<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-
12
Minnesota Power & Light Co.
...............................................................................
(Name of Registrant as Specified in Its Charter)
Philip R. Halverson
...............................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
....................................................................
2) Aggregate number of securities to which transaction applies:
....................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined.):
....................................................................
4) Proposed maximum aggregate value of transaction:
....................................................................
5) Total fee paid:
....................................................................
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
....................................................................
2) Form, Schedule or Registration Statement No.:
....................................................................
3) Filing Party:
....................................................................
4) Date Filed:
....................................................................
<PAGE>
[LOGO OF MINNESOTA POWER]
NOTICE AND PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 9, 1995
Duluth, Minnesota
<PAGE>
[LOGO OF MINNESOTA POWER]
Dear Shareholder:
We cordially invite you to attend Minnesota Power's 1995 Annual Meeting
of Shareholders on Tuesday, May 9, 1995 at 2 p.m. in the auditorium at the
Duluth Entertainment Convention Center (DECC). The DECC is located on
the waterfront at 350 Harbor Drive in Duluth, and free parking is available
in the adjoining lot. On behalf of the Board of Directors, I encourage you
to attend.
This year there are 12 nominees standing for election to the Board. Two
members of the Board, Mary Junck and Bob Mars, will not stand for reelection.
We thank them for their contributions to the success of the Company. In
addition to those returning members elected at last year's Annual Meeting, we
are pleased to have Nick Smith and Bruce Stender, both of Duluth, standing
for election at this year's meeting.
It is important that your shares be represented at the Annual Meeting.
At your earliest convenience, please sign, date, and mail the enclosed Proxy
card in the envelope provided.
Before the Annual Meeting gets underway, you will have the opportunity
to observe electric safety demonstrations and numerous Company exhibits at
the DECC and to tour Lake Superior Center. These activities will be followed
by a noon luncheon at the DECC. If you plan to participate, please fill out
the enclosed reply card and return it with your Proxy.
A summary of the Annual Meeting proceedings will be mailed about June
1 to all shareholders.
Thank you for your continued support. We look forward to seeing you on
May 9.
Sincerely,
Arend Sandbulte
Arend Sandbulte
Chairman, President and
Chief Executive Officer
<PAGE>
MINNESOTA POWER & LIGHT COMPANY
- ------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS - MAY 9, 1995
- ------------------------------------------------------------------------------
The Annual Meeting of Shareholders of Minnesota Power & Light Company
will be held in the auditorium at the Duluth Entertainment Convention Center,
350 Harbor Drive, Duluth, Minnesota, on Tuesday, May 9, 1995, at 2:00 p.m.
for the following purposes:
1. To elect a board of 12 directors to serve for the ensuing year;
2. To appoint Price Waterhouse LLP as the Company's independent accountants
for 1995;
3. To vote upon a proposal to approve the Minnesota Power Director Stock
Plan; and
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Shareholders of record on the books of the Company at the close of
business on March 10, 1995, are entitled to notice of and to vote at the
Annual Meeting.
All shareholders are cordially invited and encouraged to attend the
meeting in person. The holders of a majority of the shares entitled to vote
at the meeting must be present in person or by Proxy to constitute a quorum.
We would appreciate your signing and returning the enclosed Proxy card
at your earliest convenience to facilitate an efficient tally of your votes.
By order of the Board of Directors,
Philip R. Halverson
Philip R. Halverson
Corporate Secretary
Dated at Duluth, Minnesota
March 17, 1995
If you have not received the Minnesota Power 1994 Annual Report, which
includes financial statements, kindly notify Minnesota Power Shareholder
Services, 30 West Superior Street, Duluth, MN 55802, telephone number 1-800-
535-3056 or 1-218-723-3974, and a copy will be sent to you.
<PAGE>
MINNESOTA POWER & LIGHT COMPANY
30 WEST SUPERIOR STREET
DULUTH, MINNESOTA 55802
- ------------------------------------------------------------------------------
PROXY STATEMENT
- ------------------------------------------------------------------------------
SOLICITATION
The Proxy accompanying this statement is solicited on behalf of the
Board of Directors of Minnesota Power & Light Company (Minnesota Power or
Company) for use at the Annual Meeting of Shareholders to be held on May 9,
1995, and any adjournments thereof. The purpose of the meeting is to elect a
Board of 12 Directors to serve for the ensuing year, to appoint Price
Waterhouse LLP as the Company's independent accountants for 1995, to vote
upon a proposal to approve the Minnesota Power Director Stock Plan, and to
transact such other business as may properly come before the meeting. All
properly executed Proxies received at or before the meeting, and entitled to
vote, will be voted at the meeting.
This Proxy Statement and enclosed Proxy card were first mailed on or
about March 17, 1995. Any Proxy delivered pursuant to this solicitation is
revocable any time before it is voted, by written notice delivered to the
Corporate Secretary of the Company.
The Company expects to solicit Proxies primarily by mail. Proxies also
may be solicited in person and by telephone at a nominal cost by regular or
retired employees of the Company. The expenses of such solicitation are the
ordinary ones in connection with preparing, assembling, and mailing the
material and also include charges and expenses of brokerage houses and other
custodians, nominees, or other fiduciaries for communicating with
shareholders. Additional solicitation of Proxies will be made by mail,
telephone, and in person by Corporate Investor Communications, Inc., a firm
specializing in the solicitation of proxies, at a cost to the Company of
approximately $6,000 plus expenses. The total amount of such expenses will be
borne by the Company.
OUTSTANDING SHARES AND VOTING PROCEDURES
The outstanding shares of capital stock of the Company, as of March 10,
1995, were as follows:
<TABLE>
<CAPTION>
<S> <C>
Preferred Stock 5% Series ($100 par value) 113,358 shares
Serial Preferred Stock $7.36 Series (without par value) 170,000 shares
Serial Preferred Stock A $7.125 Series (without par value) 100,000 shares
Serial Preferred Stock A $6.70 Series (without par value) 100,000 shares
Common Stock (without par value) 31,255,505 shares
</TABLE>
Each share of the Company's preferred stocks and common stock of record
on the books of the Company at the close of business on March 10, 1995, is
entitled to notice of the Annual Meeting and to one vote.
1
<PAGE>
The affirmative vote of a majority of the shares of stock present and
entitled to vote at the Annual Meeting is required for election of each
director and for approval of the other items to be acted upon by
shareholders. An automated system administered by the Company's Shareholder
Services Department tabulates the votes. Abstentions are included in
determining the number of shares present and voting and are treated as votes
against the particular proposal. Broker non-votes are not counted for or
against any particular proposal.
PROPOSALS OF SHAREHOLDERS FOR THE ANNUAL MEETING SCHEDULED FOR MAY 14, 1996
All proposals from shareholders to be considered at the Annual Meeting
scheduled for May 14, 1996, must be received by the Corporate Secretary at 30
West Superior Street, Duluth, Minnesota 55802, not later than November 8,
1995.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents the only persons known to the Company who
own beneficially as of March 1, 1995, more than 5 percent of any class of the
Company's voting securities. Unless otherwise indicated, the beneficial
owners shown have sole voting and investment power over the shares listed.
