NORTHWESTERN PUBLIC SERVICE COMPANY
Huron, South Dakota
NOTICE OF
ANNUAL MEETING
AND PROXY STATEMENT
Annual Meeting
of Stockholders
May 1, 19967, 1997
NORTHWESTERN PUBLIC SERVICE COMPANY
Corporate Office
33 Third St. SE
P. O. Box 1318
Huron, South Dakota 57350-1318
March 15, 19961997
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 West, Huron, South Dakota, on May 1, 1996,7,
1997, 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, onlyDirectors
in Class III, the holders of the Common Stock of the Company will be
entitled to vote on two very important amendments to the Company's Restated
Certificate of Incorporation. The Board of Directors has indicated its
intention to declare a two-for-one stock split in the form of a stock
dividend if stockholders approve the first proposed amendment to increase
the authorized number of
shares of Common Stock from 20 million shares to 50 million
shares and to reduce 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 holderspar value of the Common Stock willfrom $3.50 per share
to $1.75 per share. The second proposed amendment would remove a provision
in the Restated Certificate of Incorporation which states that Directors
need not 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 holdersstockholders 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.Company.
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.Merle D. Lewis
M.Merle 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 West, Huron, South Dakota, on Wednesday, May 1, 1996,7, 1997, at
11:00 a.m., local time, for the following purposes:
(1) To elect three members of Class IIIII of the Board of Directors of
the Company to hold office until the Annual Meeting of Stockholders in
1999,2000, and until their successors are duly elected and have qualified.
(2) To consider and act separately on eachupon a proposal to amend the Company"s
Restated Certificate of two proposalsIncorporation to increase the authorized shares of
Common Stock to 50,000,000 shares and to reduce the par value of the Common
Stock to $1.75 per share;
(3) To consider and act upon a proposal 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 shareseliminate a provision (in Article
Seventh) which states that Directors need not be stockholders 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 considerCompany; 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, 1996,10, 1997, 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 officeoffices of the Company, 600 Market Street West, Huron, South Dakota,
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).envelope. If you are able to attend the Annual
Meeting and wish to vote in person, you may do so whether or not you have
returned your proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Alan D. Dietrich
ALAN D. DIETRICH
Vice President-Corporate ServicesPresident-Administration
and Corporate Secretary
March 15, 19961997
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, 19967, 1997
This statement is expected to be mailed to stockholders on March 15,
1996,1997, 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, 1996.7, 1997. 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.Kissel-Blake Inc. has been retained by the Company to assist in the
solicitation of proxies at an anticipated cost to the Company of $4,250,$5,000,
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
4,
1996,10, 1997, 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, 1996,10,
1997, there were outstanding 8,920,1228,922,632 shares of Common Stock. HoldersThe only
person known to the Company to own beneficially (as defined by the
Securities and Exchange Commission for proxy statement purposes) more than
5% of Cumulative Preferredthe outstanding Common Stock of record at the closeCompany is the Northwestern
Public Service Company Employee Stock Ownership Plan and Trust (ESOP),
whose Trustees are a committee of businessemployees of the Company, 600 Market
Street West, Huron, SD 57350. The ESOP is beneficial owner of 612,308
shares (6.86%) of the outstanding Common Stock of the Company. The Common
Shares owned by the ESOP are held in trust for the benefit of participants
in the ESOP, and the Trustees have sole investment power over the Common
Shares held in trust. Employee participants are entitled to instruct the
Trustees on March 4, 1996,how to vote all Company Common Shares allocated to their
accounts (presently 444,435) 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 entitled to one vote for each share of
Cumulative Preferred Stock heldvoted 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.Trustees.
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.upon. 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 IIIII of the Board of Directors, to
hold office for a term of three years, until the Annual Meeting of
Stockholders in 1999,2000, 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 IIIII 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 IIIII are presently serving as
directors. Current Class IIIII Director W. W. WoodR. A. Wilkens has indicated his
intention to retire from the Board of Directors, effective May 1, 1996.1997.
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 IIIII 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 19961997
- ------------------ ------------------------- ----------- --------
Aelred J. Kurtenbach President and Chief May 1994 6263
Executive Officer of to date
Daktronics, Inc.,
manufacturer of large
computer programmable
displays, Brookings,
South Dakota.
M. D. Lewis President and Chief February 1993 4849
Executive Officer of the to date
Company since February 19941994;
Chairman and Chief Executive
Officer of Northwestern
Growth Corporation since
September 1994; Formerlyformerly
held the following offices of
the Company: Executive Vice
President from May 1993 to
February 1994;1994, Executive Vice
President-Corporate
Services from November
1992 to May 1993;1993, Assistant
Secretary from May 1982 to
May 1993;1993, Vice President-
Corporate Services from
1987 to 1992, Huron,
South Dakota.
