SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or
240.14a-12
_________Otter Tail Power Company_________
(Name of Registrant as Specified in its Charter)
__________________________________________
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4)and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11. Set forth
the amount on which the filing fee is calculated and
state how it was determined:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total Fee Paid:
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[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
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March 8, 1995
To the Holders of Common Shares
of Otter Tail Power Company:
You are cordially invited to attend the Annual Meeting of
Shareholders of Otter Tail Power Company which will be held at the
National Guard Armory, 421 East Cecil, Fergus Falls, Minnesota, at
10:00 a.m. on Monday, April 10, 1995. The Armory is located just
off Friberg Avenue, north of the Senior High School.
Enclosed is a formal Notice of Annual Meeting and Proxy Statement,
together with a Proxy and return envelope for the use of holders of
Common Shares who cannot be present in person at the meeting.
As discussed in the formal Notice and Proxy Statement, the Board of
Directors proposes the reelection, for three-year terms, of Ms.
Dayle Dietz and Mr. John C. MacFarlane, whose terms as Directors
expire at the time of the Annual Meeting.
This year the Board of Directors has also proposed for election as
Director Mr. Arvid R. Liebe of Milbank, South Dakota, to succeed
Mr. James L. Stengel who has chosen not to stand for reelection to
the Board. Mr. Liebe is president of Liebe Drug, Inc., which
operates drug stores in Minnesota and South Dakota, and holds the
office of treasurer in Liebe Farms, Inc., which operates a 3,000-
acre grain farm in Grant County, South Dakota. Mr. Liebe would
serve a three-year term expiring in 1998.
At this Annual Meeting, shareholders will also be asked to ratify
the appointment of Deloitte & Touche LLP as independent auditors of
the Company for 1995.
In order to ensure that your shares may be represented at the
meeting and to save the Company additional expense of solicitation,
we urge that you promptly sign and return the enclosed Proxy card.
If you attend the meeting, as we hope you will, you may revoke your
Proxy by written notice given to an officer of the Company and vote
in person.
A question slip is also enclosed with this Proxy Statement. If you
have any questions about Otter Tail Power Company that you would
like to have answered at the meeting or in writing, please return
the question slip with your Proxy.
Sincerely,
John C. MacFarlane
John C. MacFarlane
President and Chief
Executive Officer
Notice of Annual Meeting
Notice is hereby given to the holders of Common Shares of Otter
Tail Power Company that the Annual Meeting of Shareholders of the
Company will be held in the National Guard Armory, 421 East Cecil,
Fergus Falls, Minnesota, on Monday, April 10, 1995, at 10:00 a.m.
to consider and act upon the following matters:
1. To elect three Directors to serve until the Annual Meeting
in 1998, or until their successors are elected and qualified;
2. To approve the appointment by the Board of Directors of
Deloitte & Touche LLP as independent auditors for the year
1995; and
3. To transact such other business as may properly be brought
before the meeting.
Dated: March 8, 1995 JAY D. MYSTER, Corporate Secretary
IMPORTANT - PLEASE MAIL YOUR PROXY PROMPTLY
In order that there may be a proper representation at the meeting,
you are urged, whether you own one share or many, to complete,
sign, and mail your Proxy in the enclosed envelope. No postage is
required if mailed in the United States.
<PAGE>
PROXY STATEMENT
OTTER TAIL POWER COMPANY
ANNUAL MEETING OF SHAREHOLDERS
April 10, 1995
This Proxy Statement is furnished to shareholders in connection
with the solicitation by the Board of Directors of Otter Tail Power
Company of Proxies for use at the Annual Meeting of Shareholders to
be held on April 10, 1995.
The mailing address of the principal executive office of the
Company is Box 496, Fergus Falls, Minnesota 56538-0496. The
approximate date on which the Proxy Statement and form of Proxy
will be first sent to shareholders is March 10, 1995.
Any shareholder giving a Proxy will have the right to revoke it by
written notice to an officer of the Company or by filing with an
officer another Proxy bearing a later date at any time before it is
voted at the meeting. A shareholder wishing to vote in person
after giving a Proxy must first give written notice of revocation
to an officer of the Company.
