SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or
240.14a-12
_________Otter Tail Power Company_________
(Name of Registrant as Specified in its Charter)
__________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. Set forth the amount on which the
filing fee is calculated and state how it was determined:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total Fee Paid:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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(4) Date Filed:
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March 8, 1996
To the Holders of Common Shares
of Otter Tail Power Company:
You are cordially invited to attend the Annual Meeting of Shareholders of
Otter Tail Power Company which will be held at the National Guard Armory, 421
East Cecil, Fergus Falls, Minnesota, at 10:00 a.m. on Monday, April 8, 1996.
The Armory is located just off Friberg Avenue, north of the Senior High
School.
Enclosed is a formal Notice of Annual Meeting and Proxy Statement, together
with a Proxy and return envelope for the use of holders of Common Shares who
cannot be present in person at the meeting.
As discussed in the formal Notice and Proxy Statement, the Board of Directors
proposes the reelection, for three-year terms, of Mr. Dennis R. Emmen, Mr.
Kenneth L. Nelson, and Mr. Nathan I. Partain, whose terms as Directors expire
at the time of the Annual Meeting.
At this Annual Meeting, shareholders will also be asked to ratify the
appointment of Deloitte & Touche LLP as independent auditors of the Company
for 1996.
In order to ensure that your shares may be represented at the meeting and to
save the Company additional expense of solicitation, we urge that you promptly
sign and return the enclosed Proxy card. If you attend the meeting, as we
hope you will, you may revoke your Proxy by written notice given to an officer
of the Company and vote in person.
A question slip is also enclosed with this Proxy Statement. If you have any
questions about Otter Tail Power Company that you would like to have answered
at the meeting or in writing, please return the question slip with your Proxy.
Sincerely,
John C. MacFarlane
John C. MacFarlane
President & Chief Executive Officer
Notice of Annual Meeting
Notice is hereby given to the holders of Common Shares of Otter Tail
Power Company that the Annual Meeting of Shareholders of the Company
will be held in the National Guard Armory, 421 East Cecil, Fergus Falls,
Minnesota, on Monday, April 8, 1996, at 10:00 a.m. to consider and act
upon the following matters:
1. To elect three Directors to serve until the Annual Meeting in
1999, or until their successors are elected and qualified;
2. To approve the appointment by the Board of Directors of Deloitte
& Touche LLP as independent auditors for the year 1996; and
3. To transact such other business as may properly be brought before
the meeting.
Dated: March 8, 1996 JAY D. MYSTER, Corporate Secretary
IMPORTANT - PLEASE MAIL YOUR PROXY PROMPTLY
In order that there may be a proper representation at the meeting, you
are urged, whether you own one share or many, to complete, sign, and
mail your Proxy in the enclosed envelope. No postage is required if
mailed in the United States.
<PAGE>
PROXY STATEMENT
OTTER TAIL POWER COMPANY
ANNUAL MEETING OF SHAREHOLDERS
April 8, 1996
This Proxy Statement is furnished to shareholders in connection with the
solicitation by the Board of Directors of Otter Tail Power Company of
Proxies for use at the Annual Meeting of Shareholders to be held on
April 8, 1996.
The mailing address of the principal executive office of the Company is
Box 496, Fergus Falls, Minnesota 56538-0496. The approximate date on
which the Proxy Statement and form of Proxy will be first sent to
shareholders is March 8, 1996.
Any shareholder giving a Proxy will have the right to revoke it by
written notice to an officer of the Company or by filing with an officer
another Proxy bearing a later date at any time before it is voted at the
meeting. A shareholder wishing to vote in person after giving a Proxy
must first give written notice of revocation to an officer of the
Company.
All shares represented by valid, unrevoked Proxies will be voted at the
Annual Meeting. Shares voted as abstentions on any matter (or as
"withhold authority" as to Directors) will be counted as shares that are
present and entitled to vote for purposes of determining the presence of
a quorum at the meeting and as unvoted, although present and entitled to
vote, for purposes of determining the approval of each matter as to
which the shareholder has abstained. If a broker submits a proxy which
indicates that the broker does not have discretionary authority as to
certain shares to vote on one or more matters, those shares will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum at the meeting, but will not be
considered as present and entitled to vote with respect to such matters.