<TABLE>
<CAPTION>
Number of Shares Percentage
Title of Class Name and Address of Beneficial Owner Beneficially Owned of the Class
- -------------- ------------------------------------ ------------------ ------------
<S> <C> <C> <C>
Serial Preferred American General Corporation 15,400<F1> 9.1%<F1>
Stock 2929 Allen Parkway
Houston, TX 77019
Serial Preferred ISACO 150,000 75.0%
Stock A c/o IDS Trust
P.O. Box 1450
Minneapolis, MN 55485
Serial Preferred HARE & Co. 30,000 15.0%
Stock A c/o Bank of New York
P.O. Box 11203
New York, NY 10249
Serial Preferred Saxon & Co. 10,000 5.0%
Stock A c/o Provident National Bank
P.O. Box 7780-1888
Philadelphia, PA 19102
Serial Preferred Sigler & Co. 10,000 5.0%
Stock A c/o Manufacturers Hanover Trust Co.
P.O. Box 50000
Newark, NJ 07101-8006
Common Stock Mellon Bank, N.A. 4,817,393<F2> 15.0%<F2>
One Mellon Bank Center
Pittsburgh, PA 15258
- -------------------------------------------------------------------------------------------
<FN>
<F1>American General has shared power with American General Life and
Accident Insurance Company (AGLA) to vote or direct the vote and to dispose
or direct the disposition of 10,000 shares, and with American General Life
Insurance Company of New York (AGNY) to vote or direct the vote and to
dispose or direct the disposition of 5,400 shares. AGLA and AGNY, wholly-
owned subsidiaries of American General, are the record owners of these
shares.
<F2>Mellon Bank holds 4,677,800 shares in its capacity as Trustee of the
Minnesota Power and Affiliated Companies Employee Stock Ownership Plan and
Trust (ESOP). Generally, these shares will be voted in accordance with
instructions received by Mellon Bank from participants in the ESOP.
</TABLE>
2
<PAGE>
The following table presents the shares of common stock of the Company
(Common Stock) beneficially owned by directors, nominees for director,
executive officers named in the Summary Compensation Table on page 7, and all
directors, and executive officers of the Company as a group, as of March 1,
1995. Unless otherwise indicated, the persons shown have sole voting and
investment power over the shares listed.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER SHARES<F1> NAME OF BENEFICIAL OWNER SHARES<F1>
- ------------------------ ------ ------------------------ -------
<S> <C> <C> <C>
Merrill K. Cragun 2,200 Charles A. Russell 6,264
Dennis E. Evans 4,400 Arend J. Sandbulte 29,384 <F3>
Sr. Kathleen Hofer 0 <F2> Nick Smith 200
Peter J. Johnson 2,094 Bruce W. Stender 402
Mary E. Junck 1,998 Donald C. Wegmiller 1,729
Robert S. Mars, Jr. 6,061 Robert D. Edwards 9,458
Paula F. McQueen 1,200 Allen D. Harmon 4,914 <F4>
Robert S. Nickoloff 5,477 Jack R. McDonald 9,450 <F5>
Jack I. Rajala 6,716 Bert T. Phillips 14,292 <F6>
Directors and Executive
Officers as a Group
(29 in Group) 165,571 <F7>
- -------------------------------------------------------------------------------
<FN>
<F1>Each director, nominee for director and executive officer owns only a
fraction of 1 percent of any class of Company stock and all directors,
nominees for director and executive officers as a group also own less than 1
percent of any class.
- --------------------------------------------------------------------------------
<F2> Consistent with her vows as a member of the Benedictine Order, Sr.
Kathleen Hofer owns no stock of the Company.
<F3> Includes 3,452 shares for which voting and investment power is shared
with his spouse.
<F4> Includes 400 shares for which voting and investment power is shared
with his spouse.
<F5> Includes 2,420 shares owned by his spouse.
<F6> Includes 3,051 shares for which voting and investment power is shared
with his spouse, 2,080 shares owned by a trust for his benefit and 416
shares owned by a trust for the benefit of his spouse.
<F7> An executive officer in this Group but not named above also owned 25
shares of preferred stock.
</FN>
</TABLE>
- ------------------------------------------------------------------------------
ITEM NO. 1 - ELECTION OF DIRECTORS
- ------------------------------------------------------------------------------
It is intended that the accompanying Proxy will be voted for each of the
nominees listed below for director to serve until the next Annual Meeting of
Shareholders or until their successors are elected and qualified. In case any
such nominee should become unavailable to accept nomination or election for
any reason, the Proxies may use discretionary authority to vote pursuant to
the Proxy for a substitute, or the Board of Directors may reduce the number
of directors, unless the inability to serve is believed to be temporary. In
this latter case, the accompanying Proxy will be voted for the nominee named,
but such nominee, if elected, will not serve until he or she is able to do
so. Management has no reason to believe that any of the nominees will be
unable to serve if elected to office.
The directors standing for election are presented on the following
pages.
3
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS STANDING FOR ELECTION
Director
Since
--------
<S> <C> <C>
[PHOTO] MERRILL K. CRAGUN, 63, Brainerd, MN. Member of the Electric 1991
Utility Operations Committee. President of Cragun Corporation,
a resort and conference center. Director of Topeka Group
Incorporated<F1> (Topeka Group) and Synertec, Incorporated<F1>
(Synertec).
[PHOTO] DENNIS E. EVANS, 56, Minneapolis, MN. Member of the Executive 1986
Compensation Committee. President and Chief Executive Officer (CEO)
of the Hanrow Financial Group, Ltd., a merchant banking firm. He was
previously Chairman, Chief Executive Officer, and Director of Black
Hawk Holdings, Inc., a financial services company. Director of Topeka
Group<F1>, Minnesota Paper, Incorporated<F1> (Minnesota Paper), Angeion
Corporation, and Astrocom Corporation.
[PHOTO] SR. KATHLEEN HOFER, 61, Duluth, MN. Member of the Audit 1994
Committee and the Electric Utility Operations Committee. President
and CEO of St. Mary's Medical Center, a hospital. Chair and CEO of
the Benedictine Health System, the parent corporation for a number
of non-profit health care providers.
[PHOTO] PETER J. JOHNSON, 58, Tower, MN. Member of the Electric Utility 1994
Operations Committee. President and CEO of Hoover Construction
Company, a highway and heavy construction contractor. Chairman of
Michigan Limestone Operations, which produces limestone. Director of
BNI Coal, Ltd.<F1> and Synertec, Inc.<F1> Director of Queen City Federal
Savings, and of Queen City Bancorp, Inc.
[PHOTO] PAULA F. McQUEEN, 48, Punta Gorda, FL. Member of the Audit 1993
Committee. Director and President of PGI Sales Incorporated, a
southwest Florida community developer. Partner of Webb, McQueen & Co.,
a certified public accounting firm. CEO and Director of Allied
Engineering & Testing Inc., an engineering and materials testing
company. Director of Topeka Group<F1> and of SouthTrust Bank of
Southwest Florida, N.A.
[PHOTO] ROBERT S. NICKOLOFF, 65, St. Paul, MN. Chairman of the 1986
Executive Compensation Committee and member of the Executive
Committee. Chairman of the Board of Medical Innovation Capital, Inc.
and General Partner of Medical Innovation Fund, both venture capital
firms. Self-employed as an attorney. Director of Green Tree Financial
Corporation.