All shares represented by valid, unrevoked Proxies will be voted at
the Annual Meeting. Shares voted as abstentions on any matter (or
as "withhold authority" as to Directors) will be counted as shares
that are present and entitled to vote for purposes of determining
the presence of a quorum at the meeting and as unvoted, although
present and entitled to vote, for purposes of determining the
approval of each matter as to which the shareholder has abstained.
If a broker submits a proxy which indicates that the broker does
not have discretionary authority as to certain shares to vote on
one or more matters, those shares will be counted as shares that
are present and entitled to vote for purposes of determining the
presence of a quorum at the meeting, but will not be considered as
present and entitled to vote with respect to such matters.
The cost of soliciting Proxies will be borne by the Company. In
addition to solicitation by mail, officers and regular employees of
the Company may solicit Proxies by telephone, telegraph, or in
person.
The record date for the determination of shareholders entitled to
vote at the meeting is the close of business on February 15, 1995.
A copy of the Company's 1994 Annual Report, including financial
statements, was mailed to each shareholder of record on or about
March 3, 1995.
<PAGE>
Outstanding Voting Shares
The outstanding voting shares of the Company at the close of
business on February 15, 1995, the record date for shareholders
entitled to notice of and to vote at said meeting, consisted of
11,180,136 Common Shares. Each holder of record at the close of
business on that day is entitled to one vote per share.
The only person known to the Company to own beneficially (as
defined by the Securities and Exchange Commission for proxy
statement purposes) more than 5% of the outstanding Common Shares
of the Company as of December 31, 1994, is as follows:
Amount and
Name and Address Nature of Percent
of Beneficial Beneficial of
Owner Ownership Class
Otter Tail Power 946,653 shs. 8.47%
Company Employee
Stock Ownership Plan
c/o Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258-0001
The Common Shares owned by the Employee Stock Ownership Plan (ESOP)
are held in trust for the benefit of participants in the ESOP for
which Mellon Bank is Trustee, subject to the direction of the ESOP
Retirement Committee. The ESOP has sole investment power over the
Common Shares held in trust. Participants are entitled to instruct
the ESOP Trustee on how to vote all Company Common Shares allocated
to their accounts (946,653 Common Shares as of December 31, 1994)
and will receive a separate Proxy for voting such Shares. All
Common Shares allocated to the participants for which no voting
instructions are received and all unallocated Common Shares held by
the ESOP (NONE as of December 31, 1994) will be voted by the
Trustee in proportion to the instructed shares.
Nominees for Election as Directors
The terms of Ms. Dietz, Mr. MacFarlane, and Mr. Stengel expire at
the time of the 1995 Annual Meeting. Mr. Stengel has elected not
to stand for reelection at this time.
The Board of Directors has proposed Mr. Arvid R. Liebe for election
as Director to succeed Mr. Stengel. Mr. Liebe is well acquainted
with the service area of the Company and qualified through his
business experience as president of Liebe Drug, Inc., which
operates drugstores in Minnesota and South Dakota, and as treasurer
of Liebe Farms, Inc., which operates a 3,000-acre grain farm in
Grant County, South Dakota. The Board of Directors also nominates
for reelection Ms. Dayle Dietz and Mr. John C. MacFarlane to serve
a three-year term ending at the time of the Annual Meeting in 1998.
It is the intention of the proxies named to vote for the three
nominees named below, but in case any of them should become
unavailable due to unforeseen causes, the proxies will vote for the
remainder of such nominees and may also vote for other nominees not
named herein in lieu of those unable or unwilling to serve. The
affirmative vote of a majority of the Common Shares present and
entitled to vote with respect to the election of Directors is
required for the election of the nominees to the Board of
Directors.
The following information is furnished with respect to each nominee
for election as a Director and for each Director whose term of
office will continue after the meeting:
Principal Director
Name Occupation (1) Age Since
Nominees for election for a term
of three years expiring April 1998:
Dayle Dietz ** Associate Professor 66 1983
Department Chair
Marketing & Management
North Dakota State College of Science
Wahpeton, North Dakota
John C. MacFarlane * Chairman, President and 55 1983
Chief Executive Officer
Otter Tail Power Company
Fergus Falls, Minnesota
Arvid R. Liebe President, Liebe Drug, Inc. 53 --
(Retail Business)
Treasurer, Liebe Farms, Inc.
(Grain Farming)
Milbank, South Dakota
Directors whose terms expire April 1997:
Thomas M. Brown */*** Retired Partner 64 1991
Dorsey & Whitney P.L.L.P.