The cost of soliciting Proxies will be borne by the Company. In
addition to solicitation by mail, officers and regular employees of the
Company may solicit Proxies by telephone, telegraph, or in person.
The record date for the determination of shareholders entitled to vote
at the meeting is the close of business on February 15, 1996.
A copy of the Company's 1995 Annual Report, including financial
statements, was mailed to each shareholder of record on or about
March 1, 1996.
<PAGE>
Outstanding Voting Shares
The outstanding voting shares of the Company at the close of business on
February 15, 1996, the record date for shareholders entitled to notice
of and to vote at said meeting, consisted of 11,180,136 Common Shares.
Each holder of record at the close of business on that day is entitled
to one vote per share.
The only person known to the Company to own beneficially (as defined by
the Securities and Exchange Commission for proxy statement purposes)
more than 5% of the outstanding Common Shares of the Company as of
December 31, 1995, is as follows:
Amount and
Name and Address Nature of Percent
of Beneficial Beneficial of
Owner Ownership Class
Otter Tail Power 981,803 shs. 8.78%
Company Employee
Stock Ownership Plan
c/o Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258-0001
The Common Shares owned by the Employee Stock Ownership Plan (ESOP) are
held in trust for the benefit of participants in the ESOP for which
Mellon Bank is Trustee, subject to the direction of the ESOP Retirement
Committee. The ESOP has sole investment power over the Common Shares
held in trust. Participants are entitled to instruct the ESOP Trustee
on how to vote all Company Common Shares allocated to their accounts
(981,803 Common Shares as of December 31, 1995) and will receive a
separate Proxy for voting such Shares. All Common Shares allocated to
the participants for which no voting instructions are received and all
unallocated Common Shares held by the ESOP (NONE as of December 31,
1995) will be voted by the Trustee in proportion to the instructed
shares.
Nominees for Election as Directors
The terms of Mr. Emmen, Mr. Nelson, and Mr. Partain expire at the time
of the 1996 Annual Meeting. The Board of Directors nominates for
reelection Mr. Dennis Emmen, Mr. Kenneth Nelson, and Mr. Nathan Partain
to serve a three-year term ending at the time of the Annual Meeting in
1999.
It is the intention of the proxies named to vote for the three nominees
named below, but in case any of them should become unavailable due to
unforeseen causes, the proxies will vote for the remainder of such
nominees and may also vote for other nominees not named herein in lieu
of those unable or unwilling to serve. The affirmative vote of a
majority of the Common Shares present and entitled to vote with respect
to the election of Directors is required for the election of the
nominees to the Board of Directors.
The following information is furnished with respect to each nominee for
election as a Director and for each Director whose term of office will
continue after the meeting:
Principal Director
Name Occupation (1) Age Since
Nominees for election for a term
of three years expiring April 1999:
Dennis R. Emmen * Retired Senior Vice 62 1984
President-Finance,
Treasurer and Chief
Financial Officer
Otter Tail Power Company
Fergus Falls, Minnesota (2)
Kenneth L. Nelson ** Part Owner/President, 54 1990
KLN Enterprises, Inc.
Owner/President,
Nelson's Confectionery
(Production of Snack Foods)
Perham, Minnesota
Nathan I. Partain ** Managing Director, 39 1993
Director of Equity Research,
Phoenix Duff & Phelps Corp.
(Financial Consulting, Money Management
and Investment Research)
Chicago, Illinois
Directors whose terms expire April 1998:
Dayle Dietz */** Associate Professor 67 1983
Department Chair
Marketing & Management
North Dakota State College of Science
Wahpeton, North Dakota
John C. MacFarlane * Chairman, President and 56 1983
Chief Executive Officer
Otter Tail Power Company
Fergus Falls, Minnesota
Arvid R. Liebe *** President, Liebe Drug, Inc. 54 1995
(Retail Business)
Treasurer, Liebe Farms, Inc.
(Grain Farming)
Milbank, South Dakota
Directors whose terms expire April 1997:
Thomas M. Brown */*** Retired Partner 65 1991
Dorsey & Whitney LLP
Minneapolis, Minnesota (3)
Maynard D. Helgaas */*** Owner/Manager 61 1985
Midwest Agri-Development Corp.
