PROSPECTUS
OTTER TAIL POWER COMPANY
AUTOMATIC DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN
Common Shares
($5 par value)
The Automatic Dividend Reinvestment and Share Purchase Plan (the
"Plan") of Otter Tail Power Company (the "Company") provides the Company's
Common and Preferred Shareholders, employees and customers with a convenient
method of purchasing the Company's Common Shares, $5 par value ("Common
Shares"), without payment of any brokerage commission or service charge.
Participants may purchase additional Common Shares by reinvesting dividends
and/or making cash payments. Employees of the Company may also participate
through payroll deduction.
Customers who are not shareholders of the Company may become holders of
record of the Company's Common Shares concurrently with enrollment in the
Plan by making a minimum initial investment of $100. Individuals who are not
shareholders, employees or customers of the Company may participate in the
Plan only after becoming a shareholder of record through the purchase of
Common or Preferred Shares of the Company though an independent broker.
The shares purchased under the Plan may be new issue Common Shares
or Common Shares purchased on the open market. New issue Common Shares will
be purchased from the Company at the current market price of Common Shares as
determined by the Company on the basis of the average of the high and low
sales prices of Common Shares on the applicable investment date as reported
by The Wall Street Journal. The price of Common Shares purchased on the open
market will be the weighted average price per share at which shares are
actually purchased on the open market for the relevant period.
This Prospectus relates to 1,000,000 new issue Common Shares
registered for sale under the Plan. A complete description of the Plan
begins on Page 3. Please read this Prospectus carefully before investing and
retain it for your future reference.
____________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
____________________________
The date of this Prospectus is November 1, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission ("Commission"). Reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Commission's regional offices at Seven World Trade Center, Suite
1300, New York, New York 10048, and Citicorp Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60601. Copies of such materials can be
obtained from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
The Company has filed with the Commission a registration statement
on Form S-3 with respect to the new Common Shares issuable under the Plan
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules
and regulations of the Commission. For further information, reference is
hereby made to the Registration Statement.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed with the Commission under the Exchange
Act (File No. 0-368) are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1995; and
2. The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30, and Septemer 30, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior
to the termination of this offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the respective
dates of filing of such documents. Any statement contained herein or in a
document all or part of which is incorporated or deemed to be incorporated by
reference in this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any document subsequently filed with the Commission which
also is or is deemed to be incorporated by reference in this Prospectus
modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
(including any beneficial owner) to whom this Prospectus has been delivered, on
the written or oral request of any such person, a copy of any or all of the
documents referred to above which have been or may be incorporated in this
Prospectus by reference, other than certain exhibits to such documents. Requests
for such copies should be directed to the Corporate Secretary, Otter Tail Power
Company, 215 South Cascade Street, P.O. Box 496, Fergus Falls, Minnesota
56538-0496, telephone number: (218) 739-8200.
THE COMPANY
The Company is an operating public utility engaged in the production,
transmission, distribution and sale of electric energy in western Minnesota,
eastern North Dakota and northeastern South Dakota. The Company, through its
subsidiaries, is also engaged in other businesses. Health Services Operations
consists of certain businesses acquired beginning 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. Manufacturing Operations includes businesses
acquired beginning in 1990 in such areas as metal parts stamping and
fabrication, agricultural equipment, and plastic pipe extrusion. Other
Business Operations includes businesses involved in such areas as electrical
and telephone construction contracting, radio broadcasting, waste
incinerating, and telephone/cable TV utility.
The Company 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, telephone number:
(218) 739-8200.
USE OF PROCEEDS
Unless Common Shares are purchased directly from the Company, the
Company will receive no proceeds from the offering of Common Shares through
the Plan. To the extent shares are purchased from the Company, the net
proceeds from the sale of such shares will be added to the general funds of
the Company and used for general corporate purposes, including payment of a
portion of the cost of the Company's continuing construction program. The
Company has no basis for estimating either the number of Common Shares that
ultimately will be sold pursuant to the Plan or the prices at which such
shares will be sold.
