NORTHWESTERN PUBLIC SERVICE COMPANY
Huron, South Dakota
NOTICE OF
ANNUAL MEETING
AND PROXY STATEMENT
Annual Meeting
of Shareholders
May 6, 1998
NORTHWESTERN PUBLIC SERVICE COMPANY
Corporate Office
33 Third St. SE
Huron, South Dakota 57350-1605
<PAGE>
March 20, 1998
Dear Shareholder:
You are invited to attend the Annual Meeting of Shareholders of
Northwestern Public Service Company, which will be held at the Company's
Operations Center, 600 Market Street West, Huron, South Dakota, on May 6,
1998, 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 shareholders 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
in Class I, the holders of Common Stock of the Company will be entitled to
vote on two very important items. First, the Board of Directors is
recommending that the Company's Restated Certificate of Incorporation be
amended to change the name of the Company to Northwestern Corporation.
Second, the Board of Directors is recommending the approval of the
Northwestern Public Service Company Stock Option Plan.
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/ Merle D. Lewis
Merle D. Lewis
Chairman, President
and Chief Executive Officer
<PAGE>
VOTING YOUR PROXY IS IMPORTANT
TO INSURE THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING,
HOWEVER SMALL YOUR HOLDINGS, IT IS ESSENTIAL THAT YOU SIGN, DATE,
AND RETURN THE ENCLOSED PROXY CARD PROMPTLY.
A self-addressed envelope, which requires no postage if
mailed in the United States, is enclosed for your convenience.
<PAGE>
NORTHWESTERN PUBLIC SERVICE COMPANY
Corporate Office
33 Third St. SE
Huron, South Dakota 57350-1605
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE HOLDERS OF COMMON STOCK OF NORTHWESTERN PUBLIC SERVICE COMPANY:
The Annual Meeting of Shareholders of Northwestern Public Service
Company (the "Company") will be held at the Company's Operations Center,
600 Market Street West, Huron, South Dakota, on Wednesday, May 6, 1998, at
11:00 a.m., local time, for the following purposes:
(1) To elect four members of Class I of the Board of Directors of the
Company to hold office until the Annual Meeting of Shareholders in 2001,
and until their successors are duly elected and have qualified;
(2) To consider and act upon a proposal to amend the Company's
Restated Certificate of Incorporation to change the name of the Company to
Northwestern Corporation;
(3) To consider and act upon a proposal to approve the Northwestern
Public Service Company Stock Option and Incentive Plan; and
(4) To transact such other business as may properly come before the
meeting and any adjournment or postponement thereof.
The Board of Directors of the Company has fixed the close of business
on March 9, 1998, as the record date for determining the holders of Common
Stock entitled to notice of and to vote at the meeting or any adjournment
thereof. The Common Stock transfer books of the Company will not be
closed. A list of shareholders entitled to vote at the meeting will be
maintained at the offices of the Company, 600 Market Street West, Huron,
South Dakota, and such list will be open to examination by shareholders 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. 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
ALAN D. DIETRICH
Vice President-Administration
and Corporate Secretary
March 20, 1998
<PAGE>
NORTHWESTERN PUBLIC SERVICE COMPANY
Corporate Office
33 Third St. SE
Huron, South Dakota 57350-1605
Proxy Statement for Annual Meeting of Shareholders
To be held May 6, 1998
This statement is being mailed to shareholders on March 23, 1998, 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 6, 1998. 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. Kissel-Blake
Inc. has been retained by the Company to assist in the solicitation of
proxies at an anticipated cost to the Company of $7,000, 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 9,
1998, 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 9, 1998,
there were outstanding 17,842,524 shares of Common Stock.
Shareholders 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.
A quorum of shareholders is necessary to take action at the Annual
Meeting. A majority of the outstanding shares of Common Stock of the
Company, represented in person or by proxy, will constitute a quorum.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the inspectors of election appointed for the Annual Meeting. The
inspectors of election will determine whether or not a quorum is present at
the Annual Meeting. Under certain circumstances, a broker or other nominee
may have discretionary authority to vote certain shares of Common Stock if
instructions have not been received from the beneficial owner or other
person entitled to vote. The inspectors of election will treat directions
to withhold authority, abstentions and broker non-votes (which occur when a
broker or other nominee holding shares for a beneficial owner does not vote
on a particular proposal, because such broker or other nominee does not
have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner) as present and entitled to
vote for purposes of determining the presence of a quorum for the
transaction of business at the Annual Meeting. Directions to withhold
authority will have no effect on the election of directors, because
directors are elected by a plurality of votes cast. Broker non-votes are
not counted in the vote totals and will have no effect on any proposal
scheduled for consideration at the Annual Meeting, because they are not
considered votes cast. For purposes of determining shareholder approval,
abstentions will be treated as shares of Common Stock voted against the
proposed amendment to the Restated Certificate of Incorporation and the
Northwestern Public Service Company Stock Option and Incentive Plan.
The four nominees for director who receive the greatest number of
votes cast in person or by proxy at the Annual Meeting shall be elected
directors of the Company. The vote required for approval of the amendment
to the Restated Certificate of Incorporation and the Northwestern Public
Service Company Stock Option and Incentive Plan is the affirmative vote of
a majority of the shares of Common Stock present in person or represented
by proxy at the Annual Meeting.
Proposal One
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 Shareholders,
four directors will be elected to Class I of the Board of Directors, to
hold office for a term of three years, until the Annual Meeting of
Shareholders in 2001, 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 I named below as directors.
In the event of the inability or unwillingness of one or more of these
nominees to serve as a director at the time of said meeting, or of any
adjournment thereof, the shares represented by the proxies may (in the
discretion of the holders of said proxies) be voted for other nominees not
named herein, in lieu of those unable or unwilling to serve. Each of the
nominees has consented to be named and to serve if elected. Management is
not aware that any of the nominees will be unable to serve.
All of the nominees as directors in Class I are presently serving as
directors. An additional current Class I Director, Herman Lerdal will
retire from the Board of Directors, effective May 1, 1998, when the Board
of Directors will be reduced to a ten member Board.
The following information, including principal occupation or
employment for the past five or more years, is furnished with respect to
the following nominees to Class I of the Board of Directors:
Age on
Principal Occupation Director March 1,
Nominee or Employment Since 1998
- ------------------ ------------------------- ----------- --------
Raymond M. Schutz Attorney and partner in October 1990 68
the law firm of Siegel,
Barnett & Schutz since
1963, Aberdeen, South
Dakota.
Bruce I. Smith Attorney and partner in May 1989 56
the law firm of Luebs,
Leininger, Smith, Busick
& Johnson since 1978,
Grand Island, Nebraska.
Gary G. Drook President and Chief February 1998 53
Executive Officer and
Director of Ruppman
Marketing Technologies,
Inc. since 1996; formerly
President of Network
Services (1994-1995),
President of Enhanced
Business Services (1993-
1994) and President of
Ameritech Publishing
(1989-1993) for Ameritech
Corporation, Peoria,
Illinois.
Randy G. Darcy Senior Vice President, February 1998 47
Operations of General
Mills, Inc. since 1987,
Minneapolis, Minnesota.
The following information, including principal occupation or
employment for the past five or more years, is furnished with respect to
directors in Class II whose terms expire in 1999:
Age on
Principal Occupation Director March 1,
Director or Employment Since 1998
- ------------------ ------------------------- ----------- --------
Larry F. Ness Chairman and Chief August 1991 52
Executive Officer of
First Dakota Financial
Corp., a bank holding
company, and Chairman
and Chief Executive Officer
of First Dakota National
Bank since 1996, formerly
Vice Chairman and Chief
Executive Officer (1993-
1995), Yankton, South
Dakota.
Jerry W. Johnson Dean of the School of May 1994 57
Business, University of
South Dakota, since 1990;
Director for Citibank (S.D.),
N.A. and Citibank FSB;
Vermillion, South Dakota.
