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, 1994
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 Identification No.)
incorporation or organization)
215 S. CASCADE ST., BOX 496, FERGUS FALLS, MN 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. $369,437,525 as of March 1, 1995
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, 1995
Documents Incorporated by Reference:
1994 Annual Report to Shareholders - Portions incorporated by reference
into Part II
Proxy Statement dated March 8, 1995 - Portions incorporated by reference
into Part III
<PAGE>
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 1994 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 1994
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 69% of its
operating revenues from the sale of electric energy during 1994; 73% during
1993; and 85% during 1992. During 1994 the Company derived approximately
55.3% of its electric revenues from Minnesota, 37.5% from North Dakota, and
7.2% 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, 52.3% of 1994 electric revenues was
derived from commercial and industrial customers, 31.8% from residential
customers, and 15.9% from other sources, including municipalities, farms and
power pools.
<PAGE>
The Company's two largest oil pipeline customers accounted for about
10.3% of total 1994 retail electric revenues compared to 10.4% of such
revenues in 1993. In 1994, retail kwh sales to these pipeline customers
increased by 5.1% from the previous year. Sales to a large wood products
customer accounted for 1.5% of total retail electric revenues in 1994 as
compared to 1.6% in 1993. Sales to a large barley malting plant accounted
for 1.3% of total retail electric revenues in 1994 as compared to 1.4% in
1993. Sales to a large diskette manufacturing plant accounted for about
1.1% of total retail electric revenues in 1994 as compared to 1% in 1993.
No other retail customer accounted for more than 1% of retail electric
revenues. Power pool sales to other utilities, which accounted for 26.1% of
total 1994 kwh sales, increased only slightly from 1993. Activity in
short-term energy sales is subject to change based on a number of factors
and the Company is unable to predict the 1995 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 1994 total customers had increased to 123,223. During 1994, the
Company experienced a net increase of 796 customers, with the majority of
growth in the number of residential and commercial customers.
Competition
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. The Company may also face competition as the restructuring of the
electric industry evolves. Proposals that are being considered by various
states and at the federal level, along with the National Energy Policy Act
of 1992 ("NEPA"), are expected to bring more competition into the electric
business. The NEPA reduces restrictions on operation and ownership of
independent power producers ("IPPs"). It also allows IPPs and other
wholesale suppliers and purchasers increased access to transmission lines.
The NEPA prohibits retail wheeling ordered by the Federal Energy Regulatory
Commission, but it does not address the states' authority to order retail
wheeling.
As the electric industry evolves, the Company may also have
opportunities to increase its market share. The Company's generation
capacity appears well positioned for competition due to unit heat rate
improvements and reductions in fuel and freight costs. A comparison of the
Company's electric retail rates to the rates of other investor-owned
utilities, cooperatives, and municipals in the states the Company serves
indicates that the Company's rates are competitive. In addition, the
Company would attempt more flexible pricing strategies under an open,
competitive environment.
<PAGE>
Rate Matters
The Company is subject to electric rate regulation as follows:
Year Ended
December 31, 1994
% of
Electric % of kwh
Rates Regulation Revenues Sales
MN retail sales MN Public Utilities
Commission 46.5% 39.2%
ND retail sales ND Public Service
Commission 36.5 28.9
SD retail sales SD Public Utilities
Commission 7.1 5.5
Transmission & sales Federal Energy Regulatory
for resale Commission ("FERC") 9.9 26.4
_____ _____
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, 1990:
Increase
(Decrease) Granted
Commission Date Amount %
(Thousands)
Minnesota Last Proceeding was July 1, 1987
North Dakota (1)June 1, 1990 ($ 315) (0.5%)
(2)September 9, 1992 ($1,000) (1.5%)
(3)September 22, 1993 ($ 449) (0.6%)
South Dakota Last Proceeding was November 1, 1987
FERC Last Proceeding was July 1, 1987
__________
(1) 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 economic development
efforts in North Dakota.
(2) 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.
(3) 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 $449,000 resulting
from sharing earnings above this benchmark for 1993, was returned to
customers in 1994.
In 1994 the Company filed a petition with the Minnesota Public
Utilities Commission for approval of an annual recovery mechanism for
demand-side management related costs, under Minnesota's Conservation
Improvement Programs. See "General Regulation". An intervenor, on behalf
of the Large General Service Group, filed comments against the petition and
requested the Commission to order a general rate case to review the
Company's earnings levels. In the interest of rate stability the Company
reached an agreement, which was approved by the Commission, resulting in
costs of approximately $2,000,000 each year for three years which must be
absorbed in current rates starting in 1995.
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 South Dakota Public Utilities 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, 1994, the Company had base load net plant capability
totaling 557,825 kw, consisting of 248,775 kw from the Big Stone Plant (the
Company's 53.9% share), 154,175 kw from the Hoot Lake Plant, 149,450 kw from
the Coyote Plant (the Company's 35% share), and 5,425 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 89,202 kw, and 4,375 kw of hydroelectric
capability. During 1994, the Company generated about 74% 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 1994-1995 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 1995-1996 winter
season. The Company has agreements with Manitoba Hydro Electric Board to
purchase 110,000 kw of capacity for the summer seasons of 1994 through 1996
and 50,000 kw of year-round capacity for the May 1, 1997 through April 30,
2005 period. 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 49 members representing investor-owned utilities, rural
cooperatives, municipal utilities, and other power suppliers (including
power marketers) 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 traditionally experiences its peak system demand during
the winter season. For the calendar year 1994, the Company established a
peak demand of 580,374 kw on January 7, 1994. Taking into account additional
capacity available to it in January 1994 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 744,092 kw. The highest sixty-minute peak demand ever
experienced by the Company was 589,239 kw on January 8, 1993. In 1995 the
Company expects moderate growth in peak demand as compared to 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 1995 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 1994 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 . . . . . . . . . . . . . 2,329,831 82.3%
Subbituminous Coal . . . . . . . . . . 475,607 16.8
Hydro . . . . . . . . . . . . . . . . . 25,055 .9
Oil . . . . . . . . . . . . . . . . . . 1,533 -
_________ _____
Total . . . . . . . . . . . . . . . 2,832,026 100.0%
The Company's supply of lignite coal, all of which comes from North
Dakota, is furnished by Knife River Coal Mining Company (an affiliate of
Montana-Dakota Utilities Co., which is 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 May 1995. The Company has negotiated a new
coal supply agreement with Westmoreland Resources Inc. of Billings, Montana
for supply of subbituminous coal to Big Stone Plant from mid-1995 through
1999. The coal will come from the Absaloka mine near Hardin, Montana. The
Company has also entered into a spot coal agreement with Kennecott Energy
Company of Gillette, Wyoming for subbituminous coal from Spring Creek mine
to replace the Big Stone Plant's coal stockpile in 1995. 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
also 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 May
1995. The Company negotiated a new coal transportation agreement with
Burlington Northern Railroad for transportation services to the Big Stone
Plant. This contract begins in 1995 and runs through 1999. These new coal
and freight agreements will result in significantly lower delivered coal
prices at the Big Stone Plant.
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 1995 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. Therefore,
there are no coal transportation costs, giving Coyote Plant the lowest
delivered fuel costs as 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 1994, 1993
and 1992, was 100.3 cents, 100.7 cents and 100.5 cents, respectively. The
average cost of coal consumed (including handling charges to the plant
sites) per ton for each of the three years 1994, 1993 and 1992 was $13.62,
$13.75 and $13.33, 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 1994 (1.5% of total fuel burned at the
Big Stone Plant), and expected to be burned in 1995, is insignificant when
compared to the 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 1994 (.5%
of total fuel burned at the Big Stone Plant) and expected to be burned in
1995 is insignificant when compared to Big Stone Plant's 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 belong to 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, 1993
and 1994.
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 submitted its next
plan in 1994. The Company is currently awaiting a decision by the MPUC on
this latest plan. The Minnesota legislature has enacted a statute that
favors conservation over the addition of new resources. In addition it has
mandated the use of renewable resources where new supplies are needed,
unless the utility proves that a renewable energy facility is not in the
public interest. It has effectively prohibited the building of new nuclear
facilities. An environmental externality law requires the MPUC to quantify
the environmental costs of each type of generation, and to use such
monetized values in evaluating resource plans. The MPUC must disallow any
nonrenewable rate base additions (whether within or without the state) or
any rate recovery therefrom, and shall not approve any nonrenewable energy
facility in an integrated resource plan, unless the utility proves that a
renewable energy facility is not in the public interest. The state has
prioritized the acceptability of new generation with wind and solar ranked
one and coal and nuclear ranked five, the lowest ranking. Whether these
state policies are preempted by federal law has not been determined.
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 more than 115 kv.
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, 1994, approximately $9,400,000 for environmental control facilities
(excluding allowance for funds used during construction). Included in the
1995-1999 construction budget are approximately $3,130,000 for environmental
improvements for existing and new facilities, including $1,056,000 for 1995.
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, if plant operations are to
continue near current levels. The Company intends that the Big Stone Plant
will maintain current levels of operation and meet phase two requirements by
burning subbituminous coal which is much lower in sulfur emissions than the
current fuel, lignite. The Company has signed a new subbituminous coal
contract for Big Stone Plant which will run from mid-1995 through December
1999. The cost of burning subbituminous coal in 2000 and beyond would
probably be higher than current market price but would likely not adversely
affect the Company's power plant operations.
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. The NOx
emissions regulations that were issued by the EPA for boilers such as those
used at the Company's Hoot Lake Plant were overturned by the U. S. Circuit
Court of Appeals for the District of Columbia after a successful challenge
by electric utility representatives. The Company expects that the
regulations that are ultimately adopted will be less stringent than those
which were overturned. Subject to additional evaluation of the results of
continuous emission monitoring which began at Hoot Lake in 1994, the Company
currently anticipates that the cost of complying with the limitations
expected to be applicable to Hoot Lake will not be material. The Act
requires the 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 3,580 kw at December 31, 1994).
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, 1994, 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
businesses were acquired in 1993 by the Company's wholly-owned subsidiary
Mid-States Development, Inc. On a fully consolidated basis, the Company
derived 16% of its operating revenues from this segment in 1994 and 12% 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, radiographic 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. In 1994 DMS 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.
In January 1995 the Company acquired three small diagnostic imaging
companies which are part of Mobile Imaging, Inc. The Company continues to
investigate acquisitions of additional businesses and expects continued
growth in this area.
DIVERSIFIED OPERATIONS
General
The Company's Diversified Operations consists of businesses 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 businesses during 1994,
1993 and 1992.
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 these 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.
Western Minnesota Broadcasting Company, operates both AM and FM
commercial radio stations broadcasting from Morris, MN.
Quadrant Co. ("Quadrant") operates a municipal waste burning facility
located in Perham, MN. Pursuant to agreements which will expire in
September 1996, Quadrant receives a processing fee from five Minnesota
counties for disposal of mixed waste. Under agreements which expire in
June 1995 with two industrial customers, Quadrant sells the steam
generated from the incineration process. The Company has invested
approximately $4 million in plant and equipment in Quadrant. Quadrant
represented approximately $1.8 million in sales for 1994 and an
insignificant contribution to consolidated operating income for the
Company. Successful negotiation of the above contracts will be
necessary to provide for recovery of the amount the Company has
invested in Quadrant. See "Environmental Regulation" below.
Midwest Information Systems, Inc.("MIS"), headquartered in Parkers
Prairie, MN, owns two operating telephone companies serving over 4,000
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 business, BTD Manufacturing, Inc.(a metal parts manufacturer
located in Detroit Lakes, Minnesota) was acquired in January, 1995.
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 utility 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.
<PAGE>
Environmental Regulation
In recent years, facilities such as Quadrant that burn municipal solid
waste have been subjected to increasing state and federal environmental
regulation. The Minnesota Pollution Control Agency promulgated rules
relating to ash in 1993 and air emissions in 1994. Under a 1994 Supreme
Court ruling, ash from municipal solid waste combustors must be tested for
toxic characteristics prior to disposal in landfills. The EPA recently
proposed air emission regulations which, if adopted as proposed, will be
more stringent than state regulations. Quadrant currently is operating
under an expired air emission permit with the permission of the Minnesota
Pollution Control Agency and is required to submit its application for a new
air emission permit in April of 1995. Historically, the terms of Quadrant's
contacts with customers have enabled Quadrant to pass on to its customers
much of the cost of environmental compliance. The increasing cost of
environmental compliance may adversely affect Quadrant's ability to
successfully negotiate the renewal of the contracts discussed above.
