SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
NORTHERN STATES POWER COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
[LOGO] NSP
March 8, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Northern States Power Company on April 28, 1999, at 10:00 a.m., at Minneapolis
Convention Center, 1301 Second Avenue South, Minneapolis, Minnesota.
The matters to be voted on at the meeting are described in the Notice of
Annual Meeting of Shareholders and Proxy Statement on the following pages. In
addition to these matters, we will also report on our current operations and on
our future plans. After the voting, you will have an opportunity to ask
questions.
We are pleased to inform you that this year there are three methods
available for voting your proxy. You can mail your proxy card as you have in the
past, or you can vote by telephone or over the Internet. Instructions for voting
by telephone or the Internet are included on the proxy form.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE VOTE YOUR
PROXY PROMPTLY. YOUR VOICE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU
HOLD.
IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE BRING THE ADMISSION
TICKET ATTACHED TO THE ENCLOSED PROXY FORM. A COMPLIMENTARY PARKING PASS WITH
PARKING LOCATION INSTRUCTIONS IS ALSO ATTACHED TO THE PROXY FORM. REFRESHMENTS
WILL BE SERVED FROM 8:45-9:45 A.M. AND NSP'S REDDY KILOWATT AND REDDY FLAME
WILL BE AVAILABLE FOR PHOTOGRAPHS WITH SHAREHOLDERS.
Our annual meetings are helpful in maintaining communications and
understanding between our Board of Directors and shareholders. We hope you will
join us.
Sincerely,
/s/ James J. Howard
James J. Howard
CHAIRMAN, PRESIDENT &
CHIEF EXECUTIVE OFFICER
<PAGE>
NORTHERN STATES POWER COMPANY
(A MINNESOTA CORPORATION)
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
The Annual Meeting of Shareholders of NORTHERN STATES POWER COMPANY, a
Minnesota corporation, will be held on Wednesday, April 28, 1999, at 10:00 a.m.,
at Minneapolis Convention Center, 1301 Second Avenue South, Minneapolis,
Minnesota for the following purposes:
(1) To elect 3 directors to Class I until the Annual Meeting of
Shareholders in 2002;
(2) To ratify the appointment of PricewaterhouseCoopers LLP, Certified
Public Accountants, as independent auditors of the Company for 1999;
(3) To vote on a proposal to amend the Company's Restated Articles of
Incorporation to remove limitations on the Company's issuance of
unsecured indebtedness;
(4) To vote on a proposal to amend the Company's Restated Articles of
Incorporation to remove provisions relating to series of preferred
stock that have been redeemed; and
(5) To transact such other business as may properly come before the
meeting or any adjournment thereof.
If Item 3 is adopted at the Annual Meeting, each preferred shareholder of
the Company will be entitled to receive a special cash dividend of $1.00 for
each share held as of March 1, 1999, the record date fixed for the Annual
Meeting.
Under Section 302A.471 of the Minnesota Business Corporation Act, holders
of NSP preferred stock have the right to dissent from the proposal to amend the
Restated Articles of Incorporation to remove limitations on the issuance of
unsecured indebtedness and, if such amendment is approved, to obtain payment of
the fair value of their shares. Sections 302A.471 and 302A.473 of the Minnesota
Business Corporation Act are attached in full as Annex A to the accompanying
Proxy Statement, which also includes a description of the procedure to be
followed under those sections by a preferred stockholder wishing to dissent.
Shareholders who own stock at the close of business on March 1, 1999, will
be entitled to notice of, and to vote at, this Annual Meeting.
Minneapolis, Minnesota By order of the Board of Directors
March 8, 1999 John P. Moore, Jr.
SECRETARY
PLEASE REMEMBER TO VOTE YOUR PROXY
<PAGE>
NORTHERN STATES POWER COMPANY
414 NICOLLET MALL
MINNEAPOLIS, MINNESOTA 55401
PROXY STATEMENT
INTRODUCTION
Your Board of Directors is sending you this proxy statement in connection
with the solicitation of your proxy for use at the Annual Meeting. When you
vote by proxy, you appoint Edward J. McIntyre, Gary R. Johnson and John P.
Moore, Jr. as your representatives at the Annual Meeting. Edward J. McIntyre,
Gary R. Johnson and John P. Moore, Jr. will vote your shares, as you have
instructed them on the proxy form, at the Annual Meeting. This way, your shares
will be voted whether or not you attend the Annual Meeting. Even if you plan to
attend the meeting, it is a good idea to vote by proxy in advance of the
meeting just in case your plans change.
If an issue comes up for vote at the meeting that is not covered by your
proxy, Edward J. McIntyre, Gary R. Johnson and John P. Moore, Jr. will vote
your shares, under your proxy, in accordance with their best judgment.
VOTING PROCEDURES; REVOCATION OF PROXY
You may vote by mail, in person, by telephone or by the internet. To vote
by mail, simply complete and sign the proxy form and mail it in the enclosed,
prepaid and preaddressed envelope. If you mark your voting instructions on the
proxy form, your shares will be voted as you instruct. If you return a signed
form but do not provide voting instructions, your shares will be voted FOR the
two named nominees and FOR each of the other items indicated on the prior page.
If you wish to vote in person, we will pass out written ballots at the
meeting. If you hold your shares in street name (i.e., they are held by your
broker in an account for you), you must request a legal proxy from your broker
in order to vote at the meeting.
If you wish to vote by telephone or the internet, please follow the
instructions included on the enclosed proxy form. If you vote by telephone or
the internet, it is not necessary to mail in your proxy form. Telephone and
internet voting is available to shareholders who hold their shares in the
Employee Stock Ownership Plan (ESOP) and the Dividend Reinvestment and Stock
Purchase Plan (DRIP).
If you change your mind after voting your proxy, you can revoke your proxy
and change your vote at any time before the polls close at the meeting. You can
revoke your proxy by either signing another proxy with a later date, voting a
second time by telephone or by the internet, or voting again at the meeting.
Alternatively, you may provide a written statement to the Company (attention,
John P. Moore, Jr., Secretary) of your intention to revoke your proxy.
RECORD DATE; NUMBER OF VOTES
If you owned shares of the Company's stock at the close of business on
March 1, 1999, you are entitled to vote at the meeting.
If you owned common stock, you are entitled to one vote per common share
upon each matter presented at the Annual Meeting. If you owned preferred stock
(other than the $3.60 Series), you also are entitled to one vote per share of
preferred stock upon each matter presented at the Annual Meeting. If you owned
shares of the $3.60 Series of preferred stock, you are entitled to three votes
per share of $3.60 series preferred upon each matter presented at the Annual
Meeting.
On March 1, 1999, there were _______ shares of common stock, _______ shares
of $3.60 Series preferred stock and _______ shares of other NSP preferred stock
outstanding. First Trust N.A., the
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<PAGE>
Trustee for our ESOP, holds approximately ____% of the Company's common stock
for the benefit of ESOP participants, none of whom has a total beneficial
interest of more than ____% of the Company's outstanding voting securities. We
also have been notified by J.P. Morgan & Co. Incorporated that it holds
approximately ____% of our common stock. No other person holds of record or, to
our knowledge, beneficially owns more than 5% of any class of our outstanding
voting securities.
EXPENSES OF PROXY SOLICITATION
We will pay all costs associated with preparing, assembling and mailing the
proxy materials and proxy statements. We also will reimburse brokers, nominees,
fiduciaries and other custodians for their expenses in forwarding proxy
materials to shareholders. Officers and other employees of the Company may
solicit proxies by mail, personal interview, telephone and/or telegraph. In
addition, we have retained Georgeson & Company, Inc. to assist in the
solicitation of proxies, at a fee of approximately $8,500 plus associated costs
and expenses. Our employees will not receive any additional compensation for
soliciting proxies.
MAILING OF PROXY STATEMENT AND ANNUAL REPORT
This proxy statement, the enclosed proxy materials and our Annual Report
for the year 1998 were mailed on or about March 8, 1999 to all of our
shareholders who owned stock on March 1, 1999. The following portions of the
Annual Report are incorporated in, and made a part of, this proxy statement just
as if they had been set forth in this proxy statement: the information under the
caption Management's Discussion and Analysis of Results; and the consolidated
financial statements and notes thereto, including the Report of Management and
the Report of Independent Public Accountants.
SPECIAL CASH DIVIDEND
If Item 3, the amendment to the Company's Restated Articles of
Incorporation to remove the limitation on the issuance of unsecured debt, is
adopted at the Annual Meeting, the Company will pay a Special Cash Dividend of
$1.00 per share to each holder of preferred stock as of March 1, 1999, the
record date for the Annual Meeting.
VOTING OF SHARES HELD UNDER ESOP OR DRIP
If you are a participant in our ESOP, you will receive an ESOP voting
directive for shares allocated to your account under the ESOP. The Trustee for
the ESOP will vote such shares as instructed by you in your ESOP voting
directive. If you do not return an ESOP voting directive, the Trustee will vote
your allocated ESOP shares, along with all unallocated shares held in the ESOP,
in the same proportion that all allocated shares in the ESOP are voted.
If you are a participant in our DRIP, your proxy form will include the
shares held on your behalf under the DRIP and such shares will be voted in
accordance with your proxy vote. If you do not vote your proxy, your shares in
the DRIP will not be voted.
VOTING OF SHARES HELD IN STREET NAME BY YOUR BROKER
Brokerage firms have authority under New York Stock Exchange Rules to vote
customers' unvoted shares on certain "routine" matters, including the election
of directors. If you do not vote your proxy, your brokerage firm may either vote
your shares on routine matters or leave your shares unvoted. We encourage you to
provide instructions to your brokerage firm by voting your proxy. This ensures
your shares will be voted at the meeting. When a brokerage firm votes its
customers' unvoted shares on routine matters, these shares are counted for
purposes of establishing a quorum to conduct business at the meeting. A
brokerage firm, however, cannot vote customers' shares on non-routine matters.
Accordingly, these shares (sometimes referred to as broker non-votes) are
considered not entitled to vote on non-routine matters, rather than as a vote
against the matter.
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<PAGE>
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
GENERAL INFORMATION
Our Bylaws provide that the Board of Directors must consist of at least
seven, but no more than fifteen directors, as determined by the Board. The Board
of Directors is divided into three classes, with each class as nearly equal in
number as possible. Each class has a staggered term of office so that one class
of directors will be elected at each annual meeting for a term of three years.
In January 1999, the Board of Directors unanimously elected Allan L.
Schuman to complete the unexpired term of Dale L. Haakenstad, who retired in
April, 1998. Mr. Schuman's term will expire at this year's Annual Meeting, and
as indicated below, he has been nominated for election for a three-year term
expiring in 2002.
Richard M. Kovacevich has resigned his position as a member of the Board of
Directors effective April 1, 1999.
At the Annual Meeting, the following three individuals are the nominees to
be elected to the Board of Directors to serve in Class I until the Annual
Meeting of Shareholders in the year 2002 and until their successors are elected
and have qualified: W. John Driscoll, James J. Howard and Allan L. Schuman. Each
of these nominees is currently a director of the Company whose term is scheduled
to expire at this Annual Meeting. The remaining six directors will continue to
serve the terms described in their biographies.
Each of the nominees has indicated a willingness to serve. Should any of
the nominees become unavailable prior to this Annual Meeting, your proxy will be
voted for such person or persons as shall be recommended by a proxy committee
appointed by the Board.
You are entitled to vote cumulatively for the election of directors. This
means that you are entitled to a number of votes equal to the number of votes
entitled to be cast with respect to the shares held by you multiplied by the
number of directors of each class to be elected (i.e., 3). You may cast all your
votes for one nominee or distribute your votes among the nominees. The election
of each director shall be decided by plurality vote. This means that the three
individuals receiving the most votes will be elected. As a result, any shares
not voted for a director (whether by withholding authority, broker non-vote or
otherwise) will have no impact on the election of directors except to the extent
that the failure to vote for an individual results in another individual
receiving a larger number of votes. With respect to the election of the
nominated directors, the persons named as proxies reserve the right to cumulate
votes represented by proxies which they receive and to distribute such votes
among one or more of the nominees at their discretion.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL OF THE
NOMINEES NAMED BELOW.
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<PAGE>
CLASS I -- NOMINEES FOR TERMS EXPIRING IN 2002
[PHOTO] W. JOHN DRISCOLL, age 69, was associated with the
DIRECTOR SINCE 1974 Rock Island Co. in St. Paul, a private investment
company, from 1973 until his retirement as Chairman
and Chief Executive Officer in 1994. From 1978 to
1986, Mr. Driscoll was Chairman and a director of
First National Bank in Palm Beach, Florida. In 1967,
he was co-founder of the Minnesota North Stars
National Hockey League team and served as its
Chairman until 1978. Earlier, he was General Manager
of the Rock Island Corp., a retail lumber, wood
millwork and particle board manufacturer and
distributor, and worked in sales and sales management
for the Weyerhaeuser Co., a wood products firm.
He earned a bachelors degree at Yale
University. He served in the Marine Corps from 1951
to 1954, which included a tour of duty in Korea.
Mr. Driscoll also serves as a director of
Comshare, Inc., The John Nuveen Company, The St. Paul
Companies, Inc., and Weyerhaeuser Co.
Also active in the community, he is a former
chairman of the Northwest Area Foundation; former
chairman and a life trustee of the Minneapolis
Society of Fine Arts; a former chairman and honorary
trustee of Macalester College, St. Paul; and a
trustee and former president of the Minnesota
Landscape Arboretum Foundation.
[PHOTO] JAMES J. HOWARD, age 63, is Chairman, President and
DIRECTOR SINCE 1987 Chief Executive Officer of NSP and has served in such
capacity since December 1, 1994. He earned a
bachelor's degree from the University of Pittsburgh,
and in 1969 was awarded a Sloan Fellowship to MIT
where he received his master of science degree in
1970. Before joining NSP as president and CEO in
1987, Mr. Howard was President and Chief Operating
Officer of Ameritech, the Chicago-based parent of the
Bell companies serving Illinois, Indiana, Michigan,
Ohio and Wisconsin. Prior to that, he served as
Chairman and CEO of Wisconsin Bell.
Mr. Howard is also a director of Ecolab
Inc., Honeywell Inc., ReliaStar Financial Corp.,
Walgreen Co, and the Federal Reserve Bank of
Minneapolis. He also is on the Board of Trustees for
the University of St. Thomas in St. Paul, Minnesota;
and the Board of Visitors for the University of
Pittsburgh, Joseph M. Katz Graduate School of
Business in Pittsburgh, Pennsylvania.
In addition, Mr. Howard serves as a director
of the Minnesota Business Partnership, the MEDA
Advisory Board, Danny Thompson Memorial Leukemia
Foundation, Capital City Partnership, the Minnesota
Center for Corporate Responsibility, and is a senior
member of The Conference Board, Inc. He also is a
member of the International Energy Agency Coal
Industry Advisory Board in Paris, France; and is a
director of the Nuclear Energy Institute, the Edison
Electric Institute, and Association of Edison
Illuminating Companies, Inc.