Minneapolis, Minnesota (2)
Maynard D. Helgaas */*** Owner/Manager 60 1985
Midwest Agri-Development Corp.
(Farm Equipment and Supplies)
Jamestown, North Dakota
Robert N. Spolum ** Retired Chairman, 64 1991
President and CEO
Melroe Company
(Industrial Equipment Manufacturer)
Owner, R.N. Spolum & Associates
(Business Consulting)
Fargo, North Dakota (3)
<PAGE>
Directors whose terms expire April 1996:
Dennis R. Emmen Senior Vice President- 61 1984
Finance, Treasurer and
Chief Financial Officer
Otter Tail Power Company
Fergus Falls, Minnesota
Kenneth L. Nelson ** Owner/President, 53 1990
Kenny's Candy Co. Inc.
Part Owner/President,
Barrel O'Fun Snack Foods Co.
Owner/President,
Nelson's Confectionery
(Production of Snack Foods)
Perham, Minnesota
Nathan I. Partain ** Managing Director, 38 1993
Director of Equity Research,
Duff & Phelps Corp.
(Financial Consulting, Money Management
and Investment Research)
Chicago, Illinois
* Member of Nominating Committee of the Board of Directors
** Member of Audit Committee of the Board of Directors
*** Member of Compensation Committee of the Board of Directors
(1) Except as indicated by footnotes below, each of the nominees
and Directors has had the same position or another executive
position with the same employer for the past five years.
(2) Mr. Brown was a partner in the law firm of Dorsey & Whitney
from 1963 until his retirement on January 1, 1991, at which
time he became of counsel to the firm. On November 29, 1993,
his status in the firm changed to that of Retired Partner.
(3) Mr. Spolum held the office of President and Chief Executive
Officer of Melroe Company from 1972 until he became Chairman in
September 1992. He retired as Chairman on February 28, 1993.
He also retired as Senior Vice President of Clark Equipment
Company, South Bend, Indiana, of which Melroe is a business
unit, on February 28, 1993. He continues to serve as a
consultant for Clark Equipment Company.
The Company has a standing Audit Committee, Compensation Committee,
and Nominating Committee. The Company's Audit Committee reviews
accounting and control procedures of the Company. The committee is
composed of four members of the Board of Directors who, for 1994,
were Dayle Dietz, Nathan I. Partain, Kenneth L. Nelson, and Robert
N. Spolum. In 1994 this committee held two meetings.
The Compensation Committee is composed of three members of the
Board of Directors who, for 1994, were Thomas M. Brown, Maynard D.
Helgaas, and James L. Stengel. The committee reviews the
compensation of the officers and fees of Directors of the Company
and makes recommendations on such compensation and fees to the
Board of Directors. This committee held two meetings in 1994.
The Nominating Committee identifies qualified nominees to succeed
to Board membership. The committee is composed of four members of
the Board of Directors who, for 1994, were James L. Stengel,
Maynard D. Helgaas, Thomas M. Brown, and John C. MacFarlane. Any
shareholder may submit recommendations for membership on the Board
of Directors by sending a written statement of the qualifications
of the recommended individual to the President, Otter Tail Power
Company, Box 496, Fergus Falls, Minnesota 56538-0496. In 1994
this committee held one meeting.
During 1994 the Board of Directors held a total of five regularly
scheduled and special meetings. Each incumbent Director attended
at least 75% of the total of (i) all meetings of the Board of
Directors held during the period for which he or she was a
Director, and (ii) all meetings of the committees during the
periods he or she served on such committees.
Directors' Compensation
All Directors of the Company (other than officers of the Company)
are compensated $7,800 per year for all services as Directors,
including service on committees. A fee of $250 is also paid for
attendance at a board meeting. In addition, nonofficer Directors
receive an actual expense or a $100 travel allowance if they are
required to furnish their own transportation to Directors' or any
committee meetings outside their city of residence. Nonemployee
Directors may elect to defer the receipt of all or part of the fees
pursuant to the Company's Deferred Compensation Plan for Directors.
Interest accrues on any deferred amounts at a rate equal to
one-half of 1% over the prime commercial rate of First Bank
National Association.