CONSTRUCTION PROGRAM & FINANCING
The Company is continually expanding, replacing and improving its
electric utility facilities. During 1994, the Company invested
approximately $26,951,000 (including allowance for funds used during
construction) for additions to its electric utility properties. During the
five years ended December 31, 1994, the Company had gross electric property
additions, including construction work in progress, of approximately
$121,826,000 and gross retirements of approximately $29,171,000. During
1994, capital expenditures of approximately $2,000,000 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 1995-1999 are estimated to be approximately
$182,000,000. Of this $14,000,000 is for Health Services Operations and
$16,000,000 for Diversified Operations. The Company estimates that during
the five years 1995 through 1999 it will invest for electric utility
construction approximately $152,000,000 (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 1995 through 1999 will be for work related to the Company's
production plant and distribution system.
The Company estimates that funds internally generated, combined with
funds on hand, will be sufficient to provide for all sinking fund payments
for First Mortgage Bonds in the next five years and to provide for most of
its 1995-1999 construction program expenditures (including allowance for
funds used during construction). Additional short or long-term financing
will be required in the period 1995-1999 in connection with the Company's
construction program, 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.
As of December 31, 1994, the Company had unutilized net fundable
property available for the issuance of more than $24,000,000 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 any subsidiary
money or cosign on any of their borrowing.
The Company has access to short-term borrowing resources. At December
31, 1994, the Company and its subsidiaries had established bank lines of
credit totaling $27,650,000 of which $4,738,000 was used.
EMPLOYEES
The Company and its subsidiaries had approximately 1,290 full-time
employees at December 31, 1994. A total of 462 employees are represented by
local unions of the International Brotherhood of Electrical Workers, of
which 430 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, 1994, the Company's transmission facilities, which are
interconnected 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
4,272 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, 1994.
Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT (AS OF MARCH 1, 1995)
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 (55) 4/8/91 Present: Chairman, President and
Chief Executive Officer
Prior to
4/8/91 President and Chief Executive Officer
Dennis R. Emmen (61) 4/13/81 Present: Senior Vice President,
Finance, Treasurer and Chief
Financial Officer
Marlowe E. Johnson (50) 4/12/93 Present: Vice President, Customer
Service, North Dakota
Prior to
4/12/93 Division Manager, Jamestown
Douglas L. Kjellerup (53) 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 (49) 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 (56) 1/1/78 Present: Vice President,
Corporate Services
Jay D. Myster (56) 4/12/82 Present: Vice President, Governmental
and Legal, and Corporate
Secretary
Earl D. Sjoberg (62) 4/10/89 Present: Vice President, Electrical
Ward L. Uggerud (45) 4/10/89 Present: Vice President, Operations
Andrew E. Anderson (55) 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 the
inside back cover, to "Selected Consolidated Financial Data" on page 23 and
to "Quarterly Information" on page 45, of the Company's 1994 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 1994
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 1994 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 1994 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 information under "Nominees for Election as Directors" in the
Company's definitive Proxy Statement dated March 8, 1995. 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 information under "Summary Compensation Table", "Pension and
Supplemental Retirement Plans", "Severance Agreements", and "Directors'
Compensation" in the Company's definitive Proxy Statement dated March 8,
1995.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference
from the information under "Outstanding Voting Shares" and "Security
Ownership of Management" in the Company's definitive Proxy Statement dated
March 8, 1995.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference
from the information under "Nominees for Election as Directors" in the
Company's definitive Proxy Statement dated March 8, 1995.
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 21 hereof.
(3) See Exhibit Index on Pages 22 through 30 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, 1994.
<PAGE>
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 27, 1995
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 )
Controller ) By D. R. Emmen
(principal accounting officer) ) D. R. Emmen
) Pro Se and Attorney-in-Fact
) Dated March 27, 1995
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 )
<PAGE>
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, 1994
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,
1994:
Page in
Annual
Report to
Shareholders
Financial Statements:
Independent Auditors' Report. . . . . . . . . . . . . . . . . . 33
Consolidated Balance Sheets, December 31, 1994 and 1993 . .32 & 33
Consolidated Statements of Income for the Three Years
Ended December 31, 1994 . . . . . . . . . . . . . . . . . . . . 34
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1994 . . . . . . . . . . . . . . . . . . . . 35
Consolidated Statements of Retained Earnings for the
Three Years Ended December 31, 1994 . . . . . . . . . . . . . . 35
Consolidated Statements of Capitalization, December 31, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Notes to Consolidated Financial Statements. . . . . . . . . 37-45
Selected Consolidated Financial Data for the Five Years
Ended December 31, 1994 . . . . . . . . . . . . . . . . . . . . 23
Quarterly Data for the Two Years Ended
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . 45
Schedules 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.
Exhibit Index
to
Annual Report
on Form 10-K
For Year Ended December 31, 1994
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 10-K for year 10-C-6 --Amendment No. 4 dated
ended 12/31/93 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 10-K for year 10-E-7 --Supplement No. Six, dated
ended 12/31/93 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
ownership 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
ownership of Big Stone Plant
(dated as of March 31, 1986).
<PAGE>
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 Agrmnt
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 10-A --Big Stone Plant Coal Agrmnt
ended 9/30/94 by and between the Company,
Montana-Dakota Utilities Co.,
Northwestern Public Service
Company, and Westmoreland
Resources, Inc. (dated as of
June 30, 1994).
10-G-3 10-Q for quarter 19-A --Big Stone Coal Transp.
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-4 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-5 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-6 10-Q for quarter 10-B --Big Stone Coal Transp.
ended 9/30/94 Agreement by and between the
Company, Montana-Dakota
Utilities, Northwestern Public
Service Co., and Burlington
Northern Railroad Company
(dated as of July 18, 1994).
<PAGE>
10-G-7 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-8 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
Ownership 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 Sept.
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.
<PAGE>
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
ended 12/31/92 Pool 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 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 Agreement
ended 12/31/92 by and between Company and
Manitoba Electric Hydro Board
(dated as of 12/29/92).
10-K-2 10-K for year 10-K-3 --Firm Power Serv. Agreements
ended 12/31/93 by and between Company and
Manitoba Electric Hydro Board
(dated as of 02/08/94).
<PAGE>
10-K-3 10-Q for quarter 10 --Purchased Power and
ended 6/30/94 Interconnection Agreement
between the Company and
Potlatch Corporation dated
as of June 8, 1994.
10-K-4 --Capacity & Energy Agreement
by and between the Company
and Minnkota Power Coop.
Inc. dated as of May 27, 1994.
10-K-5 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-6 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-7 10-Q for quarter 19-B --Interchange Agreement by and
ended 6/30/93 between the Company and
Wisconsin Public Service Corp
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.
<PAGE>
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 10-K for year 10-M-10 --Supplement Seven dated as of
ended 12/31/93 November 22, 1993 to Hoot Lake
Coal Transportation Agreement.
10-M-11 10-K for year 10-M-10 --Hoot Lake Coal Transp.
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 --Executive Survivor and Sup-
plemental Retirement Plan,
as amended.*
10-N-3 10-K for year 10-P --Form of Severance Agrmnt.*
ended 12/31/92
10-N-4 10-K for year 10-N-5 --Nonqualified Profit Sharing
ended 12/31/93 Plan.*
10-N-5 10-K for year 10-N-6 --Nonqualified Retirement
ended 12/31/93 Savings Plan.*
10-O 10-K for year 10-O --Dealer Agreement by and
ended 12/31/93 between DMS and Philips
Medical Systems North
America Company dated
January 18, 1994.
13-A --Portions of 1994 Annual
Report to Shareholders
incorporated by reference
in this Form 10-K.
21-A --Subsidiaries of Registrant
23-A --Independent Auditors'
Consent.
24-A --Powers of Attorney.
27 --Financial Data Schedule.
- ------------
* 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 ofsuch
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.
<PAGE>
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.
<PAGE>
$11.50 Cumulative Preferred Shares 1
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;
____________________
1 The $11.50 Cumulative Preferred Shares were redeemed in
their entirety on March 1, 1986.
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.
<PAGE>
$11.50 Cumulative Preferred Shares (Series A) 1
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
________________
2 The $11.50 Cumulative Preferred Shares (Series A) were
redeemed in their entirety on March 1, 1996
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.
<PAGE>
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]<PAGE>
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]
<PAGE>
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]
<PAGE>
ARTICLES OF AMENDMENT
OF
RESTATED ARTICLES OF INCORPORATION
OF
OTTER TAIL POWER COMPANY
1. The name of the corporation is Otter Tail Power Company, a
Minnesota corporation.
2. The following is the full text of the amendment to the
Restated Articles of Incorporation of Otter Tail Power
Company:
BE IT RESOLVED That Article V of the Restated Articles
of Incorporation of Otter Tail Power Company, a Minnesota
corporation, as heretofore amended, shall be amended in its
entirety to read as follows:
ARTICLE V.
The total authorized number of shares of the
corporation is 27,500,000, 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 25,000,000 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.
3. The amendment was adopted by the shareholders pursuant to
Section 302A.135 of the Minnesota Business Corporation Act
on April 11, 1994.
IN WITNESS WHEREOF, the undersigned, the Vice
President, Governmental and Legal and Secretary of Otter Tail
Power Company, being duly authorized on behalf of Otter Tail
Power Company, has executed this document this 11th day of April,
1994.
Jay D. Myster
Jay D. Myster
Vice President, Governmental and
Legal and Secretary
EXHIBIT 10-K-4
THIS AGREEMENT, made this 27th day of May, 1994, by Minnkota
Power Cooperative, Inc., a Minnesota Corporation, herein called
"Minnkota," and Otter Tail Power Company, a Minnesota
Corporation, herein called "Otter Tail, "said parties referred to
herein individually as "Party" and collectively as "Parties":
WITNESSETH
WHEREAS, the Parties and Beltrami Electric Cooperative, a
Minnesota Corporation, herein called "Beltrami," have entered
into that certain agreement concerning electric service dated
November 29, 1971, hereinafter called the "1971 Agreement," and
WHEREAS, the Parties and Beltrami have entered into that
certain agreement concerning electric service dated April 25,
1980, hereinafter called the "Amendment No. 1 1971 Agreement,"
and
WHEREAS, the Parties amd Beltrami have entered into that
certain agreement concerning electric service dated April 4,
1986, hereinafter called the "Amendment No. 2 1971 Agreement,"
and
WHEREAS, the Parties and Beltrami have entered into that
certain agreement concerning electric service dated April 8,
1991, hereinafter called the "Amendment No. 3 1971 Agreement,"
and
WHEREAS, Minnkota and Otter Tail have entered into an
agreement concerning electric service dated August 31, 1962, as
amended, herein called the "1962 Agreement," which has provided
for interconnections and coordinated use of transmission
facilities, and
WHEREAS, the 1962 Agreement between Minnkota and Otter Tail
was replaced by an agreement between Minnkota and Otter Tail
dated July 28, 1988 herein called the "1988 Agreement," which
provided for further interconnections and coordinated use of
transmission facilities, and
WHEREAS, Potlatch Corporation of San Francisco, California,
herein called "Potlatch," has installed a wood waste power
boiler, herein called the "Facility," located in Section 9,
Township 145N, Range 32W, Hubbard County, Minnesota, for the
production of steam and electricity, and
WHEREAS, Potlatch receives retail electric service in
Section 8, Township 145N, Range 32W, and in Section 9, Township
145N, Range 32W, Hubbard County, Minnesota, herein called the
"Plants," through facilities jointly provided by Minnkota and
Otter Tail in
accordance with previously mentioned agreements, and
<PAGE>
WHEREAS, Potlatch will generate and wishes to sell, and
Minnkota and Otter Tail jointly wish to purchase, electric power
from the Facility.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE I
PURCHASE OF CAPACITY AND ENERGY
1.01 Minnkota and Otter Tail will each purchase 50% of the
capacity and energy from the Facility. Otter Tail, acting on its
own behalf and on Minnkota's behalf, will execute an agreement
with Potlatch, hereinafter called the "Potlatch Agreement," for
the purchase of energy and capacity.
1.02 For energy, Otter Tail and Minnkota shall pay to
Potlatch an aggregate amount equal to (i) 1.5515 cents per
kilowatt-hour, which includes compensation for 7% average system
loss, for all kilowatt-hours up to the amount of retail
kilowatt-hours consumed by the Plants on a monthly basis, plus
(ii) 1.45 cents per kilowatt-hour for all kilowatt-hours
delivered to Otter Tail and Minnkota in excess of the amount
consumed by the Plants.
1.03 Minnkota and Otter Tail will purchase the capacity
from Potlatch priced at $8.20 per kW for the first 200 kW, and
$6.95 per kW for the remainder of billing capacity per month.
The monthly billing capacity shall be defined as the sum of the
non-coincident monthly metered demands of the Plants. The monthly
billing capacity shall not exceed the Midcontinent Area Power
Pool (MAPP) capacity rating credited to Otter Tail and Minnkota.