DESCRIPTION OF THE PLAN
The purpose of the Plan is to provide the Company's shareholders,
employees and customers with a simple and convenient method of purchasing
Common Shares of the Company without payment of any brokerage commissions or
service charges. The terms and conditions of the Plan are set forth below.
1. HOW TO ENROLL
Eligible persons may join the Plan at any time by completing the appropriate
authorization form and returning it to the Company. An authorization form may be
obtained by sending a written request to Otter Tail Power Company, Shareholder
Services Department, 215 South Cascade Street, P.O. Box 496, Fergus Falls,
Minnesota 56538-0496, or by calling the Company at (800) 664-1259 or (218)
739-8479 (locally).
2. PARTICIPATION
Any holder of the Company's Common or Preferred Shares, Company employee, or
retail utility customer of the Company is eligible to participate in the Plan.
If you are already a participant under the Plan, you are not required to
re-enroll.
If you are already a holder of record of Company shares, you must
complete the appropriate authorization form to become a participant in the
Plan. If you are a beneficial owner of Company shares held by a broker or
other custodial institution that has established procedures which permit
their customers to participate in the Plan, please contact such broker or
institution for the appropriate authorization form.
Company employees who wish to participate in the Plan through payroll
deductions must complete the payroll deduction form and return it to the
Company's Payroll Department.
Retail utility customers who are not already holders of Common or Preferred
Shares may join the Plan by completing the appropriate authorization form and
returning it to the Company's Shareholder Services Department along with an
initial cash payment of at least $100 and up to a maximum of $5,000. Payments
must be made by check or money order (made payable in U.S. dollars drawn on a
U.S. bank) payable to "Otter Tail Power Company -- D.R. Agent."
3. HOW THE PLAN WORKS
Participants can reinvest all dividends paid on full and fractional
Common and Preferred Shares to acquire additional Common Shares under the
Plan. Once enrolled in the Plan, participants may also make optional cash
payments of a minimum of $10 and a maximum of $5,000 per month to purchase
Common Shares. Employees of the Company may authorize payroll deductions of
a minimum of $10 and a maximum of $5,000 per month to purchase Common Shares.
Shares purchased with reinvested dividends, optional cash payments and
employee payroll deductions are held by the Plan until the participant requests
issuance of a stock certificate. A participant may instruct the Company to sell
up to, but not more than, 25 Common Shares credited to the participant's Plan
account once during any calendar month.
No brokerage fees, commissions or service charges will be paid by
participants in connection with the Plan. All administrative service fees
will be borne by the Company.
Full investment of funds will be made on behalf of each participant in the
Plan. All dividends, whether on shares held in the Plan or by the participant,
will be reinvested. Fractions of shares, computed to four decimal places, as
well as full shares, are credited to participants' accounts. Regular
Statements of Account will provide simplified record keeping.
Participants can deposit Common Share certificates for shares acquired
through the Plan or otherwise under the Share Deposit feature of the Plan.
(See Section 6 -- Certificates for Shares.) Please note that Preferred Shares
are not eligible for this service.
4. HOW INVESTMENTS ARE MADE
Shares for the Plan may come either from authorized but unissued Common
Shares ("new issue Common Shares") or from purchases of Common Shares of the
Company made on any securities exchange where the shares are traded, in the
over-the-counter market or in negotiated transactions. The Company will decide
when the Plan will purchase new issue Common Shares or when Common Shares will
be purchased on the open market. For open market purchases, First Trust National
Association (the "Agent") will act as purchasing agent. The Agent may purchase
shares on such terms as to price, delivery, and otherwise as the Agent may
determine, subject to any restrictions imposed by federal or state securities
laws. As of December 1, 1996, Common Shares purchased for participants under
the Plan will be purchased from the Company as new issue Common Shares.