[PHOTO] ALLAN L. SCHUMAN, age 64, is President and Chief
DIRECTOR SINCE 1999 Executive Officer and a director of Ecolab Inc. in
St. Paul, Minnesota. Ecolab develops and manufactures
cleaning, sanitizing, and maintenance products for
the hospitality, institutional, and individual
markets.
Mr. Schuman joined Ecolab in 1957, and
became Vice President, Institutional, Marketing and
National Accounts in 1972. In 1985 he was named
Executive Vice President and in 1988, President,
Ecolab Services Group. He was promoted to President
and Chief Operating Officer of the Company in August
1992, and named President and Chief Executive
Officer in March 1995.
Mr. Schuman serves as a director of the Soap
and Detergent Association, American Marketing
Association Services Council, Hazelden Foundation,
the Ordway Music Theatre and the Guthrie Theatre. He
is also a Trustee of the Culinary Institute of
America and of the National Education Foundation of
the National Restaurant Association, and a member of
the Board of Overseers of Carlson School of
Management at the University of Minnesota.
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<PAGE>
CLASS III -- DIRECTORS WHOSE TERMS EXPIRE IN 2001
[PHOTO] H. LYMAN BRETTING, age 62, is President and Chief
DIRECTOR SINCE 1990 Executive Officer of C.G. Bretting Manufacturing Co.
in Ashland, Wisconsin. Mr. Bretting joined C.G.
Bretting Manufacturing Co., a family owned business,
in 1958 and shifted the scope of the business from
repairing and manufacturing mining equipment to
manufacturing automated paper tissue, towel and
napkin folding equipment.
In 1989, he was named "Wisconsin Small
Business Person of the Year" and also the nation's
"Small Business Person of the Year" by President
George Bush.
A graduate of the University of Notre Dame
in South Bend, Indiana, Mr. Bretting is involved in
numerous community activities. He is also chairman of
the board and director of M&I National Bank of
Ashland, and a director of NSP-Wisconsin, a
subsidiary of the Company, and past president and
director of the Ashland Foundation.
[PHOTO] DAVID A. CHRISTENSEN, age 62, is President, Chief
DIRECTOR SINCE 1976 Executive Officer and a director of Raven Industries,
Inc. of Sioux Falls, South Dakota, a diversified
manufacturer that supplies plastics, electronics and
special apparel products to various markets. He has
been associated with Raven Industries since 1962.
Before joining Raven Industries, he worked at John
Morrell & Co. and served in the U.S. Army Corps of
Engineers.
He received his bachelors degree in
industrial engineering from South Dakota State
University, which later honored him with its
distinguished engineer, distinguished service, and
distinguished alumni awards. In 1998, Mr. Christensen
was inducted into the South Dakota Hall of Fame. In
1993, he was honored as South Dakotan of the Year by
the University of South Dakota and as South Dakota
Sales and Marketing Executive of the Year by Sales
and Marketing Executives, Inc. of Sioux Falls, South
Dakota.
Mr. Christensen also serves as a director of
Wells Fargo & Co, San Francisco, California; Beta
Raven, Inc., St. Louis, Missouri; and Glassite, Inc.,
Dunnell, Minnesota.
A strong advocate for his community and
state, he has served in many volunteer activities. He
is a past director of the South Dakota Symphony and
Sioux Falls Downtown Development Corp., as well as a
past chairman of the Sioux Empire United Way.
[PHOTO] DR. MARGARET R. PRESKA, age 61, is the Distinguished
DIRECTOR SINCE 1980 Senior Fellow for Academic Affairs of the Minnesota
State Colleges and Universities (MNSCU) and the
Distinguished Service Professor for the Minnesota
State Universities. She was President of Minnesota
State University, Mankato, from 1979 until 1992. She
had served as its Vice President for Academic Affairs
and Equal Opportunity Officer from 1975 until 1979.
She previously was academic dean, instructor,
assistant and associate professor of history and
government at LaVerne College in LaVerne, California.
Dr. Preska is on special assignment from
MNSCU as CEO and Provost to establish the Abu Dhabi
campus of Zayed National Women's University in the
United Arab Emirates.
Dr. Preska earned a bachelor of science
degree at SUNY Brockport, where she graduated SUMMA
CUM LAUDE. She earned a masters at The Pennsylvania
State University, a Ph.D. at Claremont Graduate
University, and further studied at Manchester College
of Oxford University.
She is an advisory board member of Norwest
Bank Minnesota South Central, N.A. in Mankato and a
member of Women Directors and Officers in Public
Utilities. She served as national president of Camp
Fire Boys and Girls, Inc., from 1985-87. She is a
charter member of the board of directors of Executive
Sports, Inc., a division of Golden Bear
International. She is affiliated with several
organizations, including: the Retired Presidents
Association of the American Association of State
Colleges and Universities, the St. Paul/ Minneapolis
Committee on Foreign Relations, Rotary, Minnesota
Women's Economic Roundtable and the American
Historical Association.
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CLASS II -- DIRECTORS WHOSE TERMS EXPIRE IN 2000
[PHOTO] GIANNANTONIO FERRARI, age 59, was named President and
DIRECTOR SINCE 1997 Chief Operating Officer and a director of Honeywell,
Inc., a supplier of control technology for homes,
businesses and avionics, effective April 15, 1997.
Prior to that he was president of Honeywell Europe,
based in Brussels, Belgium.
Ferrari joined Honeywell in 1960 through
Gavazzi SpA who were the official agents and
distributors for Honeywell in Italy at the time. When
Honeywell Italia was formed in 1965, Giannantonio
Ferrari was one of its first employees and went on to
hold a variety of managerial positions in Italy. In
1981, Ferrari was appointed Controller for Honeywell
Europe and was promoted to vice president of finance
and administration for Honeywell Europe in 1985. In
1988, he returned to Italy to the position of vice
president, Western Europe, Middle East and Africa.
Ferrari holds a degree as a chartered
accountant from the Catholic University of Milan,
Italy. He is on the Board of Governors, National
Electrical Manufacturers Association, and the Board
of Directors, National Association of Manufacturers.
[PHOTO] DOUGLAS W. LEATHERDALE, age 62, is Chairman and Chief
DIRECTOR SINCE 1991 Executive Officer of The St. Paul Companies, Inc., a
worldwide property and liability insurance
organization, having served in such capacity since
1990. Mr. Leatherdale joined The St. Paul Companies
in 1972 and has held numerous executive positions
with the Company, including President, Executive Vice
President and Senior Vice President of Finance.
Before joining The St. Paul Companies, Mr.
Leatherdale was employed by the Lutheran Church of
America in Minneapolis where he served as Associate
Executive Secretary on the Board of Pensions. Prior
to his four years at the Lutheran Church of America,
he served as Investment Analyst Officer at Great West
Life Assurance Company in Winnipeg.
A native of Canada, Mr. Leatherdale attended
United College in Winnipeg and later completed
additional studies at Harvard Business School and the
University of California-Berkeley.
Mr. Leatherdale also serves as a director of
The John Nuveen Company and United HealthCare
Corporation. He is also vice chairman of the board of
directors of the Minnesota Orchestral, Association,
Chairman of the University of Minnesota Foundation
and a trustee of Carleton College. He is a member of
the Twin City Society of Security Analysts and the
Financial Executives Institute.
[PHOTO] A. PATRICIA SAMPSON, age 50, currently operates The
DIRECTOR SINCE 1985 Sampson Group, Inc., a management development and
strategic planning consulting business. Prior to that
she served as a consultant with Dr. Sanders and
Associates, a management and diversity consulting
company. Prior to her current endeavors, Ms. Sampson
served as Chief Executive Officer of the Greater
Minneapolis Area Chapter of the American Red Cross
from July 1993 until January 1, 1995. She also
previously served successively as Executive Director
from October 1986 until July 1993, Assistant
Executive Director-Services (April 1985), and
Assistant Manager (July 1984) of the Greater
Minneapolis Area Chapter. Prior to the above, she
served as the Director of Service to Military
Families and Veterans and Director of Disaster
Services for the St. Paul Area Chapter of the
American Red Cross.
Mrs. Sampson received a masters degree from
the University of Pennsylvania and a bachelors degree
from Youngstown State University.
She is a member of the Minnesota Women's
Economic Roundtable and the Utility Women's
Conference. She is active in Christian education. She
serves on the David W. Preus Leadership Award
Sponsoring Council. She previously served on the
boards of the Greater Minneapolis Area United Way,
Minneapolis Urban League and the Minnesota Orchestral
Association.
6
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INFORMATION CONCERNING THE BOARD OF DIRECTORS
DIRECTOR MEETINGS
There were 11 meetings of the Board of Directors in 1998. Each director
attended at least 88% of the total number of meetings of the Board and
Committees on which such director served during 1998.
COMMITTEES OF THE BOARD
There are four committees of the Board of Directors whose duties and
responsibilities are described below.
<TABLE>
<CAPTION>
NAME OF COMMITTEE NUMBER OF MEETINGS
AND MEMBERS FUNCTIONS OF THE COMMITTEE IN 1998
- -------------------------- ------------------------------------------- ------------------
<S> <C> <C>
CORPORATE MANAGEMENT * Determines Board organization, selects 3
David A. Christensen director nominees and sets director
W. John Driscoll(1) compensation
Douglas W. Leatherdale * determines senior management organization
Margaret R. Preska and compensation
* reviews corporate structure and policies
with respect to
* mergers and acquisitions
* human resource policies
* corporate ethics
* long range planning and strategy
AUDIT * reviews auditing activities by internal 3
H. Lyman Bretting and external auditors
Richard M. Kovacevich(2) * reviews financial reporting, internal
A. Patricia Sampson(1) controls and accounting policies and
practices
* reviews matters affecting protection
and recovery of assets of the Company
* oversees dedicated funds, including
ERISA plans and nuclear
decommissioning fund
POWER SUPPLY * oversees all generation requirements 3
David A. Christensen(1) (nuclear, hydro, coal, alternative)
W. John Driscoll * oversees bulk power supply planning
Giannantonio Ferrari * oversees major power supply facility
Douglas W. Leatherdale construction and budgets
Margaret R. Preska * monitors nuclear plant safety,
reliability and operation
FINANCE * oversees corporate capital structure 3
H. Lyman Bretting and budgets
Giannantonio Ferrari * oversees financial plans and dividend
Richard M. Kovacevich(1)(2) policies
A. Patricia Sampson * recommends dividends
* oversees insurance coverage and
banking relationships
* oversees investor relations
</TABLE>
- ------------------
(1) Chairperson
(2) Resignation effective April 1, 1999
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DIRECTOR COMPENSATION
Employees of the Company receive no separate compensation for service as a
director. During 1998, directors not employed by the Company received a $25,000
annual retainer (or a pro rata portion if service was less than 12 months) and
$1,200 for each Board and Committee meeting attended. These directors also
received a grant of stock equivalent units under the Stock Equivalent Plan for
Non-Employee Directors, which was established in 1996 and is described below.
Additionally, a $2,500 annual retainer was paid to each elected Committee
Chairperson. Prior to January 1, 1998, directors also were eligible to
participate in a retirement plan which continued payment of the director's
retainer at 1.2 times the rate in effect for the calendar quarter immediately
preceding the director's retirement. Effective January 1, 1998, certain changes
were made to the directors' compensation program, including an increase from
$20,000 to $25,000 in the the annual retainer and an increase from $1,000 to
$1,200 in the Committee meeting fee. The remaining changes in the directors'
compensation program are discussed below.
In 1996, we established a Stock Equivalent Plan for Non-Employee Directors
(the "Stock Equivalent Plan") to more closely align directors' interests with
those of our shareholders. Under the Stock Equivalent Plan, directors may
receive an annual award of stock equivalent units with each unit having a value
equal to one share of common stock of the Company. Stock equivalent units do not
entitle a director to vote and are only payable as a distribution of whole
shares of the Company's common stock upon a director's termination of service.
The stock equivalent units fluctuate in value as the value of common stock of
the Company fluctuates. Additional stock equivalent units are accumulated upon
the payment of and at the same value as dividends declared on common stock of
the Company. On April 23, 1998, non-employee directors each received an award of
744.934 stock equivalent units totaling approximately $20,800 in cash value.
This cash value amount reflects the $5,000 award included in the Stock
Equivalent Plan prior to January 1, 1998, the amount of $9,700 which replaces
the directors' retirement plan compensation as discussed below, and an
additional amount of $6,100 to raise the overall compensation for directors to a
competitive level. Additional stock equivalent units were accumulated during
1998 as dividends were paid on common stock of the Company. The number of stock
equivalents for each non-employee director is listed in the share ownership
chart which is set forth below.
As stated previously, prior to January 1, 1998, directors were eligible to
participate in a retirement plan which continued payment of the director's
retainer at 1.2 times the rate in effect for the calendar quarter immediately
preceding the director's retirement. Benefits under the retirement plan
continued for a period equal to the number of calendar quarters served on the
Board, up to 40 calendar quarters. As part of our continuing effort to align
directors' interests with those of our shareholders, effective January 1, 1998,
we suspended the retirement plan. Directors who retired prior to January 1, 1998
will continue to receive their benefits under the retirement plan. Active
non-employee directors were given a one-time irrevocable option to remain in the
retirement plan and receive their accrued benefits under the retirement plan or
to cease participation in the retirement plan and instead receive a one-time
grant of stock equivalent units equal to the value of their accrued benefits on
December 31, 1997. Mr. Bretting, Mr. Christensen, Mr. Driscoll, Mr. Kovacevich,
Mr. Leatherdale, Dr. Preska and Mrs. Sampson elected to convert the value of
their accrued benefits under the retirement plan and received 6203.55, 9305.32,
9305.32, 6203.55, 5376.44, 8271.40 and 8271.40 stock equivalents, respectively.*
Finally, directors may participate in a deferred compensation plan which
provides for deferral of director retainers and meeting fees until after
retirement from the Board of Directors. Effective January 1, 1998, the Stock
Equivalent Plan was amended to permit a director to defer director retainer and
meeting fees into the Stock Equivalent Plan.
- ------------------
* Stock equivalent units are expressed in amounts reflecting the June 1, 1998
two-for-one common stock split.
8
<PAGE>
SHARE OWNERSHIP OF DIRECTORS, NOMINEES AND NAMED EXECUTIVE OFFICERS
The following table lists the beneficial ownership of NSP common stock
owned as of February 23, 1999, by (i) the Company's directors and nominees, (ii)
the executive officers named in the Summary Compensation Table that follows and
(iii) all the directors and executive officers of the Company as a group. None
of these individuals owns any shares of NSP Preferred Stock.
On June 1, 1998, the Company effected a two-for-one split of its common
stock. Shares of common stock, stock options and stock equivalent units shown in
the following tables and footnotes and elsewhere in this proxy statement reflect
this split.
<TABLE>
<CAPTION>
ACQUIRABLE
STOCK WITHIN RESTRICTED
NAME OF BENEFICIAL OWNER COMMON STOCK EQUIVALENTS(1) 60 DAYS(2) STOCK TOTAL
- --------------------------------- ------------- -------------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C>
H. Lyman Bretting ...............
David A. Christensen ............