<FN>
- ------------------------------------------------------------------------------
<F1> denotes a wholly-owned subsidiary of Minnesota Power.
- ------------------------------------------------------------------------------
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Director
Since
--------
<S> <C> <C>
[PHOTO] JACK I. RAJALA, 55, Grand Rapids, MN. Member of the Executive 1985
Committee. Director and President of Rajala Lumber Company and Rajala
Mill Company, which manufactures and trades lumber. Director of
Minnesota Paper<F1> and Synertec<F1>.
[PHOTO] CHARLES A. RUSSELL, 62, Duluth, MN. Member of the Audit 1985
Committee, the Executive Committee, and the Executive Compensation
Committee. Chairman and CEO of Norwest Bank Minnesota North, N.A.
Director of Lakehead Pipeline Company.
[PHOTO] NICK SMITH, 58, Duluth, MN. Chairman of and attorney with -
Fryberger, Buchanan, Smith & Frederick, P.A., a law firm. Chair and
CEO of Northeast Ventures Corporation, a venture capital firm
investing in northeastern Minnesota, and of Northeast Entrepreneur
Fund, Inc., offering technical and financial services to small
businesses in northeastern Minnesota.
[PHOTO] BRUCE W. STENDER, 53, Duluth, MN. President and CEO of Labovitz -
Enterprises, Inc. which owns and manages hotel properties. Trustee
and Chairman of the Blandin Foundation, a $230 million charitable
foundation. Director and Vice Chairman of the Benedictine Health
System, the parent corporation for a number of non-profit health
care providers.
[PHOTO] AREND J. SANDBULTE, 61, Duluth, MN. Chairman of the Executive 1983
Committee and the Electric Utility Operations Committee. Chairman,
President, and CEO of Minnesota Power. Director, Chairman and CEO
of Superior Water, Light and Power Company<F1> and Topeka Group<F1>.
Director and Chairman of BNI Coal, Ltd.<F1>; Energy Land Incorporated<F1>;
RendField Land Company, Inc.<F1>; Minnesota Paper<F1>; Rainy River<F1>;
and Synertec<F1>. Member of the Venture Council (governing board) of Lake
Superior Paper Industries, a joint venture, 50 percent of which is
owned by Minnesota Paper<F1>. Director of Utech Venture Capital
Corporation (a joint investment venture with ten electric utilities,
including Minnesota Power) and St. Mary Land and Exploration Company.
[PHOTO] DONALD C. WEGMILLER, 56, Minneapolis, MN. Chairman of the Audit 1992
Committee and member of the Executive Compensation
Committee. President and CEO of Management Compensation Group/
HealthCare, a national executive compensation and benefits consulting
firm. He was previously Vice Chairman and President of Health Span
Health System and President and Chief Executive Officer of Health
One Corporation, diversified health services organizations. Director
of G. D. Searle and Co., HBO & Company, Medical Graphics Corporation,
Health Providers Insurance Company, and Possis Corp.
<FN>
- ------------------------------------------------------------------------------
<F1> denotes a wholly-owned subsidiary of Minnesota Power.
- ------------------------------------------------------------------------------
</FN>
</TABLE>
5
<PAGE>
Board and Committee Meetings in 1994
During 1994, the Board of Directors held nine meetings. In the intervals
between meetings of the Board, an Executive Committee is authorized to
exercise the authority of the Board. The Executive Committee, which held two
meetings during 1994, provides oversight of corporate financial matters and
performs the functions of a nominating committee. Shareholders may recommend
nominees for director to the Executive Committee by addressing the Corporate
Secretary of the Company, 30 West Superior Street, Duluth, Minnesota 55802.
The Audit Committee, which held three meetings in 1994, recommends the
selection of independent accountants, reviews and evaluates the Company's
accounting and financial practices, and reviews and recommends approval of
the annual audit report. The Executive Compensation Committee, which held
four meetings in 1994, ensures that compensation and benefit arrangements for
Company officers and other key executives are equitable, competitive with the
marketplace, and consistent with corporate objectives. The Electric Utility
Operations Committee, which held two meetings in 1994, provides oversight of
the Electric Utility Operations of the Company. All directors attended 75
percent or more of the aggregate number of meetings of the Board of Directors
and applicable committee meetings in 1994.
Certain Relationships and Related Transactions
Director Robert S. Mars, Jr. is Chairman of W.P.&R.S. Mars Company, an
industrial equipment and supply firm, and President of its wholly-owned
subsidiary, Conveyor Belt Service, Inc., a conveyor belt maintenance and
repair firm. The Company and its subsidiaries in the normal course of
business in 1994 purchased $141,793 worth of tools, equipment, and repair
services from said companies. Some of these tools, equipment, and repair
services were purchased pursuant to competitive bids, and others were
purchased directly from inventory of the companies as required. It is the
opinion of the Company that such purchases were made at prices that were
competitive with others in this area.
In 1994 Lehigh Corporation, a second tier subsidiary in which the
Company holds an 80 percent ownership interest, sold Florida real estate
interests to James D. Hull who is a brother of Director Paula F. McQueen. The
price for Mr. Hull's undivided 50 percent ownership interest in this real
estate was $911,000. Lehigh Corporation loaned Mr. Hull and the other buyer
approximately one-half of the purchase price with interest at 6.5 percent per
annum, accepting a mortgage on the real estate as security. The loan must be
repaid in full on July 15, 2001. It is the opinion of the Company that this
real estate was sold at market price.
Director Charles A. Russell is Chairman and CEO of Norwest Bank
Minnesota, Duluth N.A. with which the Company has banking relationships and
loan commitments under which the Company is required to pay certain fees or
maintain compensating balances, although during 1994 Norwest did not hold
notes of the Company for loans pursuant to these arrangements. Additionally,
Reach All Partnership, in which the Company has an 82 1/2 percent ownership
interest through its subsidiaries, has a working capital line of credit with
Norwest under which $3.8 million is outstanding, with interest payable at
prime rate plus 2 1/2 percent per annum. It is the opinion of the Company
that the financial arrangements with Norwest were entered into at market
rates.
6
<PAGE>
Compensation of Executive Officers
The following information is submitted as the aggregate compensation for
1992 through 1994 for the Company's five highest paid executive officers.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Annual Compensation<F1> Compensation
Name and Principal Position Year All Other
Salary Bonus Payouts - LTIP Compensation
($) ($) Payouts ($)<F2> ($)<F3>
- ---------------------------- ------ ------- -------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Arend J. Sandbulte 1994 $352,587 $ 45,953 0 $74,925
Chairman, President and 1993 362,625 93,470 31,440 63,107
Chief Executive Officer 1992 362,833 123,695 0 39,478
Robert D. Edwards 1994 196,154 30,860 0 20,172
Executive Vice President 1993 196,167 35,000 22,200 17,740
and Chief Operating Officer 1992 174,500 37,701 0 12,945
Jack R. McDonald 1994 196,154 15,727 0 25,951
Executive Vice President - 1993 194,417 28,000 22,270 22,116
Finance and 1992 164,000 39,833 0 13,166
Corporate Development
Bert T. Phillips 1994 160,356 55,713 0 19,531
Group Vice President - 1993 163,500 22,481 20,960 17,543
Water Resource Operations 1992 161,000 19,199 0 12,498
Allen D. Harmon 1994 156,923 34,315 0 14,697
Group Vice President - 1993 157,292 24,000 20,960 12,799
Electric Utility Operations 1992 151,000 31,496 0 10,573
<FN>
<F1>Amounts shown include compensation earned by the named executive
officers, as well as amounts earned but deferred at the election of those
officers. The "Bonus" column includes amounts earned pursuant to Results
Sharing, the Annual Incentive Plan and, for 1993 and 1994, achievement of
Strategic Goals determined by the Board.