Security Ownership of Management
The following table sets forth information, as of December 31,
1994, with respect to beneficial ownership of Common Shares of the
Company for each Director and nominee, each executive officer named
in the Summary Compensation Table herein, and all Directors and
executive officers of the Company as a group.
<PAGE>
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership (1)(2)
Thomas M. Brown 274
Dayle Dietz 1,611
Dennis R. Emmen 8,156 (3)
Maynard D. Helgaas 1,385 (4)
Douglas L. Kjellerup 3,417
Arvid R. Liebe ---
John C. MacFarlane 15,246 (5)
Richard W. Muehlhausen 6,130 (6)
Kenneth L. Nelson 1,662
Nathan I. Partain 400 (7)
Robert N. Spolum 1,178
James L. Stengel 2,858 (8)
Ward L. Uggerud 3,581 (9)
All Directors and executive officers
as a group 69,110
(1) Represents outstanding Common Shares beneficially owned both
directly and indirectly as of December 31, 1994. The Common
Share interest of each named person and all Directors and
executive officers as a group represents less than 1% of the
aggregate amount of Common Shares issued and outstanding.
Except as indicated by footnote below, the beneficial owner
possesses sole voting and investment powers with respect to the
shares shown.
(2) Includes Common Shares held by the Trustee of the Company's
Employee Stock Ownership Plan for the account of executive
officers of the Company with respect to which such persons have
sole voting power and no investment power, as follows: Mr.
Emmen, 5,669 shares; Mr. Kjellerup, 3,417 shares; Mr.
MacFarlane, 6,440 shares; Mr. Muehlhausen, 5,403 shares; Mr.
Uggerud, 3,561 shares; and all Directors and executive officers
as a group, 44,768 shares.
(3) Includes 2,382 shares owned jointly with Mr. Emmen's wife as to
which he shares voting and investment power.
(4) Excludes 1,888 shares owned by Mr. Helgaas' wife as to which he
disclaims beneficial ownership.
(5) Includes 7,460 shares owned jointly with Mr. MacFarlane's wife
as to which he shares voting and investment power. Also
includes 1,345 shares owned directly by Mr. MacFarlane's minor
child.
(6) Includes 727 shares owned jointly with Mr. Muehlhausen's wife
as to which he shares voting and investment power.
(7) Includes 200 shares owned jointly with Mr. Partain's wife as to
which he shares voting and investment power.
(8) Excludes 468 shares owned by Mr. Stengel's wife as to which he
disclaims beneficial ownership.
(9) Excludes 42 shares owned by Mr. Uggerud's wife as to which he
disclaims beneficial ownership.
No Director, nominee or executive officer of the Company owned
beneficially, directly or indirectly, on December 31, 1994, any
shares of any series of Cumulative Preferred Shares of the Company
except for Mr. Emmen, who owned 100 Cumulative Preferred Shares of
the $3.60 series.
The information with respect to beneficial ownership of securities
of the Company is based on information furnished to the Company by
each person included in the table.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's Directors and executive officers and holders
of more than 10% of the Company's Common Shares to file with the
Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of Common Shares and other equity
securities of the Company. The Company believes that during the
year ended December 31, 1994, its Directors and executive officers
complied with all Section 16(a) filing requirements, except that
Mr. Helgaas filed a late Form 4 report for the purchase of 17
Common Shares for his own account and 24 Common Shares by his wife
in December 1994.
Executive Compensation
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the
"Committee") is responsible for developing and making
recommendations to the Board with respect to the Company's
executive compensation program. The components of the Company's
executive compensation program consist of a base salary and an
incentive bonus.
The Committee develops annual recommendations for the Board
concerning the base salary and incentive bonus for the Chief
Executive Officer and each of the other executive officers of the
Company. In order to develop its recommendations to the Board, the
Committee reviews and evaluates an analysis of executive
compensation for each of the Company's executive officers prepared
for the Committee by the Chief Executive Officer. The analysis
reflects for each of the Company's executive officers his or her
current base salary and cash bonus. The analysis includes a
listing of the average base salaries and bonus awards for similar
executive positions in companies comparable to the Company in size
and capitalization, both within and outside the utility industry,
as set forth in a market survey performed for the Company by the
independent consulting firm of Hewitt & Associates in 1992
(adjusted upward by 4.5% for 1993 and 4.4% for 1994). The analysis
also sets forth data from the Edison Electric Institute ("EEI")
Salary Survey (as of April 1, 1993, adjusted upward by 4.4% for
1994) for base salaries and cash bonuses for similar executive
positions in electric utility companies. The EEI data is adjusted
to take into account the Company's relative size (as measured by
total revenue and by electric utility revenue) when compared to all
utilities included in the survey and to those utilities with total
revenue of less than $300 million.