R. R. Hylland Executive Vice President November 1995 37
of the Company since
May 1996; Vice Chairman
and Chief Executive Officer
of Northwestern Growth
Corporation since January
1998; formerly held the
following offices with the
Company: Executive Vice
President-Strategic Develop-
ment (1995-1996), Vice
President Strategic
Development (1995),
Vice President-Corporate
Development (1993-1995),
Vice President-Finance
(1991-1995), Treasurer
(1990-1994); President
and Chief Operating
Officer of Northwestern
Growth Corporation (1994-
1998); 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 2000:
Age on
Principal Occupation Director March 1,
Director or Employment Since 1998
- ------------------ ------------------------- ----------- --------
Aelred J. Kurtenbach President, Chief May 1994 64
Executive Officer and
and Director of
Daktronics, Inc.,
manufacturer of large
computer programmable
displays, Brookings,
South Dakota.
M. D. Lewis Chairman of the Company February 1993 50
since May 1997; President
and Chief Executive Officer
since February 1994;
Chairman Officer of
Northwestern Growth
Corporation since
September 1994; formerly
held the following offices
of the Company: Executive
Vice President (1993-1994),
Executive Vice President-
Corporate Services (1992-
1993), Huron, South Dakota.
Gary Olson President and Chief February 1997 57
Executive Officer of
Norwest Bank South Dakota,
Regional President of
Norwest Corporation, and
Director and Chairman of
various Norwest credit
and insurance subsidiaries
since 1988, Sioux Falls,
South Dakota.
Meetings of the Board of Directors
The Board of Directors held four regular meetings and two special
meetings during 1997. Each director attended more than 75 percent of the
aggregate of the meetings of the Board of Directors and of each committee
on which he served.
Audit Committee
The Board of Directors has a standing Audit Committee composed of not
less than three directors who are not employees of the Company. The
present members of the Audit Committee are Chairman Larry F. Ness, Gary
Olson, Raymond M. Schutz, and Aelred J. Kurtenbach. The Audit Committee
held two meetings during 1997. 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 composed of not less than three directors who are not employees
of the Company. The present members of the Nominating and Compensation
Committee are Chairman Herman Lerdal, Bruce I. Smith, Jerry W. Johnson, and
Larry F. Ness. The Nominating and Compensation Committee held five
meetings during 1997. 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 shareholders 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, to recommend compensation
of directors and officers of the Company, and to determine awards, if any,
to the executive officers of the Company under incentive compensation
plans. The Nominating and Compensation Committee will consider nominees
for directors recommended by shareholders.
Corporate Governance Committee
The Board of Directors, during 1996, created a Corporate Governance
Committee composed of the President and Chief Executive Officer and not
less than three directors who are not employees of the Company. The
present members of the Corporate Governance Committee are Chairman Bruce I.
Smith, M. D. Lewis, Jerry W. Johnson, and Aelred J. Kurtenbach. The
Corporate Governance Committee held two meetings in 1997. The function of
the Corporate Governance Committee is to make recommendations to the Board
of Directors concerning Board policies, a chief executive officer
performance appraisal procedure, director qualifications, and Board
evaluation and to provide overall counsel and oversight for the Board.
Shareholder Submitted Candidates
A shareholder who wishes to submit a candidate for consideration at
the Annual Meeting of Shareholders to be held in 1999 must notify the
Corporate Secretary of the Company in writing not less than ninety days nor
more than 120 days prior to the meeting. The shareholder's written notice
must include information about each proposed nominee, including name, age,
business address, principal occupation, shares beneficially owned and other
information required in proxy solicitations. The nomination notice must
also include the nominating shareholder's name and address, the number of
shares of the Common Stock beneficially owned by the shareholders, and any
arrangements or understandings between the nominee and the shareholder.
The shareholder must also furnish a statement from the candidate indicating
that the candidate wishes and is able to serve as a director. These
procedures, and a statement that the shareholder intends to make the
nomination, are prerequisites to a shareholder nominating a candidate at
the meeting.
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
The following information is provided concerning the Company's
Employee Stock Ownership Plan and Trust (ESOP) in which are held more than
5% of the Company's Common Stock:
(1) Title of (2) Name and (3) Amount and (4) Percent
Class Address of Nature of of
Beneficial Beneficial Class
Owner Ownership
- --------------- ---------------- ---------------- ------------
Common Stock, Northwestern 1,483,238 8.3%
par value $1.75 Public Service
per share Company Employee
Stock Ownership
Plan and Trust,
600 Market St. W
Huron, SD 57350-1500
The Common Shares owned by the ESOP are held in trust for the benefit
of participants in the ESOP, and the Trustees have sole investment power
over the Common Shares held in trust. Employee participants are entitled
to instruct the Trustees on how to vote all Company Common Shares allocated
to their accounts (presently 892,520) and will receive a separate Proxy for
voting such shares. All shares allocated to the participants for which no
voting instructions are received and all unallocated shares held by the
ESOP will be voted by the Trustees in the same way that the allocated
shares have been voted by participants.
SECURITY OWNERSHIP BY MANAGEMENT
The following table sets forth information, as of January 31, 1998,
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 (4) 12,154 (5) *
Jerry W. Johnson 4,196 *
Aelred J. Kurtenbach 4,584 *
Herman Lerdal 5,784 (6) *
M. D. Lewis (4) 24,242 10,532 *
Larry F. Ness 5,020 *
Gary Olson 5,498 *
Raymond M. Schutz (4) 7,300 *
Bruce I. Smith 7,399 *
A. R. Donnell 22,600 (7) 7,920
R. F. Leyendecker 14,512 30 *
D. K. Newell (4) 4,272 473 *
All directors &
executive officers 124,896 49,974 1%
*Less than 1%.
(1) Shares shown represent both record and beneficial ownership. None of
such persons have the right to a right to acquire beneficial ownership
of any additional shares.
(2) Shares held individually by employees also include shares held in that
employee's account with the Trustees of the Company's Employee Stock
Ownership Plan and in the employee savings plans.
(3) Shares held jointly owned with spouse or other family member(s).
(4) Messrs. Lewis, Schutz and Newell own, respectively, 3,000, 238, and
1,000 common units representing limited partner interests in
Cornerstone Propane Partners, L.P., an affiliate of the Company, and
Messrs. Hylland, Lewis and Newell own, respectively, 14,286, 19,048,
and 9,524 restricted units, for a total of 89,524 and common and
restricted units held by directors and executive officers of the
Company. None of the foregoing amounts exceeds 1% of the outstanding
common units.
(5) Included are 695 shares that Mr. Hylland holds as custodian for his
children and 3,481 shares held by his wife.
(6) All shares are held in a trust in which Mr. Lerdal and his wife are
trustees.
(7) Included are 1,282 shares that Mr. Donnell holds as custodian for his
grandchildren.
With the exception of Thomas A. Gulbranson, Vice President-Customer
Services of the Company, none of the directors, nominees or executive
officers of the Company beneficially owns any of the Company's Cumulative
Preferred Stock ($100 par value). Mr. Gulbranson, together with other
family members, jointly owns 13 shares (0.0005%) of the Company's 4 1/2%
Cumulative Preferred Stock.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Executive Management Compensation
The Nominating and Compensation Committee has furnished the following
report on executive compensation to the shareholders of the Company.
Procedures and Policies
The Nominating and Compensation Committee of the Board of Directors,
which consists of not less than three directors who are not officers or
employees of the Company, 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
executive officer awards made under the Company's other incentive
compensation plans.
The Nominating and Compensation Committee engaged William M. Mercer,
Incorporated in 1997 to assess the current executive compensation program
for the Company and to offer recommendations that would support the
Company's short and long-term business strategy. Mercer representatives
interviewed the members of the Board of Directors and presented their
findings to the Board in May 1997. The Board of Directors has implemented
various recommendations from the Mercer study which are designed to create
and sustain an entepreneurial mindset throughout the organization; to
reward executives for Company, business segment, and individual
performance; to focus on long-term performance and shareholder value; and
to attract and retain key executives and managers.