<F2>The amounts shown represent the fair market value of shares of Common
Stock reportable in 1993, based upon corporate performance during the four-
year period ended December 31, 1993.
<F3>The amounts shown for 1994 include the following Company
contributions for the named executive officers:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Above-Market
Annual Company Annual Company Interest Earned
Annual Company Contribution to Contribution to on Compensation
Contribution to the Employee the Supplemental Deferred Under
the Flexible Stock Executive Executive
Name Benefit Plan Ownership Plan Retirement Plan Incentive Plan
dagger
- ----- ---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Arend J. Sandbulte $9,975 $3,021 $30,519 $31,260
Robert D. Edwards 6,000 3,021 5,268 5,884
Jack R. McDonald 8,100 3,021 5,800 9,030
Bert T. Phillips 6,825 3,021 2,362 7,323
Allen D. Harmon 5,475 3,021 1,925 4,200
</TABLE>
dagger The Company made investments in corporate-owned life insurance which will
recover the cost of these above-market benefits if actuarial factors and
other assumptions are realized.
7
<PAGE>
Retirement Plans
The following table sets forth examples of the estimated annual
retirement benefits that would be payable to participants in the Company's
Retirement Plan and Supplemental Executive Retirement Plan after various
periods of service, assuming no changes to the plans and retirement at the
normal retirement age of 65:
<TABLE>
PENSION TABLE
<CAPTION>
Years of Service
----------------------------------------------------------------------
Remuneration<F1> 15 20 25 30 35
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$125,000 $ 27,750 $ 34,000 $ 40,250 $ 46,500 $ 52,750
150,000 33,300 40,800 48,300 55,800 63,300
175,000 38,850 47,600 56,350 65,100 73,850
200,000 44,400 54,400 64,400 74,400 84,400
225,000 49,950 61,200 72,450 83,700 94,950
250,000 55,500 68,000 80,500 93,000 105,500
300,000 66,600 81,600 96,600 111,600 126,600
400,000 88,800 108,800 128,800 148,800 168,800
450,000 99,900 122,400 144,900 167,400 189,900
500,000 111,000 136,000 161,000 186,000 211,000
- ------------------------------------------------------------------------------------------
<FN>
<F1>Represents the highest annualized average compensation (salary and
bonus) received for 48 consecutive months during the employee's last 15 years
of service with the Company. For determination of the pension benefit, the
48-month period for highest average salary may be different from the 48-month
period of highest aggregate bonus compensation.
</FN>
</TABLE>
Retirement benefit amounts shown are in the form of a straight-life
annuity to the employee and are based on amounts listed in the Summary
Compensation Table under the headings Salary and Bonus. Retirement benefit
amounts shown are not subject to any deduction for Social Security or other
offset amounts. The Retirement Plan provides that the benefit amount at
retirement is subject to adjustment in future years to reflect cost of living
increases to a maximum adjustment of 3 percent per year. As of December 31,
1994, the executive officers named in the Summary Compensation Table had the
following number of years of credited service under the plan: Arend J.
Sandbulte - 30 years, Robert D. Edwards - 18 years, Jack R. McDonald - 27
years, Bert T. Phillips - 18 years, and Allen D. Harmon - 16 years.
With certain exceptions, the Internal Revenue Code of 1986, as amended
(Code), presently restricts the aggregate amount of annual pension which may
be paid to an employee under the Retirement Plan to $120,000, which amount is
subject to adjustment in future years to reflect cost of living increases.
The Company's Supplemental Executive Retirement Plan provides for
supplemental payments by the Company to eligible executives (including the
executive officers named in the Summary Compensation Table) in amounts
sufficient to maintain total retirement benefits upon retirement at a level
which would have been provided by the Retirement Plan if benefits were not
restricted by the Code.
Compensation of Directors
Employee directors receive no additional compensation for their services
as directors. In 1994, the Company paid each director an annual retainer fee
of $4,000 and 500 shares of Common Stock, except that two directors newly
elected in 1994 received an annual retainer of $2,000 and 500 shares of
Common Stock. In addition, each director was paid $750 for each Board,
Committee, and subsidiary board meeting attended, except that $450 was paid
for attendance at a second meeting held the same day as
8
<PAGE>
another meeting. Twice in 1994 a Board meeting was adjourned and reconvened the
following day, at which times a meeting fee was paid for each day of meeting.
Each director who is the Chairman of a Committee received an additional $150
for each Committee meeting attended. A $225 fee was paid for conference call
meetings. Directors may elect to defer all or a part of the cash portion of
their retainer fees and meeting fees. The shares of Common Stock paid to
directors during 1994 had an average market price of $30.00 per share. The
Company also provides life insurance of $5,000 on the life of each director.
The Minnesota Power Director Stock Plan, which shareholders are asked to
approve under Item No. 3 below, formalizes, but does not increase, the current
annual retainer payment plan, part of which is paid in Common Stock.
The Board has a Long-Term Incentive Plan which provides a compensation
program similar to that provided to the executive officers by the Long-Term
Incentive Plan (see page 12), except that the directors' maximum award
opportunity is 600 shares of Common Stock every other year. The plan awards
Common Stock to the directors if, over a four-year period commencing with
each even numbered year, the total return to the Company's shareholders (that
is, stock price appreciation plus reinvested dividends) exceeds the median
total return achieved by a pre-selected group of ten comparable utilities and
by the Standard & Poor's 500 (S&P 500). The size of the award varies
depending upon the extent to which the Company's total return exceeds the
median total returns. No awards are granted to directors if Company results
are below both median total returns. The first awards under the plan may be
made in 1996 based on the four-year period ending December 31, 1995.
Minnesota Power Common Stock Performance
The following graph compares the Company's cumulative total shareholder
return on its Common Stock with the cumulative return of the S&P 500 and the
Duff & Phelps Electric Utility Index over the preceding five calendar years.
The Duff & Phelps Electric Utility Index includes 89 of the largest investor-
owned electric utilities in the U.S. The calculations assume a $100
investment on December 31, 1989, and reinvestment of all dividends at the
time paid.