The station service requirements of the Facility during
maintenance and outage periods will be measured by the metering
for the oriented strand board mill and will be included in the
calculation of billing capacity. It is the intent of Minnkota
and Otter Tail that the price paid to Potlatch for the capacity
shall be at the same rate paid by Potlatch for retail electric
service under Otter Tail's Large General Service rate C-02M. If
the retail demand charge rate paid by Potlatch is changed during
the period of the Potlatch Agreement, the rates paid by Otter
Tail and Minnkota for the capacity from Potlatch shall be changed
in the same manner.
1.04 The billing cycle for the energy and capacity
purchased from Potlatch shall be the same as the billing cycle
under which Potlatch receives retail electric service.
1.05 Otter Tail shall pay to Potlatch 100% of the monies
billed for the capacity and energy, and Otter Tail shall bill to
Minnkota and Minnkota shall pay to Otter Tail 50% of the monies
paid to Potlatch.
<PAGE>
ENERGY ACCOUNTING
2.01 Minnkota and Otter Tail will each account for
receiving 50% of the energy received from the Facility on an
hourly basis. In scheduling energy from the Facility, Potlatch
will provide generation schedules to Otter Tail's system
operators. Otter Tail will provide the generation schedules to
Minnkota, and each company will schedule their share of the
energy hourly.
2.02 Minnkota and Otter Tail will use the existing
procedures for end of the month regulation accounting between the
Parties to adjust for differences between scheduled and received
energy.
GENERAL
3.01 The effective date of this agreement will be the date
of signing, and shall have the same term as the Potlatch
Agreement to be completed between Otter Tail and Potlatch.
3.02 Minnkota shall review and provide Otter Tail with
written approval of the Potlatch Agreement. Upon execution, the
Potlatch Agreement will become an attachment to this Agreement.
3.03 Otter Tail shall submit the necessary documentation
to the Midcontinent Area Power Pool Design Review Committee, and
other committees as necessary to allow the capacity to be
accredited to both Parties.
3.04 This Agreement is subject to the approval of any
regulatory body or bodies having jurisdiction thereof. Unless it
is approved by the Administrator of the Rural Electrification
Administration, this Agreement shall be of no force and effect.
IN WITNESS WHEREOF, the Parties have caused this Agreement
to be executed in duplicate as of the day and year first written
above.
ATTEST: MINNKOTA POWER COOPERATIVE, INC.
Bobby Lofstrand By: Harvey Tallackson
Secretary President
OTTER TAIL POWER COMPANY
Jay D. Myster By: Ward Uggerud
Secretary Vice-President
Exhibit 10-N-2
OTTER TAIL POWER COMPANY
EXECUTIVE SURVIVOR AND SUPPLEMENTAL RETIREMENT PLAN
Restated as of July 1, 1994
<PAGE>
Page
ARTICLE I-PURPOSE; EFFECTIVE DATE 1
ARTICLE II-DEFINITIONS 1
2.1 ACTUARIAL EQUIVALENCY 1
2.2 BENEFICIARY 1
2.3 BOARD 1
2.4 CHANGE IN CONTROL 1
2.5 COMMITTEE 2
2.6 DISABILITY 2
2.7 EARLY RETIREMENT DATE 2
2.8 EMPLOYER 2
2.9 FINAL ANNUAL COMPENSATION 2
2.10 FINAL ANNUAL SALARY 3
2.11 NORMAL RETIREMENT DATE 3
2.12 PARTICIPANT 3
2.13 PARTICIPATION AGREEMENT 3
2.14 QUALIFIED RETIREMENT PLAN 3
2.15 RETIREMENT 3
2.16 SALARY 3
2.17 SPOUSE 3
2.18 SUPPLEMENTAL RETIREMENT BENEFIT 3
2.19 TARGET RETIREMENT PERCENTAGE 4
2.20 YEARS OF CREDITED SERVICE 4
2.21 YEARS OF PARTICIPATION 4
ARTICLE III-PARTICIPATION AND VESTING 4
3.1 ELIGIBILITY AND PARTICIPATION 4
3.2 CHANGE IN EMPLOYMENT STATUS 4
3.3 VESTING 5
3.4 SUICIDE 5
ARTICLE IV-BENEFITS-EXECUTIVE OFFICERS 5
4.1 ELIGIBILITY 5
4.2 PRERETIREMENT SURVIVOR BENEFIT 5
4.3 POSTRETIREMENT SURVIVOR BENEFIT 6
4.4 POSTTERMINATION SURVIVOR BENEFIT 6
ARTICLE V-SUPPLEMENTAL RETIREMENT BENEFITS 6
5.1 NORMAL RETIREMENT BENEFIT 6
5.2 EARLY RETIREMENT BENEFIT 7
5.3 TERMINATION BENEFIT 7
5.4 PAYMENT OF BENEFITS 7
5.5 WITHHOLDING; PAYROLL TAXES 8
5.6 ACCELERATED DISTRIBUTION 8
5.7 SUPPLEMENTAL SURVIVOR BENEFIT 8
5.8 PAYMENT TO GUARDIAN 9
ARTICLE VI-BENEFICIARY DESIGNATION 9
6.1 BENEFICIARY DESIGNATION 9
6.2 AMENDMENTS 9
6.3 NO PARTICIPANT BENEFICIARY DESIGNATION 9
6.4 EFFECT OF PAYMENT 10
ARTICLE VII-ADMINISTRATION 10
7.1 COMMITTEE; DUTIES 10
7.2 AGENTS 10
7.3 BINDING EFFECT OF DECISIONS 10
7.4 INDEMNITY OF COMMITTEE 10
ARTICLE VIII-CLAIMS PROCEDURE 10
8.1 CLAIM 10
8.2 DENIAL OF CLAIM 10
8.3 REVIEW OF CLAIM 11
8.4 FINAL DECISION 11
ARTICLE IX-TERMINATION, SUSPENSION OR AMENDMENT 11
9.1 TERMINATION, SUSPENSION OR AMENDMENT OF PLAN 11
ARTICLE X-MISCELLANEOUS 11
10.1 UNFUNDED PLAN 11
10.2 UNSECURED GENERAL CREDITOR 11
10.3 TRUST FUND 12
10.4 NONASSIGNABILITY 12
10.5 NOT A CONTRACT OF EMPLOYMENT 12
10.6 PROTECTIVE PROVISIONS 12
10.7 TERMS 12
10.8 CAPTIONS 13
10.9 GOVERNING LAW 13
10.10 VALIDITY 13
10.11 NOTICE 13
10.12 SUCCESSORS 13
<PAGE>
OTTER TAIL POWER COMPANY
EXECUTIVE SURVIVOR AND SUPPLEMENTAL RETIREMENT PLAN
ARTICLE I-PURPOSE; EFFECTIVE DATE
The purpose of this Executive Survivor and Retirement Plan
(the "Plan") is to provide survivor and retirement benefits for
certain executive officers and other key management employees as
designated by the Board of Directors of Otter Tail Power Company
(the "Company"). It is intended that the Plan will aid in
securing the goodwill, loyalty and efficiency of the
participating executive officers and other key management
employees, and will attract and retain executive officers and
other key management employees of outstanding competence. This
Plan shall be effective as of November 1, 1983, and is restated
as of July 1, 1994.
ARTICLE II-DEFINITIONS
For purposes of this Plan, the following terms shall have
the meanings indicated, unless the context clearly indicates
otherwise:
2.1 Actuarial Equivalency
"Actuarial Equivalency" means an equivalent value or benefit
determined by an actuary selected by Employer using the actuarial
tables and assumptions being used to determine Actuarial
Equivalency in the Qualified Retirement Plan at the time the
determination is made.
2.2 Beneficiary
"Beneficiary" means the person, persons or entity entitled
under Article VII to receive any Plan benefits payable after a
Participant's death.
2.3 Board
"Board" means the Board of Directors of Employer.
2.4 Change in Control
A "Change in Control" shall mean:
(a)With respect to the Company, a change in control of a
nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Act") or any
successor thereto; provided that, without limitation, such a
change in control shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Act), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act),
directly or indirectly, of Voting Securities of the Company
representing forty percent (40%) or more of the combined voting
power of the Company's then outstanding Voting Securities; (ii)
during any period of two (2) consecutive years, individuals who
at the beginning of such period constitute the Board of Directors
of the Company, together with any new directors whose election,
or nomination for election by the shareholders, was approved by a
vote of at least two-thirds (2/3) of the directors then still in
office who were either directors at the beginning of the period
or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority
of the Board of Directors of the Company; or (iii) the
stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by the Voting
Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company (in one (1) transaction or a series of
transactions) of all or substantially all of the Company's assets
to a person or entity which is not a subsidiary of the Company.
As used herein, "Voting Securities" shall mean any securities
which vote generally in the election of directors.
2.5 Committee
"Committee" means the Committee appointed to administer the
Plan pursuant to Article VII.
2.6 Disability
"Disability" means the Participant is eligible to receive
benefits for permanent disability under the Otter Tail Power
Company's Long-Term Disability Plan or a plan providing
comparable benefits sponsored by Employer. Disability will be
based upon medical reports and/or other evidence satisfactory to
the Committee. In no event shall a Disability be deemed to occur
or to continue after a Participant's Normal Retirement Date.
2.7 Early Retirement Date
"Early Retirement Date" means the date on which a
Participant terminates employment with Employer if such
termination date occurs after the first day of the month
coincidental with or next following a Participant's attainment of
age fifty-five (55) and completion of ten (10) Years of Credited
Service, but prior to the participant"s Normal Retirement Date.
2.8 Employer
"Employer" means Otter Tail Power Company, a Minnesota
corporation, or any successor to the business thereof, and any
affiliated or subsidiary corporations designated by the Board.
2.9 Final Annual Compensation
"Final Annual Compensation" means the annualized base salary
plus any bonuses paid by Employer to the Participant during the
twelve (12) months prior to retirement or termination.
2.10 Final Annual Salary
"Final Annual Salary" means the annualized base salary paid
to a Participant by Employer prior to a Participant's termination
or death.
2.11 Normal Retirement Date
"Normal Retirement Date" means the first day of the month
coincident with or next following the Participant's attainment of
age sixty-five (65).
2.12 Participant
"Participant" means any employee who is participating or has
participated in this Plan as provided in Article III.
2.13 Participation Agreement
"Participation Agreement" means the agreement filed by a
Participant which acknowledges assent to the terms of the Plan.
2.14 Qualified Retirement Plan
"Qualified Retirement Plan" means the Otter Tail Power
Company Pension Plan or any successor defined benefit retirement
income plan or plans maintained by the Employer which qualifies
under Section 401(a) of the Internal Revenue Code. For purposes
of determining benefits and actuarial equivalencies under the
Qualified Retirement Plan, the actuarial principles and
assumptions which have consistently applied to such plan(s) shall
continue to be applied.
2.15 Retirement
"Retirement" means a Participant's separation from
employment with the Employer at the Participant's Early
Retirement Date or Normal Retirement Date.
2.16 Salary
"Salary" means the salary paid to or accrued for a
Participant during the calendar year, before reduction for
amounts deferred under IRC Section 401(k). Salary does not
include expense reimbursements, any form of noncash compensation
or benefits, Employer contributions to the Qualified Retirement
Plan or the Company's 401(k) Plan, or any other payments or
benefits other than normal compensation.
2.17 Spouse
"Spouse" means a Participant's wife or husband who is
lawfully married to the Participant at the time of the
Participant's death.
2.18 Supplemental Retirement Benefit
"Supplemental Retirement Benefit" means the benefit
determined under Article V of this Plan.
2.19 Target Retirement Percentage
"Target Retirement Percentage" means the percentage of Final
Annual Compensation which will be used as a target from which
other forms of retirement benefits are subtracted, as provided in
Article V, to arrive at the amount of the Supplemental Retirement
Benefit actually payable to a Participant. This percentage shall
equal seventy percent (70%).
2.20 Years of Credited Service
"Years of Credited Service" means the number of years of
"Vesting Service," as defined and calculated in the Qualified
Retirement Plan.
2.21 Years of Participation
"Years of Participation" means the number of complete years
in which the Participant has participated in this Plan.
ARTICLE III-PARTICIPATION AND VESTING
3.1 Eligibility and Participation
(a) Eligibility. Eligibility to participate in the Plan
shall be limited to certain executive officers and other key
management employees of Employer who are designated by the Board
of Directors.
(b) Participation. An Employee's participation in the
Plan shall be effective upon the employee's notification of
eligibility to participate, the Participant's completion of a
Participation Agreement, and the Committee's acceptance of the
Participation Agreement. Participation in the Plan shall
continue until such time as the Participant terminates employment
with the Employer, and as long thereafter as the Participant is
eligible to receive benefits under this Plan.