The Nominating and Compensation Committee considered the effect of the
limitations on the deductibility of executive compensation in excess of $1
million under Section 162(m) of the Internal Revenue Code on the Company's
compensation policies and practices and has determined not to make any
changes in such policies and practices. The Company does not expect to pay
any non-deductible compensation in 1998.
Base Salary
The Mercer study recommended, and the Board of Directors approved, a
compensation program which positions total direct executive compensation at
the median for a combined utility and general industry market when
performance is consistent with that comparative group, manages base salary
through a narrow range around the median for the comparative group with
adjustments primarily as the market median moves, leverages the program
through annual incentives and equity-related long-term plans, and
introduces stock ownership guidelines. The comparative group is a broader
group then the peer group used in the performance graph.
In determining Mr. Lewis's salary for 1997 as Chairman, President and
Chief Executive Officer, the Committee considered the recommendations of
the Mercer study, Mr. Lewis's individual performance as leader of the
Company, and his contributions to the long-term success of the
organization. The Committee also utilized, throughout 1997, the formal
chief executive officer evaluation process first initiated in 1996. In
particular, the Committee considered the success in creating a public
propane subsidiary which is among the top five national propane companies,
the significant growth of the Company through acquisitions and investments
in propane and heating, ventilating and air conditioning service
businesses, and the increases in earnings during the year. Mr. Lewis's
base salary, which was established at the median for the comparative group,
was included in the employment agreement discussed below. Similar factors
were used to determine the salary of the other executive officers whose
base salaries were established at or near the median for the comparative
group.
The philosophy for all incentive compensation plans of the Company is
to provide rewards when financial objectives are achieved, and to 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 known as the NorthSTAR Plan), an incentive compensation
plan which, with later amendments, has been broadened to involve employees
at many levels 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
based on 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, team, 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-
five percent of annual salary will be paid to the employee, unless
employment with the Company has been terminated for any reason other than
death, disability or retirement. Awards to executive officers under the
NorthSTAR Plan are determined by the Nominating and Compensation Committee.
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, these 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. In addition, Mr. Lewis, Mr. Hylland, and Mr. Newell
receive an acquisition fee equal to a total of 2% of the NGC acquisition
and investment transactions. Awards made in 1997 were consistent with this
philosophy and were based on NGC's investment performance.
In May 1997, in response to the recommendations of the Mercer study,
the Board of Directors adopted business segment annual incentive plans for
the Energy Operations, Administration, Customer Services, and Market
Development business segments of the Company. The annual incentive
compensation of Mr. Lewis and Mr. Hylland is tied to the success of all of
these plans, while other executive officers and other key managers are
involved in those business segment annual incentive plans which relate to
their activities. Awards under such plans were determined by the
Nominating and Compensation Committee, in February 1998.
Long-Term Incentive Compensation
As a complement to the Company's annual incentive plans, the Board of
Directors has determined that a long-term incentive compensation plan which
ties executive compensation to increases in shareholder value is important.
The Mercer study recommended, and the Board of Directors believes that the
adoption of an incentive stock option plan will accomplish this goal by
strengthening the link between compensation and the market value of the
Company's stock. Therefore, the Board recommends that shareholders approve
the item discussed below in the section of this proxy statement entitled:
Proposal Three, Approval of Northwestern Public Service Company Stock
Option and Incentive Plan. In addition, the Board of Directors has
established stock ownership guidelines for all executive officers which
require each officer to obtain a significant equity ownership interest in
the Company within eight years.
If the proposed Northwestern Public Service Company Stock Option and
Incentive Plan is approved by shareholders at the annual meeting, the Board
intends to discontinue the long-term incentive compensation plan it adopted
in 1989. That plan has provided for annual awards of performance units to
be made to all directors of the Company and any or all officers in
performance units 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 unless there has been a termination due to death, disability
or retirement of the recipient. If the performance unit plan is terminated
in 1998 by the Board, awards will continue to be paid out pursuant to such
five-year rolling period. 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.
Performance unit awards made in 1997 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.
This report is submitted on behalf of the Nominating and Compensation
Committee:
Herman Lerdal, Chairman
Jerry W. Johnson
Larry F. Ness
Bruce I. Smith
Summary Compensation Table
The following table sets forth the compensation earned by or awarded
or paid 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:
Long Term
Compensa- All
Annual Compensation tion Other
---------------------- ----------- Compen-
Name and Salary Bonus(1) Payouts (2) sation(3)
Position Year ($) ($) ($) ($)
- --------------- ---- --------- ----------- ----------- ----------
M. D. Lewis 1997 365,971 367,537 24,897 25,085
Chairman, Presi- 1996 207,388 484,625 17,765 15,358
dent & Chief 1995 187,758 97,255 18,507 14,349
Executive Officer;
Chairman of
Northwestern
Growth Corporation
R. R. Hylland 1997 246,417 345,638 24,897 10,480
Executive 1996 137,906 726,908 17,765 7,359
Vice President; 1995 115,077 100,260 18,507 6,029
Vice Chairman &
CEO of Northwestern
Growth Corporation
D. K. Newell 1997 168,333 244,154 0 9,920
Vice President- 1996 106,500 487,001 0 3,415
Finance & 1995 41,667 27,776 0 0
Chief Financial
Officer;
President & COO
of Northwestern
Growth Corporation
R. F. Leyendecker 1997 122,708 97,976 24,897
15,740
Vice President- 1996 114,208 109,180 17,765 11,453
Market 1995 104,375 41,784 18,507 13,343
Development;
President & COO
of Northwestern
Energy Corporation
A. R. Donnell 1997 124,984 38,953 37,346 12,405
Vice President- 1996 117,440 25,695 25,782 11,956
Energy 1995 109,416 26,642 27,761 11,475
Operations
(1) The amounts in the bonus column for 1995 are cash awards pursuant to
the Company's NorthSTAR Plan and the Northwestern Growth Corporation
Incentive Compensation Plan (NGC Plan), which are described under
Executive Management Compensation. For 1996 the amounts include
awards pursuant to such plans; including significant bonuses under the
NGC plan for creation of a public propane subsidiary among the
nation's industry leaders, and special discretionary awards made to
Mr. Hylland ($25,000) and Mr. Newell ($25,000) for their efforts
related to the successful completion of certain acquisition
transactions and for Mr. Leyendecker ($5,000) for his efforts related
to regulatory matters. For 1997 the amounts include awards pursuant
to the NGC Plan and business segment annual incentive plans. In
addition to such incentive awards, the award earned by the executives
in 1997, if any, is to be paid under the NorthSTAR Plan will be
determined in the spring of 1998.
(2) The amounts in this column represent the cash payouts from the
Company's Long-Term Incentive Compensation Plan at the end of the five-
year periods since the awards were made.
(3) The amounts in this column include the Company's contributions to the
Employee Savings Plan for the executives and to the Employee Stock
Ownership Plan 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 1997 such amounts under the
Employee Savings Plan, ESOP, and life insurance; respectively, were as
follows: Mr. Lewis: $4,750, $6,284, and $14,051; Mr. Hylland:
$4,635, $2,320, and $3,525; Mr. Newell: $4,750, $1,795, and $3,375;
Mr. Leyendecker: $3,681, $6,009, and $6,050; Mr. Donnell: $3,750,
$5,030, and $3,625.
Long-Term Incentive Plan Awards in Last Fiscal Year
The amounts in the following table represent the phantom stock awards
made during 1997 pursuant to the Company's Long-Term Incentive Compensation
Plan (described above under Long-Term Incentive Compensation).
Performance
or Other
Number of Shares, Period Until
Units or Maturation
Name Other Rights or Payout
- ----------------- --------------- ------------
M. D. Lewis 12,680 5 years
R. R. Hylland 5,146 5 years
D. K. Newell 1,694 5 years
R. F. Leyendecker 980 5 years
A. R. Donnell 996 5 years
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Board of Directors has adopted a program of comprehensive
employment agreements with Mr. Lewis, Mr. Hylland, Mr. Newell, Mr.