[GRAPHIC MATERIAL OMITTED - PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Minnesota Power 100.00 103.79 137.23 153.45 155.26 129.05
S&P 500 100.00 96.89 126.29 135.91 149.54 151.57
Duff & Phelps Electrics 100.00 99.10 127.52 138.40 151.69 135.38
</TABLE>
9
Report of Board Executive Compensation Committee on Executive Compensation
Described below are the compensation policies of the Executive
Compensation Committee of the Board of Directors with respect to the
executive officers of the Company. Composed entirely of independent outside
directors, the Executive Compensation Committee is responsible for
recommending to the Board the policies which govern the executive
compensation program of the Company and for administering those policies. To
assist the Executive Compensation Committee in connection with the
performance of such responsibilities, the Board has retained the services of
Hewitt Associates LLC, a benefits and compensation consulting firm. Hewitt
Associates has been retained in this capacity since 1986.
The role of the executive compensation program is to help Minnesota
Power achieve its corporate goals by motivating performance, rewarding
positive results, and encouraging teamwork. Focusing on these three goals,
the Executive Compensation Committee adopted revisions to the executive
compensation program effective for 1993 and additional revisions effective
for 1994 to place greater emphasis on performance-based compensation and
relatively less emphasis on base salary. Recognizing that the potential
impact an individual employee has on the attainment of corporate goals tends
to increase at higher levels within the Company, the executive compensation
program provides greater variability in compensating individuals based on
results achieved as their levels within the Company rise. In other words,
individuals with the greatest potential impact on achieving the stated goals
have the greatest amount to gain when goals are achieved and the greatest
amount at risk when goals are not achieved. The Company has no policy
regarding the deductibility of qualifying compensation paid to executive
officers under Section 162(m) of the Internal Revenue Code of 1986, as
amended.
The program also recognizes that, in order to attract and retain
exceptional executive talent, compensation must be competitive in the
national market when measured against comparable firms within that market.
For those executives engaged primarily or exclusively in electric utility
operations, the relevant market for purposes of comparison is other electric
utilities throughout the country which, on average, are comparable in size to
Minnesota Power. For those executives engaged substantially in the Company's
diversification activities, the appropriate market for purposes of comparison
includes both electric utilities and general industry. Comparisons with the
general industry market allow recognition of skills required in
diversification activities and compensation levels of executives in other
industries.
To determine market levels of compensation for executive officers, the
Executive Compensation Committee relied upon comparative information provided
by Hewitt Associates. Hewitt selected 15 electric utilities and 25 industrial
companies as appropriate for market compensation comparison, primarily
because they are approximately the same size as the Company as measured by
sales revenue.
The Executive Compensation Committee determined that executive base
salary plus additional performance-based compensation at the threshold level
should approximate the midpoint of the range of base salary plus total
performance-based compensation in the appropriate market. The threshold level
of results represents average corporate performance as measured under the
Company's performance-based
10
<PAGE>
compensation plans. In 1994, executive compensation actually paid by the
Company fell within the midrange of executive compensation paid by the
comparable companies.
As described below, executive officers of the Company receive a
compensation package which consists of four basic elements: base salary,
performance-based compensation, supplemental executive benefits, and
perquisites.
Base Salary
Base salary is set at a level so that, if the threshold level of
performance is achieved under the performance-based plans as described below,
executive officers' total compensation, including amounts paid under each of
the performance-based compensation plans, will be near the midpoint of market
compensation as described in the preceding three paragraphs. In 1994 the base
salaries of the executive officers were not increased. However, as discussed
below, these officers were given an additional award opportunity under the
Annual Incentive Plan.
Performance-Based Compensation
Performance-based compensation consists of the following components:
Results Sharing, Individual Strategic Goals, the Annual Incentive Plan, and
the Long-Term Incentive Plan. Performance goals are approved in advance by
the Executive Compensation Committee and the Board. A threshold level of
performance under the performance-based plans represents average corporate
performance, as determined by the Executive Compensation Committee. With
threshold performance, executive compensation will be near the midpoint of
the relevant market. If no performance awards are earned, compensation of the
Company's executive officers will be near the fortieth percentile of the
market, while performance at increments above the threshold level will result
in total compensation above the midpoint of the market.
The Company's performance-based compensation plans include:
. Results Sharing. The Results Sharing award opportunity rewards
annual performance of the executive's responsibility area as well as
overall corporate performance. Results Sharing awards are available to all
employees on the same percentage of pay basis and are intended to focus
employee attention on both responsibility area performance and corporate
performance generally. If overall corporate performance goals with respect
to earnings per share and operating income are met or exceeded, then a
bonus of up to 15 percent of salary may be earned depending upon (i)
the degree to which target earnings per share and operating income
levels are exceeded, and (ii) achievement of objectively measurable
business unit goals. Threshold performance will result in an award of
2.5 percent of base salary under this plan. In 1994, Results Sharing
awards averaging 3.1 percent of base pay were earned by executive officers
(not including the CEO) with responsibility for the Company's electric,
water, and real estate business units because operating income and other
business unit goals were exceeded.
. Individual Strategic Goals. The Executive Compensation Committee
established a set of objectively measurable "Strategic Goals" to be
accomplished in 1994 for each executive officer named in the Summary
Compensation Table plus one additional
11
<PAGE>
executive officer. The Strategic Goals for a particular officer relate
to the performance of the business unit within the scope of
responsibility of that officer. The award opportunity for the CEO under
this plan is 15 percent of base salary if all of the CEO's goals are
achieved. The other executive officers may be awarded generally up to
10 percent of base salary. Threshold performance under this plan will
result in payment of an award equal to 6 percent of the CEO's base salary
and 4 percent of base salary of the other executive officers. In 1994 five
executive officers, not including the CEO, earned an award collectively
amounting to 9.0 percent of base salary for accomplishment of Strategic
Goals in 1994. Over half of this collective amount was paid to one
executive officer for exceeding earnings goals of the Company's water
utility operations.
. Annual Incentive Plan. The Annual Incentive Plan is intended to
focus executive attention on superior performance of the Company in
comparison to other companies. The Annual Incentive Plan rewards near-term
corporate performance as measured by the Company's ranking using two- and
three-year averaging periods, in relation to (i) a peer group of ten
electric utility companies operating in the same geographic region as the
Company (Upper Midwest) and (ii) the companies listed in the S&P 500
Index. The Company's performance is compared to the peer group with
respect to return on average common equity, annual rate of growth in
operating and maintenance expenses per kilowatt-hour sold, customer cost
per kilowatt-hour sold, and the after-tax interest and preferred dividend
coverage ratio. The Company's performance with respect to total
shareholder return (that is, stock price appreciation plus reinvested
dividends) is compared with the peer group (60 percent weighting) and to
the S&P 500 companies (40 percent weighting). Each executive officer is
preassigned a percentage weighting of each of these performance measures
based on the officer's areas of responsibility. Award opportunities
relating to the above measures range from 5 percent of the base salary of
lower level executive officers to 50 percent of the base salary of the
CEO. An additional award opportunity of up to 10 percent of base salary
is earned if objectively measurable individual goals approved by the
Executive Compensation Committee are accomplished. The full award
opportunity is earned if (i) Company performance equals or exceeds the
eightieth percentile for all performance measures when measured against
performance of both the peer group utilities and the S&P 500 companies,
and (ii) the executive officer's individual goals are achieved. The
threshold level of performance is achieved if the Company's performance
falls between the fortieth and the forty-ninth percentile as measured
against the performance of the peer group of utilities and the S&P 500.