3.2 Change in Employment Status
If the Board determines that a Participant' employment
performance is no longer at a level which deserves reward through
participation in this Plan, but does not terminate the
Participant's employment with the Employer, participation herein
and eligibility to receive benefits hereunder shall be limited to
the Participant's vested interest in such benefits as of the date
designated by the Board.
3.3 Vesting
Participants shall vest in the benefits under this Plan for
which they are eligible based on Years of Participation as
follows:
Vested Years of
Percentage Participation
0% Less than 2
40 2 but less than 3
60 3 but less than 4
80 4 but less than 5
100 5 or more
Regardless of Years of Participation, any Participant who is
age fifty-five (55) and a Plan Participant on or before January
1, 1992, shall be one hundred percent (100%) vested.
3.4 Suicide
The provisions of Article IV notwithstanding, no benefit
shall be paid to a Beneficiary if the Participant's death occurs
as a result of suicide during the twenty-four (24) successive
calendar months beginning with the calendar month following the
commencement of the employee's participation in this Plan.
Similarly, no benefit shall be paid if death occurs within the
twenty-four (24) successive calendar months following
commencement of an employee's participation in the Plan if the
Participant has made a material misrepresentation in any form or
document provided by the Participant to or for the benefit of
Employer.
ARTICLE IV-BENEFITS-EXECUTIVE OFFICERS
4.1 Eligibility
Survivor benefits under this Plan shall only be due and
payable to Participants who are or have been executive officers
while employed by Employer. In no event shall Participants who
are other key management employees be eligible for a survivor
benefit under this Article.
4.2 Preretirement Survivor Benefit
(a) Amount. If a Participant dies while employed by
Employer or during a period of Disability, Employer shall pay a
survivor benefit to the Participant's Beneficiary equal to four
(4) times the Participant's Final Annual Salary.
(b) Form and Commencement of Benefit Payments. The
benefit payable under this Section shall be paid in monthly
installments equal to one-sixth (1/6) of the Participant's Final
Annual Salary until the benefit has been paid in full, without
interest. Payments shall commence the first day of the month
following the death of the Participant, or as soon thereafter as
is practicable, and shall continue the first day of each month
thereafter for the duration of the payment period.
(c) Commutation of Benefits. The Committee may, in its
sole discretion and at any time upon the request of a
Beneficiary, provide for payment of the Actuarial Equivalent of
the preretirement survivor benefit at such times and in such
forms as it may deem appropriate.
4.3 Postretirement Survivor Benefit
(a) Amount. If a Participant dies following Retirement,
Employer shall pay a survivor benefit to the Participant's
Beneficiary equal to the amount shown on the following schedule:
Age at Death Benefit
55 through 64 2 times Final Annual Salary
65 through 69 1-1/2 times Final Annual Salary
70 through 75 3/4 times Final Annual Salary
Over 75 3/8 times Final Salary
(b) Form and Commencement of Benefit Payment. The
benefit payable under this Section shall be paid to the
Beneficiary in a lump sum form on the first day of the month
following the Participant's death, or as soon as practicable
thereafter.
4.4 Posttermination Survivor Benefit
(a) Amount. If a vested Participant dies following
termination, Employer shall pay a survivor benefit to the
Participant's Beneficiary equal to the amount shown on the
following schedule times the Participant's vested percentage:
Age at Death Benefit
Less than 65 2 times Final Annual Salary
65 through 69 1-1/2 times Final Annual Salary
70 through 75 3/4 times Final Annual Salary
Over 75 3/8 times Final Annual Salary
(b) Form and Commencement of Benefit Payment. The
benefit payable under this Section shall be paid to the
Beneficiary in a lump sum form on the first day of the month
following the Participant's death, or as soon as practicable
thereafter.
ARTICLE V-SUPPLEMENTAL RETIREMENT BENEFITS
5.1 Normal Retirement Benefit
If a Participant retires at the Normal Retirement Date,
Employer shall pay to the Participant a monthly Supplemental
Retirement Benefit equal to the Target Retirement Percentage
multiplied by Final Annual Compensation, less:
(a) The Participant's monthly primary Social Security
benefit commencing at Retirement, and
(b) The Participant's benefit in the form of a monthly
single-life annuity under the Qualified Retirement Plan,
calculated with a maximum of 30 Years of Credited Service,
commencing at Retirement.
In no event shall the benefit under this Section be less
than the Retirement Benefit payable under this Plan prior to its
restatement.
5.2 Early Retirement Benefit
If a Participant retires at an Early Retirement Date,
Employer shall pay to the Participant the monthly Supplemental
Retirement Benefit calculated under Section 5.1 except:
(a) The Target Retirement Percentage shall be reduced by
the following percentage based on the Participant's age at
Retirement:
Age Reduction
62 through 65 0%
61 5
60 10
59 15
58 20
57 25
56 32
55 39
(b) The offset required by 5.1(a) shall be determined at
Retirement using the Social Security Act in effect at Retirement
and assuming zero (0) future earnings from the Participant's
Early Retirement Date to the later of Early Retirement Date or
Participant's attainment of age sixty-two (62).
5.3 Termination Benefit
If a vested Participant terminates, Employer shall pay to
the Participant the monthly Supplemental Retirement Benefit
calculated under Section 5.1 multiplied by the Participant's
vested percentage under Section 3.3 except:
(a) The offset required by 5.1(a) shall be determined at
termination using the Social Security Act in effect at
termination and assuming earnings from the date of termination to
the Participant's Normal Retirement Date are equal to the
Participant's salary at termination; and
(b) The offset required by 5.1(b) shall be the
Participant's benefit under the Qualified Retirement Plan payable
at age sixty-five (65).
5.4 Payment of Benefits
(a) Form of Benefit Payment. The Supplemental Retirement
Benefit shall be paid in the form of a monthly single life
annuity with a fifteen (15) year certain period. If a
Participant dies prior to completion of the fifteen (15) year
payment period, any remaining payments shall be paid to the
Participant's Beneficiary. For the Beneficiaries of executive
officers, this remaining benefit, if any, shall be paid in
addition to the benefits provided in 4.4. For Beneficiaries of
other key management employees, this shall be the only benefit
payable, if any.
(b) Commencement of Benefit Payments. Benefits payable
to a participant under Sections 5.1 and 5.2 shall commence as
soon as practicable after the appropriate application for
benefits has been made but not later than sixty (60) days after
all information necessary to calculate the benefit amount has
been received by Employer. Benefits payable to a vested
Participant under Section 5.3 shall commence on the first day of
the month following the Participant's sixty-fifth (65th)
birthday. All payments shall be made as of the first day of the
month.
(c) Commutation of Benefits. The Committee may, in its
sole discretion and at any time upon the request of a Participant
(or Beneficiary), provide for payment of the actuarial equivalent
of the Supplemental Retirement Benefits at such times and in such
form as it may deem appropriate.
5.5 Withholding; Payroll Taxes
Employer shall withhold from payments made hereunder any
taxes required to be withheld from a Participant's wages for the
federal or any state or local government. However, a Beneficiary
may elect not to have withholding for federal income tax purposes
pursuant to Section 3405(a)(2) of the Internal Revenue Code, or
any successor provision.
5.6 Accelerated Distribution
Notwithstanding any other provision of the Plan, at any time
within twenty four (24) months of a Change in Control or any time
following termination of employment, a Participant shall be
entitled to receive, upon written request to the Committee, a
lump sum distribution equal to ninety percent (90%) of the
Actuarial Equivalent of the Participant's unpaid benefits under
this Plan on the date on which the Committee receives the written
request. The remaining unpaid benefits shall be forfeited by the
Participant and no benefit shall be payable under Section 5.7.
The amount payable under this Section shall be paid in a lump sum
within sixty-five (65) days following the receipt of the notice
by the Committee from the Participant.
5.7 Supplemental Survivor Benefit
Benefits payable under this Section shall be applicable to
all Participants and shall be in addition to any benefit payable
under Article IV.
(a) Pretermination. If a Participant dies while employed
by the Company, the Participant's Beneficiary shall receive the
actuarial equivalent of the Participant's accrued benefit in
fifteen (15) annual installments.
(b) Posttermination. If a Participant has terminated
employment with the Company but benefits have not commenced under
this Plan, the Participant's Beneficiary shall receive the
actuarial equivalent of the Participant's benefit in fifteen (15)
annual installments.
(c) After Benefits Commence. If a Participant dies after
the commencement of benefits under this Plan but before having
received one hundred eighty (180) monthly payments, the
Participant's Beneficiary shall receive a monthly benefit equal
to the amount the Participant was receiving. The benefit shall
be payable for a period equal to one hundred eighty (180) months,
less the number of monthly payments received by the Participant.
5.8 Payment to Guardian
If a Plan benefit is payable to a minor or a person declared
incompetent or to a person incapable of handling the disposition
of his property, the Committee may direct payment of such Plan
benefit to the guardian, legal representative or person having
the care and custody of such minor, incompetent or person. The
Committee may require proof of incompetency, minority, incapacity
or guardianship as it may deem appropriate prior to distribution
of the Plan benefit. Such distribution shall completely
discharge the Committee and the Employer from all liability with
respect to such benefit.
ARTICLE VI-BENEFICIARY DESIGNATION
6.1 Beneficiary Designation
Each Participant shall have the right, at any time, to
designate any person or persons as Beneficiary (both primary as
well as secondary) to whom benefits under this Plan shall be paid
as a result of the Participant's death prior to complete
distribution to Participant of the benefits due under the Plan.
Each Beneficiary designation shall be in a written form
prescribed by the Committee, and will be effective only when
filed with the Committee during the Participant's lifetime.
6.2 Amendments
Any Beneficiary designation may be changed by a Participant
without the consent of any designated Beneficiary by the filing
of a new Beneficiary designation with the Committee. The filing
of a new Beneficiary designation form will cancel all Beneficiary
designations previously filed. If a Participant's Compensation
is community property, any Beneficiary Designation shall be valid
or effective only as permitted under applicable law.
6.3 No Participant Beneficiary Designation
In the absence of an effective Beneficiary Designation, or
if all designated Beneficiaries predecease the Participant or die
prior to complete distribution of the Participant's benefits,
then Participants designated Beneficiary shall be deemed to be
the person or persons surviving the Participant in the first of
the following classes in which there is a survivor, share and
share alike:
(a) The surviving Spouse;
(b) The Participant's children, except that if any of the
children predecease the Participant but leave issue surviving,
then such issue shall take by right of representation the share
their parent would have taken if living;
(c) The Participant's estate.
6.4 Effect of Payment
The payment to the deemed Beneficiary shall completely
discharge Employer's obligations under this Plan.
ARTICLE VII-ADMINISTRATION
7.1 Committee; Duties
This Plan shall be supervised by the Committee. The
Committee shall consist of at least three (3) individuals
appointed by the Board. The Committee shall have the authority
to make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Plan and decide or
resolve any and all questions, including interpretations of this
Plan, as may arise in connection with the Plan. A majority vote
of the Committee members shall control any decision. Members of
the Committee may be Participants under this Plan.
7.2 Agents
The Committee may, from time to time, employ other agents
and delegate to them such administrative duties as it sees fit,
and may from time to time consult with counsel who may be counsel
to the Company.
7.3 Binding Effect of Decisions
The decision or action of the Committee in respect of any
question arising out of or in connection with the administration,
interpretation and application of the Plan and the rules and
regulations promulgated hereunder shall be final and conclusive
and binding upon all persons having any interest in the Plan.
7.4 Indemnity of Committee
The Company shall indemnify and hold harmless the members of
the Committee against any and all claims, loss, damage, expense
or liability arising from any action or failure to act with
respect to this Plan, except in the case of gross negligence or
willful misconduct.
ARTICLE VIII-CLAIMS PROCEDURE
8.1 Claim
Any person claiming a benefit, requesting an interpretation
or ruling under the Plan, or requesting information under the
Plan shall present the request in writing to the Committee which
shall respond in writing within thirty (30) days.
8.2 Denial of Claim
If the claim or request is denied, the written notice of
denial shall state:
(a) The reason for denial, with specific reference to the
Plan provisions on which the denial is based.
(b) A description of any additional material or
information required and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
8.3 Review of Claim
Any person whose claim or request is denied or who has not
received a response within thirty (30) days may request review by
notice given in writing to the Committee. The claim or request
shall be reviewed by the Committee who may, but shall not be
required to, grant the claimant a hearing. On review, the
claimant may have representation, examine pertinent documents,
and submit issues and comments in writing.