R. A. Wilkens Chairman since1992.
Gary Olson President and Chief February May 1980 67
1994; Formerly President to date
and Chief1997 56
Executive Officer of theNorwest to date
Bank South Dakota, Regional
President of Norwest Cor-
poration, and Chairman of
Norwest Ag Credit Company
from December 1990 to
February 1994; President
and Chief Operating Officer
from 1980 to 1990, Huronsince 1988, 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 I whose terms expire in 1998:
Period Age on
Principal Occupation Served as March 1,
Director or Employment Director 19961997
- ------------------ ------------------------- ----------- --------
Herman Lerdal Banking and Business April 1975 6768
Consultant; formerly to date
Banker and College
Development Officer,
Sioux Falls, South Dakota.
Raymond M. Schutz Attorney and partner in October 1990 6667
the law firm of Siegel, to date
Barnett & Schutz since
1963, Aberdeen, South
Dakota.
Bruce I. Smith Attorney and partner in May 1989 5455
the law firm of Luebs, to date
Leininger, Smith, Busick
& Johnson since 1978,
Grand Island, Nebraska.
The following information, including principal occupation or
employment for the past five or more years, is furnished with respect to
directors in Class II whose terms expire in 1999:
Period Age on
Principal Occupation Served as March 1,
Director or Employment Director 1997
- ------------------ ------------------------- ----------- --------
Larry F. Ness President and Chief August 1991 51
Executive Officer of to date
First Dakota Financial
Corp., a bank holding
company, 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 56
Business, University of to date
South Dakota, since 1990,
Vermillion, South Dakota.
R. R. Hylland Executive Vice President- November 1995 36
of the Company since to date
May 1996; President
and Chief Operating Officer
of Northwestern Growth
Corporation since September
1994; formerly held the
following offices with the
Company: Executive Vice
President-Strategic Develop-
ment from November, 1995
to May 1996, 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.
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 fourthree special
meetings during 1995.1996. Each director attended more than 75 percent of the
aggregate of the meetings of the Board of Directors and theof each 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, Larry F. Ness,
Gary Olson, and Raymond M. Schutz and Bruce I. Smith.Schutz. The Audit Committee held two meetings
during 1995.1996. 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.Bruce I. Smith. The
Nominating and Compensation Committee held three meetings during 1995.1996. 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 DirectorsDirec
tors 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.
Corporate Governance Committee
The Board of Directors, during 1996, created a Corporate Governance
Committee composed of not less than three directors who are not employees
of the Company and the President and Chief Executive Officer. The present
members of the Corporate Governance Committee are Jerry W. Johnson, Aelred
J. Kurtenbach, Bruce I. Smith, and M. D. Lewis. The Corporate Governance
Committee held four meetings in 1996. 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, counsel, and
oversight.
SECURITIES OWNERSHIP BY MANAGEMENT
The following table sets forth information, as of JanuaryFebruary 1, 1996,1997,
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(4) 1,470 (5) *
Jerry W. Johnson 941 *
Aelred J. Kurtenbach 585 *
Jerry W. Johnson 612933 *
Herman Lerdal 2,5622,205 (6) *
M. D. Lewis 6,848 1,807(4) 9,776 2,309 *
Larry F. Ness 512856 *
Gary Olson 2,000 *
Raymond M. Schutz 1,2321,583 *
Bruce I. Smith 1,4441,843 *
R. A. Wilkens 12,320 *
W. W. Wood 2,66912,869 (7) *
A. R. Donnell 4,720 (4) 3,7715,356 (8) 3,789 *
R. F. Leyendecker 5,6716,372 11 *
A. D. Dietrich 2,580 570K. Newell (4) 316 79 *
------ ------
All directors &
executive officers 42,785 12,74356,515 17,835 *
*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 byin that
employee's account with the TrusteeTrustees of the Company's Employee Stock
Ownership Plan for the benefit
of participating employees and shares held as part ofin the employee savings plan.
(3) Shares held jointly owned with spouse or other family member(s).
(4) Messrs. Hylland, Lewis, and Newell own, respectively, 14,286, 20,048,
and 9,524 common units representing limited partner interests in
Cornerstone Propane Partners, L.P., an affiliate of the Company, for a
total of 43,858 common 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 327332 shares that Mr. Hylland holds as custodian for his
children and 567 shares held by his wife.
(6) All shares are held in a Trust.
(7) Included are 6,540 shares held in a Trust.
(8) Included are 612 shares that Mr. Donnell holds as custodian for his
grandchildren.