The Chief Executive Officer then makes specific recommendations to
the Committee with respect to adjustments in base salary for
certain executive officers (other than himself) based on various
factors which are typically subjective and reflect individual
performances by such officers during the year or changes in their
corporate responsibilities. These recommendations for officer base
salaries are then reviewed by the Committee against the base
salaries shown on the lists of average salaries compiled from the
Hewitt & Associates and EEI Salary Surveys to determine if the
Company's executive base salaries for the current year are in
proximity to those in the lists of average salaries taken from the
Surveys. Thereafter, further upward or downward adjustments in
base salary may be made by the Committee from those recommended by
the Chief Executive Officer; however, the final base salaries so
determined by the Committee are primarily subjective and not
targeted specifically to either the Hewitt & Associates or EEI
lists, nor are they set in accordance with any other objective
criteria. It should be noted that the group of companies which
make up the Hewitt & Associates and EEI Surveys are not the same as
those included in the EEI Index in the Stock Performance Graph
appearing in this Proxy Statement.
Incentive bonuses for executive officers (including the Chief
Executive Officer) are awarded only if the Company exceeds a
targeted year-end corporate performance objective. This
performance objective is based on the Company's operating results
as indicated by year-end earnings per share. The earnings per
share objective for each fiscal year is set by the Board of
Directors, upon the recommendation of the Committee, near the end
of the first fiscal quarter of such year. The incentive bonus is
paid in cash following the close of the fiscal year, after it has
been determined whether the targeted earnings per share has been
exceeded. The amount of the incentive bonus increases by a fixed
amount for each $0.01 per share that actual earnings per share
exceeds targeted earnings per share. Each executive officer
receives the same dollar amount of incentive bonus. Targeted
performance was exceeded in 1994. In addition to the incentive
bonus paid to all executive officers, Mr. Kjellerup, the Company's
Vice President of Marketing and Development, is eligible to receive
a special bonus based on targeted earnings realized by a Company
subsidiary. This special bonus is tied to Mr. Kjellerup's
responsibility for and participation in the Company's
diversification efforts and is determined by the Board of Directors
of a Company subsidiary and is paid from earnings of that
subsidiary. Mr. Uggerud, the Company's Vice President of
Operations, was eligible to receive a special bonus in 1994 based
on his participation in the negotiation of the new Big Stone fuel
supply and transportation contracts. The amount of the special
bonus was tied to the savings to the Company resulting from the
negotiation of lower fuel costs. No other executive officer
received or participated in the special bonus awards.
The base salary of the Chief Executive Officer is set by the Board
upon the recommendation of the Committee. The Chief Executive
Officer's base salary is determined generally in accordance with
the criteria discussed above pertaining to other executive
officers; however, the Chief Executive Officer's base salary is
determined solely by the Committee without any recommendation by
the Chief Executive Officer. The Chief Executive Officer's
incentive bonus, if any, is determined in the same manner as the
other executive officers. If the Company exceeds the targeted
performance objective for per share earnings, the Chief Executive
Officer receives an incentive bonus in the same amount as the
incentive bonus awarded to the other executive officers.
The Company currently maintains a variety of employee benefit plans
and programs, which are generally available to all employees of the
Company, including executive officers, such as the Gain Share
Program, Performance Incentive Program, Retirement Savings (401k)
Plan, Employee Stock Ownership Plan (ESOP), Pension Plan, Life and
Living Plans, and Employee Stock Purchase Plan. The Gain Share
Program provides for the payment of an annual cash bonus to all
Company employees, including executive officers, to the extent that
actual earnings per share exceeds targeted earnings per share for
the year. Awards under the Gain Share Program are based on a fixed
formula agreed to in the context of prior union negotiations and
are computed as a percent of base pay. The Compensation Committee
does not set the performance objectives or make awards under the
Gain Share Program. The Company also maintains an Executive
Survivor and Supplemental Retirement Plan and nonqualified
profit-sharing and retirement savings plans for certain senior
executives.