Leyendecker, Mr. Donnell, other executive officers, and certain key
managers, which agreements have specific terms of from one to three years
and contain non-compete, confidentiality, and change of control provisions.
The agreements also include annual incentive plan provisions tied to the
success of the employees' business segment success. The agreements provide
termination benefits if 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 shareholders 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 shareholders of the Company approve a plan of
liquidation of the Company, or the shareholders 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 annual 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 employee is able to
obtain other employment.
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 1998 based on the provisions of the
Pension Plan as it existed on December 31, 1997, would be:
Average Years of Service
Annual ----------------------------------------------------------
Earnings 15 20 25 30 35 40
- -------- ------- ------- ------- -------- -------- --------
$ 25,000 $4,648 $6,198 $7,747 $9,296 $10,846 $12,395
50,000 11,211 14,948 18,684 22,421 26,158 29,895
75,000 17,773 23,698 29,622 35,546 41,471 47,395
100,000 24,336 32,448 40,559 48,671 56,783 64,895
125,000 30,898 41,198 51,497 61,796 72,096 82,395
150,000 37,461 49,948 62,434 74,921 87,408 99,895
175,000 44,023 58,698 73,372 88,046 102,721 117,395
200,000 50,586 67,448 84,309 101,171 118,033 134,895
225,000 57,148 76,198 95,247 114,296 133,346 152,395
250,000 63,711 84,948 106,184 127,421 148,658 169,895
275,000 70,273 93,698 117,122 140,546 163,971 187,395
300,000 76,836 102,448 128,059 153,671 179,283 204,895
325,000 83,398 111,198 138,997 166,796 194,596 222,395
350,000 89,961 119,948 149,934 179,921 209,908 239,895
375,000 96,523 128,698 160,872 193,046 225,221 257,395
400,000 103,086 137,448 171,809 206,171 240,533 274,895
425,000 109,648 146,198 182,747 219,296 255,846 292,395
450,000 116,211 154,948 193,684 232,421 271,158 309,895
475,000 122,773 163,698 204,622 245,546 286,471 327,395
500,000 129,336 172,448 215,559 258,671 301,783 344,895
525,000 135,898 181,198 226,497 271,796 317,096 362,395
550,000 142,461 189,948 237,434 284,921 332,408 379,895
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, 22 years; R. R. Hylland, 8 years; D. K. Newell, 2 years; R. F.
Leyendecker, 23 years; A. R. Donnell, 27 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.
Director Compensation
Directors who are not officers of the Company annually receive 400
shares of Common Stock of the Company and are paid $1,100 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 $800 for each meeting of a committee on which such
director serves and $500 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 who are also officers are not separately compensated
for services as a director on the Company's Board.
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.
Mr. R. A. Wilkens, as Chairman of the Board of the Company from
January 1 through April 30, 1997, was paid $18,000. Mr. Lewis, Mr.
Hylland, and Mr. Newell were paid $59,750, $23,750, and $22,000,
respectively, as director fees for service on the board of Cornerstone
Propane GP, Inc., a subsidiary of Northwestern Growth Corporation.
Termination of Directors' Retirement Plan
In 1997, the Board of Directors terminated a retirement plan for non-
employee directors who have not retired prior to May 1998. The accrued
benefit to such active directors was converted to common stock of the
Company which was transferred to such directors in January 1998.
Salary Continuation Plan
In 1983, the Company implemented a non-qualified salary continuation
plan for directors and selected management employees. In 1997 a total of
82 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.
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 46 combination gas and
electric utility companies** for a five year period:
(GRAPH)
NWPS S&P 500 EEI Peer
---- ------- --------
Base 12/30/92 $100 $100 $100
1993 108.24 110.08 111.66
1994 106.92 111.53 97.28
1995 119.30 153.45 123.91
1996 154.66 188.68 123.13
1997 217.63 251.64 159.17
*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.; Duke Energy; Enova Corp.; Houston Industries, Inc.; IES
Industries, Inc.; Illinova Corp.; Interstate Power Co.; LG&E Energy
Corp.; Long Island Lighting Co.; Madison Gas & Electric Co.; MDU
Resources Group; MidAmerican Resources; Montana Power Co.; New Centuries
Energy; New York State Elec. & Gas Corp.; Niagara Mohawk Power Corp.;
NIPSCO Industries, Inc.; Northern States Power Co.; Northwestern Public
Service Co.; Orange & Rockland Utilities, Inc.; Pacific Gas & Electric
Co.; PECO Energy; Public Service Co. of New Mexico; Public Service
Enterprise Group; Puget Sound Energy; Rochester Gas & Electric Corp.;
Scana Corp.; Sierra Pacific Resources; SIGCORP; St. Joseph Light & Power
Co.; Texas Utilities, Inc.; Utilicorp United, Inc.; Washington Water
Power Co.; Western Resources, Inc.; Wisconsin Energy Corp.; WPS
Resources; and WPL Holdings, Inc.
Proposal Two
Amendment to Change the Company Name
The Board of Directors has proposed and recommends for adoption by the
holders of Common Stock a resolution to amend Article FIRST of the Restated
Certificate of Incorporation to change the name of the Company to
Northwestern Corporation. The text of the proposed resolution and
amendment to the Company's Restated Certificate of Incorporation, is as
follows:
RESOLVED, that Article FIRST of the Restated Certificate of
Incorporation of Northwestern Public Service Company, as
heretofore amended, is hereby amended to read as follows:
"FIRST: The name of this corporation is NORTHWESTERN
CORPORATION."
The Board recommends adoption of this proposal to recognize the
diversified nature of the Company's business, which includes investments in
natural gas and electric distribution, electric generation and
transmission, propane distribution, heating ventilation and air
conditioning services, telecommunications services, wholesale energy sales,
and manufacturing businesses. The Board believes that this change will
more accurately reflect the nature of the Company's ongoing business
operations which are highly diversified. The Company's natural gas and
electric distribution and electric generation and transmission will
continue to do business under the assumed name of Northwestern Public
Service, thereby maintaining its identity in the conduct of these
businesses.
Adoption of this Proposed Amendment requires the favorable vote of the
holders of a majority of the outstanding shares of Common Stock. Proxies
of the holders of such stock will be voted on the Proposed Amendment as
specified thereon, and 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 OTHERWISE INDICATED ON THE PROXY,
THE SHARES OF COMMON STOCK WILL BE VOTED
FOR THIS AMENDMENT.
Proposal Three
Approval of the
Northwestern Public Service Company
Stock Option and Incentive Plan
The Board of Directors of the Company has approved, subject to the
approval of the shareholders, the Northwestern Public Service Company Stock
Option and Incentive Plan (the "Plan"). If approved by the shareholders,
this Plan will replace the Company's current long-term incentive
compensation plan.
The Plan is intended to recognize the contributions made to the
Company by employees of the Company, to provide such persons with
additional incentive to devote themselves to the future success of the
Company, and to improve the ability of the Company to attract, retain and
motivate individuals upon whom the Company's future growth and financial
success depend, by providing such persons with an opportunity to acquire or
increase their proprietary interest in the Company through receipt of
options to acquire the Company's Common Stock. Similarly, the Plan is
intended as an additional incentive to directors who are not employees of
the Company to serve on the Board of Directors and to devote themselves to
the future success of the Company. Options granted under the Plan to
employees may be "incentive stock options" ("ISOs") within the meaning of
Section 422(b) of the Internal Revenue Code of 1986, as amended, (the
"Internal Revenue Code"), or may be options not intended to be ISOs
("nonqualified stock options") (ISO and nonqualified stock options being
hereinafter collectively referred to as "Options"). Options granted to
directors who are not employees of the Company will be nonqualified stock
options.