W. John Driscoll ................
Giannantonio Ferrari ............
James J. Howard .................
Richard M. Kovacevich ...........
Douglas W. Leatherdale ..........
Margaret R. Preska ..............
A. Patricia Sampson .............
Paul E. Anders ..................
Edward J. McIntyre ..............
Loren L. Taylor .................
Edward L. Watzl .................
Directors and executive
officers as a group ............
</TABLE>
(1) Represents stock units awarded under the Stock Equivalent Plan for
Non-employee Directors as of February 23, 1999.
(2) Represents exercisable options and performance units under the current
Long-Term Incentive Program (LTIP) as of February 23, 1999. Options to
purchase common stock of the Company which are exercisable within the next
60 days are 260,700 option shares for Mr. Howard, 37,274 option shares for
Mr. Watzl, 88,738 option shares for Mr. McIntyre, 59,314 option shares for
Mr. Taylor and 11,134 option shares for Mr. Anders. The number of shares
that would have been payable upon the exercise of performance units on
February 23, 1999 are: ______ for Mr. Howard, ______ for Mr. Watzl, ______
for Mr. McIntyre, ______ for Mr. Taylor and 0 for Mr. Anders.
9
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth cash and non-cash compensation for each of
the last three fiscal years ended December 31, 1998, for services in all
capacities to the Company and its subsidiaries, to the Chief Executive Officer
and the next four highest compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-----------------------------------------------------------------------------------
AWARDS PAYOUTS
-----------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
NUMBER OF
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) ($)(2) ($)(3) AND SARs(#) ($)(4) ($)(5)
- --------------------------- ---- --------- ----------- ------------ ---------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JAMES J. HOWARD 1998 700,000 286,300 9,578 441,000 32,558 0
Chairman, President & 1997 672,000 197,000 11,705 477,120 35,416 0 23,429
Chief Executive Officer 1996 622,000 401,000 7,610 478,940 30,528 0 20,056
EDWARD J. MCINTYRE 1998 340,000 96,300 2,444 125,800 13,284 0
Vice President & Chief 1997 260,000 58,000 961 109,200 11,510 0 11,412
Financial Officer 1996 241,000 105,000 985 108,450 9,936 0 4,378
PAUL E ANDERS, JR.(6) 1998 285,000 113,500 5,461 105,450 11,134 0
Vice President and 1997 183,334 236,000 12,651 0 0 0 5,671
Chief Information
Officer
EDWARD L. WATZL 1998 280,000 139,100 545 103,600 10,940 0
President, NSP 1997 223,667 63,000 3,077 92,068 6,702 0 13,913
Generation 1996 175,000 85,000 1,986 56,000 5,840 0 4,584
LOREN L. TAYLOR 1998 240,000 103,600 1,401 88,800 9,376 0
President, NSP Electric 1997 232,000 65,000 1,134 97,440 10,270 0 15,537
1996 215,000 84,000 1,312 96,750 8,864 0 5,201
</TABLE>
- ------------------
(1) This column consists of awards made to each named executive under the
Company's current Executive Annual Incentive Program and, with respect to
Mr. Anders, also includes an additional payment of $150,000 in each of 1997
and 1998 to replace compensation opportunities that Mr. Anders forfeited
when he left his previous employer.
(2) This column consists of reimbursements for taxes on certain personal
benefits received by the named executives.
(3) Amounts shown in this column reflect the market value of the shares of
restricted stock awarded under the LTIP, and are based on the closing price
of the Company's common stock on the date that the awards were made.
Restricted shares earned for 1998 under the Company's LTIP were granted on
January 27, 1999 based on the performance period ending September 30, 1998.
As of December 31, 1998, the named executives held the following as a
result of grants under the LTIP: Mr. Howard held 29,740 restricted shares
at a market value of $825,285; Mr. McIntyre held 6,779 restricted shares at
a market value of $188,117; Mr. Anders held 0 restricted shares at a market
value of $0; Mr. Taylor held 6,048 restricted shares at a market value of
$167,832 and Mr. Watzl held 4,877 restricted shares at a market value of
$135,337. The restricted stock awards vest one year after the date of grant
with respect to fifty (50%) of the shares and two years after such date
with respect to the remaining shares, conditioned upon the continued
employment of the recipient with the Company. Regular dividends are paid on
the restricted shares.
The total number of restricted shares awarded for the years 1996, 1997 and
1998 are as follows: 55,157 shares for Mr. Howard, 13,517 shares for Mr.
McIntyre, 4,007 shares for Mr. Anders, 11,169 shares for Mr. Taylor and
9,775 shares for Mr. Watzl.
(4) The Company had no LTIP payouts in 1998.
(5) This column consists of the following: $______ was contributed by the
Company for the Employee Stock Ownership Plan (ESOP) for each named
executive officer (the Company contribution on behalf of all ESOP
participants, including the named executive officers was equal to ______%
of their covered compensation); the value to each named executive of the
remainder of insurance premiums paid under the Officer Survivor Benefit
Plan by the Company: $______ for Mr. Howard, $______ for Mr. McIntyre,
$______ for Mr. Watzl, $______ for Mr. Taylor and $______ for Mr. Anders;
imputed income as a result of life insurance paid by the Company on behalf
of each named executive: $______ for Mr. Howard, $______ for Mr. McIntyre,
$______ for Mr. Watzl, $______ for Mr. Taylor and $______ for Mr. Anders;
Company matching 401(k) plan contribution of $______ to each named
10
<PAGE>
executive; and, earnings accrued under the Company Deferred Compensation
Plan to the extent such earnings exceeded the market rate of interest (as
prescribed pursuant to the SEC rules), which was $______ for Mr. Howard,
$______ for Mr. McIntyre, $______ for Mr. Watzl, $______ for Mr. Taylor and
$______ for Mr. Anders.
(6) Mr. Anders joined the Company in May 1997.
OPTIONS AND STOCK APPRECIATION RIGHTS (SARs)
The following table indicates for each of the named executives (i) the
extent to which the Company used stock options and SARs for executive
compensation purposes in 1998 and (ii) the potential value of such options and
SARs as determined pursuant to the SEC rules.
OPTIONS AND SARs GRANTED IN 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ------------------------------------------------------------------------------------ -----------------------------------
(a) (b) (c) (d) (e) (f) (g)
% OF TOTAL
OPTIONS AND
OPTIONS/ SARs EXERCISE
SARs GRANTED TO OR BASE
GRANTED(1) EMPLOYEES PRICE EXPIRATION
NAME (#) IN 1998 ($/Sh) DATE 5%($)(2) 10%($)(2)
- ------------------- -------------- ----------- -------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
J. Howard 32,558 options 5.69% 26.8750 01/28/08 $ 550,280 $ 1,394,519
E. McIntyre 13,284 options 2.32% 26.8750 01/28/08 $ 224,520 $ 568,978
E. Watzl 10,940 options 1.91% 26.8750 01/28/08 $ 184,903 $ 468,580
L. Taylor 9,376 options 1.64% 26.8750 01/28/08 $ 158,469 $ 401,591
P. Anders 11,134 options 1.95% 26.8750 01/28/08 $ 188,182 $ 476,890
All Shareholders(3) N/A N/A 26.8750 N/A $6,548,097,330 $10,426,750,631
</TABLE>
- ------------------
(1) Options were granted on January 28, 1998 and vested on January 28, 1999. No
SARs were awarded for 1998.
(2) The hypothetical potential appreciation shown in columns (f) and (g) for
the named executives is required by the SEC rules. The amounts in these
columns do not represent either the historical or anticipated future
performance of the Company's common stock level of appreciation.
(3) Potential realizable values during the ten year period commencing January
28, 1998, are based on the market price ($26.8750) and the outstanding
shares (149,580,046) of common stock of the Company on that date.
The following table indicates for each of the named executives the number
and value of exercisable and unexercisable options and SARs as of December 31,
1998.
AGGREGATED OPTION AND SAR EXERCISES IN 1998
AND FY-END OPTION/SAR VALUE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AND SARs AT 12/31/98 OPTIONS AND SARs AT
ACQUIRED ON REALIZED (#) -- EXERCISABLE (ex)/ 12/31/98 ($) -- EXERCISABLE (ex)/
NAME EXERCISE(#) VALUE($) UNEXERCISABLE (unex) UNEXERCISABLE (unex)*
- ----------- ----------- -------- ---------------------------- ---------------------------------
<S> <C> <C> <C> <C>
J. Howard N/A N/A 232,136 (ex) 1,547,536 (ex)
32,558 (unex) 28,488 (unex)
E. McIntyre N/A N/A 76,729 (ex) 510,091 (ex)
13,284 (unex) 11,623 (unex)
E. Watzl N/A N/A 26,445 (ex) 125,286 (ex)
10,940 (unex) 9,572 (unex)
L. Taylor N/A N/A 50,441 (ex) 277,998 (ex)
9,376 (unex) 8,204 (unex)
P. Anders N/A N/A -- (ex) -- (ex)
11,134 (unex) 9,742 (unex)
</TABLE>
- ------------------
*Share price on December 31, 1998 was $27.7500. Unexercisable options were
granted on January 28, 1998 at a price of $26.8750. No SARs were granted in
1998.
11
<PAGE>
CORPORATE MANAGEMENT COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
CORPORATE MANAGEMENT COMMITTEE. The Committee is composed entirely of
outside directors of the Company and makes recommendations to the Board
concerning total compensation for executive officers of the Company. The
Committee is the sole administrator of the executive annual and long-term
incentive programs with full authority to establish and interpret the terms of
the programs and to make payment of the awards.
COMPENSATION STRATEGY. Our executive compensation goals for 1998 were: (i)
to provide a competitive compensation package enabling us to attract and retain
key executives and (ii) to align the executives' interests with those of our
stockholders and with our performance. The 1998 compensation of NSP's executives
was comprised primarily of base salary, annual incentive awards and long-term
incentive awards.
To achieve the compensation goal of providing a competitive compensation
package, the Committee seeks to set base salary and the target amounts of the
annual and long-term awards at the median of a combined group of major utilities
and industrial companies (the "Peer Group"). For 1998, the Peer Group consisted
of twelve industrial companies, with regional representation and average
revenues of $2.6 billion, and twelve utilities, all of which operate nuclear
facilities, with average revenues of $3.9 billion. The utilities included in
this group are also part of the Edison Electric Institute Index of Investor-
Owned Electrics ("EEI Electrics") index used in the Total Shareholder Return
Comparison in this proxy statement, but all of the companies in such index are
not included in the Peer Group for purposes of compensation review. The
twenty-four companies in the Peer Group were selected primarily because they are
viewed as representative of the types of companies with which we compete in
attracting and retaining executive officers.
The annual and long-term incentive portions of an executive's compensation
are intended to achieve NSP's goal of aligning an executive's interests with our
shareholders and with our performance. These portions of an executive's
compensation are placed at risk and are linked to the accomplishment of specific
results that are designed to benefit our shareholders and the Company, both in
the long and short term. As a result, during years of excellent performance,
executives are provided the opportunity to earn a highly-competitive level of
compensation and, conversely, in years of below-average performance, their
compensation may be below competitive levels. Generally, higher level executive
officers have a greater level of their compensation placed at risk.
In 1993, a Federal tax law was passed which limits the deductibility of
executive compensation in excess of $1,000,000 unless certain exceptions are
met. Compensation increases that reflected market levels of compensation and the
regular operation of the Company's incentive plans, fully described below,
caused Mr. Howard's 1998 compensation to become partially non-deductible under
this law. It is the Committee's intent to maintain the deductibility of
executive compensation to the extent reasonably practicable and to the extent
consistent with its other compensation objectives. For this reason, the
Committee determined that the Company should modify its long-term and annual
incentive plans beginning in 1998, so that certain compensation payable
thereunder would qualify for the "performance based compensation" exception to
the $1,000,000 deduction limit, thereby ensuring that, beginning in 1998 for the
annual plan and beginning in 2001 for the long-term plan, such compensation will
be deductible under the Code.
Accordingly, the Board amended, effective January 1, 1998, its long-term
incentive plan and adopted, effective January 1, 1998, a new annual incentive
plan. The shareholders approved both plans at last year's annual meeting.
BASE PAY. The level of base pay is not directly related to the Company's
financial performance. Instead, target levels for base pay are established for
each executive officer based on the median base
12
<PAGE>
pay level for the executive's position within the Peer Group. The target level
of base pay is subject to some adjustment (15% either way) to reflect individual
and corporate performance. In deciding whether to make base pay adjustments, the
Corporate Management Committee considers the base pay target level established
for each officer, the general contribution of each officer to overall corporate
performance and the achievement level of specific annual goals established for
each officer. While individual, business area and corporate goals are considered
regarding base pay adjustments, achievement of these goals is primarily rewarded
through the Company's annual and long-term incentive programs. Generally, in
1998 base pay levels for executive officers, including Mr. Howard, were
increased in accordance with comparable market movement as reflected within the
Peer Group and solid individual and corporate performance results during 1997.
The 1998 base pay amounts for the named executives are reflected in the salary
column of the Summary Compensation Table.
ANNUAL INCENTIVE. For 1998, annual incentive awards for the executive
officers were made in accordance with the Company's Executive Annual Incentive
Program (the "Program"). Under the Program, annual incentive awards were
established with target awards (expressed as a percentage of base pay)
commensurate with annual incentive awards for comparable positions at the median
level within the Peer Group. In 1998, target awards for executive officers
ranged from 30% to 55% of their base pay. Individuals could realize from 0% to
124% of their target awards dependent on the performance of the Company, and the
individual's group in certain predetermined areas. These areas were Company
financial performance (based on EPS), customer satisfaction, service
reliability, product price/cost and safety. The awards given to the CEO, the
Vice President and Chief Financial Officer, the President-NSP Nuclear Generation
and the Executive Vice President also were dependent on performance specifically
with respect to nuclear safety. The weight accorded particular performance areas
varied by executive. Generally, financial performance accounted for 40% to 50%
of an executive's target incentive award. All of the other areas accounted for
between 10% and 25% of the target awards. Based on NSP results, executives
received from ____% to ____% of their targeted incentive awards for 1998. The
annual awards paid for 1998 are reflected in the bonus column of the Summary
Compensation Table.
Mr. Howard's annual incentive award payout for 1998 was $286,300, as shown
in the Summary Compensation Table. The determination of this amount was based on
the criteria set forth above for the other executive officers. In particular,
Mr. Howard's target incentive award was 55% of his base pay and was based 50% on
financial performance, 15% on safety, 5% on nuclear safety, 10% on customer
satisfaction, 10% on price of product and 10% on reliability.
LONG-TERM INCENTIVE. For 1998, long-term incentive awards for executive
officers were determined in accordance with the Long-Term Incentive Program (the
"LTIP") and were generally set at target levels commensurate with the median
level for comparable positions within the Peer Group. The LTIP permits the
granting of non-qualified stock options and restricted common stock to key
employees. One of the goals of the LTIP is to align key employees' long-term
interests with those of our shareholders through the use of stock ownership and
long-term financial performance goals.