The executive officers (not including the CEO) earned an average award
equal to 8 percent of base salary under this plan in 1994 as a result of
the financial performance of the electric, water, and real estate business
units.
. Long-Term Incentive Plan. The Long-Term Incentive Plan is designed to
motivate long-term strategic planning and reward long-term corporate
performance, as measured by total shareholder return. In January of each
year the executive officers are given a maximum award opportunity of a
stated number of shares of the Company's Common Stock based upon the
Company's performance over a four-year performance period. Sixty percent
of the award opportunity is based upon rank among a peer group of ten
utilities operating in the same geographic region as
12
<PAGE>
the Company (Upper Midwest), and 40 percent of the award opportunity is
based on rank among the S&P 500 companies. For the four-year performance
period ending December 31, 1994, the maximum award opportunity was 6,000
shares for the CEO. The maximum award ranged from 2,000 to 5,000 shares
for the other executive officers. The maximum award opportunity is earned
if the Company ranks first or second in the peer group and at or above the
ninetieth percentile among the S&P 500 companies. A threshold award equal
to 20 percent of the maximum award opportunity is earned if, over the
four-year period, the Company achieves at least a fifty-fifth percentile
ranking among a peer group of utilities and a fiftieth percentile ranking
among the S&P 500 companies. For the four-year performance period ending
December 31, 1994, no awards were earned because the Company did not
achieve total shareholder return required for a payout under the plan.
Supplemental Executive Benefits
The Company has established a Supplemental Executive Retirement Plan
(SERP) to treat employees, including the executive officers, equitably by
replacing benefits not provided by the Company's Flexible Benefit Plan and
the Employee Stock Ownership Plan due to government-imposed limits and to
provide retirement benefits which are competitive with those offered by other
businesses with which the Company competes for managerial talent. The SERP
also provides employees whose salaries exceed the salary limitations for tax-
qualified plans imposed by the Code with additional benefits such that they
receive in aggregate the benefits they would have been entitled to receive
had such limitations not been imposed.
The Company has also adopted Executive Investment Plans whereby
executive officers may enter into agreements with the Company to irrevocably
defer a portion of their compensation until after termination of service,
retirement, or death. The Executive Investment Plans are non-qualified
deferred compensation plans, under which benefits result wholly from deferred
compensation.
Perquisites
The Company provides various perquisites to assist selected executive
officers in fulfilling their business responsibilities in a cost- and time-
efficient manner, to the extent they are consistent with competitive
practice. Perquisites provided by the Company to the named executive officers
did not exceed the lesser of $50,000 or 10 percent of the total salary and
bonus shown for them in the Summary Compensation Table. The perquisites
provided by the Company were reviewed by the Executive Compensation Committee
and determined to be reasonable and in line with electric utility companies
of comparable size.
Chief Executive Officer Compensation
Consistent with the Compensation Committee's philosophy of linking
greater portions of top executive pay to meeting the financial and strategic
goals of the Company, the Executive Compensation Committee did not increase
the CEO's base salary for 1994, but instead maintained his salary at its 1993
level and amended the Annual Incentive Plan to provide the CEO an opportunity
to earn an award of up to 10 percent of his base salary upon achievement of
1994 earnings goals established by the Executive Compensation Committee. Under
the Company's Results Sharing Plan, the CEO was
13
<PAGE>
awarded $13,821, or 3.9 percent of his base salary, because operating income
and other business unit goals were exceeded by the Company's electric, water,
and real estate business units. For accomplishment of Individual Strategic
Goals assigned to him in 1994 by the Executive Compensation Committee, the
CEO was awarded $25,165, or 7 percent of his base salary, for achievement of
an earnings goal at the Company's Florida water utility. Under the Annual
Incentive Plan, the CEO earned $6,967, or 1.9 percent of base salary in 1994,
for achievement of electric, water, and real estate business unit earnings
goals. No award was earned in 1994 by the CEO under the Long-Term Incentive
Plan because the Company did not achieve the total shareholder return
required for payout under the plan.
March 15, 1995 Executive Compensation Committee
Robert S. Nickoloff, Chairman Dennis E. Evans
Charles A. Russell Donald C. Wegmiller
Compensation Committee Interlocks and Insider Participation
The members of the Executive Compensation Committee are Robert S.
Nickoloff, Chairman, Dennis E. Evans, Charles A. Russell, and Donald C.
Wegmiller.
Director Charles A. Russell is Chairman and CEO of Norwest Bank
Minnesota, Duluth N.A. with which the Company has banking relationships and
loan commitments under which the Company is required to pay certain fees or
maintain compensating balances, although during 1994 Norwest did not hold
notes of the Company for loans pursuant to these arrangements. Additionally,
Reach All Partnership, in which the Company has an 82 1/2 percent ownership
interest through its subsidiaries, has a working capital line of credit with
Norwest under which $3.8 million is outstanding, with interest payable at
prime rate plus 2 1/2 percent per annum. It is the opinion of the Company
that the financial arrangements with Norwest were entered into at market
rates.
- -----------------------------------------------------------------------------
ITEM NO. 2 - APPOINTMENT OF INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
The Audit Committee of the Board of Directors of the Company has
recommended the appointment of Price Waterhouse as independent accountants
for the Company for the year 1995. Price Waterhouse LLP has acted in the
same capacity since October 1963.
A representative of the accounting firm will be present at the Annual
Meeting of Shareholders, will have an opportunity to make a statement if he
or she so desires, and will be available to respond to appropriate questions.
In connection with the 1994 audit, Price Waterhouse reviewed the
Company's annual report, examined the related financial statements, and
reviewed interim financial statements and certain of the Company's filings
with the Federal Energy Regulatory Commission and the Securities and Exchange
Commission.
The Board of Directors recommends a vote in favor of the appointment of
Price Waterhouse as the Company's independent accountants for 1995.
14
<PAGE>
- -----------------------------------------------------------------------------
ITEM NO. 3 - RECOMMENDED APPROVAL OF THE
Minnesota Power Director Stock Plan
- -----------------------------------------------------------------------------
At its meeting on January 25, 1995, the Board of Directors adopted a
Director Stock Plan (the "Plan"), subject to ratification by the
shareholders. The Plan formalizes the Company's current practice of annually
paying each director 500 shares of Common Stock as part of the director's
annual retainer. The complete text of the Plan is set forth in Exhibit "A"
hereto. The following is a summary of the material features of the Plan and
is qualified in its entirety by reference to Exhibit "A".
The purpose of the Plan is to provide ownership of Minnesota Power
Common Stock to members of the Board of Directors in order to improve the
Company's ability to attract and retain highly qualified individuals to serve
as directors of the Company and to strengthen the commonality of interest
between directors and shareholders.
The Plan provides for each non-employee director to receive a stock
payment of 500 shares as a portion of the annual retainer payable to such
director. The first award under the Plan will be made on the first business
day after the annual meeting of shareholders held May 9, 1995 and subsequent
awards will be paid on January 31 of each year, provided that newly elected
or appointed directors will receive their award as soon as practical after
election or appointment. The Plan also provides each director with the right
to elect to increase the amount of common stock that will be purchased by
reducing the cash portion of the annual retainer. The number of shares to be
granted and the time when granted may not be changed by the Board more than
once every six months, or otherwise in contravention of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.