Thomas M. Brown Maynard D. Helgaas James L. Stengel
Summary Compensation Table
The following table sets forth information concerning compensation
for services in all capacities to the Company and its subsidiaries
for each of the last three fiscal years of the Chief Executive
Officer of the Company and the other four most highly compensated
executive officers whose salary and bonus for 1994 exceeded
$100,000 (the "Named Officers").
<PAGE>
Annual Compensation
All Other
Name and Principal Position Year Salary Bonus(1) Compensation(2)
John C. MacFarlane 1994 $211,750 $18,623 $9,706
Chairman of the Board, 1993 197,300 14,708 9,835
President and Chief 1992 181,150 14,608 8,912
Executive Officer
Dennis R. Emmen 1994 $133,350 $15,801 $6,346
Senior Vice President- 1993 126,850 12,313 6,573
Finance, Treasurer and 1992 120,650 12,067 6,169
Chief Financial Officer
Richard W. Muehlhausen 1994 $115,770 $15,168 $5,602
Vice President, Corporate 1993 110,735 11,765 5,826
Services 1992 105,275 11,422 5,216
Douglas L. Kjellerup 1994 $ 86,250 $44,306 $4,352
Vice President, 1993 82,300 24,701 4,510
Marketing & Development 1992 75,900 32,648 4,140
Ward L. Uggerud 1994 $ 97,650 $30,635 $4,151
Vice President, Operations 1993 91,950 11,120 4,150
1992 84,200 10,536 3,844
(1) Included (i) awards under the incentive bonus program for
executive officers described above in the Compensation
Committee Report on Executive Compensation, (ii) awards under
the Gain Share bonus program for all Company employees
described above in the Compensation Committee Report, (iii) the
special bonus award to Mr. Kjellerup described above in the
Compensation Committee Report, and (iv) the special bonus award
to Mr. Uggerud described above in the Compensation Committee
Report.
(2) Amounts of All Other Compensation for 1994 consist of (i)
amounts contributed by the Company under the Retirement Savings
Plan for 1994, as follows: Mr. MacFarlane, $2,965; Mr. Emmen,
$1,867; Mr. Muehlhausen, $1,621; Mr. Kjellerup, $1,208; and
Mr. Uggerud, $684; (ii) the amount of the Company's
contribution under the Employee Stock Ownership Plan which was
invested in Common Shares for the account of each Named Officer
for 1994, as follows: Mr. MacFarlane, $4,251; Mr. Emmen,
$3,779; Mr. Muehlhausen, $3,281; Mr. Kjellerup, $2,444; and
Mr. Uggerud, $2,767; (iii) amounts contributed by the Company
under the nonqualified Profit Sharing Plan for 1994, as
follows: Mr. MacFarlane, $1,790; and (iv) $700 for each Named
Officer pursuant to the Company's program to reimburse
employees for unreimbursed medical expenses.
<PAGE>
Pension and Supplemental Retirement Plans
The following table estimates the aggregate annual amount of
lifetime benefits, as of January 1, 1995, that would be payable
under the Company's tax-qualified defined benefit pension plan to
participants in the final average earnings and years of credited
service categories indicated:
Annual Final Years of Service
Average Earnings 15 20 25 30 40 or more
$40,000 $8,612 $11,483 $14,353 $17,224 $18,946
60,000 14,012 18,683 23,353 28,024 30,826
80,000 19,412 25,883 32,353 38,824 42,706
100,000 24,812 33,083 41,353 49,624 54,586
120,000 30,212 40,283 50,353 60,424 66,466
140,000 35,612 47,483 59,353 71,224 78,346
160,000 38,312 51,083 63,853 76,624 84,286
180,000 38,312 51,083 63,853 76,624 84,286
200,000 38,312 51,083 63,853 76,624 84,286
220,000 38,312 51,083 63,853 76,624 84,286
240,000 38,312 51,083 63,853 76,624 84,286
A participant's annual final average earnings is determined using
the 42 consecutive months out of the last 10 consecutive years
prior to the participant's retirement which produces the highest
average salary. As of December 31, 1994, the annual final average
earnings and actual credited years of service for each of the Named
Officers were as follows: Mr. MacFarlane, $193,628 (33.5 years);
Mr. Emmen, $125,385 (30 years); Mr. Muehlhausen, $109,222 (30.5
years); Mr. Kjellerup, $80,128 (32 years); Mr. Uggerud, $89,342
(23.5 years).
The benefits in the foregoing table were calculated as a straight
life annuity. Because covered compensation takes into account an
average of annual Social Security benefits, there is no deduction
for Social Security under the Pension Plan. The amounts shown in
the above table reflect the limits imposed by Sections 415 or
401(a)(17) of the Internal Revenue Code.
The Company maintains the Executive Survivor and Supplemental
Retirement Plan which was amended effective July 1, 1994. This
Plan is designed to provide survivor and retirement benefits for
certain executive officers and other key management employees in
order to attract and retain employees of outstanding competence.
Each of the Named Officers is a participant in this Plan. If a
participant dies while employed or disabled, the Company will pay
the participant's beneficiary an amount equal to four times the
participant's annual salary at the time of death. If a participant
dies after retirement or dies after termination for other reasons
with a vested benefit, the Company will pay the participant's
beneficiary a lesser amount, depending upon the participant's age
at death and his or her vested percentage. Participants in this
Plan are not eligible to receive life insurance benefits under any
group term life insurance policies (other than group travel or
accident policies) purchased by the Company until retirement. In
addition to these survivor benefits, the Plan provides retirement
benefits. Under the Plan, the Company will pay a participant who
retires at age 65 an annual retirement benefit for life (or, if
more, for 15 years) equal to 70% of the participant's salary and
bonuses during the 12 months before retirement offset by the
participant's Social Security benefit and the amount of the
participant's benefit from the Company's qualified pension plan if
it were paid in the form of a single life annuity. A participant
who retires early (after 10 years of service and age 55) or who
terminates before retirement with a vested benefit in the Plan will
be paid a reduced amount. If a participant dies while still
employed, his or her beneficiary will be paid the actuarial
equivalent of the participant's benefit in 15 annual installments.
At any time after a change in control or following termination of
employment, a participant is entitled to receive upon request a
lump sum distribution of 90% of his or her benefits in the Plan
with forfeiture of the remaining benefits. The Board of Directors
has the right to amend, suspend, or terminate the Plan, but no such
action can reduce the benefits already accrued. The Company has
purchased insurance on the lives of most of the participants to
provide sufficient revenues to satisfy the benefit obligations
payable under this Plan. The estimated annual benefits payable
under the Plan upon retirement at age 65 for each of the Named
Officers, assuming salary is unchanged from 1994, and bonus
determined by actuarial assumptions based on past financial
performance, is as follows: Mr. MacFarlane, $56,220, Mr. Emmen,
$20,993, Mr. Muehlhausen, $19,752, Mr. Kjellerup, $14,712, and Mr.
Uggerud, $18,435.
Severance Agreements
The Company has entered into change of control severance agreements
(the "Severance Agreements") with each of its executive officers,
including the Named Officers. The Severance Agreements provide
for certain payments and other benefits if, following a Change in
Control, the Company terminates the officer's employment without
Cause or the officer terminates his employment for Good Reason.
Such payments and benefits include: (i) severance pay equal to
three times the officer's salary (at the highest annual rate in
effect during the three years prior to the termination) and
benefits; (ii) a lump-sum payment equal to the difference between
(a) the actuarial equivalent of the benefit the officer would have
received under the Company's Pension Plan if he had remained
employed by the Company at the compensation level provided by the
Severance Agreement for three years following the date of
termination and (b) the actuarial equivalent of the benefit to
which he is otherwise then entitled under the Pension Plan; (iii)
the payment of legal fees and expenses relating to the termination;
(iv) the termination of any noncompetition arrangement between the
Company and the officer; and (v) a gross-up payment for any excise
tax imposed on such payments or benefits and for any tax imposed on
such gross-up. Under the Severance Agreements, "Cause" is defined
as willful and continued failure to perform duties and obligations
or willful misconduct materially injurious to the Company; "Good
Reason" is defined to include a change in the employee's
responsibility or status, a reduction in salary or benefits, or a
mandatory relocation; and "Change in Control" is defined to include
a change in control of the type required to be disclosed under
Securities and Exchange Commission proxy rules, acquisition by a
person or group of 35% of the outstanding voting stock of the
Company, a proxy fight or contested election which results in
Continuing Directors (as defined) not constituting a majority of
the Company's Board of Directors, or another event the majority of
the Continuing Directors determines to be a change in control.