The Company believes that adoption of the Plan is in the best
interests of the Company and its shareholders. Options provide more or
less of an economic benefit to Option holders depending on market value of
the Company's Common Stock, thereby constituting a particularly effective
incentive to Option holders to endeavor to improve the Company's financial
performance and, thereby, the performance of the Common Stock in the public
market.
A brief summary of the Plan follows.
Number of Shares of Common Stock. The number of shares of Common
Stock for which Options may be granted under the Plan shall initially be
1,338,189 (7 1/2% of the shares of Common Stock outstanding on January 1,
1988). The total number of shares of Common Stock available for Options
under the Plan shall, if less than 7.5% of the number of outstanding
shares, be increased annually during the term of the Plan to 7.5% of the
outstanding shares. The number of shares of Common Stock is subject to
adjustment upon the occurrence of a stock dividend, stock split,
recapitalization or certain other capital adjustments.
Administration. The Plan will be administered by the Nominating and
Compensation Committee.
Eligibility. All directors, officers and other key employees of the
Company and its subsidiarties are eligible to receive Options under the
Plan. However, those directors of the Company who are not employees of the
Company (the "Nonemployee Directors") may receive Options only pursuant to
special provisions of the Plan relating to such directors, as described
below.
Term of Plan. No Option may be granted under the Plan after May 6,
2008.
Exercise Price. The exercise price for each Option granted to an
employee will be the average of the closing sales price of the Common Stock
on The New York Stock Exchange for the 20 business days ending on the third
business day preceding the date with respect to which such Common Stock is
being valued (the "Fair Market Value"). The exercise price for each Option
granted to a Nonemployee Director will be the Fair Market Value, unless the
Committee determines in its sole discretion, to establish an exercise price
greater or less than the Fair Market Value. On January 30, 1998, the
closing price of the Common Stock on The New York Stock Exchange was $22
3/16.
Options Granted unde the Plan. Options to be granted to participants
in the Plan are not determinable at this time since they are discretionary
(other than the automatic grants to Nonemployee Directors).
Special ISO Rules for Certain Shareholders. If an ISO is granted to
an employee who then owns, directly or by attribution under the Internal
Revenue Code, shares possession more than 10% of the total combined voting
power of all classes of shares of the Company, the terms of the Option will
not exceed five years and the exercise price will be at least 110% of the
Fair Market Value of the shares on the date that the Option is granted.
Payment. An Option holder may pay the exercise price for an Option
(a) in cash, (b) in cash received from a broker-dealer to whom the holder
has submitted an exercise notice consisting of a fully endorsed Option
(however, in the case of a holder subject to Section 16 of the Exchange
Act, this payment option shall only be available to the extent such holder
complies with Regulation T issued by the Federal Reserve Board), (c) by
delivering (either actual delivery or by attestation procedures established
by the Company) previously owned shares of Common Stock having an aggregate
Fair Market Value on the date of exercise equal to the exercise price, (d)
by directing the Company to withhold such number of shares of Common Stock
otherwise issuable upon exercise of such Option having an aggregate Fair
Market Value on the date of exercise equal to the exercise price, (e) by
agreeing to surrender Options then exercisable valued at the excess of the
aggregate Fair Market Value of the shares of Common Stock subject to such
Options on the date of exercise over the aggregate option price of such
shares, (f) in the case of an employee, by such other medium of payment as
the Compensation Committee, in its discretion, shall authorize at the time
of grant, or (g) by any combination of (a), (b), (c), (d), (e) and (f).
Option Agreement; Restriction on Transferability. Each Option will be
evidenced by a written Option Agreement containing provisions consistent
with the Plan and such other provisions at the Compensation Committee deems
appropriate. No Option granted under the Plan may be transferred, except
by will, the laws of descent and distributions or pursuant to a qualified
domestic relations order. Notwithstanding the preceding sentence, an
Option Agreement for NSOs may provide that the Optionee, at any time prior
to his death, may assign all or any portion of an Option granted to him to
(i) his spouse or lineal descendant, (ii) the trustee of a trust for the
primary benefit of his spouse or lineal descendant, (iii) a partnership of
which his spouse and lineal descendants are the only partners, or (iv) a
tax exempt organization as described in Code Section 501(c)(3).
Provisions Relating to Nonemployee Directors. Each Nonemployee
Director on the effective date of the Plan shall be granted automatically
an Option to purchase 1,200 shares of Common Stock on the effective date of
the Plan, and each Nonemployee Director shall also be eligible to receive
discretionary grants.
Amendments to the Option Agreement and the Plan. The Board of
Directors may amend the Plan from time to time in such manner as it may
deem advisable. Subject to the provisions of the Plan, the Compensation
Committee may amend an Option Agreement, subject to the Option holder's
consent if the amendment is not favorable to the Option holder.
Tax Aspects of the Plan. The following discussion is intended to
summarize briefly the general principles of Federal income tax law
applicable to each Option granted under the Plan. A recipient of an ISO
will not recognize taxable income upon eihter the grant or exercise of the
ISO. The Option holder will recognize long-term capital gain or loss on a
disposition of the shares of Common Stock acquired upon exercise of an ISO,
provided the Option holder does not dispose of those shares of Common Stock
within two years from the date the ISO was granted or within one year after
the shares of Common Stock were transferred to such Option holder (a
'disqualifying disposition"). Currently, for regular Federal income tax
purposes, long-term capital gain is taxed at a maximum rate of 20% for
individuals if the individual's holding period is more than 18 months,
while ordinary income may be subject to a maximum rate of 39.6%. If the
Option holder satisfies both of the foregoing holding periods, then the
Company will not be allowed a deduction by reason of the grant or exercise
of an ISO.
As a general rule, if the Option holder disposes of the shares of
Common Stock in a disqualifying disposition, the gain recognized will be
taxed as ordinary income to the extent of the difference between (a) the
lesser of the Fair Market Value of the shares of Common Stock on the date
of exercise or the amount received for the shares of Common Stock in the
disqualifying disposition, and (b) the adjusted basis of the shares of
Common Stock, and the Company will be entitled to a deduction in that
amount. The gain (if any) in excess of the amount recognized as ordinary
income on a disqualifying dispostion will be long-term or short-term
capital gain, depending on the length of time the Option holder held the
shares of Common Stock prior to the dispostion.
The amount by which the Fair Market Value of a share of Common Stock
at the time of exercise exceeds the exercise price will be included in the
computation of such Option holder's "alternative minimum taxable income" in
the year the Option hodler exercises the ISO. If an Option holder pays
alternative minimum tax with respect to the exercise of an ISO, the amount
of such tax paid will be allowed as a credit against regular tax liability
in subsequent years. The Option hodler's basis in the shares of Common
Stock for purposes of the alternative minimum tax will be adjusted when
income is included in alternative minimum taxable income.
A recipient of a nonqualified stock option will not recognize taxable
income at the time of grant, and the Company will not be allowed a
deduction by a reason of the grant. Such an Option holder will recognize
ordinary income in the taxable year in which the Option holder exercises
the nonqualified stock option, in an amount equal to the excess of the Fair
Market Value of the shares of Common Stock received upon exercise at the
time of exercise of such an Option over the exercise price of the Option,
and the Company will be allowed a deduction in that amount, subject to the
limitations on deductibility of compensation in excess of one million
dollars under Section 162(m) of the Internal Revenue Code. Upon
disposition of the shares of Common Stock subject to the Option, and
Opinion holder will recognize the long-term or short-term capital gain or
loss, depending upon the length of time the shares of Common Stock were
held prior to disposition, equal to the difference between the amount
realized on disposition and the Option holder's adjusted basis of the
shares of Common Stock subject to the Option (which adjusted basis
ordinarily is the Fair Market Value of the shares of Common Stock subject
to the Option on the date the Option was exercised).
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF THE
NORTHWESTERN PUBLIC SERVICE COMPANY
STOCK OPTION AND INCENTIVE PLAN.