Shares to be issued under the Plan may be authorized but unissued shares
of Common Stock, or shares purchased on the open market. The maximum number
of shares that may be issued under the Plan is 250,000.
There are currently eleven directors of the Company eligible to participate
in the Plan.
<TABLE>
<CAPTION>
New Plan Benefits
Director Stock Plan
Name & Position<F1> Dollar Value ($) Number of Units
<S> <C> <C>
Non-Executive Director Group $140,965<F2> 5,500<F2>
<FN>
<F1>The Plan awards benefits only to directors.
<F2>The table reflects the number of shares that will be granted on the
first business day after the Annual Meeting if the Plan is approved by
shareholders. The dollar value is based on the closing price of $25.63 per
share on March 1, 1995.
</FN>
</TABLE>
15
<PAGE>
- -----------------------------------------------------------------------------
OTHER BUSINESS
- -----------------------------------------------------------------------------
The Board of Directors does not know of any other business to be
presented at the meeting. However, if any other matters properly come before
the meeting, it is the intention of the persons named in the accompanying
Proxy to vote pursuant to the Proxies in accordance with their judgment in
such matters.
It is important that all Proxy cards be forwarded promptly in order that
the necessary vote may be present at the meeting. We respectfully request
that you sign and return the accompanying Proxy card at your earliest
convenience.
By order of the Board of Directors,
Dated March 17, 1995
Philip R. Halverson
Philip R. Halverson
Corporate Secretary
16
<PAGE>
EXHIBIT A
MINNESOTA POWER
Director Stock Plan
I. Purpose
The purpose of the Minnesota Power Director Stock Plan is to provide
ownership of the Company's stock to members of the Board of Directors in
order to improve the Company's ability to attract and retain highly qualified
individuals to serve as directors of the Company and to strengthen the
commonality of interest between directors and shareholders.
II. Definitions
When used herein, the following terms shall have the respective meanings
set forth below:
"Annual Retainer" means the annual retainer payable by the Company to
Directors (exclusive of any per meeting fees or expense reimbursements).
"Board" or "Board of Directors" means the Board of Directors of the Company.
"Committee" means a committee whose members meet the requirements of Section
IV(A) hereof, and who are appointed from time to time by the Board to
administer the Plan.
"Common Stock" means the common stock, no par value, of the Company.
"Company" means Minnesota Power & Light Company, a Minnesota corporation, and
any successor corporation.
"Director" or "Participant" means any person who is elected or appointed to
the Board of Directors of the Company and who is not an Employee.
"Effective Date" means May 9, 1995, the date as of which the Plan is approved
by the shareholders of the Company.
"Employee" means any officer or other common law employee of the Company or
of any Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Plan" means the Company's Director Stock Plan, adopted by the Board on
January 25, 1995, and approved by the shareholders on May 9, 1995, as it may
be amended from time to time.
"Plan Year" means the period commencing on the Effective Date of the Plan and
ending the next following December 31 and, thereafter, the calendar year.
"Stock Payment" means that portion of the Annual Retainer to be paid to
Directors in shares of Common Stock rather than cash for services rendered as
a Director of the Company, as provided in Section V hereof, including that
portion of the Stock Payment resulting from any election specified in Section
VI hereof.
"Subsidiary" means any corporation that is a "subsidiary corporation" of the
Company, as that term is defined in Section 424(f) of the Internal Revenue
Code of 1986, as amended.
17
<PAGE>
III. Shares of Common Stock Subject to the Plan
Subject to Section VII below, the maximum aggregate number of
shares of Common Stock that may be delivered under the Plan is 250,000
shares. The Common Stock to be delivered under the Plan will be made
available from authorized but unissued shares of Common Stock, or shares of
Common Stock purchased on the open market and held by the Committee.
IV. Administration
A. The Plan will be administered by a Committee appointed by the
Board, consisting of three or more persons who are not eligible to
participate in the Plan. Members of the Committee need not be members of the
Board. The Company shall pay all costs of administration of the Plan.
B. Subject to and not inconsistent with the express provisions of the
Plan, the Committee has and may exercise such powers and authority of the
Board as may be necessary or appropriate for the Committee to carry out its
functions under the Plan. Without limiting the generality of the foregoing,
the Committee shall have full power and authority (i) to determine all
questions of fact that may arise under the Plan, (ii) to interpret the Plan
and to make all other determinations necessary or advisable for the
administration of the Plan, and (iii) to prescribe, amend and rescind rules
and regulations relating to the Plan, including, without limitation, any
rules which the Committee determines are necessary or appropriate to ensure
that the Company and the Plan will be able to comply with all applicable
provisions of any federal, state or local law. All interpretations,
determinations and actions by the Committee will be final and binding upon
all persons, including the Company, and the Participants.
V. Determination of Annual Retainer and Stock Payments
A. The Board shall determine the Annual Retainer payable to all
Directors of the Company.
B. Each Director shall receive on the first business day following the
Effective Date, and on each January 31 thereafter (or on the first business
day thereafter if January 31 is not a business day) a Stock Payment of 500
shares of Common Stock as a portion of the Annual Retainer payable to such
Director for the Plan Year in which such date occurs. The cash portion of the
Annual Retainer for such Plan Year shall be paid to Directors at such times
and in such manner as may be determined by the Board of Directors. Directors
joining the Board during the Plan Year after January 31 will receive their
Stock Payment of 500 shares of Common Stock on the first business day
following the effective date of their election or appointment to the Board.
C. Any Director may decline a Stock Payment for any Plan Year;
provided, however, that no cash compensation shall be paid in lieu thereof.
Any Director who declines a Stock Payment must do so in writing prior to the
performance of any services as a Director for the Plan Year to which such
Stock Payment relates.
D. No Director shall be required to forfeit or otherwise return any
shares of Common Stock issued as a Stock Payment pursuant to the Plan
(including any shares of
18
<PAGE>
Common Stock received as a result of an election under Section VI)
notwithstanding any change in status of such Director which renders him
ineligible to continue as a Participant in the Plan.
VI. Election to Increase Amount of Stock Payment
For any Plan Year, a Participant may make a written election to
reduce the cash portion of the Annual Retainer by a specified dollar amount
and have such amount applied to purchase additional shares of Common Stock of
the Company. The election shall be made on a form provided by the Committee
and must be returned to the Committee no later than six months prior to the
applicable Plan Year. The election form shall state the amount by which the
Participant desires to reduce the cash portion of the Annual Retainer, which
shall be applied toward the purchase of Common Stock to be delivered on the
same date that the Stock Payment is made; provided, however, that no
fractional shares may be purchased. Cash in lieu of any fractional share
shall be paid to the Participant. An election shall continue in effect until
changed or revoked by the Participant. No Participant shall be allowed to
change or revoke any election for the then current year.