(Farm Equipment and Supplies)
Jamestown, North Dakota
Robert N. Spolum ** Retired Chairman, 65 1991
President and CEO
Melroe Company
(Industrial Equipment Manufacturer)
Owner, R.N. Spolum & Associates
(Business Consulting)
Fargo, North Dakota (4)
* Member of Nominating Committee of the Board of Directors
** Member of Audit Committee of the Board of Directors
*** Member of Compensation Committee of the Board of Directors
(1) Except as indicated by footnotes below, each of the nominees and
Directors has had the same position or another executive position
with the same employer for the past five years.
(2) Mr. Emmen held the office of Senior Vice President-Finance,
Treasurer and Chief Financial Officer from April 13, 1981, until
his retirement on June 30, 1995.
(3) Mr. Brown was a partner in the law firm of Dorsey & Whitney from
1963 until his retirement on January 1, 1991, at which time he
became of counsel to the firm. On November 29, 1993, his status
in the firm changed to that of Retired Partner.
(4) Mr. Spolum held the office of President and Chief Executive
Officer of Melroe Company from 1972 until he became Chairman in
September 1992. He retired as Chairman on February 28, 1993. He
also retired as Senior Vice President of Clark Equipment
Company, South Bend, Indiana, of which Melroe is a business unit,
on February 28, 1993. He continued to serve as a consultant for
Clark Equipment Company until February 28, 1996.
The Company has a standing Audit Committee, Compensation Committee, and
Nominating Committee. The Company's Audit Committee reviews accounting
and control procedures of the Company. The committee is composed of
four members of the Board of Directors who, for 1995, were Dayle Dietz,
Nathan I. Partain, Kenneth L. Nelson, and Robert N. Spolum. In 1995
this committee held two meetings.
The Compensation Committee is composed of three members of the Board of
Directors who, for 1995, were Thomas M. Brown, Maynard D. Helgaas, and
Arvid R. Liebe. (Mr. Liebe replaced former director James L. Stengel as
a member of the Compensation Committee on April 10, 1995.) The
committee reviews the compensation of the officers and fees of Directors
of the Company and makes recommendations on such compensation and fees
to the Board of Directors. This committee held two meetings in 1995.
The Nominating Committee identifies qualified nominees to succeed to
Board membership. The committee is composed of five members of the
Board of Directors who, for 1995, were Thomas M. Brown, Dayle Dietz,
Dennis R. Emmen, Maynard D. Helgaas, and John C. MacFarlane. Any
shareholder may submit recommendations for membership on the Board of
Directors by sending a written statement of the qualifications of the
recommended individual to the President, Otter Tail Power Company, Box
496, Fergus Falls, Minnesota 56538-0496. In 1995 this committee held
one meeting.
During 1995 the Board of Directors held a total of five regularly
scheduled and special meetings. Each incumbent Director attended at
least 75% of the total of (i) all meetings of the Board of Directors
held during the period for which he or she was a Director, and (ii) all
meetings of the committees during the periods he or she served on such
committees.
Directors' Compensation
All Directors of the Company (other than officers of the Company) are
compensated $7,800 per year for all services as Directors, including
service on committees. A fee of $250 is also paid for attendance at a
board meeting. In addition, nonofficer Directors receive an actual
expense or a $100 travel allowance if they are required to furnish their
own transportation to Directors' or any committee meetings outside their
city of residence. Nonemployee Directors may elect to defer the receipt
of all or part of the fees pursuant to the Company's Deferred
Compensation Plan for Directors. Interest accrues on any deferred
amounts at a rate equal to one-half of 1% over the prime commercial rate
of First Bank National Association.