UNLESS OTHERWISE INDICATED ON THE PROXY,
THE SHARES OF COMMON STOCK WILL BE VOTED
FOR APPROVAL OF THIS PLAN.
ANNUAL REPORT
A copy of the Company's Annual Report for the year ended December 31,
1997, is being sent to all shareholders of record as of March 9, 1998, the
record date for the determination of shareholders entitled to vote at the
Annual Meeting of Shareholders. 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. One or more representatives of Arthur Andersen LLP will attend the
Annual Meeting of Shareholders and will be available to respond to
questions from shareholders.
During 1997, 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 SHAREHOLDER PROPOSALS
Shareholders who wish to present proposals for consideration at the
1999 Annual Meeting of Shareholders should submit their proposals, together
with any supporting statements, to the Corporate Secretary of the Company.
To be timely, a shareholder's notice must be delivered not less than 90
days nor more than 120 days prior to the date of the annual meeting
shareholders. The notice must set forth as to each matter such shareholder
proposes to bring before the annual meeting (i) a brief description of the
business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and
record address of such shareholder, (iii) the class or series and number of
shares of capital stock of the Company that are owned beneficially or of
record by such shareholder, (iv) a description of all arrangements or
understandings between such shareholder and any other person or persons
(including their names) in connection with the proposal of such business by
such shareholder and any material interest of such shareholder in such
business and (v) a representation that such shareholder intends to appear
in person or by proxy at the annual meeting to bring such business before
the meeting.
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
ALAN D. DIETRICH
Vice President-Administration
and Corporate Secretary
Northwestern Public Service Company
March 20, 1998
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 SHAREHOLDER WHOSE
PROXY IS SOLICITED FOR THE 1998 ANNUAL MEETING, UPON WRITTEN REQUEST AND
WITHOUT CHARGE, A COPY OF THE COMPANY'S 1997 ANNUAL REPORT (FORM 10-K) TO
THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS SHOULD BE DIRECTED TO
JANE RAMSELL, DIRECTOR- SHAREHOLDER SERVICES, NORTHWESTERN PUBLIC SERVICE
COMPANY, 600 MARKET STREET WEST, HURON, SOUTH DAKOTA 57350-1500.
<PAGE>
IMPORTANT:
PLEASE SIGN AND
RETURN THE ENCLOSED
PROXY PROMPTLY.
<PAGE>
NORTHWESTERN PUBLIC SERVICE COMPANY
STOCK OPTION AND INCENTIVE PLAN
Section 1. Purpose.
The purpose of the Northwestern Public Service Company Stock Option
and Incentive Plan (the "Plan") is to benefit Northwestern Public Service
Company (the "Company") and its Subsidiaries (as defined in Section 2) by
recognizing the contributions made to the Company by officers and other key
employees (including Directors of the Company who are also employees) of
the Company and its Subsidiaries, to provide such persons with additional
incentive to devote themselves to the future success of the Company, and to
improve the ability of the Company to attract, retain and motivate
individuals, by providing such persons with a favorable opportunity to
acquire or increase their proprietary interest in the Company over a period
of years through receipt of options to acquire common stock of the Company.
In addition, the Plan is intended as an additional incentive to members of
the Board of Directors of the Company who are not employees of the Company
("Non-Employee Directors") to serve on the Board of Directors of the
Company (the "Board") and to devote themselves to the future success of the
Company by providing them with a favorable opportunity to acquire or
increase their proprietary interest in the Company through receipt of
options to acquire common stock of the Company.
The Company may grant stock options that constitute "incentive stock
options" ("ISOs") within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or stock options that do not
constitute ISOs ("NSOs") (ISOs and NSOs being hereinafter collectively
referred to as "Options").
Section 2. Eligibility.
Non-Employee Directors shall participate in the Plan only in
accordance with the provisions of Section 5 of the Plan. The Committee (as
defined in Section 3) shall initially, and from time to time thereafter,
select those officers and other key employees (including Directors of the
Company who are also employees) (collectively referred to herein as "Key
Employees") of the Company or any other entity of which the Company is the
direct or indirect beneficial owner of not less than thirty-three and one-
third percent (33-1/3%) of all issued and outstanding equity interests
("Subsidiaries"), to participate in the Plan on the basis of the special
importance of their services in the management, development and operations
of the Company or its Subsidiaries (each such Director and Key Employee
receiving Options granted under the Plan is referred to herein as an
"Optionee"); provided, however, that the Committee may delegate, in writing
and subject to terms and conditions which it deems appropriate, to the
Chief Executive Officer of the Company the ability to award Options to Key
Employees who are not officers of the Company or its Subsidiaries.
Section 3. Administration.
3.1 The Committee. The Plan shall be administered by the Nominating
and Compensation Committee of the Board (the "Committee").
3.2 Authority of the Committee. Except as provided in Section 2, no
person, other than members of the Committee, shall have any authority
concerning decisions regarding the Plan. Subject to the express provisions
of the Plan, including but not limited to Section 5, the Committee (or the
Chief Executive Officer, to the extent the Committee delegates authority to
him pursuant to Section 2) shall have sole discretion concerning all
matters relating to the Plan and Options granted hereunder. The Committee
(or the Chief Executive Officer, to the extent the Committee delegates
authority to him pursuant to Section 2) in its sole discretion, shall
determine the Key Employees of the Company and its Subsidiaries to whom,
and the time or times at which Options will be granted, the number of
shares to be subject to each Option, the expiration date of each Option,
the time or times within which the Option may be exercised, the
cancellation of the Option (with the consent of the holder thereof), and
the other terms and conditions of the grant of the Option. The terms and
conditions of the Options need not be the same with respect to each
Optionee or with respect to each Option.
The Committee may, subject to the provisions of the Plan, establish
such rules and regulations as it deems necessary or advisable for the
proper administration of the Plan, and may make determinations and may take
such other action in connection with or in relation to the Plan as it deems
necessary or advisable. Each determination or other action made or taken
pursuant to the Plan, including interpretation of the Plan and the specific
terms and conditions of the Options granted hereunder by the Committee (or
the Chief Executive Officer, to the extent the Committee delegates
authority to him pursuant to Section 2) shall be final and conclusive for
all purposes and upon all persons including, but without limitation, the
Company, its Subsidiaries, the Committee, the Board, officers and the
affected employees of the Company and/or its Subsidiaries and their
respective successors in interest.
No member of the Committee shall, in the absence of bad faith, be
liable for any act or omission with respect to service on the Committee.
Service on the Committee shall constitute service as a Director of the
Company so that members of the Committee shall be entitled to
indemnification pursuant to the Company's Certificate of Incorporation and
By-Laws.
Section 4. Shares of Common Stock Subject to Plan.
4.1 The total number of shares of common stock, par value $1.75 per
share, of the Company (the "Common Stock"), that may be issued and sold
under the Plan initially shall be 1,338,189. The total number of shares of
Common Stock that may be available for Options under the Plan shall be
adjusted on January 1 of each calendar year, within the Applicable Period
(as defined below), so that the total number of shares of Common Stock that
may be issued and sold under the Plan as of January 1 of each calendar year
within the Applicable Period shall be equal to seven and one-half percent
(7.5%) of the outstanding shares of Common Stock of the Company on such
date; provided, however, that no such adjustment shall reduce the total
number of shares of Common Stock that may be issued and sold under the Plan
below 1,338,189. For purposes of the preceding sentence, Applicable Period
shall be the ten-year period commencing on May 6, 1998 and ending May 5,
2008. The aforementioned total number of shares of Common Stock shall be
adjusted in accordance with the provisions of Section 4.2 hereof. Any
shares of Common Stock subject to issuance upon exercise of Options but
which are not issued because of a surrender (other than pursuant to Section
7.2 or 7.3 of the Plan), forfeiture, expiration, termination or
cancellation of any such Option, shall once again be available for issuance
pursuant to subsequent Options. If either the purchase price of the shares
of Common Stock upon exercise of any Option or the tax withholding
requirement is satisfied by tendering or withholding of shares of Common
Stock or by tendering exercisable Options, only the number of shares of
Common Stock issued net of the shares of Common Stock tendered or withheld
shall be deemed delivered for purposes of determining the number of shares
of Common Stock available for Options under the Plan.
