), (ii) and (iii) of
this subdivision, which are being amortized or are provided for by reserve.
In computing such Common Stock equity there shall be deducted from
earned surplus, any excess of the aggregate amount of all obligations of
the Company with respect to maintenance, repairs, depreciation and
retirements imposed by any mortgage or mortgages on the Company's property
to the date of such computation over
(a) all amounts expended by the Company to the date of
computation for maintenance and repairs and included or reflected in
its operation expenses, plus
(b) all charges to and appropriations from income or earned
surplus made by the Company to the date of such computation as
provision for depreciation, retirements, or amortization of its plant
and property,
applicable to the period subsequent to January 1, 1946.
Net income available for dividends on its Common Stock shall be
determined in accordance with such system of accounts as may be prescribed
by governmental authorities having jurisdiction in the premises, or, in the
absence thereof, in accordance with sound accounting practice.
Subject to such limitations, dividends may be paid on the Common Stock
out of any funds legally available for the purpose, when and as declared by
the Board of Directors.
EXHIBIT B
DESCRIPTION OF PREFERENCE STOCK
By its terms, Preference Stock may be issued in one or more series as
the Board of Directors may determine. Regardless of series, the Preference
Stock will be junior to all of the Cumulative Preferred Stock (now or
hereafter issued) but senior to the Common Stock on matters such as
dividend and liquidation rights. Dividends on the Preference Stock will be
cumulative at a rate to be fixed by the Board of Directors when the
issuance of the shares is authorized.
The Preference Stock will be entitled to vote only in the limited
instances specified in the Restated Certificate of Incorporation or as may
be required by law. The Restated Certificate of Incorporation provides
that if the Company fails for four successive quarterly periods to pay the
full dividend on such stock, then, until the dividend arrearage is
eliminated, the Preference Stock, voting as a separate class, may elect two
of the directors which the Common Stock would otherwise be entitled to
elect. Further, approval by the holders of a majority of the Preference
Stock, voting as a separate class, will be required for certain other
transactions if provision has not been made to redeem the Preference Stock
then outstanding. Such transactions include (i) amendments of the
Company's Restated Certificate of Incorporation to authorize any stock
(other than Cumulative Preferred Stock) ranking prior to the Preference
Stock or convertible into such a prior-ranking stock; (ii) any proposal to
merge or consolidate the Company with one or more other corporations, or to
sell, lease or exchange all or substantially all of the Company's property
and assets; and (iii) any amendments of the terms of the Preference Stock
so as to affect the rights and preferences of such stock adversely,
provided that if less than all of the series then outstanding are so
affected adversely, then voting shall be by the series so affected.
Under provisions in the Restated Certificate of Incorporation, various
terms, including dividend rates, redemption prices, amounts payable upon
liquidation, conversion rights, if any, and sinking fund provisions, if
any, are to be determined by the Board of Directors for each series of
Preference Stock prior to the issuance thereof. Such determinations would
be made by the Board of Directors on the basis of market conditions
prevailing at the time.
EXHIBIT C
DESCRIPTION OF CUMULATIVE PREFERRED STOCK
The Cumulative Preferred Stock is issuable in such series as the
Company's Board of Directors may determine. The dividend rates, redemption
prices, amounts of liquidation preferences, conversion privileges (if any),
sinking fund provisions (if any), and other rights, preferences,
privileges, limitations and restrictions for shares of each series are
fixed by the Board of Directors prior to the issuance of any shares of the
series. Such terms of each new series will depend largely upon market
conditions at the time of issuance.
The holders of Cumulative Preferred Stock of each series are entitled,
without priority among series, to receive, when declared, cumulative cash
dividends at the annual rates fixed for the respective series, payable
quarterly. No dividend or distribution (except those payable in shares of
Common Stock) may be declared or paid on any junior stock (i.e., the Common
Stock and, when issued, the Preference Stock), nor may any junior stock be
purchased, redeemed or otherwise acquired for value by the Company unless
all Cumulative Preferred Stock dividends for past and current periods have
been paid or provided for and all sinking fund requirements to that time
for particular series of Cumulative Preferred Stock have been satisfied.
No dividend shall be declared on the shares of any series of Cumulative
Preferred Stock for any quarterly period unless at the same time a like
proportionate dividend for the same period (ratably in proportion to the
respective annual dividend rates for the various series) shall be declared
for all shares of all series of the Cumulative Preferred Stock then
outstanding and entitled to dividends for that period.