The Corporate Management Committee made one grant of stock options during
1998 to each of the named executive officers. Option grants were positioned at a
level which generally equated to the average grant levels awarded to executives
in comparable positions in the Peer Group. The number of shares subject to
option was not affected by the number of shares previously awarded to such
executives. These options were not exercisable until one year after their grant,
and will remain exercisable for nine years. Stock options were granted with an
exercise price of 100% of the fair market value of the stock on the date of
grant to ensure that executives can only be rewarded for appreciation in the
price of our stock when our shareholders are similarly benefited.
Target awards for restricted stock (measured as a percentage of base pay)
were established for each executive at levels consistent with median levels for
comparable positions within the Peer Group. For
13
<PAGE>
1998, actual awards ranged from 26% to 63% of the executive's base pay.
Restricted stock is actually granted, however, only if the Company achieves a
certain level of financial performance, as measured by the Company's return on
common equity ("ROE") for the three year period ending as of September 30 prior
to the year in which the restricted stock is granted, in comparison to the three
year average ROE of the EEI Electrics index (the same index used for purposes of
comparing shareholder return.) No restricted stock awards are made unless our
three year average ROE is at least equal to the median of the EEI Electrics
index, thereby prohibiting restricted stock awards when our performance does not
surpass the median performance of utilities in the index. If our ROE is 0.5% or
more above the index median, 100% of the target will be granted. Partial payout
of restricted stock will be made for ROE levels between the median and 0.5%
above the median. For the 1998 performance period, our ROE was .60% above the
median, resulting in a payout of 105% of the target award. The stock awards are
restricted so that 50% of the shares awarded become available one year following
the grant and the remaining 50% becomes available after two years. The
restricted stock awards reinforce the tie to shareholder returns, and the
restrictions encourage the retention of qualified executives.
In 1998, Mr. Howard received an option for 32,558 shares. For 1998, Mr.
Howard also received 16,760 shares of restricted stock (63% of his base pay).
These amounts were determined as described above for other executive officers.
The terms of the options and restricted stock are the same as for other
executive officers.
OTHER BENEFITS. Other benefits provided to executives generally are not
tied to the Company's financial performance. Rather, these benefits are
primarily designed to attract and retain executives. Among the benefits provided
by the Company in 1998 to its executives are contributions to the Employee Stock
Ownership Plan (ESOP) (at ____% of the individual's covered compensation - the
same rate applied to all other ESOP participants), Company paid life insurance
in an amount equal to five times base pay for Mr. Howard and three times base
pay for all other executives, and benefits provided under the NSP Deferred
Compensation Plan and the NSP Excess Benefit Plan that make up for pension
benefits that can not be paid under the Company's qualified defined benefit
pension plan due to Internal Revenue Code limitations and the exclusion of
certain elements of pay from pension-covered earnings. The level of retirement
benefits provided by these plans in the aggregate is reflected in the Pension
Plan Table.
Certain executive officers, including three of the named executive
officers, may receive severance benefits in accordance with the NSP Senior
Executive Severance Policy, which is described in more detail under the section
below entitled "Severance Arrangements."
CONCLUSION. The Committee believes that the Company's executive
compensation package effectively serves the interests of the Company and its
shareholders. The balance of base pay, and annual and long-term incentives
provides increased motivation to executives to contribute to and participate in
the Company's long-term success. The Committee is dedicated to ensuring that the
Company's total compensation package continues to meet the needs of the Company
and shall monitor and revise compensation policies as necessary.
W. JOHN DRISCOLL, CHAIRMAN DOUGLAS W. LEATHERDALE
DAVID A. CHRISTENSEN MARGARET R. PRESKA
14
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
James J. Howard, Chairman and Chief Executive Officer of the Company is a
member of the Board of Directors of Honeywell, Inc. and serves on Honeywell's
Personnel Committee. Giannantonio Ferrari became a member of the Company's
Board of Directors in October 1997. Mr. Ferrari is the President and Chief
Operating Officer of Honeywell. Since Mr. Ferrari joined the Company's Board of
Directors, Mr. Howard has abstained from voting on all matters considered by
Honeywell's Personnel Committee dealing with Mr. Ferrari's compensation. Mr.
Ferrari is not a member of the Corporate Management Committee of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the federal securities laws, the Company's directors and executive
officers are required to report, within specified monthly and annual due dates,
their initial ownership in the Company's common and preferred stocks and certain
subsequent acquisitions, dispositions or other transfers of interest in such
securities. The Company is required to disclose whether it has knowledge that
any person required to file such a report may have failed to do so in a timely
manner. Based solely upon a review of these reports and written representations
that no additional reports were required to be filed in 1998, the Company
believes that all reports were filed on a timely basis except that the initial
ownership report filed on behalf of Mr. John A. Noer, President NSP Combustion
and Hydro Generation, was late.
15
<PAGE>
TOTAL SHAREHOLDER RETURN COMPARISON
The graph below compares the Company's cumulative total shareholder return
on common stock with the cumulative total return of the Standard & Poor's 500
Composite Stock Price Index, the Edison Electric Institute Index of
Investor-Owned Electrics (EEI Electrics Index), and the EEI Combination Gas and
Electric Investor-Owned Utility Index (EEI Combination Gas Electric Index) over
the last five fiscal years (assuming a $100 investment in each vehicle on
December 31, 1993 and the reinvestment of all dividends.)
The EEI Combination Gas and Electric Index includes 44 companies. All are
included in the EEI Electrics Index, which currently includes 89 companies and
constitutes a broader measure of industry performance.
COMPARATIVE TOTAL RETURN
[PLOT POINTS CHART]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NSP ................................ $100 $109 $128 $127 $170 $170
EEI Electrics ...................... $100 $ 88 $116 $117 $149 $170
EEI Combination Gas & Electric...... $100 $ 87 $111 $110 $143 $166
S&P 500 ............................ $100 $101 $139 $171 $229 $294
</TABLE>
16
<PAGE>
PENSION PLAN TABLE
The following table illustrates the approximate retirement benefits payable
to employees retiring at the normal retirement age of 65 years:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS FOR YEARS OF SERVICE INDICATED
-------------------------------------------------------------------
YEARS OF SERVICE
AVERAGE -------------------------------------------------------------------
COMPENSATION
(4 YEARS) 5 10 15 20 25 30
- ------------ ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 3,500 $ 7,000 $ 10,500 $ 14,000 $ 17,500 $ 21,000
$ 100,000 $ 7,500 $ 15,000 $ 23,000 $ 30,500 $ 38,000 $ 45,500
$ 150,000 $11,500 $ 23,500 $ 35,000 $ 46,500 $ 58,500 $ 70,000
$ 200,000 $16,000 $ 31,500 $ 47,500 $ 63,000 $ 79,000 $ 94,500
$ 250,000 $20,000 $ 39,500 $ 59,500 $ 79,500 $ 99,000 $119,000
$ 300,000 $24,000 $ 48,000 $ 72,000 $ 95,500 $119,500 $143,500
$ 350,000 $28,000 $ 56,000 $ 84,000 $112,000 $140,000 $168,000
$ 400,000 $32,000 $ 64,000 $ 96,500 $128,500 $160,500 $192,500
$ 450,000 $36,000 $ 72,500 $108,500 $144,500 $181,000 $217,000
$ 500,000 $40,500 $ 80,500 $121,000 $161,000 $201,500 $241,500
$ 550,000 $44,500 $ 88,500 $133,000 $177,500 $221,500 $266,000
$ 600,000 $48,500 $ 97,000 $145,500 $193,500 $242,000 $290,500
$ 650,000 $52,500 $105,000 $157,500 $210,000 $262,500 $315,000
$ 700,000 $56,500 $113,000 $170,000 $226,500 $283,000 $339,500
$ 750,000 $60,500 $121,500 $182,000 $242,500 $303,500 $364,000
$ 800,000 $65,000 $129,500 $194,500 $259,000 $324,000 $388,500
$ 850,000 $69,000 $137,500 $206,500 $275,500 $344,000 $413,000
$ 900,000 $73,000 $146,000 $219,000 $291,500 $364,500 $437,500
$ 950,000 $77,000 $154,000 $231,000 $308,000 $385,000 $462,000
$1,000,000 $81,000 $162,000 $243,500 $324,500 $405,500 $486,500
$1,050,000 $85,000 $170,500 $255,500 $340,500 $426,000 $511,000
$1,100,000 $89,500 $178,500 $268,000 $357,000 $446,500 $535,500
$1,150,000 $93,500 $186,500 $280,000 $373,500 $466,500 $560,000
$1,200,000 $97,500 $195,000 $292,500 $389,500 $487,000 $584,500
wage base: $68,400
</TABLE>
- ------------------
As of January 1, 1999, pension benefits were changed. Prior to January 1,
1999, each nonbargaining employee was given an opportunity to choose
between two retirement programs, the Traditional Program and the Pension
Equity Program. All of the executive officers named in the Summary
Compensation Table chose the Traditional Program for their pension
benefits.
Under the TRADITIONAL PROGRAM, the annual compensation used to calculate
the average compensation uses base salary for the year, and, for certain
individuals, including Messrs. Howard, McIntyre and Taylor, bonus
compensation paid in that same year. After an employee has reached 30 years
of service, no additional years of service are used in determining the
pension benefit under the Traditional Program. The basic pension benefit
under the Traditional Program payable at age 65 is the same as the benefit
payable under the pension plan as of December 31, 1998. The benefit amounts
under the Traditional Program are computed in the form of a straight-life
annuity.
Under the PENSION EQUITY PROGRAM, the annual compensation used to calculate
average compensation uses base salary for the year and bonus compensation
paid in that same year, with no maximum on the number of years used to
determine the pension benefit. The benefit amounts under the Pension Equity
Program are computed in the form of a lump sum. The formula for determining
the lump sum is average compensation times years of service times 10
percent.
Both programs feature a cash balance side account, which credits $1,400
annually, plus interest each year. The opening balance as of January 1,
1999 is $1,400 times years of service.
The benefit amounts shown above reflect the plan in effect as of December
31, 1998 and therefore do not reflect the cash balance benefits.
At the end of 1998, each of the executive officers named in the Summary
Compensation Table had the following credited service: Mr. Howard, 11.92
years, Mr. Anders, 1.67 years, Mr. Watzl, 31.58 years, Mr. McIntyre, 25.83
years and Mr. Taylor, 25.58 years.
An employment agreement with Mr. Howard provides that he and his spouse, if
she survives him, will receive a lump-sum payment equal to the present
value of combined benefits from the Pension Plan and supplemental
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Company payments as though he had completed 30 years of service, less the
pension benefits earned from a former employer. For purposes of the
employment agreement, the present value of the lump sum payment will be
calculated using a discount rate based on the interest rate for valuing
immediate annuities used by the Pension Benefit Guaranty Corporation, which
is now different from the GATT rate utilized for other employees.
An employment agreement with Mr. Anders provides that he will receive
payments equal to the combined benefits from the Pension Plan and
supplemental Company payments as though his service with a former employer
were included in determining benefits under the Company's pension plans,
less the pension benefits earned from a former employer. Benefits under the
employment agreement will include incentive payments in determining the
final average compensation.
SEVERANCE ARRANGEMENTS
Certain executive officers of the Company, including the named executives
other than Mr. Howard and Mr. Anders, are participants under the NSP Senior
Executive Severance Policy which provides for payment of severance benefits to
any participant whose employment is terminated after April 28, 1995, the
effective date of the Policy, and prior to April 28, 2000, if the participant's
employment is terminated: (i) by the employer, other than for cause, disability
or retirement; (ii) as a result of the sale of a business by the employer if the
purchaser of the business does not agree to employ the participant on the same
terms and conditions as were in effect before the sale, including comparable
severance protection; (iii) or by the participant within 90 days after a
reduction in his or her salary, a material and adverse diminishment of his or
her duties and responsibilities or of the program of incentive compensation and
employee benefits covering the participant, or a relocation of the participant
by more than 50 miles.
The severance benefits under the Policy consist of: (i) a cash lump sum
payment of three years' salary and annual incentive compensation; (ii) a cash
lump sum payment of the actuarial equivalent of the additional retirement
benefits the participant would have earned if he or she had remained employed
for three more years; (iii) continued medical, dental and life insurance
coverage for three years; (iv) outplacement services at a cost of not more than
$30,000 or the use of office space and support for up to one year; (v) financial
planning counseling for two years; and (vi) transfer of title of the
participant's company car, if any, at no cost to the participant. If the
foregoing benefits, when taken together with any other payments to the
participant, result in the imposition of the excise tax on excess payments under
Section 4999 of the Code, then the severance benefits will be reduced only if
the reduction results in a greater after-tax payment to the participant.
PROPOSAL NO. 2 -- RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
Subject to ratification by the shareholders, the Board of Directors has
appointed PricewaterhouseCoopers LLP as independent auditors of the Company for
the year 1998. PricewaterhouseCoopers has performed this function for the
Company commencing with the fiscal year 1995. Members of the firm will be
available at the Annual Meeting of Shareholders to answer questions and to make
a statement if they desire to do so.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
RATIFICATION OF THE APPOINTMENT OF AUDITORS.
PROPOSAL NO. 3 -- PROPOSAL TO AMEND THE COMPANY'S
RESTATED ARTICLES TO REMOVE LIMITATIONS ON THE
COMPANY'S ISSUANCE OF UNSECURED INDEBTEDNESS
EXPLANATION OF THE PROPOSED AMENDMENT
Our Restated Articles of Incorporation (the "Articles") currently grant the
holders of our Preferred Stock special voting rights with respect to certain
matters, including, among others, the amendment of
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the Articles to authorize any prior ranking stock, the issuance of Preferred
Stock unless certain coverage tests are met, the issuance of unsecured
indebtedness unless certain coverage tests are met and the merger or
consolidation of the Company unless ordered, approved or permitted by the SEC.
Specifically Article V, Section 6(a)(i) provides that the approval of a
majority of the total number of shares of Preferred Stock, without regard to
series, present or represented by proxy is required for the Company to:
Issue any unsecured notes, debentures, or other securities
representing unsecured indebtedness, or assume any such unsecured
securities, for purposes other than the refunding of outstanding unsecured
securities theretofore issued or assumed by the Corporation or the
redemption or other retirement of outstanding shares of one or more series
of the Preferred Stock, if, immediately after such issue or assumption, the
total principal amount of all unsecured notes, debentures, or other
securities representing unsecured indebtedness issued or assumed by the
Corporation and then outstanding (including unsecured securities then to be
issued or assumed) would exceed twenty per cent (20%) of the aggregate of
(a) the total principal amount of all bonds or other securities
representing secured indebtedness issued or assumed by the Corporation and
then to be outstanding, and (b) the capital and surplus of the Corporation
(including all earned surplus, paid-in surplus, capital surplus, or other
surplus of the Corporation) as then to be stated on the books of account of
the Corporation.
The proposed amendment (the "Proposed Amendment") would delete Section
6(a)(1) and thereby enable us to incur unsecured indebtedness without a
shareholder vote.
SPECIAL CASH DIVIDEND
Subject to the terms and conditions described in this Proxy Statement, if
(but only if) the Proposed Amendment is adopted at the Annual Meeting, the
Company will declare and pay, to each holder of Preferred Stock of record as of
March 1, 1999, a special cash dividend in the amount of $1.00 per share. If the
Proposed Amendment is adopted at the Annual Meeting, the special cash dividend
will be paid promptly after the Proposed Amendment shall have become effective.
However, no accrued interest will be paid on the special cash dividend,
regardless of any delay in making such dividend payment. See "Certain Federal
Income Tax Consequences" below.
REASONS FOR THE PROPOSED AMENDMENT
GENERAL. We believe that legislative, regulatory, technological and market
developments will lead to a more competitive environment in the electric and gas
utility industries. As competition intensifies, our ability to retain
flexibility and reduce costs will be even more crucial to our success. Because
the electric and gas utility industries are extremely capital intensive, control
and minimization of financing costs are of particular importance to us. In
response to the competitive forces and regulatory changes that we face, we have
from time to time considered, and expect to continue to consider, various
strategies designed to enhance our competitive position and to increase our
ability to adapt to and anticipate changes in our utility business. An example
of one such strategy is our previously announced plan to develop an independent
transmission company, and, in connection with such ITC, to sell or spin-off our
transmission assets.
We believe that adoption of the Proposed Amendment is critical to
maintaining financial flexibility and facilitating capital cost reduction.
Historically, our debt financing generally has been accomplished through the
issuance of long-term mortgage bonds, unsecured indebtedness and pollution
control bonds. Our mortgage bonds contain certain restrictive covenants with
respect to, among other things, the disposition of assets and the ability to
issue additional mortgage bonds. While the use of these mortgages may have been
an acceptable and attractive financing vehicle in the non-competitive
environment of the
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past, the restrictive covenants contained in our mortgage bonds limit our
ability to respond to changing circumstances in a competitive environment.
Unsecured indebtedness generally has fewer restrictions than mortgage bonds,
will provide us more flexibility, and is, therefore, more desirable to us as the
environment becomes more competitive. Short-term indebtedness, a lower cost form
of debt available to us, represents one type of unsecured indebtedness.
Pollution control bond financing, a more favorable type of financing due to its
tax-exempt status, is available only for very limited purposes.
Inasmuch as the limitation on the issuance of unsecured debt contained in
the Articles restricts our flexibility in planning and financing our business
activities, we believe we ultimately will be at a competitive disadvantage
unless this provision is eliminated. Our new competitors (for example, power
marketers, exempt wholesale generators, independent power producers and
cogeneration facilities) generally are not subject to the type of financing
restrictions this provision imposes on us. Recently, several other utilities
with the same or similar charter restrictions have successfully eliminated such
provisions by soliciting their shareholders for the same or similar amendments.
In addition, some of our potential utility competitors have no comparable
provision restricting the issuance of unsecured debt. Given the onset of
competition in the utility industry, we must continue to explore new ways of
reducing our costs and enhancing our flexibility. We believe that the adoption
of the Proposed Amendment will be in the best long-term competitive interests of
our shareholders.
FINANCIAL FLEXIBILITY. If the Proposed Amendment is adopted, we will have
increased flexibility (i) to choose among different types of debt financing and
(ii) to finance projects using the most cost effective means. We believe that
various types of unsecured debt alternatives may increase in importance as a
financing option. We believe that we will be able to tailor the terms of
unsecured debt to take full advantage of changing conditions in securities
markets.
In addition, although our earnings currently are sufficient to meet the
earnings coverage tests that must be satisfied before we can issue additional
mortgage bonds and preferred stock, there is no guarantee that this will be true
in the future. Other utilities have been unable to issue mortgage bonds during
certain periods because of restrictive covenants in their mortgages. Our
inability to issue mortgage bonds or preferred stock in the future, combined
with an inability to issue additional unsecured debt, could limit our financing
options to more costly options, including additional common equity. Moreover,
continued reliance on the issuance of mortgage bonds could limit our ability in
the future to strategically redeploy our assets.
Our use of unsecured short-term indebtedness is presently restricted by the
debt limitation provision. However, we believe that the prudent use of such
indebtedness in excess of the amount currently permitted is vital to effective
financial management of our business. Not only is unsecured short-term
indebtedness generally one of our least expensive forms of raising capital, it
also provides us flexibility in meeting seasonal and business cycle fluctuations
in cash requirements, acts as a bridge between issues of permanent capital and
can be used when unfavorable conditions prevail in the market for long-term
capital. However, because of the debt limitation provision in the Articles, as
of December 31, 1998, the maximum amount of unsecured indebtedness that we were
authorized under the Articles to issue or assume was approximately $804.7
million. As of December 31, 1998, we had approximately $393.6 million of
unsecured indebtedness outstanding, thus leaving an additional $411.1 million of
capacity available.
The Proposed Amendment will not only allow us to issue a greater amount of
our debt as unsecured indebtedness, it also will allow us to issue a greater
amount of total indebtedness. We presently have no intention, however, of
issuing a greater amount of total debt than we would have issued absent the
adoption of the Proposed Amendment. It is our present intention to retain
flexibility in the mix of our outstanding debt and therefore have the option to
use more short-term and other unsecured debt and fewer mortgage bonds, not to
increase our overall debt level. Moreover, as a regulated utility, our capital
structure will continue to be subject to the approval of the Minnesota Public
Utility Commission.
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<PAGE>
LOWER COSTS. As previously mentioned, our short-term debt issuances
generally represent one of our lowest-cost forms of financing. By increasing our
use of short-term debt, we may be able to lower our cost structure further,
thereby making our products more competitive and reducing our business risks.
However, with the debt limitation provision currently in place, the availability
and corresponding benefits of short-term debt diminish. In addition, although
short-term debt may expose us to more volatility in interest rates, it should be
noted that the cost of short-term debt seldom exceeds the cost of other forms of
capital available at the same time.
CERTAIN EFFECTS OF THE PROPOSED AMENDMENT
If the Proposed Amendment is adopted at the Annual Meeting, the holders of
Preferred Stock will no longer be entitled to the benefits of the debt
limitation provision, which will have been removed by the Proposed Amendment. As
discussed above, the debt limitation provision places restrictions on our
ability to issue or assume unsecured indebtedness. Although our debt instruments
may contain certain restrictions on our ability to issue or assume debt, any
such restrictions may be waived and the increased flexibility afforded by the
removal of the debt limitation provision may permit us to take certain actions
that may increase our credit risks, adversely affecting the market prices and
credit ratings of the Preferred Stock, or that may otherwise be materially
adverse to the interests of the holders of Preferred Stock. In addition, to the
extent that we elect to issue or assume additional unsecured indebtedness, the
relative position of Preferred Stock in our capital structure could be perceived
to decline, which in turn could adversely affect the market prices and credit
ratings of the remaining Preferred Stock. Since holders of any debt, including
unsecured indebtedness, would rank ahead of Preferred Stock in a bankruptcy or
other liquidation, the issuance of a greater amount of unsecured indebtedness
may pose additional risk to holders of Preferred Stock under certain
circumstances, including circumstances relating to a default by us in the
repayment of such indebtedness.
Approval of the Proposed Amendment also will constitute approval of the
Special Cash Dividend.
RATING AGENCIES
As of the date of this Proxy Statement, each series of Preferred Stock was
rated A-1 by Moody's Investors Service, Inc. and A+ by Standard & Poor's Rating
Services, a division of The McGraw-Hill Companies, Inc. (collectively, the
"Rating Agencies"). The Rating Agencies have been advised of the Proposed
Amendment. The Rating Agencies have advised us that the adoption of the Proposed
Amendment, in and of itself, will not result in a reduction of their current
ratings of NSP's cumulative preferred stock.
Ratings are not recommendations to purchase, hold or sell the Preferred
Stock inasmuch as the ratings do not comment as to market price or suitability
for a particular investor. The ratings are based on current information
furnished to the Rating Agencies by us and obtained from other sources. The
ratings may be changed, suspended or withdrawn as a result of changes in, or the
unavailability of, such information.
VOTE REQUIRED. The affirmative vote of the holders of a majority of (i) the
Preferred Stock, voting separately as a class and (ii) the total voting power
present in person or by proxy and entitled to vote is required for the approval
of the adoption of the Proposed Amendment to the Restated Articles of
Incorporation, as amended. Abstentions from voting on this matter are treated as
votes against, while broker nonvotes are treated as shares not present and
entitled to vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
APPROVAL OF THE PROPOSED AMENDMENT TO THE RESTATED ARTICLES OF INCORPORATION,
AS AMENDED.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL. In the opinion of Gardner, Carton & Douglas, our special counsel,
the following summary describes the principal United States federal income tax
consequences of the receipt of the Special Cash Dividend and the adoption of the
Proposed Amendment. This summary is based on the Internal Revenue Code of 1986,
as amended to the date hereof (the "Code"), administrative pronouncements,
judicial decisions and existing and proposed Treasury Regulations, changes to
any of which subsequent to the date of this Proxy Statement may adversely affect
the tax consequences described herein, possibly on a retroactive basis. This
summary is addressed to Preferred Stockholders who hold such shares as capital
assets within the meaning of Section 1221 of the Code. This summary does not
discuss all of the tax consequences that may be relevant to a Preferred
Stockholder in light of such Preferred Stockholder's particular circumstances or
to Preferred Stockholders subject to special rules (including certain financial
institutions, tax-exempt organizations, insurance companies, dealers in
securities or currencies, and Preferred Stockholders who are not citizens or
residents of the United States). Preferred Stockholders should consult their tax
advisors with regard to the application of the United States federal income tax
laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction.
As used herein, the term "United States Holder" means an owner of Preferred
Stock that is for United States federal income tax purposes (i) a citizen or
resident of the United States; (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof; (iii) an estate and certain electing trusts in
existence on August 20, 1996 if the income of such estate or trust is subject to
United States federal income taxation regardless of its source; or (iv) for non
electing trusts and trusts not in existence until after August 20, 1996, any
trust if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United States
fiduciaries have the authority to control all substantial decisions of such
trust. A "Non-United States Holder" is a Preferred Stockholder that is not a
United States Holder.
SPECIAL CASH DIVIDENDS; MODIFICATION OF ARTICLES. UNITED STATES
HOLDERS. We will take the position that, for federal income tax purposes, the
Special Cash Dividends are ordinary dividend income to United States Holders
and report them as such.
NON-UNITED STATES HOLDERS. We will take the position that Special Cash
Dividends paid to a Non-United States Holder of Preferred Stock are subject to
withholding of United States federal income tax at a 30% rate unless appropriate
documentation has been provided to the Company that a lower treaty rate applies.
However, Special Cash Dividends that are effectively connected with the conduct
of a trade or business by the Non-United States Holder within the United States
are not subject to the withholding tax (provided such Non-United States Holder
provides two originals of Internal Revenue Service ("IRS") Form 4224 stating
that such Special Cash Dividends are so effectively connected), but instead are
subject to United States federal income tax on a net income basis at applicable
graduated individual or corporate rates. Any such effectively connected Special
Cash Dividends received by a foreign corporation may, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate
(or such lower rate as may be specified by an applicable income tax treaty). A
Non-United States Holder of Preferred Stock eligible for a reduced rate of
United States withholding tax pursuant to an income tax treaty may obtain a
refund of any excess amounts withheld by filing an appropriate claim for refund
with the IRS.
ALL HOLDERS Preferred Stockholders will not recognize any taxable gain or
loss with respect to their Preferred Stock as a result of the modification of
the Articles by the Proposed Amendment other than with respect to the receipt of
the Special Cash Dividend or if they exercise dissenters' rights.
BACKUP WITHHOLDING. The amount of the Special Cash Dividend paid to a
United States Holder will be reported to such holder and to the Internal
Revenue Service in the same way all cash dividends are
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<PAGE>
reported. Backup withholding at a rate of 31% will apply to any such payments
made to non-exempt United States Holders for whom backup withholding applies
with regards to the payment of regular cash dividends.
DISSENTERS' RIGHTS
Section 302A.471 of the Minnesota Business Corporation Act, as amended (the
"Business Corporation Act"), provides that if you are a shareholder of a
Minnesota corporation you are entitled to dissent from, and obtain payment for
your shares in the event of, among other things, an amendment of the
corporation's articles of incorporation that (i) materially and adversely
affects your rights in respect of your shares because it alters or abolishes a
preferential right of such shares or (ii) excludes or limits the right of a
shareholder to vote on a matter, or to cumulate votes, except as the right may
be excluded or limited through the authorization or issuance of securities of an
existing or new class or series with similar or different voting rights. As
described herein, the Proposed Amendment would amend the Articles to remove a
covenant which provides that the issuance or assumption of unsecured
indebtedness for certain purposes above a certain threshold requires the consent
of the holders of at least a majority of the total number of shares of Preferred
Stock present or represented by proxy at such meeting. To the extent that the
Proposed Amendment is deemed to alter or abolish a "preferential right" of the
Preferred Stock or to exclude or limit the right of a holder of Preferred Stock
to vote on a matter within the meaning of Section 302A.471 of the Business
Corporation Act, if you are a holder of Preferred Stock you would have the right
to dissent from the Proposed Amendment and obtain payment of the fair value of
your Preferred Stock. If you intend to demand payment for shares of Preferred
Stock if the Proposed Amendment is adopted, you must file a notice with us at
414 Nicollet Mall, Minneapolis, Minnesota 55401, Attn: Corporate Secretary. This
notice must be filed prior to the vote on the Proposed Amendment at the Annual
Meeting. You also must not vote in favor of the Proposed Amendment. A
shareholder who votes for the Proposed Amendment will have no dissenters'
rights. A shareholder who does not satisfy each of the requirements of Sections
302A.471 and 302A.473 of the Business Corporation Act is not entitled to payment
for such shares of Preferred Stock under the dissenters' rights provisions of
the Business Corporation Act and will be bound by the terms of the Proposed
Amendment.
After the Proposed Amendment has been approved at the Annual Meeting, we
must send written notice to all shareholders who have given written notice and
not voted in favor of the Proposed Amendment as described above. Our notice will
contain: (i) the address where the demand for payment and your Preferred Stock
certificates must be sent and the date by which they must be received (which
date will be the 30th day after the notice is given), (ii) any restrictions on
transfer of uncertificated shares that will apply after the demand for payment
is received, (iii) a form to be used to certify the date on which you, or the
beneficial owner on whose behalf you dissent, acquired the shares (or an
interest in them) and to demand payment, and (iv) a copy of the provisions of
the Business Corporation Act set forth in Annex A with a brief description of
the procedures to be followed under those provisions. If you wish to assert
dissenters' rights you must demand payment and deposit your Preferred Stock
certificates (at the address specified in our notice) within 30 days after such
notice is given. From and after the effective time of the Proposed Amendment,
dissenting shareholders will no longer be entitled to any rights of a
shareholder, including, but not limited to, the right to receive notice of
meetings, to vote at any meetings or to receive dividends, and will only be
entitled to any rights of appraisal as provided by the Business Corporation Act.
If you shall have failed to perfect or shall have effectively withdrawn or lost
such right, you will not be entitled to fair value for your shares from us and
your shares will remain outstanding.
After the effective time of the Proposed Amendment or upon receipt of a
valid demand for payment, whichever is later, we must remit to each dissenting
shareholder who complied with the requirements of the Business Corporation Act
the amount we estimate to be the fair value of such
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<PAGE>
shareholder's shares of Preferred Stock, plus interest accrued at a statutory
rate from the fifth day after the effective time to the date of payment. The
payment also must be accompanied by certain financial data, our estimate of the
fair value of the shares and a description of the method used to reach such
estimate, and a copy of the applicable provisions of the Business Corporation
Act with a brief description of the procedures to be followed in demanding
supplemental payment. You may decline to accept the amount remitted by us and
demand payment for an amount equal to your estimate of the fair value of the
Preferred Stock. Failure to make such demand within 30 days after the notice is
given by us, entitles you only to the amount initially remitted by us. If we
fail to remit payment within 60 days of the deposit of your Preferred Stock
certificates or the imposition of transfer restrictions on uncertificated
shares, we must return all deposited Preferred Stock certificates and cancel all
transfer restrictions; however, we may again give notice regarding the procedure
to exercise dissenters' rights and require deposit or restrict transfer at a
later time. If you believe that the amount remitted is less than the fair value
of your Preferred Stock (including statutory interest), you may give written
notice to us of your own estimate of the fair value of the shares, plus
interest, within 30 days after we mail our remittance, and demand payment of the
difference. Otherwise you are entitled only to the amount remitted by us.
If we receive a demand from you to pay such difference, we shall, within 60
days after receiving the demand, either pay to you the amount demanded or agreed
to by you after discussion with us or file in court a petition requesting that
the court determine the fair value of your shares of Preferred Stock, plus
interest.
The court may appoint one or more appraisers to receive evidence and make
recommendations to the court on the amount of the fair value of the shares. The
court shall determine whether the dissenting shareholder has complied with the
requirements of Section 302A.473 of the Business Corporation Act and shall
determine the fair value of the shares, taking into account any and all factors
the court finds relevant, computed by any method or combination of methods that
the court, in its discretion, sees fit to use. The fair value of the shares as
determined by the court is binding on all dissenting shareholders and may be
less than, equal to or greater than the current market price of the Preferred
Stock. If the court determines that the fair value of the shares is in excess of
the amount, if any, remitted by us, then the court will enter a judgment for
cash in favor of the dissenting shareholders in an amount by which the value
determined by the court, plus interest, exceeds such amount previously remitted.
A dissenting shareholder will not be liable to us if the amount, if any,
originally remitted to such shareholder by us exceeds the fair value of the
shares, as determined by the court, plus interest.
Costs of the court proceeding shall be determined by the court and assessed
against us, except that part or all of the costs may be assessed against any
dissenting shareholders whose actions in demanding supplemental payments are
found by the court to be arbitrary, vexatious or not in good faith.
If the court finds that we did not substantially comply with the relevant
dissenters' provisions of the Business Corporation Act, the court may assess the
fees and expenses, if any, of attorneys or experts as the court deems equitable.
Such fees and expenses may also be assessed against any party if the court finds
that such party in bringing the proceeding has acted arbitrarily, vexatiously or
not in good faith, and may be awarded to a party injured by those actions. The
court may award, in its discretion, fees and expenses of any attorney for the
dissenting shareholders out of the amount awarded to such shareholders, if any.
A shareholder of record may assert dissenters' rights as to fewer than all
of the shares registered in such shareholder's name only if he or she dissents
with respect to all shares beneficially owned by any one beneficial shareholder
and notifies us in writing of the name and address of each person on whose
behalf he or she asserts dissenters' rights. The rights of such a partial
dissenting shareholder are determined as if the shares as to which he or she
dissents and his or her other shares were registered in the names of different
shareholders.
Under Subdivision 4 of Section 302A.471 of the Business Corporation Act, a
holder of Preferred Stock has no right, at law or in equity, to set aside the
approval of the Proposed Amendment, except if such approval or consummation was
fraudulent with respect to such shareholder or the Company.
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A dissenter who receives payment for his or her shares upon exercise of the
right of dissent will, subject to the provisions of Section 302(b) of the
Internal Revenue Code, recognize gain or loss for Federal income tax purposes,
measured by the difference between the cost basis of his or her shares and the
amount of payment received.
PREFERRED STOCKHOLDERS WHO WISH TO RESERVE THE RIGHT TO EXERCISE
DISSENTERS' RIGHTS SHOULD REVIEW CAREFULLY THE FOREGOING DISCUSSION AND THE
PROVISIONS OF THE BUSINESS CORPORATION ACT SET FORTH IN ANNEX A. THE FAILURE TO
COMPLY STRICTLY WITH THE DESCRIBED PROCEDURES WILL RESULT IN THE LOSS OF ANY
SUCH DISSENTERS' RIGHTS. ANY PREFERRED STOCKHOLDER WHO CONTEMPLATES THE
ASSERTION OF DISSENTERS' RIGHTS IS URGED TO CONSULT HIS OR HER OWN COUNSEL.
PROPOSAL NO. 4 -- PROPOSAL TO AMEND THE COMPANY'S RESTATED
ARTICLES TO REMOVE PROVISIONS RELATING TO SERIES OF
PREFERRED STOCK THAT HAVE BEEN REDEEMED
EXPLANATION OF PROPOSED AMENDMENT
Subsections (g), (h), (i), (j) and (k) (attached hereto as Annex B) of
Section 14 of Article V of our Restated Articles of Incorporation (the
"Articles") currently set forth the specific terms of the $6.80 Series, $7.00
Series, $8.80 Series, $7.84 Series and $10.36 Series (collectively, the
"Series") of our Preferred Stock, all of which Series have been redeemed in
their entirety. Because such Series have been redeemed and there are no shares
of such Series outstanding, these subsections (g) through (k) are of no effect
and the Company desires to delete them from the Articles.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the total voting power
present in person or by proxy and entitled to vote is required for approval of
the adoption of the proposal to amend the Articles to remove subsections (g),
(h), (i), (j), and (k) of Section 14 of Article V. Abstentions from voting on
this matter are treated as votes against, while broker nonvotes are treated as
shares not present and entitled to vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
APPROVAL OF THE PROPOSAL TO AMEND THE ARTICLES TO REMOVE SUBSECTIONS (g), (h),
(i), (j), and (k) OF SECTION 14 OF ARTICLE V.
QUORUM AND VOTE REQUIRED
The presence in person or by proxy, of the holders of a majority of the
voting power of the shares of common stock and cumulative preferred stock
issued, outstanding and entitled to vote at a meeting for the transaction of
business is required to constitute a quorum. The election of each director shall
be decided by plurality vote. As a result, any shares not voted for a director
(whether by withholding authority, broker non-vote or otherwise) have no impact
on the election of directors except to the extent the failure to vote for an
individual results in another individual receiving a larger number of votes. The
Proposed Amendment of the Articles of Incorporation to remove the limitation on
the issuance of unsecured debt requires the approval of a majority of the
Preferred Stock, voting separately as a class, and a majority of the total
voting power present in person or by proxy and entitled to vote. The proposal to
amend the Articles to remove the provisions relating to series of Preferred
Stock that have been redeemed requires the approval of a majority of the total
voting power present in person or by proxy and entitled to vote. Ratification of
the selection of outside auditors requires the affirmative vote of the
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holders of a majority of the total voting power present in person or by proxy
and entitled to vote. Abstentions from voting on these matters are treated as
votes against, while broker non-votes are treated as shares not present and
entitled to vote.
2000 SHAREHOLDER PROPOSALS
Any proposal by a shareholder intended to be included in the proxy
statement for the annual shareholder meeting in 2000 must be received by the
Secretary of the Company at 414 Nicollet Mall, Minneapolis, Minnesota 55401, not
later than the close of business on November 8, 1999. Proposals received by that
date will be included in the 2000 Proxy Statement if the proposals are proper
for consideration at an annual meeting and are required for inclusion in the
proxy statement by, and conform to, the rules of the SEC.
For a proposal not included in the proxy statement to be properly brought
before an annual meeting by a shareholder, the Company's Bylaws provide that the
Secretary of the Company must have received written notice thereof not less than
20 or more than 90 days prior to the meeting. The notice must contain (i) a
description of the proposed business and the reasons for conducting such
business at the annual meeting, (ii) the shareholder's name and record address,
(iii) the class and number of shares beneficially owned by the shareholder, and
(iv) any material interest of the shareholder in such business. Any such
proposal will be considered untimely for purposes of Rule 14c-4(c) of the SEC's
proxy rules and, accordingly, we will be entitled to exercise discretionary
voting authority with respect to such item.
OTHER BUSINESS
Management does not know of any business, other than that described herein,
that may be presented for action at the Annual Meeting of Shareholders. If any
other matters are properly presented at the meeting for action, the persons
named in the accompanying proxy will vote upon them in accordance with their
best judgment.
Minneapolis, Minnesota By order of the Board of Directors
March 8, 1999 John P. Moore, Jr.
SECRETARY
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ANNEX A
DISSENTERS' RIGHTS PROVISIONS
OF THE
MINNESOTA BUSINESS CORPORATION ACT
302A.471 RIGHTS OF DISSENTING SHAREHOLDERS.
SUBDIVISION 1. ACTIONS CREATING RIGHTS. A shareholder of a corporation may
dissent from, and obtain payment for the fair value of the shareholder's shares
in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects the
rights or preferences of the shares of the dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption
of the shares, including a provision respecting a sinking fund for the
redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares
to acquire shares, securities other than shares, or rights to purchase
shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter,
or to cumulate votes, except as the right may be excluded or limited
through the authorization or issuance of securities of an existing or new
class or series with similar or different voting rights; except that an
amendment to the articles of an issuing public corporation that provides
that section 302A.671 does not apply to a control share acquisition does
not give rise to the right to obtain payment under this section;
(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation, but not including a
transaction permitted without shareholder approval in section 302A.661,
subdivision 1, or a disposition in dissolution described in section 302A.725,
subdivision 2, or a disposition pursuant to an order of a court, or a
disposition for cash on terms requiring that all or substantially all of the net
proceeds of disposition be distributed to the shareholders in accordance with
their respective interests within one year after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B, to
which the corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B,
to which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the board
directs that dissenting shareholders may obtain payment for their shares.
SUBDIVISION 2. BENEFICIAL OWNERS. (a) A shareholder shall not assert
dissenters' rights as to less than all of the shares registered in the name of
the shareholder, unless the shareholder dissents with respect to all the shares
that are beneficially owned by another person but registered in the name of the
shareholder and discloses the name and address of each beneficial owner on whose
behalf the shareholder dissents. In that event, the rights of the dissenter
shall be determined as if the shares as to which the shareholder has dissented
and the other shares were registered in the names of different shareholders.
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(b) A beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of this
section and section 302A.473, if the beneficial owner submits to the corporation
at the time of or before the assertion of the rights a written consent of the
shareholder.
SUBDIVISION 3. RIGHTS NOT TO APPLY. (a) Unless the articles, the bylaws, or
a resolution approved by the board otherwise provide, the right to obtain
payment under this section does not apply to a shareholder of the surviving
corporation in a merger, if the shares of the shareholder are not entitled to be
voted on the merger.
(b) If a date is fixed according to section 302A.445, subdivision 1, for
the determination of shareholders entitled to receive notice of and to vote on
an action described in subdivision 1, only shareholders as of the date fixed,
and beneficial owners as of the date fixed who hold through shareholders, as
provided in subdivision 2, may exercise dissenters' rights.
SUBDIVISION 4. OTHER RIGHTS. The shareholders of a corporation who have a
right under this section to obtain payment for their shares do not have a right
at law or in equity to have a corporate action described in subdivision 1 set
aside or rescinded, except when the corporate action is fraudulent with regard
to the complaining shareholder or the corporation.
302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.
SUBDIVISION 1. DEFINITIONS. (a) For purposes of this section, the terms
defined in this subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action referred to in section 302A.471, subdivision 1 or the
successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective date
of the corporate action referred to in section 302A.471, subdivision 1, up to
and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
SUBDIVISION 2. NOTICE OF ACTION. If a corporation calls a shareholder
meeting at which any action described in section 302A.471, subdivision 1 is to
be voted upon, the notice of the meeting shall inform each shareholder of the
right to dissent and shall include a copy of section 302A.471 and this section
and a brief description of the procedure to be followed under these sections.
SUBDIVISION 3. NOTICE OF DISSENT. If the proposed action must be approved
by the shareholders, a shareholder who is entitled to dissent under section
302A.471 and who wishes to exercise dissenters' rights must file with the
corporation before the vote on the proposed action a written notice of intent to
demand the fair value of the shares owned by the shareholder and must not vote
the shares in favor of the proposed action.
SUBDIVISION 4. NOTICE OF PROCEDURE; DEPOSIT OF SHARES. (a) After the
proposed action has been approved by the board and, if necessary, the
shareholders, the corporation shall send to all shareholders who have complied
with subdivision 3 and to all shareholders entitled to dissent if no shareholder
vote was required, a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will
apply after the demand for payment is received;
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(3) A form to be used to certify the date on which the shareholder, or
the beneficial owner on whose behalf the shareholder dissents, acquired the
shares or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief
description of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
SUBDIVISION 5. PAYMENT; RETURN OF SHARES. (a) After the corporate action
takes effect, or after the corporation receives a valid demand for payment,
whichever is later, the corporation shall remit to each dissenting shareholder
who has complied with subdivisions 3 and 4 the amount the corporation estimates
to be the fair value of the shares, plus interest, accompanied by:
(1) the corporation's closing balance sheet and statement of income
for a fiscal year ending not more than 16 months before the effective date
of the corporate action, together with the latest available interim
financial statements;
(2) an estimate by the corporation of the fair value of the shares and
a brief description of the method used to reach the estimate; and
(3) a copy of section 302A.471 and this section, and a brief
description of the procedure to be followed in demanding supplemental
payment.
(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person who
was not a beneficial owner on that date. If the dissenter has complied with
subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the deposit
of certificates or the imposition of transfer restrictions on uncertificated
shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the corporation may again give notice under subdivision 4
and require deposit or restrict transfer at a later time.
SUBDIVISION 6. SUPPLEMENTAL PAYMENT; DEMAND. If a dissenter believes that
the amount remitted under subdivision 5 is less than the fair value of the
shares plus interest, the dissenter may give written notice to the corporation
of the dissenter's own estimate of the fair value of the shares, plus interest,
within 30 days after the corporation mails the remittance under subdivision 5,
and demand payment of the difference. Otherwise, a dissenter is entitled only to
the amount remitted by the corporation.
SUBDIVISION 7. PETITION; DETERMINATION. If the corporation receives a
demand under subdivision 6, it shall, within 60 days after receiving the demand,
either pay to the dissenter the amount demanded or agreed to by the dissenter
after discussion with the corporation or file in court a petition requesting
that the court determine the fair value of the shares, plus interest. The
petition shall be filed in the county in which the registered office of the
corporation is located, except that a surviving foreign corporation that
receives a demand relating to the shares of a constituent domestic corporation
shall file the petition in
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the county in this state in which the last registered office of the constituent
corporation was located. The petition shall name as parties all dissenters who
have demanded payment under subdivision 6 and who have not reached agreement
with the corporation. The corporation shall, after filing the petition, serve
all parties with a summons and copy of the petition under the rules of civil
procedure. Nonresidents of this state may be served by registered or certified
mail or by publication as provided by law. Except as otherwise provided, the
rules of civil procedure apply to this proceeding. The jurisdiction of the court
is plenary and exclusive. The court may appoint appraisers, with powers and
authorities the court deems proper, to receive evidence on and recommend the
amount of the fair value of the shares. The court shall determine whether the
shareholder or shareholders in question have fully complied with the
requirements of this section, and shall determine the fair value of the shares,
taking into account any and all factors the court finds relevant, computed by
any method or combination of methods that the court, in its discretion, sees fit
to use, whether or not used by the corporation or by a dissenter. The fair value
of the shares as determined by the court is binding on all shareholders,
wherever located. A dissenter is entitled to judgment in cash for the amount by
which the fair value of the shares as determined by the court, plus interest,
exceeds the amount, if any, remitted under subdivision 5, but shall not be
liable to the corporation for the amount, if any, by which the amount, if any,
remitted to the dissenter under subdivision 5 exceeds the fair value of the
shares as determined by the court, plus interest.
SUBDIVISION 8. COSTS; FEES; EXPENSES. (a) The court shall determine the
costs and expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall
assess those costs and expenses against the corporation, except that the court
may assess part or all of those costs and expenses against a dissenter whose
action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if any.
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ANNEX B
SUBSECTIONS (g), (h), (i), (j) AND (k) OF
SECTION 14 OF ARTICLE V OF THE
RESTATED ARTICLES OF INCORPORATION
OF
NORTHERN STATES POWER COMPANY
(A MINNESOTA CORPORATION)
ARTICLE V. DESCRIPTION OF CAPITAL STOCK
The total authorized number of shares that may be issued by the Corporation and
that the Corporation will henceforth be authorized to have is three hundred
fifty-seven million (357,000,000) of the par value per share hereinafter set
forth.
A description of the classes of shares and a statement of the number of shares
in each class and the relative rights, voting power, and preferences granted to
and restrictions imposed upon the shares of each class are as follows:
* * *
14. SERIES OF PREFERRED STOCK
* * *
g. CUMULATIVE PREFERRED STOCK, $6.80 SERIES
(i) There be and there hereby is created from the authorized and
unallotted shares of Preferred Stock of the Company, a new series of
Preferred Stock of the Company which is hereby designated Cumulative
Preferred Stock, $6.80 Series, and the number of shares constituting
said new series is hereby fixed at 200,000 shares.
(ii) The dividend rate of the shares of said new series is hereby
fixed at $6.80 per share per annum; dividends on said shares shall be
payable on the 15th day of January, April, July and October for the
quarter-yearly period ending with the last day of the preceding month,
when and as declared by the Board of Directors.
(iii) The redemption prices of the shares of said new series are
hereby fixed at $108.29 per share in case of redemption on or prior to
December 31, 1973; $106.59 per share in case of redemption subsequent
to December 31, 1973 and on or prior to December 31, 1978; $104.89 per
share in case of redemption subsequent to December 31, 1978 and on or
prior to December 31, 1983; and the $103.19 per share in case of
redemption subsequent to December 31, 1983; plus in each case an
amount equal to the dividends at the rate of $6.80 per share per annum
from the date dividends on the shares to be redeemed begin to accrue
to the date fixed for redemption thereof, less the amount of dividends
theretofore paid thereon; provided, however, that the shares of said
new series shall not be redeemable prior to May 1, 1973 from the
proceeds of any refunding of shares of said new series through the
incurring of debt, or through the issuance of preferred stock ranking
equally with or prior to the shares of said new series as to dividends
or on liquidation, if such debt has an effective interest cost or such
preferred stock has an effective dividend cost to the Company of less
than the effective dividend cost to the Company of the said new
series.
(iv) The amount which the shares of said new series are entitled to
receive in preference to the Common Stock upon any distribution of
assets, other than by dividends from net earnings or surplus, upon
voluntary liquidation or dissolution of the corporation is hereby
fixed as the then redemption price, plus an amount equal to all
dividends accumulated and unpaid thereon.
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h. CUMULATIVE PREFERRED STOCK, $7.00 SERIES
(i) There be and there hereby is created from the authorized and
unallotted shares of Preferred Stock of the Company, a new series of
Preferred Stock of the Company which is hereby designated Cumulative
Preferred Stock, $7.00 Series, and the number of shares constituting
said new series is hereby fixed at 200,000 shares.
(ii) The dividend rate of the shares of said new series is hereby
fixed at $7.00 per share per annum; dividends on said shares shall be
payable on the 15th day of January, April, July and October for the
quarter-yearly period ending with the last day of the preceding month,
when and as declared by the Board of Directors.
(iii) The redemption prices of the shares of said new series are
hereby fixed at $108.45 per share in case of redemption on or prior to
December 31, 1974; $106.70 per share in case of redemption subsequent
to December 31, 1974 and on or prior to December 31, 1979; $104.95 per
share in case of redemption subsequent to December 31, 1979 and on or
prior to December 31, 1984; and $103.20 per share in case of
redemption subsequent to December 31, 1984; plus in each case an
amount equal to the dividends at the rate of $7.00 per share per annum
from the date dividends on the shares to be redeemed begin to accrue
to the date fixed for redemption thereof, less the amount of dividends
theretofore paid thereon; provided, however, that the shares of said
new series shall not be redeemed prior to January 1, 1974 from the
proceeds of any refunding of shares of said new series through the
incurring of debt, or through the issuance of preferred stock ranking
equally with or prior to the shares of said new series as to dividends
or on liquidation, if such debt has an effective interest cost or such
preferred stock has an effective dividend cost to the Company of less
than the effective dividend cost to the Company of the said new
series.
(iv) The amount which the shares of said new series are entitled to
receive in preference to the Common Stock upon any distribution of
assets, other than by dividends from net earnings or surplus, upon
voluntary liquidation or dissolution of the corporation is hereby
fixed as the then redemption price, plus an amount equal to all
dividends accumulated and unpaid thereon.
i. CUMULATIVE PREFERRED STOCK, $8.80 SERIES
(i) There be and there hereby is created from the authorized and
unallotted shares of Preferred Stock of the Company, a new series of
Preferred Stock of the Company which is hereby designated Cumulative
Preferred Stock, $8.80 Series, and the number of shares constituting
said new series is hereby fixed at 250,000 shares.
(ii) The dividend rate of the shares of said new series is hereby
fixed at $8.80 per share per annum; dividends on said shares, when and
as declared by the Board of Directors, shall be payable on the 15th
day of January, April, July and October for the quarter-yearly period
ending with the last day of the preceding month; except that the
dividend period for the first such dividend shall begin with the date
of original issue.
(iii) The redemption prices of the shares of said new series are
hereby fixed at $109.95 per share in case of redemption on or prior to
December 31, 1975; $107.75 per share in case of redemption subsequent
to December 31, 1975 and on or prior to December 31, 1980; $105.55 per
share in case of redemption subsequent to December 31, 1980 and on or
prior to December 31, 1985; and $103.35 per share in case of
redemption subsequent to December 31, 1985; plus in each case an
amount equal to the dividends at the rate of $8.80 per share per annum
from the date dividends on the shares to be redeemed begin to accrue
to the date fixed
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for redemption thereof, less the amount of dividends theretofore paid
thereon; provided, however, that the shares of said new series shall
not be redeemable prior to September 1, 1975 from the proceeds of any
refunding of shares of said new series through the incurring of debt,
or through the issuance of preferred stock ranking equally with or
prior to the shares of said new series as to dividends or on
liquidation, if such debt has an effective interest cost or such
preferred stock has an effective dividend cost to the Company of less
than the effective dividend cost to the Company of the said new
series.
(iv) The amount which the shares of said new series are entitled to
receive in preference to the Common Stock upon any distribution of
assets, other than by dividends from net earnings or surplus, upon
voluntary liquidation or dissolution of the corporation is hereby
fixed as the then redemption price, plus an amount equal to all
dividends accumulated and unpaid thereon.
j. CUMULATIVE PREFERRED STOCK, $7.84 SERIES
(i) There be and there hereby is created from the authorized and
unallotted shares of Preferred Stock of the Company, a new series of
Preferred Stock of the Company which is hereby designated Cumulative
Preferred Stock, $7.84 Series, and the number of shares constituting
said new series is hereby fixed at 350,000 shares.
(ii) The dividend rate of the shares of said new series is hereby
fixed at $7.84 per share per annum; dividends on said shares, when and
as declared by the Board of Directors, shall be payable on the 15th
day of January, April, July and October for the quarter-yearly period
ending with the last day of the preceding month; except that the
dividend period for the first such dividend shall begin with the date
of original issue.
(iii) The redemption prices of the shares of said new series are
hereby fixed at $109.00 per share in case of redemption on or prior to
December 31, 1976; $107.04 per share in case of redemption subsequent
to December 31, 1976, and on or prior to December 31, 1981; $105.08
per share in case of redemption subsequent to December 31, 1981, and
on or prior to December 31, 1986; and $103.12 per share in case of
redemption subsequent to December 31, 1986; plus in each case an
amount equal to the dividends at the rate of $7.84 per share per annum
from the date dividends on the shares to be redeemed begin to accrue
to the date fixed for redemption thereof, less the amount of dividends
theretofore paid thereon; provided, however, that the shares of said
new series shall not be redeemable prior to October 1, 1976, from the
proceeds of any refunding of shares of said new series through the
incurring of debt, or through the issuance of preferred stock ranking
equally with or prior to the shares of said new series as to dividends
or on liquidation, if such debt has an effective interest cost or such
preferred stock has an effective dividend cost to the Company of less
than the effective dividend cost to the Company of the said new
series.
(iv) The amount which the shares of said new series are entitled to
receive in preference to the Common Stock upon any distribution of
assets, other than by dividends from net earnings or surplus, upon
voluntary liquidation or dissolution of the corporation is hereby
fixed as the then redemption price, plus an amount equal to all
dividends accumulated and unpaid thereon.
k. CUMULATIVE PREFERRED STOCK, $10.36 SERIES
(i) There be and there hereby is created from the authorized and
unallotted shares of Preferred Stock of the Company, a new series of
Preferred Stock of the Company which is hereby designated Cumulative
Preferred Stock, $10.36 Series, and the number of shares constituting
said new series is hereby fixed at 250,000 shares.
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(ii) The dividend rate of the shares of said new series is hereby
fixed at $10.36 per share per annum; dividends on said shares, when
and as declared by the Board of Directors, shall be payable on the
15th day of January, April, July and October for the quarter-yearly
period ending with the last day of the preceding month; except that
the dividend period for the first such dividend shall begin with the
date of original issue.
(iii) The redemption prices of the shares of said new series are
hereby fixed at $115.00 per share in case of redemption on or prior to
June 30, 1984; $105.00 per share in case of redemption subsequent to
June 30, 1984, and on or prior to June 30, 1989; and $102.50 per share
in case of redemption subsequent to June 30, 1989; plus in each case
an amount equal to the dividends at the rate of $10.36 per share per
annum from the date dividends on the shares to be redeemed begin to
accrue to the date fixed for redemption thereof, less the amount of
dividends theretofore paid thereon; provided, however, that the shares
of said new series shall not be redeemable prior to July 1, 1979, from
the proceeds of any refunding of shares of said new series through the
incurring of debt, or through the issuance of preferred stock ranking
equally with or prior to the shares of said new series as to dividends
or on liquidation, if such debt has an effective interest cost or such
preferred stock has an effective dividend cost to the Company of less
than the effective dividend cost to the Company of the said new
series. The shares of said new series will also be redeemable at any
time on and after July 1, 1979, for the sinking fund at the sinking
fund redemption price, which shall be $101.10 per share plus accrued
and unpaid dividends.
(iv) Subject to the prohibitions and limitations contained in its
Articles of Incorporation, as amended, and in Orders of the Securities
and Exchange Commission in Files No. 70-3221 and 70-3279, the Company
shall apply as and for a sinking fund for said new series on July 1 in
each year commencing July 1, 1979, a minimum of 12,500 shares of said
new series, and may so apply on each of said July 1 dates up to a
maximum of an additional 12,500 shares of said new series. The shares
to be applied annually in satisfaction of the sinking fund may be
acquired either by redemption at the sinking fund redemption price in
accordance with the provisions of Article V of the Articles of
Incorporation and of this resolution, or by purchase from time to time
in such manner as the Board of Directors may determine. If the Company
shall be prevented by the restrictions referred to above or for any
other reason from redeeming the number of shares of said new series,
which in the absence of such restrictions it would be required to
apply for the sinking fund on any such July 1, the deficit shall be
made good on the first succeeding July 1 on which the Company shall
not be prevented by such restrictions from redeeming the number of
shares of said new series, which in the absence of such restrictions
it would be required to apply for the sinking fund on any such July 1,
the deficit shall be made good on the first succeeding July 1 on which
the Company shall not be prevented by such restrictions from redeeming
shares of said new series. Shares applied to the sinking fund on any
applicable July 1 date shall be deemed to be not outstanding on such
date. Shares of said new series acquired by redemption must be applied
in satisfaction of the current sinking fund payments; but shares of
said new series purchased by the Company may be applied in
satisfaction of any sinking fund payment. Shares applied in
satisfaction of the sinking fund shall become authorized but unissued
shares of Preferred Stock of the Company but may not be reissued as
shares of said new series, and the Company shall forthwith take all
necessary action to effectuate the foregoing.
(v) The amount which the shares of said new series are entitled to
receive in preference to the Common Stock upon any distribution of
assets, other than by dividends from net earnings or surplus, upon
voluntary liquidation or dissolution of the corporation is hereby
fixed as the then redemption price, including an amount equal to all
dividends accumulated and unpaid thereon.
B-4
<PAGE>
ANNUAL MEETING ADMISSION TICKET
[NSP LOGO] NORTHERN STATES POWER COMPANY
414 NICOLLET MALL, MINNEAPOLIS, MINNESOTA 55401
Admission ticket for Northern States Power Company Annual Meeting of
Shareholders; Wednesday, April 28, 1999, at 10:00 a.m. at the MINNEAPOLIS
CONVENTION CENTER, Ballroom, 1301 South Second Avenue. Refreshments will be
served from 8:45 a.m. - 9:45 a.m.
THIS IS
NOT
A PROXY
Please present this ticket for admittance of shareholder(s) named above.
Admittance will be based upon availability of seating.
123 456 7 VOTE BY TELEPHONE OR INTERNET
CONTROL NUMBER QUICK * * * EASY * * * IMMEDIATE
For Telephone/Internet Voting
Your telephone or internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card. For
TELEPHONE OR INTERNET VOTING you will be asked to enter the "CONTROL NUMBER"
located in the box in the upper left of this form.
VOTE BY PHONE: CALL TOLL-FREE ON A TOUCH-TONE TELEPHONE 1-888-XXX-XXXX -
ANYTIME. NO CHARGE FOR THIS CALL.
OPTION A: To vote as the Board of Directors recommends on ALL proposals:
Press 1
OPTION B: If you choose to vote on each item separately, press 0. You will
hear these instructions:
PROPOSAL 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9 To WITHHOLD FOR AN INDIVIDUAL nominee,
press 0 and listen to all the instructions
PROPOSAL 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press
0. The INSTRUCTIONS ARE THE SAME for all remaining
proposals to be voted.
WHEN ASKED, YOU MUST CONFIRM YOUR VOTE BY PRESSING 1.
VOTE BY INTERNET: THE WEB ADDRESS IS __________________________________________
IF YOU VOTE BY PHONE OR INTERNET - DO NOT MAIL THE PROXY FORM
THANK YOU FOR VOTING
VOTE BY MAIL: FOLD, DETACH HERE, SIGN (BELOW), MARK (OTHER SIDE) AND RETURN
PROXY FORM.
[LOGO] NSP NORTHERN STATES POWER COMPANY PROXY FORM
414 NICOLLET MALL, MINNEAPOLIS, MINNESOTA 55401
Please sign EXACTLY as your name(s) appear(s) on this form. Attorneys,
executors, administrators, trustees, or guardians should so indicate when
signing. For joint accounts, one joint owner may sign.
Signature______________________________________________Date_______________, 1999
Signature______________________________________________Date_______________, 1999
IMPORTANT: THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, PLEASE REVIEW THE ENCLOSED PROXY STATEMENT,
COMPLETE THIS PROXY FORM AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.
(CONTINUED AND TO BE VOTED ON OTHER SIDE)
<PAGE>
1999 ANNUAL MEETING GUIDELINES
In the interest of an orderly and constructive meeting, the following guidelines
will apply for NSP's Annual Meeting of Shareholders on Wednesday, April 28, 1999
at 10:00 a.m. at the Minneapolis Convention Center, Ballroom, 1301 Second Avenue
South, Minneapolis, Minnesota.
1. To gain entrance to the meeting, you must present the enclosed admission
ticket or evidence of ownership of NSP stock.
2. You will be required to pass through a metal detector similar to those at
airports. Briefcases, purses and parcels will be examined. The use of
cameras or sound recording equipment is prohibited, except those employed
by the Company to provide a record of the proceedings.
3. The business of the meeting is set forth in the Proxy Statement and will be
published on an Agenda that you will receive at the meeting. Whether or not
you plan to attend the meeting, please sign, date and return the proxy form
in the envelope provided. If you wish to change your vote or have not voted
by proxy, a ballot will be distributed to you at the meeting.
4. Time has been reserved at the end of the meeting for shareholder questions
that relate to the business of the Company. If you want to speak, please go
to the nearest microphone, state your name and confirm that you are a
shareholder before asking your question. Please direct all questions to the
Chairman. Questions from the floor are limited to three minutes to provide
an opportunity for as many shareholders as possible.
5. Although personal grievances and claims are not appropriate subjects for
the meeting, you may submit any grievance or claim in writing to any usher
or Company representative, and the Company will respond as soon as possible
after the meeting.
6. The Chairman in his sole discretion shall have authority to conduct the
meeting and rule on any questions or procedures that may arise.
- --------------------------------------------------------------------------------
NSP COMPLIMENTARY PARKING TICKET
PARKING
- -------
NSP will provide parking at the following ramps:
PLAZA PARKING RAMP
- ------------------
Enter on 2nd Avenue or 12th Street
ORCHESTRA HALL PARKING RAMP
- ---------------------------
Enter on 11 Street, 12th Street or Marquette [MAP]
HILTON PARKING RAMP
- -------------------
Enter on 2nd Avenue or 11th Street
LEAMINGTON PARKING RAMP
- -----------------------
Enter on 10th Street or 11th Street
PRESENT THIS CARD TO PARKING ATTENDANT.
INSTRUCTIONS FOR MARKING YOUR VOTING DIRECTIVE
Your vote is important! Please follow the instructions below for marking your
choices:
CORRECT MARK INCORRECT MARKS TO VOTE BY MAIL
RETURN
PROXY FORM
BELOW
o Use a No. 2 pencil or blue or black ink pen only. THANK YOU FOR VOTING.
o Do not use pens with ink that soaks through the paper.
o Make solid marks that fill the oval completely.
o Make no stray marks on the directive.
o Do not fold, tear or mutilate the directive.
- --------------------------------------------------------------------------------
[LOGO] NSP NORTHERN STATES POWER COMPANY PROXY FORM
414 NICOLLET MALL, MINNEAPOLIS, MINNESOTA 55401
The undersigned appoints Edward J. McIntyre, John P. Moore, Jr. and Gary R.
Johnson, or any of them, each with full power of substitution, to represent and
vote the shares of stock held by the undersigned at the Annual Meeting of
Shareholders on Wednesday, April 28, 1999, at 10 a.m., and any adjournments
thereof, as follows. If you want, you can indicate your vote and this Proxy will
be voted as indicated. If no markings are made, the proxy will be voted "FOR"
Proposals 1, 2, 3 and 4.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, 3 AND 4.
1. ELECTION OF THREE DIRECTORS IN CLASS I. (If you wish to withhold authority
to vote for any of the Directors, strike out the appropriate name(s)):
(01) W. John Driscoll (02) James J. Howard (3) Allan L. Schuman
|_| FOR |_| WITHHOLD
2. APPROVAL OF APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
AUDITORS.
|_| FOR |_| AGAINST |_| ABSTAIN
3. TO VOTE ON A PROPOSAL TO AMEND THE COMPANY'S RESTATED ARTICLES OF
INCORPORATION TO REMOVE LIMITS ON THE COMPANY'S ISSUANCE OF UNSECURED
INDEBTEDNESS.
|_| FOR |_| AGAINST |_| ABSTAIN
4. TO VOTE ON A PROPOSAL TO AMEND THE COMPANY'S RESTATED ARTICLES OF
INCORPORATION TO REMOVE PROVISIONS RELATING TO SERIES OF PREFERRED STOCK
THAT HAVE BEEN REDEEMED.
|_| FOR |_| AGAINST |_| ABSTAIN
(TO BE SIGNED ON OTHER SIDE)
<PAGE>
ANNUAL MEETING ADMISSION TICKET
[NSP LOGO] NORTHERN STATES POWER COMPANY
414 NICOLLET MALL, MINNEAPOLIS, MINNESOTA 55401
Admission ticket for Northern States Power Company Annual Meeting of
Shareholders; Wednesday, April 28, 1999, at 10:00 a.m. at the MINNEAPOLIS
CONVENTION CENTER, Ballroom, 1301 South Second Avenue. Refreshments will be
served from 8:45 a.m. - 9:45 a.m.
THIS IS
NOT A
VOTING
DIRECTIVE
Please present this ticket for admittance of shareholder(s) named above.
Admittance will be based upon availability of seating. IMPORTANT: Because of
limited seating capacity at the Annual Meeting, employees are urged to forego
attending so that other shareholder groups may attend. However, if you want to
attend, the time away from your work would be personal time. In keeping with
Company Policy you must obtain your Supervisor's permission to take a PTO or MAT
day.
123 456 7 VOTE BY TELEPHONE OR INTERNET
CONTROL NUMBER QUICK * * * EASY * * * IMMEDIATE
For Telephone/Internet Voting
Your telephone or internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card. For
TELEPHONE OR INTERNET VOTING you will be asked to enter the "CONTROL NUMBER"
located in the box in the upper left of this form.
VOTE BY PHONE: CALL TOLL-FREE ON A TOUCH-TONE TELEPHONE
1-888-XXX-XXXX - ANYTIME. NO CHARGE FOR THIS CALL.
OPTION A: To vote as the Board of Directors recommends on ALL proposals:
Press 1
OPTION B: If you choose to vote on each item separately, press 0. You will
hear these instructions:
PROPOSAL 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9 To WITHHOLD FOR AN INDIVIDUAL nominee,
press 0 and listen to all the instructions
PROPOSAL 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press
0. The INSTRUCTIONS ARE THE SAME for all remaining
proposals to be voted.
WHEN ASKED, YOU MUST CONFIRM YOUR VOTE BY PRESSING 1.
VOTE BY INTERNET: THE WEB ADDRESS IS __________________________________________
IF YOU VOTE BY PHONE OR INTERNET - DO NOT MAIL THE PROXY FORM
THANK YOU FOR VOTING
VOTE BY MAIL: FOLD, DETACH HERE, SIGN (BELOW), MARK (OTHER SIDE) AND RETURN
PROXY FORM.
- --------------------------------------------------------------------------------
[LOGO] NSP NORTHERN STATES POWER COMPANY ESOP VOTING
414 NICOLLET MALL, MINNEAPOLIS, MINNESOTA 55401 DIRECTIVE
Please sign EXACTLY as your name(s) appear(s) on this form.
Signature______________________________________________Date_______________, 1999
Signature______________________________________________Date_______________, 1999
IMPORTANT: THIS VOTING DIRECTIVE IS SOLICITED BY THE BOARD OF DIRECTORS. WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE REVIEW THE ENCLOSED PROXY
STATEMENT, COMPLETE THIS VOTING DIRECTIVE AND RETURN IT PROMPTLY IN THE ENVELOPE
PROVIDED.
(CONTINUED AND TO BE VOTED ON OTHER SIDE)
<PAGE>
[NSP LOGO] 1999 ANNUAL MEETING GUIDELINES
In the interest of an orderly and constructive meeting, the following guidelines
will apply for NSP's Annual Meeting of Shareholders on Wednesday, April 28, 1999
at 10:00 a.m. at the Minneapolis Convention Center, Ballroom, 1301 Second Avenue
South, Minneapolis, Minnesota.
1. To gain entrance to the meeting, you must present the enclosed admission
ticket or evidence of ownership of NSP stock.
2. You will be required to pass through a metal detector similar to those at
airports. Briefcases, purses and parcels will be examined. The use of
cameras or sound recording equipment is prohibited, except those employed
by the Company to provide a record of the proceedings.
3. The business of the meeting is set forth in the Proxy Statement and will be
published on an Agenda that you will receive at the meeting. Whether or not
you plan to attend the meeting, please sign, date and return the proxy form
in the envelope provided. If you wish to change your vote or have not voted
by proxy, a ballot will be distributed to you at the meeting.
4. Time has been reserved at the end of the meeting for shareholder questions
that relate to the business of the Company. If you want to speak, please go
to the nearest microphone, state your name and confirm that you are a
shareholder before asking your question. Please direct all questions to the
Chairman. Questions from the floor are limited to three minutes to provide
an opportunity for as many shareholders as possible.
5. Although personal grievances and claims are not appropriate subjects for
the meeting, you may submit any grievance or claim in writing to any usher
or Company representative, and the Company will respond as soon as possible
after the meeting.
6. The Chairman in his sole discretion shall have authority to conduct the
meeting and rule on any questions or procedures that may arise.
- --------------------------------------------------------------------------------
NSP COMPLIMENTARY PARKING TICKET
PARKING
- -------
NSP will provide parking at the following ramps:
PLAZA PARKING RAMP
- ------------------
Enter on 2nd Avenue or 12th Street
ORCHESTRA HALL PARKING RAMP
- --------------------------- [MAP]
Enter on 11 Street, 12th Street or Marquette
HILTON PARKING RAMP
- -------------------
Enter on 2nd Avenue or 11th Street
LEAMINGTON PARKING RAMP
- -----------------------
Enter on 10th Street or 11th Street
PRESENT THIS CARD TO PARKING ATTENDANT.
INSTRUCTIONS FOR MARKING YOUR VOTING DIRECTIVE
Your vote is important! Please follow the instructions below for marking your
choices:
TO VOTE BY MAIL
CORRECT MARK INCORRECT MARKS
RETURN
VOTING DIRECTIVE
BELOW
o Use a No. 2 pencil or blue or black ink pen only.
o Do not use pens with ink that soaks through the paper. THANK YOU FOR VOTING.
o Make solid marks that fill the oval completely.
o Make no stray marks on the directive.
o Do not fold, tear or mutilate the directive.
- --------------------------------------------------------------------------------
[LOGO] NSP NORTHERN STATES POWER COMPANY ESOP VOTING
414 NICOLLET MALL, MINNEAPOLIS, MINNESOTA 55401 DIRECTIVE
The undersigned hereby instructs First Trust N.A. St. Paul, Minnesota, Trustee
of the Northern States Power Company Employee Stock Ownership Trust to vote the
common stock shares allocated to the Account of the undersigned in said Trust,
either directly or by designation of proxies, at the Annual Meeting of
Shareholders on Wednesday, April 28, 1999, at 10:00 a.m., and any adjournments
thereof, as follows. IF YOU WANT, YOU CAN INDICATE YOUR VOTE AND YOUR DIRECTIVE
WILL BE VOTED AS INDICATED. BE SURE TO FOLLOW THE INSTRUCTIONS BELOW FOR MARKING
YOUR DIRECTIVE TO ASSURE THAT YOUR VOTE IS COUNTED. IF NO MARKINGS ARE MADE,
YOUR DIRECTIVE WILL BE VOTED "FOR" PROPOSALS 1, 2, 3 AND 4.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, 3 AND 4.
1. ELECTION OF THREE DIRECTORS IN CLASS I. (If you wish to withhold authority
to vote for any of the Directors, strike out the appropriate name(s)):
(01) W. John Driscoll (02) James J. Howard (3) Allan L. Schuman
|_| FOR |_| WITHHOLD
2. APPROVAL OF APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
AUDITORS.
|_| FOR |_| AGAINST |_| ABSTAIN
3. TO VOTE ON A PROPOSAL TO AMEND THE COMPANY'S RESTATED ARTICLES OF
INCORPORATION TO REMOVE LIMITS ON THE COMPANY'S ISSUANCE OF UNSECURED
INDEBTEDNESS.
|_| FOR |_| AGAINST |_| ABSTAIN
4. TO VOTE ON A PROPOSAL TO AMEND THE COMPANY'S RESTATED ARTICLES OF
INCORPORATION TO REMOVE PROVISIONS RELATING TO SERIES OF PREFERRED STOCK
THAT HAVE BEEN REDEEMED.
|_| FOR |_| AGAINST |_| ABSTAIN
(TO BE SIGNED ON OTHER SIDE)
