UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ________________ to ________________
Commission file number 1-3480
MDU Resources Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 41-0423660
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Schuchart Building
918 East Divide Avenue
P.O. Box 5650
Bismarck, North Dakota 58506-5650
(Address of principal executive offices)
(Zip Code)
(701) 222-7900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X . No __ .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of July 30, 1999: 54,054,107 shares.
INTRODUCTION
This Form 10-Q contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements should be read with the cautionary
statements and important factors included in this Form 10-Q at Item 2
- -- "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Safe Harbor for Forward-looking Statements."
Forward-looking statements are all statements other than statements of
historical fact, including without limitation, those statements that
are identified by the words "anticipates," "estimates," "expects,"
"intends," "plans," "predicts" and similar expressions.
MDU Resources Group, Inc. (company) is a diversified natural
resource company which was incorporated under the laws of the State of
Delaware in 1924. Its principal executive offices are at Schuchart
Building, 918 East Divide Avenue, P.O. Box 5650, Bismarck, North
Dakota 58506-5650, telephone (701) 222-7900.
Montana-Dakota Utilities Co. (Montana-Dakota), the public utility
division of the company, distributes natural gas and operates electric
power generation, transmission and distribution facilities, serving
256 communities in North Dakota, South Dakota, Montana and Wyoming.
The company, through its wholly owned subsidiary, Centennial
Energy Holdings, Inc. (Centennial), owns WBI Holdings, Inc. (WBI
Holdings), Knife River Corporation (Knife River), the Fidelity Oil
Group (Fidelity Oil) and Utility Services, Inc. (Utility Services).
WBI Holdings, through its wholly owned subsidiaries, serves
the Midwestern, Southern, Central and Rocky Mountain regions
of the United States providing natural gas transmission and
related services including storage and production along with
energy marketing and management, wholesale/retail propane and
energy facility construction.
Knife River, through its wholly owned subsidiary, KRC
Holdings, Inc. (KRC Holdings) and its subsidiaries, mines and
markets aggregates and construction materials in Alaska,
California, Hawaii and Oregon, and operates lignite coal
mines in Montana and North Dakota.
Fidelity Oil is comprised of Fidelity Oil Co. and Fidelity
Oil Holdings, Inc., which own oil and natural gas interests
throughout the United States and the Gulf of Mexico.
Utility Services, through its wholly owned subsidiaries,
installs and repairs electric transmission and distribution
power lines, fiber optic cable and natural gas pipeline and
provides related supplies, equipment and engineering services
throughout the western United States and Hawaii.
INDEX
Part I -- Financial Information
Consolidated Statements of Income --
Three and Six Months Ended June 30, 1999 and 1998
Consolidated Balance Sheets --
June 30, 1999 and 1998, and December 31, 1998
Consolidated Statements of Cash Flows --
Six Months Ended June 30, 1999 and 1998
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Part II -- Other Information
Signatures
Exhibit Index
Exhibits
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MDU RESOURCES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
1999 1998 1999 1998
(In thousands, except per share amounts)
Operating revenues:
Electric $ 60,413 $ 48,182 $119,388 $ 92,921
Natural gas 108,105 38,102 237,034 111,646
Construction materials and mining 107,870 80,895 167,908 119,856
Oil and natural gas production 13,879 12,536 24,983 25,414
290,267 179,715 549,313 349,837
Operating expenses:
Fuel and purchased power 12,452 12,408 25,955 24,241
Purchased natural gas sold 71,750 11,334 162,455 43,509
Operation and maintenance 143,771 103,844 245,770 173,567
Depreciation, depletion and
amortization 19,983 19,365 40,123 37,154
Taxes, other than income 6,663 6,259 13,901 12,652
Write-down of oil and natural gas
properties (Note 3) --- 33,100 --- 33,100
254,619 186,310 488,204 324,223
Operating income (loss):
Electric 10,894 7,502 22,068 15,950
Natural gas distribution (522) (819) 4,942 5,974
Natural gas transmission 14,938 7,828 24,074 20,724
Construction materials and mining 6,192 9,368 4,953 10,525
Oil and natural gas production 4,146 (30,474) 5,072 (27,559)
35,648 (6,595) 61,109 25,614
Other income -- net 1,065 2,554 4,833 5,156
Interest expense 8,452 7,215 17,258 14,350
Income (loss) before income taxes 28,261 (11,256) 48,684 16,420
Income taxes 10,465 (5,471) 18,167 4,412
Net income (loss) 17,796 (5,785) 30,517 12,008
Dividends on preferred stocks 193 195 386 389
Earnings (loss) on common stock $ 17,603 $ (5,980) $ 30,131 $ 11,619
Earnings (loss) per common share --
basic $ .33 $ (.12) $ .57 $ .24
Earnings (loss) per common share --
diluted $ .33 $ (.12) $ .56 $ .24
Dividends per common share $ .20 $ .1917 $ .40 $ .3833
Weighted average common shares
outstanding -- basic 53,373 50,936 53,260 48,171
Weighted average common shares
outstanding -- diluted 53,603 50,936 53,512 48,412
The accompanying notes are an integral part of these consolidated statements.
MDU RESOURCES GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, June 30, December 31,
1999 1998 1998
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 44,534 $ 43,106 $ 39,216
Receivables 145,479 88,059 124,114
Inventories 51,834 40,664 44,865
Deferred income taxes 18,732 16,041 16,918
Prepayments and other current assets 24,470 15,106 15,536
285,049 202,976 240,649
Investments 43,783 20,513 43,029
Property, plant and equipment:
Electric 591,510 571,936 583,047
Natural gas distribution 181,182 175,219 178,522
Natural gas transmission 317,397 292,865 304,054
Construction materials and mining 524,046 446,936 484,419
Oil and natural gas production 269,228 218,373 260,758
1,883,363 1,705,329 1,810,800
Less accumulated depreciation,
depletion and amortization 758,874 694,878 726,123
1,124,489 1,010,451 1,084,677
Deferred charges and other assets 97,319 74,795 84,420
$1,550,640 $1,308,735 $1,452,775
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 102 $ 8,439 $ 15,000
Long-term debt and preferred
stock due within one year 2,374 5,571 3,292
Accounts payable 84,109 39,880 60,023
Taxes payable 8,178 --- 9,226
Dividends payable 11,004 10,040 10,799
Other accrued liabilities,
including reserved revenues 77,374 68,850 71,129
183,141 132,780 169,469
Long-term debt 473,174 332,126 413,264
Deferred credits and other liabilities:
Deferred income taxes 177,871 178,995 173,094
Other liabilities 119,490 130,959 129,506
297,361 309,954 302,600
Preferred stock subject to mandatory
redemption 1,600 1,700 1,600
Commitments and contingencies
Stockholders' equity:
Preferred stocks 15,000 15,000 15,000
Common stockholders' equity:
Common stock (Shares issued --
$1.00 par value, 54,293,628
at June 30, 1999, $3.33 par value,
51,609,444 at June 30, 1998 and
53,272,951 at December 31, 1998) 54,294 171,859 177,399
Other paid-in capital 315,426 143,885 171,486
Retained earnings 214,270 205,057 205,583
Treasury stock at cost - 239,521
shares (3,626) (3,626) (3,626)
Total common stockholders' equity 580,364 517,175 550,842
Total stockholders' equity 595,364 532,175 565,842
$1,550,640 $1,308,735 $1,452,775
The accompanying notes are an integral part of these consolidated statements.
MDU RESOURCES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1999 1998
(In thousands)
Operating activities:
Net income $ 30,517 $ 12,008
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 40,123 37,154
Deferred income taxes and investment tax credit (112) (7,242)
Write-down of oil and natural gas properties (Note 3) --- 33,100
Changes in current assets and liabilities:
Receivables (10,094) 12,691
Inventories (1,414) 4,636
Other current assets (8,860) (637)
Accounts payable 20,928 4,440
Other current liabilities 4,594 (30,354)
Other noncurrent changes (16,344) (9,074)
Net cash provided by operating activities 59,338 56,722
Financing activities:
Net change in short-term borrowings (19,098) (1,408)
Issuance of long-term debt 80,503 58,501
Repayment of long-term debt (22,408) (40,490)
Issuance of common stock 3,184 30,109
Retirement of natural gas repurchase commitment (14,296) (12,374)
Dividends paid (21,829) (19,674)
Net cash provided by financing activities 6,056 14,664
Investing activities:
Capital expenditures including acquisitions of
businesses:
Electric (10,211) (5,861)
Natural gas distribution (4,475) (3,847)
Natural gas transmission (14,251) (5,066)
Construction materials and mining (27,262) (29,632)
Oil and natural gas production (14,817) (19,014)
(71,016) (63,420)
Net proceeds from sale or disposition of property 10,364 2,557
Net capital expenditures (60,652) (60,863)
Sale of natural gas available under repurchase
commitment 1,330 5,987
Investments (754) (1,578)
Net cash used in investing activities (60,076) (56,454)
Increase in cash and cash equivalents 5,318 14,932
Cash and cash equivalents -- beginning of year 39,216 28,174
Cash and cash equivalents -- end of period $ 44,534 $ 43,106
The accompanying notes are an integral part of these consolidated statements.
MDU RESOURCES GROUP, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 and 1998
(Unaudited)
1. Basis of presentation
The accompanying consolidated interim financial statements
were prepared in conformity with the basis of presentation
reflected in the consolidated financial statements included in
the Annual Report to Stockholders for the year ended December 31,
1998 (1998 Annual Report), and the standards of accounting
measurement set forth in Accounting Principles Board Opinion No.
28 and any amendments thereto adopted by the Financial Accounting
Standards Board. Interim financial statements do not include all
disclosures provided in annual financial statements and,
accordingly, these financial statements should be read in
conjunction with those appearing in the company's 1998 Annual
Report. The information is unaudited but includes all
adjustments which are, in the opinion of management, necessary
for a fair presentation of the accompanying consolidated interim
financial statements. For the three months and six months ended
June 30, 1999 and 1998, comprehensive income equaled net income
as reported.
2. Seasonality of operations
Some of the company's operations are highly seasonal and
revenues from, and certain expenses for, such operations may
fluctuate significantly among quarterly periods. Accordingly,
the interim results may not be indicative of results for the full
fiscal year.
3. Write-down of oil and natural gas properties
The company uses the full-cost method of accounting for its
oil and natural gas production activities. Under this method,
all costs incurred in the acquisition, exploration and
development of oil and natural gas properties are capitalized and
amortized on the units of production method based on total proved
reserves. Capitalized costs are subject to a "ceiling test" that
limits such costs to the aggregate of the present value of future
net revenues of proved reserves and the lower of cost or fair
value of unproved properties. Future net revenue is estimated
based on end-of-quarter prices adjusted for contracted price
changes. If capitalized costs exceed the full-cost ceiling at
the end of any quarter, a permanent noncash write-down is
required to be charged to earnings in that quarter.
Due to low oil prices, the company's capitalized costs under
the full-cost method of accounting exceeded the full-cost ceiling
at June 30, 1998. Accordingly, the company was required to write
down its oil and natural gas producing properties. This noncash
write-down amounted to $33.1 million ($20.0 million after tax)
for the three and six months ended June 30, 1998.
4. Cash flow information
Cash expenditures for interest and income taxes were as
follows:
Six Months Ended
June 30,
1999 1998
(In thousands)
Interest, net of amount capitalized $14,718 $12,408
Income taxes $19,673 $17,489
5. Reclassifications
Certain reclassifications have been made in the financial
statements for the prior period to conform to the current
presentation. Such reclassifications had no effect on net income
or common stockholders' equity as previously reported.
6. New accounting pronouncement
In June 1998, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133). SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an
asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset the related
results on the hedged item in the income statement, and requires
that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting
treatment.
In June 1999, the effective date of SFAS No. 133 was delayed
by the FASB to fiscal years beginning after June 15, 2000. The
company will adopt SFAS No. 133 on January 1, 2001, and has not
yet quantified the impacts of adopting SFAS No. 133 on its
financial position or results of operations.
7. Derivatives
Williston Basin Interstate Pipeline Company (Williston
Basin), a wholly owned subsidiary of WBI Holdings, and Fidelity
Oil have entered into certain price swap and collar agreements to
manage a portion of the market risk associated with fluctuations
in the price of oil and natural gas. These swap and collar
agreements are not held for trading purposes. The swap and
collar agreements call for Williston Basin and Fidelity Oil to
receive monthly payments from or make payments to counterparties
based upon the difference between a fixed and a variable price as
specified by the agreements. The variable price is either an oil
price quoted on the New York Mercantile Exchange (NYMEX) or a
quoted natural gas price on the NYMEX or Colorado Interstate Gas
Index. The company believes that there is a high degree of
correlation because the timing of purchases and production and
the swap and collar agreements are closely matched, and hedge
prices are established in the areas of operations. Amounts
payable or receivable on the swap and collar agreements are
matched and reported in operating revenues on the Consolidated
Statements of Income as a component of the related commodity
transaction at the time of settlement with the counterparty. The
amounts payable or receivable are generally offset by
corresponding increases and decreases in the value of the
underlying commodity transactions.
Innovative Gas Services, Incorporated, an indirect wholly
owned energy marketing subsidiary of WBI Holdings, participates
in the natural gas futures market to hedge a portion of the price
risk associated with natural gas purchase and sale commitments.
These futures are not held for trading purposes. Gains or losses
on the futures contracts are deferred until the transaction
occurs, at which point they are reported in "Purchased natural
gas sold" on the Consolidated Statements of Income. The gains or
losses on the futures contracts are generally offset by
corresponding increases and decreases in the value of the
underlying commodity transactions.
The company's policy prohibits the use of derivative
instruments for trading purposes and the company has procedures
in place to monitor compliance with its policies. The company is
exposed to credit-related losses in relation to financial
instruments in the event of nonperformance by counterparties, but
does not expect any counterparties to fail to meet their
obligations given their existing credit ratings.
The following table summarizes the company's hedging
activity (notional amounts in thousands):
Six Months Ended
June 30,
1999 1998
Oil swap agreement:*
Weighted average fixed price
per barrel --- $ 20.92
Notional amount (in barrels) --- 109
Natural gas swap agreements:*
Weighted average fixed price
per MMBtu --- $ 2.04
Notional amount (in MMBtu's) --- 2,353
Oil collar agreements:*
Weighted average floor/ceiling
price per barrel $14.63/$18.40 ---
Notional amount (in barrels) 84 ---
Natural gas collar agreements:*
Weighted average floor/ceiling
price per MMBtu $2.11/$2.53 $2.10/$2.67
Notional amount (in MMBtu's) 1,568 905
Natural gas futures contract:*
Weighted average fixed price
per MMBtu $2.39 ---
Notional amount (in MMBtu's) 400 ---
Interest rate swap agreement:**
Range of fixed interest rates --- 5.50%-6.50%
Notional amount (in dollars) --- $10,000
*Receive fixed -- pay variable
**Receive variable -- pay fixed
The following table summarizes the company's hedge
agreements outstanding at June 30, 1999 (notional amounts in
thousands):
Weighted
Average
Floor/Ceiling Notional
Year of Price Amount
Expiration (Per Barrel) (In Barrels)
Oil collar agreements* 1999 $14.69/$18.69 368
Weighted
Average
Floor/Ceiling Notional
Year of Price Amount
Expiration (Per MMBtu) (In MMBtu's)
Natural gas collar
agreements* 1999 $2.15/$2.58 2,208
2000 $2.30/$2.65 2,562
Weighted
Average Notional
Year of Fixed Price Amount
Expiration (Per MMBtu) (In MMBtu's)
Natural gas futures
contracts* 1999 $2.29 400
2000 $2.38 1,000
* Receive fixed -- pay variable
The fair value of these derivative financial instruments
reflects the estimated amounts that the company would receive or
pay to terminate the contracts at the reporting date, thereby
taking into account the current favorable or unfavorable position
on open contracts. The favorable or unfavorable position is
currently not recorded on the company's financial statements.
Favorable and unfavorable positions related to commodity hedge
agreements are expected to be generally offset by corresponding
increases and decreases in the value of the underlying commodity
transactions. The company's net unfavorable position on all
hedge agreements outstanding at June 30, 1999, was $192,000.
In the event a hedge agreement does not qualify for hedge
accounting or when the underlying commodity transaction or
related debt instrument matures, is sold, is extinguished, or is
terminated, the current favorable or unfavorable position on the
open contract would be included in results of operations. The
company's policy requires approval to terminate a hedge agreement
prior to its original maturity. In the event a hedge agreement
is terminated, the realized gain or loss at the time of
termination would be deferred until the underlying commodity
transaction or related debt instrument is sold or matures and is
expected to generally offset the corresponding increases or
decreases in the value of the underlying commodity transaction or
interest on the related debt instrument.
8. Common stock
At the Annual Meeting of Stockholders held on April 27,
1999, the company's common stockholders approved an amendment to
the Certificate of Incorporation increasing the authorized number
of common shares from 75 million shares to 150 million shares and
reducing the par value of the common stock from $3.33 per share
to $1.00 per share.
9. Business segment data
The company's operations are conducted through five business
segments. The company's reportable segments are those that are
based on the company's method of internal reporting, which
generally segregates the strategic business units due to
differences in products, services and regulation. The electric,
natural gas distribution, natural gas transmission, construction
materials and mining, and oil and natural gas production
businesses are all located within the United States. The
electric business operates electric power generation,
transmission and distribution facilities in North Dakota, South
Dakota, Montana and Wyoming and installs and repairs electric
transmission and distribution power lines and provides related
supplies, equipment and engineering services throughout the
western United States and Hawaii. The natural gas distribution
business provides natural gas distribution services in North
Dakota, South Dakota, Montana and Wyoming. The natural gas
transmission business serves the Midwestern, Southern, Central
and Rocky Mountain regions of the United States providing natural
gas transmission and related services including storage and
production along with energy marketing and management,
wholesale/retail propane and energy facility construction. The
construction materials and mining business mines and markets
aggregates and construction materials in Alaska, California,
Hawaii and Oregon, and operates lignite coal mines in Montana and
North Dakota. The oil and natural gas production business is
engaged in oil and natural gas acquisition, exploration and
production activities throughout the United States and the Gulf
of Mexico.
Segment information follows the same accounting policies as
described in Note 1 of the company's 1998 Annual Report. Segment
information included in the accompanying Consolidated Statements
of Income is as follows:
Operating
Operating Revenues Earnings
Revenues Inter- on Common
External segment Stock
Three Months (In thousands)
Ended June 30, 1999
Electric $ 60,413 $ --- $ 5,064
Natural gas distribution 25,881 --- (550)
Natural gas transmission 82,224 6,537 8,027
Construction materials
and mining 106,367* 1,503 2,265
Oil and natural gas
production 13,879 --- 2,797
Intersegment eliminations --- (6,537) ---
Total $ 288,764 $ 1,503 $ 17,603
Three Months
Ended June 30, 1998
Electric $ 48,182 $ --- $ 2,993
Natural gas distribution 24,197 --- (910)
Natural gas transmission 13,905 8,231 4,319
Construction materials
and mining 79,022* 1,873 5,643
Oil and natural gas
production 12,536 --- (18,025)
Intersegment eliminations --- (8,231) ---
Total $ 177,842 $ 1,873 $ (5,980)
* Includes sales, for use at the Coyote Station, an electric
generating station jointly owned by the company and other
utilities, of (in thousands) $1,577 and $1,764 for the three
months ended June 30, 1999 and 1998, respectively.
Operating
Operating Revenues Earnings
Revenues Inter- on Common
External segment Stock
Six Months (In thousands)
Ended June 30, 1999
Electric $ 119,388 $ --- $ 10,227
Natural gas distribution 87,005 --- 2,328
Natural gas transmission 150,029 27,120 13,559
Construction materials
and mining 164,129* 3,779 891
Oil and natural gas
production 24,983 --- 3,126
Intersegment eliminations --- (27,120) ---
Total $ 545,534 $ 3,779 $ 30,131
Six Months
Ended June 30, 1998
Electric $ 92,921 $ --- $ 6,585
Natural gas distribution 86,834 --- 2,716
Natural gas transmission 24,812 27,036 12,461
Construction materials
and mining 116,302* 3,554 5,895
Oil and natural gas
production 25,414 --- (16,038)
Intersegment eliminations --- (27,036) ---
Total $ 346,283 $ 3,554 $ 11,619
* Includes sales, for use at the Coyote Station, an electric
generating station jointly owned by the company and other
utilities, of (in thousands) $3,363 and $3,538 for the six
months ended June 30, 1999 and 1998, respectively.
10. Regulatory matters and revenues subject to refund
Williston Basin had pending with the Federal Energy
Regulatory Commission (FERC) a general natural gas rate change
application implemented in 1992. In October 1997, Williston
Basin appealed to the United States Court of Appeals for the D.C.
Circuit (D.C. Circuit Court) certain issues decided by the FERC
in prior orders concerning the 1992 proceeding. On January 22,
1999, the D.C. Circuit Court issued its opinion remanding the
issues of return on equity, ad valorem taxes and throughput to
the FERC for further explanation and justification. The mandate
was issued by the D.C. Circuit Court to the FERC on March 11,
1999. By order dated June 1, 1999, the FERC remanded the return
on equity issue to an Administrative Law Judge for further
proceedings. Based on the FERC's order, Williston Basin will be
allowed to seek reimbursement from its customers of a portion of
the refunds made in 1997 relating to the return on equity issue.
In June 1995, Williston Basin filed a general rate increase
application with the FERC. As a result of FERC orders issued
after Williston Basin's application was filed, Williston Basin
filed revised base rates in December 1995 with the FERC resulting
in an increase of $8.9 million or 19.1 percent over the then
current effective rates. Williston Basin began collecting such
increase effective January 1, 1996, subject to refund. In July
1998, the FERC issued an order which addressed various issues
including storage cost allocations, return on equity and
throughput. In August 1998, Williston Basin requested rehearing
of such order. On June 1, 1999, the FERC issued an order
approving and denying various issues addressed in Williston
Basin's rehearing request, and also remanded the return on equity
issue to an Administrative Law Judge for further proceedings. On
July 1, 1999, Williston Basin requested rehearing of certain
issues which were contained in the June 1, 1999 FERC order. In
addition, on July 29, 1999, Williston Basin appealed to the D.C.
Circuit Court certain issues concerning storage cost allocations
as decided by the FERC in its June 1, 1999 order.
Reserves have been provided for a portion of the revenues
that have been collected subject to refund with respect to
pending regulatory proceedings and to reflect future resolution
of certain issues with the FERC. Based on the June 1, 1999 FERC
orders referenced above, Williston Basin has determined that
reserves previously established exceed its expected refund
obligation and has adjusted such reserves accordingly. Williston
Basin believes that such remaining reserves are adequate based on
its assessment of the ultimate outcome of the various
proceedings.
11. Natural gas repurchase commitment
As described in Note 15 of its 1998 Annual Report, the
company had offered for sale since 1984 the inventoried natural
gas available under a repurchase commitment with Frontier Gas
Storage Company. As a part of the corporate realignment effected
January 1, 1985, the company agreed, pursuant to the settlement
approved by the FERC, to remove from rates the financing costs
associated with this natural gas. The FERC has issued orders
that have held that storage costs should be allocated to this
gas, prospectively beginning May 1992, as opposed to being
included in rates applicable to Williston Basin's customers.
These storage costs, as initially allocated to the Frontier gas,
approximated $2.1 million annually, for which Williston Basin has
provided reserves. In May 1999, the company purchased the
remaining 5.8 MMdk of natural gas subject to the repurchase
commitment thereby extinguishing the repurchase commitment.
12. Pending litigation
W. A. Moncrief --
In November 1993, the estate of W. A. Moncrief (Moncrief), a
producer from whom Williston Basin purchased a portion of its
natural gas supply, filed suit in Federal District Court for the
District of Wyoming (Federal District Court) against Williston
Basin and the company disputing certain price and volume issues
under the contract.
Through the course of this action Moncrief submitted damage
calculations which totaled approximately $19 million or, under
its alternative pricing theory, approximately $39 million.
In June 1997, the Federal District Court issued its order
awarding Moncrief damages of approximately $15.6 million. In
July 1997, the Federal District Court issued an order limiting
Moncrief's reimbursable costs to post-judgment interest, instead
of both pre- and post-judgment interest as Moncrief had sought.
In August 1997, Moncrief filed a notice of appeal with the United
States Court of Appeals for the Tenth Circuit (U.S. Court of
Appeals) related to the Federal District Court's orders. In
September 1997, Williston Basin and the company filed a notice of
cross-appeal.
On April 20, 1999, the U.S. Court of Appeals issued its
order which affirmed in part and reversed in part the Federal
District Court's June 1997 decision. Additionally, the U.S.
Court of Appeals remanded the case to the Federal District Court
for further determination of the prices and volumes to be used
for determination of damages. The U.S. Court of Appeals also
remanded to the lower court for further consideration the issue
of whether pre-judgment interest on damages is applicable. As a
result of the decision by the U.S. Court of Appeals, and in the
absence of rehearing, the prior judgment of $15.6 million by the
Federal District Court will be vacated. Based on the decision by
the U.S. Court of Appeals, Williston Basin estimates its
liability for damages on the remanded issues will be less than $5
million.
Williston Basin believes that it is entitled to recover from
customers virtually all of the costs which might ultimately be
incurred as a result of this litigation as gas supply realignment
transition costs pursuant to the provisions of the FERC's Order
636. However, the amount of costs that can ultimately be
recovered is subject to approval by the FERC and market
conditions.
Apache Corporation/Snyder Oil Corporation --
In December 1993, Apache Corporation (Apache) and Snyder Oil
Corporation (Snyder) filed suit in North Dakota Northwest
Judicial District Court (North Dakota District Court), against
Williston Basin and the company. Apache and Snyder are oil and
natural gas producers which had processing agreements with Koch
Hydrocarbon Company (Koch). Williston Basin and the company had a
natural gas purchase contract with Koch. Apache and Snyder have
alleged they are entitled to damages for the breach of Williston
Basin's and the company's contract with Koch. Williston Basin
and the company believe that if Apache and Snyder have any legal
claims, such claims are with Koch, not with Williston Basin or
the company as Williston Basin, the company and Koch have settled
their disputes. Apache and Snyder have submitted damage
estimates under differing theories aggregating up to $4.8 million
without interest. A motion to intervene in the case by several
other producers, all of which had contracts with Koch but not
with Williston Basin, was denied in December 1996. In November
1998, the North Dakota District Court entered an order directing
the entry of judgment in favor of Williston Basin and the
company. In December 1998, Apache and Snyder filed a motion for
relief asking the North Dakota District Court to reconsider its
November 1998 order. On February 4, 1999, the North Dakota
District Court denied the motion for relief filed by Apache and
Snyder. On March 31, 1999, judgment was entered, thereby
dismissing Apache and Snyder's claims against the company.
Apache and Snyder filed a notice of appeal with the North Dakota
Supreme Court on May 17, 1999.
In a related matter, in March 1997, a suit was filed by nine
other producers, several of which had unsuccessfully tried to
intervene in the Apache and Snyder litigation, against Koch,
Williston Basin and the company. The parties to this suit are
making claims similar to those in the Apache and Snyder
litigation, although no specific damages have been stated.
In Williston Basin's opinion, the claims of the nine other
producers are without merit. If any amounts are ultimately found
to be due, Williston Basin plans to file with the FERC for
recovery from customers. However, the amount of costs that can
ultimately be recovered is subject to approval by the FERC and
market conditions.
Coal Supply Agreement --
In November 1995, a suit was filed in District Court, County
of Burleigh, State of North Dakota (State District Court) by
Minnkota Power Cooperative, Inc., Otter Tail Power Company,
Northwestern Public Service Company and Northern Municipal Power
Agency (Co-owners), the owners of an aggregate 75 percent
interest in the Coyote electric generating station (Coyote
Station), against the company (an owner of a 25 percent interest
in the Coyote Station) and Knife River. In its complaint, the Co-
owners have alleged a breach of contract against Knife River with
respect to the long-term coal supply agreement (Agreement)
between the owners of the Coyote Station and Knife River. The Co-
owners have requested a determination by the State District Court
of the pricing mechanism to be applied to the Agreement and have
further requested damages during the term of such alleged breach
on the difference between the prices charged by Knife River and
the prices that may ultimately be determined by the State
District Court. The Co-owners also alleged a breach of fiduciary
duties by the company as operating agent of the Coyote Station,
asserting essentially that the company was unable to cause Knife
River to reduce its coal price sufficiently under the Agreement,
and the Co-owners are seeking damages in an unspecified amount.
In May 1996, the State District Court stayed the suit filed by
the Co-owners pending arbitration, as provided for in the
Agreement.
In September 1996, the Co-owners notified the company and
Knife River of their demand for arbitration of the pricing
dispute that had arisen under the Agreement. The demand for
arbitration, filed with the American Arbitration Association
(AAA), did not make any direct claim against the company in its
capacity as operator of the Coyote Station. The Co-owners
requested that the arbitrators make a determination that the
pricing dispute is not a proper subject for arbitration. By an
April 1997 order, the arbitration panel concluded that the claims
raised by the Co-owners are arbitrable. The Co-owners have
requested the arbitrators to make a determination that the prices
charged by Knife River were excessive and that the Co-owners
should be awarded damages, based upon the difference between the
prices that Knife River charged and a "fair and equitable" price.
Upon application by the company and Knife River, the AAA
administratively determined that the company was not a proper
party defendant to the arbitration, and the arbitration is
proceeding against Knife River. In October 1998, a hearing
before the arbitration panel was completed. At the hearing the Co-
owners requested damages of approximately $24 million, including
interest, plus a reduction in the future price of coal under the
Agreement. Based on its assessment of the current proceedings,
Knife River has established reserves for anticipated liabilities
in connection with the coal pricing issues and related tax
matters. Although unable to predict the ultimate outcome of the
arbitration, Knife River and the company believe that the Co-
owners' claims for past damages are overstated and are currently
awaiting a final decision from the arbitration panel.
Royalty Interest Owners --
On June 3, 1999, several oil and gas royalty interest owners
filed suit in Colorado State District Court, in the City and
County of Denver, against WBI Production, Inc. (WBI Production),
an indirect wholly owned subsidiary of the company, and several
former producers of natural gas with respect to certain gas
production properties in the state of Colorado. The complaint
arose as a result of the purchase by WBI Production effective
January 1, 1999, of certain natural gas producing leaseholds from
the former producers. Prior to February 1, 1999, the natural gas
produced from the leaseholds was sold at above market prices pursuant
to a natural gas contract. Pursuant to the contract, the royalty
interest owners were paid royalties based upon the above market
prices. The royalty interest owners have alleged that WBI
Production took assignment of the rights to the natural gas contract
from the former owner of the contract and, with respect to natural
gas produced from such leases and sold at market prices thereafter,
wrongly ceased paying the higher royalties on such gas.
In their complaint, the royalty interest owners have
alleged, in part, breach of oil and gas lease obligations and
unjust enrichment on the part of WBI Production and the other
former producers with respect to the amount of royalties being
paid to the royalty interest owners. The royalty interest owners
have requested damages for additional royalties and other costs,
including pre-judgment interest. No specific amount of damages
has been stated.
WBI Production intends to vigorously contest the suit.
13. Environmental matters
Montana-Dakota and Williston Basin discovered
polychlorinated biphenyls (PCBs) in portions of their natural gas
systems and informed the United States Environmental Protection
Agency (EPA) in January 1991. Montana-Dakota and Williston Basin
believe the PCBs entered the system from a valve sealant. In
January 1994, Montana-Dakota, Williston Basin and Rockwell
International Corporation (Rockwell), manufacturer of the valve
sealant, reached an agreement under which Rockwell has reimbursed
and will continue to reimburse Montana-Dakota and Williston Basin
for a portion of certain remediation costs. On the basis of
findings to date, Montana-Dakota and Williston Basin estimate
future environmental assessment and remediation costs will
aggregate $3 million to $15 million. Based on such estimated
cost, the expected recovery from Rockwell and the ability of
Montana-Dakota and Williston Basin to recover their portions of
such costs from ratepayers, Montana-Dakota and Williston Basin
believe that the ultimate costs related to these matters will not
be material to each of their respective financial positions or
results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For purposes of segment financial reporting and discussion of
results of operations, electric includes the electric operations
of Montana-Dakota, as well as the operations of Utility Services.
Natural gas distribution includes Montana-Dakota's natural gas
distribution operations. Natural gas transmission includes WBI
Holdings' storage, transportation, gathering, natural gas
production and energy marketing operations. Construction
materials and mining includes the results of Knife River's
operations, while oil and natural gas production includes the
operations of Fidelity Oil.
Overview
The following table (dollars in millions, where applicable)
summarizes the contribution to consolidated earnings by each of the
company's businesses.
Three Months Six Months
Ended Ended
June 30, June 30,
1999 1998 1999 1998
Electric $ 5.1 $ 3.0 $ 10.2 $ 6.6
Natural gas distribution (.6) (.9) 2.3 2.7
Natural gas transmission 8.0 4.3 13.6 12.4
Construction materials and mining 2.3 5.6 .9 5.9
Oil and natural gas production 2.8 (18.0) 3.1 (16.0)
Earnings (loss) on common stock $ 17.6 $ (6.0) $ 30.1 $ 11.6
Earnings (loss) per common
share - basic $ .33 $ (.12)* $ .57 $ .24*
Earnings (loss) per common
share - diluted $ .33 $ (.12)* $ .56 $ .24*
Return on average common equity
for the 12 months ended 9.3%** 10.0%*
* Reflects the effect of a $20 million noncash after-tax write-
down of oil and natural gas properties in June 1998.
** Reflects the effect of a $19.9 million noncash after-tax write-
down of oil and natural gas properties in December 1998.
Three Months Ended June 30, 1999 and 1998
Consolidated earnings for the quarter ended June 30, 1999, were up
$23.6 million from the comparable period a year ago due to higher
earnings at the oil and natural gas production business, largely
resulting from a 1998 $20 million noncash after-tax write-down of oil
and natural gas properties. Increased earnings at the natural gas
transmission, electric and natural gas distribution businesses also
contributed to the earnings improvement. Lower earnings at the
construction materials and mining unit somewhat offset the increase in
earnings.
Six Months Ended June 30, 1999 and 1998
Consolidated earnings for the six months ended June 30, 1999,
were up $18.5 million from the comparable period a year ago due to
higher earnings at the oil and natural gas production business,
largely resulting from the aforementioned write-down of oil and
natural gas properties. Higher earnings at the electric and natural
gas transmission businesses also added to the increase in earnings.
Decreased earnings at the construction materials and mining and
natural gas distribution businesses partially offset the earnings
improvement.
________________________________
Reference should be made to Notes to Consolidated Financial
Statements for information pertinent to various commitments and
contingencies.
Financial and operating data
The following tables (dollars in millions, where applicable) are
key financial and operating statistics for each of the company's
business units.
Electric Operations
Three Months Six Months
Ended Ended
June 30, June 30,
1999 1998 1999 1998
Operating revenues:
Retail sales $ 30.5 $ 29.4 $ 64.5 $ 62.4
Sales for resale and other 6.4 4.7 12.7 8.0
Utility services 23.5 14.1 42.2 22.5
60.4 48.2 119.4 92.9
Operating expenses:
Fuel and purchased power 12.4 12.4 26.0 24.2
Operation and maintenance 29.5 21.2 56.0 38.7
Depreciation, depletion and
amortization 5.1 4.8 10.3 9.5
Taxes, other than income 2.5 2.3 5.0 4.5
49.5 40.7 97.3 76.9
Operating income $ 10.9 $ 7.5 $ 22.1 $ 16.0
Retail sales (million kWh) 481.5 459.4 1,017.6 982.6
Sales for resale (million kWh) 248.7 180.1 517.3 309.5
Average cost of fuel and
purchased power per kWh $ .016 $ .018 $ .016 $ .018
Natural Gas Distribution Operations
Three Months Six Months
Ended Ended
June 30, June 30,
1999 1998 1999 1998
Operating revenues:
Sales $ 25.1 $ 23.5 $ 85.2 $ 85.1
Transportation and other .8 .7 1.8 1.7
25.9 24.2 87.0 86.8
Operating expenses:
Purchased natural gas sold 16.5 15.3 61.5 60.7
Operation and maintenance 7.0 6.9 14.8 14.5
Depreciation, depletion and
amortization 1.8 1.8 3.6 3.5
Taxes, other than income 1.1 1.0 2.2 2.1
26.4 25.0 82.1 80.8
Operating income (loss) $ (.5) $ (.8) $ 4.9 $ 6.0
Volumes (MMdk):
Sales 5.0 4.5 18.2 18.5
Transportation 2.2 1.8 5.3 5.0
Total throughput 7.2 6.3 23.5 23.5
Degree days (% of normal) 112% 99% 92% 95%
Average cost of gas, including
transportation thereon,
per dk $ 3.29 $ 3.41 $ 3.37 $ 3.28
Natural Gas Transmission Operations
Three Months Six Months
Ended Ended
June 30, June 30,
1999 1998 1999 1998
Operating revenues:
Transportation and storage $ 20.3 $ 13.9 $ 35.7 $ 32.9
Energy marketing and
natural gas production 68.4 8.2 141.4 18.9
88.7 22.1 177.1 51.8
Operating expenses:
Purchased natural gas sold 61.7 4.2 128.1 9.8
Operation and maintenance 7.9 6.7 16.4 14.3
Depreciation, depletion and
amortization 2.6 2.0 5.2 4.1
Taxes, other than income 1.6 1.4 3.3 2.9
73.8 14.3 153.0 31.1
Operating income $ 14.9 $ 7.8 $ 24.1 $ 20.7
Transportation volumes (MMdk):
Montana-Dakota 6.9 7.6 15.3 16.0
Other 12.5 15.2 21.6 29.6
19.4 22.8 36.9 45.6
Natural gas production (Mdk) 2,603 1,718 5,271 3,470
Construction Materials and Mining Operations
Three Months Six Months
Ended Ended
June 30, June 30,
1999 1998 1999 1998
Operating revenues:
Construction materials $ 99.9 $ 71.9 $ 150.0 $ 101.6
Coal 7.9 9.0 17.9 18.3
107.8 80.9 167.9 119.9
Operating expenses:
Operation and maintenance 94.9 65.4 149.7 98.6
Depreciation, depletion and
amortization 5.9 5.2 11.6 9.1
Taxes, other than income .8 .9 1.7 1.7
101.6 71.5 163.0 109.4
Operating income $ 6.2 $ 9.4 $ 4.9 $ 10.5
Sales (000's):
Aggregates (tons) 3,032 2,560 4,570 3,422
Asphalt (tons) 807 391 911 421
Ready-mixed concrete
(cubic yards) 290 259 508 398
Coal (tons) 763 773 1,641 1,561
Oil and Natural Gas Production Operations
Three Months Six Months
Ended Ended
June 30, June 30,
1999 1998 1999 1998
Operating revenues:
Oil $ 6.8 $ 6.3 $ 11.7 $ 13.1
Natural gas 7.1 6.2 13.3 12.3
13.9 12.5 25.0 25.4
Operating expenses:
Operation and maintenance 4.5 3.6 8.8 7.4
Depreciation, depletion and
amortization 4.6 5.6 9.4 11.0
Taxes, other than income .7 .7 1.7 1.5
Write-down of oil and
natural gas properties --- 33.1 --- 33.1
9.8 43.0 19.9 53.0
Operating income (loss) $ 4.1 $ (30.5) $ 5.1 $ (27.6)
Production:
Oil (000's of barrels) 437 490 918 973
Natural gas (MMcf) 3,312 2,942 6,788 5,750
Average sales price:
Oil (per barrel) $ 15.44 $ 12.90 $ 12.77 $ 13.47
Natural gas (per Mcf) $ 2.16 $ 2.11 $ 1.95 $ 2.14
Amounts presented in the preceding tables for natural gas
operating revenues and purchased natural gas sold for the three and
six months ended June 30, 1999 and 1998, will not agree with the
Consolidated Statements of Income due to the elimination of
intercompany transactions between Montana-Dakota's natural gas
distribution business and WBI Holdings' natural gas transmission
business.
Three Months Ended June 30, 1999 and 1998
Electric Operations
Electric earnings increased due to increased electric utility
earnings and earnings at the utility services companies acquired since
the comparable period last year. Sales for resale revenue improved
due to higher volumes and increased average realized rates, both
resulting from favorable contracts. Higher retail sales to
residential and commercial customers and decreased purchased power
demand charges, resulting from the 1998 pass-through of periodic
maintenance costs, also added to the earnings improvement. Increased
operation and maintenance expense resulting primarily from higher
subcontractor costs at the Lewis & Clark station due to boiler and
turbine maintenance and higher payroll related costs partially offset
the electric utility earnings improvement. Utility services
contributed $1.8 million to earnings during the second quarter of 1999
compared to $747,000 a year ago.
Natural Gas Distribution Operations
Earnings increased at the natural gas distribution business due
to higher weather-related sales, the result of 13 percent colder
weather. Increased service and repair income and higher returns on
gas in storage and prepaid demand balances also added to the increased
earnings. Lower average realized rates and a rate reduction
implemented in North Dakota somewhat offset the earnings improvement.
Natural Gas Transmission Operations
Earnings at the natural gas transmission business increased
primarily due to a $4.4 million after-tax reserve revenue adjustment
associated with FERC orders received in the 1992 and 1995 rate case
proceedings. Higher production and increased average prices from
company-owned reserves and earnings from new acquisitions also added
to the improvement. Decreased transportation to storage and off-
system markets at lower average transportation rates and reduced sales
of natural gas in inventory somewhat offset the earnings increase.
The increase in energy marketing revenue and the related increase in
purchased natural gas sold resulted primarily from the acquisition of
a natural gas marketing business in July 1998.
Construction Materials and Mining Operations
Construction materials and mining earnings decreased largely due
to lower earnings at the coal operations resulting from reserve
additions of $3.7 million after-tax made relating to anticipated
liabilities in connection with the pending coal contract arbitration
proceedings and related tax matters, as discussed under Coal Supply
Agreement in Note 12 of Notes to Consolidated Financial Statements.
Lower average sales prices, reduced tax depletion benefits and higher
stripping costs also added to the coal earnings decline. Earnings at
the construction materials business increased due to businesses
acquired since the comparable period last year and increased earnings
at existing construction materials operations. Increased aggregate
deliveries, lower cement costs and higher average realized prices on
ready-mixed concrete all contributed to the increase in construction
materials earnings. Higher selling, general and administrative costs
and increased interest expense resulting from increased acquisition-
related long-term debt somewhat offset the increased earnings at the
construction materials business.
Oil and Natural Gas Production Operations
Earnings for the oil and natural gas production business increased
largely as a result of the 1998 $20 million noncash after-tax write-
down of oil and natural gas properties, as discussed in Note 3 of
Notes to Consolidated Financial Statements. Increased realized oil
prices, which were 20 percent higher than last year and higher natural
gas production due to new acquisitions also contributed to the
increase in earnings. In addition, decreased depreciation, depletion
and amortization due to lower rates resulting from the June 1998 and
December 1998 write-downs of oil and natural gas properties also added
to the earnings improvement. Lower oil production partially offset
the earnings increase.
Six Months Ended June 30, 1999 and 1998
Electric Operations
Electric earnings increased due to increased electric utility
earnings and earnings at the utility services companies acquired since
the comparable period last year. Sales for resale volumes improved by
67 percent and margins increased by nearly 15 percent, both resulting
from favorable contracts. Higher retail sales to all major customer
classes and lower retail fuel and purchased power costs also
contributed to the earnings improvement. Increased generation at
lower cost versus higher cost generating stations and decreased
purchased power demand charges resulting from the 1998 pass-through of
periodic maintenance costs contributed to the decline in retail fuel
and purchased power costs. Increased operation and maintenance
expense resulting largely from higher subcontractor costs at the Lewis
& Clark station due to boiler and turbine maintenance partially offset
the electric utility earnings improvement. Earnings attributable to
utility services were $2.7 million compared to $1.1 million a year
ago.
Natural Gas Distribution Operations
Earnings decreased at the natural gas distribution business due to
a rate reduction implemented in North Dakota and lower weather-related
sales, the result of warmer weather in the first quarter. Increased
operation and maintenance expense also added to the decline in
earnings. Higher returns on gas in storage and prepaid demand
balances somewhat offset the decrease in earnings.
Natural Gas Transmission Operations
Earnings at the natural gas transmission business increased
largely due to the previously discussed $4.4 million after-tax reserve
revenue adjustment. The recognition of $1.7 million in the first
quarter resulting from a favorable order received from the D.C.
Circuit Court relating to the 1992 general rate proceeding also
contributed to the increase in earnings. In addition, higher
production from company-owned reserves and earnings from new
acquisitions also added to the earnings improvement. Decreased
transportation to storage and off-system markets at lower average
transportation rates and reduced sales of natural gas in inventory
somewhat offset the earnings increase. The $3.1 million after-tax
reversal of reserves in the first quarter of 1998 for certain
contingencies relating to a FERC order concerning a compliance filing
also partially offset the 1999 earnings increase. The increase in
energy marketing revenue and the related increase in purchased natural
gas sold resulted primarily from the acquisition of a natural gas
marketing business in July 1998.
Construction Materials and Mining Operations
Construction materials and mining earnings decreased primarily due
to lower earnings at the coal operations largely resulting from the
previously discussed reserve additions of $3.7 million after-tax
associated with the coal contract arbitration proceedings and related
tax matters, as discussed under Coal Supply Agreement in Note 12 of
Notes to Consolidated Financial Statements. Lower average sales
prices, reduced tax depletion benefits and higher stripping costs also
added to the coal earnings decline. Earnings at the construction
materials businesses increased slightly due to businesses acquired
since the comparable period last year and increased earnings at
existing construction materials operations. Increased aggregate
deliveries, lower cement costs and higher ready-mixed concrete volumes
all contributed to the increase in construction materials operations.
Higher selling, general and administrative costs and increased
interest expense resulting from increased acquisition-related long-
term debt somewhat offset the increased earnings at the construction
materials business. Normal seasonal losses realized in the first
quarter of 1999 by construction materials businesses not owned during
the full first quarter last year also partially offset the earnings
improvement at the construction materials business.
Oil and Natural Gas Production Operations
Earnings for the oil and natural gas production business increased
largely as a result of the 1998 $20 million noncash after-tax write-
down of oil and natural gas properties, as discussed in Note 3 of
Notes to Consolidated Financial Statements. Higher natural gas
production due to new acquisitions and decreased depreciation,
depletion and amortization due to lower rates resulting from the June
1998 and December 1998 write-downs of oil and natural gas properties
also added to the earnings improvement. Lower average oil and natural
gas prices in the first quarter and decreased oil production partially
offset the increase in earnings.
Safe Harbor for Forward-looking Statements
The company is including the following cautionary statement in
this Form 10-Q to make applicable and to take advantage of the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995 for any forward-looking statements made by, or on behalf of, the
company. Forward-looking statements include statements concerning
plans, objectives, goals, strategies, future events or performance,
and underlying assumptions (many of which are based, in turn, upon
further assumptions) and other statements which are other than
statements of historical facts. From time to time, the company may
publish or otherwise make available forward-looking statements of this
nature. All such subsequent forward-looking statements, whether
written or oral and whether made by or on behalf of the company, are
also expressly qualified by these cautionary statements.
Forward-looking statements involve risks and uncertainties which
could cause actual results or outcomes to differ materially from those
expressed. The company's expectations, beliefs and projections are
expressed in good faith and are believed by the company to have a
reasonable basis, including without limitation management's
examination of historical operating trends, data contained in the
company's records and other data available from third parties, but
there can be no assurance that the company's expectations, beliefs or
projections will be achieved or accomplished. Furthermore, any
forward-looking statement speaks only as of the date on which such
statement is made, and the company undertakes no obligation to update
any forward-looking statement or statements to reflect events or
circumstances that occur after the date on which such statement is
made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time, and it is not possible for
management to predict all of such factors, nor can it assess the
effect of each such factor on the company's business or the extent to
which any such factor, or combination of factors, may cause actual
results to differ materially from those contained in any forward-
looking statement.
Regulated Operations --
In addition to other factors and matters discussed elsewhere
herein, some important factors that could cause actual results or
outcomes for the company and its regulated operations to differ
materially from those discussed in forward-looking statements include
prevailing governmental policies and regulatory actions with respect
to allowed rates of return, financings, or industry and rate
structures, acquisition and disposal of assets or facilities,
operation and construction of plant facilities, recovery of purchased
power and purchased gas costs, present or prospective generation,
wholesale and retail competition (including but not limited to
electric retail wheeling and transmission costs), availability of
economic supplies of natural gas, and present or prospective natural
gas distribution or transmission competition (including but not
limited to prices of alternate fuels and system deliverability costs).
Nonregulated Operations --
Certain important factors which could cause actual results or
outcomes for the company and all or certain of its nonregulated
operations to differ materially from those discussed in forward-
looking statements include the level of governmental expenditures on
public projects and project schedules, changes in anticipated tourism
levels, competition from other suppliers, oil and natural gas
commodity prices, drilling successes in oil and natural gas
operations, ability to acquire oil and natural gas properties, and the
availability of economic expansion or development opportunities.
Factors Common to Regulated and Nonregulated Operations --
The business and profitability of the company are also influenced
by economic and geographic factors, including political and economic
risks, changes in and compliance with environmental and safety laws
and policies, weather conditions, population growth rates and
demographic patterns, market demand for energy from plants or
facilities, changes in tax rates or policies, unanticipated project
delays or changes in project costs, unanticipated changes in operating
expenses or capital expenditures, labor negotiations or disputes,
changes in credit ratings or capital market conditions, inflation
rates, inability of the various counterparties to meet their
obligations with respect to the company's financial instruments,
changes in accounting principles and/or the application of such
principles to the company, changes in technology and legal
proceedings, and the ability of the company and third parties,
including suppliers and vendors, to identify and address year 2000
issues in a timely manner.
Prospective Information
Montana-Dakota has obtained and holds valid and existing
franchises authorizing it to conduct its electric operations in all of
the municipalities it serves where such franchises are required. As
franchises expire, Montana-Dakota may face increasing competition in
its service areas, particularly its service to smaller towns, from
rural electric cooperatives. Montana-Dakota intends to protect its
service area and seek renewal of all expiring franchises and will
continue to take steps to effectively operate in an increasingly
competitive environment.
The company recently made several acquisitions. During the
second quarter, the company acquired two construction materials and
mining companies. A construction company specializing in commercial
grading as well as asphalt and concrete paving joined the company's
northern California operations. In southern Oregon, the company
acquired a vertically integrated aggregate mining and construction
materials company that performs general contracting work including
excavation, site preparation, underground utilities and road
construction. In addition, in July 1999, the company acquired a
Wyoming pipeline and gathering system. The pipeline connects
Williston Basin's existing pipeline and storage facilities to the coal
seam gas supplies being developed by various producers in Wyoming's
Powder River Basin. A gas storage field in western Kentucky was also
acquired. None of the above mentioned acquisitions were individually
material.
Year 2000 Compliance
The year 2000 issue is the result of computer programs having
been written using two digits rather than four digits to define the
applicable year. In 1997, the company established a task force with
coordinators in each of its major operating units to address the year
2000 issue. The scope of the year 2000 readiness effort includes
information technology (IT) and non-IT systems, including computer
hardware, software, networking, communications, embedded and micro-
processor controlled systems, building controls and office equipment.
The company's year 2000 plan is based upon a six-phase approach
involving awareness, inventory, assessment, remediation, testing and
implementation.
State of Readiness --
The company is conducting a corporate-wide awareness program,
compiling an inventory of IT and non-IT systems, and assigning
priorities to such systems. As of June 30, 1999, the awareness and
inventory phases, including assigning priorities to IT and non-IT
systems, have been substantially completed.
The assessment phase involves the review of each inventory item
for year 2000 compliance and efforts to obtain representations and
assurances from third parties, including suppliers, vendors and major
customers, that such entities are year 2000 compliant. The company
has identified key suppliers, vendors and customers and as of June 30,
1999, based on contacts with and representations obtained from
approximately 64 percent of these third parties, the company is not
aware of any material third party year 2000 problems. The company
will continue to contact those material third parties that have not
responded seeking written verification of year 2000 readiness. As to
those who have not responded, the company is presently unable to
determine the potential adverse consequences, if any, that could
result from each such entities' failure to effectively address the
year 2000 issue. As of June 30, 1999, the assessment phase, as it
relates to the company's review of its inventory items, has been
substantially completed.
The remediation, testing and implementation phases of the
company's year 2000 plan are currently in various stages of
completion. The remediation phase includes replacements,
modifications and/or upgrades necessary for year 2000 compliance that
were identified in the assessment phase. The testing phase involves
testing systems to confirm year 2000 readiness. The implementation
phase is the process of moving a remediated item into production
status. The table below represents the approximate percentage of
completion by business segment for the remediation, testing and
implementation phases as of June 30, 1999.
Remediation Testing Implementation
Electric and natural
gas distribution 87% 81% 86%
Natural gas transmission 98% 93% 98%
Construction materials
and mining 87% 84% 85%
Oil and natural gas
production 100% 100% 100%
The company has established a target date of October 1, 1999, to
substantially complete the remediation, testing and implementation
phases.
Costs --
The estimated total incremental cost to the company of the year
2000 issue is approximately $1 million to $3 million during the 1998
through 2000 time periods. As of June 30, 1999, the company has
incurred incremental costs of approximately $1 million. These costs
are being funded through cash flows from operations. The company has
not established a formal process to track internal year 2000 costs but
such costs are principally related to payroll and benefits. The
company's current estimate of costs of the year 2000 issue is based on
the facts and circumstances existing at this time, which were derived
utilizing numerous assumptions of future events.
Risks --
The failure to correct a material year 2000 problem including
failures on the part of third parties, could result in a temporary
interruption in, or failure of, certain critical business operations,
including electric distribution, generation and transmission; natural
gas distribution, transmission, storage and gathering; energy
marketing; mining and marketing of coal, aggregates and related
construction materials; oil and natural gas exploration, production,
and development; and utility line construction and repair services.
Although the company believes the project will be substantially
completed by October 1, 1999, unforeseen and other factors could cause
delays in the project, the results of which could have a material
effect on the results of operations and the company's ability to
conduct its business.
Contingency Planning --
Due to the general uncertainty inherent in the year 2000 issue,
including the uncertainty of the year 2000 readiness of third parties,
the company is developing contingency plans for its mission-critical
operations. As of June 30, 1999, the utility division, which includes
electric generation and transmission and electric and natural gas
distribution, has prepared contingency plans in accordance with
guidelines and schedules set forth by the North American Electric
Reliability Council (NERC) working in conjunction with the Mid-
Continent Area Power Pool, the utility's regional reliability council.
Such plans are in addition to existing business recovery and emergency
plans established to restore electric and natural gas service
following an interruption caused by weather or equipment failure. In
addition, the company has participated and will continue to
participate with the NERC in national drills to assess industry
preparation. The natural gas transmission business has adopted the
guidelines used at the utility and has completed plans for its
administrative and accounting systems. The contingency plans for its
other business operations are in the development stage. The oil and
natural gas production and the construction materials and mining
businesses are in various stages of their contingency planning
efforts. Some of the additional contingency plans under consideration
include but are not limited to: stockpiling inventories, increasing
staffing at critical times, identifying alternative suppliers for
critical products and services, using the company's radio system in
the event there is a partial loss of voice and data communications and
developing manual workarounds and backup procedures. Contingency
plans will continue to be developed and finalized and the company
anticipates having all such contingency plans substantially in place
by October 1, 1999.
Liquidity and Capital Commitments
The 1999 electric and natural gas distribution capital
expenditures are estimated at $31.3 million, including those for
system upgrades, routine replacements, service extensions and routine
equipment maintenance and replacements. It is anticipated that all of
the funds required for these capital expenditures will be met from
internally generated funds, the company's $40 million revolving credit
and term loan agreement, existing short-term lines of credit
aggregating $75 million, a commercial paper credit facility at
Centennial, as described below, and through the issuance of long-term
debt, the amount and timing of which will depend upon needs, internal
cash generation and market conditions. At June 30, 1999, $23 million
under the revolving credit and term loan agreement and none of the
commercial paper supported by the short-term lines of credit were
outstanding.
Capital expenditures in 1999 for the natural gas transmission
business, including those for acquisitions to date, pipeline expansion
projects, routine system improvements and continued development of
natural gas reserves are estimated at $50.3 million. Capital
expenditures are expected to be met with a combination of internally
generated funds, a commercial paper credit facility at Centennial, as
described below, and through the issuance of long-term debt, the
amount and timing of which will depend upon needs, internal cash
generation and market conditions.
The 1999 capital expenditures for the construction materials and
mining business, including those for acquisitions to date, routine
equipment rebuilding and replacement and the building of construction
materials handling and transportation facilities, are estimated at $62
million. It is anticipated that funds generated from internal
sources, a commercial paper credit facility at Centennial, as
described below, a $10 million line of credit, $5.2 million of which
was outstanding at June 30, 1999, and the issuance of long-term debt
and the company's equity securities will meet the needs of this
business segment.
Capital expenditures for the oil and natural gas production
business related to its oil and natural gas acquisition, development
and exploration program are estimated at $68.9 million for 1999. It
is anticipated that capital expenditures will be met from internal sources,
a commercial paper credit facility at Centennial, as described below,
and the issuance of long-term debt and the company's equity securities.
Centennial, a direct subsidiary of the company, has a revolving
credit agreement with various banks on behalf of its subsidiaries that
allows for borrowings of up to $200 million. This facility supports
the Centennial commercial paper program. Under the commercial paper
program, $164 million was outstanding at June 30, 1999.
The estimated 1999 capital expenditures set forth above for the
electric, natural gas distribution, natural gas transmission and
construction materials and mining operations do not include potential
future acquisitions. The company continues to seek additional growth
opportunities, including investing in the development of related lines
of business. To the extent that acquisitions occur, the company
anticipates that such acquisitions would be financed with existing
credit facilities and the issuance of long-term debt and the company's
equity securities.
The company's issuance of first mortgage debt is subject to
certain restrictions imposed under the terms and conditions of
its Indenture of Mortgage. Generally, those restrictions require the
company to pledge $1.43 of unfunded property to the Trustee for each
dollar of indebtedness incurred under the Indenture and that annual
earnings (pretax and before interest charges), as defined in the
Indenture, equal at least two times its annualized first mortgage bond
interest costs. Under the more restrictive of the two tests, as of
June 30, 1999, the company could have issued approximately $280
million of additional first mortgage bonds.
The company's coverage of combined fixed charges and preferred
stock dividends was 3.2 and 2.5 times for the twelve months ended
June 30, 1999, and December 31, 1998, respectively. Additionally, the
company's first mortgage bond interest coverage was 6.6 and 6.1 times
for the twelve months ended June 30, 1999, and December 31, 1998,
respectively. Common stockholders' equity as a percent of total
capitalization was 54 percent and 56 percent at June 30, 1999, and
December 31, 1998, respectively.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There are no material changes in market risk faced by the company
from those reported in the company's Annual Report on Form 10-K for
the year ended December 31, 1998. For more information on market
risk, see Part II, Item 7A in the company's Annual Report on Form 10-K
for the year ended December 31, 1998, and Notes to Consolidated
Financial Statements in this Form 10-Q.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Apache and Snyder filed a notice of appeal with the North Dakota
Supreme Court on May 17, 1999.
Based on its assessment of the current coal supply agreement
arbitration proceedings, Knife River has established reserves for
anticipated liabilities in connection with the coal pricing issues and
related tax matters.
On June 3, 1999, several oil and gas royalty interest owners filed
suit in Colorado State District Court, in the City and County of
Denver, against WBI Production, Inc. (WBI Production), an indirect
wholly owned subsidiary of the company, and several former producers
of natural gas with respect to certain gas production properties in
the state of Colorado.
For more information on the above legal actions see Note 12 of
Notes to Consolidated Financial Statements.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 9, 1999, the company issued to the shareholders of DSS
Company, 898,103 shares of Common Stock, $1.00 par value, to acquire
all of the issued and outstanding capital stock of DSS Company. The
Common Stock issued by the company in this transaction was issued in
private sales exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933. The shareholders have acknowledged that they
are holding the company's Common Stock as an investment and not with a
view to distribution.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
3(a) Restated Certificate of Incorporation of the company,
as amended to date
4(a(1)) Indenture of Mortgage, dated as of May 1, 1939, as
restated in the Forty-Fifth Supplemental Indenture,
dated as of April 21, 1992, and the Forty-Sixth through
Forty-Eighth Supplements thereto between the company and
the New York Trust Company (The Bank of New York,
successor Corporate Trustee) and A. C. Downing (Douglas J.
MacInnes, successor Co-Trustee), filed as Exhibit 4(a) in
Registration No. 33-66682; and Exhibits 4(e), 4(f) and
4(g) in Registration No. 33-53896
4(a(2)) Instrument Effecting a Change in Individual
Trustee dated as of April 30, 1999
12 Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Stock Dividends
27 Financial Data Schedule
b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
MDU RESOURCES GROUP, INC.
DATE August 9, 1999 BY /s/ Warren L. Robinson
Warren L. Robinson
Executive Vice President,
Treasurer and Chief Financial
Officer
BY /s/ Vernon A. Raile
Vernon A. Raile
Vice President, Controller
and Chief Accounting Officer
EXHIBIT INDEX
Exhibit No.
3(a) Restated Certificate of Incorporation of the company,
as amended to date
4(a(1)) Indenture of Mortgage, dated as of May 1, 1939, as
restated in the Forty-Fifth Supplemental Indenture,
dated as of April 21, 1992, and the Forty-Sixth through
Forty-Eighth Supplements thereto between the company and
the New York Trust Company (The Bank of New York,
successor Corporate Trustee) and A. C. Downing (Douglas J.
MacInnes, successor Co-Trustee), filed as Exhibit 4(a) in
Registration No. 33-66682; and Exhibits 4(e), 4(f) and
4(g) in Registration No. 33-53896
4(a(2)) Instrument Effecting a Change in Individual
Trustee dated as of April 30, 1999
12 Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Stock Dividends
27 Financial Data Schedule
RESTATED CERTIFICATE OF INCORPORATION
OF
MDU RESOURCES GROUP, INC.
MDU RESOURCES GROUP, INC. (formerly known as
Montana-Dakota Utilities Co. and originally incorporated as
Minnesota Northern Power Co.) hereby restates its
Certificate of Incorporation filed with the Secretary of
State of the State of Delaware on March 14, 1924. This
Restated Certificate of Incorporation merely restates and
integrates, but does not further amend, the Certificate of
Incorporation, as heretofore amended or supplemented, and
there is no discrepancy between those provisions and the
provisions of this Restated Certificate of Incorporation.
This Restated Certificate of Incorporation is duly adopted
by the Board of Directors of MDU Resources Group, Inc.
("Corporation") in accordance with Section 245 of the
Delaware General Corporation Law.
FIRST. The name of this Corporation is MDU
RESOURCES GROUP, INC. (the "Corporation").
SECOND. The registered office of the Corporation
in the State of Delaware is located at 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801. The name of
its registered agent at such address is The Corporation
Trust Company.
THIRD. The purpose of the Corporation is to
engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of
Delaware. Included within this purpose, without limiting
the generality of the foregoing sentence is (1) to own and
operate electric and gas public utility systems and (2) to
transact business as a multidimensional natural resource
company.
The Corporation shall have and exercise all the
powers conferred upon corporations by the General
Corporation Law of Delaware.
FOURTH. The total number of shares of stock which
the Corporation shall have authority to issue is One Hundred
Fifty-two Million (152,000,000) divided into four classes,
namely, Preferred Stock, Preferred Stock A, Preference
Stock, and Common Stock. The total number of shares of such
Preferred Stock authorized is Five Hundred Thousand
(500,000) shares of the par value of One Hundred Dollars
($100) per share (hereinafter called the "Preferred Stock")
amounting in the aggregate to Fifty Million Dollars
($50,000,000). The total number of shares of such Preferred
Stock A authorized is One Million (1,000,000) shares without
par value (hereinafter called the "Preferred Stock A"). The
total number of shares of such Preference Stock authorized
is Five Hundred Thousand (500,000) shares without par value
(hereinafter called the "Preference Stock"). The total
number of shares of such Common Stock authorized is One
Hundred Fifty Million (150,000,000) of the par value of One
and no/100 Dollars ($1.00) per share (hereinafter called the
"Common Stock"), amounting in the aggregate to One Hundred
Fifty Million Dollars ($150,000,000).
The Preferred Stock and the Preferred Stock A
shall rank equally with no preference or priority of the
Preferred Stock over the Preferred Stock A or of the
Preferred Stock A over the Preferred Stock with respect to
earnings, and assets upon liquidation, dissolution or
winding up of the Corporation, and the Preferred Stock and
the Preferred Stock A shall be senior to the Preference
Stock with respect to earnings, and assets upon liquidation,
dissolution or winding up of the Corporation, and the
Preference Stock in turn shall be senior to the Common Stock
with respect thereto.
The description of such classes of stock, and the
designations and the powers, preferences and rights and the
qualifications, limitations or restrictions thereof are as
follows:
1. The Preferred Stock may be issued from time to
time either (a) as Preferred Stock of a series to be
designated 4.50% series Preferred Stock, or (b) if so
determined from time to time by resolution or
resolutions adopted by the Board of Directors either in
whole or in part as one or more other series, each
series to be appropriately designated by distinguishing
number, letter or title prior to the issue of any
shares thereof. One Hundred Thousand (100,000) shares
of the Preferred Stock are hereby designated as 4.50%
Series Preferred Stock. The number of shares of the
Preferred Stock so designated as 4.50% Series Preferred
Stock may be increased (but not above the number of
shares then authorized) or decreased (but not below the
number of shares thereof then outstanding) by a
resolution or resolutions adopted by the Board of
Directors in the same manner as the Board may by
resolution create other series of the Preferred Stock.
2. The Preferred Stock of all series shall be of
the same class and of equal rank and shall be identical
in all respects except that
(a) the maximum dividend rate of the 4.50% Series
Preferred Stock shall be four and fifty
hundredths per cent (4.50%) per annum, and
the maximum dividend rate of the Preferred
Stock of each other series shall be such rate
as shall have been fixed and determined by
the Board of Directors to accrue in respect
of the shares of stock of each such other
series from a date to be determined as
hereinafter provided;
(b) the amount per share which the Preferred
Stock shall be entitled to receive as a
premium in case of the redemption thereof
shall be Five Dollars ($5.00) per share in
the case of the 4.50% Series Preferred Stock,
and in the case of each other series of the
Preferred Stock shall be such amount, if any,
as shall have been fixed and determined by
the Board of Directors;
(c) a sinking fund or other retirement obligation
may be provided for each series of the
Preferred Stock, other than the 4.50% Series
Preferred Stock, at such rate and on such
terms as shall have been fixed and determined
by the Board of Directors in respect of the
shares of stock of each such series;
(d) the shares of each series of the Preferred
Stock, other than the 4.50% Series Preferred
Stock, may be made convertible into, or
exchangeable for, shares of any other class
or classes, or of any other series of the
same or of any other class or classes, of
stock of the Corporation, at such price or
prices, or at such rates of exchange and with
such adjustments as shall have been fixed and
determined by the Board of Directors in
respect of the shares of stock of each such
series; and
(e) the shares of each series of the Preferred
Stock, other than the 4.50% Series Preferred
Stock, shall possess such voting power, in
addition to that provided for in paragraph
13, as shall have been fixed and determined
by the Board of Directors in respect of the
shares of stock of each such series.
The description and terms of the Preferred Stock
of each series in the foregoing particulars (except as
in this section fixed and determined in respect of the
4.50% Series Preferred Stock) shall be fixed and
determined by the Board of Directors at the time of the
authorization of the issue of the original shares of
each such other series. All shares of each series
shall be alike in every particular.
3. The Preferred Stock A may be issued from time
to time by resolution or resolutions adopted by the
Board of Directors, either in whole or in part as one
or more series, each series to be appropriately
designated by distinguishing number, letter or title
prior to the issue of any shares thereof.
4. The Preferred Stock A of all series shall be
of the same class and of equal rank and shall be
identical in all respects except that
(a) the maximum dividend rate of the Preferred
Stock A of each series shall be such rate as
shall have been fixed and determined by the
Board of Directors to accrue in respect of
the shares of stock of each such series from
a date to be determined as hereinafter
provided;
(b) the terms and conditions on which the shares
of each series may be redeemed and in the
amount or amounts per share which the
Preferred Stock A of each series shall be
entitled to receive in case of the redemption
thereof shall be such as shall have been
fixed and determined by the Board of
Directors for each such series;
(c) the amount per share which the Preferred
Stock A of each series shall be entitled to
receive in the event of any liquidation,
dissolution or winding up of this
Corporation, whether voluntary or
involuntary, shall be such amount as shall
have been fixed and determined by the Board
of Directors for such purpose for each such
series;
(d) a sinking fund or other retirement obligation
may be provided for any or all series of the
Preferred Stock A, at such rate and on such
terms as shall have been fixed and determined
by the Board of Directors in respect of the
shares of stock of each such series;
(e) the shares of any or all series of the
Preferred Stock A may be made convertible
into, or exchangeable for, shares of any
other class or classes, or of any other
series of the same or of any other class or
classes, of stock of the Corporation, at such
price or prices, or at such rates of exchange
and with such adjustments as shall have been
fixed and determined by the Board of
Directors in respect of the shares of stock
of each such series; and
(f) the shares of each series of the Preferred
Stock A shall possess such voting power, in
addition to that provided for in paragraph
13, as shall have been fixed and determined
by the Board of Directors in respect of the
shares of stock of each such series.
The description and terms of the Preferred Stock A
of each series in the foregoing particulars and the
number of shares constituting each series shall be
fixed and determined by the Board of Directors at the
time of the authorization of the issue of the original
shares of each such series. All shares of each series
shall be alike in every particular.
5. The Preference Stock may be issued from time
to time by resolution or resolutions adopted by the
Board of Directors, either in whole or in part as one
or more series, each series to be appropriately
designated by distinguishing number, letter or title
prior to the issue of any shares thereof.
6. The Preference Stock of all series shall be of
the same class and of equal rank and shall be identical
in all respects except that
(a) the maximum dividend rate of the Preference
Stock of each series shall be such rate as
shall have been fixed and determined by the
Board of Directors to accrue in respect of
the shares of stock of each such series from
a date to be determined as hereinafter
provided;
(b) the terms and conditions on which the shares
of each series may be redeemed and the amount
or amounts per share which the Preference
Stock of each series shall be entitled to
receive in case of the redemption thereof
shall be such as shall have been fixed and
determined by the Board of Directors for each
such series;
(c) the amount per share which the Preference
Stock of each series shall be entitled to
receive in the event of any liquidation,
dissolution or winding up of this
Corporation, whether voluntary or
involuntary, shall be such amount as shall
have been fixed and determined by the Board
of Directors for such purpose for each such
series;
(d) a sinking fund or other retirement obligation
may be provided for any or all series of the
Preference Stock, at such rate and on such
terms as shall have been fixed and determined
by the Board of Directors in respect of the
shares of stock of each such series; and
(e) the shares of any or all series of the
Preference Stock may be made convertible
into, or exchangeable for, shares of the
Common Stock, at such price or prices, or at
such rates of exchange and with such
adjustments as shall have been fixed and
determined by the Board of Directors in
respect of the shares of stock of each such
series.
The description and terms of the Preference Stock
of each series in the foregoing particulars and the
number of shares constituting each series shall be
fixed and determined by the Board of Directors at the
time of the authorization of the issue of the original
shares of each such series. All shares of each series
shall be alike in every particular.
7. In preference to the Preference Stock and the
Common Stock, out of the surplus or net profits of this
Corporation, as and when declared by the Board of
Directors, the holders of the 4.50% Series Preferred
Stock shall be entitled to receive dividends at but not
exceeding the maximum dividend rate herein fixed and
determined, and the holders of the other series of
Preferred Stock and all series of the Preferred Stock A
shall be entitled to receive dividends, in preference
to the Preference Stock and the Common Stock, out of
the surplus or net profits of this Corporation, as and
when declared by the Board of Directors, at but not
exceeding the maximum dividend rates fixed and
determined by the Board of Directors and expressed in
the certificates therefor, payable quarterly on January
1st, April 1st, July 1st, and October 1st in each year,
before any dividends shall be declared or paid upon or
set apart for the Preference Stock or the Common Stock
and before any sum shall be paid or set apart for the
purchase or redemption of any series of the Preferred
Stock, the Preferred Stock A or the Preference Stock,
or the Common Stock. Such dividends on the Preferred
Stock shall be cumulative from January 1, 1951, as to
all shares issued on or before and outstanding on
January 1, 1951; such dividends on all the Preferred
Stock issued after January 1, 1951 and on the Preferred
Stock A shall be cumulative from such date or dates as
the Board of Directors shall fix at the time of issue
thereof, or if no such date or dates shall be fixed,
then from the respective dates of issue thereof, so
that if in any dividend period or periods full
cumulative dividends, at the maximum rates fixed and
determined therefor, accrued on all outstanding shares
of Preferred Stock and Preferred Stock A for all past
dividend periods and for the then current dividend
period, shall not have been paid, the deficiency shall
be declared and paid or set apart for payment before
any dividends shall be declared or paid upon or set
apart for the Preference Stock or for the Common Stock
and before any sum shall be paid or set apart for the
purchase or redemption of any series of the Preferred
Stock, the Preferred Stock A or the Preference Stock,
or the Common Stock.
If at any time Preferred Stock or Preferred Stock
A of more than one series shall be outstanding, any
dividends paid upon the Preferred Stock or the
Preferred Stock A in an amount less than full
cumulative dividends accrued or in arrears upon all the
Preferred Stock and the Preferred Stock A outstanding
shall be divided among the outstanding series of the
Preferred Stock and the Preferred Stock A in proportion
to the aggregate amounts which would be distributable
to each series of the Preferred Stock and the Preferred
Stock A if full cumulative dividends were at said time
to be declared and paid thereon.
8. Subject to the prior rights and preferences of
the Preferred Stock and the Preferred Stock A
hereinbefore set forth, out of the surplus or net
profits of this Corporation remaining after full
cumulative dividends as aforesaid upon all series of
the Preferred Stock and the Preferred Stock A then
outstanding have been paid for all past dividend
periods and after full cumulative dividends upon all
series of the Preferred Stock and the Preferred Stock A
for the current dividend period have been declared and
paid or set apart for payment, then, as and when
declared by the Board of Directors, the holders of the
Preference Stock of all series shall be entitled to
receive dividends at but not exceeding the maximum
dividend rates fixed and determined by the Board of
Directors and expressed in the resolution or
resolutions authorizing the creation and issuance of
each such series, payable quarterly on January 1st,
April 1st, July 1st, and October 1st in each year,
before any dividends shall be declared or paid upon or
set apart for the Common Stock and before any sum shall
be paid or set apart for the purchase or redemption of
the Preference Stock of any series or the Common Stock.
Such dividends on the Preference Stock shall be
cumulative from such date or dates as the Board of
Directors shall fix at the time of issue thereof, or if
no such date or dates shall be fixed, then from the
respective dates of issue thereof, so that if in any
dividend period or periods full cumulative dividends,
at the maximum rates fixed and determined therefor,
accrued on all outstanding shares of Preference Stock
for all past dividend periods and for the then current
dividend period, shall not have been paid, the
deficiency shall be declared and paid or set apart for
payment before any dividends shall be declared or paid
upon or set apart for the Common Stock and before any
sum shall be paid or set apart for the purchase or
redemption of the Preference Stock of any series or the
Common Stock.
If at any time the Preference Stock of more than
one series shall be outstanding, any dividends paid
upon the Preference Stock in an amount less than full
cumulative dividends accrued or in arrears upon all the
Preference Stock outstanding shall be divided among the
outstanding series of Preference Stock in proportion to
the aggregate amounts which would be distributable to
the Preference Stock of each series if full cumulative
dividends were at said time to be declared and paid
thereon.
9. Subject to the prior rights and preferences of
the Preferred Stock, the Preferred Stock A and the
Preference Stock hereinbefore set forth, out of any
surplus or net profits of this Corporation remaining
after full cumulative dividends as aforesaid upon all
series of the Preferred Stock, the Preferred Stock A
and the Preference Stock then outstanding have been
paid for all past dividend periods and after full
cumulative dividends upon all series of the Preferred
Stock, the Preferred Stock A and the Preference Stock
for the current dividend period have been declared and
paid or set apart for payment and after making such
provision, if any, as the Board of Directors may deem
necessary for working capital, then and not otherwise,
dividends may be declared and paid upon the Common
Stock, to the exclusion of the holders of the Preferred
Stock, the Preferred Stock A and the Preference Stock,
and no holder of any series of the Preferred Stock, the
Preferred Stock A or the Preference Stock shall be
entitled to receive or shall receive dividends in
excess of the maximum dividend rates herein set forth
or fixed in the certificates therefor or in the
resolution or resolutions authorizing the creation and
issuance of each such series.
The right to receive any dividends which may be
declared payable in stock of any class is vested in the
holders of the Common Stock exclusively, but no such
dividends shall be declared in any dividend period
unless full cumulative dividends upon all series of the
Preferred Stock, the Preferred Stock A and the
Preference Stock then outstanding shall have been paid
for all past dividend periods and shall have been
declared and paid or set apart for payment for the
current dividend period.
10. All series of the Preferred Stock and the
Preferred Stock A shall be preferred as to both
earnings, and assets, and in the event of any
liquidation, dissolution or winding up of this
Corporation, whether voluntary or involuntary, before
any assets of the Corporation shall be distributed
among or paid over to the holders of the Preference
Stock or the Common Stock, the holders of the Preferred
Stock of each series shall be entitled to be paid One
Hundred Dollars ($100.00) per share, and the holders of
the Preferred Stock A of each series shall be entitled
to be paid that amount which shall have been fixed and
determined for such purpose by the Board of Directors
in the resolution or resolutions authorizing the
creation and issuance of each such series, in each case
together with a sum of money equivalent in the case of
each share of stock to all cumulative dividends on the
Preferred Stock or the Preferred Stock A, as the case
may be, accrued and in arrears thereon, before any
distribution of the assets shall be made to the holders
of the Preference Stock or the Common Stock, but the
holders of the Preferred Stock and the Preferred Stock
A shall not be entitled to any further participation in
such distribution, and the holders of the Common Stock,
subject to the prior rights and preferences of the
Preference Stock, shall be entitled, to the exclusion
of the holders of the Preferred Stock, the Preferred
Stock A and the Preference Stock, to share ratably in
all the assets of this Corporation remaining after
payment to the holders of the Preferred Stock, and the
Preferred Stock A and the Preference Stock of their
full preferential amounts. If upon any such
liquidation, dissolution or winding up of this
Corporation, the assets distributable among the holders
of the Preferred Stock and the Preferred Stock A shall
be insufficient to permit the payment in full to such
holders of the preferential amounts aforesaid, then the
entire assets of this Corporation to be distributed
shall be distributed among the holders of the Preferred
Stock and the Preferred Stock A then outstanding
ratably in proportion to the full preferential amounts
to which they are respectively entitled.
11. As hereinbefore set forth, the Preference
Stock of all series shall rank junior to all series of
the Preferred Stock and the Preferred Stock A with
respect to both earnings, and assets, and in the event
of any liquidation, dissolution or winding up of this
Corporation, whether voluntary or involuntary, after
payment to the holders of the Preferred Stock and the
Preferred Stock A of all amounts payable to them in
such event and before any assets of the Corporation
shall be distributed among or paid over to the holders
of the Common Stock, the holders of the Preference
Stock of each series shall be entitled to be paid that
amount which shall have been fixed and determined for
such purpose by the Board of Directors in the
resolution or resolutions authorizing the creation and
issuance of each such series, in each case together
with a sum of money equivalent in the case of each
share of stock to all cumulative dividends on the
Preference Stock, accrued and in arrears thereon,
before any distribution of the assets shall be made to
the holders of the Common Stock, but the holders of the
Preference Stock shall not be entitled to any further
participation in such distribution, and the holders of
the Common Stock shall be entitled, to the exclusion of
the holders of the Preferred Stock, the Preferred Stock
A and the Preference Stock, to share ratably in all the
assets of this Corporation remaining after payment to
the holders of the Preferred Stock, the Preferred Stock
A and the Preference Stock of their full preferential
amounts aforesaid. If upon any such liquidation,
dissolution or winding up of this Corporation, the
assets distributable among the holders of the
Preference Stock shall be insufficient to permit the
payment in full to such holders of the preferential
amounts aforesaid, then the entire assets of this
Corporation to be distributed, after payment to the
holders of the Preferred Stock and the Preferred Stock
A of all amounts payable to them in such event, shall
be distributed among the holders of the Preference
Stock then outstanding ratably in proportion to the
full preferential amounts to which they are entitled.
Nothing in paragraph 10 or this paragraph 11 shall
be deemed to prevent the purchase or redemption of any
series of the Preferred Stock, the Preferred Stock A or
the Preference Stock, in any manner permitted by
paragraph 12. A consolidation or merger of this
Corporation with any other corporation or corporations
shall not be regarded as a liquidation, dissolution or
winding up of this Corporation within the meaning of
paragraph 10 or this paragraph 11, but no such
consolidation or merger shall in any manner impair the
rights or preferences of any of the Preferred Stock,
the Preferred Stock A or the Preference Stock.
12. This Corporation may at the option of the
Board of Directors from time to time on any dividend
payment date redeem the whole or any part of any series
of the Preferred Stock, the Preferred Stock A or the
Preference Stock; with respect to the Preferred Stock,
by paying One Hundred Dollars ($100.00) per share for
each share thereof so redeemed, plus a premium of such
additional amount per share as herein fixed and
determined for the 4.50% Series Preferred Stock, and in
the case of any other series of the Preferred Stock,
such premium, if any, as shall have been fixed and
determined by the Board of Directors, together in each
case with the amount of any dividends accrued and in
arrears thereon; with respect to the Preferred Stock A
and the Preference Stock, by paying the appropriate
amount per share which shall have been fixed and
determined by the Board of Directors in the resolution
or resolutions authorizing the creation and issuance of
each such series of the Preferred Stock A or the
Preference Stock, together in each case with the amount
of any dividends accrued and in arrears thereon.
Notice of such election to redeem shall, not less than
thirty days prior to the dividend date upon which the
stock is to be redeemed, be mailed to each holder of
stock so to be redeemed at his address as it appears on
the books of the Corporation. In case less than all of
the outstanding Preferred Stock, the Preferred Stock A
or the Preference Stock of any series is to be
redeemed, the amount to be redeemed may be determined
by the Board of Directors; the method of effecting such
redemption, whether by lot or pro rata or otherwise, is
to be determined by the Board of Directors at the time
of issuance. If, on or before the redemption date
named in such notice, the funds necessary for such
redemption shall have been set aside by the Corporation
so as to be available for payment on demand to the
holders of the stock so called for redemption, then,
notwithstanding that any certificate of stock so called
for redemption shall not have been surrendered for
cancellation, the dividends thereon shall cease to
accrue from and after the date of redemption so
designated, and all rights with respect to such stock
so called for redemption, including any right to vote
or otherwise participate in the determination of any
proposed corporate action, shall forthwith after such
redemption date cease and determine, except only the
right of the holder to receive the redemption price
therefor but without interest.
13. Except as otherwise required by the laws of
Delaware and except as may be otherwise provided herein
and by the Board of Directors in accordance with
paragraphs 2(e) and 4(f), the holders of the Common
Stock shall exclusively possess all voting power for
the election of directors and for all other purposes,
and the holders of the Preferred Stock, the Preferred
Stock A and the Preference Stock shall have no voting
power, and no owner or holder thereof shall vote
thereon or be entitled to receive notice of any meeting
of the stockholders; provided that if at any time and
whenever cumulative dividends on the Preferred Stock or
on the Preferred Stock A shall be in default and
unpaid, in whole or in part, for a period of one year,
the holders of the Preferred Stock and the Preferred
Stock A shall have the same voting powers as the
holders of the Common Stock, to-wit: one vote for each
share of stock; and further provided that if at any
time and whenever cumulative dividends on the
Preference Stock shall be in default and unpaid, in
whole or in part, for a period of one year, the holders
of the Preference Stock shall have the same voting
powers as the holders of the Common Stock, to-wit: one
vote for each share of stock, and the holders of the
Preferred Stock and the Preferred Stock A or the
Preference Stock, as the case may be, shall be entitled
to receive notices of meetings of stockholders, and
such voting power shall so continue to vest in the
holders of the Preferred Stock and the Preferred Stock
A or the Preference Stock, as the case may be, until
all arrears in the payment of cumulative dividends on
the Preferred Stock and the Preferred Stock A or on the
Preference Stock, as the case may be, shall have been
paid and the dividends thereon for the current dividend
period shall have been declared and the funds for the
payment thereof set aside, on the condition, however,
that as often as thereafter defaulted dividends shall
have been paid in full and provision made for the
current dividend as herein provided (and such payment
shall be made as promptly as shall be consistent with
the best interests of the Corporation), the holders of
the Preferred Stock and the Preferred Stock A or of the
Preference Stock, as the case may be, shall be divested
of such voting power and the voting power shall revest
exclusively in the holders of the Common Stock, subject
always to the same provisions for the vesting of voting
power in the holders of the Preferred Stock and the
Preferred Stock A or of the Preference Stock, as the
case may be, in case of any similar default or defaults
in the payment of cumulative dividends either on the
Preferred Stock or the Preferred Stock A or on the
Preference Stock, as the case may be, for one year and
the revesting of such entire voting power in the
holders of the Common Stock, in the event that such
default or defaults shall be cured as above provided.
14. The vote or consent of the holders of a
majority of the Preference Stock at the time
outstanding, voting as a class, shall be required for
any amendment of the Certificate of Incorporation
altering materially any existing provision of the
Preference Stock, for the creation, or an increase in
the authorized amount, of any class of stock ranking,
as to earnings, and assets, prior to, or on a parity
with, the Preference Stock, or for an increase in the
authorized amount of the Preference Stock; provided,
however, that if any amendment of the Certificate of
Incorporation shall affect adversely the rights or
preferences of one or more, but not all, of the series
of the Preference Stock at the time outstanding or
shall unequally adversely affect the rights or
preferences of different series of the Preference Stock
at the time outstanding, the vote or consent of the
holders of a majority of such shares of each such
series so adversely or unequally adversely affected
shall be required in lieu of or (if such vote or
consent is required by law) in addition to the vote or
consent of the holders of a majority of the outstanding
shares of the Preference Stock, voting as a class.
15. No holder of stock of this Corporation of any
class shall have any pre-emptive or preferential rights
of subscription to any shares of any class of stock of
this Corporation, whether now or hereafter authorized,
or to any obligations convertible into stock of the
Corporation, issued or sold, nor any right of
subscription to any thereof other than such, if any, as
the Board of Directors in its discretion may from time
to time determine, and at such price as the Board of
Directors may from time to time fix and determine
pursuant to the authority conferred by this
Certificate; and any shares of stock or convertible
obligations which the Board of Directors may determine
to offer for subscription to the holders of stock may,
as said Board shall determine, be offered exclusively
to holders of the Preferred Stock, to holders of the
Preferred Stock A, to holders of the Preference Stock
or to holders of the Common Stock, or partly to the
holders of the Preferred Stock, partly to the holders
of the Preferred Stock A, partly to the holders of the
Preference Stock and partly to the holders of the
Common Stock, and in such case in such proportions as
among said classes of stock as the Board of Directors
in its discretion may determine.
Resolutions of the Board of Directors
contained in Certificate of Designation
of 4.70% Series Preferred Stock
filed November 29, 1955
RESOLVED that, pursuant to authority expressly
granted to and vested in the Board of Directors of the
Corporation by the provisions of the Certificate of
Incorporation, as amended, the Board of Directors hereby
creates a series of fifty thousand (50,000) shares of
Preferred Stock of the Corporation (the Preferred stock of
all series as a class being hereinafter called the
"Preferred Stock"), and hereby fixes the designation and the
preferences and relative, participating, optional or other
special rights and the qualifications, limitations or
restrictions of such series (in addition to the designation,
powers, preferences and rights, and the qualifications,
limitations or restrictions of such series set forth in the
Certificate of Incorporation, as amended, which are
applicable to the Preferred Stock of all Series), as
follows:
1. The designation of the Series shall be "4.70%
Series Preferred Stock" (Cumulative) (hereinafter
called the "4.70% Series") and the number of shares
which shall constitute said Series shall be 50,000; and
such number shall not be increased.
2. The annual dividend rate of the 4.70% Series
shall be four and seventy hundredths per cent. (4.70%)
of the par value of said shares, and no more, and the
date from which dividends shall accrue in respect of
all shares of the 4.70% Series shall be the date of
issue thereof.
3. The price at which the shares of the 4.70%
Series may be redeemed shall be as specified in
Paragraph 6 of Article FOURTH of the Certificate of
Incorporation, as amended, plus a premium as follows:
$5 per share to and including January 1, 1961; $4 per
share thereafter to and including January 1, 1966; $3
per share thereafter to and including January 1, 1971;
and $2 per share thereafter; together with the amount
of any dividends accrued and in arrears thereon.
4. So long as any of the shares of the 4.70%
Series are outstanding, in addition to any other vote
or consent of stockholders required in the Certificate
of Incorporation, as amended, or by law, the vote or
consent of the holders of at least sixty-six and two-
thirds per cent. (66-2/3%) of the shares of the 4.70%
Series at the time outstanding, given in person or by
proxy, either in writing without a meeting (if
permitted by law) or at any meeting called for the
purpose, shall be necessary to effect or validate:
(a) any amendment, alteration or repeal
of any of the provisions of the Certificate
of Incorporation, as amended, or By-Laws of
the Corporation, which affects adversely the
voting powers, rights or preferences of the
holders of the 4.70% Series;
(b) the authorization or creation of,
or the increase in the authorized amount of,
any stock of any class or any security
convertible into stock of any class ranking
prior to the Preferred Stock;
(c) the voluntary dissolution,
liquidation or winding up of the affairs of
the Corporation, or the sale, lease or
conveyance by the Corporation of all or
substantially all its property or assets;
(d) the merger or consolidation of the
Corporation with or into any other
corporation, unless the Corporation resulting
from such merger or consolidation will have
after such merger or consolidation no class
of stock and no other securities convertible
into stock of any class either authorized or
outstanding which stock shall rank prior to
the Preferred Stock, except the same number
of shares of such stock and the same amount
of such other securities with the same rights
and preferences as such stock and securities
of the Corporation respectively authorized
and outstanding immediately preceding such
merger or consolidation, and each holder of
Preferred Stock immediately preceding such
merger or consolidation shall receive the
same number of shares, with the same rights
and preferences, of the resulting
corporation; or
(e) the purchase or redemption (for
sinking fund purposes or otherwise) of less
than all of the Preferred Stock at the time
outstanding unless the full dividend on all
shares of Preferred Stock of all series then
outstanding shall have been paid or declared
and a sum sufficient for payment thereof set
apart; provided, however, that the amendment
of the provisions of the Certificate of
Incorporation, as amended, so as to authorize
or create or to increase the authorized
amount (a) of the Common Stock and any other
class of stock of the Corporation hereafter
authorized over which the Preferred Stock has
preference or priority in the payment of
dividends or in the distribution of assets on
any liquidation, dissolution or winding up of
the Corporation or (b) of stock of any class
ranking on a parity with the Preferred Stock,
shall not be deemed to affect adversely the
voting powers, rights or preferences of the
holders of the 4.70% Series; and provided
further, that no such consent of the holders
of the 4.70% Series shall be required, if at
or prior to the time when such amendment,
alteration or repeal is to take effect or
when the authorization, creation or increase
of any such prior stock or convertible
security is to be made, or when such
consolidation or merger, voluntary
liquidation, dissolution or winding up, sale,
lease, conveyance, purchase or redemption is
to take effect, as the case may be, either
(I) the consent of the holders of at least
sixty-six and two-thirds per cent. (66-2/3%)
of the shares of the Preferred Stock at the
time outstanding shall have been so given to
any such action except an amendment,
alteration or repeal affecting the shares of
the 4.70% Series differently from other
series of Preferred Stock, or (II) provision
is to be made for the redemption of all
shares of the 4.70% Series at the time
outstanding.
5. So long as any shares of the 4.70% Series are
outstanding, in addition to any other vote or consent
of stockholders required in the Certificate of
Incorporation, as amended, or by law, the vote or
consent of the holders of a majority of the shares of
the 4.70% Series at the time outstanding, given in
person or by proxy, either in writing without a meeting
(if permitted by law) or at any meeting called for the
purpose, shall be necessary to effect or validate any
increase in the authorized amount of the Preferred
Stock, or the authorization or creation of, or the
increase in the authorized amount of, any stock of any
class or any security convertible into stock of any
class ranking on a parity with the Preferred Stock
including any such action taken in connection with the
merger or consolidation of the Corporation with or into
any other corporation by either party thereto;
provided, however, that no such consent of the holders
of the 4.70% Series shall be required if, at or prior
to the time the authorization or increase of any such
parity stock or convertible security or any such
additional shares of Preferred Stock is to be made, as
the case may be, either (I) the consent of the holders
of a majority of the shares of the Preferred Stock at
the time outstanding shall have been so given to any
such action, or (II) provision is to be made for the
redemption of all shares of the 4.70% Series at the
time outstanding.
6. No sinking fund or other retirement obligation
shall be provided for the shares of the 4.70% Series.
Resolutions of the Board of Directors
contained in Certificate of Designation
of 5.10% Series Preferred Stock
filed April 28, 1961
RESOLVED that, pursuant to authority expressly
granted to and vested in the Board of Directors of the
Corporation by the provisions of the Certificate of
Incorporation, as amended, the Board of Directors hereby
creates a series of fifty thousand (50,000) shares of
Preferred Stock of the Corporation (the Preferred Stock of
all series as a class being hereinafter called the
"Preferred Stock"), and hereby fixes the designation and the
preferences and relative, participating, optional or other
special rights and the qualifications, limitations or
restrictions of such series (in addition to the designation,
powers, preferences and rights, and the qualifications,
limitations or restrictions of such series set forth in the
Certificate of Incorporation, as amended, which are
applicable to the Preferred Stock of all Series), as
follows:
1. The designation of the Series shall be "5.10%
Series Preferred Stock" (Cumulative) (hereinafter
called the "5.10% Series) and the number of shares
which shall constitute said Series shall be 50,000;
such number shall not be increased and shall be
decreased by the number of shares of said Series at any
time retired by the Company.
2. The annual dividend rate of the 5.10% Series
shall be five and ten hundredths per cent (5.10%) of
the par value of said shares, and no more, and the date
from which dividends shall accrue in respect of all
shares of the 5.10% Series shall be the date of issue
thereof.
3. The price at which the shares of the 5.10%
Series may be redeemed shall be as specified in
paragraph 6 of Article FOURTH of the Certificate of
Incorporation, as amended, plus a premium as follows:
$7.50 per share to and including January 1, 1966; $7.00
per share thereafter to and including January 1, 1967;
$6.50 per share thereafter to and including January 1,
1968; $6.00 per share thereafter to and including
January 1, 1969; $5.50 per share thereafter to and
including January 1, 1970; $5.00 per share thereafter
to and including January 1, 1971; $4.50 per share
thereafter to and including January 1, 1972; $4.00 per
share thereafter to and including January 1, 1973;
$3.50 per share thereafter to and including January 1,
1974; $3.00 per share thereafter to and including
January 1, 1975; $2.50 per share thereafter to and
including January 1, 1977; $2.00 per share thereafter;
together with the amount of any dividends accrued and
in arrears thereon.
4. So long as any of the shares of the 5.10%
Series are outstanding, in addition to any other vote
or consent of stockholders required in the Certificate
of Incorporation, as amended, or by law, the vote or
consent of the holders of at least sixty-six and two-
thirds per cent. (66 2/3%) of the shares of the 5.10%
Series at the time outstanding, given in person or by
proxy, either in writing without a meeting (if
permitted by law) or at any meeting called for the
purpose, shall be necessary to effect or validate:
(a) any amendment, alteration or repeal
of any of the provisions of the Certificate
of Incorporation, as amended, or By-Laws of
the Corporation, which affects adversely the
voting powers, rights or preferences of the
holders of the 5.10% Series;
(b) the authorization or creation of,
or the increase in the authorized amount of,
any stock of any class or any security
convertible into stock of any class ranking
prior to the Preferred Stock;
(c) the voluntary dissolution,
liquidation or winding up of the affairs of
the Corporation, or the sale, lease or
conveyance by the Corporation of all or
substantially all its property or assets;
(d) the merger or consolidation of the
Corporation with or into any other
corporation, unless the corporation resulting
from such merger or consolidation will have
after such merger or consolidation no class
of stock and no other securities convertible
into stock of any class either authorized or
outstanding which stock shall rank prior to
the Preferred Stock, except the same number
of shares of such stock and the same amount
of such other securities with the same rights
and preferences as such stock and securities
of the Corporation respectively authorized
and outstanding immediately preceding such
merger or consolidation, and each holder of
Preferred Stock immediately preceding such
merger or consolidation shall receive the
same number of shares, with the same rights
and preferences, of the resulting
corporation; or
(e) the purchase or redemption (for
sinking fund purposes or otherwise) of less
than all of the Preferred Stock at the time
outstanding unless the full dividend on all
shares of Preferred Stock of all series then
outstanding shall have been paid or declared
and a sum sufficient for payment thereof set
apart;
provided, however, that the amendment of the provisions
of the Certificate of Incorporation, as amended, so as
to authorize or create or to increase the authorized
amount (a) of the Common Stock and any other class of
stock of the Corporation hereafter authorized over
which the Preferred Stock has preference or priority in
the payment of dividends or in the distribution of
assets on any liquidation, dissolution or winding up of
the Corporation or (b) of any class ranking on a parity
with the Preferred Stock, shall not be deemed to affect
adversely the voting powers, rights or preferences of
the holders of the 5.10% Series; and provided further,
that no such consent of the holders of the 5.10% Series
shall be required, if at or prior to the time when such
amendment, alteration or repeal is to take effect or
when the authorization, creation or increase of any
such prior stock or convertible security is to be made,
or when such consolidation or merger, voluntary
liquidation, dissolution or winding up, sale, lease,
conveyance, purchase or redemption is to take effect,
as the case may be, either (i) the consent of the
holders of at least sixty-six and two-thirds per cent.
(66 2/3%) of the shares of the Preferred Stock at the
time outstanding shall have been so given to any such
action except an amendment, alteration or repeal
affecting the shares of the 5.10% Series differently
from other series of Preferred Stock, or (ii) provision
is to be made for the redemption of all shares of the
5.10% Series at the time outstanding.
5. So long as any shares of the 5.10% Series are
outstanding, in addition to any other vote or consent
of stockholders required in the Certificate of
Incorporation, as amended, or by law, the vote or
consent of the holders of a majority of the shares of
the 5.10% Series at the time outstanding, given in
person or by proxy, either in writing without a meeting
(if permitted by law) or at any meeting called for the
purpose, shall be necessary to effect or validate any
increase in the authorized amount of the Preferred
Stock, or the authorization or creation of, or the
increase in the authorized amount of, any stock of any
class or any security convertible into stock of any
class ranking on a parity with the preferred Stock
including any such action taken in connection with the
merger or consolidation of the Corporation with or into
any other corporation by either party thereto;
provided, however, that no such consent of the holders
of the 5.10% Series shall be required if, at or prior
to the time the authorization or increase of any such
parity stock or convertible security or any such
additional shares of Preferred Stock so to be made, as
the case may be, either (i) the consent of the holders
of a majority of the shares of the Preferred Stock at
the time outstanding shall have been so given to any
such action, or (ii) provision is to be made for the
redemption of all shares of the 5.10% Series at the
time outstanding.
6. As a sinking fund for the retirement of the
shares of the 5.10% Series, the Company agrees to
purchase (out of any funds of the Company legally
available therefor after full dividends on the
Preferred Stock of all Series then outstanding for all
past dividend periods and for the current period have
been paid or declared and a sum sufficient for the
payment thereof set apart) 1,000 shares of the 5.10%
Series in each year, commencing January 1, 1962, at the
price of $100 per share together with the amount of any
dividends accrued and unpaid thereon; provided that no
shares of the 5.10% Series shall be purchased pursuant
to this paragraph unless tendered by the holders
thereof as hereinafter provided; and provided further
that the purchase obligation of the Company under this
paragraph shall not be cumulative from year to year
even though less than 1,000 shares of said Series may
be purchased in any year if in such year the Company
shall have duly called for tenders and purchased shares
duly tendered as hereinafter provided. Shares of the
5.10% Series purchased pursuant to this paragraph shall
be cancelled and retired. The Company will, at least
40 and not more than 50 days before each January 1,
mail a letter to all holders of record of shares of the
5.10% Series, stating that it is calling for tenders of
1,000 shares of said Series for purchase and retirement
under the sinking fund on the following January 1, at
$100 per share and accrued and unpaid dividends; the
letter shall ask each holder of shares of the 5.10%
Series to indicate, by return letter to be received by
the Company at a date fixed at least 20 and not more
than 25 days before such January 1, the number of
shares, if any, which such holder tenders for sale; if
more than 1,000 shares are duly tendered by all holders
of record, the Company shall first purchase from each
holder tendering shares the number of shares tendered
up to a number of shares (rounding to the nearest 10
shares) equal as nearly as practicable to 2% of the sum
of (i) the number of shares of the 5.10% Series then of
record in the name of such holder, and (ii) the number
of shares of said Series previously retired that were
of record in the name of such holder at the time of
their redemption or purchase for retirement, and
thereafter purchases shall be made pro rata (as nearly
as practicable and rounding to the nearest 10 shares)
on the basis of the shares of said Series duly tendered
for sale or, in the case of holders duly tendering
1,000 shares, held of record; within three days after
the date on which tenders are to be received, the
Company shall by letter notify all holders of record of
shares of the 5.10% Series of the number of shares
tendered and the number of shares held by each holder
to be retired; and the Company shall make payment for
shares purchased pursuant to this paragraph upon
surrender of stock certificates to the Transfer Agent
on or after the January 1 retirement date.
Resolutions of the Board of Directors
contained in Certificate of Designation
of Series B Preference Stock
filed November 12, 1998
RESOLVED, that pursuant to the authority granted
to and vested in the Board of Directors of this Corporation
(hereinafter called the "Board of Directors" or the "Board")
in accordance with the provisions of the Certificate of
Incorporation, the Board of Directors hereby creates a
series of Preference Stock, without par value, of the
Corporation (the "Preference Stock"), and hereby states the
designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
Series B Preference Stock:
Section 1. Designation and Amount. The shares of such
series shall be designated as "Series B Preference Stock"
(the "Series B Preference Stock") and the number of shares
constituting the Series B Preference Stock shall be 60,000.
Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no
decrease shall reduce the number of shares of Series B
Preference Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding
securities issued by the Corporation convertible into
Series B Preference Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any
shares of any series of Preferred Stock or Preferred
Stock A (or any similar stock) ranking prior and
superior to the Series B Preference Stock with respect
to dividends, the holders of shares of Series B
Preference Stock, equally with holders of all other
series of Preference Stock and in preference to the
holders of Common Stock, par value $3.33 per share (the
"Common Stock"), of the Corporation, and of any other
junior stock, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends
payable in cash on the first day of January, April,
July, and October in each year (each such date being
referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or
fraction of a share of Series B Preference Stock, in an
amount per share (rounded to the nearest cent) equal to
the greater of (a) $1 or (b) subject to the provision
for adjustment hereinafter set forth, 1,000 times the
aggregate per share amount of all cash dividends, and
1,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions,
other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on
the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of
Series B Preference Stock. In the event the
Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of
Series B Preference Stock were entitled immediately
prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after
such event and the denominator of which is the number
of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Series B Preference Stock as
provided in paragraph (A) of this Section immediately
after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares
of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on
the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1 per
share on the Series B Preference Stock shall
nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series B Preference
Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the
date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the
determination of holders of shares of Series B
Preference Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares
of Series B Preference Stock in an amount less than the
total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of
Series B Preference Stock entitled to receive payment
of a dividend or distribution declared thereon, which
record date shall be not more than 60 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of
Series B Preference Stock shall have no voting rights except
as otherwise provided by law or as set forth in the
Corporation's Certificate of Incorporation.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other
dividends or distributions payable on the Series B
Preference Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared,
on shares of Series B Preference Stock outstanding
shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends, or make any
other distributions, on any shares of stock
ranking junior (either as to dividends or upon
liquidation, dissolution, or winding up) to the
Series B Preference Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution, or
winding up) with the Series B Preference Stock, except
dividends paid ratably on the Series B Preference Stock and
all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise
acquire for consideration shares of any stock
ranking junior (either as to dividends or upon
liquidation, dissolution, or winding up) to the
Series B Preference Stock, provided that the
Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock
in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends
or upon dissolution, liquidation or winding up) to
the Series B Preference Stock; or
(iv) redeem or purchase or otherwise acquire
for consideration any shares of Series B
Preference Stock, or any shares of stock ranking
on a parity with the Series B Preference Stock,
except in accordance with a purchase offer made in
writing or by publication (as determined by the
Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after
consideration of the respective annual dividend
rates and other relative rights and preferences of
the respective series and classes, shall determine
in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any
subsidiary of the Corporation to purchase or otherwise
acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B
Preference Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but
unissued shares of Preference Stock and may be reissued as
part of a new series of Preference Stock subject to the
conditions and restrictions on issuance set forth herein, in
the Certificate of Incorporation, or in any other
Certificate of Designations creating a series of Preference
Stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution, or Winding Up.
Upon any liquidation, dissolution, or winding up of the
Corporation, no distribution shall be made (1) to the
holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution, or winding up)
to the Series B Preference Stock unless, prior thereto, the
holders of shares of Series B Preference Stock shall have
received $1,000 per share, plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or
not declared, to the date of such payment, provided that the
holders of shares of Series B Preference Stock shall be
entitled to receive an aggregate amount per share, subject
to the provision for adjustment hereinafter set forth, equal
to 1,000 times the aggregate amount to be distributed per
share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution, or winding up)
with the Series B Preference Stock, except distributions
made ratably on the Series B Preference Stock and all such
parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such
liquidation, dissolution, or winding up. In the event the
Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the aggregate amount to which
holders of shares of Series B Preference Stock were entitled
immediately prior to such event under the proviso in clause
(1) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which
is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding
immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger,
combination, or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any
such case each share of Series B Preference Stock shall at
the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate
amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount
set forth in the preceding sentence with respect to the
exchange or change of shares of Series B Preference Stock
shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series B
Preference Stock shall not be redeemable.
Section 9. Rank. The Series B Preference Stock shall
rank, with respect to the payment of dividends and the
distribution of assets, junior to all series of any class of
the Corporation's Preferred Stock and Preferred Stock A,
shall rank equally with all other series of the
Corporation's Preference Stock, and shall rank superior to
the Common Stock and any other class or series of junior
stock.
Section 10. Amendment. The Certificate of
Incorporation of the Corporation shall not be amended in any
manner which would materially alter or change the powers,
preferences, or special rights of the Series B Preference
Stock so as to affect them adversely without the affirmative
vote of the holders of at least a majority of the
outstanding shares of Series B Preference Stock, voting
together as a single class.
FIFTH. The number of shares with which this
Corporation will commence business is ten (10).
SIXTH. The names and places of residence of the
subscribers to the capital stock and the number of shares
subscribed for by each are as follows:
Name Residence No. of Shares
T. L. Croteau Wilmington, Delaware 8
M. A. Bruce Wilmington, Delaware 1
A. M. Hoven Wilmington, Delaware 1
SEVENTH. The Corporation is to have perpetual
existence.
EIGHTH. The private property of the stockholders
of the Corporation shall not be subject to the payment of
corporate debts to any extent whatever.
NINTH. In furtherance, and not in limitation of
the powers conferred by statute, the Board of Directors is
expressly authorized:
Except as otherwise set forth therein, to make,
alter or repeal the By-Laws of the Corporation.
To authorize and cause to be executed mortgages
and liens upon the real and personal property of the
Corporation.
To set apart out of any of the funds of the
Corporation available for dividends a reserve or
reserves for any proper purpose or to abolish any such
reserve in the manner in which it was created.
By resolution or resolutions, passed by a majority
of the whole Board to designate one or more committees,
each committee to consist of two or more of the
directors of the Corporation, which, to the extent
provided in said resolution or resolutions or in the By-
Laws of the Corporation, shall have and may exercise
the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and may
have power to authorize the seal of the Corporation to
be affixed to all papers which may require it. Such
committee or committees shall have such name or names
as may be stated in the By-Laws of the Corporation or
as may be determined from time to time by resolution
adopted by the Board of Directors.
When and as authorized by the affirmative vote of
the holders of a majority of the stock issued and
outstanding having voting power given at a
stockholders' meeting duly called for that purpose, or
when authorized by the written consent of the holders
of a majority of the voting stock issued and
outstanding, to sell, lease or exchange all of the
property and assets of the Corporation, including its
good will and its corporate franchises, upon such terms
and conditions and for such consideration, which may be
whole or in part shares of stock in, and/or other
securities of, any other corporation or corporations,
as its Board of Directors shall deem expedient and for
the best interests of the Corporation.
The Corporation may in its By-Laws confer powers
upon its Board of Directors in addition to the
foregoing, and in addition to the powers and
authorities expressly conferred upon it by statute.
Both stockholders and directors shall have power,
if the By-Laws so provide, to hold their meetings, and
to have one or more offices within or without the State
of Delaware, and to keep the books of the surviving
Corporation (subject to the provisions of the
statutes), outside of the State of Delaware at such
places as may be from time to time designated by the
Board of Directors.
TENTH. This Corporation reserves the right to
amend, alter, change or repeal any provision contained in
this Certificate of Incorporation in the manner now or
hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this
reservation.
ELEVENTH. Whenever a compromise or arrangement is
proposed between this Corporation and its creditors or any
class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the
application in a summary way of this Corporation or of any
creditor or stockholder thereof, or on the application of
any receiver or receivers appointed for this Corporation
under the provisions of Section 3883 of the Revised Code of
1915 of said State, or on the application of trustees in
dissolution or of any receiver or receivers appointed for
this Corporation under the provisions of Section 43 of the
General Corporation Law of the State of Delaware, order a
meeting of the creditors or class of creditors, and/or of
stockholders or class of stockholders of this Corporation,
as the case may be, to be summoned in such manner as the
said Court directs. If a majority in number representing
three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree
to any compromise or arrangement and to any reorganization
of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the Court to which
the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation,
as the case may be, and also on this Corporation.
TWELFTH. Part I. For the purposes of this
Article TWELFTH, the following terms shall have the meaning
hereinafter set forth:
(a) "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in the
General Rules and Regulations under the Securities
Exchange Act of 1934 as in effect on January 1, 1985.
(b) A person shall be a "Beneficial Owner" of
any Voting Stock:
(i) which such person or any of its
Affiliates or Associates (as herein defined)
beneficially owns, directly or indirectly; or
(ii) which such person or any of its
Affiliates or Associates has (A) the right to
acquire (whether such right is exercisable
immediately or only after the passage of time),
pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to
any agreement, arrangement or understanding; or
(iii) which are beneficially owned,
directly or indirectly, by any other person with
which such person or any of its Affiliates or
Associates has any agreement, arrangement or
understanding for the purpose of acquiring,
holding, voting or disposing of any shares of
Voting Stock.
(c) "Business Combination" shall mean any of the
following:
(i) any merger or consolidation of the
Corporation or any Subsidiary with (A) any
Interested Stockholder or (B) any other
corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or
consolidation would be, an Affiliate of an
Interested Stockholder; or
(ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition
(in one transaction or a series of transactions)
to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any
assets of the Corporation or any Subsidiary having
an aggregate Fair Market Value of $5,000,000 or
more but shall not include transactions between
the Corporation and its Subsidiaries; or
(iii) the issuance or transfer by the
Corporation or any subsidiary (in one transaction
or a series of transactions) of any securities of
the Corporation or any subsidiary to any
Interested Stockholder or any Affiliate of any
Interested Stockholder in exchange for cash,
securities or other property (or a combination
thereof) having an aggregate Fair Market Value of
$5,000,000 or more; or,
(iv) the adoption of any plan or
proposal for the liquidation or dissolution of the
Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of any
Interested Stockholder; or
(v) any reclassification of securities
(including any reverse stock split), or
recapitalization of the Corporation, statutory
share exchange, or any merger or consolidation of
the Corporation with any of its Subsidiaries or
any other transaction (whether or not with or into
or otherwise involving an Interested Stockholder)
which has the effect, directly or indirectly, of
increasing the proportionate share of the
outstanding shares of any class of equity or
convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned
by any Interested Stockholder or any Affiliate of
any Interested Stockholder.
(d) "Continuing Director" shall mean any member
of the Board of Directors of the Corporation (the
"Board") who is unaffiliated with, and not a nominee
of, the Interested Stockholder (as such term is used in
the context of a Business Combination) and was a member
of the Board prior to the time that the Interested
Stockholder became an Interested Stockholder and any
successor of a Continuing Director who is unaffiliated
with, and not a nominee of, the Interested Stockholder
and is designated to succeed a Continuing Director by
two-thirds of Continuing Directors then on the Board.
(e) "Fair Market Value" means:
(i) in the case of stock, the highest
closing sale price during the thirty-day period
immediately preceding the date in question of a
share of such stock on the Composite Tape for the
New York Stock Exchange-Listed Stocks, or, if such
stock is not quoted on the Composite Tape for the
New York Stock Exchange, or, if such stock is not
listed on such Exchange, on the principal United
States securities exchange registered under the
Securities Exchange Act of 1934 on which such
stock is listed, or, if such stock is not listed
on any such exchange, the highest closing bid
quotation with respect to a share of such stock
during the thirty-day period preceding the date in
question on the National Association of Securities
Dealers, Inc. Automated Quotations System
("NASDAQ") or, if NASDAQ is not then in use, any
other system then in use, or, if no such
quotations are available, the fair market value on
the date in question of a share of such stock as
determined by two-thirds of the Continuing
Directors in good faith; and
(ii) in the case of property other than
cash or stock, the fair market value of such
property on the date in question as determined by
a majority of the Continuing Directors in good
faith.
(f) "Institutional Voting Stock" shall mean any
class of Voting Stock which was issued to and continues
to be held solely by one or more insurance companies,
pension funds, commercial banks, savings banks and/or
similar financial institutions or institutional
investors.
(g) "Interested Stockholder" shall mean any
person (other than the Corporation or any Subsidiary)
who or which:
(i) is the Beneficial Owner, directly
or indirectly, of more than 10 percent of the
voting power of the then outstanding Voting Stock;
or
(ii) is an Affiliate of the Corporation
and at any time within the two-year period
immediately prior to the date in question, became
the Beneficial Owner, directly or indirectly, of
10 percent or more of the voting power of the then
outstanding Voting Stock; or
(iii) is an assignee of or has
otherwise succeeded to any shares of Voting Stock
which were at any time within the two-year period
immediately prior to the date in question
beneficially owned by any Interested Stockholder,
if such assignment or succession shall have
occurred in the course of a transaction or series
of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
For the purpose of determining whether a person is an
Interested Stockholder pursuant to this paragraph (g), the
number of shares of Voting Stock deemed to be outstanding
shall include shares deemed owned through application of
paragraph (b) of this Part I but shall not include any other
shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(h) In the event of any Business Combination in
which the Corporation survives the phrase
"consideration other than cash to be received" as used
in Sections (a) and (b) of Part II of this Article
TWELFTH shall include the shares of Common Stock and/or
the shares of any other class of outstanding Voting
Stock retained by the holders of such shares.
(i) A "person" shall mean any individual, firm,
partnership, trust, corporation or other entity.
(j) "Subsidiary" means any corporation of which a
majority of any class of equity security is owned,
directly or indirectly, by the Corporation; provided,
however, that for the purposes of the definition of
Interested Stockholder set forth in paragraph (g) of
this Part I, the term "Subsidiary" shall mean only a
corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the
Corporation.
(k) "Voting Stock" shall mean each share of stock
of the Corporation generally entitled to vote in
elections of directors.
The Continuing Directors of the Corporation shall have
the power and duty to determine, for the purposes of this
Article TWELFTH, on the basis of information known to them
after reasonable inquiry, all facts necessary to determine
the applicability of the various provisions of this Article
TWELFTH, including (a) whether a person is an Interested
Stockholder, (b) the number of shares of Voting Stock
beneficially owned by any person, (c) whether a person is an
Affiliate or Associate of another, and (d) whether a class
of Voting Stock is Institutional Voting Stock. Any such
determination made in good faith shall be binding and
conclusive on all parties.
PART II.
Except as otherwise expressly provided in Part III of
this Article TWELFTH and in addition to any other provision
of law and as may otherwise be set forth in the Certificate
of Incorporation, the consummation of any Business
Combination shall require that all of the following
conditions shall have been met:
(a) The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of the
Business Combination of consideration other than cash
to be received per share by holders of Common Stock in
such Business Combination shall be at least equal to
the highest of the following:
(i) (if applicable) the highest per
share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid
by the Interested Stockholder for any shares of
Common Stock acquired by it (A) within the two-
year period immediately prior to the first public
announcement of the proposal of the Business
Combination (the "Announcement Date") or (B) in
the transaction in which it became an Interested
Stockholder, whichever is highest;
(ii) the Fair Market Value per share of
Common Stock on the Announcement Date or on the
date on which the Interested Stockholder became an
Interested Stockholder (such latter date is
referred to in this Article TWELFTH as the
"Determination Date"), whichever is higher; and
(iii) (if applicable) the price per
share equal to the Fair Market Value per share of
Common Stock determined pursuant to paragraph (ii)
above, multiplied by the ratio of (A) the highest
per share price (including any brokerage
commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Stockholder
for any shares of Common Stock acquired by it
within the two-year period immediately prior to
the Announcement Date to (B) the Fair Market Value
per share of Common Stock on the first day in such
two-year period upon which the Interested
Stockholder acquired any shares of Common Stock.
(b) The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of the
Business Combination of consideration other than cash
to be received per share by holders of shares of any
class of outstanding Voting Stock other than Common
Stock (and other than Institutional Voting Stock),
shall be at least equal to the highest of the following
(it being intended that the requirements of this
paragraph (b) shall be required to be met with respect
to every class of outstanding Voting Stock, whether or
not the Interested Stockholder has previously acquired
any shares of a particular class of Voting Stock):
(i) (if applicable) the highest per
share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid
by the Interested Stockholder for any shares of
such class of Voting Stock acquired by it (A)
within the two-year period immediately prior to
the Announcement Date or (B) in the transaction in
which it became an Interested Stockholder,
whichever is higher;
(ii) (if applicable) the highest
preferential amount per share to which the holders
of shares of such class of Voting Stock are
entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up
of the Corporation;
(iii) the Fair Market Value per share of
such class of Voting Stock on the Announcement
Date or on the Determination Date, whichever is
higher; and
(iv) (if applicable) the price per share
equal to the Fair Market Value per share of such
class of Voting Stock determined pursuant to
paragraph (b)(iii) above, multiplied by the ratio
of (A) the highest per share price (including any
brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested
Stockholder for any shares of such class of Voting
Stock acquired by it within the two-year period
immediately prior to the Announcement Date to (B)
the Fair Market Value per share of such class of
Voting Stock on the first day in such two-year
period upon which the Interested Stockholder
acquired any shares of such class of Voting Stock.
(c) The consideration to be received by holders of
a particular class of outstanding Voting Stock
(including Common Stock) shall be in cash or in the
same form as the Interested Stockholder has previously
paid for shares of such class of Voting Stock. If the
Interested Stockholder has paid for shares of any class
of Voting Stock with varying forms of consideration,
the form of consideration for such class of Voting
Stock shall be either cash or the form used to acquire
the largest number of shares of such class of Voting
Stock previously acquired by it.
(d) After such Interested Stockholder has become
an Interested Stockholder and prior to the consummation
of such Business Combination:
(i) except as approved by two-thirds of
the Continuing Directors, there shall have been no
failure to declare and pay at the regular date
therefor any full quarterly dividends (whether or
not cumulative) on the outstanding Preferred
Stock;
(ii) there shall have been (A) no
reduction in the annual rate of dividends paid on
the Common Stock (except as necessary to reflect
any subdivision of the Common Stock), except as
approved by two-thirds of the Continuing
Directors, and (B) an increase in such annual rate
of dividends as necessary to reflect any reclassi-
fication (including any reverse stock split),
recapitalization, reorganization or any similar
transaction which has the effect of reducing the
number of outstanding shares of the Common Stock,
unless the failure so to increase such annual rate
is approved by two-thirds of the Continuing
Directors; and
(iii) such Interested Stockholder shall
have not become the beneficial owner of any
additional shares of Voting Stock except as part
of the transaction which results in such
Interested Stockholder becoming an Interested
Stockholder.
(e) After such Interested Stockholder has become
an Interested Stockholder, such Interested Stockholder
shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder),
of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in
anticipation of or in connection with such Business
Combination or otherwise.
(f) A proxy or information statement describing
the proposed Business Combination and containing the
information specified for proxy or information
statements under the Securities Exchange Act of 1934
and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or
regulations) shall be mailed to stockholders of the
Corporation at least thirty days prior to the
consummation of such Business Combination (whether or
not such proxy or information statement is required to
be mailed pursuant to such Act or subsequent
provisions).
PART III.
Unless the Business Combination shall have been
approved by two-thirds of the Continuing Directors, (a) the
provisions of Part II of this Article TWELFTH shall be
applicable to each particular Business Combination, and (b)
any such Business Combination shall be approved by the
affirmative vote of at least four-fifths of the voting power
of all shares of Voting Stock (considered for purposes of
this Article TWELFTH as one class, it being understood that
for purposes of this Article TWELFTH, each share of Voting
Stock shall have the number of votes granted to it pursuant
to Article FOURTH of the Certificate of Incorporation).
PART IV.
Nothing contained in this Article TWELFTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
THIRTEENTH. (a) The business and affairs of the
Corporation shall be managed by the Board of Directors
consisting of not less than six nor more than fifteen
persons. The exact number of directors within the
limitations specified in the preceding sentence shall be
fixed from time to time by the Board of Directors pursuant
to a resolution adopted by two-thirds of the Continuing
Directors. The directors need not be elected by ballot
unless required by the By-Laws of the Corporation.
The Board of Directors shall be divided into three
classes as nearly equal in number as may be. The initial
term of office of each director in the first class shall
expire at the annual meeting of stockholders in 1986; the
initial term of office of each director in the second class
shall expire at the annual meeting of stockholders in 1987;
and the initial term of office of each director in the third
class shall expire at the annual meeting of stockholders in
1988. At each annual election commencing at the annual
meeting of stockholders of 1986, the successors to the class
of directors whose term expires at that time shall be
elected to hold office for a term of three years to succeed
those whose term expires, so that the term of one class of
directors shall expire each year. Each director shall hold
office for the term for which he is elected or appointed and
until his successor shall be elected and qualified or until
his death, or until he shall resign or be removed.
In the event of any increase or decrease in the
authorized number of directors, (i) each director then
serving as such shall nevertheless continue as a director of
the class of which he is a member until the expiration of
his current term, or his earlier resignation, removal from
office or death, and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall
be apportioned by the Board of Directors among the three
classes of directors so as to maintain such classes as
nearly equal in number as may be.
(b) Newly created directorships resulting from any
increase in the authorized number of directors or any
vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from
office or other cause shall be filled by a two-thirds vote
of the Continuing Directors then in office, or a sole
remaining director, although less than a quorum, and
directors so chosen shall hold office for a term expiring at
the annual meeting of stockholders at which the term of the
class to which they have been elected expires. If one or
more directors shall resign from the Board effective as of a
future date, such vacancy or vacancies shall be filled
pursuant to the provisions hereof, and such new director
ship(s) shall become effective when such resignation or
resignations shall become effective, and each director so
chosen shall hold office as herein provided in the filling
of other vacancies.
(c) Any director or the entire Board of Directors may
be removed; however, such removal must be for cause and must
be approved as set forth in this Section. Except as may
otherwise be provided by law, cause for removal shall be
construed to exist only if: (i) the director whose removal
is proposed has been convicted, or where a director was
granted immunity to testify where another has been
convicted, of a felony by a court of competent jurisdiction
and such conviction is no longer subject to direct appeal;
(ii) such director has been grossly negligent in the
performance of his duties to the Corporation; or (iii) such
director has been adjudicated by a court of competent
jurisdiction to be mentally incompetent, which mental
incompetency directly affects his ability as a director of
the Corporation, and such adjudication is no longer subject
to direct appeal.
Removal for cause, as cause is defined above, must be
approved by at least a majority vote of the shares of the
Corporation then entitled to be voted at an election for
that director, and the action for removal must be brought
within three months of such conviction or adjudication.
Notwithstanding the foregoing, and except as otherwise
provided by law, in the event that Preferred Stock of the
Corporation is issued and holders of any one or more series
of such Preferred Stock are entitled, voting separately as a
class, to elect one or more directors of the Corporation to
serve for such terms as set forth in the Certificate of
Incorporation, the provisions of this Article THIRTEENTH,
Section (c), shall also apply, in respect to the removal of
a director or directors so elected to the vote of the
holders of the outstanding shares of that class and not to
the vote of the outstanding shares as a whole.
(d) Any directors elected pursuant to special voting
rights of one or more series of Preferred Stock, voting as a
class, shall be excluded from, and for no purpose be counted
in, the scope and operation of the foregoing provisions,
unless expressly stated.
FOURTEENTH: The Board of Directors, in evaluating
any proposal by another party to (a) make a tender or
exchange offer for any securities of the Corporation, (b)
effect a Business Combination (as defined in Article
TWELFTH), or (c) effect any other transaction having an
effect upon the properties, operations or control of the
Corporation similar to a tender or exchange offer or
Business Combination, as the case may be, whether by an
Interested Stockholder (as defined in Article TWELFTH or
otherwise, may, in connection with the exercise of its
judgment as to what is in the best interests of the
Corporation and its stockholders, give due consideration to
the following:
(i) the consideration to be received by the
Corporation or its stockholders in connection with such
transaction in relation not only to the then current
market price for the outstanding capital stock of the
Corporation, but also to the market price for the
capital stock of the Corporation over a period of
years, the estimated price that might be achieved in a
negotiated sale of the Corporation as a whole or in
part through orderly liquidation, the premiums over
market price for the securities of other corporations
in similar transactions, current political, economic
and other factors bearing on securities prices and the
Corporation's financial condition, future prospects and
future value as an independent Corporation;
(ii) the character, integrity and business
philosophy of the other party or parties to the
transaction and the management of such party or
parties;
(iii) the business and financial conditions and
earnings prospects of the other party or parties to the
transaction, including, but not limited to, debt
service and other existing or likely financial
obligations of such party or parties, the intention of
the other party or parties to the transaction regarding
the use of the assets of the Corporation to finance the
acquisition, and the possible effect of such conditions
upon the Corporation and its Subsidiaries and the other
elements of the communities in which the Corporation
and its Subsidiaries operate or are located;
(iv) the projected social, legal and economic
effects of the proposed action or transaction upon the
Corporation or its Subsidiaries, its employees,
suppliers, customers and others having similar
relationships with the Corporation, and the communities
in which the Corporation and its Subsidiaries do
business;
(v) the general desirability of the continuance of
the Corporation as an independent entity; and
(vi) such other factors as the Continuing
Directors may deem relevant.
FIFTEENTH. Notwithstanding anything to the
contrary contained in this Certificate of Incorporation or
the By-Laws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, this
Certificate of Incorporation or the By-Laws of the
Corporation), the affirmative vote of the holders of at
least four-fifths of the voting power of the then
outstanding Voting Stock shall be required to amend, alter,
change or repeal, or to adopt any provision inconsistent
with, Articles TWELFTH, THIRTEENTH, FOURTEENTH, FIFTEENTH
and SIXTEENTH of this Certificate of Incorporation, provided
that such four-fifths vote shall not be required for any
amendment, alteration, change or repeal recommended to the
stockholders by two-thirds of the Continuing Directors, as
defined in Article TWELFTH.
SIXTEENTH. Any action required or permitted to be
taken by the stockholders of the Corporation must be
effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders. Special
meetings of stockholders of the Corporation may be called
only by the Chairman or President and shall be called by the
Chairman, President or the Secretary upon the written
request of two-thirds of the Continuing Directors.
Stockholders of the Corporation shall not be entitled to
request a special meeting of stockholders.
SEVENTEENTH. No director of the Corporation shall
be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (a) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (b)
for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c)
under Section 174 of the Delaware General Corporation Law,
or (d) for any transaction from which the director derived
an improper personal benefit.
IN WITNESS WHEREOF, MDU Resources Group, Inc. has
caused its corporate seal to be hereunto affixed, and this
Restated Certificate of Incorporation to be signed by Martin
A. White, its President and Chief Executive Officer, and
Lester H. Loble, II, its Secretary, this 13th day of May,
1999.
MDU RESOURCES GROUP, INC.
ATTEST:
/s/ Lester H. Loble, II By: /s/ Martin A. White
Lester H. Loble, II Martin A. White
Secretary President and
Chief Executive Officer
STATE OF NORTH DAKOTA)
) ss.
COUNTY OF BURLEIGH )
BE IT REMEMBERED that on this 13th day of May, 1999,
before me, Bruce J. Gallagher, a Notary Public for the State
of North Dakota, personally appeared Martin A. White and
Lester H. Loble, II, personally known by me to be the
President and Chief Executive Officer and the Secretary,
respectively, of MDU Resources Group, Inc., and they
severally acknowledged that the execution of said
Certificate is their act and deed and the act and deed of
said corporation and that the facts therein stated are true.
Given under my hand and seal of office the day and year
aforesaid.
/s/ Bruce J. Gallagher
Bruce J. Gallagher, Notary Public
Burleigh County, North Dakota
(NOTARY SEAL) My Commission expires: 8-23-01
MDU RESOURCES GROUP, INC.
TO
THE BANK OF NEW YORK
(Formerly IRVING TRUST COMPANY)
and
DOUGLAS J. MacINNES
Trustees
INSTRUMENT EFFECTING A CHANGE
IN INDIVIDUAL TRUSTEE
Dated as of April 30, 1999
Supplemental to Indenture of Mortgage
dated as of May 1, 1939,
as restated in the Forty-Fifth Supplemental Indenture
dated as of April 21, 1992
THIS INSTRUMENT, dated as of the 30th day of April, 1999,
made by and among MDU RESOURCES GROUP, INC. (formerly MONTANA-
DAKOTA UTILITIES CO.), a corporation organized and existing under
the laws of the State of Delaware, the post-office address of
which is 918 East Divide Avenue, P.O. Box 5650, Bismarck, North
Dakota 58506-5650 (hereinafter sometimes called the "Company"),
THE BANK OF NEW YORK (formerly IRVING TRUST COMPANY), a
corporation organized and existing under the laws of the State of
New York and having its principal office at, and the post-office
address of which is, 101 Barclay Street, New York, New York 10286
(hereinafter sometimes called the "Corporate Trustee"), and
DOUGLAS J. MacINNES, whose post-office address is 1784 W.
McGalliard Avenue, Hamilton, New Jersey 08610.
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered
to The New York Trust Company and A. C. Downing, as Trustees, its
Indenture of Mortgage dated as of May 1, 1939 (which Indenture is
hereinafter referred to as the "Original Indenture"), to secure
the payment of the principal of and the interest and premium (if
any) on all Bonds at any time issued and outstanding thereunder,
and to declare the terms and conditions upon which Bonds are to
be issued under the Original Indenture; and, in accordance with
the terms of the Original Indenture, (First), (Second), (Third),
(Fourth), (Fifth), (Sixth), (Seventh), (Eighth), (Ninth),
(Tenth), (Eleventh), (Twelfth), (Thirteenth), (Fourteenth),
(Fifteenth), (Sixteenth), (Seventeenth), (Eighteenth),
(Nineteenth), (Twentieth), (Twenty-First), (Twenty-Second),
(Twenty-Third), (Twenty-Fourth), (Twenty-Fifth), (Twenty-Sixth),
(Twenty-Seventh), (Twenty-Eighth), (Twenty-Ninth), (Thirtieth),
(Thirty-First), (Thirty-Second), (Thirty-Third), (Thirty-Fourth),
(Thirty-Fifth), (Thirty-Sixth), (Thirty-Seventh), (Thirty-
Eighth), (Thirty-Ninth), (Fortieth), (Forty-First), (Forty-
Second), (Forty-Third), (Forty-Fourth), (Forty-Fifth), (Forty-
Sixth), (Forty-Seventh) and (Forty-Eighth) Supplemental
Indentures dated, respectively, as of May 1, 1940, August 1,
1940, January 1, 1941, May 1, 1942, June 1, 1942, April 1, 1945,
September 1, 1945, October 1, 1947, October 2, 1947, November 1,
1947, August 1, 1948, December 1, 1948, March 26, 1951, April 1,
1951, June 1, 1951, June 2, 1951, June 1, 1954, September 1,
1954, November 1, 1958, December 1, 1958, September 1, 1962,
December 1, 1962, May 1, 1964, July 1, 1964, March 1, 1966, June
1, 1966, September 1, 1968, November 1, 1968, August 1, 1970,
October 1, 1970, August 1, 1972, October 15, 1972, August 1,
1974, October 15, 1974, October 1, 1976, August 10, 1977,
September 15, 1978, May 15, 1979, December 1, 1982, September 5,
1985, November 15, 1985, November 15, 1986, May 15, 1991, October
1, 1991, April 21, 1992, June 1, 1992, June 1, 1992 and June 1,
1992, supplemental to the Original Indenture, have heretofore
been entered into between the Company and The New York Trust
Company, or one of its successors as Corporate Trustee, Chemical
Bank New York Trust Company, Chemical Bank or The Bank of New
York (either under that name or its former name, Irving Trust
Company), and A. C. Downing or one of his successors as
Individual Trustee, Henry J. Gertcher, Jr., John H. Baile, K.
Mehl, S. Lasher, D. W. May, J. A. Vaughan, Joseph J. Arney or W.
T. Cunningham as Individual Trustee; and
WHEREAS, Part II of the (Forty-Fifth) Supplemental Indenture
contains a Restatement of the Original Indenture, as supplemented
to April 21, 1992 (hereinafter called the "Restated Indenture");
and
WHEREAS, Section 13.06 of the Restated Indenture, provides
that the Company and the Corporate Trustee at any time, by an
instrument in writing executed by them jointly, may remove the
Individual Trustee under the Original Indenture, or his
successor, and may appoint a successor to the Individual Trustee
so removed; and
WHEREAS, the Company and the Corporate Trustee now desire to
exercise their joint right to remove W. T. Cunningham as
Individual Trustee and to appoint a successor Individual Trustee;
NOW, THEREFORE, THIS INDENTURE WITNESSETH: The Company and
the Corporate Trustee, by this instrument hereby remove W. T.
Cunningham as the Individual Trustee under the Original Indenture
and under each of said Supplemental Indentures, supplemental
thereto, and do hereby appoint Douglas J. MacInnes as successor
Individual Trustee under the Original Indenture and under each of
said Supplemental Indentures to succeed said W. T. Cunningham as
Individual Trustee, all effective as of the close of business on
April 30, 1999.
The undersigned, Douglas J. MacInnes, does hereby accept his
appointment by the Company and by the Corporate Trustee as
successor Individual Trustee under the Original Indenture and
under each of said Supplemental Indentures, supplemental thereto,
to succeed said W. T. Cunningham, as Individual Trustee.
Douglas J. MacInnes, without any further act, deed or
conveyance, shall be and hereby is fully vested with all of the
estates, properties, rights, powers and trusts of his
predecessor, W. T. Cunningham, as Individual Trustee, in the
trust created by the Original Indenture as amended and
supplemented by said Supplemental Indentures, with like effect as
if originally named as original Trustee in the Original Indenture
and in each of said Supplemental Indentures.
This instrument may be simultaneously executed in any number
of counterparts, and all of said counterparts executed and
delivered each as an original shall constitute but one and the
same instrument.
IN WITNESS WHEREOF, the Company and the Corporate Trustee
have caused this instrument to be executed by their proper
officers thereunto duly authorized and their respective corporate
seals to be hereto duly affixed, and Douglas J. MacInnes has
hereunto set his hand and seal, all as of the day and year first
above written.
MDU RESOURCES GROUP, INC.
By /s/ WARREN L. ROBINSON
Warren L. Robinson
Vice President, Treasurer and
Chief Financial Officer
and /s/ DOUGLAS W. SCHULZ
Douglas W. Schulz
Assistant Secretary
Executed by MDU Resources
Group, Inc. in the presence
of:
/s/ SHEILA GLASS
/s/ CYNTHIA J. NORLAND
THE BANK OF NEW YORK,
as Corporate Trustee
By /s/ MICHAEL CULHANE
Vice President
Executed by The Bank of
New York, as Corporate
Trustee, in the presence of: and /s/ SUZANNE J. MACDONALD
Vice President
/s/ MARYBETH LEWICKI
/s/ ROBERT A. MASSIMILLO
/s/ DOUGLAS J. MACINNES [L.S.]
Douglas J. MacInnes
Executed by Douglas J.
MacInnes in the presence of:
/s/ MARYBETH LEWICKI
/s/ ROBERT A. MASSIMILLO
Receipt of an executed counterpart of the foregoing instrument is
hereby acknowledged.
/s/ W. T. CUNNINGHAM
W.T. CUNNINGHAM, as resigning
Individual Trustee
Dated April 30, 1999
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 30th day of April, 1999, before me, a Notary
Public within and for said County, personally appeared William T.
Cunningham, to me known to be the resigning Individual Trustee
described in and who executed the foregoing instrument and
acknowledged that he executed the same as his free act and deed.
/s/ WILLIAM J. CASSELS
WILLIAM J. CASSELS
Notary Public State of New York
No. 01CA5027729
Qualified in Bronx County
Certificate filed in New York
County
Commission Expires May 16, 2000
STATE OF NORTH DAKOTA )
) ss.:
COUNTY OF BURLEIGH )
On this 30th day of April, 1999, before me, a Notary
Public within and for said County, personally appeared Warren L.
Robinson and Douglas W. Schulz to me personally known to be
respectively the Vice President, Treasurer and Chief Financial
Officer and Assistant Secretary of MDU Resources Group, Inc., the
corporation which executed the within instrument, and who, being
each by me duly sworn, did say that they reside respectively at
1909 North Grandview Lane, Bismarck, N.D. 58501 and 2409 Jackson
Avenue, Bismarck, N.D. 58501; that they are respectively the Vice
President, Treasurer and Chief Financial Officer and Assistant
Secretary of MDU Resources Group, Inc., the corporation named in
the foregoing instrument; that the seal affixed to said
instrument is the corporate seal of said corporation; that said
instrument was signed and sealed in behalf of said corporation by
authority of its Board of Directors; and said Warren L. Robinson
and Douglas W. Schulz acknowledged to me said instrument to be
the free act and deed of said corporation, and that said
corporation executed the same.
/s/ SHARON L. SABO
SHARON L. SABO
Notary Public, STATE OF NORTH DAKOTA
My Commission Expires FEB. 24, 2000
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 30th day of April, 1999, before me, a Notary
Public within and for said County, personally appeared
Michael Culhane and Suzanne J. MacDonald, to me
personally known to be respectively a Vice President
and a Vice President of The Bank of New York, the
corporation which executed the within instrument, and who, being
each by me duly sworn, did say that they reside respectively at
Brooklyn, New York and New York, New York; that they
are respectively a Vice President and a
Vice President of The Bank of New York, the corporation
named in the foregoing instrument; that the seal affixed to said
instrument is the corporate seal of said corporation; that said
instrument was signed and sealed in behalf of said corporation by
authority of its Board of Directors; and said
Michael Culhane and Suzanne J. MacDonald
acknowledged to me said instrument to be the free act and deed of
said corporation, and that said corporation executed the same.
/s/ WILLIAM J. CASSELS
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Michael Culhane and Suzanne J. MacDonald, being
duly sworn, on oath say that they are respectively a
Vice President and a Vice President of The
Bank of New York, the Corporate Trustee named in the foregoing
instrument; that each of them has knowledge of the facts in
relation to the making and execution of said instrument, and that
said instrument is made in good faith and without any design to
hinder, delay or defraud creditors.
/s/ MICHAEL CULHANE
/s/ SUZANNE J. MACDONALD
Subscribed and sworn to
before me this 30th day of
April, 1999.
/s/ WILLIAM J. CASSELS
WILLIAM J. CASSELS
Notary Public State of New York
No. 01CA5027729
Qualified in Bronx County
Certificate filed in New York County
Commission Expires May 16, 2000
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 30th day of April, 1999, before me, a Notary
Public within and for said County, personally appeared Douglas J.
MacInnes, to me known to be the Individual Trustee described in
and who executed the foregoing instrument and acknowledged that
he executed the same as his free act and deed.
/s/ WILLIAM J.CASSELS
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Douglas J. MacInnes, being duly sworn, on oath says that he
is the Individual Trustee named in the foregoing instrument; that
he has knowledge of the facts in relation to the making and
execution of said instrument; and that said instrument is made in
good faith and without any design to hinder, delay or defraud
creditors.
/s/ DOUGLAS J. MACINNES
Douglas J. MacInnes
Subscribed and sworn to before
me this 30th day of April, 1999.
/s/ WILLIAM J. CASSELS
WILLIAM J. CASSELS
Notary Public State of New York
No. 01CA5027729
Qualified in Bronx County
Certificate filed in New York County
Commission Expires May 16, 2000
MORTGAGOR'S RECEIPT
The undersigned mortgagor company, MDU RESOURCES GROUP,
INC., acknowledges that it has received from the Trustees named
in the foregoing and attached instrument, without cost to the
mortgagor and at the time of the execution of said instrument, a
correct copy of the original thereof signed by the mortgagor and
with all witnesses and acknowledgments shown thereon.
MDU RESOURCES GROUP, INC.
By /s/ DOUGLAS W. SCHULZ
Douglas W. Schulz
Assistant Secretary
Dated: May 3, 1999
MDU RESOURCES GROUP, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Twelve Months Year
Ended Ended
June 30, 1999 December 31, 1998
(In thousands of dollars)
Earnings Available for
Fixed Charges:
Net Income per Consolidated
Statements of Income $ 52,617 $ 34,107
Income Taxes 31,238 17,485
83,855 51,592
Rents (a) 1,800 1,749
Interest (b) 34,178 31,587
Total Earnings Available
for Fixed Charges $119,833 $ 84,928
Preferred Dividend Requirements $ 775 $ 777
Ratio of Income Before Income
Taxes to Net Income 159% 151%
Preferred Dividend Factor on
Pretax Basis 1,232 1,173
Fixed Charges (c) 35,978 33,336
Combined Fixed Charges and
Preferred Stock Dividends $ 37,210 $ 34,509
Ratio of Earnings to Fixed
Charges 3.3x 2.5x
Ratio of Earnings to
Combined Fixed Charges
and Preferred Stock Dividends 3.2x 2.5x
(a) Represents portion (33 1/3%) of rents which is estimated to
approximately constitute the return to the lessors on their
investment in leased premises.
(b) Represents interest and amortization of debt discount and
expense on all indebtedness and excludes amortization of gains
or losses on reacquired debt which, under the Uniform System of
Accounts, is classified as a reduction of, or increase in,
interest expense in the Consolidated Statements of Income.
Also includes carrying costs associated with natural gas
available under a repurchase agreement with Frontier Gas
Storage Company as more fully described in Notes to
Consolidated Financial Statements. In May 1999, the
Company purchased the remaining natural gas subject to
the repurchase commitment thereby extinguishing the
repurchase commitment.
(c) Represents rents and interest, both as defined above.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED
STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000067716
<NAME> MDU RESOURCES GROUP, INC.
<MULTIPLIER> 1000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 510718
<OTHER-PROPERTY-AND-INVEST> 657554
<TOTAL-CURRENT-ASSETS> 285049
<TOTAL-DEFERRED-CHARGES> 97319
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1550640
<COMMON> 54054
<CAPITAL-SURPLUS-PAID-IN> 312040
<RETAINED-EARNINGS> 214270
<TOTAL-COMMON-STOCKHOLDERS-EQ> 580364
1600
15000
<LONG-TERM-DEBT-NET> 473174
<SHORT-TERM-NOTES> 102
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 2274
100
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 478026
<TOT-CAPITALIZATION-AND-LIAB> 1550640
<GROSS-OPERATING-REVENUE> 549313
<INCOME-TAX-EXPENSE> 18167
<OTHER-OPERATING-EXPENSES> 488204
<TOTAL-OPERATING-EXPENSES> 506371
<OPERATING-INCOME-LOSS> 42942
<OTHER-INCOME-NET> 4833
<INCOME-BEFORE-INTEREST-EXPEN> 47775
<TOTAL-INTEREST-EXPENSE> 17258
<NET-INCOME> 30517
386
<EARNINGS-AVAILABLE-FOR-COMM> 30131
<COMMON-STOCK-DIVIDENDS> 21443
<TOTAL-INTEREST-ON-BONDS> 4865
<CASH-FLOW-OPERATIONS> 59338
<EPS-BASIC> .57
<EPS-DILUTED> .56
</TABLE>