With the exception of Thomas A. Gulbranson, Vice President-Energy
Services of the Company, and Herman Lerdal, a director, none of the
directors, nominees andor executive officers of the Company beneficially owns
any of the Company's Cumulative Preferred Stock ($100 par value). or any of
the Company's Trust Preferred Capital Debentures. Mr. Gulbranson, together
with other family members, jointly owns 13 shares (0.0005%) of the
Company's 4 1/2% Cumulative Preferred Stock. Director HermanStock, and Mr. Lerdal owns, in a
trust whereof which 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 CommitteeCompany, 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 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 for 1996 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. In 1996 the Board of Directors adopted a
formal chief executive officer evaluation process which will be utilized in
1997 and succeeding years.
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 knowknown 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 inbased 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 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 thirtythirty-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 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 19951996 were consistent with this philosophy
and were based on NGCNGC's 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
executive 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 19951996 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,Aelred J Kurtenbach, Chairman Aelred J. Kurtenbach
Herman Lerdal
W. W. WoodBruce I. Smith
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 1996 207,388 (3) 17,765 15,358
President & 1995 187,758 (3)97,255 18,507 14,349
President &Chief Execu- 1994 157,000 65,231 11,171 14,312
Chief Execu- 1993 98,771 15,900 0 6,634
tive Officer
R. R. Hylland 1996 137,906 (3) 17,765 7,359
Executive 1995 115,077 (3)125,260 18,507 6,029
ExecutiveVice President- 1994 95,242 52,505 0 5,516
Vice President- 1993 84,458 33,500 0 4,102
Strategic
Development
A. R. Donnell 1996 117,440 (3) 26,647 8,329
Vice President- 1995 109,416 (3)26,642 27,761 11,475
Vice President-Energy 1994 99,829 19,631 16,757 13,380
Energy 1993 93,332 14,460 0 7,937
Operations
R.F. LeyendeckerR. F. Leyendecker1996 114,208 (3) 17,765 11,453
Vice President- 1995 104,375 (3)46,784 18,507 13,343
Vice President-Market 1994 90,708 25,195 11,171 12,664
Market 1993 86,215 23,850Development
D. K. Newell 1996 106,500 (3) 0 8,616
Development
A. D. Dietrich 1995 92,071 (3) 18,507 7,8223,415
Vice President- 1995 41,667 52,776 0 0
Finance & 1994 80,808 17,577 0 7,904
Corporate 1993 72,979 11,550 0 5,457
Services &
Corporate
Secretary- - - -
Chief Financial
Officer
(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 and
Exchange Commission.
(2) The amounts in the bonus column for 19931994 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 19931995 the amounts represent cashinclude awards pursuant
to the Company's NorthSTAR Plan,such plans, and in addition, special cash bonuses awardeddiscretionary awards made to Mr. Hylland
($25,000) and to Mr. Leyendecker of $20,000
and $15,000, respectively,Newell ($25,000) for their efforts related to the
LodgeNet Entertainment Corp.
initial public offering.successful completion of certain acquisition transactions and for Mr.
Leyendecker ($5,000) for his efforts related to certain regulatory
matters.
(3) The award earned by the executives in 1995,1996, if any is to be paid under
the NorthSTAR Plan and/or the NGC Incentive Compensation Plan, will be
determined in May 1996.the spring of 1997.
(4) The amounts in this column represent the cash payoutpayouts from the
Company's Long-Term Incentive Compensation Plan at the end of the five-
year periodperiods since the award was made in 1990.awards were made.
(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 19941996 such amounts under the Employee Savings Plan, ESOP, Plan, and life
insurance respectively, were as follows: Mr. Lewis: $4,259,
$5,739.$4,750, $6,257.
and $4,351; Mr. Hylland: $3,452, $1,433,$4,137, $2,078, and $1,144; Mr. Donnell:
$3,282, $4,568,$3,110, $3,319, and $3,625; ;$1,900; Mr. Leyendecker: $3,131,
$5,514,$3,426, $5,639, and
$2,698;$2,388; and Mr. Dietrich: $2,762, $2,931,Newell: $1,540, $0, and $2,129.$1,875.