VII. Adjustment for Changes in Capitalization
If the outstanding shares of Common Stock of the Company are
increased, decreased, or exchanged for a different number or kind of shares
or other securities, or if additional shares or new or different shares or
other securities are distributed with respect to such shares of Common Stock
or other securities, through merger, consolidation, sale of all or
substantially all of the property of the Company, reorganization or
recapitalization, reclassification, stock dividend, stock split, reverse
stock split, combinations of shares, rights offering, distribution of assets
or other distribution with respect to such shares of Common Stock or other
securities or other change in the corporate structure or shares of Common
Stock, the number of shares to be granted annually, the maximum number of
shares and/or the kind of shares that may be issued under the Plan shall be
appropriately adjusted by the Committee. Any determination by the Committee
as to any such adjustment will be final, binding, and conclusive. The maximum
number of shares issuable under the Plan as a result of any such adjustment
shall be rounded down to the nearest whole share.
VIII. Amendment and Termination of Plan
A. The Board will have the power, in its discretion, to amend, suspend
or terminate the Plan at any time; provided, however, that no amendment which
requires shareholder approval in order for the Plan to continue to comply
with Rule 16b-3 under the Exchange Act, including any successor to such Rule,
shall be effective unless such amendment shall be approved by the requisite
vote of the shareholders of the Company entitled to vote thereon.
B. Notwithstanding the foregoing, any provision of the Plan that
either states the amount and price of securities to be issued under the Plan
and specifies the price and timing of such issuances, or sets forth a formula
that determines the amount, price, and timing of such issuances, shall not be
amended more than once every six months, other than to comport with changes in
the Internal Revenue Code, the Employee Retirement Income Security Act, or the
rules thereunder.
19
<PAGE>
IX. Effective Date and Duration of the Plan
The Plan will become effective upon the Effective Date, and shall
remain in effect, subject to the right of the Board of Directors to terminate
the Plan at any time pursuant to Section VIII, until all shares subject to
the Plan have been purchased or acquired according to the Plan's provisions.
X. Miscellaneous Provisions
A. Continuation of Directors in Same Status
Nothing in the Plan or any action taken pursuant to the Plan shall be
construed as creating or constituting evidence of any agreement or
understanding, express or implied, that the Company will retain a Director as
a director or in any other capacity for any period of time or at a particular
retainer or other rate of compensation, as conferring upon any Participant
any legal or other right to continue as a director or in any other capacity,
or as limiting, interfering with or otherwise affecting the right of the
Company to terminate a Participant in his capacity as a director or otherwise
at any time for any reason, with or without cause, and without regard to the
effect that such termination might have upon him as a Participant under the
Plan.
B. Compliance with Government Regulations
Neither the Plan nor the Company shall be obligated to issue any shares
of Common Stock pursuant to the Plan at any time unless and until all
applicable requirements imposed by any federal and state securities and other
laws, rules and regulations, by any regulatory agencies or by any stock
exchanges upon which the Common Stock may be listed have been fully met. As a
condition precedent to any issuance of shares of Common Stock and delivery of
certificates evidencing such shares pursuant to the Plan, the Board or the
Committee may require a Participant to take any such action and to make any
such covenants, agreements, and representations as the Board or the Committee,
as the case may be, in its discretion deems necessary or advisable to ensure
compliance with such requirements. The Company shall in no event be obligated
to register the shares of Common Stock deliverable under the Plan pursuant to
the Securities Act of 1933, as amended, or to qualify or register such shares
under any securities laws of any state upon their issuance under the Plan or at
any time thereafter, or to take any other action in order to cause the issuance
and delivery of such shares under the Plan or any subsequent offer, sale, or
other transfer of such shares to comply with any such law, regulation, or
requirement. Participants are responsible for complying with all applicable
federal and state securities and other laws, rules, and regulations in
connection with any offer, sale, or other transfer of the shares of Common
Stock issued under the Plan or any interest therein including, without
limitation, compliance with the registration requirements of the Securities
Act of 1933 as amended (unless an exception therefrom is available) or with
the provisions of Rule 144 promulgated thereunder, if applicable, or any
successor provisions. Certificates for shares of Common Stock may be legended
as the Committee shall deem appropriate.
C. Nontransferability of Rights
No Participant shall have the right to assign the right to receive any
Stock Payment or any other right or interest under the Plan, contingent or
otherwise, or to
20
<PAGE>
cause or permit any encumbrance, pledge, or charge of any nature to be imposed
on any such Stock Payment (prior to the issuance of stock certificates
evidencing such Stock Payment) or any such right or interest.
D. Severability
In the event that any provision of the Plan is held invalid, void, or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of the Plan.
E. Governing Law
To the extent not preempted by federal law, the Plan shall be governed
by the laws of the state of Minnesota.
21
<PAGE>
"Printed with soy based inks on recycled paper containing at
least 10% fibers from paper recycled by consumers."
[LOGOS OF RECYCLING AND SOY INK APPEAR HERE]
<PAGE>
APPENDIX
[MINNESOTA POWER LOGO] PROXY CARD AND VOTING INSTRUCTIONS
Minnesota Power & Light Company, 30 West Superior
Street, Duluth, Minnesota 55802-2093
- -------------------------------------------------------------------------------
This Proxy is Solicited on Behalf of the Board of Directors.
Arend J. Sandbulte and Philip R. Halverson or either of them, with power of
substitution, are hereby appointed Proxies of the undersigned to vote all
shares of Minnesota Power stock owned by the undersigned at the Annual Meeting
of Shareholders to be held in the auditorium at the Duluth Entertainment
Convention Center, 350 Harbor Drive, Duluth Minnesota, at 2 p.m. on Tuesday,
May 9, 1995, or any adjournments thereof, for the election of Directors, the
appointment of independent accountants, and approval of the Minnesota Power
Director Stock Plan, and such other matters as may properly come before the
meeting.
- -------------------------------------------------------------------------------
This Proxy confers authority to vote "FOR" each
proposition listed on the other side unless
otherwise indicated. If any other business is
transacted at said meeting, this Proxy shall be
voted in accordance with the best judgment of
the Proxies. The Board of Directors recommends a
vote "FOR" each of the listed propositions. This
Proxy is solicited on behalf of the Board of
Directors of Minnesota Power and may be revoked
prior to its exercise. Please mark, sign, date
and return this Proxy card using the enclosed
envelope. Shares cannot be voted unless this
Proxy card is signed and returned, or other
specific arrangements are made to have the
shares represented at the meeting. By returning
your Proxy promptly, you may help save the costs
of additional Proxy solicitations.
<PAGE>
The Board of Directors recommends a vote "FOR" the following proposals
submitted by the Board. Please mark your vote and sign:
1) Election of Directors / / FOR all nominees listed / / WITHHOLD AUTHORITY
below (except as marked to vote for all
to the contrary below) nominees listed
below
To withhold authority to vote for any individual nominee, strike a line
through the nominee's name in the list below.
M. K. Cragun, D. E. Evans, K. Hofer, P. J. Johnson, P. F. McQueen,
R. S. Nickoloff, J. I. Rajala, C. A. Russell, A. J. Sandbulte,
N. Smith, B. W. Stender, and D. C. Wegmiller.
2) Appointment of PRICE WATERHOUSE Sign here as X -------------------
as independent accountants. name(s) appears
/ / FOR / / AGAINST / / ABSTAIN on reverse side X -------------------
3) Approval of the Minnesota Power
Director Stock Plan.
/ / FOR / / AGAINST / / ABSTAIN Date ---------------, 1995.
Shares:
Account No.:
