SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One) (X) Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (fee required)
For the fiscal year ended December 31, 1993
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (no fee required)
For the transition period from to
Commission File Number 0-368
OTTER TAIL POWER COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0462685
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
215 SOUTH CASCADE STREET, BOX 496, FERGUS FALLS, MINNESOTA 56538-0496
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (218) 739-8200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON SHARES, par value $5.00 per share
CUMULATIVE PREFERRED SHARES, without par value.
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. (Yes X No )
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. $347,339,216 as of March 1, 1994
Indicate the number of shares outstanding of each of the registrant's classes
of Common Stock, as of the latest practicable date: 11,180,136 Common Shares
($5 par value) as of March 1, 1994
Documents Incorporated by Reference:
1993 Annual Report to Shareholders - Portions incorporated by reference into
Part II
Proxy Statement dated March 9, 1994 - Portions incorporated by reference into
Part III
PART I
Item 1. BUSINESS
(a) General Development of Business
Otter Tail Power Company (the "Company") is an operating public utility
which was incorporated in 1907 under the laws of the State of Minnesota. Its
principal executive office is located at 215 South Cascade Street, Box 496,
Fergus Falls, Minnesota 56538-0496; and its telephone number is (218) 739-
8200.
The Company's primary business is the production, transmission,
distribution and sale of electric energy. The Company, through its
subsidiaries, is also engaged in other businesses which are referred to as
Health Services Operations and Diversified Operations. Health Services
Operations consists of certain businesses acquired in 1993, including a
diagnostic medical imaging company, a management company for a number of
diagnostic medical imaging companies, and a medical imaging company that sells
and services diagnostic medical imaging equipment and associated supplies and
accessories. Diversified Operations consists of businesses diversified in
such areas as manufacturing (fabricated metal parts and agricultural
equipment), electrical and telephone contracting, radio broadcasting, waste
incinerating, and telephone/cable TV utility.
For a discussion of the Company's results of operations, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," which is incorporated by reference to pages 24 through 31 of the
Company's 1993 Annual Report to Shareholders, filed as an Exhibit hereto.
(b) Financial Information About Industry Segments
The Company and its subsidiaries are engaged in businesses that have been
classified into three segments: Electric Operations, Health Services
Operations, and Diversified Operations. Financial information about the
Company's industry segments is incorporated by reference to note 2 of "Notes
to Consolidated Financial Statements" on page 39 of the Company's 1993 Annual
Report to Shareholders, filed as an Exhibit hereto.
(c) Narrative Description of Business
ELECTRIC OPERATIONS
General
On a fully consolidated basis, the Company derived 73% of its operating
revenues from the sale of electric energy during 1993; 85% during 1992; and
90% during 1991. During 1993 the Company derived approximately 54.5% of its
electric revenues from Minnesota, 38.4% from North Dakota, and 7.1% from South
Dakota.
The territory served by the Company is predominantly agricultural,
including a part of the Red River Valley. Although there are relatively few
large customers, sales to commercial and industrial customers are significant.
By customer category, 51.7% of 1993 electric revenues was derived from
commercial and industrial customers, 32.6% from residential customers, and
15.7% from other sources, including municipalities, farms and power pools.
The Company's two largest oil pipeline customers accounted for about
10.4% of total 1993 retail electric revenues compared to 10.5% of such
revenues in 1992. In 1993, retail kwh sales to these pipeline customers
increased by 4.2% from the previous year. Sales to a large wood products
customer accounted for 1.6% of total retail electric revenues in 1993 as
compared to 1.7% in 1992. Sales to a large barley malting plant accounted for
1.4% of total retail electric revenues in 1993 as compared to 1.7% in 1992.
No other retail customer accounted for more than 1% of retail electric
revenues. Power pool sales to other utilities, which accounted for 26.8% of
total 1993 kwh sales, increased 72.9% from 1992. The increase in power pool
sales in 1993 can be attributed to the weather, which resulted in low water
conditions in the spring in Manitoba and widespread summer flooding in the
Midwest. Activity in short-term energy sales is subject to change based on a
number of factors and the Company is unable to predict the 1994 level of
activity. The Company's other sales of electricity for resale are
insignificant.
The aggregate population of the Company's retail service area is
approximately 230,000. In this service area of 423 communities and adjacent
rural areas and farms, approximately 123,600 people lived in communities
having a population of more than 1,000, according to the 1990 census. The
only communities served which have a population in excess of 10,000 are
Jamestown, North Dakota, (15,571); Fergus Falls, Minnesota (12,362); and
Bemidji, Minnesota (11,245). Since 1990 when the customer count was at a low
of 121,287, the Company has experienced an increase in customers. By year end
1993 total customers had increased to 122,427. During 1993, the Company
experienced a net increase of 430 customers, with growth in the number of
residential and commercial customers, notwithstanding the loss of 243
customers to the city of Detroit Lakes, Minnesota as a result of annexation of
a portion of the Company's service territory.
The Company's electric sales are subject to competition in some areas
from municipally owned systems, rural cooperatives and, in certain respects,
from on-site generators and cogenerators. The Company's electricity also
competes with other forms of energy. The degree of competition may vary from
time to time depending on relative costs and supplies of other forms of
energy. Although the Company cannot predict the precise extent to which its
future business may be affected by supply, relative cost or promotion of other
electricity or energy suppliers, the Company believes that it will be in a
position to compete favorably with other suppliers.
Rate Matters
The Company is subject to electric rate regulation as follows:
Year Ended
December 31, 1993
% of
Electric % of kwh
Rates Regulation Revenues Sales
Minnesota retail sales Minnesota Public Utilities
Commission 46.4% 38.7%
North Dakota retail sales North Dakota Public Service
Commission 36.7 28.9
South Dakota retail sales South Dakota Public Utilities
Commission 7.0 5.4
Transmission and sales Federal Energy Regulatory
for resale Commission ("FERC") 9.9 27.0
100.0% 100.0%
The following table summarizes the electric rate proceedings with the
Minnesota and the South Dakota Public Utilities Commissions, the North Dakota
Public Service Commission, and the Federal Energy Regulatory Commission since
January 1, 1989:
Increase
% Increase Increase (Decrease) Granted
Request (Decrease) (Decrease)
Commission Filed Requested Effective Amount %
(Thousands)
Minnesota Last Proceeding was July 1, 1987
North Dakota (1). . . . . January 15, 1989 ($1,000) (1.5%)
(2). . . . . June 1, 1990 ($ 315) (0.5%)
(3). . . . . September 9, 1992 ($1,000) (1.5%)
(4). . . . . September 22, 1993 ($ 300) (0.4%)
South Dakota Last Proceeding was November 1, 1987
FERC Last Proceeding was July 1, 1987
___________
(1) A voluntary settlement agreement reached between the Company and the
North Dakota Commission decreased North Dakota retail rates by $1,000,000
annually (or approximately 1.5%) effective January 15, 1989. In
addition, the settlement agreement provided for the Company to spend
$315,000 annually on additional North Dakota economic development, which
expenditures will be offset by reduced North Dakota depreciation expense.
(2) This voluntary rate adjustment decreased North Dakota retail rates by
$315,000 annually to recognize the positive effect on the Company's
customer base in North Dakota as a result of the economic development
expenditures referred to in note (1) above.
(3) A voluntary settlement agreement reached between the Company and the
North Dakota Commission pursuant to which the Company made a refund of
$1,000,000 to its North Dakota customers. This settlement does not
require a permanent reduction in rates charged by the Company to
customers in North Dakota.
(4) An agreement for incentive regulation reached between the Company and the
North Dakota Commission provides for sharing equally between ratepayers
and shareholders any amount earned in 1993 over or under a benchmark
overall rate of return. A liability of $300,000 for the Company to its
North Dakota customers resulted from sharing earnings above this
benchmark for 1993. The status of this liability will be considered in
future incentive agreements between the Company and the North Dakota
Commission for the years 1994 and following.
Under Minnesota law, the Minnesota Commission must allow implementation
of an interim rate increase, subject to refund with interest, 60 days after
the initial filing date of a rate increase request, except that the Commission
is not required to allow implementation of the interim rate increase until
four months after the effective date of a previous rate order. The amount of
the interim rate increase will be calculated using the proposed test year cost
of capital, the rate of return on common equity most recently granted to the
Company by the Commission, and rate base and expense items allowed by a
currently effective Commission order. In addition, if the Commission fails to
make a final determination regarding any rate request within ten months after
the initial request is filed, then the requested rate is deemed to be
approved, except if (i) an extension of the procedural schedule (in case of a
contested rate increase request) has been granted, in which case the schedule
of rates will be deemed to have been approved by the Commission on the last
day of the extended period of suspension of the rate increase, or (ii) a
settlement has been submitted to and rejected by the Commission, and the
Commission does not make a final determination concerning the schedule of
rates, in which case the schedule of rates will be deemed to have been
approved 60 days after the initial or, if applicable, the extended period of
suspension of the rate increase.
Rate requests filed with the North Dakota Public Service Commission
become effective 30 days after the date of filing unless suspended by the
Commission. Within seven months after the date of suspension, the North
Dakota Commission must act on the request, and during the period of
consideration by the Commission a suspended rate can be implemented only with
the approval of the Commission.
South Dakota law provides that a requested rate increase can be
implemented 30 days after the date of filing, unless its effectiveness is
suspended by the Commission. The Commission may suspend the effectiveness of
the proposed rate change for a period not longer than 90 days beyond the time
when the rate change would otherwise go into effect, unless the Commission
finds that a longer time is required, in which case the Commission may extend
the suspension for a period not to exceed a total of 12 months. A public
utility may not put a proposed rate change into effect until at least 45 days
after the Commission has made a determination concerning any previously filed
rate change. In the event that a requested rate change is suspended by the
Commission, such requested rate change can be implemented by the public
utility six months after the date of filing (unless previously authorized by
the Commission), subject to refund with interest.
The Company's wholesale power sales and transmission rates are subject to
the jurisdiction of the Federal Energy Regulatory Commission under the Federal
Power Act of 1935. Filed rates are effective after a one-day suspension
period, subject to ultimate approval by the FERC. Power pool sales are
conducted continuously through the Mid-Continent Area Power Pool ("MAPP") on
the basis of generating costs, in accordance with schedules filed by MAPP with
the FERC.
In rate cases, a forward test year procedure enables cost increases to be
recovered more promptly than use of an historic test year. The Minnesota
Public Utilities Commission has established by regulation a forward test year
procedure. The North Dakota Public Service Commission has not formally
established a test year procedure; however, it accepted a forward test year in
the Company's most recent rate case. The South Dakota Public Utilities
Commission uses an historic test year with adjustments for known and
measurable changes occurring within 24 months of the last month of the test
year.
The Company has obtained approval from the regulatory commissions in all
three states which it serves for lower rates for residential demand control
and controlled service, and in North Dakota and South Dakota for bulk
interruptible rates. Each of these special rates is designed to improve
efficient use of Company facilities, while encouraging use of electricity
instead of other fuels and giving customers more control over the size of
their electric bill.
All of the Company's electric rate schedules now in effect, except for
wheeling, certain municipal and area lighting services and certain
interruptible rates, provide for adjustments in rates based upon the cost of
fuel delivered to the Company's generating plants, as well as for adjustments
based upon the cost of the energy charge for electric power purchased by the
Company. Such adjustments are presently based upon a two-month moving average
in Minnesota and under the FERC, a three-month moving average in South Dakota,
and a four-month moving average in North Dakota and are applied to the next
billing after becoming applicable.
Capability and Demand
At December 31, 1993, the Company had base load net plant capability
totaling 550,869 kw, consisting of 242,874 kw from the Big Stone Plant (the
Company's 53.9% share), 153,175 kw from the Hoot Lake Plant, 149,450 kw from
the Coyote Plant (the Company's 35% share), and 5,370 kw from the Potlatch Co-
generation Plant near Bemidji, Minnesota (the Company's 50% share). In
addition to its base load capability, the Company has internal combustion
units and small diesel units, used chiefly for peaking and standby purposes,
with a total capability of 87,993 kw, and 4,030 kw of hydroelectric
capability. During 1993, the Company generated about 76% of its total kwh
sales and purchased the balance.
The Company has made arrangements to help meet its future base load
requirements, and continues to investigate other means for meeting such
requirements. The Company has an agreement with Northern States Power Company
("NSP") for the annual exchange of 75,000 kw of seasonal diversity capacity.
Pursuant to this agreement, NSP began providing the Company with 75,000 kw of
capacity for winter seasons on November 1, 1990, and the Company started
providing NSP with 75,000 kw of summer capacity on May 1, 1991. This is a
fifteen-year agreement which provides the Company a means of increasing the
capacity of its winter peaking system and better coordinates use of its
generating facilities with no additional investment. In addition, for the
1993-1994 winter season, the Company purchased 20,000 kw of capacity from
Lincoln Electric System ("LES"). The Company has extended its winter season
agreement with LES through the 1994-1995 winter season. The Company has an
agreement with Manitoba Hydro Electric Board to purchase 110,000 kw of
capacity for the summer seasons of 1994 through 1996. The Company also has a
direct control load management system which provides some flexibility to the
Company to effect reductions of peak load.
The Company is a member of the Mid-Continent Area Power Pool ("MAPP"),
which includes 46 investor-owned utilities, rural cooperatives, municipal
utilities, and other power suppliers in the North Central region of the United
States and in two Canadian provinces. The objective of MAPP is to coordinate
planning and operation of generating and interconnecting transmission
facilities to provide reliable and economic electric service to members'
customers. Customers served by MAPP members may, therefore, benefit from the
regional high voltage interconnections which are capable of transferring large
blocks of energy between systems. Also, high voltage interconnections permit
companies to buy and sell power among each other according to differing peak
demands.
The Company is a winter peaking utility and traditionally experiences its
peak system demand during the winter season. For the calendar year 1993, the
Company established a new record sixty-minute peak demand of 589,239 kw on
January 8, 1993. Taking into account additional capacity available to it in
January 1993 under power purchase contracts (including short-term
arrangements), as well as its own generating capacity, the Company's
capability of then meeting system demand, including reserve requirements
computed in accordance with accepted industry practice, amounted to
741,623 kw. In 1994 the Company expects moderate growth in peak demand as
compared to 1993. Due to very cold temperatures it is likely that a new
record sixty-minute peak demand was set early in 1994. The Company's
additional capacity available under power purchase contracts (as described
above), combined with the Company's generating capability and load management
control capabilities, are expected to meet 1994 system demand, including
industry reserve requirements.
Fuel Supply
Lignite coal is the principal fuel burned by the Company at its Big Stone
and Coyote generating plants. The majority of coal burned at the Hoot Lake
Plant since 1988 has been western subbituminous coal. The following table
shows for 1993 the sources of energy used to generate the Company's net output
of electricity:
Net
Kilowatt % of Total
Hours Kilowatt
Generated Hours
Sources (Thousands) Generated
Lignite Coal . . . . . . . . . . . . . 2,251,572 82.1%
Subbituminous Coal . . . . . . . . . . 466,458 17.0
Hydro . . . . . . . . . . . . . . . . . 25,719 .9
Oil . . . . . . . . . . . . . . . . . . 673 -
Total . . . . . . . . . . . . . . . 2,744,422 100.0%
The Company's supply of lignite coal (all of which comes from North
Dakota) is furnished by Knife River Coal Mining Company (a subsidiary of
Montana-Dakota Utilities Co., a co-owner of the Big Stone and Coyote Plants).
The Company has a contract for sufficient lignite coal to supply the Big Stone
Plant until 1995, with an option to renew for an additional 20 years subject
to certain contingencies. In 1992 the parties reached an agreement which
resulted in lower coal costs for the life of the contract. The Company has a
contract running through 1999 with Knife River Coal Mining Company for
sufficient lignite coal to operate its Hoot Lake Plant. The Company has
negotiated purchase agreements for fixed quantities of subbituminous coal as
needed for Hoot Lake Plant. The lignite coal contract with Knife River Coal
Mining Company for the Coyote Plant expires in 2016, with a 15-year renewal
option subject to certain contingencies, and is expected to provide the
plant's lignite coal requirements during the term of the contract.
It is the Company's practice to maintain minimum 30-day inventories (at
full output) of coal at the Big Stone and Coyote Plants, and a 10-day
inventory at the Hoot Lake Plant.
The lignite coal used at Big Stone Plant is transported in unit train
cars belonging to the plant owners. The coal transportation contract for the
Big Stone Plant with the Burlington Northern Railroad expires in 1995. A
freight rate reduction was negotiated for lignite deliveries to the Big Stone
Plant, effective in March 1990.
Transportation costs of lignite coal to Hoot Lake Plant are governed by
tariffs established pursuant to authority of the Interstate Commerce
Commission. The existing contract with Burlington Northern Railroad for
subbituminous coal deliveries at Hoot Lake was amended in 1993 and will remain
in effect for 1994 with annual renewals by mutual agreement. The Company also
has a subbituminous coal transportation agreement with Northern Coal
Transportation Company effective January 1993 covering coal moved from
Kennecott Energy's Spring Creek Mine to Hoot Lake Plant. This agreement
expires January, 1996. Freight rates were reduced in 1993 under both
agreements.
The Coyote Plant is a mine-mouth plant located in western North Dakota,
near the source of lignite coal used for generation. Because there are no
coal transportation costs, this plant has a relatively low fuel cost compared
to other Company units.
The average cost of coal consumed (including handling charges to the
plant sites) in cents per million BTU for each of the three years 1993, 1992
and 1991, was 100.7 cents, 100.5 cents and 104.1 cents, respectively. The
average cost of coal consumed (including handling charges to the plant sites)
per ton for each of the three years 1993, 1992 and 1991 was $13.75, $13.33 and
$13.60, respectively.
North Dakota imposes a severance tax on lignite at a flat rate of $ .75
per ton, plus an additional $ .02 per ton which is deposited in a lignite
research fund. The lignite coal used by the Company at its plants is surface
mined. The North Dakota laws relating to surface mining and the Federal
Surface Mining Control and Reclamation Act will continue to adversely affect
the price of lignite to the Company. Any increased costs of lignite would be
substantially recovered through the provisions in the Company's rate schedules
for adjustments in rates based upon the cost of fuel delivered to the
Company's generating plants. See "Rate Matters."
During 1990, the Company conducted test burns of tire-derived fuel
("TDF") at the Big Stone Plant and has received approval from the South Dakota
Department of Environment and Natural Resources to burn TDF. The quantity of
TDF burned as fuel during 1993 (1.6% of total fuel burned at the Big Stone
Plant), and expected to be burned in 1994, is insignificant when compared to
the lignite coal consumption at the Big Stone Plant. During 1991, test burns
of refuse derived fuel ("RDF") were conducted at Big Stone Plant and approval
to burn RDF as fuel was granted by the South Dakota Department of Environment
and Natural Resources. The quantity of RDF burned in 1993 (.8% of total fuel
burned at the Big Stone Plant) and expected to be burned in 1994 is
insignificant when compared to Big Stone Plant's lignite coal consumption.
General Regulation
Under the Minnesota Public Utilities Act, the Company is subject to the
jurisdiction of the Minnesota Public Utilities Commission ("MPUC") with
respect to rates, issuance of securities, public utility services,
construction of major utility facilities, establishment of exclusive assigned
service areas, contracts and arrangements with subsidiaries and other
affiliated interests, and other matters. The MPUC has the authority to assess
the need for large energy facilities and to issue or deny certificates of
need, after public hearings, within six months of an application to construct
such a facility.
The Minnesota Department of Public Service ("DPS") is responsible for
investigating all matters subject to the jurisdiction of the DPS or the MPUC,
and for the enforcement of MPUC orders. Among other things, the DPS is
authorized to collect and analyze data on energy and the consumption of
energy, develop recommendations as to energy policies for the Governor and the
Legislature of Minnesota and evaluate policies governing the establishment of
rates and prices for energy as related to energy conservation. The DPS acts
as state advocate in matters heard before the MPUC. The DPS also has the
power to prepare and adopt regulations to conserve and allocate energy in the
event of energy shortages and on a long term basis.
Under Minnesota law, every public utility that furnishes electric service
must make annual investments and expenditures in energy conservation
improvements, or make a contribution to the State's energy and conservation
account, in an amount equal to at least 1.5% of its gross operating revenues
from service provided in Minnesota. The DPS may require the Company to make
investments and expenditures in energy conservation improvements whenever it
finds that the improvement will result in energy savings at a total cost to
the utility less than the cost to the utility to produce or purchase an
equivalent amount of a new supply of energy. Such DPS orders are appealable
to the MPUC. Investments made pursuant to such orders generally are
recoverable costs in rate cases, even though ownership of the improvement may
be in the property owner rather than the utility. The Company is required to
submit, and the MPUC has approved, the Company's incentive mechanism for
recovery of conservation related expenditures for 1992 and 1993. The MPUC
requires the submission of a 15-year advance integrated resource plan by
jurisdictional utilities. The Company submitted its first plan in 1992, which
was approved by the MPUC in 1993, and will be required to submit its next plan
in 1994.
Pursuant to the Minnesota Power Plant Siting Act, the Minnesota
Environmental Quality Board ("EQB") has been granted the authority to regulate
the siting in Minnesota of large electric power generating facilities in an
orderly manner compatible with environmental preservation and the efficient
use of resources. To that end, the EQB is empowered, after study, evaluation,
and hearings, to select or designate in Minnesota sites for new electric power
generating plants (50,000 kw or more) and routes for transmission lines
(200 kv or more) and to certify such sites and routes as to environmental
compatibility.
The Company is subject to the jurisdiction of the Public Service
Commission of North Dakota with respect to rates, services, certain issuances
of securities and other matters. The North Dakota Energy Conversion and
Transmission Facility Siting Act grants the North Dakota Commission the
authority to approve sites in North Dakota for large electric generating
facilities and high voltage transmission lines. This Act is similar to the
Minnesota Power Plant Siting Act described above and affects new electric
power generating plants of 50,000 kw or more and new transmission lines of
115 kv or more.
The South Dakota Public Utilities Act subjects the Company to the
jurisdiction of the South Dakota Public Utilities Commission with respect to
rates, public utility services, establishment of assigned service areas, and
other matters. The Company is currently exempt from the jurisdiction of the
Commission with respect to the issuance of securities. Under the South Dakota
Energy Facility Permit Act, the South Dakota Commission has the authority to
approve sites in South Dakota for large energy conversion facilities
(100,000 kw or more) and transmission lines of 115 kv or more.
The Company is also subject to regulation by the Federal Energy
Regulatory Commission, successor to the Federal Power Commission, created
pursuant to the Federal Power Act of 1935, as amended. The FERC is an
independent agency which has jurisdiction over rates for sales for resale,
transmission and sale of electric energy in interstate commerce,
interconnection of facilities, and accounting policies and practices.
The Company is subject to various federal and state laws, including the
Federal Public Utility Regulatory Policies Act and the Energy Policy Act of
1992, which are intended to promote the conservation of energy and the
development and use of alternative energy sources.
The Company is unable to predict the impact on its operations resulting
from future regulatory activities by any of the above agencies, from any
future legislation or from any future tax which may be imposed upon the source
or use of energy.
Environmental Regulation
Impact of Environmental Laws The Company's existing generating plants
are subject to stringent standards and regulations regarding, among other
things, air, water and solid waste pollution, by agencies of the federal
government and the respective states where the Company's plants are located.
The Company estimates that it has expended in the five years ended December
31, 1993, approximately $9,700,000 for environmental control facilities
(excluding allowance for funds used during construction). Included in the
1994-1998 construction budget are approximately $980,000 for environmental
improvements for existing and new facilities, including $500,000 for 1994.
Air Quality Pursuant to the Federal Clean Air Act of 1970, the Clean Air
Act Amendments of 1990 and other amendments thereto (collectively the "Act"),
the United States Environmental Protection Agency ("EPA") has promulgated
national primary and secondary standards for certain air pollutants.
All primary fuel burned by the Company at its steam generating plants is
North Dakota lignite or western subbituminous coal with sulfur content
averaging less than one percent. Electrostatic precipitators have been
installed at the Company's principal units at the Hoot Lake Plant and at the
Big Stone Plant. A fabric filter to collect particulates from stack gases has
been installed on a smaller unit at Hoot Lake Plant. As a result, the
Company's units at Big Stone and Hoot Lake currently meet all federal and
state air quality and emission standards presently applicable.
The Coyote Plant is substantially the same design as the Big Stone Plant,
except for site-related items and the inclusion of sulfur dioxide removal
equipment. The removal equipment--referred to as a dry scrubber--consists of
a spray dryer, followed by a fabric filter, and is designed to desulphurize
hot gases from the stack without producing sludge, an unwanted by-product of
the conventional wet scrubber system. The Coyote Plant is currently operating
within all presently applicable federal and state air quality and emission
standards.
The Clean Air Act Amendments of 1990, in addressing acid deposition, will
impose new requirements on power plants in an effort to reduce national
emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx).
The national SO2 emission reduction goals are to be achieved through a
new market-based system under which power plants are to be allocated
"emissions allowances" that will require plants to either reduce their
emissions or acquire allowances from others to achieve compliance. The SO2
emission reduction requirements will be imposed in two phases, the first to
take effect in 1995 and the second in 2000.
The phase one requirements do not apply to any of the Company's plants.
The phase two standards apply to the Company's plants in the year 2000. The
Company believes that its current use of low sulfur coal at the Hoot Lake
Plant and the dry scrubbers installed at the Coyote Plant will enable the
facilities to comply with anticipated phase two limitations with regards to
SO2. Although the Big Stone Plant's current annual SO2 emissions meet
presently applicable standards, they are higher than the levels that will be
allowed by the phase two requirements. The Big Stone Plant can maintain
current levels of operation and meet the phase two requirements by using
allowances (alloted and/or purchased), by installing scrubbers and/or by
switching to subbituminous coal which is lower in sulfur emissions than
lignite which the plant currently uses. Big Stone Plant's lignite contract
expires in 1995. The cost of switching to subbituminous coal from lignite
would not adversely affect the Company's power plant operations based upon
current market price. In the unlikely event the Company decides to continue
to burn lignite, the Company's share of the cost of installing scrubbers at
its Big Stone Plant by the year 2000 is estimated to be approximately $54
million.
The national NOx emission reduction goals are to be achieved by imposing
mandatory emissions standards on individual sources. The standards will not
apply to the Company's plants until the year 2000. Based on the NOx emissions
limitations set forth in regulations recently issued by the EPA for boilers
such as those used at the Company's Hoot Lake Plant, but subject to an
evaluation of the results of continuous emission monitoring expected to begin
at Hoot Lake in 1994, the Company currently anticipates that the cost of
complying with the limitations to be applicable to Hoot Lake will not be
material. The Act requires EPA to specify before January 1, 1997 the NOx
limitations for cyclone boilers such as those used at Big Stone and Coyote.
Because the EPA has not yet issued such regulations, the Company is unable to
determine the NOx emissions limitations that will be applicable to those
plants in the year 2000 or the cost to comply with such limitations.
The Clean Air Act Amendments of 1990 contain a list of toxic air
pollutants to be regulated. The list includes certain substances believed to
be emitted by the Company's plants. The Act calls for EPA studies of the
effects of emissions of the listed pollutants by electric utility steam
generating plants. Because promulgation of rules by the EPA has not been
completed however, it is not possible to assess at this time whether, or to
what extent, this legislation will ultimately impact the Company.
Water Quality The Federal Water Pollution Control Act Amendments of
1972, and amendments thereto, provide for, among other things, the imposition
of effluent limitations to regulate discharges of pollutants, including
thermal discharges, into the water of the United States, and the EPA has
established effluent guidelines for the steam electric power generating
industry. Discharges must also comply with state water quality standards.
The Company has all federal and state water permits presently necessary
for the operation of its Big Stone Plant. A water discharge permit for the
Hoot Lake Plant was renewed in 1992 for a five year term. A renewal permit
for the Coyote Plant was renewed in 1993 also for a five year term. The
Company owns five small dams on the Otter Tail River which are subject to FERC
licensing requirements. A license for all five dams was issued on December 5,
1991. Total nameplate rating of the five dams is 3,450 kw (net unit capability
of 3,480 kw at December 31, 1993).
Solid Waste Permits for disposal of ash and other solid wastes have been
issued for the Company's Big Stone and Coyote Plants. A renewal permit is
pending for the Company's Hoot Lake Plant and the Company anticipates that it
will obtain this renewal in due course. The EPA has promulgated various solid
and hazardous waste regulations and guidelines pursuant to, among other laws,
the Resource Conservation and Recovery Act of 1976, the Solid Waste Disposal
Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984,
which provide for, among other things, the comprehensive control of various
solid and hazardous wastes from their generation to final disposal. The
states of Minnesota, North Dakota and South Dakota have also adopted rules and
regulations pertaining to solid and hazardous waste. The total impact on the
Company of the various solid and hazardous waste statutes and regulations
enacted by the Federal Government or the states of Minnesota, North Dakota and
South Dakota is not certain at this time. To date, the Company has incurred
no significant costs as a result of these laws.
In 1980, the United States enacted the Comprehensive Environmental
Response, Compensation and Liability Act, commonly known as the Federal
Superfund law, and in 1986, reauthorized and amended the 1980 Act. In 1983,
Minnesota adopted the Minnesota Environmental Response and Liability Act,
commonly known as the Minnesota Superfund law. In 1988, South Dakota enacted
the Regulated Substance Discharges Act, commonly called the South Dakota
Superfund law. In 1989, North Dakota enacted the Environmental Emergency Cost
Recovery Act. Among other requirements, the federal and state acts establish
environmental response funds to pay for remedial actions associated with the
release or threatened release of certain regulated substances into the
environment. These federal and state Superfund laws also establish liability
for cleanup costs and damage to the environment resulting from such releases
or threatened releases of regulated substances. The Minnesota Superfund law
also creates liability for personal injury and economic loss under certain
circumstances. The Company is unable to determine the total impact of the
Superfund laws on its operations at this time but has not incurred any
significant costs to date related to these laws.
The Federal Toxic Substances Control Act of 1976 regulates, among other
things, polychlorinated byphenyls (PCBs). The EPA has enacted regulations
concerning the use, storage and disposal of PCBs. The Company completed a
program for removal of all PCB filled transformers and capacitors by the end
of 1987 and received Certificates of Disposal in 1989. The Company completed
removal of PCB contaminated mineral oil dielectric fluid from all substation
transformers in 1991 and continues to remove such oil from voltage regulators
as well as other electrical equipment.
Health Effects of Electric and Magnetic Fields Although research
conducted to date has found no conclusive evidence that electric and magnetic
fields affect health, a few studies have suggested a possible connection with
cancer. The utility industry is funding studies. The ultimate impact, if
any, of this issue on the Company and the utility industry is impossible to
predict.
Franchises
At December 31, 1993, the Company had franchises in all of the 371
incorporated municipalities which it serves. All franchises are nonexclusive
and generally were obtained for 20-year terms, with varying expiration dates.
No franchises are required to serve unincorporated communities in any of the
three states which the Company serves. The Company believes that the
situation with regard to its franchises is satisfactory.
HEALTH SERVICES OPERATIONS
General
Health Services Operations consists of businesses involved in the sale,
service, rental, refurbishing and operation of medical imaging equipment and
the sale of related supplies and accessories to various medical institutions
primarily in the Midwest United States. All of these business were acquired
in 1993 by the Company's wholly-owned subsidiary Mid-States Development, Inc.
On a fully consolidated basis, the Company derived 12% of its operating
revenues from this segment in 1993.
Subsidiaries comprising Health Services Operations include the following:
Diagnostic Medical Systems, Inc. ("DMS"), located in Fargo, ND,
sells, services and refurbishes diagnostic medical imaging equipment
manufactured primarily by Philips Medical Systems ("Philips"),
including fluoroscopic, radiograhic and mammography equipment, along
with ultrasound, computerized tomography ("CT") scanners, magnetic
resonance imaging ("MRI") scanners, cardiac cath labs, and radiation
therapy equipment for the treatment of cancer. DMS recently entered
into a five year dealer agreement with Philips, which can be
terminated by Philips upon eighteen months notice and certain other
circumstances. DMS is also a supplier for Kodak, DuPont, and Fuji
in the medical film and accessory business. DMS markets mainly to
hospitals, clinics and mobile services in North Dakota, South
Dakota, Minnesota, Montana and Wyoming. Almost 80% of the hospitals
served by DMS have 50 or fewer beds. DMS also offers, through its
subsidiaries, mobile CT and MRI service in the Upper Midwest and
Central United States.
Mobile Imaging, Inc., located in Fargo, ND, and its subsidiaries are
engaged primarily in providing mobile CT and MRI services in the
Upper Midwest, and also provide interim scanner service on a
national basis.
Imaging Plus, Inc., located in Fargo, ND, provides management,
marketing and administrative services for diagnostic medical imaging
companies, including Mobile Imaging, Inc. and a subsidiary of DMS.
Combined, the Health Service subsidiaries cover the three basics of the
medical imaging industry: (1) operating technicians who do the imaging of
patients of hospitals and clinics; (2) the equipment function that researches,
buys, sells, owns, rents, refurbishes and maintains the imaging machines; and
(3) central office specialists who provide scheduling, billing personnel and
administrative support.
Due to the complex nature of the equipment, the diagnostic medical
imaging industry is both technology intensive and capital intensive. The
industry is highly competitive, with competition based primarily on the
quality of the equipment and the availability of service. The Company's
Health Services businesses compete with a number of other companies that make,
sell, rent and service diagnostic medical imaging equipment, including large
manufacturers other than Philips and their respective distributors. The
Company estimates that its market share is greater than fifty percent in the
Upper Midwest region.
The Company continues to investigate acquisitions of additional
businesses and expects continued growth in this area.
General Regulation
Operation of the Health Services subsidiaries will be subject to the
effects of pending health care legislation, the outcome of which cannot be
accurately assessed at this time. As an efficient, low-cost provider of
certain health services and equipment, management believes that the Health
Services businesses are in line with the goals of national health-care reform.
DIVERSIFIED OPERATIONS
General
The Company's Diversified Operations consists of business that are
diversified in such areas as manufacturing, electrical and telephone
contracting, radio broadcasting, waste incinerating, and telephone/cable TV
utility. On a fully consolidated basis, the Company derived 15% of its
operating revenues from these smaller diversified business during 1993 and
1992, and 10% during 1991.
The following is a brief description of each of these businesses:
Precision Machine of North Dakota, Inc., located in West Fargo, ND,
uses computer-controlled lathes and milling machines to produce
parts for manufacturers.
Moorhead Electric, Inc., located in Moorhead, MN, provides
commercial and industrial wiring of large buildings, constructs and
maintains telecommunications and power distribution systems, and
provides computer networking.
Aerial Contractors, Inc., with headquarters in West Fargo, ND,
constructs and maintains overhead and underground electric,
telephone, communications, and cable television lines.
Dakota Machine Tool, Inc., located in West Fargo, ND, is primarily
engaged in metal fabrication of large machines that handle and
refine sugar beets. Tec Steel, a division of Dakota Machine, cuts
metal parts for such machines and sells the same service to other
manufacturers.
Glendale Machining, Inc. of Pelican Rapids, MN, machines parts for
manufacturers.
KFGO Inc. operates both AM and FM commercial radio stations
broadcasting from Fargo, ND.
Quadrant Co. ("Quadrant") operates a municipal waste burning
facility located in Perham, MN. Pursuant to agreements which expire
in 1995, Quadrant receives a processing fee from five Minnesota
counties for disposal of mixed waste and sells the steam generated
from the incineration process to two customers. During 1994,
Quadrant's management will be evaluating its future business plans.
Midwest Information Systems, Inc.("MIS"), headquartered in Parkers
Prairie, MN, owns two operating telephone companies serving over
4000 customers and a cable television company serving approximately
600 customers. MIS is also involved in long-distance
transport, fiber-optic transmission facilities and the sale of
direct broadcast satellite television programming and equipment.
With the exception of Quadrant, which was founded by the Company in 1985,
each of these businesses was acquired by the Company since 1989. An
additional acquisition (a radio broadcasting company located in Morris, MN)
was finalized in January, 1994. Quadrant is a wholly-owned subsidiary of
Minnesota Dakota Generating Company ("MDG"), which in turn is a wholly-owned
subsidiary of the Company. MIS is a wholly-owned subsidiary of North Central
Utilities, Inc., a subsidiary of MDG formed for the purpose of acquiring
regulated telephone companies. Each of the other subsidiaries described above
are owned by Mid-States Development, Inc., which is also a wholly-owned
subsidiary of MDG.
Each of the businesses in Diversified Operations is subject to competition, as
well as the effects of general economic conditions, in their respective
industries.
The Company continues to investigate acquisitions of additional
businesses (both utility and nonutility) and expects continued growth in this
area.
General Regulation
The Company's operating telephone subsidiaries are subject to the
regulatory authority of the MPUC regarding rates and charges for telephone
services, as well as other matters. The operating telephone subsidiaries must
keep on file with the Minnesota DPS schedules of such rates and charges, and
any requests for changes in such rates and charges must be filed for approval
by the MPUC. The telephone industry is also subject generally to rules and
regulations of the Federal Communications Commission ("FCC"). The Company's
operating cable television subsidiary is regulated by federal and local
authorities. The Company's radio broadcasting subsidiaries are regulated by
the FCC.
Environmental Regulation
The Minnesota Pollution Control Agency issued an air emission facility
permit, authorizing the incineration of up to 116 tons of municipal solid
waste per day at Quadrant's facility in addition to the incineration of other
allowable wastes and petroleum derived used oil. The permit expired in May
1990; however the facility has been granted permission by the Minnesota
Pollution Control Agency to operate under the conditions of the expired permit
until operating rules for incinerators are fully developed (see discussion
below). The subsidiary has formally requested a renewal of the permit.
The state of Minnesota has recently promulgated rules relating to
storage, transport, testing and disposal of ash from municipal solid waste
combustors, which are not expected to have a material adverse effect on the
operations of Quadrant. The state of Minnesota has proposed, and the EPA is
expected to propose, rules covering air emissions from municipal waste
combustors of this size. Although the effects of such regulations
on Quadrant's operations cannot be accurately predicted at this time,
additional costs are expected to result if the regulations take effect.
CONSTRUCTION PROGRAM & FINANCING
The Company is continually expanding, replacing and improving its
electric utility facilities. During 1993, the Company invested approximately
$23,781,000 (including allowance for funds used during construction) for
additions to its electric utility properties. During the five years ended
December 31, 1993, the Company had gross electric property additions,
including construction work in progress, of approximately $114,189,000 and
gross retirements of approximately $27,934,000. During 1993, capital
expenditures of approximately $3,000,000 were also made in each of Health
Services Operations and Diversified Operations.
Total capital expenditures for the Company and its subsidiaries during
the five-year period 1994-1998 are estimated to be approximately $146,000,000.
Of this $14,000,000 is for Health Services Operations and $9,000,000 for
Diversified Operations. The Company estimates that during the five years 1994
through 1998 it will invest for electric utility construction approximately
$123,000,000 (including allowance for funds used during construction). The
Company has no firm plans for additional base load construction. The majority
of electric utility expenditures for the five-year period 1994 through 1998
will be for work related to the Company's transmission and distribution
system.
The Company estimates that funds internally generated, combined with
funds on hand, will be sufficient to provide for all of its 1994-1998 electric
construction program expenditures (including allowance for funds used during
construction) and to meet all sinking fund payments for First Mortgage Bonds
in the next five years. Additional short or long-term financing will be
required in the period 1994-1998 in connection with the maturity of First
Mortgage Bonds and a Long-Term Lease Obligation ($21,000,000), in the event
the Company decides to refund or retire early any of its presently outstanding
debt or Cumulative Preferred Shares, to complete its Common Share repurchase
program or for other corporate purposes.
The foregoing estimates of capital expenditures and funds internally
generated may be subject to substantial changes due to unforeseen factors,
such as changed economic conditions, competitive conditions, technological
changes, new environmental and other governmental regulations, changed tax
laws and rate regulation.
On October 13, 1993, the Company sold $4,000,000 of a new series of $6.75
Cumulative Preferred Shares. The proceeds were used for the redemption on
November 12, 1993, of the Company's outstanding $9.50 Cumulative Preferred
Shares at an aggregate redemption price of $4,080,000, plus accrued dividends
to the redemption date. On November 1, 1993, the Company retired $4,970,000
of First Mortgage Bonds, 4.625% Series of 1993.
The Company sold on December 7, 1993, $3,010,000 of Industrial
Development Refunding Revenue Bonds, 5% Series of 2002, and on December 15,
1993, $10,400,000 of Pollution Control Refunding Revenue Bonds, Variable
Series of 2012. The proceeds were used for the redemption of the Company's
First Mortgage Bonds, 7.10% Series of 2003 and 5.90% Series of 2004 in the
aggregate principal amount of $13,445,000.
As of December 31, 1993, the Company had unutilized net fundable property
available for the issuance of more than $13,000,000 principal amount of
additional First Mortgage Bonds and also was entitled to issue in excess of
$102,000,000 principal amount of additional Bonds on the basis of Bonds
theretofore retired.
The Company's operating subsidiaries are responsible for obtaining their
own financing after the Company's initial equity investment and have developed
financing arrangements with various banks. The Company does not intend to
make or guarantee loans to its subsidiaries, lend a subsidiary money or cosign
on any borrowing.
The Company has access to short-term borrowing resources and has
authority from the Minnesota Public Utilities Commission to have outstanding
during 1994 such borrowings in an amount not to exceed $50,000,000. The
Company and its subsidiaries currently have established bank lines of credit
totaling $19,050,000 of which $4,437,000 was used at December 31, 1993.
EMPLOYEES
The Company and its subsidiaries had approximately 1,124 full-time
employees at December 31, 1993. A total of 465 employees are represented by
local unions of the International Brotherhood of Electrical Workers, of which
429 are employees of the Electrical Operations segment and are covered by a
three-year labor contract expiring November 1, 1996. The Company has never
experienced any strike, work stoppage, or strike vote, and regards its present
relations with employees as very good.
Item 2. PROPERTIES
The Coyote Station, which commenced operation in 1981, is a 414,000 kw
(nameplate rating) mine-mouth plant located in the lignite coal fields near
Beulah, North Dakota and is jointly owned by the Company, Northern Municipal
Power Agency, Montana-Dakota Utilities Co. and Northwestern Public Service
Company. The Company has a 35% interest in the plant and was the project
manager in charge of construction. Montana-Dakota Utilities Co., in whose
service territory the plant is located, is the operating manager of the plant.
The Company, jointly with Northwestern Public Service Company and
Montana-Dakota Utilities Co., owns the 414,000 kw (nameplate rating) Big Stone
Plant in northeastern South Dakota which commenced operation in 1975. The
Company, for the benefit of all three utilities, was in charge of construction
and is now in charge of operations. The Company owns 53.9% of the plant.
Located near Fergus Falls, Minnesota, the Hoot Lake Plant is comprised of
three separate generating units with a combined rating of 127,000 kw. The
oldest Hoot Lake Plant generating unit was constructed in 1948 (7,500 kw
nameplate rating) and a subsequent unit was added in 1959 (53,500 kw nameplate
rating). A third unit was added in 1964 (66,000 kw nameplate rating) and
later modified during 1988, to provide cycling capability, allowing this unit
to be more efficiently brought on-line from a standby mode.
At December 31, 1993, the Company's transmission facilities, which are
inter-connected with lines of other public utilities, consisted of 48 miles of
345 kv lines; 363 miles of 230 kv lines; 567 miles of 115 kv lines; and 4,268
miles of lower voltage lines, principally 41.6 kv. The Company owns the
uprated portion of the 48 miles of the 345 kv line, with Minnkota Power
Cooperative retaining title to the original 230 kv construction.
All of the Company's electric utility properties, with minor exceptions,
are subject to the lien of the Company's Indenture of Mortgage dated July 1,
1936, as amended and supplemented, securing its First Mortgage Bonds.
Item 3. LEGAL PROCEEDINGS
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the three
months ended December 31, 1993.
Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT (AS OF MARCH 1, 1994)
Set forth below is a summary of the principal occupations and business
experience during the past five years of executive officers of the Company:
DATES ELECTED
NAME AND AGE TO OFFICE PRESENT POSITION AND BUSINESS EXPERIENCE
John C. MacFarlane (54) 4/8/91 Present: Chairman, President and
Chief Executive Officer
Prior to
4/8/91 President and Chief Executive
Officer
Dennis R. Emmen (60) 4/13/81 Present: Senior Vice President,
Finance,Treasurer and Chief
Financial Officer
Marlowe E. Johnson (49) 4/12/93 Present: Vice President, Customer
Service, North Dakota
Prior to
4/12/93 Division Manager, Jamestown
Douglas L. Kjellerup (52) 4/12/93 Present: Vice President, Marketing
and Development
4/8/91 Vice President, Planning and
Development
Prior to
4/8/91 Director, Strategic Planning and
Productivity
LeRoy S. Larson (48) 4/12/93 Present: Vice President, Customer
Service, Minnesota and South Dakota
4/13/92 Vice President, Division
Operations, Minnesota and South
Dakota
Prior to
4/13/92 Division Manager, Morris
Richard W. Muehlhausen (55) 1/1/78 Present: Vice President, Corporate
Services
Jay D. Myster (55) 4/12/82 Present: Vice President,
Governmental and Legal, and
Corporate Secretary
Earl D. Sjoberg (61) 4/10/89 Present: Vice President,
Electrical
Prior to
4/10/89 Manager, Division Engineering
Ward L. Uggerud (44) 4/10/89 Present: Vice President,
Operations
Prior to
4/10/89 Director, System Operations
Andrew E. Anderson (54) 1/1/78 Present: Controller
The term of office of each of the officers is one year, and there are no
arrangements or understanding between individual officers or any other persons
pursuant to which he was selected as an officer.
No family relationships exist between any officers of the Company.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by this Item is incorporated by reference to
Dividends" on page 48, to first sentence under "Buying and Selling" on
page 48, to "Selected Consolidated Financial Data" on page 23 and to
"Quarterly Information" on page 45, of the Company's 1993 Annual Report to
Shareholders, filed as an Exhibit hereto.
Item 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference to
"Selected Consolidated Financial Data" on Page 23 of the Company's 1993 Annual
Report to Shareholders, filed as an Exhibit hereto.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated by reference to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on Pages 24 through 31 of the Company's 1993 Annual Report to
Shareholders, filed as an Exhibit hereto.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to
"Quarterly Information" on Page 45 and the Company's audited financial
statements on Pages 32 through 45 of the Company's 1993 Annual Report to
Shareholders excluding "Report of Management" on page 32, filed as an Exhibit
hereto.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated by reference from
the in-formation under "Nominees for Election as Directors" in the Company's
definitive Proxy Statement dated March 9, 1994. The information regarding
executive officers is set forth in Item 4A hereto.
Item 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from
the in-formation under "Summary Compensation Table", "Pension and Supplemental
Retirement Plans", "Severance Agreements", "Directors' Compensation", and
"Compensation Committee Interlocks and Insider Participation" in the
Company's definitive Proxy Statement dated March 9, 1994.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference from
the in-formation under "Outstanding Voting Shares" and "Security Ownership of
Management" in the Company's definitive Proxy Statement dated March 9, 1994.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference from
the in-formation under "Nominees for Election as Directors" in the Company's
definitive Proxy Statement dated March 9, 1994.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed:
(1) and (2) See Table of Contents on Page 20 hereof.
(3) See Exhibit Index on Pages 25 through 33 hereof.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of
certain instruments defining the rights of holders of certain
long-term debt of the Company are not filed, and in lieu
thereof, the Company agrees to furnish copies thereof to the
Securities and Exchange Commission upon request.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter ended
December 31, 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
OTTER TAIL POWER COMPANY
By D. R. Emmen
D. R. Emmen
Senior Vice President,
Finance, Treasurer
and Chief Financial
Officer
Dated: March 25, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature and Title
John C. MacFarlane )
Chairman, President and )
Chief Executive Officer )
(principal executive officer) )
and Director )
)
D. R. Emmen )
Senior Vice President, Finance, )
Treasurer and Chief Financial Officer )
(principal financial officer) )
and Director )
)
Andrew E. Anderson ) By D. R. Emmen
Controller ) D. R. Emmen
(principal accounting officer) ) Pro Se and Attorney-in-Fact
) Dated March 25, 1994
Thomas M. Brown, Director )
)
Dayle Dietz, Director )
)
Maynard D. Helgaas, Director )
)
Kenneth L. Nelson, Director )
)
Nathan I. Partain, Director )
)
Robert N. Spolum, Director )
)
James L. Stengel, Director )
OTTER TAIL POWER COMPANY
TABLE OF CONTENTS
FINANCIAL STATEMENTS, SUPPLEMENTARY FINANCIAL DATA, SUPPLEMENTAL FINANCIAL
SCHEDULES INCLUDED IN ANNUAL REPORT (FORM 10-K) FOR THE YEAR ENDED
DECEMBER 31, 1993
The following items are included in this annual report by reference to the
registrant's Annual Report to Shareholders for the year ended December 31,
1993:
Page in
Annual
Report to
Shareholders
Financial Statements:
Independent Auditors' Report . . . . . . . . . . . . . . . . . 33
Consolidated Balance Sheets, December 31, 1993 and 1992 . . . 32 & 33
Consolidated Statements of Income for the Three Years
Ended December 31, 1993 . . . . . . . . . . . . . . . . . . 34
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1993 . . . . . . . . . . . . . . . . . . 35
Consolidated Statements of Retained Earnings for the
Three Years Ended December 31, 1993 . . . . . . . . . . . . 35
Consolidated Statements of Capitalization, December 31, 1993
and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Notes to Consolidated Financial Statements . . . . . . . . . . 37-45
Selected Consolidated Financial Data for the Five Years
Ended December 31, 1993 . . . . . . . . . . . . . . . . . . . 23
Quarterly Data for the Two Years Ended
December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . 45
The following supplemental financial data included herein should be read in
conjunction with the financial statements referenced above:
Page in
Form 10-K
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . 21
Supplemental Financial Schedules:
V - Property, Plant and Equipment . . . . . . . . . . . . . . 22
VI - Accumulated Provision for Depreciation and
Amortization of Property, Plant and Equipment . . . . . 23
IX - Short-Term Borrowings . . . . . . . . . . . . . . . . . . . 24
Schedules other than those listed above are omitted because of the absence of
the conditions under which they are required or because the information
required is included in the financial statements or the notes thereto.
INDEPENDENT AUDITORS' REPORT
Otter Tail Power Company:
We have audited the consolidated balance sheets and statements of
capitalization of Otter Tail Power Company and its subsidiaries as of December
31, 1993 and 1992, and the related consolidated statements of income, retained
earnings and cash flows for each of the three years in the period ended
December 31, 1993, and have issued our report thereon dated January 31 1994;
such consolidated financial statements and report are included in your 1993
Annual Report to Shareholders and are incorporated herein by reference. Our
audits also included the financial statement schedules of Otter Tail Power
Company and its subsidiaries for each of the three years in the period ended
December 31, 1993, as listed in the accompanying Table of Contents. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE
Deloitte & Touche
Minneapolis, Minnesota
January 31, 1994
<TABLE>
<CAPTION>
SCHEDULE V
OTTER TAIL POWER COMPANY
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992, AND 1993
- -----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
RETIREMENTS OR OTHER CHANGES
STRAIGHT-LINE BALANCE AT SALES--AT ORIGINAL AND RECLASSI- BALANCE
DEPRECIATION BEGINNING ADDITIONS AT COST, ESTIMATED FICATIONS - AT END
CLASSIFICATION RATES OF YEAR COST IF NOT KNOWN ADD (DEDUCT) OF YEAR
- -------------------------------- -------------- ---------------- ----------------- ------------------- ----------------- ----------
December 31, 1993: (THOUSANDS OF DOLLARS)
Electric Utility Plant:
<S> <C> <C> <C> <C> <C> <C>
Plant In Service:
Steam Production 2.57% 284,003 3,344 732 0 286,615
Hydro Production Plant 0.39% 1,870 58 0 0 1,928
Other Production Plant 2.66% 10,058 13 0 0 10,071
Transmission 1.97% 123,225 4,487 564 250 127,398
Distribution 3.30% 180,998 9,837 1,719 (252) 188,864
General 5.77% 61,901 4,512 2,008 1 64,406
Construction Work In Progress 6,812 1,529 0 0 8,341
---------------- ----------------- ------------------- ----------------- ----------
Total Electric Utility Plant 668,867 23,780 5,023 (1) 687,623
Other Property 22,700 12,651 1,485 760 34,626
---------------- ----------------- ------------------- ----------------- ----------
Total 691,567 36,431 6,508 759 722,249
================ ================= =================== ================= ==========
December 31, 1992:
Electric Utility Plant:
Plant In Service:
Steam Production 2.85% 281,691 4,468 2,156 0 284,003
Hydro Production Plant 1.19% 1,810 69 9 0 1,870
Other Production Plant 2.60% 10,053 8 3 0 10,058
Transmission 1.87% 120,213 3,525 621 108 123,225
Distribution 2.76% 174,026 8,547 1,465 (110) 180,998
General 5.87% 57,642 6,359 2,082 (18) 61,901
Construction Work In Progress 9,400 (2,588) 0 0 6,812
---------------- ----------------- ------------------- ----------------- ----------
Total Electric Utility Plant 654,835 20,388 6,336 (20) 668,867
Other Property 14,903 8,059 202 (60) 22,700
---------------- ----------------- ------------------- ----------------- ----------
Total 669,738 28,447 6,538 (80) 691,567
================ ================= =================== ================= ==========
December 31, 1991: Electric Utility Plant:
Plant In Service:
Steam Production 2.93% 271,881 11,284 1,474 0 281,691
Hydro Production Plant .092% 1,765 46 1 0 1,810
Other Production Plant 2.60% 10,050 3 0 0 10,053
Transmission 1.85% 117,479 3,047 330 17 120,213
Distribution 2.85% 168,179 7,783 1,937 1 174,026
General 5.87% 54,571 7,013 3,924 (18) 57,642
Construction Work In Progress 14,349 (4,949) 0 0 9,400
---------------- ----------------- ------------------- ---------------- ------------
Total Electric Utility Plant 638,274 24,227 7,666 0 654,835
Other Property 13,116 1,787 0 0 14,903
---------------- ----------------- ------------------- ---------------- ------------
Total 651,390 26,014 7,666 0 669,738
================ ================= =================== ================ ============
</TABLE>
<TABLE>
<CAPTION>
OTTER TAIL POWER COMPANY SCHEDULE VI
ACCUMULATED PROVISION FOR DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992, AND 1993
- -----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
DEPRECIATION AND
AMORTIZATION CHARGED: DEDUCTIONS: OTHER
BALANCE AT TO CLEARING CHANGES BALANCE
BEGINNING TO ACCOUNTS PROPERTY NET AND RECLAS- AT END
CLASSIFICATION OF YEAR EXPENSE AND OTHER RETIRED SALVAGED SIFICATIONS OF YEAR
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1993: (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
Electric Utility Plant:
Steam production 125960 7105 151 732 470 0 132014
Hydro production 1452 6 0 0 0 0 1458
Other production plan 4472 267 0 0 0 0 4739
Transmission 38543 2445 0 542 141 -10 40295
Distribution 58257 6046 0 1578 404 -5 62316
General 19571 2201 1325 2008 -191 -34 21246
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total 248255 18070 1476 4860 824 -49 262068
Other Property 4408 4031 0 122 0 0 8317
---------- ---------- ---------- ---------- ---------- ---------- ---------
TOTAL 252663 22101 1476 4982 824 -49 270385
========== ========== ========== ========== ========== ========== =========
December 31, 1992:
Electric Utility Plant:
Steam production 120222 7865 180 2156 151 0 125960
Hydro production 1443 19 0 9 1 0 1452
Other production pla 4214 261 0 3 0 0 4472
Transmission 36990 2262 0 621 88 0 38543
Distribution 55335 4854 0 1465 499 32 58257
General 18302 2116 1258 2082 -154 -177 19571
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total 236506 17377 1438 6336 585 -145 248255
Other Property 2821 1618 0 31 0 0 4408
---------- ---------- ---------- ---------- ---------- ---------- ---------
TOTAL 239327 18995 1438 6367 585 -145 252663
========== ========== ========== ========== ========== ========== =========
December 31, 1991:
Electric Utility Plant:
Steam production 114087 7865 180 1271 639 0 120222
Hydro production 1429 15 0 1 0 0 1443
Other production pla 3954 260 0 0 0 0 4214
Transmission 35207 2191 0 330 78 0 36990
Distribution 52340 4850 0 1938 178 261 55335
General 18522 1891 1266 3924 -350 197 18302
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total 225539 17072 1446 7464 545 458 236506
Other Property 1933 888 0 0 0 0 2821
---------- ---------- ---------- ---------- ---------- ---------- ---------
TOTAL 227472 17960 1446 7464 545 458 239327
========== ========== ========== ========== ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
OTTER TAIL POWER COMPANY
SCHEDULE IX
SHORT-TERM BORROWINGS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
MAXIMUM AMOUNT
OUTSTANDING AVERAGE AMOUNT WEIGHTED
BALANCE WEIGHTED AVERAGE DURING THE OUTSTANDING AVERAGE INTEREST
CATEGORY OF AGGREGATE AT END INTEREST RATE PERIOD DURING RATE DURING
SHORT-TERM BORROWINGS OF PERIOD (at December 31) (at Month End) THE PERIOD (1) THE PERIOD (2)
(in thousands) (in thousands) (in thousands)
Year Ended December 31, 1993
<S> <C> <C> <C> <C> <C> <C>
Notes Payable -- -- $1,200 $ 28 3.78%
Year Ended December 31, 1992
Notes Payable -- -- -- -- --
Year Ended December 31, 1991
Notes Payable -- -- $2,500 $ 176 7.12%
(1) Average amount outstanding during the period is computed by dividing the total of daily outstanding principal
balances by 365.
(2) Average interest rate for the year is computed by dividing the actual short-term interest by the average short-
term debt outstanding.
</TABLE>
[TEXT]
Exhibit Index
to
Annual Report
on Form 10-K
For Year Ended December 31, 1993
Previously Filed
As
Exhibit
File No. No.
3-A --Restated Articles of
Incorporation, as amended
(including resolutions
creating outstanding series
of Cumulative Preferred
Shares).
3-C 33-46071 4-B --Bylaws as amended through
April 11, 1988.
4-D-1 2-14209 2-B-1 --Twenty-First Supplemental
Indenture from the Company to
First Trust Company of Saint
Paul and Russel M. Collins, as
Trustees, dated as of July 1,
1958.
4-D-2 2-14209 2-B-2 --Twenty-Second Supplemental
Indenture dated as of
July 15, 1958.
4-D-3 33-32499 4-D-6 --Thirty-First Supplemental
Indenture dated as of
February 1, 1973.
4-D-4 33-32499 4-D-7 --Thirty-Second Supplemental
Indenture dated as of
January 18, 1974.
4-D-5 2-66914 2-L-13 --Thirty-Ninth Supplemental
Indenture dated as of
October 15, 1979.
4-D-6 33-46070 4-D-11 --Forty-Second Supplemental
Indenture dated as of
December 1, 1990.
4-D-7 33-46070 4-D-12 --Forty-Third Supplemental
Indenture dated as of
February 1, 1991.
4-D-8 33-46070 4-D-13 --Forty-Fourth Supplemental
Indenture dated as of
September 1, 1991
4-D-9 8-K dated 4-D-15 --Forty-Fifth Supplemental
7/24/92 Indenture dated as of
July 1, 1992
10-A 2-39794 4-C --Integrated Transmission
Agreement dated August 25,
1967, between Cooperative
Power Association and the
Company.
10-A-1 10-K for year 10-A-1 --Amendment No. 1, dated as
ended 12/31/92 of September 6, 1979, to
Integrated Transmission
Agreement, dated as of
August 25, 1967, between
Cooperative Power Associa-
tion and the Company.
10-A-2 10-K for year 10-A-2 --Amendment No. 2, dated as of
ended 12/31/92 November 19, 1986, to Integ-
rated Transmission Agreement
between Cooperative Power
Association and the Company.
10-C-1 2-55813 5-E --Contract dated July 1, 1958,
between Central Power Elec-
tric Corporation, Inc.,
and the Company.
10-C-2 2-55813 5-E-1 --Supplement Seven dated
November 21, 1973.
(Supplements Nos. One
through Six have been super-
seded and are no longer in
effect.)
10-C-3 2-55813 5-E-2 --Amendment No. 1 dated
December 19, 1973, to
Supplement Seven.
10-C-4 10-K for year 10-C-4 --Amendment No. 2 dated
ended 12/31/91 June 17, 1986, to Supple-
ment Seven.
10-C-5 10-K for year 10-C-5 --Amendment No. 3 dated
ended 12/31/92 June 18, 1992, to Supple-
ment Seven.
10-C-6 --Amendment No. 4 dated
January 18, 1994, to Supple-
ment Seven.
10-D 2-55813 5-F --Contract dated April 12,
1973, between the Bureau of
Reclamation and the Company.
10-E-1 2-55813 5-G --Contract dated January 8,
1973, between East River
Electric Power Cooperative
and the Company.
10-E-2 2-62815 5-E-1 --Supplement One dated
February 20, 1978.
10-E-3 10-K for year 10-E-3 --Supplement Two dated
ended 12/31/89 June 10, 1983.
10-E-4 10-K for year 10-E-4 --Supplement Three dated
ended 12/31/90 June 6, 1985.
10-E-5 10-K for year 10-E-5 --Supplement No. Four, dated
ended 12/31/92 as of September 10, 1986.
10-E-6 10-K for year 10-E-6 --Supplement No. Five, dated
ended 12/31/92 as of January 7, 1993.
10-E-7 --Supplement No. Six, dated
as of December 2, 1993.
10-F 10-K for year 10-F --Agreement for Sharing
ended 12/31/89 Ownership of Generating
Plant by and between the
Company, Montana-Dakota
Utilities Co., and North-
western Public Service
Company (dated as of
January 7, 1970).
10-F-1 10-K for year 10-F-1 --Letter of Intent for pur-
ended 12/31/89 chase of share of Big Stone
Plant from Northwestern
Public Service Company
(dated as of May 8, 1984).
10-F-2 10-K for year 10-F-2 --Supplemental Agreement No. 1
ended 12/31/91 to Agreement for Sharing
Ownership of Big Stone Plant
(dated as of July 1, 1983).
10-F-3 10-K for year 10-F-3 --Supplemental Agreement No. 2
ended 12/31/91 to Agreement for Sharing Owner-
ship of Big Stone Plant
(dated as of March 1, 1985).
10-F-4 10-K for year 10-F-4 --Supplemental Agreement No. 3
ended 12/31/91 to Agreement for Sharing Owner-
ship of Big Stone Plant
(dated as of March 31, 1986).
10-F-5 10-K for year 10-F-5 --Amendment I to Letter of
ended 12/31/92 Intent dated May 8, 1984, for
purchase of share of Big Stone
Plant.
10-G 2-50382 5-F --Big Stone Plant Coal Agreement
by and between the Company,
Montana-Dakota Utilities Co.,
Northwestern Public Service
Company, and Knife River Coal
Mining Company (dated as of
January 1, 1972).
10-G-1 10-Q for quarter 19-A --Amendment, dated as of
ended 6/30/92 June 25, 1992, to Big Stone
Plant Coal Agreement (dated
as of January 1, 1972).
10-G-2 10-Q for quarter 19-A --Big Stone Coal Transportation
ended 3/31/89 Agreement by and between the
Company, Northwestern Public
Service Company, Montana-
Dakota Utilities Co. and
Burlington Northern Railroad
Company (dated as of
October 5, 1983).
10-G-3 10-Q for quarter 19-A --Amendment No. 1, dated as of
ended 6/30/90 May 30, 1990, to Big Stone Coal
Transportation Agreement (dated
as of October 5, 1983).
10-G-4 10-K for year 10-G-3 --Amendment No. 2, dated as of
ended 12/31/91 February 4, 1991, to Big Stone
Coal Transportation Agreement
(dated as of October 5, 1983).
10-G-5 10-Q for quarter 19-D --Big Stone Plant Tire Derived
ended 6/30/93 Fuel Agreement by and between
the Company and BFI Tire
Recyclers of Minnesota (dated
as of November 2, 1992).
10-G-6 10-Q for quarter 19-E --Big Stone Plant Tire Derived
ended 6/30/93 Fuel Agreement by and between
the Company and National Tire
Services (dated as of November
2, 1992).
10-H 2-61043 5-H --Agreement for Sharing Owner-
ship of Coyote Station
Generating Unit No. 1 by and
between the Company, Minnkota
Power Cooperative, Inc.,
Montana-Dakota Utilities Co.,
Northwestern Public Service
Company, and Minnesota Power
& Light Company (dated as of
July 1, 1977).
10-H-1 10-K for year 10-H-1 --Supplemental Agreement No.
ended 12/31/89 One dated as of November 30,
1978, to Agreement for Sharing
Ownership of Coyote Generating
Unit No. 1.
10-H-2 10-K for year 10-H-2 --Supplemental Agreement No.
ended 12/31/89 Two dated as of March 1, 1981,
to Agreement for Sharing Owner-
ship of Coyote Generating Unit
No. 1 and Amendment No. 2
dated March 1, 1981, to Coyote
Plant Coal Agreement.
10-H-3 10-K for year 10-H-3 --Amendment dated as of
ended 12/31/89 July 29, 1983, to Agreement
for Sharing Ownership of
Coyote Generating Unit No. 1.
10-H-4 10-K for year 10-H-4 --Agreement dated as of September
ended 12/31/92 5, 1985, containing Amendment
No. 3 to Agreement for Sharing
Ownership of Coyote Generating
Unit No. 1, dated as of July 1,
1977, and Amendment No. 5 to
Coyote Plant Coal Agreement,
dated as of January 1, 1978.
10-I 2-63744 5-I --Coyote Plant Coal Agreement
by and between the Company,
Minnkota Power Cooperative,
Inc., Montana-Dakota
Utilities Co., Northwestern
Public Service Company,
Minnesota Power & Light
Company, and Knife River
Coal Mining Company (dated
as of January 1, 1978).
10-I-1 10-K for year 10-I-1 --Addendum, dated as of March
ended 12/31/92 10, 1980, to Coyote Plant
Coal Agreement.
10-I-2 10-K for year 10-I-2 --Amendment (No. 3), dated as
ended 12/31/92 of May 28, 1980, to Coyote
Plant Coal Agreement.
10-I-3 10-K for year 10-I-3 --Fourth Amendment, dated as
ended 12/31/92 of August 19, 1985, to
Coyote Plant Coal Agreement.
10-I-4 10-Q for quarter 19-A --Sixth Amendment, dated as of
ended 6/30/93 February 17, 1993, to Coyote
Plant Coal Agreement.
10-J-1 10-K for year 10-J-1 --Mid-Continent Area Power Pool
ended 12/31/92 Agreement dated March 31,
1972 (amended through May 1,
1985).
10-J-2 2-66914 5-J-1 --Memorandum of Understanding
between Mid-Continent Area
Power Pool Parties (dated
as of December 1979).
10-K 10-K for year 10-K --Diversity Exchange Agreement
ended 12/31/91 Agreement by and between the
Company and Northern States
Power Company, (dated as of
May 21, 1985) and amendment
thereto (dated as of August
12, 1985).
10-K-1 10-K for year 10-K-2 --Firm Power Service Agreements
ended 12/31/91 by and between Company and
Manitoba Electric Hydro Board
(dated as of January 27, 1992).
10-K-2 10-K for year 10-K-2 --Firm Power Service Agreement
ended 12/31/92 by and between Company and
Manitoba Electric Hydro Board
(dated as of December 29,1992).
10-K-3 --Firm Power Service Agreements
by and between Company and
Manitoba Electric Hydro Board
(dated as of February 8, 1994).
10-K-4 10-Q for quarter 19-B --Purchased Power and
ended 6/30/92 Interconnection Agreement
between the Company and
Potlatch Corporation dated
as of June 3, 1992.
10-K-5 10-K for year 10-K-4 --Capacity and Energy Agreement
ended 12/31/92 by and between the Company
and Minnkota Power Cooperative,
Inc. dated as of May 4, 1992.
10-K-6 10-K for year 10-K-5 --Interchange Agreement by and
ended 12/31/92 between the Company and
Wisconsin Power and Light
Company dated as of February
21, 1992.
10-K-7 10-K for year 10-K-6 --Interchange Agreement by and
ended 12/31/92 between the Company and
Wisconsin Electric Power Co.
dated as of June 26, 1992.
10-K-8 10-K for year 10-K-7 --Firm Power Service Agreement
ended 12/31/92 by and between the Company and
Lincoln Electric System dated
as of September 11, 1992.
10-K-9 10-Q for quarter 19-B --Interchange Agreement by and
ended 6/30/93 between the Company and
Wisconsin Public Service
Corporation dated as of January
20, 1993.
10-L 10-K for year 10-L --Integrated Transmission
ended 12/31/91 Agreement by and between the
Company, Missouri Basin
Municipal Power Agency and
Western Minnesota Municipal
Power Agency (dated as of
March 31, 1986).
10-L-1 10-K for Year 10-L-1 --Amendment No. 1, dated as
ended 12/31/88 of December 28, 1988, to
Integrated Transmission
Agreement (dated as of
March 31, 1986).
10-M-1 10-K for year 10-M-1 --Hoot Lake Plant Coal
ended 12/31/89 Agreement dated as of
October 1, 1980, by and
between the Company and
Knife River Coal Mining
Company.
10-M-2 10-K for year 10-M-2 --First Amendment dated as of
ended 12/31/89 August 14, 1985, to Hoot
Lake Plant Coal Agreement.
10-M-3 10-K for year 10-M-3 --Hoot Lake Coal Transporta-
ended 12/31/89 tion Agreement dated as of
September 2, 1988 by and
between the Company and
Burlington Northern Rail-
road Company.
10-M-4 10-K for year 10-M-4 --Supplement One dated as of
ended 12/31/89 December 16, 1988, to Hoot
Lake Coal Transportation
Agreement.
10-M-5 10-K for year 10-M-5 --Supplement Two dated as of
ended 12/31/89 April 5, 1989, to Hoot Lake
Coal Transportation
Agreement.
10-M-6 10-K for year 10-M-6 --Supplement Three dated as
ended 12/31/89 of December 18, 1989, to
Hoot Lake Coal Transporta-
tion Agreement.
10-M-7 10-K for year 10-M-7 --Supplement Four dated as of
ended 12/31/91 May 10, 1991, to Hoot Lake
Coal Transportation Agreement.
10-M-8 10-K for year 10-M-8 --Supplement Five dated as of
ended 12/31/92 December 11, 1992 to Hoot Lake
Coal Transportation Agreement.
10-M-9 10-K for year 10-M-9 --Supplement Six dated as of
ended 12/31/92 January 11, 1993 to Hoot Lake
Coal Transportation Agreement.
10-M-10 --Supplement Seven dated as of
November 22, 1993 to Hoot Lake
Coal Transportation Agreement.
10-M-11 10-K for year 10-M-10 --Hoot Lake Coal Transportation
ended 12/31/92 Agreement dated January 15,
1993 by and between the
Company and Northern Coal
Transportation Co.
10-M-12 10-Q for quarter 19-C --First Amendment dated as of
ended 6/30/93 January 20, 1993 to Hoot Lake
Coal Transportation Agreement
dated January 15, 1993.
10-N-1 10-K for year 10-N --Deferred Compensation Plan
ended 12/31/91 for Directors, dated
April 9, 1984.*
10-N-2 10-K for year 10-O --Executive Survivor and Sup-
ended 12/31/92 plemental Retirement Plan,
as amended.*
10-N-3 10-K for year 10-P --Form of Severance Agreement.*
ended 12/31/92
10-N-4 --Nonqualified Pension Plan*
10-N-5 --Nonqualified Profit Sharing
Plan.*
10-N-6 --Nonqualified Retirement
Savings Plan.*
10-O --Dealer Agreement by and between
DMS and Philips Medical Systems
North America Company dated
January 18, 1994.
13-A --Portions of 1993 Annual
Report to Shareholders
incorporated by reference
in this Form 10-K.
21-A --Subsidiaries of the Registrant
23-A --Independent Auditors'
Consent.
24-A --Powers of Attorney.
- ------------
* Management contract or compensatory plan or arrangement required to be filed
pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K.
Exhibit 3-A
RESTATED
ARTICLES OF INCORPORATION
OF
OTTER TAIL POWER COMPANY
(restated as of October 17, 1988)
ARTICLE I.
The name of the corporation shall be Otter Tail Power Company.
ARTICLE II.
The purposes of the corporation shall be as follows:
(a) To generate, produce, buy or in any manner acquire, and to sell,
dispose of, and distribute electricity for light, heat and power and other
purposes, and to carry on the business of furnishing, supplying,
manufacturing, and selling light, heat, power, gas, water, and steam, and any
and all business incidental thereto; and to build, construct, develop,
improve, buy, acquire by condemnation or otherwise, hold, own, lease, maintain
and operate plants, facilities, systems, and works for the manufacture,
generation, production, accumulation, transmission, and distribution of
electricity, gas, water, and steam, and to exercise rights of condemnation and
eminent domain in connection with the doing of any of its purposes as herein
set forth so far as may be permissible by law.
(b) To produce, mine, buy, sell, store, market, deal in, and prospect
for, coal, oil and minerals of all kinds and the products and by-products
thereof.
(c) To manufacture, buy, sell, trade, and deal in goods, wares,
merchandise, property, and commodities of any and every class and description.
(d) To purchase, acquire, and lease, and to sell, lease, and dispose of
water, water rights, and power privileges for power, light, heat, mining,
milling, irrigation, agricultural, domestic or any other use or purpose.
(e) To acquire, hold, mortgage, pledge, or dispose of the shares, bonds,
securities, and other evidences of indebtedness of any domestic or foreign
corporation.
(f) To endorse or guarantee the promissory notes, checks, drafts,
evidences of indebtedness or obligations of whatsoever nature of any
corporation, domestic or foreign, of which the corporation shall own or
control, directly or indirectly a majority of the stock then entitled to elect
directors, or a majority thereof.
(g) To do or perform any and all lawful business necessary, essential or
expedient to the proper conduct of any of the purposes aforesaid.
ARTICLE III.
The period of duration of the corporation shall be perpetual.
ARTICLE IV.
The location and post-office address of the registered office of the
corporation in Minnesota is 215 Cascade Street South, Fergus Falls, Minnesota
56537.
ARTICLE V.
The total authorized number of shares of the corporation is 17,500,000,
divided into three classes; namely, 1,500,000 Cumulative Preferred Shares
without par value (the "Cumulative Preferred Shares"); 1,000,000 Cumulative
Preference Shares without par value (the "Cumulative Preference Shares"); and
15,000,000 Common Shares of the par value of $5 per share (the "Common
Shares"). No fractional shares of any class or series shall be issued by the
corporation.
ARTICLE VI.
The designations, relative rights, voting power, preferences and
restrictions of the Cumulative Preferred Shares, the Cumulative Preference
Shares and the Common Shares, respectively, shall be as set forth in
Division I through Division VI, inclusive, of this Article VI.
The term "subordinate shares," when hereinafter in this Article VI used
with reference to shares junior to the Cumulative Preferred Shares, means the
Cumulative Preference Shares, the Common Shares and shares of any other class,
which may hereafter be authorized, ranking junior to the Cumulative Preferred
Shares with respect to the payment of dividends or the distribution of assets;
and when hereinafter used with reference to shares junior to the Cumulative
Preference Shares, means the Common Shares and shares of any other class,
which may hereafter be authorized, ranking junior to the Cumulative Preference
Shares with respect to the payment of dividends or the distribution of assets.
DIVISION I
Provisions Relating to Cumulative Preferred Shares
A. Issue in Series. The Cumulative Preferred Shares may be issued from
time to time in one or more series, each of which series shall have such
designation and such relative rights, voting power, preferences and
restrictions as are hereinafter provided and, to the extent hereinafter
permitted, as are determined and stated by the Board of Directors in the
resolution or resolutions authorizing the creation of shares of such series.
All Cumulative Preferred Shares shall be of equal rank and shall be
identical, except in respect of their relative voting power (determined as
hereinafter provided in Division IV) and the particulars that may be
determined by the Board of Directors as hereinafter provided; and each share
of each series shall be identical in all respects with the other shares of
such series, except as to the dates from which dividends thereon shall be
cumulative. Cumulative Preferred Shares shall be issued only as fully paid
and nonassessable shares.
Subject to the provisions of the last paragraph of this Subdivision A,
authority is hereby expressly granted to the Board of Directors to authorize
the issuance of Cumulative Preferred Shares in one or more series, and to
determine and state, by the resolution or resolutions authorizing the creation
of each series: (i) the designation of the series and the number of shares
which shall constitute such series, which number may be altered from time to
time by like action of the Board of Directors in respect of shares then
unallotted; (ii) the annual rate of dividends payable on shares of such
series; (iii) the price or prices per share at which the shares of such series
shall be redeemable; (iv) the amount payable on shares of such series in the
event of any dissolution, liquidation or winding up of the affairs of the
corporation, which amount may differ in the case of a voluntary or involuntary
dissolution, liquidation or winding up of such affairs; (v) the conversion
rights, if any, with respect to the conversion of shares of such series into
Common Shares of the corporation; and (vi) the sinking or purchase fund
provisions, if any, for the mandatory redemption or purchase of shares of such
series.
In the case of each series of Cumulative Preferred Shares created after
April 1, 1977, the amount (in addition to accrued and unpaid dividends, if
any) which the holders of shares of such series shall be entitled to receive
in the event of any dissolution, liquidation or winding up of the affairs of
the corporation which shall be involuntary shall be equal to the gross
consideration received by the corporation upon the issuance thereof (without
regard to any premium received or any underwriting discount or commission,
private placement fee or other expense incurred by the corporation in
connection with the issuance thereof).
B. Dividends. Before any dividends on any subordinate shares shall be
paid or declared and set apart for payment, the holders of the Cumulative
Preferred Shares of each series shall be entitled to receive, when and as
declared by the Board of Directors, out of any funds legally available for
such purpose, cash dividends at the annual rate for such series theretofore
fixed by the Board of Directors as hereinbefore provided, and no more, payable
quarterly on such dates as may be fixed in the resolution or resolutions
adopted by the Board of Directors authorizing the creation of such series.
Such dividends shall be paid to shareholders of record on the respective
dates, not exceeding twenty (20) days prior to such payment dates, fixed by
the Board of Directors for such purpose. Such dividends shall be cumulative,
in the case of shares of each particular series:
(1) if issued prior to the record date for the first dividend on
shares of such series, then from and including the date fixed for such
purpose by the Board of Directors in the resolution or resolutions
creating such series;
(2) if issued during the period commencing immediately after the
record date for a dividend on shares of such series and terminating at
the close of the payment date for such dividend, then from and including
such last mentioned dividend payment date;
(3) otherwise from and including the quarterly dividend payment
date next preceding the date of issue of such shares.
No dividend shall be paid, or declared and set apart for payment, upon
any Cumulative Preferred Shares of any series for any quarterly dividend
period unless at the same time a like proportionate dividend for the same or
comparable quarterly period, ratable in proportion to the respective annual
dividend rates fixed therefor, shall be paid, or declared and set apart for
payment, upon all Cumulative Preferred Shares of all series then issued and
outstanding.
In no event shall any dividend be paid or declared, nor shall any
distribution be made, on any subordinate shares, nor shall any subordinate
shares be purchased, redeemed or otherwise acquired by the corporation for
value, nor shall any moneys be paid to or set aside or made available for a
purchase fund or sinking fund for the purchase or redemption of any
subordinate shares, unless (i) all dividends on the Cumulative Preferred
Shares of all series for all past quarterly dividend periods and for the then
current quarterly dividend period shall have been paid or declared and a sum
sufficient for the payment thereof set apart for payment; and (ii) the
corporation shall not be in default or deficient under any requirement of a
sinking or purchase fund established with respect to outstanding Cumulative
Preferred Shares of any series for any period then elapsed.
Subject to the provisions of this Article VI, and not otherwise,
dividends may be declared by the Board of Directors and paid from time to
time, out of any funds legally available therefor, upon the then outstanding
subordinate shares, and the holders of the Cumulative Preferred Shares shall
not be entitled to participate in any such dividends.
C. Redemption of Cumulative Preferred Shares. Subject to the
limitations stated in Subdivision D of this Division I, the Cumulative
Preferred Shares of any or all series may be redeemed, as a whole at any time
or in part from time to time, at the option of the corporation by resolution
of the Board of Directors, at the applicable redemption price for the shares
of such series as determined by the Board of Directors in the resolution or
resolutions authorizing the creation of such series, together with an amount
(hereinafter referred to as "accrued dividends to the redemption date") in the
case of each share, computed at the annual dividend rate for the series of
which the particular share is a part, from and including the date on which
dividends on such shares become cumulative to and including the date of
redemption, less the aggregate amount of all dividends which have theretofore
been paid thereon or which have been declared thereon and for which moneys for
payment have been set apart and remain available for payment. To the extent
that Cumulative Preferred Shares of any series are redeemed through the
operation of a sinking or purchase fund provided for in the resolution or
resolutions of the Board of Directors creating such series, such shares shall
be redeemed by resolution of the Board of Directors at the time and at the
applicable redemption price specified for redemption of shares of such series
pursuant to such sinking or purchase fund by the resolution or resolutions
creating such series. If less than all the outstanding Cumulative Preferred
Shares of any series are to be redeemed, the shares to be redeemed shall be
determined by lot in such manner as the Board of Directors may prescribe.
Notice of every redemption of Cumulative Preferred Shares shall be
mailed, addressed to the holders of record of the shares to be redeemed at
their respective addresses as they shall appear on the stock books of the
corporation, not less than thirty (30) days and not more than sixty (60) days
prior to the date fixed for redemption.
If notice of redemption shall have been duly given as aforesaid, and if,
on or before the redemption date specified in the notice, all funds necessary
for the redemption shall have been deposited in trust with a bank or trust
company in good standing and doing business at any place within the United
States, having capital, surplus and undivided profits aggregating at least
$1,000,000 and designated in the notice of redemption, for the pro rata
benefit of the holders of the shares so called for redemption, so as to be and
continue to be available therefor, then from and after the date of such
deposit, notwithstanding that any certificate for Cumulative Preferred Shares
so called for redemption shall not have been surrendered for cancellation, the
shares represented thereby shall no longer be deemed outstanding, the
dividends thereon shall cease to accumulate from and after the date fixed for
redemption, and all rights with respect to the Cumulative Preferred Shares so
called for redemption shall forthwith on the date of such deposit cease and
terminate, except only the right of the holders thereof to receive the
redemption price of the shares so redeemed, including accrued dividends to the
redemption date, but without interest. Any funds deposited by the corporation
pursuant to this paragraph and unclaimed at the end of six (6) years after the
date fixed for redemption shall be repaid to the corporation upon its request
expressed in a resolution of its Board of Directors, after which repayment the
holders of the shares so called for redemption shall look only to the
corporation for the payment thereof.
All Cumulative Preferred Shares converted, redeemed or purchased
voluntarily or pursuant to any sinking fund or purchase fund for the mandatory
redemption or purchase of shares shall be retired and cancelled and shall have
the status of authorized but unissued Cumulative Preferred Shares of the
corporation and may be reissued in the same manner as authorized but unissued
Cumulative Preferred Shares undesignated as to series.
D. Limitations on Purchase and Redemption of Cumulative Preferred
Shares. No Cumulative Preferred Shares of any series shall be purchased,
redeemed or otherwise acquired by the corporation for value, nor shall any
moneys be paid to or set aside or made available for a purchase fund or
sinking fund for the purchase or redemption of Cumulative Preferred Shares of
any series, unless all dividends on the Cumulative Preferred Shares of all
series for all past quarterly dividend periods and for the current quarterly
period shall have been paid or declared and a sum sufficient for the payment
thereof set apart for payment, except in the event all of the Cumulative
Preferred Shares shall be called for redemption.
E. Liquidation Preferences. In the event of any dissolution,
liquidation or winding up of the affairs of the corporation, before any
distribution or payment shall be made to the holders of any subordinate
shares, the holders of the shares of each series of Cumulative Preferred
Shares shall be entitled to be paid in full the respective amounts fixed by
the Board of Directors in the resolution or resolutions authorizing the issue
of such series, together with a sum, in the case of each share, computed at
the annual dividend rate for the series of which the particular share is a
part, from the date on which dividends on such shares became cumulative to and
including the date fixed for such distribution or payment, less the aggregate
amount of all dividends which have theretofore been paid thereon or which have
been declared thereon and for which moneys have been set apart and remain
available for payment. If such distribution or payment shall have been made
to the holders of the Cumulative Preferred Shares, or moneys made available
for such payment in full, the remaining assets and funds of the corporation
shall be distributed among the holders of the classes of subordinate shares,
according to their respective rights and preferences and in each case
according to their respective shares. If the assets available are not
sufficient to pay in full the amounts so payable to the holders of all
outstanding Cumulative Preferred Shares, the holders of all series of such
shares shall share ratably in any distribution of assets in proportion to the
full amounts to which they would otherwise be respectively entitled. The
consolidation or merger of the corporation into or with any other corporation
or corporations pursuant to the statutes of the State of Minnesota providing
for consolidation or merger shall not be deemed a liquidation, dissolution or
winding up of the affairs of the corporation within the meaning of any of the
provisions of this Subdivision E.
F. Voting and Restrictions on Certain Corporate Action. The holders of
the Cumulative Preferred Shares shall not be entitled to vote at any meetings
of the shareholders of the corporation, except as required by law or as
hereinafter otherwise provided in this Subdivision F and in Division IV:
(1) So long as any Cumulative Preferred Shares of any series are
outstanding, the corporation shall not without the consent (given by vote
at a special meeting of shareholders called for the purpose) of the
holders of at least two-thirds (2/3) of the aggregate voting power
(determined as hereinafter provided in Division IV) vested in the
Cumulative Preferred Shares of all series then outstanding:
(a) Create, authorize or issue any shares of any class ranking
prior to, or any securities of any kind or class convertible into
shares of any class ranking prior to, the Cumulative Preferred
Shares as to dividends or assets; or
(b) Amend the Articles of Incorporation so as to affect
adversely any of the preferences or other rights of the holders of
the Cumulative Preferred Shares, provided, however, that if any such
amendment would affect adversely the holders of one or more, but not
all, of the series of Cumulative Preferred Shares at the time
outstanding, consent only of the holders of at least two-thirds
(2/3) of the aggregate voting power (determined as hereinafter
provided in Division IV) vested in the shares of each series so
adversely affected shall be required.
(2) So long as any Cumulative Preferred Shares of any series are
outstanding, the corporation shall not without the consent (given by vote
at a special meeting of shareholders called for the purpose) of the
holders (i) of at least a majority of the aggregate voting power
(determined as hereinafter provided in Division IV) vested in the
Cumulative Preferred Shares of all series then outstanding, or (ii) in
case of the negative vote at such meeting of the holders of more than
one-fourth (1/4) of the aggregate voting power (determined as hereinafter
provided in Division IV) vested in the Cumulative Preferred Shares of all
series then outstanding, of at least two-thirds (2/3) of aggregate voting
power (determined as hereinafter provided in Division IV) vested in the
Cumulative Preferred Shares of all series then outstanding:
(a) Increase the authorized number of Cumulative Preferred
Shares, or create, authorize or issue any shares of any class
ranking on a parity with the Cumulative Preferred Shares as to
dividends or assets, or any securities of any kind or class
convertible into Cumulative Preferred Shares or shares of any class
on a parity with the Cumulative Preferred Shares; or
(b) Issue any Cumulative Preferred Shares of any series if as
a result thereof more than 60,000 Cumulative Preferred Shares of all
series will then be outstanding, unless:
(i) The corporation's "Adjusted Income Available for
Interest," as hereinafter defined, shall be at least equal to
one-and-one-half (1-1/2) times the corporation's "Adjusted
Interest and Preferred Charges," as hereinafter defined; and
(ii) The corporation's "Adjusted Income Available for
Preferred Dividends," as hereinafter defined, shall be at least
equal to two-and-one-half (2-1/2) times the corporation's
"Adjusted Preferred Charges," as hereinafter defined; and
(iii) The corporation's "Common Share Equity," as
hereinafter defined, shall equal at least one-fourth (1/4) of
the corporation's "Total Capitalization," as hereinafter
defined; or
(c) Declare, pay or set apart for payment any dividend on any
subordinate shares, or purchase, redeem or otherwise acquire for
value any subordinate shares, or pay or set aside or make available
any moneys for a purchase fund or sinking fund for the purchase or
redemption of any such subordinate shares, unless after giving
effect to the payment of such dividend or such purchase, redemption
or other acquisition of such payment or setting aside of moneys in a
purchase fund or sinking fund,
(i) The "Common Share Equity," as hereinafter defined,
shall equal at least one-fourth (1/4) of the "Total
Capitalization," as hereinafter defined; and
(ii) The earned surplus of the corporation shall be not
less than $831,398.
(d) Consolidate or merge into or with any other corporation or
corporations pursuant to the statutes of the State of Minnesota
providing for consolidation or merger, unless, immediately after
such consolidation or merger shall become effective:
(i) The Cumulative Preferred Shares of the corporation
outstanding immediately prior to such consolidation or merger
shall remain outstanding or be constituted as shares of the
corporation resulting from such consolidation or merger in the
same number and with the same relative rights, voting power,
preferences and restrictions as theretofore, the authorized
number thereof shall not be increased, there shall be no shares
of the resulting corporation outstanding or authorized ranking
prior to or on a parity with the Cumulative Preferred Shares,
except shares of the corporation outstanding or authorized
immediately prior to such consolidation or merger, and the
indebtedness for borrowed money of the resulting corporation
immediately after such consolidation or merger shall be no
greater than the indebtedness for borrowed money of the
corporation immediately preceding such consolidation or merger;
or
(ii) (aa) The "Adjusted Income Available for Interest,"
as hereinafter defined, of the resulting corporation shall be
at least equal to one-and-one-half (1-1/2) times its "Adjusted
Interest and Preferred Charges," as hereinafter defined; and
(bb) The "Adjusted Income Available for Preferred
Dividends," as hereinafter defined, of the resulting
corporation shall be at least equal to two-and-one-half (2-1/2)
times its "Adjusted Preferred Charges," as hereinafter defined;
and
(cc) The "Common Share Equity," as hereinafter
defined, of the resulting corporation shall equal at least
one-fourth (1/4) of its "Total Capitalization," as hereinafter
defined.
(e) Sell, lease or exchange all or substantially all of its
property and assets, unless, after the completion of such
transaction, the fair value of the assets of the corporation shall
at least equal the preference on voluntary liquidation of all
Cumulative Preferred Shares of all series then outstanding and of
all shares then outstanding of a class on parity with the Cumulative
Preferred Shares, after first deducting an amount equal to all then
existing indebtedness of the corporation and an amount equal to the
preference on voluntary liquidation of all shares ranking prior to
the Cumulative Preferred Shares.
(3) For the purposes of the foregoing provisions of this
Subdivision F:
(a) The term "Adjusted Income Available for Interest" shall
mean the gross income of the corporation for a period of twelve (12)
consecutive calendar months selected by the corporation out of the
fifteen (15) calendar months immediately preceding the proposed
issuance of additional Cumulative Preferred Shares, or the proposed
consolidation or merger, determined in accordance with such system
of accounts as may be prescribed by governmental authorities having
jurisdiction in the premises or, in the absence thereof, in
accordance with generally accepted accounting practice, available
for the payment of interest, but after deduction of taxes of all
kinds (including taxes based on income) including for a like period
such gross income (similarly computed and with similar deductions
and eliminating any duplication of income) of any property which was
or will have been an operating unit or a part of an operating unit
preceding its acquisition by the corporation and which has been
acquired within the past twelve (12) months immediately preceding or
is to be acquired by the corporation substantially contemporaneously
with the proposed issuance of additional Cumulative Preferred
Shares, or the proposed consolidation or merger.
(b) The term "Adjusted Interest and Preferred Charges" is
hereby defined as the sum of (i) the interest charges for one year
upon all interest bearing indebtedness of the corporation
outstanding at the time of issuance of such Cumulative Preferred
Shares or of the proposed consolidation or merger, including that,
if any, proposed to be issued or assumed substantially
contemporaneously, or to which property theretofore acquired or to
be acquired substantially contemporaneously is or will be subject
(adjusted for all amortization of debt discount and expense, or of
premium on debt, as the case may be), and (ii) the dividend
requirements for one year on all outstanding Cumulative Preferred
Shares, and on all other shares of a class ranking prior to or on a
parity with the Cumulative Preferred Shares as to dividends or
assets, outstanding at the time of issuance of such additional
Cumulative Preferred Shares, or of such consolidation or merger,
including all such shares proposed to be issued, or all such shares
of the resulting corporation, as the case may be.
(c) The term "Adjusted Income Available for Preferred
Dividends" is hereby defined as the "Adjusted Income Available for
Interest" for the aforesaid twelve (12) months' period, less the
interest charges for one year and the dividend requirements for one
year on any shares ranking prior to the Cumulative Preferred Shares,
included in determining the "Adjusted Interest and Preferred
Charges."
(d) The term "Adjusted Preferred Charges" is hereby defined as
the "Adjusted Interest and Preferred Charges" for one year
determined at the time of issuance of such Cumulative Preferred
Shares or of the proposed consolidation or merger, less the interest
charges for one year and the dividend requirements for one year on
any shares ranking prior to the Cumulative Preferred Shares,
included in determining the "Adjusted Interest and Preferred
Charges."
(e) The term "Common Share Equity" is hereby defined as the
sum of (i) the stated capital of the corporation applicable to its
Common Shares and to all other subordinate shares (including shares,
if any, proposed to be issued substantially contemporaneously or any
additional such shares of the resulting corporation, as the case may
be), (ii) capital surplus to the extent of premium on Common Shares
and on all other subordinate shares (including premium, if any, on
shares proposed to be issued substantially contemporaneously or any
additional such shares of the resulting corporation, as the case may
be), (iii) contributions in aid of construction, and (iv) earned
surplus, all determined in accordance with such system of accounts
as may be prescribed by governmental authorities having jurisdiction
in the premises or, in the absence thereof, in accordance with
generally accepted accounting practice.
(f) The term "Total Capitalization" is hereby defined as the
sum of (i) the Common Share Equity, (ii) the involuntary liquidation
preference of all Cumulative Preferred Shares and all other shares
prior to or on a parity with the Cumulative Preferred Shares to be
outstanding after the proposed event, and (iii) the principal amount
of all interest bearing debt (including debt to which property
theretofore acquired or to be acquired substantially
contemporaneously is or will be subject) to be outstanding after the
proposed event, excluding, however, all indebtedness maturing by its
terms within one year from the time of creation thereof unless the
corporation, without the consent of the lender, has the right to
extend the maturity of such indebtedness for a period or periods
which, with the original period of such indebtedness, aggregates one
year or more.
DIVISION II
Provisions Relating to Cumulative Preference Shares
A. Issue in Series. The Cumulative Preference Shares may be issued
from time to time in one or more series, each of which series shall have such
designation and such relative rights, voting power, preferences and
restrictions as are hereinafter provided and, to the extent hereinafter
permitted, as are determined and stated by the Board of Directors in the
resolution or resolutions authorizing the creation of shares of such series.
All Cumulative Preference Shares shall be of equal rank and shall be
identical, except in respect of their relative voting power (determined as
hereinafter provided in Division IV) and the particulars that may be
determined by the Board of Directors as hereinafter provided; and each share
of each series shall be identical in all respects with the other shares of
such series, except as to the dates from which dividends thereon shall be
cumulative. Cumulative Preference Shares shall be issued only as fully paid
and nonassessable shares.
Subject to the provisions of the last paragraph of this Subdivision A,
authority is hereby expressly granted to the Board of Directors to authorize
the issuance of Cumulative Preference Shares in one or more series, and to
determine and state, by the resolution or resolutions authorizing the creation
of each series: (i) the designation of the series and the number of shares
which shall constitute such series, which number may be altered from time to
time by like action of the Board of Directors in respect of shares then
unallotted; (ii) the annual rate of dividends payable on shares of such
series; (iii) the price or prices per share at which the shares of such series
shall be redeemable; (iv) the amount payable on shares of such series in the
event of any dissolution, liquidation or winding up of the affairs of the
corporation, which amount may differ in the case of a voluntary or involuntary
dissolution, liquidation or winding up of such affairs, provided that the
amount in the case of an involuntary dissolution, liquidation or winding up of
such affairs shall be determined as provided in the following paragraph;
(v) the conversion rights, if any, with respect to the conversion of shares of
such series into Common Shares of the corporation; and (vi) the sinking or
purchase fund provisions, if any, for the mandatory redemption or purchase of
shares of such series.
The amount (in addition to accrued and unpaid dividends, if any) which
the holders of Cumulative Preference Shares of each series shall be entitled
to receive in the event of any dissolution, liquidation or winding up of the
affairs of the corporation which shall be involuntary shall be equal to the
gross consideration received by the corporation upon the issuance thereof
(without regard to any premium received or any underwriting discount or
commission, private placement fee or other expense incurred by the corporation
in connection with the issuance thereof).
B. Dividends. Subject to the preferential rights of the holders of
Cumulative Preferred Shares with respect to payment of dividends as set forth
in Subdivision B of Division I, the holders of the Cumulative Preference
Shares of each series shall be entitled to receive, when and as declared by
the Board of Directors, out of any funds legally available for such purpose,
cash dividends at the annual rate for such series theretofore fixed by the
Board of Directors as hereinbefore provided, and no more, payable quarterly on
such dates as may be fixed in the resolution or resolutions adopted by the
Board of Directors authorizing the creation of such series. Such dividends
shall be paid to shareholders of record on the respective dates, not exceeding
twenty (20) days prior to such payment dates, fixed by the Board of Directors
for such purpose. Such dividends shall be cumulative from and including the
date or dates fixed for such purpose by the Board of Directors in the
resolution or resolutions authorizing the creation of such series.
No dividend shall be paid, or declared and set apart for payment, upon
any Cumulative Preference Shares of any series for any quarterly dividend
period unless at the same time a like proportionate dividend for the same or
comparable quarterly period, ratable in proportion to the respective annual
dividend rates fixed therefor, shall be paid, or declared and set apart for
payment, upon all Cumulative Preference Shares of all series then issued and
outstanding.
In no event shall any dividend be paid or declared, nor shall any
distribution be made, on any subordinate shares, other than a dividend or
distribution payable solely in subordinate shares, nor shall any subordinate
shares be purchased, redeemed or otherwise acquired by the corporation for
value, nor shall any moneys be paid to or set aside or made available for a
purchase fund or sinking fund for the purchase or redemption of any
subordinate shares, unless (i) all dividends on the Cumulative Preference
Shares of all series for all past quarterly dividend periods and for the then
current quarterly dividend period shall have been paid or declared and a sum
sufficient for the payment thereof set apart for payment; and (ii) the
corporation shall not be in default or deficient under any requirement of a
sinking or purchase fund established with respect to outstanding Cumulative
Preference Shares of any series for any period then elapsed.
Subject to the provisions of this Article VI, and not otherwise,
dividends may be declared by the Board of Directors and paid from time to
time, out of any funds legally available therefor, upon the then outstanding
subordinate shares, and the holders of the Cumulative Preference Shares shall
not be entitled to participate in any such dividends.
C. Redemption of Cumulative Preference Shares. Subject to the
limitations stated in Subdivision B of Division I and in Subdivision D of this
Division II, the Cumulative Preference Shares of any or all series may be
redeemed, as a whole at any time or in part from time to time, at the option
of the corporation by resolution of the Board of Directors, at the applicable
redemption price for the shares of such series as determined by the Board of
Directors in the resolution or resolutions authorizing the creation of such
series, together with an amount (hereinafter referred to as "accrued dividends
to the redemption date") in the case of each share, computed at the annual
dividend rate for the series of which the particular share is a part, from and
including the date on which dividends on such share became cumulative to and
including the date of redemption, less the aggregate amount of all dividends
which have theretofore been paid thereon or which have been declared thereon
and for which moneys for payment have been set apart and remain available for
payment. Each such redemption shall be effected upon the same notice as
provided in Subdivision C of Division I in respect of the redemption of
Cumulative Preferred Shares, and all other provisions of said Subdivision C
with respect to the method and effect of redemption of Cumulative Preferred
Shares shall be applicable to the redemption of Cumulative Preference Shares
in the same manner and with the same force and effect as though such
provisions were set forth in full in this Subdivision C.
All Cumulative Preference Shares converted, redeemed or purchased
voluntarily or pursuant to any sinking fund or purchase fund for the mandatory
redemption or purchase of shares shall be retired and cancelled and shall have
the status of authorized but unissued Cumulative Preference Shares of the
corporation and may be reissued in the same manner as authorized but unissued
Cumulative Preference Shares undesignated as to series.
D. Limitation on Purchase and Redemption of Cumulative Preference
Shares. No Cumulative Preference Shares of any series shall be purchased,
redeemed or otherwise acquired by the corporation for value, nor shall any
moneys be paid to or set aside or made available for a purchase fund or
sinking fund for the purchase or redemption of Cumulative Preference Shares of
any series, unless all dividends on the Cumulative Preference Shares of all
series for all past quarterly dividend periods and for the current quarterly
period shall have been paid or declared and a sum sufficient for the payment
thereof set apart for payment, except in event all of the Cumulative
Preference Shares shall be called for redemption.
E. Liquidation Preferences. In the event of any dissolution,
liquidation or winding up of the affairs of the corporation, before any
distribution or payment shall be made to the holders of any class of
subordinate shares, the holders of the shares of each series of Cumulative
Preference Shares shall be entitled to be paid in full the respective amounts
fixed by the Board of Directors in the resolution or resolutions authorizing
the creation of such series together with an amount, in the case of each
share, computed at the annual dividend rate for the series of which the
particular share is a part, from and including the date on which dividends on
such share became cumulative to and including the date fixed for such payment,
less the aggregate amount of all dividends which have theretofore been paid
thereon or which have been declared thereon and for which moneys have been set
apart and remain available for payment; provided, however, that no such
payment to the holders of Cumulative Preference Shares shall be made until
payment in full shall have been made to the holders of Cumulative Preferred
Shares, or moneys made available for such payment in full, in accordance with
the provisions of Subdivision E of Division I. If such payment shall have
been made to the holders of the Cumulative Preference Shares, or moneys made
available for such payment in full, the remaining assets and funds of the
corporation shall be distributed among the holders of the classes of
subordinate shares according to their respective rights and preferences and in
each case according to their respective shares. If the assets available are
not sufficient to pay in full the amounts so payable to the holders of all
outstanding Cumulative Preference Shares, the holders of all series of such
shares shall share ratably in any distribution of assets in proportion to the
full amounts to which they would otherwise be respectively entitled. The
consolidation or merger of the corporation into or with any other corporation
or corporations pursuant to the statutes of the State of Minnesota providing
for consolidation or merger shall not be deemed a liquidation, dissolution or
winding up of the affairs of the corporation within the meaning of any of the
provisions of this Subdivision E.
F. Voting and Restrictions on Certain Corporate Action. The holders of
the Cumulative Preference Shares shall not be entitled to vote at any meetings
of the shareholders of the corporation, except as required by law or as
hereinafter otherwise provided in this Subdivision F and in Division IV:
(1) So long as any Cumulative Preference Shares of any series are
outstanding, the corporation shall not, without the consent (given by
vote at a special meeting of shareholders called for the purpose) of the
holders of at least two-thirds (2/3) of the aggregate voting power
(determined as hereinafter provided in Division IV) vested in the
Cumulative Preference Shares of all series then outstanding:
(a) Create or authorize any shares of any class (other than
the Cumulative Preferred Shares, whether now or hereafter
authorized) ranking prior to the Cumulative Preference Shares as to
dividends or assets; or
(b) Amend the Articles of Incorporation so as to affect
adversely any of the preferences or other rights of the holders of
the Cumulative Preference Shares, provided, however, that if any
such amendment would affect adversely the holders of one or more,
but not all, of the series of Cumulative Preference Shares at the
time outstanding, consent only of the holders of at least two-thirds
(2/3) of the aggregate voting power (determined as hereinafter
provided in Division IV) vested in the shares of each series so
adversely affected shall be required.
(2) So long as any Cumulative Preference Shares of any series are
outstanding, the corporation shall not, without the consent (given by
vote at a special meeting of shareholders called for the purpose) of the
holders (i) of at least a majority of the aggregate voting power
(determined as hereinafter provided in Division IV) vested in the
Cumulative Preference Shares of all series then outstanding, or (ii) in
case of the negative vote at such meeting of the holders of more than
one-fourth (1/4) of the aggregate voting power (determined as hereinafter
provided in Division IV) vested in the Cumulative Preference Shares of
all series then outstanding, of at least two-thirds (2/3) of the
aggregate voting power (determined as hereinafter provided in Division
IV) vested in the Cumulative Preference Shares of all series then
outstanding:
(a) Increase the authorized number of Cumulative Preference
Shares, or create or authorize any shares of any class ranking on a
parity with the Cumulative Preference Shares as to dividends or
assets; or
(b) Consolidate or merge into or with any other corporation or
corporations pursuant to the statutes of the State of Minnesota
providing for consolidation or merger unless, immediately after such
consolidation or merger shall become effective, the Cumulative
Preference Shares of the corporation outstanding immediately prior
to such consolidation or merger shall remain outstanding or be
constituted as shares of the corporation resulting from such
consolidation or merger in the same number and with the same
relative rights, voting power, preferences and restrictions as
theretofore, the authorized number thereof shall not be increased,
and there shall be no shares of the resulting corporation
outstanding or authorized ranking prior to or on a parity with the
Cumulative Preference Shares, except shares of the corporation
outstanding or authorized immediately prior to such consolidation or
merger; or
(c) Sell, lease or exchange all or substantially all of its
property and assets, unless, after the completion of such
transaction, the fair value of the assets of the corporation shall
at least equal the preference on voluntary liquidation of all
Cumulative Preference Shares of all series then outstanding and of
all shares then outstanding of a class on a parity with the
Cumulative Preference Shares, after first deducting an amount equal
to all then existing indebtedness of the corporation and an amount
equal to the preference on voluntary liquidation of all shares
ranking prior to the Cumulative Preference Shares.
DIVISION III
Provisions Relating to Common Shares
A. Dividends. Subject to the preferential rights of the holders of the
Cumulative Preferred Shares and the Cumulative Preference Shares with respect
to the payment of dividends, as set forth in Subdivision B of Division I and
Subdivision B of Division II, respectively, holders of the Common Shares shall
be entitled to receive dividends, out of any funds legally available therefor,
when and as declared by the Board of Directors.
B. Liquidation Preferences. In the event of any dissolution,
liquidation or winding-up of the affairs of the corporation, whether voluntary
or involuntary, holders of the Common Shares shall be entitled to receive
ratably, in accordance with the numbers of shares held by them respectively,
the assets of the corporation available for payment to shareholders remaining
after payment in full shall have been made to holders of the Cumulative
Preferred Shares and the Cumulative Preference Shares in accordance with the
provisions of Subdivision E of Division I and Subdivision E of Division II,
respectively.
DIVISION IV
Voting Rights and Other Provisions
Relating to Cumulative Preferred Shares,
Cumulative Preference Shares and Common Shares
A. Voting Rights of Common Shares. Except as otherwise expressly set
forth in this Article VI and as provided by law, the holders of Common Shares
shall have the sole voting rights of shareholders of the corporation and shall
be entitled to one vote for each share held, and the holders of a majority of
the Common Shares outstanding shall have power to authorize the sale, lease,
exchange or other disposal of all, or substantially all, of the property and
assets of the corporation, including its good will, to adopt or reject an
agreement of consolidation or merger and to amend the Articles of
Incorporation.
B. Voting Rights of Cumulative Preferred Shares.
(1) After an amount equivalent to four (4) full quarterly dividend
installments on the Cumulative Preferred Shares of any series outstanding
shall be in default, the holders of Cumulative Preferred Shares of all
series at the time outstanding, voting separately as a class, shall, at
any annual meeting of the shareholders or any special meeting of the
shareholders called as herein provided occurring during such period,
elect three members of the Board of Directors, and the holders of the
Common Shares, voting separately as a class, shall, subject to any rights
of the holders of Cumulative Preference Shares to elect directors as
provided in Subdivision C of this Division IV, elect the remaining
directors of the corporation.
(2) After an amount equivalent to twelve (12) full quarterly
dividend installments on the Cumulative Preferred Shares of any series
outstanding shall be in default, the holders of Cumulative Preferred
Shares of all series at the time outstanding, voting separately as a
class, shall at any annual meeting of the shareholders or any special
meeting of the shareholders called as herein provided occurring during
such period, elect the smallest number of directors necessary to
constitute a majority of the full Board of Directors, and the holders of
the Common Shares, voting separately as a class, shall, subject to any
rights of the holders of Cumulative Preference Shares to elect directors
as provided in Subdivision C of this Division IV, elect the remaining
directors of the corporation.
(3) At any annual meeting or special meeting of the shareholders
for the election of directors occurring after all dividends then in
default on the Cumulative Preferred Shares then outstanding shall be paid
(and such dividends shall be declared and paid out of any funds legally
available therefor as soon as reasonably practical), the Cumulative
Preferred Shares shall thereupon be divested of any special rights with
respect to the election of directors provided in paragraphs (1) and (2)
of this Subdivision B, but always subject to the same provisions for the
vesting of such voting power in the holders of the Cumulative Preferred
Shares in the case of a future like default or defaults in dividends
thereon.
(4) Voting power vested in the holders of the Cumulative Preferred
Shares as provided in paragraphs (1) and (2) of this Subdivision B may be
exercised at any annual meeting of shareholders or at a special meeting
of shareholders held for such purpose, which special meeting of
shareholders shall be called by the proper officers of the corporation at
any time when such voting power shall be so vested, within twenty (20)
days after written request therefor signed by the holders of not less
than five percent (5%) of the aggregate voting power (determined as
hereinafter provided in Subdivision D of this Division IV) vested in the
Cumulative Preferred Shares of all series then outstanding, the date of
such special meeting to be not more than forty (40) days from the date of
giving of notice thereof.
(5) Notice of any annual or special meeting of shareholders for the
election of directors held when voting powers as aforesaid shall be
vested in the holders of Cumulative Preferred Shares shall be given to
all holders of Cumulative Preferred Shares not less than fifteen (15)
days prior to said meeting, and such notice shall describe with
particularity the voting rights of the holders of each series of
Cumulative Preferred Shares.
(6) At any such annual or special meeting the presence in person or
by proxy of the holders of a majority of the aggregate voting power
(determined as hereinafter provided in Subdivision D of this Division IV)
vested in the Cumulative Preferred Shares of all series then outstanding
shall be required to constitute a quorum of the holders of the Cumulative
Preferred Shares for the election by them of the directors whom they are
entitled to elect; provided, however, that the holders of a majority of
the aggregate voting power (determined as hereinafter provided in
Subdivision D of this Division IV) vested in the Cumulative Preferred
Shares who are present in person or by proxy shall have power to adjourn
such meeting for the election of directors by the holders of the
Cumulative Preferred Shares from time to time, without notice other than
announcement at the meeting.
C. Voting Rights of Cumulative Preference Shares.
(1) After an amount equivalent to four (4) full quarterly dividend
installments on the Cumulative Preference Shares of any series
outstanding shall be in default, the holders of Cumulative Preference
Shares of all series at the time outstanding, voting separately as a
class, shall, at any annual meeting of the shareholders or any special
meeting of the shareholders called as herein provided occurring during
such period, elect two members of the Board of Directors, and the holders
of the Common Shares, voting separately as a class, shall, subject to any
rights of the holders of Cumulative Preferred Shares to elect directors
as provided in Subdivision B of this Division IV, elect the remaining
directors of the corporation.
(2) At any annual meeting or special meeting of the shareholders
for the election of directors occurring after all dividends then in
default on the Cumulative Preference Shares then outstanding shall be
paid (and such dividends shall be declared and paid out of any funds
legally available therefor as soon as reasonably practical), the
Cumulative Preference Shares shall thereupon be divested of any special
rights with respect to the election of directors provided for in
paragraph (1) of this Subdivision C, but always subject to the same
provisions for the vesting of such voting power in the holders of the
Cumulative Preference Shares in the case of a future like default or
defaults in dividends thereon.
(3) All provisions of paragraphs (4), (5) and (6) of Subdivision B
of this Division IV with respect to the method of exercising the special
voting rights of the holders of Cumulative Preferred Shares shall be
applicable to the special voting rights of the holders of Cumulative
Preference Shares in the same manner and with the same force and effect
as though such provisions were set forth in full in this Subdivision C.
D. Number of Votes Applicable to Each Cumulative Preferred Share and to
Each Cumulative Preference Share. For the purpose of each vote or consent
under the Articles of Incorporation or pursuant to applicable law, the number
of votes to which each Cumulative Preferred Share and each Cumulative
Preference Share shall be entitled shall be determined as follows:
(a) In voting by holders of Cumulative Preferred Shares, separately
as a class, or by series, each Cumulative Preferred Share entitled to
receive the smallest fixed amount (in addition to accrued and unpaid
dividends, if any) in the event of any dissolution, liquidation or
winding up of the affairs of the corporation which shall be involuntary
shall have one vote, and each Cumulative Preferred Share entitled to
receive a greater fixed amount (in addition to accrued and unpaid
dividends, if any) in any such event shall have the number of votes which
is in the same proportion as such greater amount shall be to such
smallest amount;
(b) In voting by holders of Cumulative Preference Shares,
separately as a class, or by series, each Cumulative Preference Share
entitled to receive the smallest fixed amount (in addition to accrued and
unpaid dividends, if any) in the event of any dissolution, liquidation or
winding up of the affairs of the corporation which shall be involuntary
shall have one vote, and each Cumulative Preference Share entitled to
receive a greater fixed amount (in addition to accrued and unpaid
dividends, if any) in any such event shall have the number of votes which
is in the same proportion as such greater amount shall be to such
smallest amount; and
(c) In voting by holders of Cumulative Preferred Shares and/or
Cumulative Preference Shares and/or holders of Common Shares, together as
a single class, each Common Share shall have one vote, each Cumulative
Preferred Share and each Cumulative Preference Share entitled to receive
$100 (in addition to accrued and unpaid dividends, if any) in the event
of any dissolution, liquidation or winding up of the affairs of the
corporation which shall be involuntary shall have one vote and each
Cumulative Preferred Share and each Cumulative Preference Share entitled
to receive a different fixed amount (in addition to accrued and unpaid
dividends, if any) in such event shall be entitled to such greater or
lesser number of votes which is in the same proportion as such different
amount shall be to $100.
E. Number and Term of Directors and Manner of Election.
(1) Except at such times as the holders of Cumulative Preferred
Shares and/or Cumulative Preference Shares shall have voting rights for
the election of directors, (a) the Board of Directors shall consist of
such number of persons, not less than seven (7) nor more than nine (9),
as may be determined by the shareholders from time to time at annual
meetings thereof (subject to the authority of the Board of Directors to
increase or decrease the number of directors as permitted by law), (b)
the term of office of each director other than directors elected to fill
vacancies shall be for the period ending at the third annual meeting
following his election and until his successor is elected and qualified,
(c) vacancies in the Board of Directors occurring by reason of death,
resignation, removal or disqualification shall be filled for the
unexpired term of the director with respect to whom the vacancy occurred
by a majority of the remaining directors of the Board of Directors,
although less than a quorum, and (d) vacancies in the Board of Directors
occurring by reason of newly created directorships resulting from an
increase in the authorized number of directors by action of the Board of
Directors as permitted by these Articles of Incorporation and the Bylaws
of the corporation shall be filled by a majority vote of the directors
serving at the time of such increase, each director so elected to a newly
created directorship to serve for the appropriate term so as to maintain,
as near as may be, an equal division between the classes of directors.
Notwithstanding any other provisions of these Articles of Incorporation
or the Bylaws of the corporation or the fact that a lesser percentage may
be specified by law, these Articles of Incorporation or the Bylaws of the
corporation, the affirmative vote of the holders of at least 75% of the
voting power of the then outstanding Common Shares shall be required to
amend, alter, adopt any provision inconsistent with or repeal this
paragraph (1) of Subdivision E of this Division IV unless the Board of
Directors, if all such directors are Continuing Directors, as defined in
this Article VI, shall unanimously recommend such amendment, alteration,
adoption or repeal.
(2) If at any time the holders of Cumulative Preferred Shares
and/or Cumulative Preference Shares of the corporation shall, under the
provisions of paragraph (1) of Subdivision B of this Division IV or of
paragraph (1) of Subdivision C of this Division IV, become entitled to
elect any directors, then the terms of all incumbent directors shall
expire at the time of the first annual meeting thereafter at which such
holders of Cumulative Preferred Shares and/or Cumulative Preference
Shares are so entitled to elect directors. If at any time the holders of
Cumulative Preferred Shares of the corporation shall, under the
provisions of paragraph (2) of Subdivision B of this Division IV, become
entitled to elect a majority of the Board of Directors, the terms of all
incumbent directors shall expire whenever such majority has been duly
elected and qualified. During any period during which the holders of
Cumulative Preferred Shares and/or Cumulative Preference Shares of the
corporation shall have voting rights with respect to directors under the
provisions of this Division IV, the Board of Directors shall consist of
eleven (11) persons and the entire number of persons composing such Board
shall be elected at each annual or special meeting of shareholders for
the election of directors and shall serve until the next such annual or
special meeting or until their successors have been elected and
qualified, provided, however, that whenever the holders of Cumulative
Preferred Shares and/or Cumulative Preference Shares acquire voting
rights under paragraph (1) of Subdivision B of this Division IV or under
paragraph (1) of Subdivision C of this Division IV, and exercise such
rights at a special meeting called therefor, the terms of office of
directors theretofore elected by the holders of Common Shares will not
expire until the next annual meeting. If a vacancy or vacancies in the
Board of Directors shall exist with respect to a director or directors
who shall have been elected by the holders of either Cumulative Preferred
Shares or Cumulative Preference Shares, the remaining directors elected
by the holders of Cumulative Preferred Shares or Cumulative Preference
Shares, as the case may be, by affirmative vote of a majority thereof, or
the remaining director so elected if there be but one, may elect a
successor or successors to hold office for the unexpired term of the
director or directors whose place or places shall be vacant. Likewise,
if a vacancy or vacancies shall exist with respect to a director or
directors who shall have been elected by the holders of Common Shares,
the remaining directors elected by the holders of Common Shares, by
affirmative vote of a majority thereof, or the remaining director so
elected if there be but one, may elect a successor or successors to hold
office for the unexpired term of the director or directors whose place or
places shall be vacant.
(3) Whenever the Cumulative Preferred Shares shall be divested of
voting powers with respect to the election of directors as provided in
paragraph (3) of Subdivision B of this Division IV, the terms of all
incumbent directors, other than directors elected by the holders of
Cumulative Preference Shares pursuant to Subdivision C of this
Division IV, shall expire upon the election of their successors by the
holders of the Common Shares at the next annual or special meeting of
shareholders for the election of directors. A special meeting shall be
called for such purpose within twenty (20) days after the written request
therefor signed by the holders of not less than five percent (5%) of the
Common Shares outstanding, the date of such special meeting to be not
more than forty (40) days from the date of giving of notice thereof.
Upon the election and qualification of directors by the holders of Common
Shares as aforesaid the provisions of paragraph (1) of Subdivision E of
this Division IV shall again control, unless at that time the holders of
Cumulative Preference Shares have voting rights for the election of
directors.
(4) Whenever the Cumulative Preference Shares shall be divested of
voting powers with respect to the election of directors as provided in
paragraph (2) of Subdivision C of this Division IV, the terms of all
incumbent directors, other than directors elected by the holders of
Cumulative Preferred Shares pursuant to Subdivision B of this
Division IV, shall expire on the election of their successors by the
holders of the Common Shares at the next annual or special meeting of
shareholders for the election of directors. A special meeting shall be
called for such purpose within twenty (20) days after the written request
therefor signed by the holders of not less than five percent (5%) of the
Common Shares outstanding, the date of such special meeting to be not
more than forty (40) days from the date of giving of notice thereof.
Upon the election and qualification of directors by the holders of Common
Shares as aforesaid, the provisions of paragraph (1) of Subdivision E of
this Division IV shall again control, unless at that time the holders of
Cumulative Preferred Shares have voting rights for the election of
directors.
F. Cumulative Voting. The holders of Common Shares of the corporation
shall have no right to cumulate votes in the election of directors. If notice
in writing is given by any holder of Cumulative Preferred Shares or Cumulative
Preference Shares to any officer of the corporation before a meeting for the
election of directors at which such shareholder is entitled to vote, or to the
presiding officer at such meeting at any time before the election of directors
takes place, that he intends to cumulate his votes in such election, each
holder of shares of the class with respect to which such notice has been given
shall have the right to multiply the number of votes to which he may be
entitled by the number of directors to be elected by the holders of shares of
such class, and he may cast all such votes for one candidate or distribute
them among any two or more candidates. In such case, it shall be the duty of
the presiding officer, before the election of directors at the meeting, to
announce that all shareholders of the class with respect to which such notice
has been given shall cumulate their votes.
G. Preemptive Rights. No holder of shares of the corporation of any
class or of any security or obligation convertible into, or of any warrant,
option or right to purchase, subscribe for or otherwise acquire, shares of any
class of the corporation, whether now or hereafter authorized, shall, as such
holder, have any preemptive or preferential right whatsoever to purchase,
subscribe for or otherwise acquire shares of any class of the corporation or
of any security or obligation convertible into, or of any warrant, option or
right to purchase, subscribe for or otherwise acquire, shares of any class of
the corporation, whether now or hereafter authorized, other than such rights
of subscription, if any, as the Board of Directors may from time to time
determine.
DIVISION V
Voting Rights of Common Shares
Relating To Certain Business Combinations
A. In addition to any other affirmative vote required by law or these
Articles of Incorporation, and except as otherwise expressly provided in
Subdivision B of this Division V,
1. any merger or consolidation of the corporation or any
Subsidiary (as hereinafter defined) with (a) an Interested Shareholder
(as hereinafter defined) or (b) any other corporation (whether or not
itself an Interested Shareholder) which is, or after such merger or
consolidation would be, an Affiliate or Associate (as such terms are
hereinafter defined) of an Interested Shareholder, or
2. any sale, lease, exchange, mortgage, pledge, grant of a
security interest, transfer or other disposition (in one transaction or a
series of transactions), other than in the ordinary course of business,
to or with (a) an Interested Shareholder or (b) any other person (whether
or not itself an Interested Shareholder) which is, or after such sale,
lease, exchange, mortgage, pledge, grant of a security interest, transfer
or other disposition would be, an Affiliate or Associate of an Interested
Shareholder, directly or indirectly, of all or any Substantial Part (as
hereinafter defined) of the assets of the corporation (including, without
limitation, any voting securities of a Subsidiary) or any Subsidiary, or
both, or
3. the issuance or transfer by the corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities
(except pursuant to stock dividends, stock splits or similar transactions
which would not have the effect of increasing the proportionate voting
power of an Interested Shareholder) of the corporation or any Subsidiary,
or both, to (a) an Interested Shareholder or (b) any other person
(whether or not itself an Interested Shareholder) which is, or after such
issuance or transfer would be, an Affiliate or Associate of an Interested
Shareholder, or
4. the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by or on behalf of an Interested
Shareholder or any Affiliate or Associate of an Interested Shareholder,
or
5. any reclassification of securities (including any reverse stock
split), or recapitalization of the corporation, or any merger or
consolidation of the corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving an
Interested Shareholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
of equity or convertible securities of the corporation or any subsidiary
directly or indirectly beneficially owned by (a) an Interested
Shareholder or (b) any other person (whether or not itself an Interested
Shareholder) which is, or after such reclassification, recapitalization,
merger or consolidation or other transaction would be, an Affiliate or
Associate of an Interested Shareholder,
shall not be consummated unless such consummation shall have been approved by
the affirmative vote of the holders of at least 75% of the voting power of the
then outstanding Common Shares. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law, in these Articles of Incorporation or in
any agreement with any national securities exchange or otherwise.
B. The provisions of Subdivision A of this Division V shall not be
applicable to any particular Business Combination (as hereinafter defined) and
such Business Combination shall require only such affirmative vote as is
required by law and any other provision of these Articles of Incorporation, if
the Business Combination shall have been approved by a majority of the
Continuing Directors (as hereinafter defined) or all of the following
conditions shall have been met:
1. The transaction constituting the Business Combination shall
provide for a consideration to be received by all holders of Common
Shares in exchange for all their Common Shares, and the aggregate amount
of the cash and the Fair Market Value as of the date of the consummation
of the Business Combination of consideration other than cash to be
received per share by holders of Common Shares in such Business
Combination shall be at least equal to the higher of the following:
(a) (if applicable) the highest per-share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid in order to acquire any Common Shares beneficially owned by an
Interested Shareholder (i) within the two-year period immediately
prior to the Announcement Date (as hereinafter defined), (ii) within
the two-year period immediately prior to the Determination Date (as
hereinafter defined) or (iii) in the transaction in which it became
an Interested Shareholder, whichever is highest; or
(b) the Fair Market Value per Common Share on the Announcement
Date or on the Determination Date, whichever is higher.
2. The consideration to be received by holders of Common Shares
shall be in cash or in the same form as was previously paid in order to
acquire the Common Shares that are beneficially owned by an Interested
Shareholder and, if an Interested Shareholder beneficially owns Common
Shares that were acquired with varying forms of consideration, the form
of consideration for such Common Shares shall be either cash or the form
used to acquire the largest number beneficially owned by it. The price
determined in accordance with paragraph 1 of this Subdivision B shall be
subject to appropriate adjustment in the event of any recapitalization,
stock dividend, stock split, combination of shares or similar event.
3. After such Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business Combination:
(a) except as approved by a majority of the Continuing
Directors, there shall have been no failure to declare and pay at
the regular date therefor the full amount of any dividends (whether
or not cumulative) payable on any outstanding Cumulative Preferred
Shares or Cumulative Preference Shares;
(b) there shall have been (i) no reduction in the annual rate
of dividends paid on the Common Shares (except as necessary to
reflect any subdivision of the Common Shares) other than as approved
by a majority of the Continuing Directors and (ii) an increase in
such annual rate of dividends as necessary to prevent any such
reduction in the event of any reclassification (including any
reverse stock split), recapitalization, reorganization or any
similar transaction which has the effect of reducing the number of
outstanding Common Shares, unless the failure so to increase such
annual rate is approved by a majority of the Continuing Directors;
and
(c) such Interested Shareholder shall not have become the
beneficial owner of any additional Common Shares except as part of
the transaction in which it became an Interested Shareholder.
4. After such Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder shall not have received the
benefit, directly or indirectly (except proportionately as a
shareholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages provided
by the corporation, whether in anticipation of or in connection with such
Business Combination or otherwise; and
5. A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder
(or any subsequent provisions replacing such Act, rules or regulations)
shall be mailed to the shareholders of the corporation, no later than the
earlier of (a) 30 days prior to any vote on the proposed Business
Combination or (b) if no vote on such Business Combination is required,
60 days prior to the consummation of such Business Combination (whether
or not such proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions). Such proxy statement
shall contain at the front thereof, in a prominent place, any
recommendations as to the advisability (or inadvisability) of the
Business Combination which the Continuing Directors, or any of them, may
have furnished in writing and, if deemed advisable by a majority of the
Continuing Directors, an opinion of a reputable investment banking firm
as to the fairness (or lack of fairness) of the terms of such Business
Combination, from the point of view of the holders of the Common Shares
other than an Interested Shareholder (such investment banking firm to be
selected by a majority of the Continuing Directors, to be furnished with
all information it reasonably requests and to be paid a reasonable fee
for its services upon receipt by the corporation of such opinion).
C. For the purposes of this Division V:
1. "Business Combination" shall mean any transaction that is
referred to in any one or more of paragraphs 1 through 5 of Subdivision A
of this Division V.
2. "Person" shall mean any individual, firm, trust, partnership,
association, corporation or other entity.
3. "Interested Shareholder" shall mean any person (other than the
corporation or any Subsidiary) who or which:
(a) is the beneficial owner, directly or indirectly, of more
than 10% of the voting power of the then outstanding Common Shares;
or
(b) is an Affiliate of the corporation and at any time within
the two-year period immediately prior to the date in question was
the beneficial owner, directly or indirectly, of more than 10% of
the voting power of the then outstanding Common Shares; or
(c) is an assignee of or has otherwise succeeded to the
beneficial ownership of any Common Shares which were, at any time
within the two-year period immediately prior to the date in
question, beneficially owned by an Interested Shareholder, unless
such assignment or succession shall have occurred pursuant to a
Public Transaction (as hereinafter defined) or any series of
transactions involving a Public Transaction.
For the purpose of determining whether a person is an Interested
Shareholder, the number of Common Shares deemed to be outstanding shall
include shares deemed owned through application of paragraph 5 below, but
shall not include any other Common Shares that may be issuable pursuant
to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
4. "Public Transaction" shall mean any (a) purchase of shares
offered pursuant to an effective registration statement under the
Securities Act of 1933 or (b) open-market purchase of shares on a
national securities exchange or in the over-the-counter market if, in
either such case, the price and other terms of sale are not negotiated by
the purchaser and the seller of the beneficial interest in the shares.
5. A person shall be a "beneficial owner" of any Common Shares:
(a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(b) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise or (ii) the right to vote or to direct the voting thereof
pursuant to any agreement, arrangement or understanding; or
(c) which is beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any Common
Shares.
6. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on January 1,
1986.
7. "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3all-1 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect on January 1, 1986) is owned, directly or indirectly, by the
corporation; provided, however, that, for purposes of the definition of
Interested Shareholder set forth in paragraph 3, the term "Subsidiary"
shall mean only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the corporation.
8. "Continuing Director" shall mean any member of the Board of
Directors of the corporation who (1) is not an Affiliate or Associate of,
and not a nominee of, an Interested Shareholder having any interest,
direct or indirect, in the proposed Business Combination and (2) was a
member of the Board of Directors prior to the time that such Interested
Shareholder became an Interested Shareholder, and any successor of a
Continuing Director who is not an Affiliate or Associate of, and not a
nominee of, such Interested Shareholder and is recommended to succeed a
Continuing Director by a majority of Continuing Directors then on the
Board of Directors.
9. "Announcement Date" shall mean the date of the first public
announcement of the proposed Business Combination.
10. "Determination Date" shall mean the date on which an Interested
Shareholder became an Interested Shareholder.
11. "Fair Market Value" shall mean: (a) in the case of stock, the
highest closing sale price during the 30-day period immediately preceding
the date in question of a share of such stock on the Composite Tape for
New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on
the Composite Tape, on the New York Stock Exchange, or, if such stock is
not listed on such Exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934 on which
such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation or last reported sale price,
whichever is applicable, with respect to a share of such stock during the
30-day period preceding the date in question on the National Association
of Securities Dealers, Inc. Automated Quotations System or any system
then in use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock as determined by a
majority of the Continuing Directors in good faith; and (b) in the case
of property other than cash or stock, the fair market value of such
property on the date in question as determined by a majority of the
Continuing Directors in good faith.
12. "Substantial Part" shall mean more than 30% of the fair market
value of the total assets of the corporation as of the end of its most
recent fiscal year ending prior to the time the determination is being
made.
D. A majority of the Continuing Directors shall have the power and duty
to determine for the purposes of this Division V, on the basis of information
known to them after reasonable inquiry, all facts necessary to determine
compliance with this Division V, including, without limitation, (1) whether a
person is an Interested Shareholder, (2) the number of Common Shares
beneficially owned by any person, (3) whether a person is an Affiliate or
Associate of another, (4) whether the assets which are the subject of any
Business Combination constitute a Substantial Part of the assets of the
corporation or the Subsidiary, or both, (5) whether the requirements of
Subdivision B of this Division V have been met, and (6) such other matters
with respect to which a determination is required under this Division V. The
good faith determination of a majority of the Continuing Directors on such
matters shall be conclusive and binding for all purposes of this Division V.
E. Nothing contained in this Division V shall be construed to relieve
an Interested Shareholder from any fiduciary obligation imposed by law.
F. Notwithstanding any other provisions of these Articles of
Incorporation or the Bylaws of the corporation or the fact that a lesser
percentage may be specified by law, these Articles of Incorporation or the
Bylaws of the corporation, the affirmative vote of the holders of at least 75%
of the voting power of the then outstanding Common Shares, shall be required
to amend, alter, adopt any provision inconsistent with or repeal this
Division V unless the Board of Directors, if all such directors are Continuing
Directors, shall unanimously recommend such amendment, alteration, adoption or
repeal.
DIVISION VI
Provisions Relating to Purchases
Of Common Shares Of The Corporation
A. Except as otherwise expressly provided in this Division VI, the
corporation may not purchase any Common Shares at a per-share price in excess
of the Fair Market Price (as hereinafter defined) as of the time of such
purchase from a person known by the corporation to be a Substantial
Shareholder (as hereinafter defined), unless such purchase has been approved
by the affirmative vote of the holders of at least two-thirds (2/3) of the
Common Shares voted thereon held by Disinterested Shareholders (as hereinafter
defined). Such affirmative vote shall be required notwithstanding the fact
that no vote may be required or that a lesser percentage may be specified by
law, in these Articles of Incorporation or in any agreement with any national
securities exchange or otherwise.
B. The provisions of this Division VI shall not apply to (1) any
purchase pursuant to an offer to purchase which is made on the same terms and
conditions to the holders of all of the outstanding Common Shares or (2) any
open market purchase that constitutes a Public Transaction (as hereinafter
defined).
C. For the purposes of this Division VI:
1. The terms "Continuing Director," "Person," "Public
Transaction," "Affiliate" and "Associate" shall have the meanings given
to them in Division V of this Article VI.
2. "Substantial Shareholder" shall mean any person (other than any
employee benefit plan or trust of the corporation or any similar entity)
who or which:
(a) is the beneficial owner of more than 10% of the voting
power of the then outstanding Common Shares, the acquisition of any
shares of which has occurred within the two-year period immediately
prior to the date on which the corporation purchases any such
shares; or
(b) is an assignee of or has otherwise succeeded to the
beneficial ownership of any Common Shares beneficially owned by a
Substantial Shareholder, unless such assignment or succession shall
have occurred pursuant to a Public Transaction or any series of
transactions involving a Public Transaction and, with respect to all
Common Shares owned by such person, such person has been the
beneficial owner of any such shares for a period of less than two
years (including, for these purposes, the holding period of the
Substantial Shareholder from whom such person acquired shares).
For the purposes of determining whether a person is a Substantial
Shareholder, the number of Common Shares deemed to be outstanding shall
include shares deemed owned through application of paragraph 5 below, but
shall not include any other Common Shares which may be issuable pursuant
to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
3. "Disinterested Shareholders" shall mean those holders of Common
Shares who are not Substantial Shareholders.
4. "Fair Market Price" shall mean the highest closing sale price
on the Composite Tape for New York Stock Exchange-Listed Stocks during
the 30-day period immediately preceding the date in question of a Common
Share or, if such Common Shares are not quoted on the Composite Tape, on
the New York Stock Exchange or, if such Common Shares are not listed on
such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such Common
Shares are listed, or, if such Common Shares are not listed on any such
exchange, the highest closing bid quotation with respect to a Common
Share during the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotations
System or any system then in use, or, if no such quotations are
available, the fair market value on the date in question of a Common
Share, as determined by a majority of the Board of Directors in good
faith.
5. A person shall be a "beneficial owner" of any Common Shares:
(a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(b) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise or (ii) the right to vote or to direct the voting thereof
pursuant to any agreement, arrangement or understanding; or
(c) which is beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any Common
Shares.
D. A majority of the Board of Directors shall have the power and duty
to determine for the purposes of this Division VI, on the basis of information
known to them after reasonable inquiry, all facts necessary to determine
compliance with this Division VI, including without limitation, (1) whether a
person is a Substantial Shareholder, (2) the number of Common Shares
beneficially owned by any person, (3) whether a person is an Affiliate or
Associate of another, (4) whether a price is in excess of the Fair Market
Price, (5) whether a purchase constitutes a Public Transaction, and (6) such
other matters with respect to which a determination is required under this
Division VI. The good faith determination of a majority of the Board of
Directors on such matters shall be conclusive and binding for all purposes of
this Division VI.
E. Nothing contained in this Division VI shall be construed to relieve
a Substantial Shareholder from any fiduciary obligation imposed by law.
F. Notwithstanding any other provisions of these Articles of
Incorporation or the Bylaws of the corporation or the fact that a lesser
percentage may be specified by law, these Articles of Incorporation or the
Bylaws of the corporation, the affirmative vote of the holders of at least 75%
of voting power of the then outstanding Common Shares shall be required to
amend, alter, adopt any provision inconsistent with or repeal this Division VI
unless the Board of Directors, if all such directors are Continuing Directors,
shall unanimously recommend such amendment, alteration, adoption or repeal.
ARTICLE VII.
The Board of Directors of the corporation shall have authority to accept
or reject subscriptions for shares.
ARTICLE VIII.
Except as herein otherwise limited or qualified, the corporation reserves
the right to amend, alter, change or repeal any of the terms or provisions of
these Articles of Incorporation, all in the manner now or hereafter prescribed
by the laws of the State of Minnesota, and all rights conferred herein upon
officers, directors and shareholders of the corporation are granted subject to
this reservation.
ARTICLE IX.
The Board of Directors shall have the power, to the extent permitted by
law, to adopt, amend or repeal the Bylaws of the corporation, subject to the
power of the shareholders to adopt, amend or repeal such Bylaws. Bylaws
fixing the number of directors or their classifications, qualifications, or
terms of office, or prescribing procedures for removing such directors may be
adopted, amended or repealed only by (i) the Board of Directors, to the extent
permitted by law, or (ii) the affirmative vote of the holders of 75% of the
outstanding Common Shares of the corporation or such lesser percentage of the
outstanding Common Shares as may from time to time be provided in such Bylaws.
Notwithstanding any other provisions of these Articles of Incorporation
or the Bylaws of the corporation or the fact that a lesser percentage may be
specified by law, these Articles of Incorporation or the Bylaws of the
corporation, the affirmative vote of the holders of at least 75% of the voting
power of the then outstanding Common Shares shall be required to amend, alter,
adopt any provision inconsistent with, or repeal this Article IX unless the
Board of Directors, if all such directors are Continuing Directors, as defined
in Article VI of the Articles of Incorporation, shall unanimously recommend
such amendment, alteration, adoption or repeal.
ARTICLE X.
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its shareholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under Sections 302A.559 or 80A.23 of the
Minnesota Statutes; (iv) for any transaction from which the director derived
an improper personal benefit; or (v) for any act or omission occurring prior
to the date when this Article X became effective.
Any repeal or modification of the foregoing provisions of this Article X
shall not adversely affect any right or protection of a director of the
corporation existing at the time of such repeal or modification.
-*-
RESOLUTIONS OF BOARD OF DIRECTORS
ESTABLISHING SERIES OF
CUMULATIVE PREFERRED SHARES
$3.60 Cumulative Preferred Shares
The Board of Directors of the corporation adopted the following
resolution on August 12, 1946, which was filed with the Secretary of State of
Minnesota on August 13, 1946:
Resolution
Pursuant to authority conferred on the Board of Directors of Otter Tail
Power Company, a Minnesota corporation, by Article VI of the Articles of
Incorporation, as amended, BE IT RESOLVED that an initial series of Cumulative
Preferred Shares be and it hereby is created as follows:
A. The designation of such series shall be "$3.60 Cumulative Preferred
Shares," and the number of shares of such series shall be sixty thousand
(60,000);
B. The rate of dividends payable on the $3.60 Cumulative Preferred
Shares shall be Three & 60/100 Dollars -- ($3.60) per annum, payable quarterly
on the first days of March, June, September and December in each year and such
dividends shall be cumulative and accrue in the case of shares issued prior to
the record date for the first dividend thereon from and including September 1,
1946;
C. The $3.60 Cumulative Preferred Shares shall be redeemable at One
Hundred Two & 25/100 dollars -- ($102.25) per share, together, as provided in
said Articles of Incorporation, with accrued dividends to the redemption date;
D. The amount payable on $3.60 Cumulative Preferred Shares, in the
event of any dissolution, liquidation or winding up of the affairs of the
corporation which shall be voluntary, shall be the sum of One Hundred Two &
25/100 Dollars ($102.25) per share, and the amount payable on $3.60 Cumulative
Preferred Shares, in the event of any dissolution, liquidation or winding up
of the affairs of the corporation which shall be involuntary, shall be One
Hundred Dollars ($100) per share, together in either event, as provided in
said Articles of Incorporation, with a sum, in the case of each share,
computed at the annual dividend rate for the $3.60 Cumulative Preferred
Shares, from the date on which dividends on such share become cumulative to
and including the date fixed for such distribution or payment, less the
aggregate amount of all dividends which have theretofore been paid thereon or
which have been declared thereon and for which moneys for payment have been
set apart and remain available for payment.
$4.40 Cumulative Preferred Shares
The Board of Directors of the corporation adopted the following
resolution on March 6, 1950, which was filed with the Secretary of State of
Minnesota on March 8, 1950:
Resolution
Pursuant to authority conferred on the Board of Directors of Otter Tail
Power Company, a Minnesota corporation, by Article VI of its Articles of
Incorporation, as amended, BE IT RESOLVED that a second series of Cumulative
Preferred Shares be and it hereby is created as follows:
A. The designation of such series shall be "$4.40 Cumulative Preferred
Shares," and the number of shares of such series shall be twenty-five thousand
(25,000);
B. The rate of dividends payable on the $4.40 Cumulative Preferred
Shares shall be $4.40 per share per annum, payable quarterly on the first days
of March, June, September and December of each year and such dividends shall
be cumulative and accrue in the case of shares issued prior to the record date
for the first dividend thereon from and including March 15, 1950;
C. The $4.40 Cumulative Preferred Shares shall be redeemable at $104
per share if redeemed on or before March 15, 1955; at $103 if redeemed
thereafter and on or before March 15, 1960; and at $102 per share if redeemed
thereafter, together, as provided in said Articles of Incorporation, in each
instance with accrued dividends to the redemption date;
D. The amount payable on $4.40 Cumulative Preferred Shares in the event
of any dissolution, liquidation or winding up of the affairs of the
corporation which shall be voluntary, shall be the price at which said shares
are at the time redeemable, and the amount payable on $4.40 Cumulative
Preferred Shares in the event of any dissolution, liquidation or winding up of
the affairs of the Company which shall be involuntary, shall be One Hundred
Dollars ($100.00) per share together in either event as provided in said
Articles of Incorporation, with a sum, in the case of each share, computed at
the annual dividend rate for the $4.40 Cumulative Preferred Shares from the
date on which dividends on such share become cumulative to and including the
date fixed for such distribution or payment, less the aggregate amount of all
dividends which have heretofore been paid thereon or which have been declared
thereon and for which moneys for payment have been set apart and remain
available for payment.
$4.65 Cumulative Preferred Shares
The Board of Directors of the corporation adopted the following
resolution on March 24, 1964, which was filed with the Secretary of State of
Minnesota on March 25, 1964:
Resolution
Pursuant to authority conferred on the Board of Directors of Otter Tail
Power Company, a Minnesota corporation, by Article VI of its Articles of
Incorporation, as amended, BE IT RESOLVED that a third series of Cumulative
Preferred Shares be, and it hereby is, created as follows:
A. The designation of such series shall be "$4.65 Cumulative Preferred
Shares," and the number of shares of such series shall be thirty thousand
(30,000);
B. The rate of dividends payable on the $4.65 Cumulative Preferred
Shares shall be $4.65 per share per annum, payable quarterly on the first days
of March, June, September and December of each year, and such dividends shall
be cumulative and accrue in the case of shares issued prior to the record date
for the first dividend thereon from and including the date of issuance
thereof;
C. The $4.65 Cumulative Preferred Shares shall be redeemable at $107.50
per share if redeemed on or before April 1, 1969; at $106.00 per share if
redeemed thereafter and on or before April 1, 1974; at $104.50 per share if
redeemed thereafter and on or before April 1, 1979; at $103.00 per share if
redeemed thereafter and on or before April 1, 1984; and at $101.50 per share
if redeemed thereafter together, as provided in said Articles of
Incorporation, in each instance, with accrued dividends to the redemption
date; and
D. The amount payable on $4.65 Cumulative Preferred Shares in the event
of any dissolution, liquidation or winding up of the affairs of the
corporation which shall be voluntary shall be the price at which said shares
are at the time redeemable, and the amount payable on $4.65 Cumulative
Preferred Shares in the event of any dissolution, liquidation or winding up of
the affairs of the Company which shall be involuntary shall be One Hundred
Dollars ($100.00) per share together in either event as provided in said
Articles of Incorporation, with a sum, in the case of each share, computed at
the annual dividend rate for the $4.65 Cumulative Preferred Shares from the
date on which dividends on such share become cumulative to and including the
date fixed for such distribution or payment, less the aggregate amount of all
dividends which have heretofore been paid thereon or which have been declared
thereon and for which moneys for payment have been set apart and remain
available for payment.
$9.50 Cumulative Preferred Shares
The Board of Directors of the corporation adopted the following
resolution on August 9, 1971, which was filed with the Secretary of State of
Minnesota on August 20, 1971:
Resolution
Pursuant to authority conferred on the Board of Directors of Otter Tail
Power Company, a Minnesota corporation, by Article VI of its Articles of
Incorporation, as amended, BE IT RESOLVED that a fourth series of Cumulative
Preferred Shares be, and it hereby is, created as follows:
A. The designation of such series shall be "$9.50 Cumulative Preferred
Shares," and the number of shares of such series shall be forty thousand
(40,000);
B. The rate of dividends payable on the $9.50 Cumulative Preferred
Shares shall be $9.50 per share per annum, payable quarterly on the first days
of March, June, September and December of each year, commencing December 1,
1971, and such dividends shall be cumulative and accrue in the case of shares
issued prior to the record date for the first dividend thereon from and
including the date of issuance thereof;
C. The $9.50 Cumulative Preferred Shares shall be redeemable at $109.50
per share if redeemed before September 1, 1979 and, if redeemed thereafter, at
a redemption price which shall decrease by $0.50 on September 1, 1979 and on
each succeeding September 1 to and including September 1, 1997, on and after
which date the redemption price shall be $100.00 per share, together, as
provided in said Articles of Incorporation, in each instance, with accrued
dividends to the redemption date; provided, however, that the $9.50 Cumulative
Preferred Shares shall not be redeemable, in whole or in part, prior to
September 1, 1978 as a part of or in contemplation of any refunding operation
including the application, directly or indirectly, of money borrowed or the
proceeds of preferred stock sold at an interest or dividend cost to the
corporation (calculated in accordance with generally accepted financial
practice) of less than 9 1/2% per annum; and
D. The amount payable on the $9.50 Cumulative Preferred Shares in the
event of any dissolution, liquidation or winding up of the affairs of the
corporation which shall be voluntary shall be the price at which said shares
are at the time redeemable, and the amount payable on the $9.50 Cumulative
Preferred Shares in the event of any dissolution, liquidation or winding up of
the affairs of the corporation which shall be involuntary shall be One Hundred
dollars ($100.00) per share, together, as provided in said Articles of
Incorporation, in either event, with a sum, in the case of each share,
computed at the annual dividend rate for the $9.50 Cumulative Preferred Shares
from the date on which dividends on such share became cumulative to and
including the date fixed for such distribution or payment, less the aggregate
amount of all dividends which shall have theretofore been paid thereon or
which shall have been declared thereon and for which moneys for payment shall
have been set apart and remain available for payment.
$11.50 Cumulative Preferred Shares
The Board of Directors of the corporation adopted the following
resolution on July 28, 1975, which was filed with the Secretary of State of
Minnesota on July 28, 1975:
Resolution
BE IT FURTHER RESOLVED That, pursuant to authority conferred on the Board
of Directors of Otter Tail Power Company, a Minnesota corporation, by Article
VI of its Articles of Incorporation, as amended, a fifth series of Cumulative
Preferred Shares be, and it hereby is, created as follows:
A. The designation of such series shall be "$11.50 Cumulative Preferred
Shares," and the number of shares of such series shall be one hundred thousand
(100,000).
B. The rate of dividends payable on the $11.50 Cumulative Preferred
Shares shall be $11.50 per share per annum, payable quarterly on the first day
of March, June, September and December of each year, commencing September 1,
1975, and such dividends shall be cumulative and accrue in the case of shares
issued prior to the record date for the first dividend thereon from and
including the date of issuance thereof.
C. The $11.50 Cumulative Preferred Shares shall be redeemable
(otherwise than with respect to any redemption effected through or by the
sinking funds hereafter described in subdivision E below) at $111.50 per share
if redeemed before June 1, 1976, and at the following redemption prices per
share if redeemed thereafter:
If redeemed during the twelve months' period beginning
Redemption Redemption
June 1 Price June 1 Price
1976 $110.86 1985 $105.11
1977 $110.22 1986 $104.48
1978 $109.58 1987 $103.83
1979 $108.94 1988 $103.19
1980 $108.31 1989 $102.56
1981 $107.77 1990 $101.92
1982 $107.03 1991 $101.28
1983 $106.39 1992 $100.64
1984 $105.75 1993 $100.00
together, as provided in said Articles of Incorporation, in each instance,
with accrued dividends to the redemption date; provided, however, that, except
for redemptions effected through or by the sinking funds described in
subdivision E below, the $11.50 Cumulative Preferred Shares shall not be
redeemable, in whole or in part, prior to July 15, 1985, as a part of or in
contemplation of any refunding operation including the application, directly
or indirectly, of (i) the proceeds from the sale of common shares of the
Company, or (ii) money borrowed or the proceeds of preferred or preference
shares of the Company sold at an interest or dividend cost to the Company
(calculated in accordance with generally accepted financial practice) of less
than 11.5% per annum.
D. The amount payable on the $11.50 Cumulative Preferred Shares in the
event of any dissolution, liquidation or winding up of the affairs of the
Company which shall be voluntary shall be the price at which said shares are
at the time redeemable (as set forth in subdivision C above), and the amount
payable on the $11.50 Cumulative Preferred Shares in the event of any
dissolution, liquidation or winding up of the affairs of the Company which
shall be involuntary shall be One Hundred Dollars ($100.00) per share,
together, as provided in said Articles of Incorporation, in either event, with
a sum, in the case of each share, computed at the annual dividend rate for the
$11.50 Cumulative Preferred Shares from the date on which dividends on such
share became cumulative to and including the date fixed for such distribution
or payment, less the aggregate amount of all dividends which shall have
theretofore been paid thereon or which shall have been declared thereon and
for which moneys for payment shall have been set apart and remain available
for payment.
E. So long as any of the $11.50 Cumulative Preferred Shares remain
outstanding, after all dividends on all Cumulative Preferred Shares of all
series for all past quarterly dividend periods and for the current quarterly
period shall have been paid or declared and a sum sufficient for the payment
thereof set apart for payment, the Company shall, as and for a mandatory
sinking fund for the benefit of the $11.50 Cumulative Preferred Shares,
redeem, in the manner and upon the notice and with the effect provided in
Section C of Article VI of said Articles of Incorporation, on June 1, 1979,
and on each succeeding June 1 to and including June 1, 1993 (each such June 1
being hereinafter called a "sinking fund redemption date"), 6.50% of the
maximum number of $11.50 Cumulative Preferred Shares which shall theretofore
have been issued, and on June 1, 1994, the balance of the $11.50 Cumulative
Preferred Shares then outstanding (such required redemptions being hereinafter
called the "mandatory sinking fund requirement"). The price at which the
$11.50 Cumulative Preferred Shares shall be redeemed in satisfaction of the
mandatory sinking fund requirement shall be $100.00 per share, together, as
provided in said Articles of Incorporation, in each instance, with accrued
dividends to the redemption date. The mandatory sinking fund requirement for
the $11.50 Cumulative Preferred Shares shall be cumulative so that if, in any
year, the Company shall not satisfy in full the sinking fund requirement for
such year, the amount of the deficiency shall be added to the mandatory
sinking fund requirement for succeeding years until the deficiency shall have
been fully satisfied.
In addition to the mandatory sinking fund requirement of the immediately
preceding paragraph, the Company may, at its option, redeem, in the manner and
upon the notice and with the effect provided in Section C of Article VI of
said Articles of Incorporation, on any sinking fund redemption date $11.50
Cumulative Preferred Shares not in excess of 6.50% of the maximum number of
$11.50 Cumulative Preferred Shares which shall theretofore have been issued at
the mandatory sinking fund redemption price hereinbefore specified in this
subdivision E. The privilege of so redeeming $11.50 Cumulative Preferred
Shares shall not be cumulative and shall not relieve the Company to any extent
from its obligation to redeem shares pursuant to the mandatory sinking fund
requirement.
$8.30 Cumulative Preferred Shares
The Board of Directors of the corporation adopted the following
resolution on March 30, 1977, which was filed with the Secretary of State of
Minnesota on March 30, 1977:
Resolution
BE IT FURTHER RESOLVED That, pursuant to authority conferred on the Board
of Directors of Otter Tail Power Company, a Minnesota corporation, by
Article VI of its Articles of Incorporation, as amended, a sixth series of
Cumulative Preferred Shares be, and it hereby is, created as follows:
A. The designation of such series shall be "$8.30 Cumulative Preferred
Shares," and the number of shares of such series shall be forty-five thousand
(45,000).
B. The rate of dividends payable on the $8.30 Cumulative Preferred
Shares shall be $8.30 per share per annum, payable quarterly on the first day
of March, June, September and December of each year, commencing June 1, 1977,
and such dividends shall be cumulative and accrue in the case of shares issued
prior to the record date for the first dividend thereon from and including the
date of issuance thereof.
C. The $8.30 Cumulative Preferred Shares shall be redeemable (otherwise
than with respect to any redemption effected through or by the sinking funds
hereafter described in subdivision E below) at $108.30 per share if redeemed
before March 1, 1978, and at the following redemption prices per share if
redeemed thereafter:
If redeemed during the twelve months' period beginning
Redemption Redemption
March 1 Price March 1 Price
1978 $107.95 1990 $103.80
1979 $107.61 1991 $103.46
1980 $107.26 1992 $103.11
1981 $106.92 1993 $102.77
1982 $106.57 1994 $102.42
1983 $106.23 1995 $102.08
1984 $105.88 1996 $101.73
1985 $105.53 1997 $101.38
1986 $105.19 1998 $101.04
1987 $104.84 1999 $100.69
1988 $104.50 2000 $100.35
1989 $104.15 2001 $100.00
together, as provided in said Articles of Incorporation, in each instance,
with accrued dividends to the redemption date; provided, however, that, except
for redemptions effected through or by the sinking funds described in
subdivision E below, the $8.30 Cumulative Preferred Shares shall not be
redeemable, in whole or in part, prior to March 1, 1987 as a part of, or in
contemplation of, any refunding operation including the application, directly
or indirectly, of the proceeds of (i) indebtedness for money borrowed by the
Company or any affiliate if such indebtedness (a) has an effective interest
cost (computed in accordance with generally accepted financial practice) of
less than 8.30% per annum or (b) has a Weighted Average Life to Maturity, at
the time of such redemption, of less than the remaining Weighted Average Life
to Maturity of the $8.30 Cumulative Preferred Shares or (ii) the issue or sale
of preferred or preference shares of the Company or any affiliate if such
shares have an effective dividend rate (based on the proceeds to the Company
or such affiliate from such issue or sale net of any discount or commission to
underwriters) of less than 8.30% per annum. The term "Weighted Average Life
to Maturity" shall mean, at any date, the number of years obtained by dividing
the then Remaining Dollar-years of such indebtedness or the $8.30 Cumulative
Preferred Shares by the then outstanding principal amount of such indebtedness
or by the product of $100.00 times the number of $8.30 Cumulative Preferred
Shares which are then outstanding, as the case may be; and for the purpose of
this definition, the term "Remaining Dollar-years" of any indebtedness or the
$8.30 Cumulative Preferred Shares shall mean, at any date, the total of the
products obtained by multiplying (i) the amount of each then remaining
installment, mandatory sinking fund, serial maturity or other required
payment, including payment at final maturity, in respect thereof by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the date on which such payment is required to be made.
D. The amount payable on the $8.30 Cumulative Preferred Shares in the
event of any dissolution, liquidation or winding up of the affairs of the
Company which shall be voluntary shall be the price at which said shares are
at the time redeemable (as set forth in subdivision C above), and the amount
payable on the $8.30 Cumulative Preferred Shares in the event of any
dissolution, liquidation or winding up of the affairs of the Company which
shall be involuntary shall be $100.00 per share, together, as provided in said
Articles of Incorporation, in either event, with a sum, in the case of each
share, computed at the annual dividend rate for the $8.30 Cumulative Preferred
Shares from the date on which dividends on such share became cumulative to and
including the date fixed for such distribution or payment, less the aggregate
amount of all dividends which shall have theretofore been paid thereon or
which shall have been declared thereon and for which moneys for payment shall
have been set apart and remain available for payment.
E. So long as any of the $8.30 Cumulative Preferred Shares remain
outstanding, after all dividends on all Cumulative Preferred Shares of all
series for all past quarterly dividend periods and for the current quarterly
dividend period shall have been paid or declared and a sum sufficient for the
payment thereof set apart for payment, the Company shall, as and for a
mandatory sinking fund for the benefit of the $8.30 Cumulative Preferred
Shares, redeem, in the manner and upon the notice and with the effect provided
in Section C of Article VI of said Articles of Incorporation, (i) on March 1,
1983, and on each succeeding March 1 to and including March 1, 1997, 4% of the
maximum number of $8.30 Cumulative Preferred Shares which shall theretofore
have been issued, (ii) on March 1, 1998, and on each succeeding March 1 to and
including March 1, 2001, 8% of the maximum number of $8.30 Cumulative
Preferred Shares which shall theretofore have been issued (each March 1
referred to in clause (i) or (ii) above of this sentence being hereinafter
called a "sinking fund redemption date") and (iii) on March 1, 2002, the
balance of the $8.30 Cumulative Preferred Shares then outstanding (such
required redemptions being hereinafter called the "mandatory sinking fund
requirement"). The price at which the $8.30 Cumulative Preferred Shares shall
be redeemed in satisfaction of the mandatory sinking fund requirement shall be
$100.00 per share, together, as provided in said Articles of Incorporation, in
each instance, with accrued dividends to the redemption date. The mandatory
sinking fund requirement for the $8.30 Cumulative Preferred Shares shall be
cumulative so that if, in any year, the Company shall not satisfy in full the
mandatory sinking fund requirement for such year, the amount of the deficiency
shall be added to the mandatory sinking fund requirement for succeeding years
until the deficiency shall have been fully satisfied.
In addition to the mandatory sinking fund requirement, the Company may,
at its option, redeem, in the manner and upon the notice and with the effect
provided in Section C of Article VI of said Articles of Incorporation, on any
sinking fund redemption date $8.30 Cumulative Preferred Shares in an amount
not to exceed the number of $8.30 Cumulative Preferred Shares which shall be
redeemed on such sinking fund redemption date through the mandatory sinking
fund requirement at the mandatory sinking fund redemption price hereinbefore
specified in this subdivision E. The privilege of so redeeming $8.30
Cumulative Preferred Shares shall not be cumulative and shall not relieve the
Company to any extent from its obligation to redeem shares pursuant to the
mandatory sinking fund requirement.
$8.375 Cumulative Preferred Shares
The Board of directors of the corporation adopted the following
resolution on March 6, 1978, which was filed with the Secretary of State of
Minnesota on March 21, 1978:
Resolution
BE IT FURTHER RESOLVED That, pursuant to authority conferred on the Board
of Directors of Otter Tail Power Company, a Minnesota corporation, by
Article VI of its Articles of Incorporation, as amended, a seventh series of
Cumulative Preferred Shares be, and it hereby is, created as follows:
A. The designation of such series shall be "$8.375 Cumulative Preferred
Shares," and the number of shares of such series shall be one hundred Thousand
(100,000).
B. The rate of dividends payable on the $8.375 Cumulative Preferred
Shares shall be $8.375 per share per annum, payable quarterly on the first day
of March, June, September and December of each year, commencing June 1, 1978.
Such dividends shall be cumulative and accrue in the case of each share from
and including the date of original issuance thereof; and the amount of the
dividend for any period of less than a full quarter shall be computed on the
basis of a 360-day year of twelve 30-day months.
C. The $8.375 Cumulative Preferred Shares shall be redeemable
(otherwise than with respect to any redemption effected through or by the
sinking funds hereafter described in subdivision E below) at $108.375 per
share if redeemed on or before June 1, 1979, and at the following redemption
prices per share if redeemed thereafter:
If redeemed during the twelve months' period ending
Redemption Redemption
June 1 Price June 1 Price
1980 $108.026 1992 $103.839
1981 $107.677 1993 $103.490
1982 $107.329 1994 $103.141
1983 $106.979 1995 $102.792
1984 $106.630 1996 $102.443
1985 $106.281 1997 $102.094
1986 $105.932 1998 $101.745
1987 $105.583 1999 $101.396
1988 $105.234 2000 $101.047
1989 $104.886 2001 $100.698
1990 $104.537 2002 $100.349
1991 $104.188 2003 $100.000
together, as provided in said Articles of Incorporation, in each instance,
with accrued dividends to the redemption date; provided, however, that, except
for redemptions effected through or by the sinking funds described in
subdivision E below, the $8.375 Cumulative Preferred Shares shall not be
redeemable, in whole or in part, prior to June 1, 1988 as a part of, or in
contemplation of, any refunding operation including the application, directly
or indirectly, of the proceeds of (i) indebtedness for money borrowed by the
Company or any affiliate if such indebtedness (a) has an effective interest
cost (computed in accordance with generally accepted financial practice) of
less than 8.375% per annum or (b) has a Weighted Average Life to Maturity, at
the time of such redemption, of less than the remaining Weighted Average Life
to Maturity of the $8.375 Cumulative Preferred Shares or (ii) the issue or
sale of shares of the Company ranking prior to or on a parity with the $8.375
Cumulative Preferred Shares as to dividends or on liquidation if such shares
have an effective dividend rate (based on the proceeds to the Company from
such issue or sale net of any discount or commission to underwriters) of less
than 8.375% per annum. The term "Weighted Average Life to Maturity" shall
mean, at any date, the number of years obtained by dividing the then Remaining
Dollar-years of such indebtedness or the $8.375 Cumulative Preferred Shares by
the then outstanding principal amount of such indebtedness or by the product
of $100.00 times the number of $8.375 Cumulative Preferred Shares which are
then outstanding, as the case may be; and for the purpose of this definition,
the term "Remaining Dollar-years" of any indebtedness or the $8.375 Cumulative
Preferred Shares shall mean, at any date, the total of the products obtained
by multiplying (i) the amount of each then remaining installment, mandatory
sinking fund, serial maturity or other required payment, including payment at
final maturity, in respect thereof by (ii) the number of years (calculated to
the nearest one-twelfth) which will elapse between such date and the date on
which such payment is required to be made.
D. The amount payable on the $8.375 Cumulative Preferred Shares in the
event of any dissolution, liquidation or winding up of the affairs of the
Company which shall be voluntary shall be the price at which said shares are
at the time redeemable (as set forth in subdivision C above), and the amount
payable on the $8.375 Cumulative Preferred Shares in the event of any
dissolution, liquidation or winding up of the affairs of the Company which
shall be involuntary shall be $100.00 per share, together, as provided in said
Articles of Incorporation, in either event, with a sum, in the case of each
share, computed at the annual dividend rate for the $8.375 Cumulative
Preferred Shares from the date on which dividends on such share became
cumulative to and including the date fixed for such distribution or payment,
less the aggregate amount of all dividends which shall have theretofore been
paid thereon or which shall have been declared thereon and for which moneys
for payment shall have been set apart and remain available for payment.
E. So long as any of the $8.375 Cumulative Preferred Shares remain
outstanding, after all dividends on all Cumulative Preferred Shares of all
series for all past quarterly dividend periods and for the current quarterly
dividend period shall have been paid or declared and a sum sufficient for the
payment thereof set apart for payment, the Company shall, as and for a
mandatory sinking fund for the benefit of the $8.375 Cumulative Preferred
Shares, redeem, in the manner and upon the notice and with the effect provided
in Section C of Article VI of said Articles of Incorporation (i) on June 1,
1984, and on each succeeding June 1 to and including June 1, 1993, 2% of the
maximum number of $8.375 Cumulative Preferred Shares which shall theretofore
have been issued, (ii) on June 1, 1994, and on each succeeding June 1 to and
including June 1, 2002, 6.67% of the maximum number of $8.375 Cumulative
Preferred Shares which shall theretofore have been issued (each June 1
referred to in clause (i) or (ii) above of this sentence being hereinafter
called a "sinking fund redemption date") and (iii) on June 1, 2003, the
balance of the $8.375 Cumulative Preferred Shares then outstanding (such
required redemptions being hereinafter called the "mandatory sinking fund
requirement"). The price at which the $8.375 Cumulative Preferred Shares
shall be redeemed in satisfaction of the mandatory sinking fund requirement
shall be $100.00 per share, together, as provided in said Articles of
Incorporation, in each instance, with accrued dividends to the redemption
date. The mandatory sinking fund requirement for the $8.375 Cumulative
Preferred Shares shall be cumulative so that if, in any year, the Company
shall not satisfy in full the mandatory sinking fund requirement for such
year, the amount of the deficiency shall be added to the mandatory sinking
fund requirement for succeeding years until the deficiency shall have been
fully satisfied.
In addition to the mandatory sinking fund requirement, the Company may,
at its option, redeem, in the manner and upon the notice and with the effect
provided in Section C of Article VI of said Articles of Incorporation, on any
sinking fund redemption date $8.375 Cumulative Preferred Shares in an amount
not to exceed the number of $8.375 Cumulative Preferred Shares which shall be
redeemed on such sinking fund redemption date through the mandatory sinking
fund requirement at the mandatory sinking fund redemption price hereinbefore
specified in this subdivision E. The privilege of so redeeming $8.375
Cumulative Preferred Shares shall not be cumulative and shall not relieve the
Company to any extent from its obligation to redeem shares pursuant to the
mandatory sinking fund requirement.
$8.90 Cumulative Preferred Shares
The Board of directors of the corporation adopted the following
resolution on July 23, 1979, which was filed with the Secretary of State of
Minnesota on July 26, 1979:
Resolution
BE IT FURTHER RESOLVED That, pursuant to authority conferred on the Board
of Directors of Otter Tail Power Company, a Minnesota corporation, by
Subdivision A of Division I of Article VI of its Articles of Incorporation, as
amended, an eighth series of Cumulative Preferred Shares be, and it hereby is,
created as follows:
A. The designation of such series shall be "$8.90 Cumulative Preferred
Shares," and the number of shares of such series shall be seventy thousand
(70,000).
B. The rate of dividends payable on the $8.90 Cumulative Preferred
Shares shall be $8.90 per share per annum, payable quarterly on the first day
of March, June, September and December of each year, commencing September 1,
1979. Such dividends shall be cumulative and accrue in the case of each share
from and including the date of original issuance thereof; and the amount of
the dividend for any period of less than a full quarter shall be computed on
the basis of a 360-day year of twelve 30-day months.
C. The $8.90 Cumulative Preferred Shares shall be redeemable (otherwise
than with respect to any redemption effected through or by the sinking funds
hereafter described in subdivision E below) at $108.90 per share if redeemed
on or before September 1, 1980, and at the following redemption prices per
share if redeemed thereafter:
If redeemed during the twelve months' period ending
Redemption Redemption
September 1 Price September 1 Price
1981 $108.529 1993 $104.079
1982 $108.158 1994 $103.708
1983 $107.788 1995 $103.338
1984 $107.417 1996 $102.967
1985 $107.046 1997 $102.596
1986 $106.675 1998 $102.225
1987 $106.304 1999 $101.854
1988 $105.933 2000 $101.483
1989 $105.563 2001 $101.113
1990 $105.192 2002 $100.742
1991 $104.821 2003 $100.371
1992 $104.450 2004 $100.000
together, as provided in Subdivision C of said Division I, in each instance,
with accrued dividends to the redemption date; provided, however, that, except
for redemptions effected through or by the sinking funds described in
subdivision E below, the $8.90 Cumulative Preferred Shares shall not be
redeemable, in whole or in part, prior to September 1, 1989 as a part of, or
in contemplation of, any refunding operation including the application,
directly or indirectly, of the proceeds of (i) indebtedness for money borrowed
by the Company or any affiliate if such indebtedness (a) has an effective
interest cost (computed in accordance with generally accepted financial
practice) of less than 8.90% per annum or (b) has a Weighted Average Life to
Maturity, at the time of such redemption, of less than the remaining Weighted
Average Life to Maturity of the $8.90 Cumulative Preferred Shares or (ii) the
issue or sale of shares of the Company ranking prior to the Common Shares of
the Company as to dividends or on liquidation if such shares have an effective
dividend rate (based on the proceeds to the Company from such issue or sale
net of any discount or commission to underwriters) of less than 8.90% per
annum. The term "Weighted Average Life to Maturity" shall mean, at any date,
the number of years obtained by dividing the then Remaining Dollar-years of
such indebtedness or the $8.90 Cumulative Preferred Shares by the then
outstanding principal amount of such indebtedness or by the product of $100.00
times the number of $8.90 Cumulative Preferred Shares which are then
outstanding, as the case may be; and for the purpose of this definition, the
term "Remaining Dollar-years" of any indebtedness or the $8.90 Cumulative
Preferred Shares shall mean, at any date, the total of the products obtained
by multiplying (i) the amount of each then remaining installment, mandatory
sinking fund, serial maturity or other required payment, including payment at
final maturity, in respect thereof by (ii) the number of years (calculated to
the nearest one-twelfth) which will elapse between such date and the date on
which such payment is required to be made.
D. The amount payable on the $8.90 Cumulative Preferred Shares in the
event of any dissolution, liquidation or winding up of the affairs of the
Company which shall be voluntary shall be the price at which said shares are
at the time redeemable (as set forth in subdivision C above), and the amount
payable on the $8.90 Cumulative Preferred Shares in the event of any
dissolution, liquidation or winding up of the affairs of the Company which
shall be involuntary shall be $100.00 per share, together, as provided in
Subdivision E of said Division I, in either event, with a sum, in the case of
each share, computed at the annual dividend rate for the $8.90 Cumulative
Preferred Shares from the date on which dividends on such share became
cumulative to and including the date fixed for such distribution or payment,
less the aggregate amount of all dividends which shall have theretofore been
paid thereon or which shall have been declared thereon and for which moneys
for payment shall have been set apart and remain available for payment.
E. So long as any of the $8.90 Cumulative Preferred Shares remain
outstanding, after all dividends on all Cumulative Preferred Shares of all
series for all past quarterly dividend periods and for the current quarterly
dividend period shall have been paid or declared and a sum sufficient for the
payment thereof set apart for payment, the Company shall, as and for a
mandatory sinking fund for the benefit of the $8.90 Cumulative Preferred
Shares, redeem, in the manner and upon the notice and with the effect provided
in Subdivision C of said Division I, (i) on September 1, 1985, and on each
succeeding September 1 to and including September 1, 1994, 2 1/2% of the
maximum number of $8.90 Cumulative Preferred Shares which shall theretofore
have been issued, (ii) on September 1, 1995, and on each succeeding
September 1 to and including September 1, 2003, 7.5% of the maximum number of
$8.90 Cumulative Preferred Shares which shall theretofore have been issued
(each September 1 referred to in clause (i) or (ii) above of this sentence
being hereinafter called a "sinking fund redemption date") and (iii) on
September 1, 2004, the balance of the $8.90 Cumulative Preferred Shares then
outstanding (such required redemptions being hereinafter called the "mandatory
sinking fund requirement"). The price at which the $8.90 Cumulative Preferred
Shares shall be redeemed in satisfaction of the mandatory sinking fund
requirement shall be $100.00 per share, together, as provided in Subdivision C
of said Division I, in each instance, with accrued dividends to the redemption
date. The mandatory sinking fund requirement for the $8.90 Cumulative
Preferred Shares shall be cumulative so that if, in any year, the Company
shall not satisfy in full the mandatory sinking fund requirement for such
year, the amount of the deficiency shall be added to the mandatory sinking
fund requirement for succeeding years until the deficiency shall have been
fully satisfied.
In addition to the mandatory sinking fund requirement, the Company may,
at its option, redeem, in the manner and upon the notice and with the effect
provided in Subdivision C of said Division I, on any sinking fund redemption
date $8.90 Cumulative Preferred Shares in an amount not to exceed the number
of $8.90 Cumulative Preferred Shares which shall be redeemed on such sinking
fund redemption date through the mandatory sinking fund requirement at the
mandatory sinking fund redemption price hereinbefore specified in this
subdivision E; provided that not more than 30% of the maximum number of $8.90
Cumulative Preferred Shares which shall theretofore have been issued may be so
redeemed. The privilege of so redeeming $8.90 Cumulative Preferred Shares
shall not be cumulative and shall not relieve the Company to any extent from
its obligation to redeem shares pursuant to the mandatory sinking fund
requirement.
$11.50 Cumulative Preferred Shares (Series A)
The Board of Directors of the corporation adopted the following
resolution on June 18, 1980, which was filed with the Secretary of State of
Minnesota on June 20, 1980:
Resolution
BE IT FURTHER RESOLVED That, pursuant to authority conferred on the Board
of Directors of Otter Tail Power Company, a Minnesota corporation, by
Subdivision A of Division I of Article VI of its Articles of Incorporation, as
amended, a ninth series of Cumulative Preferred Shares be, and it hereby is,
created as follows:
A. The designation of such series shall be "$11.50 Cumulative Preferred
Shares (Series A)," and the number of shares of such series shall be eighty
thousand (80,000).
B. The rate of dividends payable on the $11.50 Cumulative Preferred
Shares (Series A) shall be $11.50 per share per annum, payable quarterly on
the first day of March, June, September and December of each year, commencing
September 1, 1980. Such dividends shall be cumulative and accrue in the case
of each share from and including the date of original issuance thereof; and
the amount of the dividend for any period of less than a full quarter shall be
computed on the basis of a 360-day year of twelve 30-day months.
C. The $11.50 Cumulative Preferred Shares (Series A) shall be
redeemable (otherwise than with respect to any redemption effected through or
by the sinking funds hereafter described in subdivision E below) at $111.50
per share if redeemed on or before June 1, 1981, and at the following
redemption prices per share if redeemed thereafter:
If redeemed during the twelve months' period ending
Redemption Redemption
June 1 Price June 1 Price
1982 $111.02 1994 $105.27
1983 $110.54 1995 $104.79
1984 $110.06 1996 $104.31
1985 $109.58 1997 $103.83
1986 $109.10 1998 $103.35
1987 $108.63 1999 $102.88
1988 $108.15 2000 $102.40
1989 $107.67 2001 $101.92
1990 $107.19 2002 $101.44
1991 $106.71 2003 $100.96
1992 $106.23 2004 $100.48
1993 $105.75 2005 $100.00
together, as provided in Subdivision C of said Division I, in each instance,
with accrued dividends to the redemption date; provided, however, that, except
for redemptions effected through or by the sinking funds described in
subdivision E below, the $11.50 Cumulative Preferred Shares (Series A) shall
not be redeemable, in whole or in part, prior to June 1, 1990 as a part of, or
in contemplation of, any refunding operation including the application,
directly or indirectly, of the proceeds of (i) indebtedness for money borrowed
by the Company or any affiliate if such indebtedness (a) has an effective
interest cost (computed in accordance with generally accepted financial
practice) of less than 11.50% per annum or (b) has a Weighted Average Life to
Maturity, at the time of such redemption, of less than the remaining Weighted
Average Life to Maturity of the $11.50 Cumulative Preferred Shares (Series A)
or (ii) the issue or sale of shares of the Company ranking prior to the Common
Shares of the Company as to dividends or on liquidation if such shares have an
effective dividend rate (based on the proceeds to the Company from such issue
or sale net of any discount or commission to underwriters) of less than
$11.50% per annum. The term "Weighted Average Life to Maturity" shall mean,
at any date, the number of years obtained by dividing the then Remaining
Dollar-years of such indebtedness or the $11.50 Cumulative Preferred Shares
(Series A) by the then outstanding principal amount of such indebtedness or by
the product of $100.00 times the number of $11.50 Cumulative Preferred Shares
(Series A) which are then outstanding, as the case may be; and for the purpose
of this definition, the term "Remaining Dollar-years" of any indebtedness or
the $11.50 Cumulative Preferred Shares (Series A) shall mean, at any date, the
total of the products obtained by multiplying (i) the amount of each then
remaining installment, mandatory sinking fund, serial maturity or other
required payment, including payment at final maturity, in respect thereof by
(ii) the number of years (calculated to the nearest one-twelfth) which will
elapse between such date and the date on which such payment is required to be
made.
D. The amount payable on the $11.50 Cumulative Preferred Shares
(Series A) in the event of any dissolution, liquidation or winding up of the
affairs of the Company which shall be voluntary shall be the price at which
said shares are at the time redeemable (as set forth in subdivision C above),
and the amount payable on the $11.50 Cumulative Preferred Shares (Series A) in
the event of any dissolution, liquidation or winding up of the affairs of the
Company which shall be involuntary shall be $100.00 per share, together, as
provided in Subdivision E of said Division I, in either event, with a sum, in
the case of each share, computed at the annual dividend rate for the $11.50
Cumulative Preferred Shares (Series A) from the date on which dividends on
such share became cumulative to and including the date fixed for such
distribution or payment, less the aggregate amount of all dividends which
shall have theretofore been paid thereon or which shall have been declared
thereon and for which moneys for payment shall have been set apart and remain
available for payment.
E. So long as any of the $11.50 Cumulative Preferred Shares (Series A)
remain outstanding, after all dividends on all Cumulative Preferred Shares of
all series for all past quarterly dividend periods and for the current
quarterly dividend period shall have been paid or declared and a sum
sufficient for the payment therof set apart for payment, the Company shall, as
and for a mandatory sinking fund for the benefit of the $11.50 Cumulative
Preferred Shares (Series A), redeem, in the manner and upon the notice and
with the effect provided in Subdivision C of said Division I, (i) on June 1,
1986, and on each succeeding June 1 to and including June 1, 2004 (each such
June 1 being hereinafter called a "sinking fund redemption date"), 5% of the
maximum number of $11.50 Cumulative Preferred Shares (Series A) which shall
theretofore have been issued and (ii) on June 1, 2005, the balance of the
$11.50 Cumulative Preferred Shares (Series A) then outstanding (such required
redemptions being hereinafter called the "mandatory sinking fund
requirement"). The price at which the $11.50 Cumulative Preferred Shares
(Series A) shall be redeemed in satisfaction of the mandatory sinking fund
requirement shall be $100.00 per share, together, as provided in Subdivision C
of said Division I, in each instance, with accrued dividends to the redemption
date. The mandatory sinking fund requirement for the $11.50 Cumulative
Preferred Shares (Series A) shall be cumulative so that if, in any year, the
Company shall not satisfy in full the mandatory sinking fund requirement for
such year, the amount of the deficiency shall be added to the mandatory
sinking fund requirement for succeeding years until the deficiency shall have
been fully satisfied.
In addition to the mandatory sinking fund requirement, the Company may,
at its option, redeem, in the manner and upon the notice and with the effect
provided in Subdivision C of said Division I, on any sinking fund redemption
date $11.50 Cumulative Preferred Shares (Series A) in an amount not to exceed
the number of $11.50 Cumulative Preferred Shares (Series A) which shall be
redeemed on such sinking fund redemption date through the mandatory sinking
fund requirement at the mandatory sinking fund redemption price hereinbefore
specified in this subdivision E; provided that not more than 25% of the
maximum number of $11.50 Cumulative Preferred Shares (Series A) which shall
theretofore have been issued may be so redeemed. The privilege of so
redeeming $11.50 Cumulative Preferred Shares (Series A) shall not be
cumulative and shall not relieve the Company to any extent from its obligation
to redeem shares pursuant to the mandatory sinking fund requirement.
CERTIFICATE
The undersigned, D. R. EMMEN and JAY D. MYSTER, do hereby certify that we
are duly elected, qualified and acting as the Senior Vice President, Finance
and Treasurer and the Vice President, Governmental and Legal and Secretary,
respectively, of Otter Tail Power Company, a Minnesota corporation (the
"Company"), and that the following is a true and correct copy of a resolution
duly adopted at a meeting of the Board of Directors of the Company duly called
and held on April 13, 1992, at which a quorum was present and acted
throughout:
BE IT RESOLVED That, pursuant to authority conferred on the Board of
Directors of Otter Tail Power Company, a Minnesota corporation, by
Subdivision A of Division I of Article VI of its Articles of Incorporation, as
amended, a tenth series of Cumulative Preferred Shares be, and it hereby is,
created as follows:
A. The designation of such series shall be "$9.00 Exchangeable
Cumulative Preferred Shares," and the number of shares of such series shall be
fifty-three thousand three hundred eleven (53,311).
B. The rate of dividends payable on the $9.00 Exchangeable Cumulative
Preferred Shares shall be $9.00 per share per annum, payable quarterly on the
first day of March, June, September and December of each year, commencing on
the first day of the first such month following the date of original issuance
of the $9.00 Exchangeable Cumulative Preferred Shares. Such dividends shall
be cumulative and accrue in the case of each share from and including the date
of original issuance thereof; and the amount of the dividend for any period of
less than a full quarter shall be computed on the basis of a 360-day year of
twelve 30-day months.
C. The $9.00 Exchangeable Cumulative Preferred Shares shall be
redeemable at any time on or after the seventh anniversary of the date of
original issuance thereof at $100.00 per share together, as provided in
Subdivision C of said Division I, in each instance, with accrued dividends to
the redemption date; provided, however, that the holder of any $9.00
Exchangeable Cumulative Preferred Shares to be redeemed pursuant to this
Section C shall have the right, at such holder's option, to exchange any or
all of the $9.00 Exchangeable Cumulative Preferred Shares held by such holder
and so to be redeemed into Common Shares (as defined below) pursuant to, and
subject to and upon compliance with, the provisions of Section E hereof.
D. The amount payable on the $9.00 Exchangeable Cumulative Preferred
Shares in the event of any dissolution, liquidation or winding up of the
affairs of the Company, whether voluntary or involuntary, shall be $100.00 per
share, together, as provided in Subdivision E of said Division I, with a sum,
in the case of each share, computed at the annual dividend rate for the $9.00
Exchangeable Cumulative Preferred Shares from the date on which dividends on
such share became cumulative to and including the date fixed for such
distribution or payment, less the aggregate amount of all dividends which
shall have theretofore been paid thereon or which shall have been declared
thereon and for which moneys for payment shall have been set apart and remain
available for payment.
E. (1) Subject to and upon compliance with the provisions of this
Section E, each holder of $9.00 Exchangeable Cumulative Preferred Shares shall
have the right, at each such holder's option, at any time on or after the
seventh anniversary of the date of original issuance thereof, to exchange any
or all of the $9.00 Exchangeable Cumulative Preferred Shares held by each such
holder into either (a) cash in the amount of $100.00 per each $9.00
Exchangeable Cumulative Preferred Share so exchanged, together, in each
instance, with accrued dividends to the Exchange Date (as defined below), or
(b) the number of fully paid and nonassessable Common Shares obtained by
dividing (i) the sum of (A) the $100.00 liquidation value of a $9.00
Exchangeable Cumulative Preferred Share and (B) any accrued dividends to the
Exchange Date with respect to the $9.00 Exchangeable Cumulative Preferred
Share to be exchanged, by (ii) the Fair Market Value (as defined below) of a
Common Share, and multiplying such resulting number by the number of $9.00
Exchangeable Cumulative Preferred Shares to be so exchanged (rounding such
product, for the purpose of determining the amount of any cash payments
provided for under subsection (3) of this Section E, to the nearest 1/100
Common Share, with 1/200 of a Common Share being rounded upward), and in the
case of either clause (a) or (b), by surrender of such $9.00 Exchangeable
Cumulative Preferred Shares to be so exchanged, such surrender to be made in
the manner provided in subsection (2) of this Section E.
For purposes of this Section E, the term "Common Shares" shall mean the
Common Shares of the Company as the same exists at the date of original issue
of the $9.00 Exchangeable Cumulative Preferred Shares or as such shares may be
constituted from time to time thereafter.
For purposes of this Section E, the term "Exchange Date" shall mean (x),
if the $9.00 Exchangeable Cumulative Preferred Shares are being exchanged for
cash, the date which is 10 calendar days after the date such shares have been
duly surrendered to the Registrar or (y), if the $9.00 Exchangeable Cumulative
Preferred Shares are being exchanged for Common Shares, the date which is 60
Trading Days (as defined below) after the date such shares have been duly
surrendered to the Registrar, or, in the case of either clause (x) or (y), if
such day is not a business day, the next succeeding business day.
For purposes of this Section E, the term "Fair Market Value" with respect
to the Common Shares shall mean the average of the reported last sale prices
for the 60 consecutive Trading Days immediately preceding the relevant
Exchange Date. The reported last sale price for each Trading Day shall be the
reported last sale price, regular way, or, in case no sale takes place on such
day, the average of the reported closing bid and asked prices, regular way, in
either case as reported on the New York Stock Exchange Composite Tape or, if
the Common Shares are not listed or admitted to trading on the New York Stock
Exchange, in the principal national securities exchange on which the Common
Shares are listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, on the National Market System of
the National Association of Securities Dealers, Inc. Automated Quotations
System ("NASDAQ") or, if the Common Shares are not quoted on such National
Market System, the average of the closing bid and asked prices on such day in
the over-the-counter market as reported by NASDAQ or, if bid and asked prices
for Common Shares on each such day shall not have been reported through
NASDAQ, the average of the bid and asked prices for such day as furnished by
any New York Stock Exchange member firm regularly making a market in the
Common Shares selected for such purpose by the Company and if no such
quotations are available, the fair market value of the Common Shares as
determined by a New York Stock Exchange member firm regularly making a market
in the Common Shares selected for such purpose by the Company.
For purposes of this Section E, the term "Trading Day" means (x), if the
Common Shares are listed or admitted for trading on the New York Stock
Exchange or another national securities exchange, a day on which the New York
Stock Exchange or such other national securities exchange is open for business
or (y), if the Common Shares are quoted on the National Market System of
NASDAQ, a day on which trades may be made on such National Market System or
(z), otherwise, any day other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by
law or executive order to close.
(2) In order to validly exercise the exchange privilege pursuant to this
Section E, the holder of each $9.00 Exchangeable Cumulative Preferred Share to
be exchanged shall surrender the certificate representing such share at the
office of the Registrar for the $9.00 Exchangeable Cumulative Preferred Shares
in Fergus Falls, Minnesota, appointed for such purpose by the Company (which
may be the Company), with the Notice of Election to Exchange on the back of
such certificate completed and signed. Unless the shares issuable on exchange
are to be issued in the same name as the name in which the share to be
exchanged is registered, each share surrendered for exchange shall be
accompanied by instruments of transfer, in form satisfactory to the Registrar,
duly executed by the holder or the holder's duly authorized attorney, and by
an amount sufficient to pay any transfer or similar tax. If the $9.00
Exchangeable Cumulative Preferred Shares have been called for redemption and
are being surrendered for exchange pursuant to the proviso contained in
Section C hereof, then the certificate representing such shares must be duly
surrendered, as aforesaid, to the Registrar on or before the twentieth day
following the date of the notice of redemption relating to such shares in
order for the exchange privilege to be validly exercised, and any such shares
with respect to which the exchange privilege is not validly exercised shall be
redeemed on the redemption date.
On or before the Exchange Date, the Company shall deliver at the office
of the Registrar, for the account of each holder of $9.00 Exchangeable
Cumulative Preferred Shares surrendered for exchange on such Exchange Date,
(i) if such $9.00 Exchangeable Cumulative Preferred Shares are being exchanged
for cash, funds in the amount provided in clause (a) of subsection (1) of this
Section E, or (ii) if such $9.00 Exchangeable Cumulative Preferred Shares are
being exchanged for Common Shares, a certificate or certificates for the
number of full Common Shares issuable upon the exchange of such shares in
accordance with the provisions of clause (b) of subsection (1) of this
Section E, and funds for the settlement of any fractional interest in respect
of a Common Share arising upon such exchange as provided in subsection (3) of
this Section E. At the option of the Company, the Common Shares so delivered
may be newly issued shares, treasury shares or shares reacquired by or on
behalf of the Company, including shares purchased in the open market at any
time in the sole discretion of the Company.
Each holder of $9.00 Exchangeable Cumulative Preferred Shares
acknowledges by acceptance thereof that (i) the Common Shares deliverable upon
any exchange of $9.00 Exchangeable Cumulative Preferred Shares will not be
registered under the Securities Act of 1933, as amended, or any applicable
state securities laws and that any such Common Shares may not be resold except
pursuant to an exemption from such Act and all such applicable laws or
pursuant to registrations thereunder; (ii) such Common Shares may not be sold,
transferred or otherwise disposed of in any manner without first obtaining (a)
an opinion of counsel reasonably acceptable to the Company, both as to opinion
and as to counsel, that such proposed sale, transfer or other disposition can
lawfully be made without registration pursuant to the Securities Act of 1933,
as then amended, and applicable state securities laws, or (b) such
registrations (it being expressly understood that the Company shall not have
any obligation to register such securities for such purpose); (iii)
certificates representing such Common Shares may bear a legend stating that
such Common Shares have not been registered under the Securities Act of 1933,
as amended, and applicable state securities laws and referring to the
foregoing restrictions on transferability of such Common Shares; and (iv) the
Company may place stop transfer orders or notations on the Company's stock
record referring to such restrictions on transferability.
All Common Shares delivered upon exchange of the $9.00 Exchangeable
Cumulative Preferred Shares pursuant to this Section E will, upon delivery, be
duly and validly issued and fully paid and nonassessable, free of all liens
and charges and not subject to any preemptive rights.
Each exchange of $9.00 Exchangeable Cumulative Preferred Shares pursuant
to this Section E shall be deemed to have been effected immediately prior to
the close of business on the Exchange Date. Until such time on the Exchange
Date, any $9.00 Exchangeable Cumulative Preferred Shares which have been
surrendered for exchange with respect to such Exchange Date shall be treated
as outstanding and the person or persons in whose name or names a certificate
for any such shares is registered (or any prior holder who was the holder of
record of such shares on the relevant record date) shall remain the holder of
record for the purpose of voting such shares and receiving any dividends paid
with respect to such shares prior to such time on the Exchange Date,
notwithstanding that such shares might have been redeemed on a date prior to
the Exchange Date but for the exercise of the right to exchange such shares
pursuant to the proviso contained in Section C hereof. At such time on such
Exchange Date, the person or persons in whose name or names any certificate or
certificates for Common Shares shall be deliverable upon such exchange shall
be deemed to have become the holder or holders of record of the Common Shares
represented thereby unless the stock transfer books of the Company are closed
on such date, in which event such person or persons shall be deemed to have
become such holder or holders of record at the close of business on the next
succeeding day on which such stock transfer books are open.
(3) In connection with the exchange of any $9.00 Exchangeable Cumulative
Preferred Shares for Common Shares pursuant to this Section E, no fractional
Common Share or scrip representing fractions of a Common Share shall be
issued. Instead of any fractional interest in a Common Share which would
otherwise be deliverable upon the exchange of $9.00 Exchangeable Cumulative
Preferred Shares, the Company shall pay to the holder of such $9.00
Exchangeable Cumulative Preferred Shares an amount in cash (computed to the
nearest cent, with one-half cent being rounded upward) equal to the Fair
Market Value of a Common Share multiplied by the fraction of a Common Share
represented by such fractional interest.
(4) The number of $9.00 Exchangeable Cumulative Preferred Shares which
may be exchanged pursuant to this Section E in any twelve-month period shall
be limited to a total of 10,662 $9.00 Exchangeable Cumulative Preferred
Shares, and the Company shall have no obligation to exchange any shares
surrendered in excess of that amount; provided, however, that $9.00
Exchangeable Cumulative Preferred Shares called for redemption and surrendered
for exchange pursuant to the proviso contained in Section C hereof shall not
be subject to the limitation set forth in this subsection (4) and shall not be
counted for purposes of determining the limitation set forth in this
subsection (4) as it applies to shares otherwise surrendered for exchange.
(5) On any Exchange Date, the Company shall have no obligation to
exchange for Common Shares, whether pursuant to the proviso contained in
Section C hereof or otherwise, $9.00 Exchangeable Cumulative Preferred Shares
held by any holder unless either (i) the total number of $9.00 Exchangeable
Cumulative Preferred Shares surrendered for exchange by such holder with
respect to such Exchange Date equals or exceeds 500 or (ii) the total number
of $9.00 Exchangeable Cumulative Preferred Shares surrendered for exchange by
all holders of $9.00 Exchangeable Cumulative Preferred Shares with respect to
such Exchange Date equals or exceeds 500.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as the
Senior Vice President, Finance and Treasurer and the Vice President,
Governmental and Legal and Secretary, respectively, of Otter Tail Power
Company and have affixed the seal of Otter Tail Power Company this 10th day of
August, 1992.
D. R. Emmen
D. R. Emmen
Senior Vice President, Finance and
Treasurer
Jay D. Myster
Jay D. Myster
Vice President, Governmental and
Legal and Secretary
[CORPORATE SEAL]
STATE OF MINNESOTA )
) SS
COUNTY OF OTTER TAIL )
ON this 10th day of August, 1992 before me a Notary Public and for said
County and State, personally appeared D. R. EMMEN and JAY D. MYSTER, to me
personally known to be the Senior Vice President, Finance and Treasurer and
the Vice President, Governmental and Legal and Secretary, respectively, of
Otter Tail Power Company, who, being by me duly sworn, did say that they are,
respectively, the Senior Vice President, Finance and Treasurer and the Vice
President, Governmental and Legal and Secretary of said corporation, and that
the seal affixed to the within certificate is the corporate seal of said
corporation, and that said certificate was signed and sealed in behalf of said
corporation by authority of its Board of Directors, and said D. R. EMMEN and
JAY D. MYSTER acknowledged said certificate to be the free act and deed of
said corporation.
Raymond J. Holmgren
[NOTARIAL SEAL]
CERTIFICATE
The undersigned, D. R. EMMEN and JAY D. MYSTER, do hereby certify that we
are duly elected, qualified and acting as the Senior Vice President, Finance
and Treasurer and the Vice President, Governmental and Legal and Secretary,
respectively, of Otter Tail Power Company, a Minnesota corporation (the
"Company"), and that the following is a true and correct copy of a resolution
duly adopted by a Written Action of the Pricing Committee of the Board of
Directors of the Company, dated September 29, 1992, executed by all the
members of said Pricing Committee, duly established by the Board of Directors
of the Company at a meeting thereof duly called and held on February 3, 1992,
at which a quorum was present and acted throughout, to act for the Board of
Directors with respect to the matters set forth in said Written Action:
RESOLUTION
BE IT RESOLVED That, pursuant to authority conferred on the Board of
Directors of Otter Tail Power Company, a Minnesota corporation, by
Subdivision A of Division I of Article VI of its Articles of Incorporation, as
amended, an eleventh series of Cumulative Preferred Shares be, and it hereby
is, created as follows:
A. The designation of such series shall be "$6.35 Cumulative Preferred
Shares," and the number of shares of such series shall be one hundred eighty
thousand (180,000).
B. The rate of dividends payable on the $6.35 Cumulative Preferred
Shares shall be $6.35 per share per annum, payable quarterly on the first day
of March, June, September and December of each year, commencing December 1,
1992. Such dividends shall be cumulative and accrue in the case of each share
from and including the date of original issuance thereof; and the amount of
the dividend for any period of less than a full quarter shall be computed on
the basis of a 360-day year of twelve 30-day months.
C. The $6.35 Cumulative Preferred Shares shall be redeemable (otherwise
than with respect to any redemption effected through or by the sinking fund
hereafter described in subdivision E below), at the option of the Company, in
whole or in part, at $103.175 per share if redeemed before December 1, 1998,
and at the following redemption prices per share if redeemed thereafter:
If redeemed during the twelve months' period beginning:
Redemption
December 1 Price
1998 . . . . . . . . . . . . . . . . . $102.540
1999 . . . . . . . . . . . . . . . . . $101.905
2000 . . . . . . . . . . . . . . . . . $101.270
2001 . . . . . . . . . . . . . . . . . $100.635
2002 and thereafter . . . . . . . . . $100.000
together, as provided in Subdivision C of said Division I, in each instance,
with accrued dividends to the redemption date; provided, however, that the
$6.35 Cumulative Preferred Shares shall not be redeemable, in whole or in
part, prior to December 1, 1997.
D. The amount payable on the $6.35 Cumulative Preferred Shares in the
event of any dissolution, liquidation or winding up of the affairs of the
Company which shall be voluntary shall be $106.350 per share prior to
December 1, 1993, and will decrease by $0.635 per share on December 1, 1993
and on each December 1 thereafter to $100.00 per share on December 1, 2002,
and the amount payable on the $6.35 Cumulative Preferred Shares in the event
of any dissolution, liquidation or winding up of the affairs of the Company
which shall be involuntary shall be $100.00 per share, together, as provided
in Subdivision E of said Division I, in either event, with a sum, in the case
of each share, computed at the annual dividend rate for the $6.35 Cumulative
Preferred Shares from the date on which dividends on such share became
cumulative to and including the date fixed for such distribution or payment,
less the aggregate amount of all dividends which shall have theretofore been
paid thereon or which shall have been declared thereon and for which moneys
for payment shall have been set apart and remain available for payment.
E. So long as any of the $6.35 Cumulative Preferred Shares remain
outstanding, after all dividends on all Cumulative Preferred Shares of all
series for all past quarterly dividend periods and for the current quarterly
dividend period shall have been paid or declared and a sum sufficient for the
payment thereof set apart for payment, the Company shall, as and for a
mandatory sinking fund for the benefit of the $6.35 Cumulative Preferred
Shares, redeem, in the manner and upon the notice and with the effect provided
in Subdivision C of said Division I, (i) on December 1, 2002, and on each
succeeding December 1 to and including December 1, 2006, 5% of the maximum
number of $6.35 Cumulative Preferred Shares which shall theretofore have been
issued and (ii) on December 1, 2007, the balance of the $6.35 Cumulative
Preferred Shares then outstanding (such required redemptions being hereinafter
called the "mandatory sinking fund requirement"). The price at which the
$6.35 Cumulative Preferred Shares shall be redeemed in satisfaction of the
mandatory sinking fund requirement shall be $100.00 per share, together, as
provided in Subdivision C of said Division I, in each instance, with accrued
dividends to the redemption date. The mandatory sinking fund requirement for
the $6.35 Cumulative Preferred Shares shall be cumulative so that if, in any
year, the Company shall not satisfy in full the mandatory sinking fund
requirement for such year, the amount of the deficiency shall be added to the
mandatory sinking fund requirement for succeeding years until the deficiency
shall have been fully satisfied.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as the
Senior Vice President, Finance and Treasurer and the Vice President,
Governmental and Legal and Secretary, respectively, of Otter Tail Power
Company and have affixed the seal of Otter Tail Power Company this 1st day of
October, 1992.
D. R. Emmen
D. R. Emmen
Senior Vice president, Finance
and Treasurer
Jay D. Myster
Vice President, Governmental
and Legal and Secretary
[CORPORATE SEAL]
STATE OF MINNESOTA )
)SS
COUNTY OF OTTER TAIL )
On this 1st day of October, 1992, before me a Notary Public within and
for said County and State, personally appeared D. R. EMMEN and JAY D. MYSTER,
to me personally known to be the Senior Vice President, Finance and Treasurer
and the Vice President, Governmental and Legal and Secretary, respectively, of
Otter Tail Power Company, who, being by me duly sworn, did say that they are,
respectively, the Senior Vice President, Finance and Treasurer and the Vice
President, Governmental and Legal and Secretary of said corporation, and that
the seal affixed to the within certificate is the corporate seal of said
corporation, and that said certificate was signed and sealed in behalf of said
corporation by authority of its Board of Directors, and said D. R. EMMEN and
JAY D. MYSTER acknowledged said certificate to be the free act and deed of
said corporation.
Larry W. Marquard
[NOTARIAL SEAL]
CERTIFICATE
The undersigned, D. R. EMMEN and JAY D. MYSTER, do hereby certify that we
are duly elected, qualified and acting as the Senior Vice President, Finance
and Treasurer and the Vice President, Governmental and Legal and Secretary,
respectively, of Otter Tail Power Company, a Minnesota corporation (the
"Company"), and that the following is a true and correct copy of a resolution
duly adopted by a Written Action of the Pricing Committee of the Board of
Directors of the Company, dated October 11, 1993, executed by all the members
of said Pricing Committee, duly established by the Board of Directors of the
Company at a meeting thereof duly called and held on February 3, 1992, at
which a quorum was present and acted throughout, to act for the Board of
Directors with respect to the matters set forth in said Written Action:
RESOLUTION
BE IT RESOLVED That, pursuant to authority conferred on the Board of
Directors of Otter Tail Power Company, a Minnesota corporation, by
Subdivision A of Division I of Article VI of its Articles of Incorporation, as
amended, a twelfth series of Cumulative Preferred Shares be, and it hereby is,
created as follows:
A. The designation of such series shall be "$6.75 Cumulative Preferred
Shares," and the number of shares of such series shall be forty thousand
(40,000).
B. The rate of dividends payable on the $6.75 Cumulative Preferred
Shares shall be $6.75 per share per annum, payable quarterly on the first day
of March, June, September and December of each year, commencing December 1,
1993. Such dividends shall be cumulative and accrue in the case of each share
from and including the date of original issuance thereof; and the amount of
the dividend for any period of less than a full quarter shall be computed on
the basis of a 360-day year of twelve 30-day months.
C. The $6.75 Cumulative Preferred Shares shall be redeemable at the
option of the Company, in whole or in part, at $103.375 per share if redeemed
before December 1, 2004, and at the following redemption prices per share if
redeemed thereafter:
If redeemed during the twelve months' period beginning:
Redemption
December 1 Price
2004 . . . . . . . . . . . . . . . . . $103.0375
2005 . . . . . . . . . . . . . . . . . $102.7000
2006 . . . . . . . . . . . . . . . . . $102.3625
2007 . . . . . . . . . . . . . . . . . $102.0250
2008 . . . . . . . . . . . . . . . . . $101.6875
2009 . . . . . . . . . . . . . . . . . $101.3500
2010 . . . . . . . . . . . . . . . . . $101.0125
2011 . . . . . . . . . . . . . . . . . $100.6750
2012 . . . . . . . . . . . . . . . . . $100.3375
2013 and thereafter . . . . . . . . . $100.0000
together, as provided in Subdivision C of said Division I, in each instance,
with accrued dividends to the redemption date; provided, however, that the
$6.75 Cumulative Preferred Shares shall not be redeemable, in whole or in
part, prior to December 1, 2003.
D. The amount payable on the $6.75 Cumulative Preferred Shares in the
event of any dissolution, liquidation or winding up of the affairs of the
Company which shall be voluntary shall be $106.75 per share prior to
December 1, 1994, and will decrease by $0.3375 per share on December 1, 1994
and on each December 1 thereafter to $100.00 per share on December 1, 2013,
and the amount payable on the $6.75 Cumulative Preferred Shares in the event
of any dissolution, liquidation or winding up of the affairs of the Company
which shall be involuntary shall be $100.00 per share, together, as provided
in Subdivision E of said Division I, in either event, with a sum, in the case
of each share, computed at the annual dividend rate for the $6.75 Cumulative
Preferred Shares from the date on which dividends on such share became
cumulative to and including the date fixed for such distribution or payment,
less the aggregate amount of all dividends which shall have theretofore been
paid thereon or which shall have been declared thereon and for which moneys
for payment shall have been set apart and remain available for payment.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as the
Senior Vice President, Finance and Treasurer and the Vice President,
Governmental and Legal and Secretary, respectively, of Otter Tail Power
Company and have affixed the seal of Otter Tail Power Company this 11th day of
October, 1993.
D. R. Emmen
D. R. Emmen
Senior Vice President, Finance
and Treasurer
Jay D. Myster
Jay D. Myster
Vice President, Governmental
and Legal and Secretary
[CORPORATE SEAL]
STATE OF MINNESOTA )
)SS
COUNTY OF OTTER TAIL )
On this 11th day of October, 1993, before me a Notary Public within and
for said County and State, personally appeared D. R. EMMEN and JAY D. MYSTER,
to me personally known to be the Senior Vice President, Finance and Treasurer
and the Vice President, Governmental and Legal and Secretary, respectively, of
Otter Tail Power company, who, being by me duly sworn, did say that they are,
respectively, the Senior Vice President, Finance and Treasurer and the Vice
President, Governmental and Legal and Secretary of said corporation, and that
the seal affixed to the within certificate is the corporate seal of said
corporation, and that said certificate was signed and sealed in behalf of said
corporation by authority of its Board of Directors, and said D. R. EMMEN and
JAY D. MYSTER acknowledged said certificate to be the free act and deed of
said corporation.
Larry W. Marquard
[NOTARIAL SEAL]
Exhibit 10-C-6
CONTRACT FOR ELECTRIC SERVICE
INTEGRATED SYSTEMS SUPPLEMENT NO. 7
OTTER TAIL POWER COMPANY and
CENTRAL POWER ELECTRIC COOPERATIVE, INC.
AMENDMENT NO. 4
THIS AGREEMENT made this date January 18, 1994, by and between CENTRAL
POWER ELECTRIC COOPERATIVE, INC., a North Dakota corporation, herein called
"Central" and OTTER TAIL POWER COMPANY, a Minnesota corporation, herein called
"Otter Tail", such Parties referred to individually as "Party" or collectively
as "Parties", and
0.1 WHEREAS, Central and Otter Tail are presently Parties to a contract
for Electric Service, Integrated Systems Supplement No. 7 dated November 21,
1973, which includes Supplements and Amendments, herein together called the
"Integrated Systems Agreement", and
0.2 WHEREAS, the Integrated Systems Agreement provides for established
Points of Delivery identified in the Agreement Exhibits and Amendments, and
0.3 WHEREAS, the Integrated Systems Agreement provides that the Parties
may from time to time add other Points of Delivery and connections to loads
from the facilities within the Integrated System, and
0.4 WHEREAS, Central has requested that additional Points of Delivery be
made to Otter Tail's 41,600-volt transmission system, and
0.5 WHEREAS, Central and Otter Tail desire to append to and make part of
Exhibit B-2, Points of Delivery, thereto what is herein contained,
NOW THEREFORE, the Parties agree as follows:
1.1 Pursuant to Paragraph F, Section IV of the 1973 Agreement,
Supplement No. 7, Central and Otter Tail agree to add the following locations
to the Points of Delivery specified in Exhibit B-2 and amendments thereof
subject to the conditions specified herein:
POINTS OF DELIVERY AT 41.6-KV
OTP-MCCLUSKY At a point located on OTP's 41,600-volt circuit in the SE
Quarter of Section 2, Township 146N, Range 77W, Sheridan
County, North Dakota.
BUFFALO At a point located on the 41,600-volt circuit at the CPEC
Barlow Station in the SW Quarter of Section 8, Township
148N, Range 66W, Eddy County, North Dakota.
1.2 METERING OTP-MCCLUSKY. Deliveries of electric power and energy for
the OTP-McClusky Point of Delivery shall be metered on the 480/277-volt
circuit at the Kirschmann Manufacturing load. Adjustment for losses for
transformation and distribution facilities shall be made by multiplying the
applicable proportion of the meter reading by a loss percentage established by
separate agreement between Otter Tail, Central, and Capital Electric
Cooperative, Inc. The proportion of the meter reading attributable to Central
shall be the same proportion as established by separate agreement between
Otter Tail and Capital Electric Cooperative, Inc.
1.3 TERM. This Agreement shall become effective upon execution and
shall continue in effect until terminated under the same terms and conditions
as provided for in the Integrated Systems Agreement. This Agreement shall be
subject to all applicable provisions of Integrated Systems Supplement No. 7
dated November 21, 1973, as amended or supplemented.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized officers as of this day and year first written above.
ATTEST: CENTRAL POWER ELECTRIC COOPERATIVE, INC.
Clifford Haro BY: Armand Tiegs
Secretary President
ATTEST: OTTER TAIL POWER COMPANY
Jay D. Myster BY: Earl Sjoberg
Secretary Vice President
Exhibit 10-E-7
SUPPLEMENT NO. 6
to the
INTERCONNECTION AND TRANSMISSION SERVICE AGREEMENT
Between
EAST RIVER ELECTRIC POWER COOPERATIVE, INC.
Madison, South Dakota
and
OTTER TAIL POWER COMPANY
Fergus Falls, Minnesota
THIS AGREEMENT, made this 2nd day of December, 1993, by and between Otter
Tail Power Company, a Minnesota corporation (hereinafter referred to as "Otter
Tail"), and East River Electric Power Cooperative, Inc. (hereinafter referred
to as "East River"), a cooperative corporation incorporated under the laws of
South Dakota, which corporations are referred to herein individually as Party
and collectively as Parties.
WITNESSETH
WHEREAS, the Parties have entered into an Interconnection and
Transmission Service Agreement dated January 8, 1973, as supplemented; and
WHEREAS, the Wendell Point of Delivery has been relocated;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Parties agree as follows:
1.0 WENDELL POINT OF DELIVERY
1.1 Revision of Exhibit "A". Exhibit "A" as revised by Supplement
No. 5 and dated November 4, 1992 is hereby deleted and replaced by Exhibit "A"
dated June 2, 1993 to this Supplement No. 6 hereto and made a part hereof.
1.2 Revision of Wendell Exhibit "D". Exhibit "D", Wendell,
Minnesota Substation of the Original Contract is hereby deleted and replaced
by Exhibit "D" to this Supplement No. 6 hereto and made a part hereof.
2.0 GENERAL
2.1 Subject to the terms of Paragraph 2.4 hereof this
Agreement shall become effective on the date of its execution and shall
terminate coincidentally with the Original Contract.
2.2 No waiver or a breach of any of the agreements or
provisions contained in this contract shall be construed to be a waiver of any
subsequent breach of the same, or of any other common provision of the
contract.
2.3 Except as expressly modified by this Supplement, the
Original Contract shall remain in full force and effect and this Supplement
shall be subject to all the applicable provisions of the Original Contract
except as herein provided or modified.
2.4 This Agreement is subject to the approval of the
Administrator of the Rural Electrification Administration and any regulatory
body having jurisdiction thereof.
IN WITNESS WHEREOF, the Parties hereto have caused this agreement to be
duly executed as of the date and year first above written.
EAST RIVER ELECTRIC POWER OTTER TAIL POWER COMPANY
COOPERATIVE, INC.
Wayne Wright Earl Sjoberg
President Vice President, Electrical
Keith Kleppin Jay D. Myster
Secretary Secretary
<TABLE>
<CAPTION>
EXHIBIT "A"
TRANSMISSION SERVICE AGREEMENT BETWEEN
EAST RIVER ELECTRIC COOPERATIVE, INC.
AND
OTTER TAIL POWER COMPANY
SUPPLEMENT NO. 6
LOCATION OF POINTS OF
NAME OF AGREED SUB. DELIVERY FROM OTTER TAIL LOCATION OF
SUBSTATION CAPACITY POWER COMPANY'S SYSTEM VOLTAGE POINTS OF METERING VOLTAGE
<S> <C> <C> <S> <C>
Beardsley 3,750 kVA At or near the NE corner 41,600 At or near the NE corner 7,200/12,500
of the NE 1/4 of Sec. 6, of the NE 1/4 of Sec. 6,
T 124 N., R 48 W., Big T 124 N., R 48 W., Big
Stone County, Minnesota Stone County, Minnesota
Doran 1,500 kVA At or near the SE corner 41,600 At or near the SE corner 7/200/12,500
of Sec. 5, T 131 N., of Sec. 20, T 131 N.,
R 46 W., Wilkin County, R 46 W., Wilkin County,
Minnesota Minnesota
Graceville 2,500 kVA Near the SW corner of the 41,600 Near the SW corner of 7,200/12,500
SE 1/4, Sec. 4, T 124 N., Sec. 34, T 125 N.,
R 46 W., Big Stone County, R 46 W., Traverse County,
Minnesota Minnesota
Wendell 2,500 kVA Near the SW corner of Sec. 41,600 Near the NE corner of 7,200/12,500
30, T 129 N., R 43 W., Sec. 36, T 129 N.,
Grant County, Minnesota R 45 W., Traverse
County, Minnesota
Wheaton 7,500 kVA At or near the NE corner 41,600 At or near the NE corner 7,200/12,500
of the NW 1/4 of the of the NW 1/4 of the
NW 1/4 of Sec. 29, NW 1/4 of Sec. 29,
T 127 N., R 46 W., T 127 N., R 46 W.,
Traverse County, Minnesota Traverse County, Minnesota
Hillhead 3,750 kVA The NE 1/4 of Sec. 34, 41,600 The NE 1/4 of Sec. 34, 72,000/12,500
T 128 N., R 54 W., 8 miles T 128 N., R 54 W., 8 miles
north of Lake City on north of Lake City on
Highway 23, Marshall Highway 23, Marshall
County, South Dakota County, South Dakota
Dumont 3,750 kVA At or near the NE corner 41,600 The SW corner of the SW 7,200/12,500
of the NW 1/4, Sec. 6, 1/4 of Sec. 17, T 126 N.,
T 124 N., R 44 W., Stevens R 44 W., Stevens County,
County, Minnesota Minnesota
Dome 5,000 kVA SW corner of the SW 1/4 41,600 Near the SE corner of the 4,160
of Sec. 14, T 128 N., NE 1/4 of Sec. 19, T 128 N.,
R 47 W., Traverse County, R 47 W., Traverse County,
Minnesota Minnesota
</TABLE>
[TEXT]
"Exhibit D"
Wendell, MN, Substation
INTERCONNECTION AND TRANSMISSION SERVICE AGREEMENT
BETWEEN
EAST RIVER ELECTRIC POWER COOPERATIVE, INC.
AND
OTTER TAIL POWER COMPANY
ELECTRIC LINE CONNECTING AGREEMENT
1. Otter Tail is the owner of an electric transmission line that East
River Electric Power Cooperative, Inc. (hereinafter referred to as East
River), is presently connected to in the vicinity of Wendell, Minnesota. East
River will be abandoning this connection and wishes to reconnect to Otter Tail
again for the purpose of receiving deliveries of electric power and energy
pursuant and subject to the interconnection and transmission service agreement
between East River and Otter Tail, dated January 8, 1973, as supplemented.
Otter Tail agrees to permit said connection to its line in accordance with the
terms concerning ownership of the connecting facilities specified herein.
2. The line connection hereunder is located at or near the S.W. corner
of Section 30, T. 129 N., R. 43 W., Grant County, Minnesota.
3. Electric power and energy delivered at the specified connection
shall be three-phase alternating current approximately 41,600 volts.
4. East River shall install, own, and maintain in Otter Tail's line a
junction pole or structure of a design approved by Otter Tail for the purpose
of supporting and terminating the lines of the parties and providing for the
East River connection thereof. In addition thereto, East River shall install,
own, and maintain switching equipment at the point of connection complete with
the supporting structures therefore as listed below:
a. One gang-operated, three-pole air break switch in each of Otter
Tail's lines North and South from said point of connection.
b. One gang-operated, three-pole air break switch in East River's
tap line West from said point of connection.
Said switching equipment shall be of standard make and design with
voltage and current ratings approved by Otter Tail. Otter Tail will provide
insulation and fittings as required for the support or termination of its
lines on East River's structures.
5. East River shall, at its own expense, maintain and keep in repair
its structures, attachments, and equipment. Otter Tail shall cooperate in
temporarily releasing the use of its transmission lines when possible for
normal maintenance of East River's equipment connected to said lines. East
River shall reimburse Otter Tail for all switching costs including labor
incurred for such line switching. Upon request by East River, Otter Tail
shall perform maintenance work on the East River electrical installations and
equipment specified herein. East River shall reimburse Otter Tail for all
costs incurred in the performance of such maintenance work, including
administrative and generation expenses.
6. Operation of the switches specified herein which are located in
Otter Tail's transmission lines shall be done only upon specific orders from
Otter Tail's system dispatchers at Fergus Falls. Employees of Otter Tail
shall have access at all times to operate East River switching equipment
specified hereunder. East River shall operate the switching equipment
specified herein without delay when so requested by Otter Tail's dispatchers.
No charge shall be made by East River to Otter Tail for switching performed
hereunder.
7. If East River decides to discontinue use of its connection to Otter
Tail's line or if the connection is no longer usable in its present location,
East River shall, at its own expense, remove its property, installed in
conformance with this Agreement and restore Otter Tail's line and supporting
structures to their original condition or that condition satisfactory with
Otter Tail.
8. If it shall be determined by the parties hereto that it has become
necessary for Otter Tail to relocate its transmission line serving the
connection specified herein to eliminate interference with other utilities,
with conflicting rights of way, such as roads, ditches, etc., or for similar
reasons, East River, if it wishes to continue to receive service, shall at its
own expense, relocate the connecting facilities specified under Paragraph 4
hereof and build the necessary connecting lines to such relocated point of
connection as may be agreed between the parties hereto.
9. Each party shall pay any and all taxes levied and assessed on their
respective properties as specified by the Agreement.
10. Otter Tail does not in any manner warrant or covenant unto East
River the existence or validity of any easement, franchise or other
authorization for the erection, maintenance, or repair of East River
installations specified herein. East River shall procure all necessary
easements, franchise, or authorization required for the construction,
operation, and maintenance of its structures, wires, equipment, guys, or other
installations.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed
as of this 2nd day of December, 1993.
EAST RIVER ELECTRIC POWER COOPERATIVE, INC.
By Wayne Wright
President
ATTEST:
Keith Kleppin
Title Secretary
OTTER TAIL POWER COMPANY
By Earl Sjoberg
Vice President, Electrical
ATTEST:
Jay D. Myster
Title Secretary
Exhibit 10-K-3
Firm Power Transaction
May 1, 1995 - October 31, 1995
as provided for under
Interconnection, Facilities
and
Coordinating Agreement
Respecting Winnipeg - Grand Forks 230 Interconnection
dated January 16, 1969, as amended
between
Otter Tail Power Company
and
Manitoba Hydro Electric Board
Governing Agreements: Interconnection, Facilities and Coordinating Agreement
Respecting Winnipeg - Grand Forks 230 Interconnection
dated January 16, 1969, as amended between Otter Tail
Power Company and Manitoba Hydro Electric Board.
and
Mid-Continent Area Power Pool Agreement, as Amended
(MAPP)
Transaction type: Firm Power Interchange Service (Service Schedule X --
identical to MAPP Service schedule J).
Selling Party: Manitoba Hydro Electric Board (MH)
Purchasing Party: Otter Tail Power Company (OTP)
Terms: The period shall cover the MAPP Summer Season (six-
months season May 1 through October 31) commencing
May 1, 1995 and ending October 31, 1995.
Quantity and Price: The quantity of electric Capacity shall be 35 MW and
the capacity price MH sells to OTP shall be $1650
(One Thousand Six Hundred and Fifty dollars) per
MW-month. The capacity quantity includes reserves.
Energy Charge: Shall be determined by MH at a later date, but shall
not exceed $100 (One Hundred dollars) / MWh.
Other Provisions: OTP shall inform MH not later than 3 P.M. of the
weekday preceding delivery of the amounts of energy to
be delivered the following day or weekend. Schedule
changes will require a mutual agreement between MH and
OTP.
This Transaction Agreement is contingent on receipt of
approval of applicable regulatory authorities, Canadian
National Energy Board, Federal Energy Regulatory
Commission (FERC) and OTP's receipt of Mid Continent
Area Power Pool's (MAPP) accreditation approval.
Otter Tail Power Company Manitoba Hydro-Electric Board
By: Wallace Ness By: D. W. Gunter
Title: Director Title: Division Manager
System Operations System Operating
Division
Date: February 8, 1994 Date: February 16, 1994
Firm Power Transaction
May 1, 1996 - October 31, 1996
as provided for under
Interconnection, Facilities
and
Coordinating Agreement
Respecting Winnipeg - Grand Forks 230 Interconnection
dated January 16, 1969, as amended
between
Otter Tail Power Company
and
Manitoba Hydro Electric Board
Governing Agreements: Interconnection, Facilities and Coordinating Agreement
Respecting Winnipeg - Grand Forks 230 Interconnection
dated January 16, 1969, as amended between Otter Tail
Power Company and Manitoba Hydro Electric Board.
and
Mid-Continent Area Power Pool Agreement, as Amended
(MAPP)
Transaction type: Firm Power Interchange Service (Service Schedule X --
identical to MAPP Service schedule J).
Selling Party: Manitoba Hydro Electric Board (MH)
Purchasing Party: Otter Tail Power Company (OTP)
Terms: The period shall cover the MAPP Summer Season (six-
months season May 1 through October 31) commencing
May 1, 1996 and ending October 31, 1996.
Quantity and Price: The quantity of electric Capacity shall be 35 MW and the
capacity price MH sells to OTP shall be $1700 (Seventeen
Hundred dollars) per MW-month. The capacity quantity
includes reserves.
Energy Charge: Shall be determined by MH at a later date, but shall not
exceed $100 (One Hundred dollars) / MWh.
Other Provisions: OTP shall inform MH not later than 3 P.M. of the weekday
preceding delivery of the amounts of energy to be
delivered the following day or weekend. Schedule
changes will require a mutual agreement between MH and
OTP.
This Transaction Agreement is contingent on receipt of
approval of applicable regulatory authorities, Canadian
National Energy Board, Federal Energy Regulatory
Commission (FERC) and OTP's receipt of Mid Continent
Area Power Pool's (MAPP) accreditation approval.
Otter Tail Power Company Manitoba Hydro-Electric Board
By: Wallace Ness By: D. W. Gunter
Title: Director Title: Division Manager
System Operations System Operating
Division
Date: February 8, 1994 Date: February 16, 1994
Exhibit 10-M-10
SEVENTH AMENDMENT TO COAL TRANSPORTATION AGREEMENT
ICC-BN-C-2420
This Seventh Amendment is made pursuant to 49 U.S.C. Section 10713, on
this 22nd day of November, 1993, by and between Burlington Northern Railroad
Company ("BN") and Otter Tail Power Company ("Otter Tail").
WITNESS THAT:
WHEREAS, BN and Otter Tail are parties to a Coal Transportation Agreement
dated September 2, 1988, ICC-BN-C-2420, and amended December 16, 1988,
April 5, 1989, December 18, 1989, May 10, 1991, December 7, 1992, and
January 11, 1993, (hereinafter the Base Agreement and previous Amendments
there to are collectively referred to as the "Original Agreement"); and
WHEREAS, BN and Otter Tail desire to extend the term of the Agreement.
NOW, THEREFORE, in consideration of the premises, covenants and
provisions set out herein, the parties hereto agree as follows:
1. This Seventh Amendment shall be effective on December 31, 1993,
subject to 49 C.F.R. Section 1313(c). If the ICC does not approve
this Seventh Amendment, it shall be null and void and the Original
Agreement shall remain in full force and effect as written.
2. Amend Section 1. EFFECTIVE DATE by changing the expiration date to
"December 31, 1994" subject to a one year extension, provided both
parties consent and notification is given BN by Otter Tail at least
sixty (60) days before the expiration of the contract term set out
above.
3. Nothing in this Seventh Amendment shall alter the rights or
obligations of the parties under the Original Agreement except and
specifically provided for above.
IN WITNESS WHEREOF, the parties have caused this Seventh Amendment to be
executed by their duly authorized representatives on the day and year first
written above.
OTTER TAIL POWER COMPANY
By: Ward Uggerud
Title: Vice President, Operations
BURLINGTON NORTHERN RAILROAD COMPANY
By: T.R. Jacobson
Title: AVP Market & Strategic Planning
Exhibit 10-N-4
OTTER TAIL POWER COMPANY
NONQUALIFIED PENSION PLAN
WITNESSETH: That
WHEREAS, Otter Tail Power Company, a Minnesota corporation,
by action of its Board
of Directors taken on December 13, 1993, has authorized the
creation of a nonqualified, unfunded,
deferred compensation and excess benefits plan effective January
1, 1994, for the benefit of a select
group of management or highly compensated eligible employees as
set forth in the document entitled
Nonqualified Pension Plan; and
WHEREAS, This is the document so approved and adopted;
NOW, THEREFORE, Otter Tail Power Company does hereby create
and establish such
deferred compensation and excess benefit plan to read in full as
follows:
1. Plan Purposes. The Otter Tail Power Company Nonqualified
Pension Plan ( Nonqualified
Pension Plan or Plan ) is an unfunded deferred compensation and
excess benefit plan established
by Otter Tail Power Company, a Minnesota corporation ( Employer )
for the purpose of providing
a select group of management or highly compensated employees of
the Employer and certain
affiliated corporations who are participants in the Otter Tail
Power Company 1975 Amended
Employees Pension Plan (the Qualified Pension Plan ) with
benefits which would have been
provided under the Qualified Pension Plan but for the limitations
of sections 401(a)(17) and 415 of
the Internal Revenue Code ( Code ).
2. Effective Date. January 1, 1994.
3. Coverage. An individual shall participate in and receive
benefits under the Nonqualified
Pension Plan if that individual:
(i) is, on or after January 1, 1994, actively
employed by the Employer or by any
subsidiary or affiliate of the Employer which
is a participating employer
under the Qualified Pension Plan, and
(ii) is on or after January 1, 1994, a participant
in the Qualified Pension Plan,
and
(iii) is affirmatively selected for participation
in the Nonqualified Pension Plan by
the Administrative Committee of the Qualified
Pension Plan ( Committee ).
Any employee who receives a benefit in the Plan is hereinafter
called a Participant.
4. Specific Exclusions from Coverage. Notwithstanding anything
apparently to the contrary
in this Plan or in any written communication, summary, resolution
or document or oral
communication, no individual shall be a Participant in this Plan,
develop benefits under this Plan
or be entitled to receive benefits under this Plan (either for
himself or his survivors) unless such
individual is a member of a select group of management or highly
compensated employees (as that
expression is used in the Employee Retirement Income Security Act
of 1974 ( ERISA ). If a court
of competent jurisdiction, any representative of the U.S.
Department of Labor or any other
governmental, regulatory or similar body makes any direct or
indirect, formal or informal,
determination that an individual is not a member of a select
group of management or highly
compensated employees (as that expression is used in ERISA), such
individual shall not be (and shall
not have ever been) a Participant in this Plan at any time. If
any person not so defined has been
erroneously treated as a Participant in this Plan, upon discovery
of such error, such person's
erroneous participation shall immediately terminate ab initio,
all benefits erroneously treated as
having accrued for the individual shall be immediately and
irrevocably forfeited and the individual
(or his or her beneficiaries and estate) shall be obligated to
repay any benefits previously and
erroneously paid.
5. Payments to Participants.
5.1. Amount of Payment. Benefits shall be paid to the
Participant or, in the event of
death, to the beneficiary designated by the Participant for the
purposes of the Qualified Pension
Plan (or established by operation of the rules of the Qualified
Pension Plan) in an amount equal to
(a) over (b) where:
(a) is the amount that would have been payable to such
person under the Qualified
Pension Plan if such benefit had been determined
without regard to the benefit
limitations under section 415 of the Code and without
regard to the compensation
limitation of section 401(a)(17) of the Code, and
(b) is the amount actually paid to such person from the
Qualified Pension Plan as
limited by sections 401(a)(17) and 415 of the Code.
This benefit shall be determined by comparing single sum present
values determined by the actuary
of the Qualified Pension Plan under the actuarial factors then in
effect under the Qualified Pension
Plan.
5.2. Time and Form of Payment. Benefits shall be paid to
the Participant in a single
lump sum cash payment not more than 30 days after the earliest
date the Participant could receive
any benefit (on account of retirement or other termination of
employment) directly under the
Qualified Pension Plan. Benefits shall be paid to a Participant
s beneficiary in a single lump sum
cash payment not more than 30 days after the earliest date such
person could receive any survivor
benefit directly under the Qualified Pension Plan.
5.3. In General. Except for the limited purposes of
determining the actuarial factors and
the date when payment shall be determined and made, elections and
optional forms of settlement
in effect and all other rules governing the payment of benefits
under the Qualified Pension Plan shall
be given no effect under this Nonqualified Pension Plan in
determining the time or form in which
excess benefits are paid under this Plan.
6. Nontransferability. Participants and beneficiaries shall
not have the right to assign,
encumber or otherwise anticipate the payments to be made under
this Plan, and the benefits
provided hereunder shall not be subject to seizure for payment of
any debts or judgments against
any Participant or any beneficiary.
7. Tax Withholding. The Employer may deduct from any benefit
payment (and transmit to
the proper taxing authority) such amount as it may be required to
withhold under any federal, state
or other law.
8. Not Funded. The obligation of the Employer to make payments
under the Nonqualified
Pension Plan constitutes only the unsecured (but legally
enforceable) promise of the Employer to
make such payments, and the Participant shall have no lien, prior
claim or other security interest
in any property of the Employer. No fund, trust or account
(other than an bookkeeping account
or reserve) will be established or maintained by the Employer for
the purpose of funding or paying
the benefits promised under the Plan. If such a fund is
established, the property therein shall
remain the sole and exclusive property of the Employer. the
Employer will pay the cost of the Plan
out of its general assets. All references to accounts, credits,
gains, losses, income, expenses, payments
and the like are included merely for the purpose of measuring the
Employer s obligation to
Participants in this Plan and shall not be construed to impose on
the Employer the obligation to
create any separate fund for purposes of the Plan.
9. Claims Procedure. Payments will be paid to each Participant
automatically. Payments will
be made to a beneficiary only after a proper written claim for
payment as been filed with the
Committee. If any Participant or beneficiary is in disagreement
with any determination that has
been made, a claim may be presented.
9.1. Making a Claim. The claim must be written and must be
delivered to the
Committee. Within 90 days after the claim is delivered the
claimant will receive either: (a) a
decision; or (b) a notice describing specific special
circumstances requiring a specified amount of
additional time (but no more than 180 days from the date the
claim was delivered) to reach a
decision.
If the claim wholly or partially denied, the claimant will
receive a written notice specifying: (a) the
reasons for the denial; (b) the Plan provisions on which the
denial is based; and (c) any additional
information needed in connection with the claim and the reason
such information is needed. A copy
of Paragraph 9.2 below concerning the claimant s right to request
a review will also be given to the
claimant.
9.2. Requesting Review of Denied Claim. A claimant may
request that a denied claim
be reviewed. The request for review must be written and must be
delivered to the Committee within
60 days after the claimant s receipt of notice that the claim was
denied. A request for review may
(but is not required to) include issues and comments the claimant
wants considered in the review.
The claimant may examine pertinent Plan documents by asking the
Committee. Within 60 days
after the delivery of the request for review, the claimant will
receive either (a) a decision; or (b) a
notice describing specific special circumstances requiring a
specified amount of additional time (but
not more than 120 days from the date the request for review was
delivered) to reach a decision.
The decision will be in writing and will specify the Plan
provisions on which it is based.
9.3. In General. All decisions on claims and on requests
for a review of denied claims
shall be made by the Committee. The Committee may, in its
discretion, hold one or more hearings
on a claim or a request for a review of a denied claim. If a
claimant does not receive a decision
within the time specified, the claimant should assume the claim
was denied or re-denied on the date
the specified time expired. The claimant may, at claimant s own
expense, have an attorney or other
representative act on behalf of the claimant, but the Committee
reserves the right to require a
written authorization. The Committee also reserves the right to
delegate its authority to make
decisions.
10. Employment Rights and Other Benefit Programs. The
provisions of this Plan shall not give
any Participant any right to be retained in the employment of the
Employer. This Plan shall not
replace any contract of employment, whether oral or written,
between the Employer and any
Participant, but shall be considered a supplement thereto. This
Plan is in addition to, and not in
lieu of, any other employee benefit plan or program in which any
Participant may be or become
eligible to participate by reason of employment with the
Employer. The receipt of benefits
hereunder shall have such effect on contributions to and benefits
under such other plans or
programs as the provisions of each such other plan or program may
specify.
11. Applicability to Successors. This Plan shall be binding
upon and inure to the benefit of the
Employer and each Participant, the successors and assigns of the
Employer, and the beneficiaries,
personal representatives and heirs of each Participant. If the
Employer becomes a party to any
merger, consolidation or reorganization, this Plan shall remain
in full force and effect as an
obligation of the Employer or its successors in interest.
12. Amendment and Termination. The Board of Directors of the
Employer may amend this
Nonqualified Pension Plan prospectively, retroactively, or both,
at any time and for any reason
deemed sufficient by it without notice to any person affected by
this Plan and may likewise
terminate or curtail the benefits of this Plan both with regard
to persons expecting to receive
benefits hereunder in the future and persons already receiving
benefits at the time of such action.
13. Plan Administrator. The Employer shall be the plan
administrator of this Plan.
14. Conflicts of Interest. If any officer or employee of the
Employer, or any member of the
Board of Directors of the Employer shall also be a Participant in
the Plan, such Participant shall
have no authority as such officer, employee or member with
respect to any matter specially affecting
such Participant's individual interest hereunder, all such
authority being reserved exclusively to the
other officers, employees or members as the case may be, to the
exclusion of such Participant, and
such Participant shall act only in such Participant's individual
capacity in connection with any such
matter.
15. Construction. This Nonqualified Pension Plan is adopted
with the understanding that it is
both an unfunded excess benefit plan within the meaning of
sections 3(36) and 4(b)(5) of ERISA and
an unfunded plan of deferred compensation for a select group of
management or highly
compensated employees with the meaning of sections 3(36), 201,
301 and 401 of ERISA, and each
provision hereof shall be interpreted and administered
accordingly. This Plan will not provide any
excess benefits with respect to any defined contribution profit
sharing plan, stock bonus plan,
employee stock ownership plan or PAYSOP nor shall it duplicate
any benefits which are provided
pursuant to any other agreement, arrangement or plan. References
to the Board of Directors shall
include any committee of the Board to whom a function under this
Plan may have been assigned.
This Plan is adopted in the State of Minnesota and shall be
construed and enforced according to the
laws of that State.
December 13, 1993 OTTER TAIL POWER COMPANY
By Richard W. Muehlhausen
Its Vice President
Corporate Services
And Jay D. Myster
Its Vice President
Governmental & Legal
Corporate Secretary
Exhibit 10-N-5
OTTER TAIL POWER COMPANY
NONQUALIFIED PROFIT SHARING PLAN
WITNESSETH: That
WHEREAS, Otter Tail Power Company, a Minnesota corporation,
by action of its Board
of Directors taken on December 13, 1993, has authorized the
creation of a nonqualified, unfunded,
deferred compensation and excess benefits plan effective January
1, 1994, for the benefit of a select
group of management or highly compensated eligible employees as
set forth in the document entitled
Nonqualified Profit Sharing Plan; and
WHEREAS, This is the document so approved and adopted;
NOW, THEREFORE, Otter Tail Power Company does hereby create
and establish such
deferred compensation and excess benefit plan to read in full as
follows:
1. Plan Purposes. The Otter Tail Power Company Nonqualified
Profit Sharing Plan
( Nonqualified Profit Sharing Plan or Plan ) is an unfunded,
deferred compensation and excess
benefit plan established by Otter Tail Power Company, a Minnesota
corporation ( Employer ) for
the purpose of providing a select group of management or highly
compensated employees of the
Employer and certain affiliated corporations who are participants
in the Otter Tail Power Company
Employee Stock Ownership Plan (the ESOP ) with benefits which
would have been provided under
the ESOP but for the limitations of sections 401(a)(17) and 415
of the Internal Revenue Code
( CODE ).
2. Effective Date. January 1, 1994.
3. Coverage. An individual shall participate in and receive
benefits under the Nonqualified
Profit Sharing Plan if that individual:
(i) is, on or after January 1, 1994, actively
employed by the Employer or by any
subsidiary or affiliate of the Employer which
is a participating employer
under ESOP, and
(ii) is on or after January 1, 1994, a participant
in the ESOP, and
(iii) is affirmatively selected for participation
in the Nonqualified Profit Sharing
Plan by the Administrative Committee of the
ESOP ( Committee ).
Any employee who receives a benefit in the Plan is hereinafter
called a Participant.
4. Specific Exclusions from Coverage. Notwithstanding anything
apparently to the contrary
in this Plan or in any written communication, summary, resolution
or document or oral
communication, no individual shall be a Participant in this Plan,
develop benefits under this Plan
or be entitled to receive benefits under this Plan (either for
himself or his survivors) unless such
individual is a member of a select group of management or highly
compensated employees (as that
expression is used in the Employee Retirement Income Security Act
of 1974 ( ERISA ). If a court
of competent jurisdiction, any representative of the U.S.
Department of Labor or any other
governmental, regulatory or similar body makes any direct or
indirect, formal or informal,
determination that an individual is not a member of a select
group of management or highly
compensated employees (as that expression is used in ERISA), such
individual shall not be (and shall
not have ever been) a Participant in this Plan at any time. If
any person not so defined has been
erroneously treated as a Participant in this Plan, upon discovery
of such error, such person s
erroneous participation shall immediately terminate ab initio,
all benefits erroneously treated as
having accrued for the individual shall be immediately and
irrevocably forfeited and the individual
(or his or her beneficiaries and estate) shall be obligated to
repay any benefits previously and
erroneously paid.
5. Nonqualified Profit Sharing Account. Subject to the
following rules, there shall be created
and maintained for each Participant an unfunded bookkeeping
account ( Nonqualified Account )
on the books of the Employer.
5.1. Credits to the Account. The credit to each account for
each calendar year shall equal
the excess, if any, of (a) over (b), where
(a) is the dollar amount of the that would have been
credited to the Participant s
account or accounts in the ESOP for such calendar year
if the dollar amount had
been determined without regard to the benefit
limitations in section 415 of the Code
and without regard to the compensation limitation in
section 401(a)(17) of the Code,
and
(b) is the dollar amount actually credited to the
Participant s account or accounts in the
ESOP as limited by sections 401(a)(17) and 415 of the
Code.
Insofar as is practicable, the amount described in this Section
5.1 shall be credited to the
Nonqualified Account at the time or times when such amount (or
comparable amount) would have
in fact been contributed (not accrued) to the ESOP but for the
limitations of sections 401(a)(17) and
415 of the Code as described above.
5.2. Value of the Account. The value of the Nonqualified
Account shall be determined
as if the credits to the Account had in fact been immediately
invested in accordance with the terms
of the ESOP, and any dividends, interest and similar amounts that
would have been received with
respect to such investment under the ESOP had been immediately
reinvested under the ESOP.
No amount shall be credited under this Section 5 to the
Nonqualified Account with respect to any
period of time following the first business day of the calendar
year immediately following the
calendar year in which the Participant terminates employment with
the Employer.
6. Benefit Payments.
6.1. Eligibility for Payments. Each Participant or, in the
event of death, the beneficiary
designated by the Participant for the purposes of the ESOP (or
established by operation of the rules
of the ESOP) shall be entitled to benefits under this Plan upon
the Participant s termination of
employment with the Employer (or affiliate of the Employer),
whether voluntary or involuntary,
upon the Participant s permanent and total disability or upon the
Participant s death. A transfer
of employment from the Employer to an affiliate of the Employer
shall not be considered a
termination of employment.
6.2. Time and Form of Payments. Benefits shall be paid to
the Participant in a single
lump sum cash payment as of the Valuation Date (as that term is
defined in the ESOP) immediately
following the date on which the event referred to in Section 6.1
occurs. Benefits shall be paid to a
beneficiary in a single lump sum cash payment as of the Valuation
Date immediately following the
date of the Participant s death. Actual payment shall occur as
soon as administratively feasible after
such dates. Rules governing the payment of benefits under the
ESOP shall be given no effect under
this Plan in determining the time or form in which the
Nonqualified Account is paid under this Plan.
6.3. Amount of Payment. The amount of the benefit shall be
the fair market value of the
credits in the Nonqualified Account on the Valuation Date as of
which of such payment is made.
6.4. Nontransferability. Participants and beneficiaries
shall not have the right to assign,
encumber or otherwise anticipate the payments to be made under
this Plan, and the benefits
provided hereunder shall not be subject to seizure for payment of
any debts or judgments against
any Participant or any beneficiary.
6.5. Tax Withholding. The Employer may deduct from any
benefit payment (and
transmit to the proper taxing authority) such amount as it may be
required to withhold under any
federal, state or other law.
7. Not Funded. The obligation of the Employer to make payments
under the Nonqualified
Profit Sharing Plan constitutes only the unsecured (but legally
enforceable) promise of the Employer
to make such payments, and the Participant shall have no lien,
prior claim or other security interest
in any property of the Employer. No fund, trust or account
(other than an bookkeeping account
or reserve) will be established or maintained by the Employer for
the purpose of funding or paying
the benefits promised under the Plan. If such a fund is
established, the property therein shall
remain the sole and exclusive property of the Employer. the
Employer will pay the cost of the Plan
out of its general assets. All references to accounts, credits,
gains, losses, income, expenses, payments
and the like are included merely for the purpose of measuring the
Employer s obligation to
Participants in this Plan and shall not be construed to impose on
the Employer the obligation to
create any separate fund for purposes of the Plan.
8. Claims Procedure. Payments will be paid to each Participant
automatically. Payments will
be made to a beneficiary only after a proper written claim for
payment as been filed with the
Committee. If any Participant or beneficiary is in disagreement
with any determination that has
been made, a claim may be presented.
8.1. Making a Claim. The claim must be written and must be
delivered to the
Committee. Within 90 days after the claim is delivered the
claimant will receive either: (a) a
decision; or (b) a notice describing specific special
circumstances requiring a specified amount of
additional time (but no more than 180 days from the date the
claim was delivered) to reach a
decision.
If the claim wholly or partially denied, the claimant will
receive a written notice specifying: (a) the
reasons for the denial; (b) the Plan provisions on which the
denial is based; and (c) any additional
information needed in connection with the claim and the reason
such information is needed. A copy
of Paragraph 8.2 below concerning the claimant s right to request
a review will also be given to the
claimant.
8.2. Requesting Review of Denied Claim. A claimant may
request that a denied claim
be reviewed. The request for review must be written and must be
delivered to the Committee within
60 days after the claimant s receipt of notice that the claim was
denied. A request for review may
(but is not required to) include issues and comments the claimant
wants considered in the review.
The claimant may examine pertinent Plan documents by asking the
Committee. Within 60 days
after the delivery of the request for review, the claimant will
receive either (a) a decision; or (b) a
notice describing specific special circumstances requiring a
specified amount of additional time (but
not more than 120 days from the date the request for review was
delivered) to reach a decision.
The decision will be in writing and will specify the Plan
provisions on which it is based.
8.3. In General. All decisions on claims and on requests
for a review of denied claims
shall be made by the Committee. The Committee may, in its
discretion, hold one or more hearings
on a claim or a request for a review of a denied claim. If a
claimant does not receive a decision
within the time specified, the claimant should assume the claim
was denied or re-denied on the date
the specified time expired. The claimant may, at claimant s own
expense, have an attorney or other
representative act on behalf of the claimant, but the Committee
reserves the right to require a
written authorization. The Committee also reserves the right to
delegate its authority to make
decisions.
9. Employment Rights and Other Benefit Programs. The
provisions of this Plan shall not give
any Participant any right to be retained in the employment of the
Employer. This Plan shall not
replace any contract of employment, whether oral or written,
between the Employer and any
Participant, but shall be considered a supplement thereto. This
Plan is in addition to, and not in
lieu of, any other employee benefit plan or program in which any
Participant may be or become
eligible to participate by reason of employment with the
Employer. Deferral of compensation and
receipt of benefits hereunder shall have such effect on
contributions to and benefits under such other
plans or programs as the provisions of each such other plan or
program may specify.
10. Applicability to Successors. This Plan shall be binding
upon and inure to the benefit of the
Employer and each Participant, the successors and assigns of the
Employer, and the beneficiaries,
personal representatives and heirs of each Participant. If the
Employer becomes a party to any
merger, consolidation or reorganization, this Plan shall remain
in full force and effect as an
obligation of the Employer or its successors in interest.
11. Amendment and Termination. The Board of Directors of the
Employer may amend this
Nonqualified Profit Sharing Plan prospectively, retroactively, or
both, at any time and for any
reason deemed sufficient by it without notice to any person
affected by this Plan and may likewise
terminate or curtail the benefits of this Plan both with regard
to persons expecting to receive
benefits hereunder in the future and persons already receiving
benefits at the time of such action
12. Plan Administrator. The Employer shall be the plan
administrator of this Plan.
13. Conflicts of Interest. If any officer or employee of the
Employer, or any member of the
Board of Directors of the Employer shall also be a Participant in
the Plan, such Participant shall
have no authority as such officer, employee or member with
respect to any matter specially affecting
such Participant s individual interest hereunder, all such
authority being reserved exclusively to the
other officers, employees or members as the case may be, to the
exclusion of such Participant, and
such Participant shall act only in such Participant s individual
capacity in connection with any such
matter.
14. Construction. This Nonqualified Profit Sharing Plan is
adopted with the understanding that
it is an unfunded excess benefit plan within the meaning of ERISA
sections 3(36) and 4(b)(5) and
an unfunded plan of deferred compensation for a select group of
management or highly
compensated employees with the meaning of ERISA sections 3(36),
201, 301 and 401, and each
provision hereof shall be interpreted and administered
accordingly. This Plan will not provide any
excess benefits with respect to any defined benefit pension plan
nor shall it duplicate any benefits
which are provided pursuant to any other agreement, arrangement
or plan. References to the Board
of Directors shall include any committee of the Board to whom a
function under this Plan may have
been assigned. This Plan is adopted in the State of Minnesota
and shall be construed and enforced
according to the laws of that State.
December 13, 1993 OTTER TAIL POWER COMPANY
By R. W. Muehlhausen
Its Vice President
Corporate Services
And Jay D. Myster
Its Vice President
Governmenal & Legal
Corporate Secretary
Exhibit 10-N-6
OTTER TAIL POWER COMPANY
NONQUALIFIED RETIREMENT SAVINGS PLAN
WITNESSETH: That
WHEREAS, Otter Tail Power Company, a Minnesota corporation,
by action of its Board
of Directors taken on December 13, 1993, has authorized the
creation of a nonqualified, unfunded,
deferred compensation plan effective January 1, 1994, for the
benefit of a select group of
management or highly compensated eligible employees as set forth
in the document entitled
Nonqualified Retirement Savings Plan; and
WHEREAS, This is the document so approved and adopted;
NOW, THEREFORE, Otter Tail Power Company does hereby create
and establish such
deferred compensation plan to read in full as follows:
1. Plan Purpose. The purpose of the Otter Tail Power Company
Nonqualified Retirement
Savings Plan ( Nonqualified Retirement Savings Plan or Plan )
is to provide eligible employees
of Otter Tail Power Company (the Employer ) and certain
affiliated corporations the opportunity
to defer compensation in addition to the amounts such employees
are allowed to defer under the
Otter Tail Power Company Nonunion Employees Retirement Savings
Plan ( Qualified Retirement
Savings Plan ).
2. Effective Date. January 1, 1994.
3. Coverage. The Nonqualified Retirement Savings Plan shall be
made available to a group
of management or highly compensated employees of the Employer and
certain affiliated corporations
who are affirmatively selected by the Administrative Committee of
the Qualified Retirement Savings
Plan (the Committee ). Any such employee who elects to
participate in the Nonqualified
Retirement Savings Plan is hereinafter called a Participant.
4. Specific Exclusions from Coverage. Notwithstanding anything
apparently to the contrary
herein or in any written communication, summary, resolution or
document or oral communication,
no individual shall be a Participant in the Plan, develop
benefits under the Plan or be entitled to
receive benefits under the Plan (either for himself or his
survivors) unless such individual is a
member of a select group of management or highly compensated
employees (as that expression is
used in the Employee Retirement Income Security Act of 1974 (
ERISA )). If a court of competent
jurisdiction, any representative of the U.S. Department of Labor
or any other governmental,
regulatory or similar body makes any direct or indirect, formal
or informal, determination that an
individual is not a member of a select group of management or
highly compensated employees (as
that expression is used in ERISA), such individual shall not be
(and shall not have ever been) a
Participant in this Plan at any time. If any person not so
defined has been erroneously treated as
a Participant in the Plan, upon discovery of such error, such
person s erroneous participation shall
immediately terminate ab initio, all benefits erroneously treated
as having accrued for the individual
shall be immediately and irrevocably forfeited and the individual
(or his or her beneficiaries and
estate) shall be obligated to repay any benefits previously and
erroneously paid.
5. Elections to Defer Compensation. A Participant may enroll
in the Nonqualified Retirement
Savings Plan by electing to have an amount, expressed as a
percentage, of such Participant s annual
compensation (excluding Gain Share payments, if any) which would
otherwise be received and
included in gross income deferred in accordance with the
provisions herein. A separate election, also
expressed as a percentage, may be made with respect to the
Participant s annual Gain Share
payment, if any. Such elections must be in writing and must be
received by the Committee prior
to the January 1 on which such elections are to be first
effective.
An election will remain in effect until revised or revoked by the
Participant. The revised election
or the revocation of an election must be in writing and must be
received by the Committee before
the January 1 on which it is to take effect.
6. Nonqualified Retirement Savings Accounts.
6.1. Establishment of Accounts. The amount of benefits to
be paid by the Employer to
each Participant under this Plan shall be determined by reference
to an unfunded bookkeeping
account ( Nonqualified Account ), which the Employer shall
establish and maintain for each
Participant and which shall be adjusted as of each Valuation
Date, which dates shall be the same
as the valuation dates under the Qualified Retirement Savings
Plan.
6.2. Compensation Credits to Accounts. As of each Valuation
Date, the Nonqualified
Account shall be credited with the amount of compensation which,
but for an election
under Section 5, would have been paid to the Participant on or
before such Valuation Date but after
the immediately preceding Valuation Date.
6.3. Investment Credits to or Charges Against Accounts. The
Employer shall be deemed
to have invested all compensation that is credited to the
Nonqualified Account in the Balanced Fund
(or a comparable fund designated by the Committee) established
under the Qualified Retirement
Savings Plan. As of each Valuation Date, there shall be credited
to (or charged against) each
Nonqualified Account the pro rata increase (or decrease) in the
such Fund from the immediately
preceding Valuation Date.
6.4. Charges Against Accounts for Benefit Payments. On each
date that a benefit
payment is made by the Employer under the Nonqualified Retirement
Savings Plan, the amount of
such payment shall be charged against the appropriate
Nonqualified Account.
6.5. Reports. As soon as administratively feasible after
each December 31, the Employer
shall make a report to each Participant (or, in the event of
death, to the beneficiary) showing:
(a) The balance of the Nonqualified Account as of the
preceding December 31,
(b) The amounts and dates of the credits to the
Nonqualified Account since such date,
(c) The amounts and dates of the charges against the
Nonqualified Account since such
date,
(d) The balance of the Nonqualified Account as of the
December 31 in question.
7. Benefit Payments.
7.1. Eligibility for Payments. Each Participant or, in the
event of death, the beneficiary
designated by the Participant for the purposes of the Qualified
Retirement Savings Plan (or
established by operation of the rules of the Qualified Retirement
Savings Plan) shall be entitled to
benefits under this Plan upon the Participant s termination of
employment with the Employer or
affiliate of the Employer, whether voluntary or involuntary, upon
the Participant s permanent and
total disability or upon the Participant s death. A transfer of
employment from the Employer to
an affiliate of the Employer shall not be considered a
termination of employment.
7.2. Time and Form of Payments. Benefits shall be paid to a
Participant in a single lump
sum cash payment as of the Valuation Date immediately following
the date on which the event
referred to in Section 7.1 occurs. Benefits shall be paid to a
beneficiary in a single lump sum cash
payment as of the Valuation Date immediately following the date
of the Participant s death. Actual
payment shall occur as soon as administratively feasible after
such dates. Rules governing the
payment of benefits under the Qualified Retirement Savings Plan
shall be given no effect under this
Plan in determining the time or form in which the Nonqualified
Account is paid.
7.3. Amount of Payments. The amount of the lump sum payment
shall be the fair market
value of the credits in the Nonqualified Account on the Valuation
Date as of which such payment
is made.
7.4. Nontransferability. Participants and beneficiaries
shall not have the right to assign,
encumber or otherwise anticipate the payments to be made under
this Plan, and the benefits
provided hereunder shall not be subject to seizure for payment of
any debts or judgments against
any Participant or any beneficiary.
7.5. Tax Withholding. The Employer may deduct from any
benefit payment (and
transmit to the proper taxing authority) such amount as it may be
required to withhold under any
federal, state or other law. The Employer may deduct FICA taxes
on compensation deferred under
this Plan from the Participant s nondeferred compensation.
8. Not Funded. The obligation of the Employer to make payments
under the Nonqualified
Retirement Savings Plan constitutes only the unsecured (but
legally enforceable) promise of the
Employer to make such payments, and the Participant shall have no
lien, prior claim or other
security interest in any property of the Employer. No fund,
trust or account (other than a
bookkeeping account or reserve) will be established or maintained
by the Employer for the purpose
of funding or paying the benefits promised under the Plan. If
such a fund is established, the
property therein shall remain the sole and exclusive property of
the Employer. The Employer will
pay the cost of the Plan out of its general assets. All
references to accounts, credits, gains, losses,
income, expenses, payments, custodial funds and the like are
included merely for the purpose of
measuring the Employer s obligation to Participants in this Plan
and shall not be construed to
impose on the Employer the obligation to create any separate fund
for purposes of the Plan.
9. Claims Procedure. Payments will be paid to each Participant
automatically. Payments will
be made to a beneficiary only after a proper written claim for
payment has been filed with the
Committee. If any Participant or beneficiary is in disagreement
with any determination that has
been made, a claim may be presented.
9.1. Making a Claim. The claim must be written and must be
delivered to the
Committee. Within 90 days after the claim is delivered, the
claimant will receive either: (a) a
decision; or (b) a notice describing special circumstances
requiring a specified amount of additional
time (but no more than 180 days from the day the claim was
delivered) to reach a decision.
If the claim is wholly or partially denied, the claimant will
receive a written notice specifying: (a)
the reasons for denial; (b) the Plan provisions on which the
denial is based; and (c) any additional
information needed in connection with the claim and the reason
such information is needed. A copy
of Paragraph 9.2 below concerning the claimant s right to request
a review will also be given to the
claimant.
9.2. Requesting Review of a Denied Claim. A claimant may
request that a denied claim
be reviewed. The request for review must be written and must be
delivered to the Committee within
60 days after claimant s receipt of written notice that the claim
was denied. A request for review
may (but is not required to) include issues and comments the
claimant wants considered in the
review. The claimant may examine pertinent Plan documents by
asking the Committee. Within 60
days after delivery of a request for review, claimant will
receive either: (a) a decision; or (b) a
notice describing special circumstances requiring a specified
amount of additional time (but no more
than 120 days from the day the request for review was delivered)
to reach a decision.
The decision will be in writing and will specify the Plan
provisions on which it is based.
9.3. In General. All decisions on claims and on reviews of
denied claims will be made
by the Committee. The Committee may, in its discretion, hold one
or more hearings. If a claimant
does not receive a decision within the specified time, the
claimant should assume the claim was
denied or re-denied on the date the specified time expired. The
claimant may, at the claimant s own
expense, have an attorney or other representative act on behalf
of the claimant, but the Committee
reserves the right to require a written authorization. The
Committee also reserves the right to
delegate its authority to make decisions.
10. Employment Rights and Other Benefit Programs. The
provisions of this Plan shall not give
any Participant any right to be retained in the employment of the
Employer. This Plan shall not
replace any contract of employment, whether oral or written,
between the Employer and any
Participant, but shall be considered a supplement thereto. This
Plan is in addition to, and not in
lieu of, any other employee benefit plan or program in which any
Participant may be or become
eligible to participate by reason of employment with the
Employer. Deferral of compensation and
receipt of benefits hereunder shall have such effect on
contributions to and benefits under such other
plans or programs as the provisions of each such other plan or
program may specify.
11. Applicability to Successors. This Plan shall be binding
upon and inure to the benefit of the
Employer and each Participant, the successors and assigns of the
Employer, and the beneficiaries,
personal representatives and heirs of each Participant. If the
Employer becomes a party to any
merger, consolidation or reorganization, this Plan shall remain
in full force and effect as an
obligation of the Employer or its successors in interest.
12. Amendment and Termination. The Board of Directors of the
Employer may amend this
Nonqualified Retirement Savings Plan prospectively,
retroactively, or both, at any time and for any
reason deemed sufficient by it without notice to any person
affected by this Plan and may likewise
terminate or curtail the benefits of this Plan both with regard
to persons expecting to receive
benefits hereunder in the future and persons already receiving
benefits at the time of such action
13. Plan Administrator. The Employer shall be the plan
administrator of this Plan.
14. Conflicts of Interest. If any officer or employee of the
Employer, or any member of the
Board of Directors of the Employer shall also be a Participant in
the Plan, such Participant shall
have no authority as such officer, employee or member with
respect to any matter specially affecting
such Participant s individual interest hereunder, all such
authority being reserved exclusively to the
other officers, employees or members as the case may be, to the
exclusion of such Participant, and
such Participant shall act only in such Participant s individual
capacity in connection with any such
matter.
15. Construction. This Nonqualified Retirement Savings Plan is
adopted with the understanding
that it is an unfunded, deferred compensation plan for a select
group of management or highly
compensated employees within the meaning of sections 3(36), 201,
301 and 401 of the Employee
Retirement Income Security Act of 1974, as amended, and each
provision hereof shall be interpreted
and administered accordingly. This Plan will not provide any
benefits with respect to any defined
benefit pension plan nor shall it duplicate any benefits which
are provided pursuant to any other
agreement, arrangement or plan. References to the Board of
Directors shall include any committee
of the Board to whom a function under this Plan may have been
assigned. This Plan is adopted in
the State of Minnesota and shall be construed and enforced
according to the laws of that State.
December 13, 1993 OTTER TAIL POWER COMPANY
By R. W. Muehlhausen
Its Vice President
Corporate Services
And Jay D. Myster
Its Vice President
Governmental & Legal
Corporate Secretary
Exhibit 10-O
DEALER AGREEMENT
BETWEEN
PHILIPS MEDICAL SYSTEMS NORTH AMERICA COMPANY
AND
DIAGNOSTIC MEDICAL SYSTEMS, INC.
THIS AGREEMENT is entered into on this 18th day of
January, 1994, by and between Philips Medical Systems
North America Company, a division of Philips Electronics North
America Corporation, with its principal place of business at 710
Bridgeport Avenue, Shelton, Connecticut 06484 (hereinafter
"PMSNA") and Diagnostic Medical Systems, Inc. (hereinafter
"Dealer"), a wholly owned subsidiary of Mid-States Development,
Inc. with its principal place of business at 2101 North
University Drive, Fargo, North Dakota 58102.
WHEREAS, PMSNA is engaged in, among other things, the
design, development, manufacture and sales of diagnostic imaging
equipment to the medical profession, hospitals, clinics, national
accounts and the government.
WHEREAS, Dealer desires to be a dealer for certain PMSNA
products and accounts.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements between the parties hereto, it is agreed as follows:
1. SCOPE
PMSNA grants to Dealer the right to purchase the
products identified on Schedule A, which is attached hereto and
incorporated by reference herein ("Product(s)") on terms and
conditions which are set forth below. PMSNA has the option of
adding or deleting products from this list upon sixty (60) days
prior written notice.
2. TERRITORY
PMSNA grants to Dealer an exclusive right to sell
Products in the Territory as described more fully in Schedule B,
which is attached hereto and incorporated by reference herein.
PMSNA may however directly sell products in the Territory as
follows:
(a) Any Products or related components to
manufacturers for incorporation in or as replacement parts for
systems manufactured by PMSNA .
(b) Any specially designed Products which may or may
not be listed in Schedule A.
(c) Any Products to any agency of the United States
government and to national accounts in accordance with Schedule
D, which is attached hereto and incorporated by reference herein.
The Dealer agrees that neither it nor any of its
employees or agents will, without the prior written approval of
PMSNA, sell Products, equipment (including used or refurbished
Philips equipment), or spare parts outside the Territory, and it
will sell Products, equipment, spare parts, testing equipment,
service tools and any other documentation which is designated by
PMSNA as proprietary, only to end users of Philips equipment
within the Territory. Breach of this provision shall be
considered a material breach of this Agreement and may result in
termination pursuant to Paragraph 20 below.
3. LIMITATIONS ON SALE OF EQUIPMENT AND PARTS
Dealer agrees to sell only PMSNA's equipment and parts.
PMSNA may, however, grant exceptions, in writing, for diagnostic
X-ray equipment which is not regarded as competitive and for
certain parts. Such exceptions are not perpetual and must be
renewed via the annual Dealer Agreement. The sale of competitive
equipment to any third party, shall constitute a material breach
of this Agreement, and may result in termination under the terms
and conditions of Paragraph 20 below.
4. PRICING
PMSNA agrees to sell to Dealer those products included
in Schedule A based on "Dealer Net Price List." PMSNA will honor
prices in the "Dealer Net Price List" for a period of thirty (30)
days after any change has been made in such list.
5. FINAL SELLING PRICE
A PMSNA suggested selling price is not a requirement
to sell Products at a particular price.
6. ORDERS AND DELIVERY
Orders for equipment or subsystems shall not be binding
on PMSNA until approved and accepted in writing by PMSNA's
Commercial Operations Department in Shelton, CT. All orders for
Products shall be subject to the terms of this Agreement and any
provision of Dealer's order inconsistent with this Agreement or
which seeks to impose additional or different obligations shall
not be valid.
PMSNA shall not be responsible for any special terms
agreed to by Dealer, outside the standard terms and conditions
including, but not limited to penalty clauses, liquidated
damages, extended warranties and training.
The following provisions shall apply to all Dealer orders:
(a) All orders for equipment, components and upgrades
over $15,000, (defined as acknowledgment of a clean,
noncontingent order, accompanied by a deposit), placed by Dealer,
shall include a ten percent (10%) down payment. Such orders will
be at the then current Dealer net price, providing Dealer accepts
shipment within twelve (12) months. Down payments are waived for
orders placed for shipment to National Account hospitals set
forth in Schedule D.
(b) Final Dealer net prices for orders requesting
delivery beyond the twelve (12) month period will be forward
priced to the lower of either the Dealer Net Price in effect at
the time of delivery or the original Dealer Net Price plus one
percent (1%) per month beginning with the thirteenth (13) month,
unless the delivery delay is caused by PMSNA. Dealer Net Price
for orders accompanied by delivery requests greater than eighteen
(18) months from the date of order will be determined after
consultation with PMSNA's Vice President of Sales.
(c) PMSNA will treat contingent orders as "Entered"
upon the showing of the actual customer order, presentation of
standard down payment and PMSNA's acceptance consistent with
paragraph 6(a) above. Dealer must include a complete description
of the nature and scope of the contingency. All contingencies
must be removed within six (6) months of original order and
delivery must be accepted within twelve (12) months of original
Dealer order, otherwise paragraph 6(b) above shall apply.
Contingent orders shall only be scheduled for delivery upon
receipt of written notice by Dealer to PMSNA of the contingency
release.
(d) PMSNA will exercise its best efforts to schedule
deliveries consistent with the dates specified on Dealer's order,
provided that the requested shipment time equals or exceeds the
normal factory delivery schedule. Changes or deferrals of the
requested delivery date must be made in writing to PMSNA at least
sixty (60) days prior to the scheduled factory shipment. If the
required notice for change of delivery is not provided, Dealer
will accept shipment on the original requested date and honor all
payment terms as specified herein.
(e) PMSNA will charge a restocking fee of five percent
(5%) or the specific factory restocking charge as invoiced,
whichever is higher for any order canceled within the 60 day
frozen period. Dealer shall also be responsible for rehandling
and transportation costs associated with any orders canceled
while in transit from factories or Shelton.
(f) Dealer shall pay a 15% restocking fee if change
orders deleting equipment are made after shipment, provided that
the change order was not caused by PMSNA.
(g) If a request for return and credit is made in
writing within more than three (3) but less than nine (9) months
after shipment, the maximum credit shall be 50% of original
invoice price. No credit is available if the request is made
more than nine (9) months after shipment.
(h) Dealer shall update the backlog status on all
orders in the backlog on a bi-weekly basis.
7. PAYMENT AND LATE PAYMENT
Dealer shall pay for equipment, within forty-five (45)
days and for subsystems and all service and spare parts within
thirty (30) days of receipt of PMSNA's invoice for all Products
ordered and shipped under this Agreement. Unless Dealer notifies
PMSNA in writing that an invoice is being disputed, detailing
reasons for such dispute, PMSNA reserves the right to charge
interest at five percent (5%) above the prime rate for business
loans charged by the Citibank of New York at the end of the
calendar month that payment is due, or the maximum rate allowed
by law, whichever is lower. Any disputed issues must be resolved
within sixty (60) days from date of invoice, and if no resolution
is achieved, then interest shall be charged following said sixty
(60) day period.
Dealer must immediately notify PMSNA's Manager of
Dealer Operations if it intends to withhold payment. Only
payment for that portion of an order which is in dispute may be
withheld, and not payment for the entire order. The authorized
senior representatives of both parties must communicate by
telephone within ten (10) working days following such
notification. If resolution cannot be achieved, then PMSNA will
enforce the original invoice. The Dealer shall, however, retain
its remedies at law to dispute PMSNA's decision if it so wishes.
8. F.O.B. TERMS
All Dealer Net Prices shall be F.O.B. point of
shipment utilizing land or sea freight. After the equipment has
reached the U.S., all surface freight costs from distribution
center to Dealer will be paid by PMSNA.
9. DEALER FORECASTS
Dealer will exercise its best efforts in providing
accurate estimates of Products to be purchased over a twelve (12)
month period and to participate in PMSNA's Market Activity
Profile ("MAPS") on a monthly basis or as requested by PMSNA.
Dealer will also provide, as requested by PMSNA, detailed
business plans supporting these forecasts, including semiannual
operations reviews in writing, discussing its plans, results,
personnel, support requirements and financial details. Dealer
shall provide profit and loss statements and balance sheets on a
quarterly basis (unless waived by PMSNA) and submit audited
statements on an annual basis for credit evaluation purposes.
Failure to provide this information will be deemed a material
breach of the Agreement.
10. SALES, INSTALLATION AND SERVICE
Dealer shall use its best efforts to sell, distribute,
install and service Products to meet or exceed the performance
goals and quotas established by PMSNA as set forth in Schedule C,
which is attached hereto and incorporated by reference herein.
In order to accomplish this, Dealer shall maintain such
facilities for sales and service as are reasonably considered by
PMSNA to be necessary for compliance with this Agreement. In
addition, Dealer shall maintain a sales and service staff
considered by PMSNA adequate in size, education, ability and
experience to sell, distribute, install and service Products.
PMSNA may, at its option, make joint service calls with Dealer.
Failure to meet PMSNA's requirements in this regard
shall be considered a material breach of this Agreement and may
result in termination under Paragraph 20 below.
11. REPAIR
PMSNA guarantees all Products sold hereunder according
to the terms and conditions of the standard printed warranties as
set forth in Schedule E. NO OTHER WARRANTIES, EITHER EXPRESS OR
IMPLIED, SHALL APPLY TO ANY PRODUCTS SOLD HEREUNDER, and Dealer
shall not obligate nor shall it attempt to obligate PMSNA to any
third parties by means of warranties or guarantees on the
Products other than such standard warranties. Dealer shall, at
its expense, perform warranty service on all Products sold, at no
additional charge to the customer and, shall buy parts for that
purpose except that costs associated with mandatory modifications
shall be borne by PMSNA. Expenses associated with such
replacement shall, however, be factored into the discount on
equipment. Dealer agrees to comply with the warranty procedures
set forth in Schedule E which is attached hereto and incorporated
by reference herein.
If PMSNA incurs any expense in the exchange of Products
or the repair thereof caused by the failure of Dealer to fulfill
its obligations hereunder, then PMSNA shall invoice Dealer for
such costs. In doing so, PMSNA does not waive any other rights
it may have with respect to this Agreement. Dealer agrees to
maintain sufficient equipment and replacement parts to adequately
maintain and service the Products sold hereunder and shall
purchase such tools and test equipment as PMSNA considers
necessary for the proper installation, maintenance and service of
the Products .
PMSNA shall replace parts or credit Dealer for parts
required to repair failures during the standard installation
period (See Schedule F) at no cost to the Dealer. If the Product
is not directly shipped to a customer site, or if installations
do not start, then the Dealer must notify PMSNA in writing when
installation actually begins. This period shall not generally be
longer than ninety (90) days from shipment by PMSNA; however, if
Dealer can demonstrate, to PMSNA's satisfaction that, through no
fault of the Dealer, an installation cannot be accomplished
within the 90 day time frame, PMSNA may grant an extension.
12. NOTIFICATION TO PMSNA OF COMPLAINTS
If a Product allegedly caused an injury to persons or
property or if a Product allegedly failed to meet any of its
performance specifications or otherwise allegedly failed to
perform as intended or if Dealer receives any information
regarding dissatisfaction by a customer relative to the identity,
quality, durability, reliability, effectiveness or performance of
a Product, Dealer will immediately notify PMSNA's Manager of
Regulatory Affairs and the Manager of Dealer Operations in
Shelton of such occurrences. In all other respects, Dealer will
cooperate with PMSNA in the investigation of all complaints for
regulatory and product liability purposes. Dealer shall, in
addition, make required repairs as well as mandatory and
performance modifications at Dealer's cost and assist in whatever
corrective actions are necessary.
PMSNA shall supply parts to Dealer free of charge, for
mandatory modifications, with all labor expenses to be borne by
Dealer.
13. LICENSES
Philips may, from time to time, provide, at Dealer's
request and expense, service documentation and service software.
This information shall remain the sole and exclusive property of
PMSNA.
In order to protect its right, title and interest in
and to such documentation and software, Philips grants to Dealer,
non-transferable and non-exclusive licenses to use the
information contained therein, upon the terms and conditions set
forth in Schedules G and H to this Agreement.
14. COMPLIANCE WITH LAWS
Dealer represents that it is in compliance with all
applicable local, state and Federal statutes, orders, rules,
regulations and ordinances with respect to conducting its
business in the Territory. Dealer represents that it has all
permits, licenses, and other authorizations necessary to conduct
business in the Territory.
15. FORCE MAJEURE
PMSNA shall not be responsible for indirect, direct or
consequential damages alleged to be sustained by Dealer for
failure to deliver Products for any reasons beyond its control.
16. TRADENAMES
Dealer may use the name "Philips" including, without
limitation, Philips Medical Systems North America Company, or any
other trademarks or word mark names owned by Philips Medical
Systems North America Company or its affiliates, parent company
or subsidiaries only with the prior written consent of PMSNA. If
Dealer wishes to use any such trademarks or tradenames for
purposes not connected with the marketing or sale of Products,
Dealer must obtain prior written approval from PMSNA.
17. RECORDS AND REPORTS
Dealer shall maintain complete records (including
serial number, date of purchase and name and address of
purchaser) of all Products sold and furnish such data to PMSNA
upon request. Dealer shall also furnish information to PMSNA
relating to sales, inventories, installation, servicing, repair
and similar data in such manner and at such times as PMSNA may
request.
18. TRAINING AND APPLICATIONS
Dealer agrees to assure that its sales and service
personnel are adequately trained and will, at Dealers own
expense, require its personnel to attend periodic sales and
service training conducted by PMSNA or Philips Medical Systems
International, B.V. at times and locations to be determined by
PMSNA. Dealer will provide equipment turnover and applications
training on the Equipment. If Dealer elects to use PMSNA's
Application Staff, PMSNA will bill Dealer for the services
according to current rates.
19. SHOWS AND EXHIBITIONS
Dealer shall cooperate with PMSNA by assisting at all
industry and professional shows and exhibitions as may be
reasonably requested by PMSNA.
20. TERM AND TERMINATION
This Agreement shall commence on the date entered into
and shall continue until December 31, 1998. It shall be
automatically terminated unless renewed by mutual written
agreement within thirty (30) days prior to December 31, 1998.
During this 60 month period, the parties will
renegotiate the sales target at least 60 days before the end of
each calendar year.
The basic terms and conditions of the Agreement, over the 60
month period shall reflect, in general, those offered to other
Philips dealers.
Notwithstanding the above, this Agreement may be
terminated by either party for a material breach upon ten (10)
days written notice or upon the occurrence of one or more of the
following:
(a) Any change in the ownership, structure of
ownership, financial interests or operational management of
Dealer and/or its subsidiary, Diagnostic Medical Systems, Inc.
(including the retirement, disability or death of Michael J.
Hofer) upon one hundred twenty (120) days written notice by
PMSNA.
(b) Any merger, acquisition, joint venture or change
in ownership of all or part of PMSNA.
(c) Failure of Dealer to achieve performance quotas as
set forth in Schedule C, if such failure is due principally to
acts or omissions of Dealer with respect to pursuing the
objectives set forth in Schedule C.
(d) Upon eighteen (18) months prior written notice by
PMSNA to Dealer, during which time dealer may begin exploring
opportunities for alternative suppliers, but may not begin
selling competitive equipment until the end of the eighteen (18)
month notification period.
Upon termination of this Agreement, PMSNA shall, at its
option:
(a) Deliver Products to Dealer to meet any purchase
order accepted by Dealer prior to termination, or
(b) Either permit Dealer to complete all obligations
with respect to the purchase order and receive its usual
compensation, or accept an assignment of such purchase order, in
which case PMSNA shall reimburse Dealer for any reasonable and
supportable expenses incurred in obtaining such order.
Following termination by PMSNA, Dealer shall be
reimbursed for any verifiable, authorized expenses it may have
incurred directly or indirectly as a result of written requests
made by PMSNA.
21. INDEMNIFICATION AND INSURANCE
(a) Dealer agrees to indemnify and hold PMSNA harmless
from and against any losses, damages, deficiencies, liabilities,
costs and expenses, including without limitation, interest,
penalties and attorneys' fees and expenses asserted against,
relating to, imposed upon or incurred by PMSNA directly or
indirectly by reason of or resulting from liabilities,
obligations or claims arising out of actions, omissions or events
with respect to Dealer's activities, if such damages were
incurred by Third Parties pursuant to the negligent acts or
omissions of Dealer or for Dealer's violation of laws. Dealer
shall make every effort to obtain adequate insurance coverage for
the acts or omissions of its employees. Under no circumstances
or for any reason shall PMSNA be responsible for indirect or
consequential damages associated with the acts of any employee,
agent or other party associated with the Dealer.
(b) PMSNA agrees to indemnify and hold Dealer harmless
from and against any losses, damages, deficiencies, liabilities,
costs and expenses, including without limitation, interest,
penalties and attorneys' fees and expenses asserted against,
relating to, imposed upon or incurred by Dealer directly or
indirectly by reason of or resulting from liabilities,
obligations or claims arising out of actions, omissions or events
with respect to PMSNA's activities, if such damages were incurred
by Third Parties pursuant to the negligent acts or omissions of
PMSNA or for PMSNA's violation of laws. PMSNA shall make every
effort to obtain adequate insurance coverage for the acts or
omissions of its employees. Under no circumstances or for any
reason shall Dealer be responsible for indirect or consequential
damages associated with the acts of any employee, agent or other
party associated with PMSNA.
22. CONFIDENTIALITY
Dealer shall keep in confidence and not divulge to
third parties any proprietary information relating to Philips
product development efforts, technology, trade secrets, service
software, service documentation, specialized service tools, and
financial or business data, without the express written consent
of PMSNA.
For purposes of this section, Philips shall mean:
Philips Medical Systems North America Company (PMSNA),
Philips Medical Systems International B.V. (PMSI B.V.),
Philips Ultrasound International (PUI),
Philips Electronics North America Corporation (PENAC)
Philips Electronics N.V.
23. GENERAL PROVISIONS
(a) If any provision of this Agreement shall be
determined to be unlawful then such provision shall be deemed to
be severed from this Agreement and every other provision shall
remain in full force and effect.
(b) This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs,
successors and assigns except as otherwise set forth herein.
(c) This Agreement embodies the entire Agreement and
understanding hereto and supersedes all prior agreements and
understandings between the parties relating to the subject matter
hereof.
(d) This Agreement may be amended only by an
instrument in writing signed on behalf of each of the parties
hereto.
(e) This Agreement shall not be effective or binding
upon PMSNA until signed or countersigned on its behalf by an
officer of PMSNA, nor shall any modification, renewal,
termination or waiver of any of the provisions herein contained
or any future representations, promises, conditions or waivers in
connection with the subject matter hereof be binding upon PMSNA
unless made in writing and signed on its behalf by one of its
officers.
(f) This Agreement shall be governed by and construed
under the laws of the State of Connecticut.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written.
PHILIPS MEDICAL SYSTEMS NORTH AMERICA COMPANY
By: M. P. Moakley, Presdient
M. P. Moakley, President
DIAGNOSTIC MEDICAL SYSTEMS, INC.
By: Michael J. Hofer
Michael J. Hofer
President, Diagnostic Medical Systems, Inc.
<PAGE>
TABLE OF CONTENTS
DEALER CONTRACT
Schedule A Exclusivity
Schedule B Territory
Schedule C Performance Quotas
Schedule D National Accounts
Schedule E Standard Warranty
Schedule F Standard Installation Period
Schedule G Service Documentation License
Agreement
Schedule H Service Software License Agreement
<PAGE>
SCHEDULE A
EXCLUSIVE
All X-ray equipment and accessories as designated in the
Philips Medical Systems North America Company Price Book, except
Computed Tomography Systems, MRI Systems, Therapy Systems,
PACS/PCR, Ultrasound Systems and other products which may be
deemed by PMSNA to be unavailable to Dealer from time to time,
including new products introduced by PMSNA.
<PAGE>
SCHEDULE B
Territory:
South Dakota: All counties
Minnesota: All counties north of and including
Rock, Murray, Pipestone, Lincoln,
Lyon, Yellow Medicine, Lac Qui
Parle, Swift, Pope, Todd, Cass,
Crow Wing, Aitkin Carlson, St.
Louis, Lake, and Cook
North Dakota: All counties
Montana: All counties
Michigan: Counties of Gogebic, Ontanagon and
Iron
Wisconsin: Counties of Douglas, Bayfield and Ashland
Wyoming: Counties of Park, Teton, Big Horn,
Johnson, Sheridan, Campbell, Crook,
Hot Springs, Washakie, and Weston
<PAGE>
SCHEDULE C
Performance Targets
January 1, 1994 - December 31, 1994
Targets
Radiographic -
Radiographic/fluoroscopic -
Cardiac -
Vascular -
Surgery -
Performance targets are net of credits, freight, returns and
other adjustments.
<PAGE>
SCHEDULE D
NATIONAL ACCOUNTS
1. Columbia
2. Healthtrust, Inc.
3. National Medical Enterprises and affiliates
4. Daughters of Charity, Inc.
5. University Hospital Consortium
6. Mercy National Purchasing
7. C+R+O+S+S
8. SunHealth
9. Quorum
10. Other National Accounts which may from time to time be
designated for direct sales status by PMSNA.
<PAGE>
SCHEDULE E
STANDARD WARRANTY
R & F, Radiographic, Vascular and DVI -
Doc. # 4535 983 01024
MRC 200 X-ray Tubes -
Doc. # 4535 983 01036
SRC X-ray Tubes -
Doc. # 4535 983 00747
Exhibit 13-A
DIVIDENDS
We have paid quarterly dividends on our common stock since 1938 without
interruption or reduction. Dividends paid in 1993 totaled $1.68 per common
share. The indicated annual rate for 1994 is $1.72.
BUYING AND SELLING
Otter Tail common stock is traded on NASDAQ's National Market System. (NASDAQ:
National Association of Securities Dealers Automated Quotation.)
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
1993 1992 1991 1990 1989 1988 1983
(thousands except per-share data)
Revenues
<S> <C> <C> <C> <C> <C> <C> <C>
Electric
Residential........................ $ 62,167 $ 59,038 $ 61,844 $ 60,326 $ 61,891 $ 62,591 $ 58,978
Commercial and Farms............... 36,971 35,342 36,246 35,443 35,725 36,210 32,768
Industrial......................... 65,757 63,522 62,284 58,812 59,173 60,739 50,451
Other Electric..................... 27,395 19,203 19,082 17,758 15,818 18,681 20,937
--------- -------- -------- --------- --------- --------- ---------
Total Electric....................... $ 192,290 $ 177,105 $ 179,456 $ 172,339 $ 172,607 $ 178,221 $ 163,134
Health Services...................... 32,068 - - - - - -
Diversified Operations............... 40,869 32,433 20,389 8,009 1,756 - -
--------- --------- --------- --------- --------- --------- ---------
Total Operating Revenues........... $ 265,227 $ 209,538 $ 199,845 $ 180,348 $ 174,363 $ 178,221 $ 163,134
Net Income........................... $ 27,369 $ 26,538 $ 26,096 $ 24,852 $ 25,266 $ 25,317 $ 21,455
Cash Flow from Operations............ $ 53,255 $ 44,866 $ 46,667 $ 46,681 $ 46,902 $ 47,675 N/A
Total Assets......................... $ 563,905 $ 530,456 $ 491,633 $ 477,224 $ 462,596 $ 476,363 $ 446,465
Long-Term Debt....................... $ 166,563 $ 159,295 $ 146,326 $ 135,186 $ 119,711 $ 121,815 $ 155,961
Redeemable Preferred................. $ 18,000 $ 18,000 $ 13,150 $ 13,705 $ 14,815 $ 15,925 $ 33,740
Common Shares Outstanding
(1) (thousands).................... 11,180 11,180 11,185 11,223 11,795 11,968 11,029
Number of Common Shareholders (2).... 13,634 13,812 13,928 13,984 14,277 14,595 17,161
Earnings per Common Share (3)........ $ 2.23 $ 2.17 $ 2.15 $ 1.99 $ 1.94 $ 1.92 $ 1.60
Dividends per Common Share........... $ 1.68 $ 1.64 $ 1.60 $ 1.56 $ 1.52 $ 1.48 $ 1.22
NOTES:
(1) Number of shares outstanding at year end
(2) Holders of record at year end
(3) Based on average number of shares outstanding
</TABLE>
[TEXT]
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's major financial objective is to earn a reasonable return on the
Company's capital. This will enable the Company to preserve and enhance its
financial capability by maintaining acceptable capitalization ratios,
maintaining a strong interest coverage position, providing a reasonable return
to the common shareholder, maintaining a reasonable level of internal cash
generation, and preserving and strengthening its current credit ratings on
outstanding securities.
Liquidity: Liquidity is the ability to generate adequate amounts of cash to
meet the Company's needs, both short-term and long-term. An electric
utility's liquidity is a function of its construction program and debt service
requirements, its net internal funds generation and its access to long-term
securities markets and credit facilities for external capital.
The Company's operating subsidiaries are responsible for obtaining their own
financing after the Company's initial equity investment and have developed
financing arrangements with various banks. The Company does not intend to
make or guarantee loans to its subsidiaries, lend a subsidiary money or cosign
on any borrowing.
Otter Tail Power Company has achieved a high degree of long-term liquidity by
maintaining strong bond ratings, implementing cost containment programs,
evaluating operations and projects on a cost-benefit approach, pursuing rate
adjustments to keep pace with utility operating expenses and obtaining
adequate depreciation rates.
The Company has had a stock repurchase program in place since May of 1989,
pursuant to which it has purchased 787,376 common shares. The stock
repurchase program was extended by approval of the Company's Board of
Directors on April 12, 1993. Under the extension, up to 611,481 common shares
(the unpurchased remainder from previous authorizations) may be purchased
during the period ending December 31, 1995. No common shares were repurchased
during 1993.
Cash provided from operations, as indicated by the Consolidated Statement of
Cash Flows for the year ended December 31, 1993 of $53,255,000 combined with
funds on hand of $18,024,000 at December 31, 1992, allowed the Company to
finance its construction program, pay dividends, participate in a preferred
stock investment program, redeem First Mortgage Bonds at maturity and through
sinking fund operations, and invest in additional subsidiary companies.
On October 13, 1993, the Company sold $4,000,000 of a new series of $6.75
Cumulative Preferred Shares. The proceeds were used for the redemption on
November 12, 1993, of the Company's outstanding $9.50 Cumulative Preferred
Shares at an aggregate redemption price of $4,080,000, plus accrued dividends
to the redemption date. On November 1, 1993, the Company retired $4,970,000
of First Mortgage Bonds, 4.625% Series of 1993.
The Company sold on December 7, 1993, $3,010,000 of Industrial Development
Refunding Revenue Bonds, 5% Series of 2002, and on December 15, 1993,
$10,400,000 of Pollution Control Refunding Revenue Bonds, Variable Series of
2012. The proceeds were used for the redemption of the Company's First
Mortgage Bonds, 7.10% Series of 2003 and 5.90% Series of 2004 in the aggregate
principal amount of $13,445,000.
The Company estimates that funds internally generated combined with funds on
hand will be sufficient to provide for all of its 1994-1998 electric
construction program expenditures (including allowance for funds used during
construction) and to meet all sinking fund payments for First Mortgage Bonds
in the next five years. (Internally generated funds consist of cash provided
by operations less dividends and certain other adjustments.)
Additional short or long-term financing will be required in the period 1994-
1998 in connection with maturity of First Mortgage Bonds and Long-Term Lease
Obligation ($21,000,000), in the event the Company decides to refund or
retire early any of its presently outstanding debt or cumulative preferred
shares, to complete the common stock repurchase program or for other corporate
purposes.
The Company had $4.3 million in cash, cash equivalents and temporary cash
investments at December 31, 1993, and $18 million at December 31, 1992.
Capital Requirements: The Company has a construction and capital investment
program to provide facilities necessary to meet forecasted customer demands
and provide reliable service. This includes, primarily, improvements to
existing power plants, acquisition or construction of additional generating
capacity, and upgrading or replacing portions of the distribution and
transmission systems and other buildings and equipment. The construction
program is subject to continuing review and is revised annually in light of
changes in demands for energy, in environmental laws, in technology affecting
the electric utility industry, in the costs of labor, materials and equipment,
and in the Company's financial condition (including cash flow, earnings and
adequacy of timely rate relief).
Capital expenditures for the years 1993, 1992 and 1991 were $31 million, $23
million, and $25 million, respectively. Capital expenditures for 1993
included $25 million for the electric utility, $3 million for health services,
and $3 million for diversified operations. The estimated capital expenditures
for 1994 are $29 million, and the total expenditures for the five-year period
1994-1998 are expected to be approximately $146 million. The 1994 amount
includes $26 million for the electric utility, $2 million for health services
and $1 million for diversified operations. The 1994-1998 amount includes $123
million for the electric utility, $14 million for health services, and $9
million for diversified operations.
In addition to these capital requirements, funds totaling approximately
$55,063,000 will be needed during the five-year period 1994 through 1998 to
retire First Mortgage Bonds and other long-term obligations at maturity and
through sinking fund payments. In addition, funds may be needed to complete
the common stock repurchase program.
Capital Resources: Financial flexibility is provided by unused lines of
credit, by financial coverages well in excess of the minimum levels required
for issuance of securities and by strong credit ratings.
As of December 31, 1993, unused credit lines totaling $14.6 million were
available to meet interim financing of working capital and other capital
requirements, if needed.
During 1993 the Company's coverage ratios remained at almost the same levels
as in 1992. The fixed charge coverage ratio after taxes was 3.2 for both 1993
and 1992. The long-term debt interest coverage ratio before taxes was 4.2, as
compared to 4.3 in 1992. The Company expects these coverages will remain
approximately the same or rise slightly in 1994.
The Company's credit ratings affect its access to the capital market. The
current credit ratings for the Company's First Mortgage Bonds are as follows:
Moody's Investors Service Aa3
Duff and Phelps AA
Fitch Investors Service AA
Standard and Poor's AA-
The Company's disclosure of these security ratings is not a recommendation to
buy, sell, or hold the Company's securities.
As of December 31, 1993, the Company had the capacity under its Indenture of
Mortgage to issue an additional $115 million principal amount of First
Mortgage Bonds.
Results of Operations:
Otter Tail Power Company provides electrical service to over 120,000 customers
in a service territory of 50,000 square miles. The Company has purchased
health service companies, and various diversified businesses referred to
throughout this report as diversified operations.
Electric Operations
Operating Revenues: The change in revenues may be summarized as follows:
Revenue Increase (Decrease)
From Prior Year
1993 1992 1991
(in thousands)
Volume Variance (1) $15,326 $(1,109) $ 9,413
Price Variance (2) (1,525) (1,543) (1,999)
Other 1,384 301 (297)
Total Electric $15,185 $(2,351) $ 7,117
(1) Derived for each customer class by multiplying year-to-year change in
units sold by the average revenue per kwh for the prior year.
(2) Derived for each customer class by multiplying the year-to-year change in
average revenue per kwh by the units sold during the year.
The 1993 volume variance was due to increased kwh sales in almost every retail
customer classification and a 84% increase in noncontractual power pool sales.
The increase in retail kwh sales can be attributed to the return of normal
winter weather in 1993 coupled with increased usage in the commercial
category. The increase in power pool sales can be attributed to the weather,
which resulted in low water conditions in the spring in Manitoba and the wide-
spread summer flooding in the Midwest.
The 1992 volume variance was due to a 4.2% decrease in kwh sales to
residential customers, offset to a smaller extent by a 2.6% increase in kwh
sales to industrial customers. A warmer winter coupled with an abnormally
cool summer in 1992 contributed heavily to the decrease.
The 1991 volume variance was the result of increased kwh sales in almost every
retail customer classification and an 18% increase in kwh power pool sales to
other utilities. The oil pipeline and large commercial customers had the
biggest increase in retail kwh sales of 9% and 7%, respectively. Consumption
of electricity by the oil pipeline customers is a result of both the volume of
product they move and the efficiencies of their systems. Colder winter
weather experienced in 1991 also accounted for some of the increased kwh
sales.
Heating degree days, which contribute to increases or decreases in usage by
residential customers, were 9,523 for 1993, 8,253 for 1992, and 8,869 for
1991. The average revenue per retail kilowatt-hour was 5.53 cents in 1993,
5.54 cents in 1992, and 5.60 cents in 1991.
The 1993 price variance was primarily due to noncontractual power pool sales,
residential sales, and the cost of energy adjustment clause. Noncontractual
power pool sales had a 4.3% decrease in revenue per kwh sold in 1993. The
price variance from residential sales was due to the increase in volume sold.
In 1993 slightly over $7,100,000 (an increase of $350,000 over 1992) was
returned to the Company's retail customers through the Cost of Energy
Adjustment clause. (See the explanation under Production Fuel and Purchased
Power Expense.)
The 1992 price variance was chiefly the result of an Order entered by the
North Dakota Public Service Commission (NDPSC) pursuant to which the Company
made a refund to its North Dakota customers in the aggregate amount of
$1,000,000.
The 1991 price variance was the result of a decrease in retail rates chiefly
due to the operation of the Cost of Energy Adjustment clause coupled with an
increase in volume sold.
The increase in the other variance is due to the Company recognizing
$1,446,000 of unbilled revenue in 1993. The Company changed its method of
accounting in North Dakota from billing dates to energy delivery dates as a
result of an Order entered by the NDPSC in September 1993. The change in
method of revenue recognition increased net income by $870,000 and earnings
per share by $.08 in 1993. (See notes 1 and 3 to Financial Statements for
further information.)
Expenses: The percentage changes in operating expenses may be summarized as
follows:
Percentage Increase (Decrease)
From Prior Year
1993 1992 1991
Production Fuel 10 .5 4
Purchased Power 22 2 (8)
Electric Operation Expenses 14 (1) 11
Electric Maintenance 18 (8) 10
Depreciation and Amortization 4 (2) 2
Property Taxes 7 5 1
Production Fuel and Purchased Power Expense: The 10% increase in production
fuel in 1993 is due primarily to a 11% increase in generation. Of the
increased generation, 56% was for power pool sales and 44% was for system use.
The slight increase in production fuel in 1992 is chiefly due to a 4% increase
in generation offset by a 3.7% decrease in cost per kwh produced. In 1992 the
Company replaced some power pool purchases for system use with increased
generation. The decrease in cost per kwh produced results from decreased
generation at the Company's highest-cost unit.
Production fuel expense increased 4% in 1991 due to a 12% increase in
generation at Big Stone Plant. Generation at the Coyote Plant increased only
slightly due to an extended spring plant overhaul and an unanticipated fall
outage. The longer spring overhaul was due to converting the dry scrubber
from soda ash to less-expensive lime as the reagent in the sulfur-removal
process. The fall outage resulted from the failure of the generator current
transformers. Big Stone is not a mine-mouth plant like Coyote. This results
in a higher fuel cost per kwh produced at Big Stone Plant than at Coyote
Plant.
The increase in purchased power costs of 22% in 1993 is related directly to
the increase in power pool sales.
Purchased power costs increased by 2% in 1992 due to a 7.5% increase in cost
per kwh purchased, offset to a smaller extent by a 5.3% decrease in kwh
purchased. As stated before, replacing system purchases with the Company's
own generation accounted for a significant portion of the decrease in kwh
purchased. However, when the Company did purchase for system use, the
purchases were sometimes made at peak demand times increasing the purchase
price per kwh.
Purchased power costs decreased 8% for 1991 primarily as a result of decreased
costs per kwh purchased, offset somewhat by increased purchases for resale to
other utilities in the power pool. The Company was able to obtain favorably
priced contracts by buying from summer-peaking utilities in the winter,
spring, and fall.
The increase or decrease in fuel and purchased power costs, arising from
changing prices, results in adjustments to the Company's rate schedules
through the Cost of Energy Adjustment clauses. Over the last five years, this
has resulted in savings of slightly over $28.7 million to the Company's
customers.
Electric Operation and Maintenance Expenses: The increase of 14% in electric
operation expense in 1993 was due primarily to increases in labor expenses
(SFAS 106 costs), in North Dakota conservation programs, and in administrative
and general expenses.
The decrease of 1% for 1992 in electric operation expense was mainly due to
decreases in administration and general expenses relating to outside services
employed and by decreases in uninsured losses.
The increase of 11% for 1991 in electric operation expense was chiefly due to
increases in administrative and general expenses and customer-related
expenses. The increase in administrative and general expenses was principally
due to an increase in compensation, increased outside consulting services, and
an increase in research and development expenditures. Customer-related
expenses increased mainly due to increases in marketing and customer account
expenses.
The 18% increase in electric maintenance expense in 1993 was due to an
increase in production maintenance of the steam plants (generator, turbine,
and coal handling equipment).
The 8% decrease in 1992 and 10% increase in 1991 in electric maintenance
expense were mainly due to increased maintenance cost at the Coyote Plant in
1991. Coyote Plant had a longer-than-anticipated spring overhaul and an
unanticipated fall outage because of failure of the generator current
transformers.
Depreciation and Amortization: The 4% increase in depreciation expense in
1993 is due to additional plant in service and higher depreciation rates. The
2% decrease in depreciation expense in 1992 resulted from extending the life
of Hoot Lake Plant due to additional investment and switching the plant's fuel
to subbituminous coal. The 2% increase in depreciation expense for 1991 is
due to more property placed in service.
Property Taxes: The 7% increase in property taxes for 1993 is due to property
additions and increased mill rates. The 5% increase in property taxes for
1992 results from a higher tax rate in Minnesota. The slight increase in
property taxes for 1991 was due to increased assessable property placed in
service and increased mill rates which more than offset a significant
reduction in South Dakota due to a change in the valuation system.
Health Services Operations
1993
(thousands)
Operating Revenues $32,068
Operating Expenses 30,101
Pretax Operating Income $ 1,967
Health Services Operations are composed of businesses that were acquired in
1993. On January 1, 1993, the Company purchased a diagnostic medical imaging
company and a management company for a number of diagnostic medical imaging
companies. As of February 26, 1993, the Company acquired a medical imaging
company that sells and services diagnostic medical imaging equipment and
associated supplies and accessories. For 1993 the Health Services financial
results have met the Company's expectations.
Diversified Operations
1993 1992 1991
(thousands)
Operating Revenues $40,869 $32,433 $20,389
Operating Expenses 35,964 28,565 18,434
Pretax Operating Income $ 4,905 $ 3,868 $ 1,955
The Company's Diversified Operations are composed of businesses that are
diversified in such areas as manufacturing (fabricated metal parts and
agricultural equipment), electrical and telephone contracting, radio
broadcasting, waste incinerating, and telephone utility.
The 26% increase in Operating Revenues in 1993 is due to the purchase of an
additional business in the third quarter of 1992 as well as increased sales in
the Company's electrical and telephone contracting subsidiaries. The 26%
increase in Operating Expenses in 1993 is also due to the additional business
purchased in the third quarter of 1992 as well as increased expenses in the
Company's electrical and telephone contracting subsidiaries.
The 59% increase in Operating Revenues and 55% increase in Operating Expenses
in 1992 are due to the purchase of two additional businesses. The 155%
increase in Operating Revenues and 169% increase in Operating Expenses in 1991
are due to purchasing one additional business in 1991 and operating the five
businesses purchased in 1990.
Consolidated Income Taxes
The 2% increase in income tax expense for 1993 is due to an increase in
taxable income and higher corporate tax rates imposed by the Omnibus Budget
Reconciliation Act of 1993. The 5% decrease in income tax expense for 1992
resulted from favorable adjustments related to a premature property
retirement. The 5% increase in income tax expense for 1991 is due to higher
taxable income.
Consolidated Interest Charges
Interest charges increased 5% in 1993 due to the new businesses acquired.
Interest charges increased 9% in 1992 due to the issuance in July of $50
million of First Mortgage Bonds. Interest increases in 1992 were offset to a
smaller extent by the retirement in August of $28,280,000 of First Mortgage
Bonds, and the retirement in September of $12,758,000 of First Mortgage Bonds.
Interest charges increased 16% during 1991 due to the issuance in December
1990 of $20 million of First Mortgage Bonds, and the issuance in September
1991 of an additional $20 million of First Mortgage Bonds. Interest increases
in 1991 were offset to a smaller extent by the retirement of $12,559,000 of
First Mortgage Bonds, and the refunding of the two series of Pollution Control
Bonds.
Impact of Inflation: For an electric utility, the regulatory process limits
the amount of depreciation expense included in the Company's revenue allowance
and limits electric utility plant in the rate base to original cost. Such
amounts produce cash flows which are inadequate to replace such property in
the future or preserve the purchasing power of common equity capital
previously invested. However, the Company expects that it will be able to
establish rates which will cover the increased costs of new plant when such
costs are incurred. The Company operates under regulatory provisions which
allow price increases in the cost of fuel and purchased power to be passed to
customers through automatic adjustments to the Company's rate schedules under
Cost of Energy Adjustment clauses. Other increases in the cost of electric
service must be recovered through timely filings for rate relief with the
appropriate regulatory agency.
The Company's Health Services and Diversified Operations consist almost
entirely of unregulated businesses. Increased operating costs are passed on
to customers with any limitations on price increases determined by the
marketplace.
Factors Affecting Future Earnings: The results of operations discussed above
are not necessarily indicative of future earnings. Anticipated higher
operating costs and carrying charges on increased investment in plant, if not
offset by proportionate increases in operating revenues and other income
(either by appropriate rate increases, increases in unit sales, or increases
in nonelectric operations), will affect future earnings.
Growth in electric sales will be subject to a number of factors, including the
volume of power pool sales to other utilities, the effectiveness of demand-
side management programs, weather, competition, and the rate of economic
growth or decline in the Company's service area. The Company's electric
business is primarily dependent upon the use of electricity by customers in
our service area. Percentage changes in the Company's electric kwh sales to
retail customers over the prior year for the last three years were: an
increase of 4.4% in 1993, a decrease of .5% for 1992, and an increase of 5.3%
for 1991.
Demand-side management (DSM) efforts will continue to increase in all the
jurisdictions that the Company serves. DSM will reduce electric sales in the
short term, but it is not anticipated to reduce profits. The goal of DSM is
to encourage the wise and efficient use of electricity by customers.
Successful DSM will contribute to the more efficient and cost effective
operation of existing and future generation and distribution facilities.
Currently, Minnesota is the only jurisdiction that mandates investments in
DSM, and indications are that the Minnesota Public Utilities Commission's
emphasis in this area will continue into the foreseeable future.
The Federal Clean Air Act (the Act) is not currently expected to have a
significant impact on future capital requirements or operating costs.
However, future regulations under the Act, changes in the future coal supply
market, and/or other governmental laws and regulations could impact such
requirements or costs. It is anticipated that, under current regulatory
principles, any such costs could be recovered through rates.
The Company's plants are not subject to the Act's phase one requirements.
Phase two standards of the Act must be met by the year 2000.
The Big Stone Plant can maintain current levels of operation and meet phase
two requirements by using allowances (allotted and/or purchased), by
installing scrubbers and/or by switching to subbituminous coal which is much
lower in sulfur emissions than lignite which the plant currently uses. Big
Stone Plant's lignite contract expires in 1995.
The cost of switching to subbituminous coal from lignite would not adversely
affect the Company's power plant operations based upon current market price.
In the unlikely event the Company decides to continue to burn lignite, the
Company's share of the cost of installing scrubbers at its Big Stone Plant by
the year 2000 is estimated to be $54 million.
The Company's Coyote Plant is equipped with sulfur dioxide removal equipment.
Compliance with the phase two requirements is not expected to significantly
impact operations at that plant. Minor modifications may be required to meet
the phase two requirements by the year 2000 at the Hoot Lake Plant, which
already uses subbituminous coal.
The Company has continued to diversify by purchasing nonutility businesses-one
in 1991, one in 1992, and six more in 1993. In 1992 the Company also
purchased its first utility business, an independent telephone company. (See
note 2 to Financial Statements for further information.)
The Company continues to investigate acquisitions of additional businesses
(both utility and nonutility) and expects continued growth in this area. The
success of these businesses and any future business purchases will affect
future earnings.
Operation of the Health Services subsidiaries will be subject to the effects
of pending health care legislation. As an efficient low-cost provider of
certain health services and equipment, management believes that the Health
Services businesses are in line with the goals of national health-care reform.
On September 22, 1993, the NDPSC entered an Order approving an Agreement for
Incentive Regulation for 1993. The Agreement for Incentive Regulation
provides a mechanism of sharing equally between ratepayers and shareholders of
any amounts earned in 1993 over or under a specified return on rate base in
North Dakota. The impact on the Company of Incentive Regulation for 1993 was
immaterial. The Company intends to negotiate an incentive plan for 1994 and
beyond.
The NDPSC Order required the Company to change its method of revenue
recognition from billing dates to energy delivery dates. The North Dakota
unbilled revenue amount as of January 1, 1993, ($4.4 million) is required by
the Order to be amortized over 36 months. (See notes 1 and 3 to the Financial
Statements for further information.)
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106 - Employers' Accounting for Postretirement
Benefits Other than Pensions. The Company has elected to recognize the
initial postretirement benefit obligation of $17,619,000 over a period of
twenty years. (See note 8 to the Financial Statements for further
information.)
In November 1992 the Financial Accounting Standards Board (FASB) issued
Financial Accounting Standards No. 112 - Employers' Accounting for
Postemployment Benefits (SFAS 112). SFAS 112, which will be effective for
fiscal years beginning after December 15, 1993, establishes standards of
financial accounting and reporting for the estimated cost of benefits provided
by an employer to former or inactive employees after employment but before
retirement.
In May 1993, the FASB issued Financial Accounting Standards No. 115 -
Accounting for Certain Investments in Debt and Equity Securities (SFAS 115)
which will be effective for fiscal years beginning after December 15, 1993.
SFAS 115 establishes standards of financial accounting and reporting for
investments in equity securities that have readily determinable fair values
and for all investments in debt securities.
The adoption of SFAS 112 and SFAS 115 in 1994 will not have a material impact
on the Company's financial statements.
<TABLE>
<CAPTION>
O T T E R T A I L P O W E R C O M P A N Y
Consolidated Statements of Income
For the Years Ended December 31 1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Operating Revenues:
Electric.................................................... $192,290 $177,105 $179,456
Health Services............................................. 32,068 -- --
Diversified Operations...................................... 40,869 32,433 20,389
-------- -------- --------
Total Operating Revenues............................ 265,227 209,538 199,845
Operating Expenses:
Production Fuel............................................. 31,325 28,428 28,300
Purchased Power............................................. 27,438 22,582 22,208
Electric Operation Expenses................................. 44,593 39,082 39,450
Electric Maintenance........................................ 12,914 10,927 11,866
Cost of Health Services Sold................................ 16,695 -- --
Other Health Services Expenses.............................. 12,971 -- --
Diversified Cost of Goods................................... 26,203 20,914 14,680
Other Diversified Expenses.................................. 7,862 6,488 3,156
Depreciation and Amortization............................... 20,512 18,697 18,414
Property Taxes.............................................. 10,728 10,034 9,571
Income Taxes................................................ 14,331 14,024 14,828
-------- -------- --------
Total Operating Expenses............................ 225,572 171,176 162,473
Operating Income.............................................. 39,655 38,362 37,372
Other Income and Deductions:
Allowance for Equity (Other) Funds Used During Construction 120 116 409
Other Income and Deductions and Applicable Taxes............ 1,419 1,225 350
-------- -------- --------
Total Other Income and Deductions................... 1,539 1,341 759
Income Before Interest Charges................................ 41,194 39,703 38,131
Interest Charges:
Interest.................................................... 13,881 13,222 12,237
Allowance for Borrowed Funds Used During Construction -- Credit (56) (57) (202)
------- ------- -------
Interest Charges -- Net............................. 13,825 13,165 12,035
Net Income.................................................... 27,369 26,538 26,096
Preferred Dividend Requirements............................... 2,477 2,280 2,037
------- ------- -------
Earnings Available for Common Shares.......................... $ 24,892 $ 24,258 $ 24,059
======== ======== ========
Average Number of Common Shares Outstanding................... 11,180 11,185 11,196
Earnings Per Average Common Share............................. $ 2.23 $ 2.17 $ 2.15
Dividends Per Common Share.................................... $ 1.68 $ 1.64 $ 1.60
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
O T T E R T A I L P O W E R C O M P A N Y
Consolidated Balance Sheets, December 31 1993 1992
(in thousands)
ASSETS
<S> <C> <C>
Plant:
Electric Plant in Service........................................... $679,282 $662,055
Other............................................................... 34,626 22,700
-------- --------
Total............................................................. 713,908 684,755
Less Accumulated Depreciation and Amortization...................... 270,385 252,663
-------- --------
443,523 432,092
Construction Work in Progress....................................... 8,341 6,812
-------- --------
Net Plant......................................................... 451,864 438,904
Investments and Other Assets.......................................... 43,853 32,048
Current Assets:
Cash and Cash Equivalents........................................... 3,808 8,369
Temporary Cash Investments.......................................... 451 9,655
Accounts Receivable:
Trade (Less Accumulated Provision for Uncollectible Accounts:
1993, $398,000; 1992, $384,000)................................... 10,120 10,072
Other............................................................. 12,772 7,697
Materials and Supplies:
Fuel.............................................................. 3,667 3,610
Plant Materials and Operating Supplies............................ 15,378 10,554
Deferred Income Taxes............................................... 4,482 --
Accrued Utility Revenues............................................ 4,368 --
Other............................................................... 1,651 701
-------- --------
Total Current Assets........................................ 56,697 50,658
Deferred Debits:
Unamortized Debt Expense and Reacquisition Premiums................. 5,611 5,890
Other............................................................... 5,880 2,956
------- --------
Total Deferred Debits....................................... 11,491 8,846
TOTAL..................................................... $563,905 $530,456
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
O T T E R T A I L P O W E R C O M P A N Y
Consolidated Balance Sheets, December 31 1993 1992
(in thousands)
LIABILITIES
Capitalization (page 36):
<S> <C> <C>
Common Shares, Par Value $5 Per Share -- Authorized, 15,000,000 Shares;
Outstanding, 1993 and 1992- 11,180,136 Shares.................... $ 55,901 $ 55,901
Premium on Common Shares............................................ 30,336 30,421
Retained Earnings................................................... 84,209 78,189
-------- --------
Total............................................................. 170,446 164,511
Cumulative Preferred Shares:
Subject to Mandatory Redemption................................... 18,000 18,000
Other............................................................. 20,831 20,831
Long-Term Debt...................................................... 166,563 159,295
--------- --------
Total Capitalization........................................ 375,840 362,637
Current Liabilities:
Sinking Fund Requirements and Current Maturities.................... 9,356 8,941
Accounts Payable.................................................... 15,987 12,495
Accrued Salaries and Wages.......................................... 3,552 3,666
Federal and State Income Taxes Accrued.............................. - 598
Other Taxes Accrued................................................. 11,187 10,576
Interest Accrued.................................................... 3,522 3,908
Other............................................................... 2,135 1,194
--------- --------
Total Current Liabilities................................... 45,739 41,378
Noncurrent Liabilities................................................ 5,690 3,589
Commitments (note 6).................................................. - -
Deferred Credits:
Accumulated Deferred Income Taxes................................... 92,940 97,964
Accumulated Deferred Investment Tax Credit.......................... 23,518 24,752
Regulatory Liability................................................ 16,046 --
Other............................................................... 4,132 136
-------- --------
Total Deferred Credits...................................... 136,636 122,852
TOTAL..................................................... $563,905 $530,456
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
O T T E R T A I L P O W E R C O M P A N Y
Consolidated Statements of Cash Flows
For the Years Ended December 31 1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income.................................................. $ 27,369 $ 26,538 $ 26,096
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation and Amortization ............................ 25,348 21,115 20,461
Deferred Investment Tax Credit -- Net..................... (1,234) (1,220) (1,210)
Deferred Income Taxes..................................... 3,937 4,505 4,183
Change in Deferred Debits and Other Assets................ (1,996) (2,909) (1,972)
(Gain)/Loss on Disposal of Noncurrent Assets.............. (77) 105 --
Change in Noncurrent Liabilities and Deferred Credits..... 5,509 (239) 194
Allowance for Equity (Other) Funds Used During Construction (120) (116) (409)
Cash Provided by (Used For) Current Assets and Current Liabilities:
Change in Receivables, Materials and Supplies.............. (357) (3,103) (1,119)
Change in Other Current Assets............................. (4,389) (116) (294)
Change in Payables and Other Current Liabilities........... 250 912 (84)
Change in Interest and Income Taxes Payable................ (985) (606) 821
-------- -------- --------
Net Cash Provided by Operating Activities............... 53,255 44,866 46,667
Cash Flows From Investing Activities:
Gross Capital Expenditures.................................. (30,894) (22,616) (24,642)
Proceeds from Disposal of Noncurrent Assets................. 1,574 196 290
Purchase of Subsidiaries Net of Cash Acquired............... (4,056) (1,813) (1,161)
Change in Temporary Cash Investments........................ 9,204 (7,011) 2,750
Change in Marketable Securities and Other Investments....... (7,329) (6,410) (6,354)
-------- -------- --------
Net Cash Used in Investing Activities.................. (31,501) (37,654) (29,117)
Cash Flows From Financing Activities:
Proceeds from Issuance of Long-Term Debt.................... 33,156 59,848 50,668
Proceeds from Issuance of Preferred Stock................... 4,000 18,000 --
Payments for Debt and Preferred Stock Issuance Expense...... (245) (611) (937)
Payments for Repurchase of Common Stock..................... -- (157) (950)
Payments for Retirement of Long-Term Debt................... (24,432) (48,903) (48,586)
Payments to Trustee for Retirement of Long-Term Debt........ (13,445) -- --
Payments for Retirement of Preferred Stock.................. (4,080) (14,184) (555)
Dividends Paid.............................................. (21,269) (20,586) (19,952)
-------- -------- --------
Net Cash Used In Financing Activities.................... (26,315) (6,593) (20,312)
Net Change in Cash and Cash Equivalents....................... (4,561) 619 (2,762)
Cash and Cash Equivalents at Beginning of Year................ 8,369 7,750 10,512
-------- -------- --------
Cash and Cash Equivalents at End of Year...................... $ 3,808 $ 8,369 $ 7,750
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest (net of amount capitalized)..................... $ 13,371 $ 11,653 $ 11,933
Income Taxes.............................................. $ 12,009 $ 10,996 $ 10,532
Consolidated Statements of Retained Earnings
For the Years Ended December 31 1993 1992 1991
(in thousands)
Retained Earnings at Beginning of Year........................ $ 78,189 $ 72,752 $ 66,867
Net Income.................................................... 27,369 26,538 26,096
Other......................................................... (80) (515) (259)
-------- -------- --------
TOTAL............................................. 105,478 98,775 92,704
Dividends Paid:
Cumulative Preferred Shares at Required Annual Rates........ 2,486 2,242 2,041
Common Shares .............................................. 18,783 18,344 17,911
-------- -------- --------
TOTAL............................................. 21,269 20,586 19,952
Retained Earnings at End of Year.............................. $ 84,209 $ 78,189 $ 72,752
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
O T T E R T A I L P O W E R C O M P A N Y
Consolidated Statements of Capitalization December 31 1993 1992
<S> <C> <C>
(in thousands)
Total Common Shareholders' Equity..................................... $ 170,446 $164,511
Cumulative Preferred Shares -- Without Par Value (Stated and
Liquidating Value $100 a Share) -- Authorized 1,500,000 Shares;
Outstanding:
Series Subject to Mandatory Redemption
$6.35, 180,000 Shares; 9,000 Shares due 2002-06; 135,000
Shares due 2007............................................. 18,000 18,000
--------- --------
Total..................................................... 18,000 18,000
Less Current Sinking Fund Requirement............................. - -
--------- --------
Total Preferred Subject to Mandatory Redemption............. 18,000 18,000
Other Series:
$3.60, 60,000 Shares............................................ 6,000 6,000
$4.40, 25,000 Shares............................................ 2,500 2,500
$4.65, 30,000 Shares............................................ 3,000 3,000
$6.75, 40,000 Shares............................................ 4,000 -
$9.00, 53,311 Shares............................................ 5,331 5,331
$9.50, 40,000 Shares............................................ - 4,000
------- --------
Total Other Preferred....................................... 20,831 20,831
Cumulative Preference Shares -- Without Par Value, Authorized
1,000,000 Shares; Outstanding: None
Long-Term Debt:
First Mortgage Bond Series:
4.625%, due November 1, 1993...................................... - 4,970
8.75%, due December 15, 1997...................................... 19,400 19,600
7.25%, due August 1, 2002......................................... 19,800 20,000
7.625%, due February 1, 2003...................................... 9,600 9,719
8.75%, due September 15, 2021..................................... 19,600 19,800
8.25%, due August 1, 2022......................................... 29,700 30,000
Pollution Control and Industrial Development Series:
7.10%, due August 1, 2003....................................... - 3,010
5.90%, due February 1, 2004, Series A........................... - 10,560
5.60-6.80%, due February 1, 2006, Big Stone Project............. 5,607 5,667
8.125%, due August 1, 2009, Coyote Project, Series B............ 860 870
5.60-6.90%, due February 1, 2019, Coyote Project................ 22,439 22,674
--------- -------
Total....................................................... 127,006 146,870
Subsidiary and Other Long-Term Debt:
Long-Term Lease Obligation (5.625% Pollution Control Revenue
Bonds due July 1, 1998)......................................... 2,200 2,200
Industrial Development Refunding Revenue Bonds
5.00%, due December 1, 2002..................................... 3,010 -
Pollution Control Refunding Revenue Bonds
Variable 3.15% at December 31,1993, due December 1, 2012......... 10,400 -
Industrial Development Revenue Bond (Quadrant Co. Project
Variable 3.78% at December 31, 1993, due April 1, 1996 --
Otter Tail Power Company Guarantor)............................. 1,000 1,400
Obligations of Mid-States Development, Inc.
Rates 3.9% to 13.65% at December 31, 1993....................... 22,014 7,869
Obligations of North Central Utilities, Inc.
Rates 4.78% to 4.93% at December 31, 1993....................... 10,912 10,490
Other (Less Unamortized Discount Based on Imputed Interest Rate
of 15%: 1993, $0; 1992, $11,000)................................ 155 245
----------- --------
Total....................................................... 176,697 169,074
Less:
Current Maturity.................................................. 8,031 7,489
Sinking Fund Requirement of which $0 and $58,000 were
Satisfied with Reacquired Bonds................................. 1,325 1,452
Unamortized Debt Discount and Premium -- Net...................... 778 838
------------ --------
Total Long-Term Debt........................................ 166,563 159,295
------------ --------
Total Capitalization.................................................. $ 375,840 $362,637
See accompanying notes to consolidated financial statements.
</TABLE>
[TEXT]
Otter Tail Power Company
Notes to Consolidated Financial Statements
For the Three Years Ended December 31, 1993
1. Summary of Accounting Policies
System of Accounts--The accounting records of the Company conform to the
Uniform System of Accounts prescribed by the Federal Energy Regulatory
Commission (FERC), the Public Service Commission of North Dakota, and the
Public Utilities Commissions of Minnesota and South Dakota.
Principles of Consolidation--The consolidated financial statements include
the accounts of the Company and all wholly owned subsidiaries. All
significant intercompany transactions have been eliminated.
Plant, Retirements, and Depreciation--Utility plant is stated at original
cost and the cost of additions includes contracted work, direct labor and
materials, allocable overheads, and allowance for funds used during
construction. The cost of depreciable units of property retired plus
removal costs less salvage is charged to the accumulated provision for
depreciation. Maintenance, repairs, and replacement of minor items of
property are charged to operating expenses. Repairs to property made
necessary by storm damage are charged to the reserve therefor. The
provisions for depreciation for financial reporting purposes are made on
the straight-line method based on the estimated service lives of the
properties. Such provisions as a percent of the average balance of
depreciable property were 2.95% in 1993; 2.90% in 1992; and 2.95% in
1991.
Health Services' and Diversified Operations' property and equipment are
carried at historical cost, or at the current appraised value if acquired
in a business combination, and are depreciated on a straight-line basis
over the useful lives (5 to 15 years) of the related assets. Upon sale
or retirement of property and equipment, the cost and related accumulated
depreciation are eliminated from the respective accounts and the
resulting gain or loss is included in the consolidated financial
statements.
Jointly Owned Plants--The consolidated financial statements include the
Company's 53.9% and 35% ownership interests in the assets, liabilities
and expenses of the Big Stone and Coyote Plants, respectively. Amounts
at December 31, 1993 and 1992 included in Plant in Service for Big Stone
were $107,243,000 and $105,315,000, respectively, and the Accumulated
Provision for Depreciation and Amortization was $57,159,000 and
$54,674,000, respectively. Amounts at December 31, 1993 and 1992
included in Plant in Service for Coyote were $143,078,000 and
$142,723,000, respectively, and the Accumulated Provision for
Depreciation and Amortization was $47,729,000 and $43,873,000,
respectively. The Company's share of direct expenses of the jointly
owned plants in service is included in the corresponding operating
expenses in the statement of income.
Allowance for Funds Used During Construction (AFC)--AFC, a noncash item, is
included in construction work in progress based on a composite rate which
assumes that funds used for construction were provided by borrowed funds
and equity funds. The AFC so included in construction work in progress
will ultimately be included in the rate base used in establishing rates
for utility services. The composite rate for AFC was 10.25% for 1993,
10.50% for 1992, and 10.75% for 1991.
Income Taxes--Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109 - Accounting for Income Taxes
(SFAS 109). SFAS 109 required a change in the accounting and reporting
for income taxes from a deferral method to a liability method. The
adoption of SFAS 109 resulted in no significant change in the Company's
components of income tax expense. However, the adoption of SFAS 109 did
impact the financial position of the Company with the establishment of a
regulatory liability and a corresponding reduction in accumulated
deferred taxes of approximately $19.8 million.
Comprehensive interperiod income tax allocation is used for substantially
all book and tax temporary differences. Deferred income taxes arise for
all temporary differences between pretax financial and taxable income,
and between the book and tax basis of assets and liabilities. Deferred
taxes are recorded using the tax rates scheduled by tax law to be in
effect when the temporary differences reverse. The Company amortizes the
investment tax credit over the estimated lives of the related property.
Operating Revenues--Electric customers' meters are read and bills are
rendered on a cycle basis. Prior to 1993 the Company in all of its
jurisdictions recorded electric revenues based on billing dates.
Effective as of January 1, 1993, due to a North Dakota Public Service
Commission's (NDPSC) Order, the Company changed its method of revenue
recognition in North Dakota from billing dates to energy delivery dates.
(See note 3 for further information on the Order.) The North Dakota
unbilled revenue amount as of January 1, 1993, ($4.4 million) is required
by the Order to be amortized to electric revenues over 36 months. The
impact of changing the North Dakota method of revenue recognition was to
increase net income by $870,000 and earnings per share by $.08 in 1993.
The Company's rate schedules applicable to substantially all customers
include a Cost of Energy adjustment clause under which the rates are
adjusted to reflect changes in average cost of fuels and purchased power.
Health Services' operating revenues on major equipment and installation
contracts are recorded using the percentage-of-completion method.
Amounts received in advance under customer service contracts are deferred
and recognized on a straight-line basis over the contract period.
Diversified Operations' operating revenues are recorded when services are
rendered, products are shipped, and in the case of construction
contracts, the percentage-of-completion method is used.
Storm Damage Reserve--The Company is required under its Indenture of Mortgage
to make annual provisions for storm damage of not less than .5% of gross
electric operating revenues. Provisions for loss have been used in
determination of rates approved by the applicable regulatory commissions.
Provisions for 1993, 1992, and 1991 were $1,164,000, $886,000, and
$1,098,000, respectively, and repairs charged to such reserves were
$1,083,000, $1,063,000, and $1,494,000, respectively. Accrued
liabilities included $1,131,000 and $1,050,000 for storm damage at
December 31, 1993 and 1992, respectively.
Employee Incentive Plan--Effective January 1, 1988, the Company established a
gain sharing plan for the benefit of all employees. The totals received
by all employees for 1993, 1992, and 1991 were $1,172,000, $1,367,000,
and $1,775,000, respectively.
Reclassifications--Certain prior year amounts have been reclassified to
conform to 1993 presentation. Such reclassification had no impact on net
income and shareholders' equity.
Cash Equivalents--The Company considers all highly liquid debt instruments
purchased with a maturity of 90 days or less to be cash equivalents.
Debt Reacquisition Premiums--In accordance with regulatory treatment, the
Company defers debt redemption premiums and amortizes such costs over the
original life of the reacquired bonds.
Investments--The Company's temporary cash investments consist of tax-free
municipal bonds and money market funds, recorded at cost which
approximates market. In addition, the Company has noncurrent investments
of preferred stock which are recorded at the lower of cost or market.
Inventories--The Electric Operations' inventories are reported at average
cost. The Health Services' and Diversified Operations' inventories are
stated at the lower of cost (first-in, first-out) or market.
Intangible Assets--The majority of the Company's intangible assets consist of
Goodwill and are amortized on a straight-line basis over a period from 15
to 40 years.
<TABLE>
<CAPTION>
2. Segment Information
The Company's wholly-owned subsidiary Mid-States Development, Inc.
purchased one additional business in both 1991 and 1992, and six additional
businesses in 1993.
The Company's wholly-owned subsidiary North Central Utilities, Inc. acquired
in 1992 RD Communications, Inc., an independent telephone company serving
Parkers Prairie, Minnesota, and the surrounding area. As part of the
acquisition consideration, the Company issued $5,331,000 of a new series of
$9.00 Exchangeable Cumulative Preferred Shares. The balance of consideration
consisted of cash and Common Shares acquired by a subsidiary of the Company
in the open market.
In all acquisitions, the purchase method of accounting was used and the
acquisitions would have had no significant pro forma effect on the Company's
net income or earnings per share for 1993 and 1992. Operating revenues for
1992 would have been $248,909,000. The total acquisition price for all
businesses was $22,925,000.
The Company has operations in three business areas. Electric Operations
includes the electric utility only. Health Services Operations includes
certain businesses purchased in 1993, including a diagnostic medical imaging
company, a management company for a number of diagnostic imaging companies,
and a medical imaging company that sells and services diagnostic medical
imaging equipment and associated supplies and accessories. Diversified
Operations consists of businesses diversified in such areas as manufacturing
(fabricated metal parts and agricultural equipment), electrical and telephone
contracting, radio broadcasting, waste incinerating, and telephone utility.
The businesses were not significant enough to warrant segment information
until 1993. Information for the business segments for 1993 is presented in
the table below:
Health Diversified
Electric Services Operations Total
<S> <C> <C> <C> <C>
(in thousands)
Operating Revenues $192,290 $32,068 $40,869 $265,227
Pretax Operating Income $ 47,114 $ 1,967 $ 4,905 $ 53,986
Income Taxes 14,331
Consolidated Operating Income $ 39,655
Depreciation and Amortization $ 18,219 $ 435 $ 1,858 $ 20,512
Capital Expenditures $ 24,526 $ 3,471 $ 2,897 $ 30,894
Identifiable Assets $498,440 $23,175 $42,290 $563,905
3. Rate Matters
On September 22, 1993, the NDPSC entered an Order approving an Agreement for
Incentive Regulation for 1993. The Agreement provides a mechanism for
sharing equally between ratepayers and shareholders of any amounts earned in
1993 over or under a specified return on rate base in North Dakota. As part
of the calculation, the NDPSC will allow the Company to recognize
postretirement benefits other than pensions under the accrual method required
by SFAS 106. The NDPSC's Order also requires the Company to change its
method of revenue recognition in North Dakota as of January 1, 1993, from
billing dates to energy delivery dates. (See Operating Revenues under note 1
for more information on the accounting for unbilled revenue.)
On September 9, 1992, following an audit by the staff of the NDPSC, the NDPSC
entered an Order approving a settlement agreement with the Company pursuant
to which the Company made a refund to its North Dakota customers in the
aggregate amount of $1,000,000. The refund was reflected in electric
revenues for the quarter ended September 30, 1992.
4. Common Shares
The Company's stock repurchase program was extended by approval of the Board
of Directors on April 12, 1993. Under the extension, up to 611,481 common
shares (the unpurchased remainder from previous authorizations) may be
purchased during the period ending December 31, 1995. The purpose for
implementing this stock repurchase plan is to reduce the common equity
portion of the Company's capital structure. There were no shares purchased
in 1993. During 1992 the Company purchased 5,000 shares at a cost of
$157,000.
5. Retained Earnings Restriction
The Company's Indenture of Mortgage and Articles of Incorporation, as
amended, contain provisions which limit the amount of the dividends which may
be paid to common shareholders. Under the most restrictive of these
provisions, retained earnings at December 31, 1993, were restricted by
$9,686,000.
6. Commitments
At December 31, 1993, the Company had commitments under contracts in
connection with construction programs aggregating approximately $2,500,000.
For capacity requirements the Company has an agreement with Lincoln Electric
System, to purchase 20 mw for the winter seasons of 1993 through 1995 at an
approximate annual cost of $1,300,000 for 1994 and $800,000 for 1995. The
Company also has an agreement with Manitoba Hydro Electric Board to purchase
110 mw annually for 1994 through 1996 at a minimum annual cost of
approximately $3,900,000 for 1994 and $4,100,000 for 1995 and 1996.
The Company also has several long-term coal contracts in which the Company is
responsible for making payment only upon the delivery of the coal. The risk
of loss from nonperformance of the contracts is considered nominal because of
the availability of other suppliers and the expected continued reliability of
the current fuel suppliers. Furthermore, the Cost of Energy Adjustment
provision in the rate-making process lessens the risk of loss (in the form of
increased costs) from market price changes because it assures recovery of
almost all fuel costs. Lease rental commitments are not considered
significant.
7. Long-Term Obligations
Preferred Shares--On November 12, 1993, the Company retired 40,000 shares of
the $9.50 series. This redemption resulted in a reduction to Retained
Earnings of $80,000. On November 5, 1992, the Company retired the remaining
18,000 shares of the $8.30 series, 68,000 shares of the $8.375 series, and
the 45,500 shares of the $8.90 series. This redemption resulted in a
reduction to Retained Earnings of $479,000.
The $6.35 Cumulative Preferred Shares are redeemable in whole or in part at
the option of the Company after December 1, 1997, at $103.175.
The $9.00 Exchangeable Cumulative Preferred Shares are redeemable in whole or
in part at the option of the Company after August 9, 1999, for $100.00 per
share payable in cash or, at the holder's election, Common Shares. Subject
to certain conditions, such shares are exchangeable at the option of the
holder after August 9, 1999, for $100.00 per share in cash or Common Shares.
Long-Term Debt--All utility property, with certain minor exceptions, is
subject to the lien of the Indenture of Mortgage of the Company securing its
First Mortgage Bonds. The Company is required by the Indenture to make
annual payments (exclusive of redemption premiums) for sinking fund purposes,
except that the requirement with respect to certain series may be satisfied
by the delivery of bonds of such series of equal principal amount. The
Company issued First Mortgage Bonds of its pollution control and industrial
development series to secure payment of a like principal amount of revenue
bonds which were issued by local governmental units to finance facilities
leased or purchased and which the Company has capitalized. The aggregate
amounts of maturities and sinking fund requirements on bonds outstanding and
other long-term obligations at December 31, 1993, for each of the next five
years are $9,356,000 for 1994, $9,538,000 for 1995, $5,670,000 for 1996,
$25,463,000 for 1997, and $5,036,000 for 1998.
In December 1993, the Company defeased its First Mortgage Bonds, 7.10% Series
of 2003, and 5.9% Series of 2004. Cash and U.S. Government Obligations were
deposited in an irrevocable trust to cover the principal, interest, and call
premium payable in February 1994.
8. Pension Plan and Other Postretirement Benefits
The Company's noncontributory funded pension plan covers substantially all
employees. The plan provides for 100% vesting after 5 "vesting years" of
service and for retirement compensation at age 65, with reduced compensation
in cases of retirement prior to age 62. The Company reserves the right to
discontinue the plan, but no change or discontinuance may affect the pensions
theretofore vested. The Company's policy is to fund pension costs accrued.
All past service costs have been provided for. The total pension expense was
$1,333,000 for 1993, $1,293,000 for 1992, and $1,123,000 for 1991. A portion
of the pension expense is capitalized as a part of utility plant
construction.
The pension plan has a trustee who is responsible for pension payments to
retirees. Two investment managers have responsibility for management of the
plan's assets. In addition, an independent actuary performs the necessary
actuarial valuations for the plan.
Net periodic pension cost for 1993, 1992, and 1991 includes the following
components:
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Service Cost - Benefit Earned During the Period $ 1,774 $ 1,699 $ 1,469
Interest Cost on Projected Benefit Obligation 5,867 5,570 5,194
------- ------- -------
$ 7,641 $ 7,269 $ 6,663
Less: Actual Return on Assets 7,636 6,223 17,813
Plus/(Less): Net Deferral and Amortization 1,328 247 12,273
------- ------- -------
Net Periodic Pension Cost $ 1,333 $ 1,293 $ 1,123
The assumptions used for actuarial valuations were:
1993 1992 1991
Discount Rate 7.5% 8.0% 8.0%
Rate of Increase in Future Compensation Level 4.5% 5.0% 5.0%
Long-Term Rate of Return on Assets 8.0% 8.5% 8.5%
The plan assets consist of common stock and bonds of public companies, U.S.
Government Securities, cash and cash equivalents.
The funded status of the plan and amounts recognized on the balance sheet at
December 31, 1993 and 1992, are as follows:
</TABLE>
<TABLE>
<CAPTION>
1993 1992
(in thousands)
Actuarial present value of benefit obligation:
<S> <C> <C>
Vested Benefits $ 58,462 $ 56,769
Nonvested Benefits 6,113 3,525
-------- --------
Accumulated Benefit Obligation $ 64,575 $ 60,294
Projected Benefit Obligation $ 80,006 $ 75,291
Plan Assets at Fair Value 94,945 91,416
-------- --------
Funded Status $ 14,939 $ 16,125
Unrecognized Transition Asset (1,957) (2,193)
Unrecognized Prior Service Cost 6,206 6,804
Unrecognized Net Actuarial (Gain) or Loss (13,395) (15,021)
-------- --------
Net Pension Asset $ 5,793 $ 5,715
In addition to providing pension benefits, the Company provides a portion of
health insurance and life insurance benefits for retired employees.
Substantially all of the Company's employees may become eligible for health
insurance and life insurance benefits if they reach age 55 and have 10 years
of service. Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 106 - Employers' Accounting for
Postretirement Benefits Other Than Pensions (SFAS 106). SFAS 106 requires
the Company to accrue the estimated cost of retiree benefit payments during
the years the employee provides service. The Company previously expensed the
cost of these benefits, which are principally health care, as claims were
incurred. The Company has elected to recognize the transitional obligation
of approximately $17,619,000 over a period of twenty years. The Company's
cash flows are not affected by implementation of this Statement, but
implementation of this Statement decreased net income by $837,000 and
earnings per share by $.07 in 1993.
In 1992 and 1991, the Company recognized $960,000 and $850,000, respectively,
as an expense for postretirement health care and life insurance benefits.
The net postretirement benefit cost for 1993 includes the following
components:
1993
(in thousands)
Service Cost - Benefit Earned During the Period $ 502
Interest Cost on Accumulated Postretirement
Benefit Obligation 1,367
Amortization of Transition Obligation 881
-------
Net Postretirement Benefit Cost $ 2,750
The funded status of the plan and the amounts recognized on the balance sheet
are as follows:
</TABLE>
<TABLE>
<CAPTION>
December 31, January 31,
1993 1993
(in thousands)
<S> <C> <C>
Actuarial present value of benefit obligation:
Retirees $ 10,694 $ 10,520
Fully Eligible Plan Participants 5,194 4,548
Other Active Plan Participants 3,565 2,551
-------- --------
Accumulated Postretirement Benefit Obligation $ 19,453 $ 17,619
Plan Assets at Fair Value 0 0
-------- --------
Funded Status $(19,453) $(17,619)
Unrecognized Loss 981 0
Unrecognized Transitional Obligation 16,738 17,619
-------- --------
Postretirement Benefit Liability $ (1,734) $ 0
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation as of December 31, 1993 was 11.5% for 1994
decreasing linearly each successive year until it reaches 5% in 2001, after
which it remains constant. A one-percentage-point increase in the assumed
health care cost trend rate for each year would increase the accumulated
postretirement obligation as of December 31, 1993 and the service and
interest cost components of the net postretirement health care cost in 1993
by approximately 13.1% and 14.9%, respectively. The assumed discount rate
used in determining the accumulated postretirement benefit obligation was
7.5%.
The Company has a leveraged employee stock ownership plan (ESOP) for the
benefit of all its employees. Contributions made by the Company were
$940,000 for 1993, $880,000 for 1992, and $850,000 for 1991.
9. Compensating Balances and Short-Term Borrowings
At December 31, 1993, the Company had no compensating balances to support
formal bank lines of credit. The Company's bank lines of credit totaled
$19,050,000 of which $4,437,000 was used at December 31, 1993. They make
available to the Company bank loans for short-term financing and provide
backup financing for commercial paper notes.
10. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
Cash and Short-Term Investments--The carrying amount approximates fair value
because of the short-term maturity of those instruments.
Marketable Securities--The fair value of investments are estimated based on
quoted market prices.
Redeemable Preferred Stock-- The fair value is estimated based on the current
rates available to the Company for the issuance of redeemable preferred
stock.
Long-Term Debt-- The fair value of the Company's long-term debt is estimated
based on the current rates available to the Company for the issuance of debt.
</TABLE>
<TABLE>
<CAPTION>
1993 1992
(in thousands)
Carrying Fair Carrying Fair
<S> <C> <C> <C> <C>
Amount Value Amount Value
Cash and Short-Term Investments $ 4,259 $ 4,259 $ 18,024 $ 18,024
Marketable Securities 17,025 17,406 10,277 10,382
Redeemable Preferred Stock (18,000) (18,728) (18,000) (18,000)
Long-Term Debt (166,563) (181,669) (159,295) (165,227)
11. Income Tax Expense
The total income tax expense differs from the amount computed by applying the
federal income tax rate (35% in 1993 and 34% in 1992 and 1991) to net income
before total income tax expense for the following reasons:
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
(in thousands)
Tax Computed at Federal Statutory Rate............ $14,495 $13,739 $14,214
Increases (Decreases) in Tax from:
State Income Taxes Net of Federal Income Tax
Benefit....................................... 1,926 1,932 1,853
Investment Tax Credit Amortization.............. (1,234) (1,220) (1,210)
Depreciation Timing Differences -- Flow-Through
Method Reversal............................... 649 380 486
Timing Differences Reversing in Excess of
Federal Rates................................... (635) (560) (429)
Dividend Received/Paid Deduction................ (824) (225) (150)
Permanent and Other Differences................. (333) (176) 469
------- ------- -------
Total Income Tax Expense................ $14,044 $13,870 $15,233
Overall Effective Federal and State Income Tax
Rate............................................ 33.9% 34.3% 36.9%
Income Tax Expense is Comprised of the Following:
Charged (Credited) to Operations:
Current Federal Income Taxes................ $ 9,288 $ 9,189 $10,264
Current State Income Taxes.................. 2,344 2,096 2,057
Deferred Federal Income Taxes............... 3,275 3,216 3,059
Deferred State Income Taxes................. 658 743 658
Investment Tax Credit Amortization.......... (1,234) (1,220) (1,210)
------- ------- -------
Total.................................. 14,331 14,024 14,828
Charged (Credited) to Other Income and
Deductions:
Current Federal Income Taxes.............. (192) (639) (38)
Current State Income Taxes................ (11) (121) 6
Deferred Federal and State Income Taxes... (84) 606 437
------- ------- -------
Total Income Tax Expense.............. $14,044 $13,870 $15,233
</TABLE>
<TABLE>
<CAPTION>
Deferred Income Tax Expense is Comprised of
<S> <C> <C>
the Following:
Accelerated Depreciation (Tax over Book)-Net $ 3,580 $ 3,802
Overhead Costs Capitalized.................... (145) (200)
Unbilled Revenues............................. (274) (52)
Deductible Net Pension Asset.................. 455 425
Premium On Bond Redemption.................... 610 442
Other......................................... 339 (263)
------- -------
Total................................... $ 4,565 $ 4,154
The Company's deferred tax assets and liabilities were comprised of the
following on December 31, 1993:
</TABLE>
[TEXT]
1993
(in thousands)
Deferred Income Taxes
Deferred Tax Assets
Amortization of Tax Credits $ 15,376
Unbilled/Unearned Revenue 4,501
Operating Reserves 2,340
Non Deductible Land - Plant Abandonment 1,134
Other 1,661
Transfer to Regulatory Asset (938)
--------
Total Deferred Tax Assets $ 24,074
Deferred Tax Liabilities
Differences Related to Property (107,317)
Excess Tax Over Book - Pensions (2,298)
Other (3,161)
Transfer to Regulatory Asset (501)
Transfer to Regulatory Liability 745
---------
Total Deferred Tax Liabilities $(112,532)
Deferred Income Taxes $ (88,458)
<TABLE>
<CAPTION>
12. Quarterly Information (Unaudited)
The quarterly data shown below reflects seasonal and timing variations which are common in the utility industry.
Because of changes in the number of common shares outstanding, the sum of quarterly earnings per common share may
not equal total earnings per common share. The information for the first three quarters in 1993 has been restated
to reflect the change in method of electric revenue recognition for North Dakota from billing dates to energy
delivery dates. The effects of the restatement on net income, by quarter and for the nine months ended September
30, 1993, are immaterial. (See note 1 and 3 for further information.)
Three Months Ended
March 31 June 30 September 30 December 31
1993 1992 1993 1992 1993 1992 1993 1992
(in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues..................... $58,714 $52,559 $71,183 $49,994 $67,882 $48,145 $67,448 $58,840
Operating Income....................... 12,257 11,595 8,438 9,217 9,423 8,298 9,537 9,252
Net Income............................. 8,990 8,885 5,447 6,421 6,225 4,599 6,707 6,633
Earnings Available for
Common Shares........................ 8,373 8,382 4,830 5,922 5,608 4,035 6,081 5,919
Earnings Per Common Share.............. .75 .75 .43 .53 .50 .36 .54 .53
Dividends Paid Per Common Share........ .42 .41 .42 .41 .42 .41 .42 .41
Price Range:
High................................. 39 1/2 36 1/4 41 1/4 35 1/2 35 1/2 35 1/4 34 1/4 34 3/4
Low.................................. 33 30 1/2 33 1/2 32 3/4 31 1/2 31 1/2 30 5/8 31
Average Number of Common
Shares Outstanding................... 11,180 11,185 11,180 11,185 11,180 11,185 11,180 11,183
</TABLE>
[TEXT]
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Otter Tail Power Company:
We have audited the accompanying consolidated balance sheets and statements of
capitalization of Otter Tail Power Company and its subsidiaries as of December
31, 1993 and 1992, and the related consolidated statements of income, retained
earnings, and cash flows for each of the three years in the period ended
December 31, 1993. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Companies at December 31,
1993 and 1992, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles.
As discussed in notes 1 and 8 to the financial statements, in 1993 the Company
made required changes in its method of accounting for income taxes and
postretirement health-care costs.
DELOITTE & TOUCHE
Deloitte & Touche
January 31, 1994
Minneapolis, Minnesota
Exhibit 21-A
OTTER TAIL POWER COMPANY
Subsidiaries of the Registrant
March 1, 1994
Company State of Incorporation
Minnesota Dakota Generating Company Minnesota
Otter Tail Realty Company Minnesota
Otter Tail Management Corporation* Minnesota
ORD Corporation* Minnesota
Quadrant Co. Minnesota
North Central Utilities, Inc. Minnesota
Midwest Information Systems, Inc. Minnesota
Midwest Telephone Co. Minnesota
Osakis Telephone Company Minnesota
Data Video Systems, Inc. Minnesota
MIS Investments, Inc. Minnesota
Mid-States Development, Inc. Minnesota
Hylden Industries, Inc.* Minnesota
Glendale Machining, Inc. Minnesota
Precision Machine of North Dakota, Inc. North Dakota
Dakota Machine Tool, Inc. North Dakota
Aerial Contractors, Inc. North Dakota
Moorhead Electric, Inc. Minnesota
KFGO, Inc. North Dakota
Western Minnesota Broadcasting Company Minnesota
Imaging Plus, Inc. North Dakota
Mobile Imaging. Inc. North Dakota
International Falls Imaging, Inc. North Dakota
Scanners, Inc. Minnesota
Great Plains Imaging, Inc. North Dakota
Diagnostic Medical Systems, Inc. North Dakota
DMS Leasing Corporation North Dakota
Medical Operators and Management Corp. North Dakota
*Inactive
Exhibit 23-A
We consent to the incorporation by reference in Registration Statement No. 33-
46071 of Otter Tail Power Company on Form S-3 of our reports dated January 31,
1994 appearing and incorporated by reference in this Annual Report on Form 10-
K of Otter Tail Power Company for the year ended December 31, 1993.
Deloitte & Touche
Deloitte & Touche
Minneapolis, Minnesota
March 25, 1994
Exhibit 24-A
POWER OF ATTORNEY
__________
I, JOHN C. MAC FARLANE, do hereby constitute and appoint D. R.
EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN, or any one of them,
my Attorney-in-Fact for the purpose of signing, in my name and on my behalf as
President and Chief Executive Officer, Principal Executive Officer and
Director of Otter Tail Power Company, the Annual Report of Otter Tail Power
Company on Form 10-K for its fiscal year ended December 31, 1993, and any and
all amendments to said Annual Report, and to deliver on my behalf said Annual
Report and any and all amendments thereto, as each thereof is so signed, for
filing with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934, as amended.
Date: ____January 6_______, 1994.
______ John C. MacFarlane____
John C. MacFarlane
In Presence of:
Lori D. Dawkins____________________
Penny Mosher_______________________
POWER OF ATTORNEY
__________
I, DENNIS R. EMMEN, do hereby constitute and appoint JOHN C.
MAC FARLANE, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN, or any one of
them, my Attorney-in-Fact for the purpose of signing, in my name and on my
behalf as Sr. Vice President, Finance of Otter Tail Power Company, the Annual
Report of Otter Tail Power Company on Form 10-K for its fiscal year ended
December 31, 1993, and any and all amendments to said Annual Report, and to
deliver on my behalf said Annual Report and any and all amendments thereto, as
each thereof is so signed, for filing with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended.
Date: ____January 6_______, 1994.
_______ Dennis R. Emmen_________
Dennis R. Emmen
In Presence of:
Penny Mosher_______________________
Lori D. Dawkins____________________
POWER OF ATTORNEY
__________
I, ANDREW E. ANDERSON, do hereby constitute and appoint JOHN C.
MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN,
or any one of them, my Attorney-in-Fact for the purpose of signing, in my name
and on my behalf as Controller and Principal Accounting Officer of Otter Tail
Power Company, the Annual Report of Otter Tail Power Company on Form 10-K for
its fiscal year ended December 31, 1993, and any and all amendments to said
Annual Report, and to deliver on my behalf said Annual Report and any and all
amendments thereto, as each thereof is so signed, for filing with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
Date: _____January 7______, 1994.
___________Andrew E. Anderson________
Andrew E. Anderson
In Presence of:
Lori D. Dawkins____________________
Penny Mosher_______________________
POWER OF ATTORNEY
__________
I, DAYLE DIETZ, do hereby constitute and appoint JOHN C.
MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN,
or any one of them, my Attorney-in-Fact for the purpose of signing, in my name
and on my behalf as Director of Otter Tail Power Company, the Annual Report of
Otter Tail Power Company on Form 10-K for its fiscal year ended December 31,
1993, and any and all amendments to said Annual Report, and to deliver on my
behalf said Annual Report and any and all amendments thereto, as each thereof
is so signed, for filing with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended.
Date: _____January 14_____, 1994.
___________Dayle Dietz_______________
Dayle Dietz
In Presence of:
Owen E. Jensen_____________________
M. D. Isley________________________
POWER OF ATTORNEY
__________
I, MAYNARD D. HELGAAS, do hereby constitute and appoint JOHN C.
MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN,
or any one of them, my Attorney-in-Fact for the purpose of signing, in my name
and on my behalf as Director of Otter Tail Power Company, the Annual Report of
Otter Tail Power Company on Form 10-K for its fiscal year ended December 31,
1993, and any and all amendments to said Annual Report, and to deliver on my
behalf said Annual Report and any and all amendments thereto, as each thereof
is so signed, for filing with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended.
Date: ____January 17______, 1994.
___________Maynard D. Helgaas________
Maynard D. Helgaas
In Presence of:
Colleen A. Weatherly_______________
Jayme L. Kautzman__________________
POWER OF ATTORNEY
__________
I, NATHAN I. PARTAIN, do hereby constitute and appoint
JOHN C. MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A.
NORLIN, or any one of them, my Attorney-in-Fact for the purpose of signing, in
my name and on my behalf as Director of Otter Tail Power Company, the Annual
Report of Otter Tail Power Company on Form 10-K for its fiscal year ended
December 31, 1993, and any and all amendments to said Annual Report, and to
deliver on my behalf said Annual Report and any and all amendments thereto, as
each thereof is so signed, for filing with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended.
Date: _____January 18_____, 1994.
___________Nathan I. Partain_________
Nathan I. Partain
In Presence of:
M. Broyle__________________________
Jeffrey Miller_____________________
POWER OF ATTORNEY
__________
I, JAMES L. STENGEL, do hereby constitute and appoint JOHN C.
MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN,
or any one of them, my Attorney-in-Fact for the purpose of signing, in my name
and on my behalf as Director of Otter Tail Power Company, the Annual Report of
Otter Tail Power Company on Form 10-K for its fiscal year ended December 31,
1993, and any and all amendments to said Annual Report, and to deliver on my
behalf said Annual Report and any and all amendments thereto, as each thereof
is so signed, for filing with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended.
Date: ______January 10____, 1994.
___________J. L. Stengel_____________
James L. Stengel
In Presence of:
Robert L. Abram____________________
Marjorie A. Abram__________________
POWER OF ATTORNEY
__________
I, ROBERT N. SPOLUM, do hereby constitute and appoint JOHN C.
MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN,
or any one of them, my Attorney-in-Fact for the purpose of signing, in my name
and on my behalf as Director of Otter Tail Power Company, the Annual Report of
Otter Tail Power Company on Form 10-K for its fiscal year ended December 31,
1993, and any and all amendments to said Annual Report, and to deliver on my
behalf said Annual Report and any and all amendments thereto, as each thereof
is so signed, for filing with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended.
Date: _____January 8_____, 1994.
___________Robert N. Spolum__________
Robert N. Spolum
In Presence of:
John M. Grove______________________
Charles E. Lattes__________________
POWER OF ATTORNEY
__________
I, THOMAS M. BROWN, do hereby constitute and appoint JOHN C.
MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN,
or any one of them, my Attorney-in-Fact for the purpose of signing, in my name
and on my behalf as Director of Otter Tail Power Company, the Annual Report of
Otter Tail Power Company on Form 10-K for its fiscal year ended December 31,
1993, and any and all amendments to said Annual Report, and to deliver on my
behalf said Annual Report and any and all amendments thereto, as each thereof
is so signed, for filing with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended.
Date: ____January 10______, 1994.
___________Thomas M. Brown___________
Thomas M. Brown
In Presence of:
Linda J. Barnes____________________
Joyce N. Bliss_____________________
POWER OF ATTORNEY
__________
I, KENNETH L. NELSON, do hereby constitute and appoint JOHN C.
MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN,
or any one of them, my Attorney-in-Fact for the purpose of signing, in my name
and on my behalf as Director of Otter Tail Power Company, the Annual Report of
Otter Tail Power Company on Form 10-K for its fiscal year ended December 31,
1993, and any and all amendments to said Annual Report, and to deliver on my
behalf said Annual Report and any and all amendments thereto, as each thereof
is so signed, for filing with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended.
Date: _____January 8______, 1994.
___________Kenneth L. Nelson_________
Kenneth L. Nelson
In Presence of:
Becky Luhning______________________
Lori D. Dawkins____________________