Subject to certain limitations, the shares of any series of Cumulative
Preferred Stock may be redeemed, in whole or in part, upon not less than 30
days' notice, at a redemption price equal to the amount fixed by the Board
of Directors prior to issuance of the series, plus accrued dividends to the
date of redemption.
Sinking fund provisions for redemption or purchase of shares of any
series may be fixed by the Board of Directors prior to the issuance of that
series. If default is made in satisfying any sinking fund requirement in
full in any year, so long as such default continues no dividends (other
than dividends payable in Common Stock) or other distribution may be paid
on any stock ranking junior to the Cumulative Preferred Stock, and no such
junior stock may be purchased or otherwise acquired by the Company for
value.
In the event of liquidation (voluntary or involuntary) of the Company,
holders of any series of Cumulative Preferred Stock are entitled to receive
the amounts fixed by the Board of Directors prior to issuance of the
series, plus accrued dividends, before any distribution to holders of
junior stock.
The Cumulative Preferred Stock has voting rights only as specified in
the Restated Certificate of Incorporation or as required by law. The
holders of such stock are entitled to one vote per share on each matter
submitted for their vote except that in the instances in which the holders
of Cumulative Preferred Stock elect certain directors, cumulative voting
applies (which results in one vote per share multiplied by the number of
directors to be elected).
When dividends payable on the Cumulative Preferred Stock are in
default in an amount equivalent to four full quarter-yearly dividends
thereon, then, until all dividends accrued on the shares are paid, the
holders of the Cumulative Preferred Stock of all series, voting as a class,
are entitled to elect the smallest number of directors necessary to
constitute a majority of the Company's Board of Directors. In such event,
the holders of the Common Stock, voting as a class, are entitled to elect
the remaining directors except that the holders of the Preference Stock are
entitled to elect two of the directors who would otherwise be elected by
the holders of the Common Stock if there is a similar dividend arrearage on
the Preference Stock.
The affirmative vote (or written consent) of the holders of at least
two-thirds of the outstanding shares of Cumulative Preferred Stock of all
series, as a separate class, is required (i) to authorize any stock ranking
prior to the outstanding Cumulative Preferred Stock or any stock
convertible into such prior ranking stock, (ii) to change the terms and
provisions of the Cumulative Preferred Stock so as to affect adversely the
rights and preferences of the holders thereof (but if one or more, but not
all, of the series would be affected adversely, such vote or consent of the
holders of only those series is required), or (iii) to permit dividends on,
or acquisitions for value of, the Company's Common Stock in excess of the
restrictions hereinafter mentioned. Such two-thirds vote or consent is
also required to issue additional shares of Cumulative Preferred Stock, or
stock (or securities convertible into stock) ranking on a parity therewith
as to dividends or liquidation rights (except in exchange for or to redeem
or otherwise retire an equal number of shares of Cumulative Preferred Stock
or stock ranking on a parity therewith) unless certain gross income and
capital ratio requirements are met (with the gross income requirement being
the subject of a proposed amendment which will delete that requirement if
approved at the Annual Meeting).
The affirmative vote (or written consent) of the holders of a majority
of the outstanding shares of Cumulative Preferred Stock of all series, as a
separate class, is required by law to authorize an increase or decrease in
the number of authorized shares of Cumulative Preferred Stock, or a change
in the par value thereof; to merge or consolidate the Company with one or
more other corporations; or to sell, lease or exchange all, or
substantially all, of the Company's property and assets. Such a vote (or
consent) is also presently required by the Restated Certificate of
Incorporation to authorize unsecured indebtedness of the Company (except in
certain circumstances) if the amount thereof will exceed 25% of the
aggregate of the Company's secured indebtedness and the total of its
capital stocks, premium thereon and surplus (paid-in, earned and other, if
any), but this voting requirement would be eliminated if a proposed
amendment to do so is approved at the Annual Meeting.
None of the foregoing voting (or consent) requirements will apply if
at the time provision has been made for the redemption of the outstanding
Cumulative Preferred Stock.
So long as any shares of Cumulative Preferred Stock are outstanding,
at present, the following limitations may not be exceeded unless authorized
by the holders of two-thirds of the outstanding shares of such stock.