Long-Term Incentive Plan
Performance or Other
Period Until
Name Number of Units* Maturation or Payout
- ----------------- --------------- --------------------
M. D. Lewis 1,5602,315.73 5 years
R. R. Hylland 5241,502.22 5 years
A. R. Donnell 542562.24 5 years
R. F. Leyendecker 480562.24 5 years
A. D. Dietrich 445K. Newell 488.89 5 years
*The amounts in this column represent the phantom stock awards made
during 19951996 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 250300
shares of common stockCommon Stock of the Company and are paid $1,250$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 $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$54,000, 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 approximately equal to the quarterly retainer feefees,
other than meeting fees 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. Directors who are not
employees are not eligible to participate in this plan. 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 eligibleAmounts in excess of $9,500 may be deferred by, up to
participatethe 12% limits in this
plan.a 401(k) wraparound plan, effective January 1, 1997. 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 stockCommon Stock of the
Company acquired by the ESOP are allocated to participants' accounts in
proportion to the compensa
tioncompensation 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 Benefitsbenefits 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 19961997 based on the provisions of the
Pension Plan as it existed on December 31, 1995,1996, 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$4,760 $6,347 $7,934 $9,521 $11,107 $12,694
50,000... 11,429 15,239 19,048 22,858 26,668 30,47811,323 15,097 18,871 22,646 26,420 30,194
75,000... 17,992 23,989 29,986 35,983 41,980 47,97817,885 23,847 29,809 35,771 41,732 47,694
100,000... 24,554 32,739 40,923 49,108 57,293 65,47824,448 32,597 40,746 48,896 57,045 65,194
125,000... 31,117 41,489 51,861 62,233 72,605 82,97831,010 41,347 51,684 62,021 72,357 82,694
150,000... 37,679 50,239 62,798 75,358 87,918 100,47837,573 50,097 62,621 75,146 87,670 100,194
175,000... 44,242 58,989 73,736 88,483 103,230 117,97844,135 58,847 73,559 88,271 102,982 117,694
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 85,239 106,548 127,858 149,168 170,47850,698 67,597 84,496 101,396 118,295 135,194
225,000... 57,260 76,347 95,434 114,521 133,607 152,694
250,000... 63,823 85,097 106,371 127,646 148,920 170,194
275,000... 70,385 93,847 117,309 140,771 164,232 187,694
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, 2021 years; R. R. Hylland, 67 years; A. R. Donnell, 2526 years; R.
F. Leyendecker, 2122 years; A. D. Dietrich, 17 years.K. Newell, 1 year.
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 19951996 a total of
7445 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,Newell, 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 12/30/9091 $100 $100 $100
1991 133.59 130 129.68
1992 153.97 140 142.72115.28 108 110.24
1993 166.66 155 159.45124.81 118 123.10
1994 164.67 157 138.93123.29 120 107.25
1995 183.74 215 176.64137.56 165 136.60
1996 178.34 203 135.74
*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;Enova Corp.; 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;Power Corp.; NIPSCO Industries, Inc.;
Northern States Power Co.; Northwestern Public Service Co.; Orange &
Rockland Utilities, Inc.; Pacific Gas & Electric Co.; PECO Energy;
Public Service Co. of Colo.; Public Service Co. of New Mexico; Public
Service Enterprise Group; Rochester Gas & Electric Corp.; Scana Corp.;
Sierra Pacific Resources; Southern Indiana Gas & Elec. Co.;SIGECORP; St. Joseph Light & Power Co.;
Utilicorp United;United, Inc.; Washington Water Power Co.; Western Resources;Resources,
Inc.; 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 DIVIDENDSELIMINATE PROVISION THAT
DIRECTORS NEED NOT BE STOCKHOLDERS
Your Board of Directors has proposed and recommends the adoption of
sixtwo amendments to the Company's Restated Certificate of Incorporation.
These amendments will (1) increase from 200,00020,000,000 to 1,000,00050,000,000 the number
of authorized shares of the Company's PreferenceCommon Stock and reduce the par value
$50of the Common Stock from $3.50 per share to $1.75 per share; and (2)
eliminate a provision which states that Directors need not be stockholders
of the abilityCompany. The text of shareholders oreach of these amendments appears below.
Proposed Amendment to Increase Authorized Shares
of Common Stock and Reduce Par Value
During its meeting February 5, 1997, the Board of Directors declared
its intention to authorize a vice president ortwo-for-one split of the secretaryCommon Stock of the
Company, $3.50 par value, if an amendment to callthe Company's Restated
Certificate of Incorporation, which the Board of Directors considers
necessary to implement the stock split, is approved by holders of Common
Stock. Authority for the proposed stock split from the Federal Energy
Regulatory Commission, which has regulatory jurisdiction over the issuance
of securities by the Company, will be sought by the Company in advance of
the Annual Meeting.
The Directors voted unanimously to approve, present, and recommend for
adoption by holders of Common Stock a special meetingresolution to amend Article FOURTH of
stockholders; (3)the Restated Certificate of Incorporation to increase from 300,000 to 1,000,000 the number of authorized shares
of Common Stock from 20 million shares to 50 million shares and to reduce
the par value of the Common Stock from $3.50 per share to $1.75 per share.
The text of the proposed resolution and amendment to the Company's Cumulative Preferred Stock, par value $100 per share; (4)
eliminateRestated
Certificate of Incorporation (hereinafter referred to as the so-called income coverage requirement which heretofore has
had to be satisfied in order to issue additional Cumulative Preferred Stock
without obtaining approval"First
Proposed Amendment"), with proposed changes indicated by underlining, is as
follows:
RESOLVED that the holdersfirst paragraph of at least two-thirdsArticle FOURTH of the
outstandingRestated Certificate of Incorporation of Northwestern Public Service
Company (the "Company"), as heretofore amended, is hereby amended to
read as follows:
"FOURTH: The total authorized capital stock of the Company is
(i) 1,000,000 shares of Cumulative Preferred Stock; (5) eliminateStock, of the requirementpar
value of $100 per share (hereinafter called the "New Preferred
Stock"), (ii) 1,000,000 shares of Preference Stock, of the par
value of $50 per share, and (iii) 50,000,000 shares of Common
Stock, of the par value of $1.75 per share."
The Board of Directors believes that approvalthe proposed two-for-one split is
advisable in order to place the price of the Common Stock at a more
attractive level for the individual investor, broaden ownership of the
Common Stock, and improve the marketability of the shares. The stock split
could result in higher brokerage commissions for transactions of equivalent
dollar amounts.
If the First Proposed Amendment is approved by the holders of a
majority of the Cumulative
Preferredshares of Common Stock, the Board of Directors presently
intends to authorize a two-for-one split of the Common Stock, to be
obtainedeffected in orderthe form of a 100% stock dividend, during its meeting on May 7,
1997, immediately following the annual meeting of stockholders.
Notwithstanding such approval, however, the Board of Directors reserves the
right to elect not to declare the stock split if the market price of the
Common Stock has substantially decreased from its present level. If the
stock split is declared by the Board of Directors, each holder will receive
one additional share of Common Stock, par value $1.75 per share, for each
share held on the record date for the Companystock split, which is presently
expected to issue or assume
notes, debentures or other securities representing unsecured indebtednessbe May 19, 1997. The stock certificate for the additional
shares will be sent to each holder as soon as practicable after the record
date. After the effective date of the Company in excess of 25% of the Company's total capitalization (as
defined inamendment to the Restated
Certificate of Incorporation); and (6) eliminateIncorporation, the restrictions which applyoutstanding Common Stock certificates
will be considered to dividendsrepresent the same number of shares, but with a par
value of $1.75 per share. Following the split, holders of Common Stock
will then hold of record two shares of Common Stock, par value $1.75, for
each share of Common Stock, par value $3.50 held on other distributions on, andthe record date. As a
result of this procedure, it is NOT necessary to purchases or other acquisitionssend the presently
outstanding Common Stock certificates to the Company.
Although the number of shares of Common Stock outstanding after the
stock split will be two times the amount outstanding prior to the stock
split, the resulting increased number of shares held by a stockholder will
represent the same percentage interest in the Company as before the stock
split. Because the par value of the Company's Common Stock whenwill be proportionately
reduced by one-half, the Company'sstock split will not change the stated capital of
the Company. Each share of Common Stock equity is less than prescribed percentagesafter the split will have one vote
and will be fully paid and non-assessable. The two-for-one stock split
will result in corresponding adjustments in outstanding warrants to
purchase Common Stock and in phantom stock units denominated in shares of
Common Stock.
Because the number of shares of Common Stock outstanding after the
split will be increased from 8,922,632 to 17,845,264 shares, the Board of
Directors considers it advisable to increase the authorized shares of
Common Stock from 20 million shares to 50 million shares, as provided in
the First Proposed Amendment. The number of shares in excess of the Company's total capitalization (as defined innumber
of shares necessary to effect 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 split will be available for
financingissuance from time to time in connection with the future business needs of the
Company, to limit the ability to call a special meetingby authorization 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 stockholders.
In the stockholders. The termsopinion of counsel for the Company's
Common Stock, Preference Stock and Cumulative Preferred Stock do not grant
to theCompany, 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,will not realize any gain or before the Company may purchase or
otherwise acquireloss 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 (orfederal income tax purposes as a
result of such action
would become less than) 20%the split. Shares held following the split will have a new basis
for computing gain or loss equal to one-half 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%basis 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
respectshares
held prior 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.split.
Adoption of this proposed amendmentProposed Amendment requires the favorable vote of the
holders of a majority of the outstanding shares of Common Stock of the Company.Stock. Proxies of the
holders of such stock will be voted on this amendmentthe Proposed 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.
----------------------------------------------------------------------Proposed Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF THIS PROPOSED AMENDMENT.
UNLESS OTHERWISE 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 PreferredProvision
that Directors Need Not be Stockholders
The other proposed amendment to the Restated Certificate of
Incorporation would remove a provision which states that Directors need not
be stockholders of the Company. During its meeting August 7, 1996, the
Board of Directors voted unanimously to approve, present, and recommend for
adoption by holders of Common Stock a resolution to amend Article Seventh
of the Restated Certificate of Incorporation to remove this provision. The
fourthtext of the proposed amendmentsresolution and amendment to the Company's Restated
Certificate of Incorporation, will eliminatewith the income coverage requirement
for issuing Cumulative Preferred Stock without obtaining approval ofproposed language to be eliminated
underlined, is as follows:
RESOLVED that 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 approvalof Northwestern Public Service Company,
as heretofore, amended, is hereby amended by deleting
therefrom the holders of at least two-thirdsfollowing underlined language in Article
Seventh:
None of the outstanding shares of Cumulative Preferred Stock, voting separately
asdirectors need be 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 indebtednessstockholder of the
Company (including
amortizationcorporation or a resident of debt discount and expense or premium on debt in such 12
month period) which will be outstanding at the dateState 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 theDelaware.
The Board of Directors based on market conditions.believes that it is important that they, as
Directors, have an investment in the Company, and while all of the
Directors have been stockholders, they wanted to remove language in the
Restated Certificate of Incorporation that was contrary to that intent.
Adoption of this proposed amendmentProposed 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.Stock. Proxies of the
holders of each such class of stock will be voted on the amendmentProposed Amendment as specified
thereon, butand in the absence of such specification, the proxies will be
voted in favor of the proposed amendment.
----------------------------------------------------------------------Proposed Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF THIS PROPOSED AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.AMENDMENT.
UNLESS OTHERWISE 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 been1996, is being sent to all stockholders of record as of March 4, 1996,10, 1997, 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 1995,1996, 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
19971998 Annual Meeting of Stockholders should submit their proposals, together
with any supporting statements, to the Company on or before November 15,
1996.1997. 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 ServicesPresident-Administration
and Corporate Secretary
Northwestern Public Service Company
March 15, 19961997
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 19961997 ANNUAL MEETING, UPON WRITTEN REQUEST AND
WITHOUT CHARGE, A COPY OF THE COMPANY'S 19951996 ANNUAL REPORT (FORM 10-K) TO
THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS SHOULD BE DIRECTED TO
ALAN D. DIETRICH, VICE PRESIDENT-CORPORATE SERVICESPRESIDENT-ADMINISTRATION AND CORPORATE SECRETARY,
NORTHWESTERN PUBLIC SERVICE COMPANY, 600 MARKET STREET WEST, 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.57350-1500.
IMPORTANT:
PLEASE SIGN AND
RETURN THE ENCLOSED
PROXY PROMPTLY.
(PROXY CARD)
COMMON STOCK
NORTHWESTERN PUBLIC SERVICE COMPANY
Huron, South Dakota 57350
PROXY FOR 19961997 ANNUAL MEETING OF STOCKHOLDERS
Solicited on behalf of the Board of Directors
The undersigned hereby appoints R. A. Wilkens and 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 4, 1996,10, 1997, at the Annual Meeting of the Stockholders of the Company to
be held on May 1, 1996,7 1997, 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. NessAelred J. Kurtenbach
M. D. Lewis
Gary Olson
(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
1,000,00050,000,000 the number of authorized shares of the Company's PreferenceCommon
Stock, and to reduce the par value $50 per share.to $1.75.
3. Vote For ( ) Against ( ) Abstain ( ) on the proposal to amend
the Company's Restated Certificate of Incorporation to eliminate the
ability ofprovision that Directors need not be stockholders or a vice president or the secretary of the Company to call a special meeting of stockholders.Company.
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
AMENDMENTSPROPOSALS
REFERRED TO IN ITEMS 2 3, 4, 5, 6, and 7AND 3.
Dated , 19961997
- ------------------------------ -----------------------------
(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
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31
1996 1995 1994
1993
--------------------------- ------------- -------------
Operating Activities:
Net income $ 26,053,800 $ 19,305,569 $ 15,440,208 $ 15,191,073
Items not affecting cash:
Depreciation and amortization 19,414,065 14,633,154 12,438,501 11,805,763
Deferred income taxes 5,830,313 2,540,385 1,509,619 (1,398,578)
Investment tax credit (561,278) (563,311) (564,801) (566,498)
Changes in current assets and
liabilities net of
effects from acquisitions:
Trade accounts receivable (332,902) (3,897,932) (1,057,563)
(2,145,693)
Inventories (4,374,494) (327,160) (1,447,191) (111,703)
Other current assets (4,308,027) (2,641,018) (259,826)
(1,056,726)
Accounts payable 15,712,431 (1,718,666) 2,699,294
(1,565,245)
Accrued taxes 4,621,014 937,553 (1,487,575)
2,393,850
Accrued interest 23,477 1,741,160 (30,991) 193,772
Other current liabilities (143,168) 3,328,632 421,690
898,638
Debt issuance related costs (711,189) - -
Other, net 2,739,783(1,032,214) 2,028,594 (1,392,444)
624,146
-------------- ------------- ------------------------- ------------
Cash flows from operating
activities 60,903,017 35,366,960 26,268,921
24,262,799
-------------- ------------- ------------------------- ------------
Investment Activities:
Property additions (37,651,026) (29,636,745) (22,680,856) (19,974,072)
Purchase of noncurrent
investments, net (107,425,554) (5,669,229) (1,386,178) (6,923,488)
Purchase of net assets, net
of cash acquired (22,000,000) (109,528,168) -
(2,850,000)
Purchase of working capital, adjustments, net 0 (10,607,114) - -
Acquisition related costs 0 (5,405,328) -
-
-------------- ------------- ------------------------- ------------
Cash flows for investment
activities (167,076,580) (160,846,584) (24,067,034)
(29,747,560)
-------------- ------------- ------------------------- ------------
Financing Activities:
Dividends on common and
preferred stock (16,346,762) (14,463,389) (12,940,868) (12,635,351)
Minority interest on preferred
securities of subsidiary trust (2,722,232) (1,056,250) - -
Issuance of long-term debt 19,613,811 86,599,820 1,100,000 76,453,842
Repayment of long-term debt (339,958) (3,156,699) (677,500) (58,900,200)
Issuance of preferred securities
of subsidiary trust 0 31,213,261 - -
Issuance of preferred stock 0 3,650,000 - -
Retirement of preferred stock (30,000)(10,000) (30,000) (30,000)
Issuance of common stock 0 31,022,182 -
-
Commercial paperShort term borrowings
(repayments) 35,500,000 (6,300,000) 9,800,000
-
-------------- ------------- ------------------------- ------------
Cash flows from (for)
financing activities 35,694,859 127,478,925 (2,748,368)
4,888,291
-------------- ------------- ------------ ------------
Cornerstone Propane Partners
Formation Transactions:
Acquisition of CGI Holdings,
net of $2,568,000 of cash
acquired (68,962,482) 0 0
Issuance of Cornerstone Propane
Partners Common Units 191,804,130 0 0
Issuance of long-term debt 220,000,000 0 0
Repayment of long-term debt
and short-term borrowings (229,570,969) 0 0
Other fees and expenses (10,553,650) 0 0
------------- ------------ ------------
Cash flows from Cornerstone
Partners Formation 102,717,029 0 0
Transactions
------------- ------------ ------------
Increase (Decrease) in Cash and
Cash Equivalents 32,238,325 1,999,301 (546,481) (596,470)
Cash and Cash Equivalents,
beginning of year 4,551,913 2,552,612 3,099,093
3,695,563
-------------- ------------- ------------------------- ------------
Cash and Cash equivalents,
end of year $ 36,790,238 $ 4,551,913 $ 2,552,612
$ 3,099,093
============== ============= ========================= ============
Supplemental Cash Flow Information:
Cash paid during the year for:
Income taxes $ 6,271,000 $ 5,972,200 $ 7,382,119
$ 6,338,293
Interest 18,644,802 8,381,217 8,887,901 8,771,595
Noncash transactions during the year for:
Assumption of debt as part of
acquisition $ 2,344,603149,516,144 $ -2,344,603 $ -
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTSTATEMENTS OF OPERATIONSINCOME AND RETAINED EARNINGS
Years Ended December 31
1996 1995 1994 1993
------------- ------------- -------------
Operating Revenues:
Propane $ 175,102,363 $ 38,883,031 $ -
Electric $73,416,994 74,857,501 $ 73,077,431
$ 70,104,822Natural Gas 72,269,047 64,482,943 62,141,382
65,017,964
Propane 38,883,031 - -
Manufacturing 23,220,737 26,746,847 22,047,241 18,134,456
------------- ------------- -------------
344,009,141 204,970,322 157,266,054 153,257,242
------------- ------------- -------------
Operating Expenses:
Propane gas sold 101,359,989 18,527,061 -
Fuel and purchased power 13,347,461 14,304,791 14,552,637
13,961,306
Purchased natural gas sold 51,170,517 46,430,023 46,351,422
48,153,861Manufacturing costs of goods sold 14,547,866 17,162,626 13,996,217
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 16,269,76680,555,962 43,190,237 27,117,519
Maintenance 5,919,354 6,019,601 6,169,895 6,368,346
Depreciation and amortization 19,414,065 14,633,154 12,438,501 11,805,763
Property and other taxes 7,275,925 6,605,660 6,103,903 6,139,613
------------- ------------- -------------
293,591,139 166,873,153 126,730,094 125,983,932
------------- ------------- -------------
Operating Income:
Propane 18,947,261 5,604,307 -
Electric 24,474,634 26,003,006 25,661,632
21,752,231Natural Gas 5,683,585 3,861,608 2,540,091
3,903,313
Propane 5,604,307 - -
Manufacturing 1,312,522 2,628,248 2,334,237 1,617,766
------------- ------------- -------------
50,418,002 38,097,169 30,535,960
27,273,310Interest Expense, net (18,668,279) (11,694,483) (9,669,829)
Investment Income and Other 9,719,236 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 41,468,959 29,432,062 23,309,551
22,759,192
Income Taxes (15,415,159) (10,126,493) (7,869,343) (7,568,119)
------------- ------------- -------------
Net Income 26,053,800 19,305,569 15,440,208 15,191,073
Minority Interest on Preferred
Securities of Subsidiary Trust (2,722,232) (1,056,250) - -
Dividends on Cumulative Preferred
Stock (468,945) (258,939) (119,888) (121,463)
------------- ------------- -------------
Earnings on Common Stock 22,862,623 17,990,380 15,320,320 15,069,610
Retained Earnings, beginning of year 59,159,042 55,373,112 52,873,772 50,318,050
Dividends on Common Stock (15,877,817) (14,204,450) (12,820,980) (12,513,888)
------------- ------------- -------------
Retained Earnings, end of year $ 66,143,848 $ 59,159,042 $ 55,373,112 $ 52,873,772
============= ============= =============
Average Shares Outstanding 8,920,122 8,130,581 7,677,232 7,677,232
Earnings Per Average Common Share $ 2.56 $ 2.21 $ 2.00 $ 1.96
============= ============= =============
Dividends Declared Per Average
Common Share $ 1.7471.780 $ 1.6701.746 $ 1.6301.670
============= ============= =============
See Notes to Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS
December 31
1996 1995 1994
--------------- ----------------
ASSETS
Property:
Electric $ 350,419,398 $ 336,961,117
$ 321,153,724Natural Gas 80,905,454 73,546,150
67,213,487
Propane 248,555,861 74,815,533
-
Manufacturing 2,141,553 2,048,725 1,558,484
--------------- ----------------
682,022,266 487,371,525 389,925,695
Less-Accumulated depreciation (162,908,836) (150,469,310) (139,381,075)
--------------- ----------------
519,113,430 336,902,215 250,544,620
Current Assets:
Cash and cash equivalents 36,790,238 4,551,913 2,552,612
Trade accounts receivable, net 89,258,503 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 -43,826,307 21,645,758
Deferred gas costs 7,006,445 2,925,865
3,029,688
Other 9,948,238 3,694,91220,806,825 33,305,776
--------------- ----------------
197,688,318 90,619,701 36,170,897
--------------- ----------------
Other Assets:
Investments 159,332,695 51,907,141 46,237,912
Deferred charges and other 40,260,445 30,240,083 22,881,641
Goodwill and other intangibles, net 197,320,839 49,052,343 3,230,570
--------------- ----------------
396,913,979 131,199,567 72,350,123
--------------- ----------------
$ 558,721,4831,113,715,727 $ 359,065,640558,721,483
=============== ================
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity $ 152,678,191163,805,137 $ 114,704,940152,678,191
Nonredeemable cumulative preferred stock 2,600,000 2,600,000
Redeemable cumulative preferred stock 3,660,000 40,0001,150,000 1,160,000
Company obligated mandatorily redeemable
security of trust holding solely
parent debentures 32,500,000 -32,500,000
Long-term debt 212,840,224 127,052,500183,850,000 183,850,000
--------------- ----------------
383,905,137 372,788,191
Preferred Stock of Subsidiary 2,500,000 2,500,000
Minority Interest in Subsidiaries 186,713,663 0
Long-term debt of Subsidiaries 240,562,549 28,990,224
--------------- ----------------
813,681,349 404,278,415 244,397,440
--------------- ----------------
Commitments and Contingencies
(Notes 7, 8, 9)
Current Liabilities:
Commercial Paper 0 3,500,000 9,800,000
Long-term debt due within one year 570,0001,244,220 570,000
Accounts payable 99,393,912 15,564,985 13,139,557
Accrued taxes 11,834,153 7,689,592 6,740,035
Accrued interest 4,761,720 4,738,243
2,915,084
Liabilities related to acquisition 12,750,424 -
Other 13,947,990 6,039,43035,532,721 26,698,414
--------------- ----------------
152,766,726 58,761,234 39,204,106
--------------- ----------------
Deferred Credits:
Accumulated deferred income taxes 70,893,910 43,666,229 37,328,539
Unamortized investment tax credits 9,460,241 10,021,519
10,584,830
Other 66,913,501 41,994,086 27,550,725
--------------- ----------------
147,267,652 95,681,834 75,464,094
--------------- ----------------
$ 558,721,4831,113,715,727 $ 359,065,640558,721,483
See Notes to Consolidated Financial =============== ================
Statements
QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth
------- ------- ------- -------
(thousands except per share amounts)
1996: Operating revenues $97,219 $56,681 $49,705 $140,404
Operating income 23,813 6,436 4,652 15,517
Net income 13,309 3,353 1,301 8,091
Average shares 8,920 8,920 8,920 8,920
Earnings per average
common share $1.40 $0.29 $0.06 $0.81
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