8.4 Final Decision
The decision on review shall normally be made within sixty
(60) days. If an extension of time is required for a hearing or
other special circumstances, the claimant shall be notified and
the time limit shall be one hundred twenty (120) days. The
decision shall be in writing and shall state the reason and the
relevant plan provisions. All decisions on review shall be final
and bind all parties concerned.
ARTICLE IX-TERMINATION, SUSPENSION OR AMENDMENT
9.1 Termination, Suspension or Amendment of Plan
The Board may, in its sole discretion, terminate or suspend
this Plan at any time or from time to time, in whole or in part.
The Board may amend this Plan at any time or from time to time.
Any amendment may provide different benefits or amounts of
benefits from those herein set forth. However, no such
termination, suspension or amendment shall adversely affect the
benefits of Participants which have accrued prior to such action
or the benefits of any Beneficiary of a Participant who has
previously died.
ARTICLE X-MISCELLANEOUS
10.1 Unfunded Plan
This Plan is intended to be an unfunded plan maintained
primarily to provide deferred compensation benefits for a select
group of management or highly compensated employees.
10.2 Unsecured General Creditor
In the event of Employer's insolvency, Participants and
their Beneficiaries, heirs, successors and assigns shall have no
legal or equitable rights, interest or claims in any property or
assets of Employer, nor shall they be Beneficiaries of, or have
any rights, claims or interests in any life insurance policies,
annuity contracts or the proceeds therefrom owned or which may be
acquired by Employer. In that event, any and all of Employer's
assets and policies shall be, and remain, the general, unpledged,
unrestricted assets of Employer. Employer's obligation under the
Plan shall be that of an unfunded and unsecured promise of
Employer to pay money in the future.
10.3 Trust Fund
Employer shall be responsible for the payment of all
benefits provided under the Plan. At its discretion, Employer
may establish one or more trusts, with such trustees as the Board
may approve, for the purpose of providing for the payment of such
benefits. Such trust or trusts may be irrevocable, but the
assets thereof shall be subject to the claims of Employer's
creditors. To the extent any benefits provided under the Plan
are actually paid from any such trust, Employer shall have no
further obligation with respect thereto, but to the extent not so
paid, such benefits shall remain the obligation of, and shall be
paid by, Employer.
10.4 Nonassignability
Neither a Participant nor any other person shall have any
right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate or convey
in advance of actual receipt the amounts, if any, payable
hereunder, or any part thereof, which are, and all rights to
which are, expressly declared to be unassignable and
nontransferable. No part of the amounts payable shall, prior to
actual payment, be subject to seizure or sequestration for the
payment of any debts, judgments, alimony or separate maintenance
owed by a Participant or any other person, nor be transferable by
operation of law in the event of a Participant's or any other
person's bankruptcy or insolvency.
10.5 Not a Contract of Employment
The terms and conditions of this Plan shall not be deemed to
constitute a contract of employment between Employer and the
Participant, and the Participant (or the Participant's
Beneficiary) shall have no rights against Employer except as may
otherwise be specifically provided herein. Moreover, nothing in
this Plan shall be deemed to give a Participant the right to be
retained in the service of Employer or to interfere with the
right of Employer to discipline or discharge the Participant at
any time.
10.6 Protective Provisions
A Participant will cooperate with Employer by furnishing any
and all information requested by Employer, in order to facilitate
the payment of benefits hereunder, and by taking such physical
examinations as Employer may deem necessary and taking such other
action as may be requested by Employer.
10.7 Terms
Wherever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in the
plural or the singular, as the case may be, in all cases where
they would so apply.
10.8 Captions
The captions of the articles, sections and paragraphs of
this Plan are for convenience only and shall not control or
affect the meaning or construction of any of its provisions.
10.9 Governing Law
The provisions of this Plan shall be construed and
interpreted according to the laws of the State of Minnesota.
10.10 Validity
In case any provision of this Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be
construed and enforced as if such illegal and invalid provision
had never been inserted herein.
10.11 Notice
Any notice or filing required or permitted to be given to
the Committee under the Plan shall be sufficient if in writing
and hand delivered, or sent by registered or certified mail to
any member of the Committee or the Secretary of the Employer.
Such notice shall be deemed given as of the date of delivery or,
if delivery is made by mail, as of the date shown on the postmark
on the receipt for registration or certification.
10.12 Successors
The provisions of this Plan shall bind and inure to the
benefit of Otter Tail Power Company and its successors and
assigns. The term successors as used herein shall include any
corporate or other business entity which shall, whether by
merger, consolidation, purchase or otherwise acquire all or
substantially all of the business and assets of Otter Tail Power
Company, and successors of any such corporation or other business
entity.
IN WITNESS WHEREOF, and pursuant to resolution of the Board
of Directors of Otter Tail Power Company, such corporation has
caused this instrument to be executed by its duly authorized
officers effective as of July 1, 1994.
OTTER TAIL POWER COMPANY
By: Jay D. Myster
Its Vice President,
Governmental & Legal/
Corporate Secretary
Dated: March 23, 1995
Exhibit 13-A
DIVIDENDS
We have paid quarterly dividends on our common stock since 1938
without interruption or reduction. Dividends paid in 1994
totaled $1.72 per common share. The indicated annual rate for
1995 is $1.76.
BUYING AND SELLING
Otter Tail common stock is traded on The Nasdaq Stock Market's
National Market.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
1994 1993 1992 1991 1990 1989 1984
(Thousands Except Per-Share Data)
Revenues
__________
Electric
<S> <C> <C> <C> <C> <C> <C> <C>
Residential $62,687 $62,167 $59,038 $61,844 $60,326 $61,891 $62,803
Commercial and Farms 38,082 36,971 35,342 36,246 35,443 35,725 34,847
Industrial 69,332 65,757 63,522 62,284 58,812 59,173 56,928
Sales for Resale 19,066 18,107 11,126 11,330 9,759 7,902 10,724
Other Electric 9,645 9,288 8,077 7,752 7,999 7,916 7,010
________ ________ ________ ________ ________ ________ ________
Total Electric $198,812 $192,290 $177,105 $179,456 $172,339 $172,607 $172,312
Health Services 45,555 32,068 -- -- -- -- --
Diversified Operations 43,156 40,869 32,433 20,389 8,009 1,756 --
________ ________ ________ ________ ________ ________ ________
Total Operating Revenues $287,523 $265,227 $209,538 $199,845 $180,348 $174,363 $172,312
Net Income $28,475 $27,369 $26,538 $26,096 $24,852 $25,266 $23,719
__________
Cash Flow from Operations $51,832 $53,255 $44,866 $46,667 $46,681 $46,902 N/A
_________________________
Total Assets $578,972 $563,905 $530,456 $491,633 $477,224 $462,596 $463,699
____________
Long-Term Debt $162,196 $166,563 $159,295 $146,326 $135,186 $119,711 $153,458
______________
Redeemable Preferred $18,000 $18,000 $18,000 $13,150 $13,705 $14,815 $31,505
____________________
Common Shares Outstanding
(1) (thousands) 11,180 11,180 11,180 11,185 11,223 11,795 11,559
_________________________
Number of Common Shareholders (2) 14,115 13,634 13,812 13,928 13,984 14,277 17,057
_________________________________
Earnings per Common Share (3) $2.34 $2.23 $2.17 $2.15 $1.99 $1.94 $1.75
_____________________________
Dividends per Common Share $1.72 $1.68 $1.64 $1.60 $1.56 $1.52 $1.31
___________________________
</TABLE>
Notes:
(1) Number of shares outstanding at year-end.
(2) Holders of record at year-end.
(3) Based on average number of shares outstanding.
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 any subsidiary money, or cosign on any of
their 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 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 in 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
1994.
Cash provided from operations, as indicated by the Consolidated
Statement of Cash Flows for the year ended December 31, 1994, of
$51,832,000 combined with funds on hand of $4,259,000 at December
31, 1993, allowed the Company to finance its construction
program, pay dividends, participate in a preferred stock
investment program, retire First Mortgage Bonds through sinking
fund operations, and invest in an additional subsidiary company.
The Company estimates that funds internally generated combined
with funds on hand will be sufficient to meet all sinking fund
payments for First Mortgage Bonds in the next five years and to
provide for most of its 1995-1999 construction program
expenditures (including allowance for funds used during
construction). (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 1995-1999 in connection with the Company's construction
program, 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.
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,
changes in environmental laws, changes in technology affecting
the electric utility industry, changes in the costs of labor,
materials and equipment, and changes in the Company's financial
condition (including cash flow, earnings, and adequacy of timely
rate relief).
Capital expenditures for the years 1994, 1993, and 1992 were $30
million, $31 million, and $23 million, respectively. Capital
expenditures for 1994 included $26 million for the electric
utility, $2 million for health services, and $2 million for
diversified operations. The estimated capital expenditures for
1995 are $37 million, and the total expenditures for the
five-year period 1995-1999 are expected to be approximately $182
million. The 1995 amount includes $32 million for the electric
utility, $2 million for health services and $3 million for
diversified operations. The 1995-1999 amount includes $152
million for the electric utility, $14 million for health
services, and $16 million for diversified operations.
In addition to these capital requirements, funds totaling
approximately $52,089,000 will be needed during the five-year
period 1995 through 1999 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, 1994, unused credit lines totaling $22.9
million were available to meet interim financing of working
capital and other capital requirements, if needed. As of
December 31, 1994, the Company had short-term borrowings of $2.9
million.
During 1994 the Company's coverage ratios remained at almost the
same levels as in 1993. The fixed charge coverage ratio after
taxes was 3.3 for 1994, as compared to 3.2 in 1993. The
long-term debt interest coverage ratio before taxes was 4.5, as
compared to 4.2 in 1993. The Company expects these coverages
will remain approximately the same in 1995.
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, 1994, the Company had the capacity under its
Indenture of Mortgage to issue an additional $126 million
principal amount of First Mortgage Bonds.
Results of Operations:
Electric Operations
Otter Tail Power Company provides electrical service to over
120,000 customers in a service territory of over 50,000 square
miles.
Operating Revenues
The change in revenues may be summarized as follows:
Revenue Increase (Decrease)
From Prior Year
1994 1993 1992
(in thousands)
Volume Variance (1) $6,979 $15,325 $(1,109)
Price Variance (2) (492) (1,525) (1,543)
Other 35 1,385 301
______ _______ _______
Total Electric $6,522 $15,185 $(2,351)
(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 1994 volume variance was due to a 3.6% increase in retail kwh
sales. The increase in retail kwh sales was principally due to
increased sales to commercial and industrial customers. Power
pool sales remained at the same level as in the previous year.
Noncontractual power pool sales declined in 1994 because of the
exceptionally high level of sales in 1993. However, contractual
power pool sales were up significantly in 1994 because of a large
sale to another utility.
The 1993 volume variance was due to increased kwh sales in almost
every retail customer classification and an 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 widespread 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.
Heating degree days, which contribute to increases or decreases
in usage by residential customers, were 9,204 for 1994, 9,523 for
1993, and 8,253 for 1992. The average revenue per retail
kilowatt-hour was 5.50 cents in 1994, 5.53 cents in 1993, and 5.54 cents in
1992.
The 1994 price variance was essentially due to industrial
customers and contractual power pool sales. The decrease in
contractual power pool sales revenue per kwh sold resulted from
spreading a fixed demand charge over an increase in kwh sales.
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 increase in the other variance in 1993 is due to the Company
recognizing $1,446,000 of unbilled revenue. 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 in 1993, and
$751,000 in 1994. The impact on earnings per share was an
increase of $.08 in 1993 and $.07 in 1994. (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
1994 1993 1992
Production Fuel 3 10 .5
Purchased Power 5 22 2
Electric Operation Expenses 2 14 (1)
Electric Maintenance 6 18 (8)
Depreciation and Amortization 4 4 (2)
Property Taxes 6 7 5
Production Fuel and Purchased Power Expense The 3% increase in
production fuel in 1994 resulted chiefly from a 3.2% increase in
generation. The 10% increase in production fuel in 1993 was 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 was 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.
Purchased power increased 5% in 1994 essentially because of a
5.4% increase in cost per kwh purchased. The bulk of the increase
in cost per kwh purchased resulted from an increase in
replacement generation cost for plant outages. 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 degree by
a 5.3% decrease in kwh purchased. 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.
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
clause. Over the last five years, this has resulted in savings
of slightly over $32.4 million to the Company's customers.
Electric Operation and Maintenance Expenses The increase of 2%
in 1994 in electric operating expense resulted principally from
increases in customer account expenses and payroll 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 increase in electric maintenance expense of 6% in 1994 was
due to increases in production and distribution maintenance.