These limitations are that dividends (other than dividends payable in
Common Stock) or other distributions on, or acquisitions for value of,
Common Stock of the Company (i) may not exceed 50% of the portion of the
Company's net income for a preceding 12 months' period which is available
for dividends on the Common Stock if the Common Stock equity of the Company
is less than 20% of total capitalization (all calculated as required by the
Restated Certificate of Incorporation), (ii) may not exceed 75% if such
capitalization ratio is 20% or more but less than 25%, and (iii) if such
capitalization ratio is 25% or more, such dividends, distributions or
acquisitions may not reduce such ratio to less than 25% except to the
extent permitted by the limitations mentioned in (i) and (ii). This voting
requirement would be eliminated if a proposed amendment to do so is
approved at the Annual Meeting.
IMPORTANT:
PLEASE SIGN AND
RETURN THE ENCLOSED
PROXY PROMPTLY.
(PROXY CARD)
COMMON STOCK
NORTHWESTERN PUBLIC SERVICE COMPANY
Huron, South Dakota 57350
PROXY FOR 1996 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 4, 1996, at the Annual Meeting of the Stockholders of the Company to
be held on May 1, 1996, 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: R. R. Hylland
Jerry W. Johnson
Larry F. Ness
(Instruction: To withhold authority to vote for any individual
nominee, print that nominee's name on the line provided below.)
---------------------------------------------------------
2. Vote For ( ) Against ( ) Abstain ( ) on the proposal to amend
the Company's Restated Certificate of Incorporation to increase to
1,000,000 the number of authorized shares of the Company's Preference
Stock, par value $50 per share.
3. Vote For ( ) Against ( ) Abstain ( ) on the proposal to amend
the Company's Restated Certificate of Incorporation to eliminate the
ability of stockholders or a vice president or the secretary of the
Company to call a special meeting of stockholders.
4. Vote For ( ) Against ( ) Abstain ( ) on the proposal to amend
the Company's Restated Certificate of Incorporation to increase to
1,000,000 the number of authorized shares of the Company's Cumulative
Preferred Stock, par value $100 per share.
5. Vote For ( ) Against ( ) Abstain ( ) on the proposal to amend
the Company's Restated Certificate of Incorporation to delete
subparagraph (c)(i) in subdivision 6-I of Division A of Article Fourth
therein to eliminate the income coverage requirement which must be
satisfied to issue additional Cumulative Preferred Stock without
obtaining approval of the holders of at least two-thirds of the
outstanding Cumulative Preferred Stock.
6. Vote For ( ) Against ( ) Abstain ( ) on the proposal to amend
the Company's Restated Certificate of Incorporation to delete
subparagraph (a) in subdivision 6-II of Division A of Article Fourth
therein to eliminate the requirement that the approval of the holders
of a majority of the outstanding Cumulative Preferred Stock be obtained
for the Company to issue or assume unsecured indebtedness securities in
an aggregate amount exceeding 25% of the Company's capitalization (as
defined in such provision).
7. Vote For ( ) Against ( ) Abstain ( ) on the proposal to amend
the Company's Restated Certificate of Incorporation to eliminate the
restrictions which apply to dividends or other distributions on, and to
purchases or other acquisitions of, the Company's Common Stock when the
Company's Common Stock equity is less than prescribed percentages of
the Company's total capitalization, unless approval of at least two-
thirds of the outstanding shares of the Cumulative Preferred Stock is
obtained.
8. Upon such other matters as may come before said meeting or any
adjournments thereof.
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 AND FOR THE APPROVAL OF THE
AMENDMENTS IN ITEMS 2, 3, 4, 5, 6, and 7
Dated , 1996
- ------------------------------ -----------------------------
(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.
(PROXY CARD)
CUMULATIVE PREFERRED STOCK
NORTHWESTERN PUBLIC SERVICE COMPANY
Huron, South Dakota 57350
PROXY FOR 1996 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 Cumulative Preferred
Stock of Northwestern Public Service Company held of record by the
undersigned on March 4, 1996, at the Annual Meeting of the Stockholders of
the Company to be held on May 1, 1996, and at any adjournments thereof, in
accordance with the Notice and Proxy Statement received, as follows:
1. Vote For ( ) Against ( ) Abstain ( ) on the proposal to amend
the Company's Restated Certificate of Incorporation to increase to
1,000,000 the number of authorized shares of the Company's Cumulative
Preferred Stock, par value $100 per share.
2. Vote For ( ) Against ( ) Abstain ( ) on the proposal to amend
the Company's Restated Certificate of Incorporation to delete
subparagraph (c)(i) in subdivision 6-I of Division A of Article Fourth
therein to eliminate the income coverage requirement which must be
satisfied to issue additional Cumulative Preferred Stock without
obtaining approval of the holders of at least two-thirds of the
outstanding Cumulative Preferred Stock; and
3. Vote For ( ) Against ( ) Abstain ( ) on the proposal to amend
the Company's Restated Certificate of Incorporation to delete
subparagraph (a) in subdivision 6-II of Division A of Article Fourth
therein to eliminate the requirement that the approval of the holders
of a majority of the outstanding Cumulative Preferred Stock be
obtained to issue or assume unsecured indebtedness securities in an
aggregate amount exceeding 25% of the Company's capitalization (as
defined in such provision).
4. Vote For ( ) Against ( ) Abstain ( ) on the proposal to amend
the Company's Restated Certificate of Incorporation to eliminate the
restrictions which apply to dividends or other distributions on, and
to purchases or other acquisitions of, the Company's Common Stock when
the Company's Common Stock equity is less than prescribed percentages
of the Company's total capitalization, unless approval of at least two-
thirds of the outstanding shares of the Cumulative Preferred Stock is
obtained.
.
(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 THE APPROVAL OF THE AMENDMENTS IN ITEMS 1, 2, 3, and 4.
Dated , 1996
- ------------------------------- -----------------------------
(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.
"FURNISHED for use of SEC only"
CONSOLIDATED STATEMENT OF CAPITALIZATION
December 31
1995 1994
------------------- -------------------
Common Stock Equity:
Common stock, $3.50 par value,
20,000,000 shares authorized;
8,920,122 and 7,677,232 shares
outstanding, respectively $ 31,220,427 $ 26,870,312
Additional paid-in capital 56,594,914 29,922,847
Retained earnings 59,159,042 55,373,112
Unrealized gain on investments, net 5,703,808 2,538,669
------------------- -------------------
152,678,191 38% 114,704,940 47%
------------------- -------------------
Cumulative Preferred Stock:
$100 par value, 300,000 shares
authorized; outstanding:
Nonredeemable - 4 1/2% Series 2,600,000 2,600,000
Redeemable -
5 1/4% Series 10,000 40,000
6 1/2% Series 1,150,000 -
Preferred Stock of Subsidiary:
No par value, 2,500 shares outstanding:
Redeemable -
15% Series 2,500,000 -
------------------- -------------------
6,260,000 1% 2,640,000 1%
------------------- -------------------
Company Obligated Mandatorily Redeemable
Security of Trust Holding Solely Parent Debentures:
8 1/8% Series due 2023 32,500,000 8% -
Long-Term Debt:
Series Due
- ---------------------------------
General mortgage bonds-
8.824% 1998 15,000,000 15,000,000
8.9% 1999 7,500,000 7,500,000
6.99% 2002 25,000,000 25,000,000
7.10% 2005 60,000,000 -
7% 2023 55,000,000 55,000,000
Pollution control obligations-
5.85%, Mercer Co., 2023 7,550,000 7,550,000
5.90%, Salix, IA 2023 4,000,000 4,000,000
5.90%, Grant Co., 2023 9,800,000 9,800,000
------------------- -------------------
183,850,000 123,850,000
Other long-term debt 29,560,224 3,772,500
Less-Due within one year (570,000) (570,000)
------------------- -------------------
212,840,224 53% 127,052,500 52%
------------------- -------------------
Total Capitalization $404,278,415 100% $244,397,440 100%
=================== ===================
See Notes to Consolidated Financial Statements
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31
1995 1994 1993
-------------- ------------- -------------
Operating Activities:
Net income $ 19,305,569 $ 15,440,208 $ 15,191,073
Items not affecting cash:
Depreciation and amortization 14,633,154 12,438,501 11,805,763
Deferred income taxes 2,540,385 1,509,619 (1,398,578)
Investment tax credit (563,311) (564,801) (566,498)
Changes in current assets and
liabilities net of
effects from acquisitions:
Trade accounts receivable (3,897,932) (1,057,563) (2,145,693)
Inventories (327,160) (1,447,191) (111,703)
Other current assets (2,641,018) (259,826) (1,056,726)
Accounts payable (1,718,666) 2,699,294 (1,565,245)
Accrued taxes 937,553 (1,487,575) 2,393,850
Accrued interest 1,741,160 (30,991) 193,772
Other current liabilities 3,328,632 421,690 898,638
Debt issuance related costs (711,189) - -
Other, net 2,739,783 (1,392,444) 624,146
-------------- ------------- -------------
Cash flows from operating
activities 35,366,960 26,268,921 24,262,799
-------------- ------------- -------------
Investment Activities:
Property additions (29,636,745) (22,680,856) (19,974,072)
Purchase of noncurrent
investments, net (5,669,229) (1,386,178) (6,923,488)
Purchase of net assets, net
of cash acquired (109,528,168) - (2,850,000)
Purchase working capital
adjustments, net (10,607,114) - -
Acquisition related costs (5,405,328) - -
-------------- ------------- -------------
Cash flows for investment
activities (160,846,584) (24,067,034) (29,747,560)
-------------- ------------- -------------
Financing Activities:
Dividends on common and
preferred stock (14,463,389) (12,940,868) (12,635,351)
Minority interest on preferred
securities of subsidiary trust (1,056,250) - -
Issuance of long-term debt 86,599,820 1,100,000 76,453,842
Repayment of long-term debt (3,156,699) (677,500) (58,900,200)
Issuance of preferred securities
of subsidiary trust 31,213,261 - -
Issuance of preferred stock 3,650,000 - -
Retirement of preferred stock (30,000) (30,000) (30,000)
Issuance of common stock 31,022,182 - -
Commercial paper borrowings
(repayments) (6,300,000) 9,800,000 -
-------------- ------------- -------------
Cash flows from (for)
financing activities 127,478,925 (2,748,368) 4,888,291
-------------- ------------- -------------
Increase (Decrease) in Cash and
Cash Equivalents 1,999,301 (546,481) (596,470)
Cash and Cash Equivalents,
beginning of year 2,552,612 3,099,093 3,695,563
-------------- ------------- -------------
Cash and Cash equivalents,
end of year $ 4,551,913 $ 2,552,612 $ 3,099,093
============== ============= =============
Supplemental Cash Flow Information:
Cash paid during the year for:
Income taxes $ 5,972,200 $ 7,382,119 $ 6,338,293
Interest 8,381,217 8,887,901 8,771,595
Noncash transactions during the year for:
Assumption of debt as part of
acquisition $ 2,344,603 $ - $ -
See Notes to Consolidated Financial Statements
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
Years Ended December 31
1995 1994 1993
------------- ------------- -------------
Operating Revenues:
Electric $ 74,857,501 $ 73,077,431 $ 70,104,822
Gas 64,482,943 62,141,382 65,017,964
Propane 38,883,031 - -
Manufacturing 26,746,847 22,047,241 18,134,456
------------- ------------- -------------
204,970,322 157,266,054 153,257,242
------------- ------------- -------------
Operating Expenses:
Fuel and purchased power 14,304,791 14,552,637 13,961,306
Purchased gas sold 46,430,023 46,351,422 48,153,861
Other operating expenses 23,428,509 21,728,387 23,285,277
Propane costs 31,716,415 - -
Manufacturing costs 23,735,000 19,385,349 16,269,766
Maintenance 6,019,601 6,169,895 6,368,346
Depreciation and amortization 14,633,154 12,438,501 11,805,763
Property and other taxes 6,605,660 6,103,903 6,139,613
------------- ------------- -------------
166,873,153 126,730,094 125,983,932
------------- ------------- -------------
Operating Income:
Electric 26,003,006 25,661,632 21,752,231
Gas 3,861,608 2,540,091 3,903,313
Propane 5,604,307 - -
Manufacturing 2,628,248 2,334,237 1,617,766
------------- ------------- -------------
38,097,169 30,535,960 27,273,310
Investment Income and Other 3,029,376 2,443,420 4,430,466
Interest Expense, net (11,694,483) (9,669,829) (8,944,584)
------------- ------------- -------------
Income Before Income Taxes 29,432,062 23,309,551 22,759,192
Income Taxes (10,126,493) (7,869,343) (7,568,119)
------------- ------------- -------------
Net Income 19,305,569 15,440,208 15,191,073
Minority Interest on Preferred
Securities of Subsidiary Trust (1,056,250) - -
Dividends on Cumulative Preferred
Stock (258,939) (119,888) (121,463)
------------- ------------- -------------
Earnings on Common Stock 17,990,380 15,320,320 15,069,610
Retained Earnings, beginning of year 55,373,112 52,873,772 50,318,050
Dividends on Common Stock (14,204,450) (12,820,980) (12,513,888)
------------- ------------- -------------
Retained Earnings, end of year $ 59,159,042 $ 55,373,112 $ 52,873,772
============= ============= =============
Average Shares Outstanding 8,130,581 7,677,232 7,677,232
Earnings Per Average Common Share $ 2.21 $ 2.00 $ 1.96
============= ============= =============
Dividends Declared Per Average
Common Share $ 1.747 $ 1.670 $ 1.630
============= ============= =============
See Notes to Consolidated Financial Statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
December 31
1995 1994
--------------- ----------------
ASSETS
Property:
Electric $ 336,961,117 $ 321,153,724
Gas 73,546,150 67,213,487
Propane 74,815,533 -
Manufacturing 2,048,725 1,558,484
--------------- ----------------
487,371,525 389,925,695
Less-Accumulated depreciation (150,469,310) (139,381,075)
--------------- ----------------
336,902,215 250,544,620
Current Assets:
Cash and cash equivalents 4,551,913 2,552,612
Trade accounts receivable, net 28,190,389 12,255,483
Receivable related to acquisition 23,357,538 -
Inventories
Coal and fuel oil 3,600,474 4,886,572
Materials and supplies 4,097,484 4,686,771
Manufacturing 5,660,357 5,064,859
Propane 8,287,443 -
Deferred gas costs 2,925,865 3,029,688
Other 9,948,238 3,694,912
--------------- ----------------
90,619,701 36,170,897
--------------- ----------------
Other Assets:
Investments 51,907,141 46,237,912
Deferred charges and other 30,240,083 22,881,641
Goodwill and other intangibles, net 49,052,343 3,230,570
--------------- ----------------
131,199,567 72,350,123
--------------- ----------------
$ 558,721,483 $ 359,065,640
=============== ================
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity $ 152,678,191 $ 114,704,940
Nonredeemable cumulative preferred stock 2,600,000 2,600,000
Redeemable cumulative preferred stock 3,660,000 40,000
Company obligated mandatorily redeemable
security of trust holding solely
parent debentures 32,500,000 -
Long-term debt 212,840,224 127,052,500
--------------- ----------------
404,278,415 244,397,440
--------------- ----------------
Commitments and Contingencies
(Notes 7, 8, 9)
Current Liabilities:
Commercial Paper 3,500,000 9,800,000
Long-term debt due within one year 570,000 570,000
Accounts payable 15,564,985 13,139,557
Accrued taxes 7,689,592 6,740,035
Accrued interest 4,738,243 2,915,084
Liabilities related to acquisition 12,750,424 -
Other 13,947,990 6,039,430
--------------- ----------------
58,761,234 39,204,106
--------------- ----------------
Deferred Credits:
Accumulated deferred income taxes 43,666,229 37,328,539
Unamortized investment tax credits 10,021,519 10,584,830
Other 41,994,086 27,550,725
--------------- ----------------
95,681,834 75,464,094
--------------- ----------------
$ 558,721,483 $ 359,065,640
See Notes to Consolidated Financial =============== ================
Statements
<PAGE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth
------- ------- ------- -------
(thousands except per share amounts)
1995: Operating revenues $50,754 $40,107 $45,548 $68,561
Operating income 12,929 6,679 6,908 11,581
Net income 7,103 3,049 3,140 6,014
Average shares 7,677 7,677 8,277 8,889
Earnings per average
common share $0.92 $0.39 $0.32 $0.59
1994: Operating revenues $55,464 $33,757 $30,195 $37,850
Operating income 14,163 4,783 3,793 7,797
Net income 8,017 2,244 1,330 3,849
Average shares 7,677 7,677 7,677 7,677
Earnings per average
common share $1.04 $0.29 $0.17 $0.50