Below are the various ways you can acquire shares:
Dividend Reinvestment
Dividends may be reinvested to purchase either new issue Common Shares
or Common Shares purchased on the open market, as determined by the
Company. Common and/or Preferred Share dividends used to purchase new issue
Common Shares will be invested on the dividend payment date (which is
typically the tenth or first day, respectively, of each March, June,
September and December) or, if that date is not a trading day, the next
succeeding trading day. Common and/or Preferred Share dividends will
normally be used by the Agent to purchase Common Shares on the open market
within 10 business days of the dividend payment date, depending on market
conditions.
Participants can authorize full reinvestment of dividends on all
shares. The Plan does not permit the reinvestment of part of the dividend
and receipt of cash for the balance. To change participation to allow receipt of
dividends in cash, instead of automatically reinvesting that dividend, the
Company's Shareholder Services Department must receive a written request for
such change on or before the record date established for the particular
dividend. If the request is received after the record date, the change will
begin with the next dividend.
Cash Investment Option Optional Cash Payments for Participants Enrolled in
the Plan
Participants may, at any time, send checks or money orders only (made
payable in U.S. dollars drawn on a U.S. bank) to make cash investments in the
Plan. Checks and money orders must be made payable to "Otter Tail Power
Company- -D.R. Agent" and sent with the authorization form or the form
provided as part of the Statements of Account. Once enrolled in the Plan,
participants may vary cash investments from a minimum of $10 to a maximum of
$5,000 per month.
The Company will process all payments on the date they are received.
Payments post-dated and received on or before that date will be accepted as
of such date. Cash payments are invested monthly on the first day of each
month or, if that date is not a trading day, the next succeeding trading day.
In order to be invested in a particular month, cash payments must be received
on or before the last business day of the preceding month. No interest will
be paid on funds being held by the Company or the Agent.
Cash payments will be used to purchase either new issue Common
Shares or Common Shares purchased on the open market, as determined by the
Company. Cash payments used to purchase new issue Common Shares will be
invested on the investment date each month. Cash payments used to purchase
Common Shares on the open market will normally be purchased by the Agent on
the investment date each month.
Participants can request a refund of the current month's cash
payment by sending a written request to the Company's Shareholder Services
Department. The request must be received at least two business days prior to
the investment date. Payments that are rejected by the Company will be refunded
to participants as promptly as practicable.
Payroll Deduction
Company employees who wish to participate in the Plan through payroll
deductions must complete the payroll deduction form and return it to the
Company's Payroll Department. Deductions may be made in addition to
reinvestment of dividends and optional cash payments. The combined total of
payroll deductions and optional cash payments may not exceed $5,000 in any
month. The minimum monthly payroll deduction is $10.
Payroll deduction forms can be obtained from the Company's Payroll
Department. Employees may change or terminate payroll deductions at any time
by completing a new payroll deduction authorization form. The commencement,
change or termination will become effective as soon as practicable after
receipt of the authorization form.
Price
The price per share of new issue Common Shares will be the current
market price of Common Shares as determined by the Company on the basis of the
average of the high and low sales prices of Common Shares on the applicable
investment date as reported by The Wall Street Journal.
The price per share of shares purchased for the Plan on the open market
will be the weighted average price per share at which Common Shares of the
Company are actually purchased on the open market for the relevant period by
the Agent on behalf of all participants in the Plan.
The Company has no basis for estimating either the number of shares
that will be purchased under the Plan or the prices at which shares will be
purchased. Participants should be aware that since investment prices are
determined as of specified dates, they may lose any advantages otherwise
available from being able to select the timing of their investment. Neither
the Company nor the Agent shall have any responsibility for the value of the
Common Shares acquired for participants' accounts.
5. STATEMENTS OF ACCOUNT
The Company will maintain an account for each Plan participant and will send
Statements of Account to each participant as soon as practicable after each
quarterly dividend reinvestment and each monthly cash investment. The Statements
include the participant's current share balance and all year-to-date
transactions in the participant's account. Statements are a participant's
continuing record of the cost of the participant's purchases, and the
statements should be retained for tax purposes. Included as a part of the
Statements is a form for making optional cash payments, selling shares,
requesting certificates, depositing certificates, or withdrawing from the Plan.
6. CERTIFICATES FOR SHARES
Normally, certificates for Plan shares are not issued to participants unless
requested. Instead, the shares are credited to Plan accounts and are shown on
the Statements of Account. This protects against loss, theft or destruction
of stock certificates, and reduces the Company's administrative costs.
Participants can, however, request stock certificates for any number of full
shares credited to their Plan accounts. There is no charge for this service. A
written request must be made to the Company Shareholder Services Department by
completing the form provided as part of the Statements of Account or by
submitting a written request. A separate request must be made for each
certificate requested specifying the number of full shares to be issued.
Requests are processed as soon as practicable after receipt. Generally, the
certificates are issued within five business days after the Company receives
the request. Any remaining full and fractional shares will continue to be
credited to participants' accounts. Certificates for fractional shares will
not be issued under any conditions.
The Company reserves the right to suspend its policy of issuing
certificates, other than upon termination or withdrawal from the Plan, at any
time.
Registration of Share Certificates
Certificates can be registered and issued in names other than
participants' names subject to compliance with any applicable laws. To do
this participants must complete an "Assignment Separate from Certificate"
form and return it to the Company's Shareholder Services Department. This
form must bear the signature of the registered holder(s) with the signature
guaranteed by an eligible financial institution which is a member of a
signature medallion program. Assignment forms can be obtained from the
Company's Shareholder Services Department.
If a participant wants shares issued or a transfer to be effective for a
particular dividend payment, the appropriate form must be received at least
five days before the record date established for that dividend.
Shares credited to participants' accounts may not be pledged and may not
be assigned, except to another Plan account. To pledge or assign shares
participants must make a written request for certificates to be issued.
Deposit of Common Share Certificates into the Plan
Participants can deposit any certificates for Common Shares of the Company
into the Plan, whether such certificates were issued under the Plan or
otherwise, at no cost. To take advantage of this feature, participants must
send certificates for Common Shares to the Company's Shareholder Services
Department together with the appropriate information on the form provided as
part of the Statements of Account or with a separate written request. Common
Shares represented by such certificates are credited to the appropriate
participant account under the Plan. Certificates for Preferred Shares of the
Company are not eligible for deposit.
Should participants choose to deposit certificates, the Company
recommends that registered or certified mail be used. The method used to
submit certificates to the Company is at the option and risk of the
participant. Participants should submit their certificates without
endorsement.
7. HOW TO TERMINATE PARTICIPATION
Participation in the Plan is voluntary, and a participant may terminate
participation at any time by submitting the appropriate information on the
form provided as part of the Statements of Account or by submitting a separate
written request to the Company's Shareholder Services Department.
The request for termination will be processed as soon as practicable after
receipt. A stock certificate for full shares will normally be mailed within
five business days after receipt of the request, unless the request is
received between a dividend record date and a dividend payment date. If the
request is received during this period, a certificate will generally not be
sent out until the dividends paid for the quarter have been credited to your
account. The Agent will sell all fractional shares normally on the first
trading day of each month. A check for the fractional share will be sent to
you promptly. For income tax purposes the amount of the fractional share check
is taxable and is reported accordingly. If the request to terminate has been
received at least two business days prior to the investment date, any cash
payments waiting for investment will be returned, without interest, as soon as
practicable. Any subsequent dividends, if applicable, will be paid in cash.
Participants wishing to terminate with 25 or less shares credited under the
Plan may sell all but not less than all Plan shares through the Company,
without the issuance of a certificate and without payment of a brokerage fee.
(See Section 8 -- Selling Plan Shares.)
To cancel payroll deductions, employees must complete the appropriate
authorization form. Forms can be obtained from the Company's Payroll
Department.
After termination, previous participants can re-enroll in the Plan by
completing the appropriate authorization form. However, the Company reserves
the right to reject any enrollment forms from previous participants on the
grounds of excessive joining and termination. Such reservation is intended to
minimize unnecessary administrative expense and to encourage use of the Plan
as a long-term investment service.
8. SELLING PLAN SHARES
A participant may instruct the Company to sell up to, but not more than, 25
Common Shares credited to the participant's Plan account by completing the
information on the form provided as part of the Statements of Account or by
submitting a separate written request to the Company's Shareholder Services
Department. A participant may submit only one such request during a calendar
month.
The Agent will sell the shares normally on the first trading day of each
month. In the event that shares being sold by terminating participants are
needed to meet Plan requirements, those shares will be purchased by the Plan.
In either case, the participant will receive the proceeds of the sale, less
any backup withholding tax, within 10 days after the sale. The price of the
Plan shares sold on the open market will be the actual sale price of such
shares. The price of shares purchased by the Plan to meet Plan requirements
will be the average of the high and low sales prices of Common Shares on the
date of purchase as reported by The Wall Street Journal.
9. OTHER INFORMATION
Stock Dividends and Stock Splits
Should the Company declare a stock dividend or a stock split, the number
of additional shares participants receive will be based on the number of
shares in their Plan account as of the record date for such stock dividend or
stock split. Additional full and fractional shares that result from a stock
dividend or a stock split will be credited to participants' Plan accounts.
Stock dividend or stock split shares issued with respect to certificated
shares held by participants will be mailed directly to the participants in
the same manner as to shareholders who are not participating in the Plan.
Rights to Purchase
In the event that the Company makes available to its shareholders rights
to purchase additional shares or other securities, the Agent will sell such
rights accruing to shares held by the Plan for the participant and will
combine the funds from such sale with the next regular dividend or optional
cash investment for reinvestment at that time. If a participant desires to
exercise these rights, the participant should request that certificates be
issued for full shares as provided herein.
Voting at the Annual Meeting of Shareholders
The Company will vote all shares held in the participant's Plan account in
the same way in which the participant votes Common Shares standing in the
participant's name by the regular proxy returned by the participant to the
Company. If the Company sends to participant a separate proxy covering the
shares credited to participant's Plan account, then such shares will be voted
as designated in such separate proxy. In the event participant does not
direct the voting of the participant's shares by either such regular or
separate proxy, the shares credited to the participant's Plan account will
not be voted.
Company Responsibility in Administering the Plan
The Company and the Agent will have no responsibility beyond the
exercise of ordinary care for any action taken or omitted pursuant to the
Plan nor will they have any duties, responsibilities or liabilities except
such as are expressly set forth herein. In administering the Plan, neither
the Company nor the Agent will be liable for any act done in good faith or
for any good faith omission to act, including, without limitation, any claim
of liability (a) arising out of failure to terminate participants' accounts
upon death prior to receipt of notice in writing of such death; (b) with
respect to the prices at which the shares are purchased or sold, the time
such purchases or sales are made or any fluctuation in the market value
before or after purchases or sales of shares; or (c) as to the value of the
shares acquired for participants.
Participants should recognize that neither the Company nor the Agent can
assure them of a profit or protect them against a loss on shares purchased or
sold by them under the Plan. The Company believes that its serving as
administrator, rather than a registered broker-dealer or a
federally insured banking institution, poses no material risks to
participants.
The Company reserves the right to interpret and regulate the Plan as may
be necessary or desirable in connection with the operation of the Plan. The
terms and conditions of the Plan and any authorization forms shall be
governed by Minnesota law.
Company's Right to Amend or Terminate the Plan
While the Company expects to continue the Plan indefinitely, it reserves
the right to amend, modify, suspend or terminate the Plan or participation
therein, in whole or in part, at any time. Any such amendment, modification,
suspension or termination will be announced to participants in advance.
FEDERAL INCOME TAX INFORMATION
The information set forth below is only a summary and does not claim to be a
complete description of all tax consequences of participation in the Plan. The
description may be affected by future legislation, IRS rulings and regulations,
or court decisions. Accordingly, participants should consult with their own tax
advisors with respect to the federal, state, local and foreign tax consequences
of participation in the Plan.
What are the federal income tax consequences of participation in the Plan?
For tax purposes, participants' reinvested dividends are treated in the same
manner they would have been treated had the participants received them in cash
on the applicable dividend payment date.
Participants will not realize any taxable income when stock certificates for
full shares are issued from Plan accounts. However, participants will realize
gain or loss when the shares are sold either at their request through the
Company or by them after certificates have been issued. The amount of the
gain or loss is the difference between the amount the participant receives
for the shares and the cost basis of the shares. In addition, terminating
participants will realize gain or loss upon receipt of the check covering
the value of the fractional share.
How will participants be notified of their taxable dividend income?
The Company will report the dividend income to participants and to the
IRS on Form 1099-Div. When shares are sold through the Company, the Company
will report the proceeds from the sale to participants and to the IRS on Form
1099-B.
What is the federal tax basis of Plan shares?
The tax basis of participants' Plan shares acquired is equal to their
purchase price as indicated on the participants' Statements of Account.
Please be sure to retain your December Statements, which summarize the entire
year's activity for tax purposes.
How does the Company invest and report dividends subject to federal backup
withholding or foreign tax withholding?
The Company will invest an amount equal to the dividends less the amount of
tax withheld. The net dividend will purchase shares. The Statements of Account
and the Form 1099-Div sent to participants subject to tax withholding will
indicate the amount of tax withheld and will show the net dividend reinvested by
the Company. For IRS reporting purposes, the amount of the dividend withheld
will be included in the dividend income of participants subject to backup
withholding or foreign participants subject to foreign withholding.
DESCRIPTION OF COMMON SHARES
At August 1, 1996 there were outstanding 11,180,136 Common Shares
(25,000,000 shares authorized) and 388,311 Cumulative Preferred Shares
(1,500,000 shares authorized). There are also authorized 1,000,000 Cumulative
Preference Shares, none of which are outstanding. The Board of Directors of
the Company is authorized under its Restated Articles of Incorporation to
provide for the issue of future series of Cumulative Preferred Shares and
Cumulative Preference Shares and, as to each series, to fix the designation,
dividend rate, redemption price or prices, voluntary and involuntary
liquidation prices, conversion rights and sinking and purchase fund rights.
Cumulative dividends and redemption and conversion provisions could have an
adverse effect on the availability of earnings for distribution to the
holders of Common Shares.
The following statements with respect to the Company's Restated Articles of
Incorporation, as amended (the "Articles") are brief summaries of certain
provisions of the Articles, do not purport to be complete and are subject to the
detailed provisions of the Articles, a copy of which is filed with the
Commission as an exhibit to the Registration Statement and is incorporated in
this section by reference. Terms in italics are defined in the Articles and
are used herein as so defined.
Dividend Rights
Subject to the prior dividend rights of the holders of the Cumulative
Preferred Shares and the Cumulative Preference Shares and the limitations set
forth in the following two paragraphs, dividends may be declared by the Board of
Directors and paid from time to time upon the outstanding Common Shares from any
funds legally available therefor.
The Company's Indenture of Mortgage securing its First Mortgage Bonds
contains restrictions on the payment of dividends and other distributions
with respect to the Company's Common Shares, the most restrictive of which
provides that the Company may not declare or pay dividends on its Common
Shares (other than dividends payable in Common Shares) or make any other
distribution in respect of its Common Shares, unless, after giving effect
thereto, the sum of all such dividends and distributions subsequent to
December 31, 1976 will not exceed $8,000,000 plus the Company's net income
available for Common Shares accrued after that date. Such Indenture provides
that in computing such net income there shall be deducted, as an additional
depreciation charge, for each year after 1976, the amount, if any, by which
the Indenture depreciation requirement exceeds the depreciation charges
against such net income actually made by the Company on account of its
depreciable fundable property. Under these restrictions, $9,686,000 of
retained earnings of the Company at December 31, 1995 were not available for
dividends or other distributions on the Common Shares.
So long as any Cumulative Preferred Shares remain outstanding, the Company
shall not, without the consent of the holders of a majority of the voting power
of the Cumulative Preferred Shares of all series then outstanding (two-thirds if
more than one-fourth vote negatively), declare or pay any dividend on or
purchase, redeem or otherwise acquire any Common Shares of the Company unless,
after giving effect thereto (a) Common Share Equity shall equal at least 25% of
Total Capitalization and (b) the earned surplus of the Company shall not be less
than $831,398. Such provisions are less restrictive than the restrictions on the
payment of dividends and other distributions with respect to the Common Shares
contained in the Company's Indenture of Mortgage. Moreover, no dividend shall be
declared or paid on the Common Shares at any time while there is a default or
deficiency with respect to a sinking or purchase fund established for the
benefit of any series of the Cumulative Preferred Shares or the Cumulative
Preference Shares. Certain series of the Company's Cumulative Preferred
Shares have sinking funds.
Voting Rights
Subject to the rights of the holders of the Cumulative Preferred Shares and
the Cumulative Preference Shares described below, only the holders of Common
Shares have voting rights and are entitled to one vote for each share held.
In the event that four full quarterly dividend payments on the Cumulative
Preferred Shares of any series shall be in default, the holders of the
Cumulative Preferred Shares of all series, voting as a class, shall
thereafter elect three members of an eleven member Board of Directors; and,
if such default shall increase to twelve full quarterly dividend payments,
such holders shall thereafter elect six members of an eleven member Board of
Directors. In the event that four full quarterly dividend payments on the
Cumulative Preference Shares of any series shall be in default, the holders
of the Cumulative Preference Shares of all series, voting as a class, shall
thereafter elect two members of an eleven member Board of Directors. Holders
of Cumulative Preferred Shares and Cumulative Preference Shares shall be
entitled to cumulative voting in the election of Directors. After any such
default shall have been cured, the Cumulative Preferred Shares and/or the
Cumulative Preference Shares, as the case may be, shall be divested of such
voting rights, subject to being revested in the event of subsequent defaults.
The consent of the holders of at least two-thirds of the voting power of the
Cumulative Preferred Shares is required to (a) authorize or issue any shares
ranking prior to the Cumulative Preferred Shares as to dividends or assets or
(b) amend the Articles so as to affect adversely any of the preferences or other
rights of the holders of the Cumulative Preferred Shares, provided that if less
than all series of Cumulative Preferred Shares are so affected, only the consent
of the holders of at least two-thirds of the voting power of the affected series
shall be required.
A majority (two-thirds if more than one-fourth vote negatively) of the
voting power of the Cumulative Preferred Shares is required to authorize
certain other corporate acts, including (a) an increase in the number of
authorized Cumulative Preferred Shares or the authorization of shares on a
parity therewith, (b) the issue of additional Cumulative Preferred Shares
unless specified financial tests are satisfied and (c) the participation by
the Company in any merger or consolidation or the sale of all or
substantially all of its assets unless specified conditions are met.
The consent of the holders of at least two-thirds of the voting power of the
Cumulative Preference Shares is required to (a) 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 so as to affect adversely any of the
preferences or other rights of the holders of the Cumulative Preference
Shares, provided that if less than all series of Cumulative Preference Shares
are so affected, only the consent of the holders of at least two-thirds of
the voting power of the affected series shall be required.
A majority (two-thirds if more than one-fourth vote negatively) of the
voting power of the Cumulative Preference Shares is required to authorize (a) an
increase in the number of authorized Cumulative Preference Shares or the
authorization of shares on a parity therewith or (b) the participation by the
Company in any merger or consolidation or the sale of all or substantially all
of its assets unless specified conditions are met.
Liquidation Rights
Upon any liquidation, dissolution or winding up of the Company, the holders
of Common Shares shall be entitled to receive pro rata all assets of the Company
distributable to shareholders after the payment of the respective liquidation
preferences to the holders of the Cumulative Preferred Shares and the Cumulative
Preference Shares.
Certain Provisions of Articles and Bylaws
Except at such times when holders of Cumulative Preferred Shares and/or
Cumulative Preference Shares have special voting rights for the election of
Directors as described above, the Company's Directors are elected for three-
year, staggered terms by the holders of the Common Shares. Cumulative voting
of the Common Shares in the election of Directors is prohibited. In addition,
the Company's Bylaws provide that a vote of 75% of the Common Shares is
required to remove Directors who have been elected by the holders of Common
Shares. The affirmative vote of 75% of the Common Shares is required to amend
provisions of the Articles and Bylaws relating to the staggered terms and the
removal of Directors, unless approved by all of the Continuing Directors as
specified therein.
The Articles contain "fair price" provisions which require the affirmative
vote of 75% of the voting power of the Common Shares to approve Business
Combinations, including mergers, consolidations and sales of a Substantial Part
of the Company's assets, with an Interested Shareholder or its Affiliates or
Associates, unless specified price criteria and procedural requirements are met
or unless the transaction is approved by the majority of the Continuing
Directors. The Articles also contain "anti-greenmail" provisions which preclude
the Company from making certain purchases of Common Shares at a price per share
in excess of the Fair Market Price from a Substantial Shareholder unless
approved by the affirmative vote of 66 2/3% of the voting power of the Common
Shares held by the Disinterested Shareholders. The "fair price" and "anti-
greenmail" provisions of the Articles may not be amended without the
affirmative vote of the holders of at least 75% of the voting power of the
Common Shares, unless approved by all of the Continuing Directors as
specified therein.
The overall effect of the foregoing provisions of the Company's Articles and
Bylaws, together with the ability of the Board of Directors to issue additional
Common Shares, Cumulative Preferred Shares and Cumulative Preference Shares, may
be to delay or prevent attempts by other persons or entities to acquire control
of the Company without negotiations with the Company's Board of Directors.
Miscellaneous
The Common Shares are not redeemable. The Common Shares are not entitled to
any conversion or preemptive rights. The outstanding Common Shares of the
Company are, and the new issue Common Shares when issued will be, fully paid and
non-assessable. The Transfer Agents and Registrars for the Common Shares are
Norwest Bank Minnesota, N.A. and the Company.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report which is
incorporated herein by reference, and have been so incorporated in reliance upon
such report given upon their authority as experts in accounting and auditing.
VALIDITY OF COMMON SHARES
The validity of the issuance of the new issue Common Shares has been
passed upon for the Company by Dorsey & Whitney LLP, Minneapolis, Minnesota.
ADDITIONAL INFORMATION
For further information and assistance, please write or call at:
Otter Tail Power Company
Shareholder Services Department
215 South Cascade Street
Box 496
Fergus Falls, Minnesota 56538-0496
Telephone:
(218) 739-8479 (locally)
(800) 664-1259 (toll free)<PAGE>
TABLE OF CONTENTS
Page
Available Information. . . . . . . . 2
Information Incorporated by Reference 2
The Company . . . . . . . . . . . . 3
Use of Proceeds. . . . . . . . . . . 3
Description of the Plan. . . . . . . 3
How to Enroll . . . . . . . . . 3
Participation . . . . . . . . . 3
How the Plan Works . . . . . . 4
How Investments are Made. . . . 4
Statements of Account . . . . . 6
Certificates for Shares . . . . 6
How to Terminate Participation 7
Selling Plan Shares . . . . . . 8
Other Information . . . . . . . 8
Federal Income Tax Information . . . 9
Description of Common Shares . . . . 10
Experts . . . . . . . . . . . . . . 13
Validity of Common Shares. . . . . . 13
Additional Information . . . . . . . 13
_________________________
Neither the delivery of this
Prospectus nor any sales hereunder
shall under any circumstances create
any implication that there has been no
change in the affairs of the Company
since the date hereof. No dealer,
broker, salesman or any other person
has been authorized to give any
information or to make any
representations, other than those
contained in this Prospectus, in
connection with the offering contained
in this Prospectus, and information or
representations not herein contained,
if given or made, must not be relied
upon as having been authorized by the
Company. This Prospectus does not
constitute an offering in any state in
which such offering may not lawfully
be made.
________________
PROSPECTUS
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AUTOMATIC DIVIDEND REINVESTMENT
AND SHARE PURCHASE PLAN