4.2 The number of shares of Common Stock subject to the Plan and to
Options granted under the Plan shall be adjusted as follows: (a) in the
event that the number of outstanding shares of Common Stock is changed by
any stock dividend, stock split or combination of shares, the number of
shares subject to the Plan and to Options previously granted thereunder
shall be proportionately adjusted; (b) in the event of any merger,
consolidation or reorganization of the Company with any other corporation
or corporations, there shall be substituted on an equitable basis as
determined by the Board of Directors, in its sole discretion, for each
share of Common Stock then subject to the Plan and for each share of Common
Stock then subject to an Option granted under the Plan, the number and kind
of shares of stock, other securities, cash or other property to which the
holders of Common Stock of the Company are entitled pursuant to the
transaction; and (c) in the event of any other change in the capitalization
of the Company, the Committee, in its sole discretion, shall provide for an
equitable adjustment in the number of shares of Common Stock then subject
to the Plan and to each share of Common Stock then subject to an Option
granted under the Plan. In the event of any such adjustment, the exercise
price per share shall be proportionately adjusted.
Section 5. Grant of Options to Non-Employee Directors.
5.1 Grants. Each individual who is a Non-Employee Director on the
effective date of the Plan shall be granted automatically a NSO to purchase
1200 shares of Common Stock on the effective date on the Plan. Non-
Employee Directors shall also be eligible to receive discretionary grants
of NSOs as determined by the Committee from time to time.
5.2 Exercise Price and Period. Except as provided for in the next
sentence, the per share Option exercise price of each such NSO granted to a
Non-Employee Director shall be the "Fair Market Value," on the date on
which the Option is granted, of the Common Stock subject to the Option.
The Committee shall, in its sole discretion, have the right to establish
(in the Option Agreement described in Section 6.2) a per share Option
exercise price for each such NSO granted to a Non-Employee Director which
is more or less than Fair Market Value. For purposes of this Agreement,
"Fair Market Value" shall mean the average of the closing price for Company
Stock as reported on the New York Stock Exchange for the 20 business days
ending on the third business day preceding the date with respect to which
such Company Stock is being valued, for which trades in Company Stock were
reported on the New York Stock Exchange. If no trades occur on a certain
day, the closing price for the last preceding day on which trading occurred
will be used as the closing price for that day.
In addition to the terms and conditions set forth in this Section 5,
NSOs also shall be subject to such terms and conditions applicable to ISOs
according to Sections 6.2, 6.3, 6.4 and 6.5, provided, however, such
additional terms and conditions are not inconsistent with the terms and
conditions set forth in Section 5 of this Plan.
Section 6. Grants of Options to Employees.
6.1 Grant. Subject to the terms of the Plan, the Committee (or the
Chief Executive Officer, to the extent the Committee delegates authority to
him pursuant to Section 2) may from time to time grant Options, which may
be ISOs or NSOs, to Key Employees of the Company or any of its
Subsidiaries. Unless otherwise expressly provided at the time of the
grant, Options granted under the Plan to Key Employees will be ISOs.
6.2 Option Agreement. Each Option shall be evidenced by a written
Option Agreement specifying the type of Option granted, the Option exercise
price, the terms for payment of the exercise price, the expiration date of
the Option, the number of shares of Common Stock to be subject to each
Option, the time frame in which an Option shall become vested and
exercisable, the circumstances under which an Option which has not become
vested and exercisable can be forfeited, the circumstances under which an
Option which has not become vested and exercisable can become immediately
vested and exercisable, and such other terms and conditions established by
the Committee, in its sole discretion, not inconsistent with the Plan.
6.3 Expiration. Except to the extent otherwise provided in or
pursuant to Section 7, each Option shall expire, and all rights to purchase
shares of Common Stock shall expire, on the tenth anniversary of the date
on which the Option was granted.
6.4 Required Terms and Conditions of ISOs. Each ISO granted to a Key
Employee shall be in such form and subject to such restrictions and other
terms and conditions as the Committee (or the Chief Executive Officer, to
the extent the Committee delegates authority to him pursuant to Section 2)
may determine, in its sole discretion, at the time of grant, subject to the
general provisions of the Plan, the applicable Option Agreement, and the
following specific rules:
(a) Except as provided in Section 6.4(d), the per share
exercise price of each ISO shall be the Fair Market Value of the
shares of Common Stock on the date such ISO is granted.
(b) The aggregate Fair Market Value (determined with
respect to each ISO at the time such Option is granted) of the
shares of Common Stock with respect to which ISOs are exercisable
for the first time by an individual during any calendar year
(under all incentive stock option plans of the Company and its
parent and subsidiary corporations) shall not exceed $100,000.
If the aggregate Fair Market Value (determined at the time of
grant) of the Common Stock subject to an Option, which first
becomes exercisable in any calendar year exceeds the limitation
of this Section 6.4(b), so much of the Option that does not
exceed the applicable dollar limit shall be an ISO and the
remainder shall be a NSO; but in all other respects, the original
Option Agreement shall remain in full force and effect.
(c) As used in this Section 6, the words "parent" and
"subsidiary" shall have the meanings given to them in Section
424(e) and 424(f) of the Code.
(d) Notwithstanding anything herein to the contrary, if an
ISO is granted to an individual who owns stock possessing more
than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of its parent or subsidiary
corporations, within the meaning of Section 422(b)(6) of the
Code, (i) the purchase price of each share of Common Stock
subject to the ISO shall be not less than one hundred ten percent
(110%) of the Fair Market Value of the Common Stock on the date
the ISO is granted, and (ii) the ISO shall expire and all rights
to purchase shares thereunder shall cease no later than the fifth
anniversary of the date the ISO was granted.
(e) No ISOs may be granted under the Plan after May 5,
2008.
6.5 Required Terms and Conditions of NSOs. Each NSO granted to Key
Employees shall be in such form and subject to such restrictions and other
terms and conditions as the Committee (or the Chief Executive Officer, to
the extent the Committee delegates authority to him pursuant to Section 2)
may determine, in its sole discretion, at the time of grant, subject to the
general provisions of the Plan and the applicable Option Agreement;
provided, however, that the per share exercise price of each NSO shall be
the Fair Market Value of the shares of Common Stock on the date such NSO is
granted.
Section 7. Exercise of Options.
7.1 Notice. A person entitled to exercise an Option may do so by
delivery of a written notice to that effect specifying the number of shares
of Common Stock with respect to which the Option is being exercised and any
other information the Committee may prescribe. The notice shall be
accompanied by payment as described in Section 7.2. The notice of exercise
shall be accompanied by the Optionee's copy of the writing or writings
evidencing the grant of the Option. All notices or requests provided for
herein shall be delivered to the Corporate Secretary of the Company.
7.2 Exercise Price. Except as otherwise provided in the Plan or in
any Option Agreement, the Optionee shall pay the purchase price of the
shares of Common Stock upon exercise of any Option: (a) in cash; (b) in
cash received from a broker-dealer to whom the Optionee has submitted an
exercise notice consisting of a fully endorsed Option (however, in the case
of an Optionee subject to Section 16 of the 1934 Act, this payment option
shall only be available to the extent such insider complies with Regulation
T issued by the Federal Reserve Board); (c) by delivering (either actual
delivery or by attestation procedures established by the Company)
previously owned shares of Common Stock (which the Optionee has held for at
least six months prior to the delivery of such shares or which the Optionee
purchased on the open market and in each case for which the Optionee has
good title, free and clear of all liens and encumbrances) having an
aggregate Fair Market Value on the date of exercise equal to the Option
exercise price; (d) by directing the Company to withhold such number of
shares of Common Stock otherwise issuable upon exercise of such Option
having an aggregate Fair Market Value on the date of exercise equal to the
Option exercise price; (e) by agreeing to surrender Options then
exercisable valued at the excess of the aggregate Fair Market Value of the
shares of Common Stock subject to such Options on the date of exercise over
the aggregate option price of such shares; (f) in the case of a Key
Employee, by such other medium of payment as the Committee, in its
discretion, shall authorize at the time of grant; or (g) by any combination
of (a), (b), (c), (d) (e) and (f). In the case of an election pursuant to
(a) or (b) above, cash shall mean cash or a check issued by a federally
insured bank or savings and loan, and made payable to the Company. The
Company shall issue, in the name of the Optionee, stock certificates
representing the total number of shares of Common Stock issuable pursuant
to the exercise of any Option as soon as reasonably practicable after such
exercise, provided that any shares of Common Stock purchased by an Optionee
through a broker-dealer pursuant to clause (b) above shall be delivered to
such broker-dealer in accordance with 12 C.F.R. Sec. 220.3(e)(4) or other
applicable provision of law.
7.3 Taxes Generally. At the time of the exercise of any Option, as a
condition of the exercise of such Option, the Company may require the
Optionee to pay the Company an amount equal to the amount of the tax the
Company or any Subsidiary may be required to withhold to obtain a deduction
for federal and state income tax purposes as a result of the exercise of
such Option by the Optionee or to comply with applicable law.
7.4 Payment of Taxes. At any time when an Optionee is required to
pay an amount required to be withheld under applicable income tax or other
laws in connection with the exercise of an Option, the Optionee may satisfy
this obligation in whole or in part by: (a) directing the Company to
withhold such number of shares of Common Stock otherwise issuable upon
exercise of such Option having an aggregate Fair Market Value on the date
of exercise equal to the amount of tax required to be withheld; or (b)
delivering (either actual delivery or by attestation procedures established
by the Company) previously owned shares of Common Stock (which the Optionee
has held for at least six months prior to the delivery of such shares or
which the Optionee purchased on the open market and in each case for which
the Optionee has good title, free and clear of all liens and encumbrances)
having an aggregate Fair Market Value equal to the amount of tax required
to be withheld. The Committee may disapprove any election or delivery or
may suspend or terminate the right to make elections or deliveries.
Section 8. Transferability of Options.
No Option granted pursuant to the Plan shall be transferable otherwise
than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code. Notwithstanding
the preceding sentence, an Option Agreement for NSOs may provide that the
Optionee, at any time prior to his death, may assign all or any portion of
an Option granted to him to (i) his spouse or lineal descendant, (ii) the
trustee of a trust for the primary benefit of his spouse or lineal
descendant, (iii) a partnership of which his spouse and lineal descendants
are the only partners, or (iv) a tax exempt organization as described in
Code Section 501(c)(3). In such event, the spouse, lineal descendant,
trustee, partnership or tax exempt organization will be entitled to all of
the rights of the Optionee with respect to the assigned portion of such
Option, and such portion of the Option will continue to be subject to all
of the terms, conditions and restrictions applicable to the Option, as set
forth herein and in the related Option Agreement immediately prior to the
effective date of the assignment. Any such assignment will be permitted
only if: (i) the Optionee does not receive any consideration therefore;
and (ii) the assignment is expressly permitted by the applicable Agreement
as approved by the Committee. Any such assignment shall be evidenced by an
appropriate written document executed by the Optionee, and a copy thereof
shall be delivered to the Company on or prior to the executive date of the
assignment.
Section 9. Rights as Shareholder.
An Optionee or a transferee of an Optionee pursuant to Section 8 shall
have no rights as a shareholder with respect to any Common Stock covered by
an Option or receivable upon the exercise of an Option until the Optionee
or transferee shall have become the holder of record of such Common Stock,
and no adjustments shall be made for dividends in cash or other property or
other distributions or rights in respect to such Common Stock for which the
record date is prior to the date on which the Optionee shall have in fact
become the holder of record of the shares of Common Stock acquired pursuant
to the Option.
Section 10. Postponement of Exercise.
The Committee may postpone any exercise of an Option for such time as
the Committee in its sole discretion may deem necessary in order to permit
the Company (a) to effect, amend or maintain any necessary registration of
the Plan or the shares of Common Stock issuable upon the exercise of an
Option under the Securities Act of 1933, as amended, or the securities laws
of any applicable jurisdiction, (b) to permit any action to be taken in
order to (i) list such shares of Common Stock on a stock exchange if shares
of Common Stock are then listed on such exchange or (ii) comply with
restrictions or regulations incident to the maintenance of a public market
for its shares of Common Stock, including any rules or regulations of any
stock exchange on which the shares of Common Stock are listed, or (c) to
determine that such shares of Common Stock and the Plan are exempt from
such registration or that no action of the kind referred to in (b)(ii)
above needs to be taken; and the Company shall not be obligated by virtue
of any terms and conditions of any Option or any provision of the Plan to
recognize the exercise of an Option or to sell or issue shares of Common
Stock in violation of the Securities Act of 1933 or the law of any
government having jurisdiction thereof. Any such postponement shall not
extend the term of an Option and neither the Company nor its directors or
officers shall have any obligation or liability to an Optionee, to the
Optionee's successor or to any other person with respect to any shares of
Common Stock as to which the Option shall lapse because of such
postponement.
Section 11. Trust Agreement.
The Company may enter into a trust agreement ("Trust Agreement")
whereby the Company shall agree to contribute to a trust ("Trust) for the
purpose of accumulating shares of Common Stock to assist the Company in
fulfilling its obligations to Optionee hereunder. Such Trust Agreement
shall be substantially in the form of the model trust agreement set forth
in Internal Revenue Service Revenue Procedure 92-64, or any subsequent
Internal Revenue Service Revenue Procedure, and shall include provisions
required in such model trust agreement that all assets of the Trust shall
be subject to the creditors of the Company in the event of insolvency.
Section 12. Termination or Amendment of Plan.
The Committee may correct any defect or supply an omission or
reconcile any inconsistency in the Plan or in any Option granted hereunder
in the manner and to the extent it shall deem desirable, in its sole
discretion, to effectuate the Plan.
No amendment or termination of the Plan shall in any manner affect any
Option theretofore granted without the consent of the Optionee, except that
the Committee may amend the Plan in a manner that does affect Options
theretofore granted upon a finding by the Committee that such amendments is
in the best interest of holders of outstanding Options affected thereby.
Section 13. Effective Date.
The Plan shall be effective upon the date of approval of the Plan by
an affirmative vote of a majority of the shares of the voting stock of the
Company entitled to be voted by the holders of stock represented at a duly
held shareholders' meeting, within 12 months after the date of adoption of
the Plan by the Board.
<PAGE>
(PROXY CARD)
NORTHWESTERN PUBLIC SERVICE COMPANY
Huron, South Dakota 57350
PROXY FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
Solicited on behalf of the Board of Directors
The undersigned hereby appoints M. D. Lewis and R. R. Hylland, 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 9, 1998, at the Annual Meeting of the Shareholders of the Company to
be held on May 6 1998, 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: Randy G. Darcy
Gary G. Drook
Raymond M. Schutz
Bruce I. Smith
(Instruction: To withhold authority to vote for any individual
nominee, print that nominee's name on the line provided below.)
---------------------------------------------------------
2. Vote For ( ) Against ( ) Abstain ( ) on the proposal to amend
the Company's Restated Certificate of Incorporation to change the
Company name to Northwestern Corporation.
3. Vote For ( ) Against ( ) Abstain ( ) on the proposal to adopt
the Northwestern Public Service Company Stock Option and Incentive
Plan.
4. 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 SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES NAMED IN ITEM 1 AND FOR THE PROPOSALS
REFERRED TO IN ITEMS 2 AND 3.
Dated , 1998
- ------------------------------ -----------------------------
(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.