Production maintenance increased because of boiler repairs at the
Coyote Plant. Distribution maintenance increased due to more
tree trimming expenses. The 18% increase in electric maintenance
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 in electric maintenance expense was due
mainly to increased maintenance cost at the Coyote Plant in 1991.
Depreciation and Amortization The 4% increase in depreciation
expense in 1994 resulted from additional plant in service. The
4% increase in depreciation expense in 1993 was 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.
Property Taxes The increases in property taxes of 6% for 1994
and 7% for 1993 were due to property additions and increased mill
rates. The 5% increase in property taxes for 1992 resulted from
a higher tax rate in Minnesota.
Health Services Operations
Health Services Operations consist of businesses acquired by the
Company, beginning in 1993, which are 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.
1994 1993
(in thousands)
Operating Revenues $45,555 $32,068
Operating Expenses 43,542 30,101
_______ _______
Pretax Operating Income $ 2,013 $ 1,967
======= =======
The increase in Health Services operating income in 1994 was due
to an increase in sales of refurbished equipment as well as
including the results of a new subsidiary that was acquired by
the Company toward the end of the first quarter of 1993.
Diversified Operations
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.
1994 1993 1992
(in thousands)
Operating Revenues $43,156 $40,869 $32,433
Operating Expenses 36,851 35,964 28,565
_______ _______ _______
Pretax Operating Income $ 6,305 $ 4,905 $ 3,868
======= ======= =======
The increase of 6% in operating revenues and 2% in operating
expenses in 1994 was due principally to an increase in sales of
existing product lines in the manufacturing subsidiaries.
The 26% increase in operating revenues in 1993 was 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 were due to the purchase of two
additional businesses.
Consolidated Income Taxes
Income tax expense increased 11% in 1994 due primarily to higher
pretax operating income. The 2% increase in income tax expense
for 1993 was 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.
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.
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 that 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 that will cover the increased costs of new plant when such
costs are incurred. The Company operates under regulatory
provisions that 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 the Cost of
Energy Adjustment clause. 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 3.6% in 1994, an increase of
5.0% in 1993, and a decrease of .5% for 1992.
Demand-side management (DSM) efforts will continue in all the
jurisdictions that the Company serves. 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 (MPUC)
emphasis in this area will continue into the foreseeable future.
In 1994 the Company filed a petition with the MPUC for approval
of an annual recovery mechanism for DSM-related costs, under
Minnesota's Conservation Improvement Programs (CIP). An
intervenor, on behalf of the Large General Service Group, filed
comments against the petition and requested the MPUC to order a
general rate case to review the Company's earnings levels. In
the interest of rate stability the Company reached an agreement,
which was approved by the MPUC, resulting in costs to the Company
of approximately $2 million each year for three years. These
costs must be absorbed in current rates starting in 1995.
The Company signed a new Big Stone Plant coal contract, which
will run from mid-1995 through December 1999. Price reductions,
in addition to plant efficiency gains due to switching from
lignite to the higher Btu subbituminous coal are estimated to
result in cost reductions of about $4.9 million a year. These
price reductions will be passed on to customers through the Cost
of Energy Adjustment clause.
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 Company intends that the Big Stone Plant will
maintain current levels of operation and meet phase two
requirements by burning subbituminous coal which is much lower in
sulfur emissions than lignite. As stated previously, the Big
Stone Plant's new coal contract expires at the end of 1999. The
cost of burning subbituminous coal in 2000 and beyond would
probably be higher than current market price but would likely not
adversely affect the Company's power plant operations.
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.
The Hoot Lake Plant already uses low-sulfur subbituminous coal;
minor modifications may be required at the Hoot Lake Plant to
meet the phase two nitrogen oxide emission requirements by the
year 2000.
On September 22, 1993, the North Dakota Public Service Commission
(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. As a result of
1993 Incentive Regulation, the Company refunded $413,000, plus
accrued interest, to its North Dakota customers in December 1994.
There was no incentive regulation in place in 1994 and the
Company is working with the NDPSC to develop incentive regulation
for 1995.
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.)
The electric industry is becoming more competitive. The
restructuring of the electric industry is still developing.
Proposals that are being considered by various states and at the
federal level, along with the National Energy Policy Act of 1992
(Act), are expected to bring more competition into the electric
business. The Act reduces restrictions on operation and
ownership of independent power producers (IPP's). It also allows
IPP's and other wholesale suppliers and purchasers increased
access to transmission lines. The Act prohibits FERC-ordered
retail wheeling, but it does not address the states' authority to
order retail wheeling.
As the electric industry evolves, the Company may be subject to
increased competition. However, the Company may also have
opportunities to increase its market share. The Company's
generation capacity appears well positioned for competition due
to unit heat rate improvements and reductions in fuel and freight
costs. A comparison of the Company's electric retail rates to
the rates of other investor-owned utilities, cooperatives, and
municipals, in the states the Company serves indicates that the
Company's rates are competitive. In addition, the Company would
attempt more flexible pricing strategies under an open
competitive environment.
The Company has continued to diversify by purchasing nonutility
businesses-one in 1992, six more in 1993, and one in 1994. In
1992 the Company also purchased its first utility business, an
independent telephone company. In January of 1995 the Company
acquired an additional manufacturing business and three small
diagnostic imaging companies. (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.
The Company has invested approximately $4 million in plant and
equipment for its Quadrant subsidiary that sells steam to two
industrial customers. Steam is produced from burning garbage at
a fee from several counties. The contracts with the industrial
customers expire in June 1995. Quadrant represented
approximately $1.8 million in sales for 1994 and an insignificant
contribution to consolidated operating income for the Company.
In addition, in September 1996 the contracts for burning garbage
will expire. In June 1997, new pollution rules will be in effect
which require new operating permits and possible modifications to
current plant operations. These modifications would need to
start by June 1996. Successful negotiation of the above
contracts will be necessary to provide for recovery of the amount
the Company has invested in Quadrant.
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 1994 the Company adopted SFAS 112 - Employer's Accounting for
Postemployment Benefits and SFAS 115 - Accounting for Certain
Investments in Debt and Equity Securities. The adoption of SFAS
112 in 1994 did not have a material impact on the Company's
financial statements. At December 31, 1994, as the result of
adopting SFAS 115, the Company's marketable securities, which are
principally invested in preferred stocks of other utilities, were
recorded at fair value, which was $1,100,000 ($684,000 net of
tax) less than original cost. The unrealized loss was recorded
net of tax in shareholder's equity. The reduction in market
value is because the investments reacted adversely to the
increase in general interest rates during 1994. These securities
are held in the "available for sale" category as defined by SFAS
115. Management does not believe the decline in market value is
other than temporary.
<TABLE>
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 1994 1993
(in thousands)
ASSETS
Plant:
<S> <C> <C>
Electric Plant in Service $698,437 $679,282
Other 36,221 34,626
_______ _______
Total 734,658 713,908
Less Accumulated Depreciation and Amortization 287,902 270,385
_______ _______
446,756 443,523
Construction Work in Progress 10,485 8,341
_______ _______
Net Plant 457,241 451,864
_______ _______
Investments and Other Assets 43,944 43,853
_______ _______
Current Assets:
Cash and Cash Equivalents 1,852 3,808
Temporary Cash Investments 391 451
Accounts Receivable:
Trade (Less Accumulated Provision for
Uncollectible Accounts:
1994, $432,000; 1993, $398,000) 27,004 19,531
Other 5,172 3,361
Materials and Supplies:
Fuel 3,664 3,667
Inventory, Materials and Operating Supplies 15,794 14,552
Deferred Income Taxes 4,306 4,482
Accrued Utility Revenues 4,154 4,368
Other 3,041 2,477
_______ _______
Total Current Assets 65,378 56,697
_______ _______
Deferred Debits:
Unamortized Debt Expense and Reacquisition Premiums 5,174 5,611
Other 7,235 5,880
_______ _______
Total Deferred Debits 12,409 11,491
_______ _______
TOTAL $578,972 $563,905
======= =======
See accompanying notes to consolidated financial statements.
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 1994 1993
(in thousands)
LIABILITIES
Capitalization (page 36):
Common Shares, Par Value $5 Per Share--Authorized,
25,000,000 Shares;
Outstanding, 1994 and 1993--11,180,136 Shares $55,901 $55,901
Premium on Common Shares 30,335 30,336
Retained Earnings 90,412 84,209
_______ _______
Total 176,648 170,446
Cumulative Preferred Shares:
Subject to Mandatory Redemption 18,000 18,000
Other 20,831 20,831
Long-Term Debt 162,196 166,563
_______ _______
Total Capitalization 377,675 375,840
_______ _______
Current Liabilities:
Short-Term Debt 2,900 --
Sinking Fund Requirements and Current Maturities 8,739 9,356
Accounts Payable 22,542 15,987
Accrued Salaries and Wages 3,889 3,552
Federal and State Income Taxes Accrued 2,095 --
Other Taxes Accrued 11,712 11,187
Interest Accrued 3,524 3,522
Other 2,480 2,135
_______ _______
Total Current Liabilities 57,881 45,739
_______ _______
Noncurrent Liabilities 8,245 5,690
_______ _______
Commitments (note 6) -- --
_______ _______
Deferred Credits:
Accumulated Deferred Income Taxes 94,911 92,940
Accumulated Deferred Investment Tax Credit 22,171 23,518
Regulatory Liability 15,197 16,046
Other 2,892 4,132
_______ _______
Total Deferred Credits 135,171 136,636
_______ _______
TOTAL $578,972 $563,905
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
O T T E R T A I L P O W E R C O M P A N Y
<TABLE>
Consolidated Statements of Income
For the Years Ended December 31 1994 1993 1992
(in thousands)
Operating Revenues:
<S> <C> <C> <C>
Electric $198,812 $192,290 $177,105
Health Services 45,555 32,068 --
Diversified Operations 43,156 40,869 32,433
_______ _______ _______
Total Operating Revenues 287,523 265,227 209,538
_______ _______ _______
Operating Expenses:
Production Fuel 32,311 31,325 28,428
Purchased Power 28,717 27,438 22,582
Electric Operation Expenses 45,684 44,593 39,082
Electric Maintenance 13,725 12,914 10,927
Cost of Health Services Sold 28,690 19,019 --
Other Health Services Expenses 14,396 10,647 --
Diversified Cost of Goods 26,070 26,203 20,914
Other Diversified Expenses 8,978 7,862 6,488
Depreciation and Amortization 21,190 20,512 18,697
Property Taxes 11,318 10,728 10,034
Income Taxes 15,931 14,331 14,024
_______ _______ _______
Total Operating Expenses 247,010 225,572 171,176
_______ _______ _______
Operating Income 40,513 39,655 38,362
_______ _______ _______
Other Income and Deductions:
Allowance for Equity (Other) Funds Used During
Construction 146 120 116
Other Income and Deductions and Applicable Taxes 1,503 1,419 1,225
_______ _______ _______
Total Other Income and Deductions 1,649 1,539 1,341
_______ _______ _______
Income Before Interest Charges 42,162 41,194 39,703
_______ _______ _______
Interest Charges:
Interest 13,749 13,881 13,222
Allowance for Borrowed Funds Used During
Construction--Credit (62) (56) (57)
_______ _______ _______
Interest Charges--Net 13,687 13,825 13,165
_______ _______ _______
Net Income 28,475 27,369 26,538
Preferred Dividend Requirements 2,358 2,477 2,280
_______ _______ _______
Earnings Available for Common Shares $26,117 $24,892 $24,258
======= ======= =======
Average Number of Common Shares Outstanding 11,180 11,180 11,185
Earnings Per Average Common Share $2.34 $2.23 $2.17
Dividends Per Common Share $1.72 $1.68 $1.64
</TABLE>
See accompanying notes to consolidated financial statements.
O T T E R T A I L P O W E R C O M P A N Y
<TABLE>
Consolidated Statements of Cash Flows
For the Years Ended December 31 1994 1993 1992
(in thousands)
Cash Flows From Operating Activities:
<S> <C> <C> <C>
Net Income $28,475 $27,369 $26,538
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 25,899 25,348 21,115
Deferred Investment Tax Credit -- Net (1,347) (1,234) (1,220)
Deferred Income Taxes 1,386 3,937 4,505
Change in Deferred Debits and Other Assets (1,016) (1,996) (2,909)
(Gain)/Loss on Disposal of Noncurrent Assets (201) (77) 105
Change in Noncurrent Liabilities and Deferred
Credits 1,016 5,509 (239)
Allowance for Equity (Other) Funds Used During
Construction (146) (120) (116)
Cash Provided by (Used For) Current Assets and
Current Liabilities:
Change in Receivables, Materials, and Supplies (10,712) (227) (2,602)
Change in Other Current Assets (339) (4,519) (617)
Change in Payables and Other Current
Liabilities 6,720 250 912
Change in Interest and Income Taxes Payable 2,097 (985) (606)
_______ _______ _______
Net Cash Provided by Operating Activities 51,832 53,255 44,866
_______ _______ _______
Cash Flows From Investing Activities:
Gross Capital Expenditures (30,411) (30,894) (22,616)
Proceeds from Disposal of Noncurrent Assets 2,574 1,574 196
Purchase of Subsidiaries, Net of Cash Acquired (286) (4,056) (1,813)
Change in Temporary Cash Investments 60 9,204 (7,011)
Change in Marketable Securities and Other
Investments (1,630) (7,329) (6,410)
_______ _______ _______
Net Cash Used in Investing Activities (29,693) (31,501) (37,654)
_______ _______ _______
Cash Flows From Financing Activities:
Change in Short-Term Debt--Net Issuances 2,900 --- ---
Proceeds from Issuance of Long-Term Debt 6,433 33,156 59,848
Proceeds from Issuance of Preferred Stock --- 4,000 18,000
Payments for Debt and Preferred Stock Issuance
Expense (56) (245) (611)
Payments for Repurchase of Common Stock --- --- (157)
Payments for Retirement of Long-Term Debt (11,784) (24,432) (48,903)
Payments to Trustee for Retirement of Long-Term
Debt --- (13,445) ---
Payments for Retirement of Preferred Stock --- (4,080) (14,184)
Dividends Paid (21,588) (21,269) (20,586)
_______ _______ _______
Net Cash Used In Financing Activities (24,095) (26,315) (6,593)
_______ _______ _______
Net Change in Cash and Cash Equivalents (1,956) (4,561) 619
Cash and Cash Equivalents at Beginning of Year 3,808 8,369 7,750
_______ _______ _______
Cash and Cash Equivalents at End of Year $1,852 $3,808 $8,369
======= ======= =======
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest (net of amount capitalized) $13,160 $13,371 $11,653
Income Taxes $14,058 $12,009 $10,996
</TABLE>
O T T E R T A I L P O W E R C O M P A N Y
<TABLE>
Consolidated Statements of Retained Earnings
For the Years Ended December 31 1994 1993 1992
(in thousands)
<S> <C> <C> <C>
Retained Earnings at Beginning of Year $84,209 $78,189 $72,752
Net Income 28,475 27,369 26,538
Other (684) (80) (515)
_______ _______ _______
TOTAL 112,000 105,478 98,775
_______ _______ _______
Dividends Paid:
Cumulative Preferred Shares at Required
Annual Rates 2,358 2,486 2,242
Common Shares 19,230 18,783 18,344
_______ _______ _______
TOTAL 21,588 21,269 20,586
_______ _______ _______
Retained Earnings at End of Year $90,412 $84,209 $78,189
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
O T T E R T A I L P O W E R C O M P A N Y
<TABLE>
Consolidated Statements of Capitalization December 31 1994 1993
(in thousands)
<S> <C> <C> <C>
Total Common Shareholders' Equity $176,648 $170,446
_______ _______
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 4,000
$9.00, 53,311 Shares 5,331 5,331
_______ _______
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:
8.75%, due December 15, 1997 19,200 19,400
7.25%, due August 1, 2002 19,600 19,800
7.625%, due February 1, 2003 9,480 9,600
8.75%, due September 15, 2021 19,400 19,600
8.25%, due August 1, 2022 29,400 29,700
Pollution Control and Industrial Development
Series:
5.80-6.80%, due February 1, 2006, Big Stone
Project 5,547 5,607
8.125%, due August 1, 2009, Coyote Project,
Series B 850 860
5.80-6.90%, due February 1, 2019, Coyote
Project 22,204 22,439
_______ _______
Total 125,681 127,006
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 3,010
Pollution Control Refunding Revenue Bonds
Variable 5.55% at December 31, 1994, due
December 1, 2012 10,400 10,400
Industrial Development Revenue Bond (Quadrant Co.
Project
Variable 5.36% at December 31, 1994, due
April 1, 1996 -- Otter Tail Power Company
Guarantor) 600 1,000
Obligations of Mid-States Development, Inc.
Rates 6% to 12% at December 31, 1994 19,729 22,014
Obligations of North Central Utilities, Inc.
Variable 7.45% to 7.60% at December 31, 1994 9,999 10,912
Other 49 155
_______ _______
Total $171,668 $176,697
Less:
Current Maturity 7,414 8,031
Sinking Fund Requirement 1,325 1,325
Unamortized Debt Discount and Premium -- Net 733 778
_______ _______
Total Long-Term Debt 162,196 166,563
_______ _______
Total Capitalization $377,675 $375,840
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
Otter Tail Power Company
Notes to Consolidated Financial Statements
For the Three Years Ended December 31, 1994
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 utility 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 2.98% in 1994, 2.95% in 1993, and 2.90% in 1992.
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, 1994 and 1993, included in Plant in Service for Big Stone
were $107,872,000 and $107,243,000, respectively, and the Accumulated
Provision for Depreciation and Amortization was $59,757,000 and
$57,159,000, respectively. Amounts at December 31, 1994 and 1993,
included in Plant in Service for Coyote were $143,445,000 and
$143,078,000, respectively, and the Accumulated Provision for Depreciation
and Amortization was $50,918,000 and $47,729,000, 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
both 1994 and 1993, and 10.50% for 1992.
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
income 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 change in method of
revenue recognition increased net income by $870,000 in 1993, and $751,000
in 1994. The impact on earnings per share was an increase of $.08 in
1993, and $.07 in 1994.
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 1994, 1993, and 1992 were $995,000,
$1,164,000, and $886,000, respectively, and repairs charged to such
reserves were $1,269,000, $1,083,000, and $1,063,000, respectively.
Accrued liabilities included $857,000 and $1,131,000 for storm damage at
December 31, 1994 and 1993, 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 1994, 1993, and 1992 were $1,314,000,
$1,172,000, and $1,367,000, respectively.
Reclassifications--Certain prior year amounts have been reclassified
to conform to 1994 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 money
market funds, recorded at cost which approximates market. In addition,
the Company has noncurrent investments of preferred stock which are
recorded at fair value. Prior to 1994, the noncurrent investments were
recorded at the lower of cost or market. (See further discussion under
note 10.)
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.
Short-Term Debt--The composite interest rate on short-term debt
outstanding as of December 31, 1994, was 6.5%.
Intangible Assets--The majority of the Company's intangible assets consist
of Goodwill associated with the acquisition of subsidiaries and are
amortized on a straight-line basis over a period from 15 to 40 years.
Total intangibles are as follows as of December 31:
1994 1993
(in thousands)
Intangible Assets $18,982 $18,817
Less Accumulated Amortization 3,502 2,323
_______ _______
Intangibles-Net $15,480 $16,494
2. Segment Information
The Company's wholly-owned subsidiary Mid-States Development, Inc.
purchased an additional business in both 1992 and 1994, and six
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.
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 operating revenues, net income, or earnings per share for 1994,
1993, and 1992. Operating revenues, including Health Services, for 1992
would have been $248,909,000. The total acquisition price for all
businesses was $22,469,000.
The Company has operations in three business areas. Electric Operations
includes the electric utility only. Health Services Operations consists
of businesses involved in the sale, service, rental, refurbishing and
operations of medical imaging equipment and the sale of related supplies
and accessories to various medical institutions primarily in the Midwest
United States. 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 1994 and 1993 is presented in the table
below:
1994 1993
Operating Revenue (in thousands)
Electric $198,812 $192,290
Health Services 45,555 32,068
Diversified Operations 43,156 40,869
________ ________
Total $287,523 $265,227
Pretax Operating Income
Electric $ 48,126 $ 47,114
Health Services 2,013 1,967
Diversified Operations 6,305 4,905
________ ________
Total $ 56,444 $ 53,986
Income Taxes 15,931 14,331
________ ________
Consolidated Operating Income $ 40,513 $ 39,655
Depreciation and Amortization
Electric $ 18,970 $ 18,219
Health Services 455 435
Diversified Operations 1,765 1,858
________ ________
Total $ 21,190 $ 20,512
Capital Expenditures
Electric $ 25,693 $ 24,526
Health Services 2,544 3,471
Diversified Operations 2,174 2,897
________ ________
Total $ 30,411 $ 30,894
Identifiable Assets
Electric $505,291 $498,440
Health Services 26,415 23,175
Diversified Operations 47,266 42,290
________ ________
Total $578,972 $563,905
In January 1995 the Company acquired an additional manufacturing business and
three small diagnostic imaging companies. The total revenues of these
companies were $17,122,000 in 1994.
3. Rate Matters
In 1994 the Company filed a petition with the MPUC for approval of an
annual recovery mechanism for DSM related costs, under Minnesota's
Conservation Improvement Programs (CIP). An intervenor, on behalf of the
Large General Service Group, filed comments against the petition and
requested the MPUC to order a general rate case to review the Company's
earnings levels. In the interest of rate stability the Company reached an
agreement, which was approved by the MPUC, resulting in costs of
approximately $2 million each year for three years which must be absorbed
in current rates starting in 1995.
On September 22, 1993, the NDPSC entered an Order approving an Agreement
for Incentive Regulation for 1993. The Agreement provided 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.)
As a result of 1993 Incentive Regulation, the Company refunded $413,000,
plus accrued interest, to its North Dakota customers in December 1994.
There was no Incentive Regulation in place in 1994 and the Company is
working with the NDPSC for Incentive Regulation for 1995.
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 the Company in 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 both 1994 and 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, 1994, were restricted by
$9,701,000.
6. Commitments
At December 31, 1994, the Company had commitments under contracts in
connection with construction programs aggregating approximately $9,600,000.
For capacity requirements the Company has an agreement with Lincoln
Electric System, to purchase 20 mw for the winter seasons of 1995 and 1996
at an approximate annual cost of $1,300,000 for 1995 and $900,000 for 1996.
The Company also has an agreement with Manitoba Hydro Electric Board to
purchase 110 mw for the summer seasons for 1995 and 1996 at a minimum
annual cost of approximately $4,100,000. The Company also has an agreement
with Manitoba Hydro Electric Board to purchase 50 mw annually for 1997
through 1999 at an approximate annual cost of $1,300,000 in 1997 and
$2,300,000 for 1998 and 1999.
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, 1994, for each of the next five years are $8,739,000 for 1995,
$7,389,000 for 1996, $23,056,000 for 1997, $7,540,000 for 1998, and
$5,365,000 for 1999.
8. Pension Plan and Other Postretirement Benefits
The Company's noncontributory funded pension plan covers substantially all
electric utility 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 $1,356,000 for 1994, $1,333,000 for 1993, and
$1,293,000 for 1992. 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 1994, 1993, and 1992 includes the following
components:
1994 1993 1992
(in thousands)
Service Cost - Benefit Earned During the Period $ 2,076 $ 1,774 $ 1,699
Interest Cost on Projected Benefit Obligation 6,209 5,867 5,570
_______ _______ _______
$ 8,285 $ 7,641 $ 7,269
(Gain)/Loss on Return on Assets 3,234 (7,636) (6,223)
Plus/(Less): Net Deferral and Amortization (10,163) 1,328 247
_______ _______ _______
Net Periodic Pension Cost $ 1,356 $ 1,333 $ 1,293
The assumptions used for actuarial valuations were:
1994 1993 1992
Discount Rate 8.0% 7.5% 8.0%
Rate of Increase in Future Compensation Level 4.5% 4.5% 5.0%
Long-Term Rate of Return on Assets 8.5% 8.0% 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, 1994 and 1993, are as follows:
1994 1993
(in thousands)
Actuarial present value of benefit obligation:
Vested Benefits $60,528 $58,462
Nonvested Benefits 7,645 6,113
_______ _______
Accumulated Benefit Obligation $68,173 $64,575
_______ _______
Projected Benefit Obligation $83,653 $80,006
Plan Assets at Fair Value 87,313 94,945
_______ _______
Funded Status $ 3,660 $14,939
Unrecognized Transition Asset (1,722) (1,957)
Unrecognized Prior Service Cost 10,079 6,206
Unrecognized Net Actuarial (Gain) or Loss (7,581) (13,395)
_______ _______
Net Pension Asset $ 4,436 $ 5,793
======= =======
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 electric utility 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. However, implementation of this
Statement decreased net income by $1,061,000 and $837,000 and earnings per
share by $.09 and $.07 in 1994 and 1993, respectively.
In 1992, the Company recognized $960,000 as an expense for postretirement
health care and life insurance benefits.
The net postretirement benefit cost for 1994 and 1993 includes the following
components:
1994 1993
(in thousands)
Service Cost - Benefit Earned During the Period $ 596 $ 502
Interest Cost on Accumulated Postretirement
Benefit Obligation 1,412 1,367
Amortization of Transition Obligation 881 881
______ ______
Net Postretirement Benefit Cost $2,889 $2,750
====== ======
The funded status of the plan and the amounts recognized on the balance
sheet at December 31, 1994 and 1993, are as follows:
1994 1993
(in thousands)
Actuarial present value of benefit obligation:
Retirees $ 10,377 $ 10,694
Fully Eligible Plan Participants 5,289 5,194
Other Active Plan Participants 3,576 3,565
________ ________
Accumulated Postretirement Benefit
Obligation $ 19,242 $ 19,453
Plan Assets at Fair Value 0 0
________ ________
Funded Status $(19,242) $(19,453)
Unrecognized (Gain)/Loss (566) 981
Unrecognized Transitional Obligation 15,857 16,738
________ ________
Postretirement Benefit Liability $ (3,951) $ (1,734)
======== ========
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation as of December 31, 1994, was 10.5% for
1995, decreasing linearly each successive year until it reaches 5% in 2001,
after which it remains constant. The assumed health care cost trend rate
used in measuring the accumulated postretirement benefit obligation as of
December 31, 1993, was 12% for 1994, decreasing linearly each successive
year until it reaches 5.5% in 2001, after which it remains constant. The
assumed discount rate used in determining the accumulated postretirement
benefit obligation as of December 31, 1994 and 1993, was 8% and 7.5%,
respectively. 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, 1994, and the service and interest cost
components of the net postretirement health care cost in 1994, by
approximately 12% and 15%, respectively.
The Company has a leveraged employee stock ownership plan (ESOP) for the
benefit of all its employees. Contributions made by the Company were
$970,000 for 1994, $940,000 for 1993, and $880,000 for 1992.
9. Compensating Balances and Short-Term Borrowings
At December 31, 1994, the Company had no compensating balances to support
formal bank lines of credit. The Company's bank lines of credit totaled
$27,650,000 of which $4,738,000 was used at December 31, 1994. 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.
1994 1993
(in thousands)
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and Short-Term Investments $2,243 $2,243 $ 4,259 $ 4,259
Marketable Securities 17,132 17,132 17,025 17,406
Redeemable Preferred Stock (18,000) (17,487) (18,000) (18,728)
Long-Term Debt (162,196) (160,694) (166,563) (181,669)
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 - Accounting for Certain Investments in Debt
and Equity Securities (SFAS 115). SFAS No. 115 establishes standards of
financial accounting and reporting for Investments in Equity Securities
that have readily determinable values and for all investments in debt
securities. The Company's marketable securities are included in Invest-
ments and Other Assets on the Balance Sheet and are classified as
available for sale. These securities are recorded at fair value with any
unrealized gain or loss included as a separate component in the Retained
Earnings on the Balance Sheet. Realized gains and losses are computed on
each specific investment sold. The amount recognized on the balance
sheet as of December 31 and amount sold for the year are as follows:
1994
Available for Sale - Securities (in thousands)
Cost $18,268
Gross Unrealized Gain 99
Gross Unrealized Loss (1,235)
_______
Fair Value $17,132
=======
Proceeds From Sale $39,092
Gross Realized Gains 993
Gross Realized Losses (1,066)
11. Income Tax Expense
The total income tax expense differs from the amount computed by applying
the federal income tax rate (35% in 1994 and 1993 and 34% in 1992) to
net income before total income tax expense for the following reasons:
1994 1993 1992
(in thousands)
Tax Computed at Federal Statutory Rate.. $15,525 $14,495 $13,739
Increases (Decreases) in Tax from:
State Income Taxes Net of Federal Income
Tax Benefit. . . . . . . . . . . . . 2,088 1,926 1,932
Investment Tax Credit Amortization. . . (1,347) (1,234) (1,220)
Depreciation Differences -- Flow-Through
Method Reversal. . . . . . . . . . . 617 649 380
Differences Reversing in Excess of
Federal Rates . . . . . . . . . . . . . (707) (635) (560)
Dividend Received/Paid Deduction. . . . (889) (824) (225)
Permanent and Other Differences . . . . 594 (333) (176)
________ _______ _______
Total Income Tax Expense . . . . . . $15,881 $14,044 $13,870
Overall Effective Federal and State
Income Tax Rate 35.8% 33.9% 34.3%
Income Tax Expense is Comprised of the
Following:
Charged (Credited) to Operations:
Current Federal Income Taxes . . . . $12,892 $ 9,288 $ 9,189
Current State Income Taxes . . . . . 2,935 2,344 2,096
Deferred Federal Income Taxes. . . . 1,185 3,275 3,216
Deferred State Income Taxes. . . . . 266 658 743
Investment Tax Credit Amortization . (1,347) (1,234) (1,220)
_______ _______ _______
Total. . . . . . . . . . . . . . . . $15,931 $14,331 $14,024
Charged (Credited) to Other Income and
Deductions:
Current Federal Income Taxes . . . 115 (192) (639)
Current State Income Taxes . . . . 50 (11) (121)
Deferred Federal and State Income
Taxes . . . . . . . . . . . . . (215) (84) 606
_______ _______ _______
Total Income Tax Expense. . . . . . $15,881 $14,044 $13,870
1992
Deferred Income Tax Expense is Comprised of the Following: (in thousands)
Accelerated Depreciation (Tax over Book)-Net. 3,580
Overhead Costs Capitalized . . . . . (145)
Unbilled Revenues. . . . . . . . . . (274)
Deductible Net Pension Asset . . . . 455
Premium On Bond Redemption . . . . . 610
Other. . . . . . . . . . . . . . . . 339
______
Total . . . . . . . . . . . . . . . $4,565
The Company's deferred tax assets and liabilities were comprised of the
following on December 31, 1994 and 1993:
1994 1993
(in thousands)
Deferred Tax Assets
Amortization of Tax Credits $ 14,544 $ 15,376
Vacation Accrual 844 531
Unbilled/Unearned Revenue 3,864 4,501
Operating Reserves 3,572 2,340
Nondeductible Land - Plant Abandonment 1,134 1,134
Transfer to Regulatory Asset (790) (938)
Other 1,716 1,130
_________ _________
Total Deferred Tax Assets $ 24,884 $ 24,074
Deferred Tax Liabilities
Differences Related to Property (110,062) (107,317)
Excess Tax Over Book - Pensions (1,759) (2,298)
Transfer to Regulatory Asset (1,157) (501)
Transfer to Regulatory Liability 657 745
Other (3,168) (3,161)
_________ _________
Total Deferred Tax Liabilities $(115,489) $(112,532)
_________ _________
Deferred Income Taxes $ (90,605) $ (88,458)
12. Property, Plant and Equipment 1994 1993
(December 31)
Production $ 300,712 $ 298,614
Transmission 129,627 127,398
Distribution 198,163 188,864
General 69,935 64,406
Other Property 36,221 34,626
_________ _________
$ 734,658 $ 713,908
Less Accumulated Depreciation
& Amortization 287,902 270,385
_________ _________
$ 446,756 $ 443,523
Construction Work in Progress 10,485 8,341
_________ _________
Net Plant $ 457,241 $ 451,864
<TABLE>
<PAGE>
13. Quarterly Information (Unaudited)
The quarterly data shown below reflects seasonal and timing variations that are common in the utility industry. 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 notes 1 and 3 for further
information.)
Three Months Ended
March 31 June 30 September 30 December 31
1994 1993 1994 1993 1994 1993 1994 1993
(in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues. . . . . $73,436 $58,714 $68,917 $71,183 $71,142 $67,882 $74,028 $67,448
Operating Income. . . . . . 12,347 12,257 8,267 8,438 8,943 9,423 10,956 9,537
Net Income. . . . . . . . . 9,356 8,990 5,397 5,447 5,905 6,225 7,817 6,707
Earnings Available for
Common Shares . . . . . . 8,766 8,373 4,808 4,830 5,315 5,608 7,228 6,081
Earnings Per Common Share . .78 .75 .43 .43 .48 .50 .65 .54
</TABLE>
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 (the Company) as of December 31, 1994 and 1993, and
the related consolidated statements of income, retained earnings,
and cash flows for each of the three years in the period ended
December 31, 1994. 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 asssurance about whether the consolidated
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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, 1994 and 1993, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1994, 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 LLP
Deloitte & Touche LLP
January 30, 1995
Minneapolis, Minnesota
Exhibit 21-A
OTTER TAIL POWER COMPANY
Subsidiaries of the Registrant
March 1, 1995
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
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
Diagnostic Medical Systems, Inc. North Dakota
DMS Leasing Corporation North Dakota
Medical Operators and Management Corp. North Dakota
BTD Manufacturing, Inc. Minnesota
*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 report dated January 30, 1995 incorporated by reference in
this Annual Report on Form 10-K of Otter Tail Power Company for
the year ended December 31, 1994.
DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Minneapolis, Minnesota
March 27, 1995
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, 1994, 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 19_______, 1995.
_______Andrew E. Anderson_________
Andrew E. Anderson
In Presence of:
_______Denise R. Stein__________
_______Kathy M. Naylor__________
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, 1994,
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 4________, 1995.
__________John C. MacFarlane_________
John C. MacFarlane
In Presence of:
______Becky Luhning_______________
______Lori D. Dawkins_____________
<PAGE>
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, 1994, 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 5_______, 1995
__________Robert N. Spolum___________
Robert N. Spolum
In Presence of:
________Janis Blauton______________
________W. T. Todd_________________
<PAGE>
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, 1994, 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 9_______, 1995.
___________Nathan I. Partain_________
Nathan I. Partain
In Presence of:
_____Maureen A. Dalton, Notary_____
___________________________________
<PAGE>
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,
1994, 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_______, 1995.
__________Dayle Dietz________________
Dayle Dietz
In Presence of:
_____Mel Isley_____________________
_____Marlys Frederickson___________
<PAGE>
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, 1994, 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 4________, 1995.
__________J. L. Stengel______________
James L. Stengel
In Presence of:
_____Victoria C. Cunningham________
_____Jean G. Stengel_______________
<PAGE>
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, 1994, 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 3________, 1995.
___________Thomas M. Brown___________
Thomas M. Brown
In Presence of:
_____Donna M. Hull_________________
_____K. K. Schmidt_________________
<PAGE>
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, 1994, 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 3________, 1995.
__________Maynard D. Helgaas_________
Maynard D. Helgaas
In Presence of:
_____Jamie Heidinger_______________
_____Renee Valenta_________________
<PAGE>
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, 1994, 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 16______, 1995
__________Kenneth L. Nelson__________
Kenneth L. Nelson
In Presence of:
____Mike Holper____________________
____Denny Iverson__________________
<PAGE>
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, 1994, 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 3________, 1995.
__________Dennis R. Emmen____________
Dennis R. Emmen
In Presence of:
____Lori K. Haiby__________________
____Lori D. Dawkins_______________
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted
from the Consolidated Balance Sheet as of December 31, 1994 and
the Consolidated Statement of Income for the twelve months ended
December 31, 1994 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 432,543
<OTHER-PROPERTY-AND-INVEST> 68,642
<TOTAL-CURRENT-ASSETS> 65,378
<TOTAL-DEFERRED-CHARGES> 12,409
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 578,972
<COMMON> 55,901
<CAPITAL-SURPLUS-PAID-IN> 30,335
<RETAINED-EARNINGS> 90,412
<TOTAL-COMMON-STOCKHOLDERS-EQ> 176,648
18,000
20,831
<LONG-TERM-DEBT-NET> 162,196
<SHORT-TERM-NOTES> 1,400
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 1,500
<LONG-TERM-DEBT-CURRENT-PORT> 8,739
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 189,658
<TOT-CAPITALIZATION-AND-LIAB> 578,972
<GROSS-OPERATING-REVENUE> 287,523
<INCOME-TAX-EXPENSE> 15,931
<OTHER-OPERATING-EXPENSES> 231,079
<TOTAL-OPERATING-EXPENSES> 247,010
<OPERATING-INCOME-LOSS> 40,513
<OTHER-INCOME-NET> 1,649
<INCOME-BEFORE-INTEREST-EXPEN> 42,162
<TOTAL-INTEREST-EXPENSE> 13,687
<NET-INCOME> 28,475
2,358
<EARNINGS-AVAILABLE-FOR-COMM> 26,117
<COMMON-STOCK-DIVIDENDS> 19,230
<TOTAL-INTEREST-ON-BONDS> 13,331
<CASH-FLOW-OPERATIONS> 51,832
<EPS-PRIMARY> 2.34
<EPS-DILUTED> 2.34
</TABLE>