Stock Performance Graph
The graph below compares the cumulative total shareholder return on
the Company's Common Shares for the last five fiscal years with the
cumulative total return of the NASDAQ Market Index and the Edison
Electric Institute Index over the same period (assuming the
investment of $100 in each vehicle on December 29, 1989, and
reinvestment of all dividends).
Comparison of five-year cumulative total return among Otter Tail
Power, NASDAQ Market Index, and Edison Electric Institute Index.
1990 1991 1992 1993 1994
Otter Tail Power 113.73 144.57 165.25 176.75 178.75
NASDAQ 81.12 104.14 105.16 126.14 132.44
EEI Index 101.37 130.64 140.59 156.22 138.14
Approval of Auditors
There will be presented to the Annual Meeting a proposal to approve
the appointment by the Board of Directors of the firm of Deloitte
& Touche LLP as the Certified Public Accountants to audit the
accounts of the Company for 1995. This firm has no direct or
indirect financial interest in the Company. A partner of the
certified public accounting firm of Deloitte & Touche LLP will be
present at the Annual Meeting to answer questions and to make a
statement if he desires to do so. It is the intention that the
Proxies, unless otherwise directed thereon, will be voted in favor
of said approval.
<PAGE>
Shareholder Proposals for 1996 Annual Meeting
Any holder of Common Shares of the Company who intends to present
a proposal which may properly be acted upon at the 1996 Annual
Meeting of Shareholders of the Company must submit such proposal to
the Company so that it is received at the Company's principal
executive offices at Box 496, Fergus Falls, Minnesota 56538-0496,
on or before November 10, 1995, for inclusion in the Company's
Proxy Statement and form of Proxy relating to that meeting.
Other Business
As of the date hereof, the Board of Directors of the Company does
not know of any matters to be presented to the meeting other than
as described above. If any other matters properly come before the
meeting, it is intended that the Proxies will vote thereon at their
discretion.
A copy of the Company's Annual Report on Form 10-K for the year
ended December 31, 1994, including financial statements and
schedules thereto, filed with the Securities and Exchange
Commission, is available without charge to shareholders. Address
written requests to:
The Corporate Secretary
Otter Tail Power Company
Box 496
Fergus Falls, MN 56538-0496
Dated: March 8, 1995 By order of the Board of Directors
JAY D. MYSTER, Corporate Secretary
PROXY
Solicited on Behalf of the Board of Directors of
OTTER TAIL POWER COMPANY
The undersigned hereby appoints KENNETH L. NELSON, ROBERT N.
SPOLUM, and JAY D. MYSTER (each with power to act alone and with
full power of substitution) the proxies of the undersigned to
vote all Common Shares which the undersigned is entitled to vote
at the Annual Meeting of Otter Tail Power Company to be held
April 10, 1995, and at any adjournment thereof, and hereby
directs that this proxy be voted as follows:
1.ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to to vote for all
the contrary below) nominees listed
below
Dayle Dietz John C. MacFarlane Arvid R. Liebe
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.)
_________________________________________________________________
2. PROPOSAL TO APPROVE THE APPOINTMENT OF DELOITTE & TOUCHE LLP
as auditors.
FOR__ AGAINST__ ABSTAIN__
3. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting.
<PAGE>
SEE OTHER SIDE
This proxy will be voted as directed. In the absence of specific
directions, the proxy will be voted for the election of Directors
and for Item 2.
Please sign exactly as name appears hereon. When signing as
attorney, administrator, trustee, or guardian, please give your
full title.
Dated:
______________________, 1995
____________________________ ___________________________
Signature Signature, if held jointly
WHAT IS YOUR QUESTION?
Otter Tail management welcomes the questions of all
shareholders--whether or not they can attend the annual meeting.
Questions of general interest will be answered at the meeting.
All questions will be answered by letter. This blank is for your
use in submitting your question. It may be mailed to the Company
with your Proxy.
I wish to ask:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Name _____________________________________
Street or P.O. Box _____________________________________
City __________________State ____ Zip_____
1995
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<PAGE>
PLEASE SEND IN YOUR PROXY . . . NOW!
You are urged to date and sign the enclosed Proxy and return it
promptly. This will help save the expense of follow-up letters to
stockholders who have not responded.
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