Security Ownership of Management
The following table sets forth information, as of December 31, 1995,
with respect to beneficial ownership of Common Shares of the Company for
each Director and nominee, each executive officer named in the Summary
Compensation Table herein, and all Directors and executive officers of
the Company as a group.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1)(2)
Thomas M. Brown 574
Dayle Dietz 1,690
Dennis R. Emmen 2,626 (3)
Maynard D. Helgaas 1,489 (4)
Douglas L. Kjellerup 3,672
Arvid R. Liebe 1,001 (5)
John C. MacFarlane 14,761 (6)
Richard W. Muehlhausen 6,244 (7)
Jay D. Myster 6,684 (8)
Kenneth L. Nelson 2,037
Nathan I. Partain 400 (9)
Robert N. Spolum 1,546
Ward L.Uggerud 3,860 (10)
All Directors and executive officers
as a group 63,190
(1) Represents outstanding Common Shares beneficially owned both
directly and indirectly as of December 31, 1995. The Common Share
interest of each named person and all Directors and executive
officers as a group represents less than 1% of the aggregate
amount of Common Shares issued and outstanding. Except as
indicated by footnote below, the beneficial owner possesses sole
voting and investment powers with respect to the shares shown.
(2) Includes Common Shares held by the Trustee of the Company's
Employee Stock Ownership Plan for the account of executive
officers of the Company with respect to which such persons have
sole voting power and no investment power, as follows: Mr.
Kjellerup, 3,672 shares; Mr. MacFarlane, 6,905 shares; Mr.
Muehlhausen, 5,795 shares; Mr. Myster, 4,673 shares; Mr. Uggerud,
3,838 shares; and all Directors and executive officers as a group,
40,549 shares.
(3) Includes 2,382 shares owned jointly with Mr. Emmen's wife as to
which he shares voting and investment power.
(4) Excludes 2,029 shares owned by Mr. Helgaas' wife as to which he
disclaims beneficial ownership.
(5) Includes 52 shares owned jointly with Mr. Liebe's wife as to which
he shares voting and investment power.
(6) Includes 7,856 shares owned jointly with Mr. MacFarlane's wife
as to which he shares voting and investment power.
(7) Excludes 316 shares owned by Mr. Muehlhausen's wife as to which he
disclaims beneficial ownership.
(8) Includes 1,830 shares owned jointly with Mr. Myster's wife as to
which he shares voting and investment power.
(9) Includes 200 shares owned jointly with Mr. Partain's wife as to
which he shares voting and investment power.
(10) Excludes 44 shares owned by Mr. Uggerud's wife as to which he
disclaims beneficial ownership.
No Director, nominee or executive officer of the Company owned
beneficially, directly or indirectly, on December 31, 1995, any shares
of any series of Cumulative Preferred Shares of the Company except for
Mr. Emmen, who owned 115 Cumulative Preferred Shares of the $3.60
series.
The information with respect to beneficial ownership of securities of
the Company is based on information furnished to the Company by each
person included in the table.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's Directors and executive officers and holders of
more than 10% of the Company's Common Shares to file with the Securities
and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Shares and other equity securities of the
Company. The Company believes that during the year ended December 31,
1995, its Directors and executive officers complied with all Section
16(a) filing requirements, except that the Forms 4 for the month of
September for the following officers and/or Directors were sent by
regular mail and were received by the SEC one day late: Andrew E.
Anderson, Dayle Dietz, Dennis R. Emmen, Maynard D. Helgaas, Marlowe E.
Johnson, LeRoy S. Larson, Jeffrey J. Legge, Arvid R. Liebe, John C.
MacFarlane, Richard W. Muehlhausen, Jay D. Myster, Kenneth L. Nelson,
Rodney C. H. Scheel, Earl D. Sjoberg, Robert N. Spolum, and Ward L.
Uggerud.
Executive Compensation
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee")
is responsible for developing and making recommendations to the Board
with respect to the Company's executive compensation program. The
components of the Company's executive compensation program consist of a
base salary and an incentive bonus.
The Committee develops annual recommendations for the Board concerning
the base salary and incentive bonus for the Chief Executive Officer and
for each of the other executive officers of the Company. In order to
develop its recommendations to the Board, the Committee reviews and
evaluates an analysis of executive compensation for each of the
Company's executive officers prepared for the Committee by the Chief
Executive Officer (the "Company Analysis"). The Company Analysis is
based upon a compensation analysis performed for the Company by the
independent consulting firm of Towers Perrin (the "TP Analysis"). The
TP Analysis established the market competitiveness for twelve top
management positions of the Company by listing for each management
position the median base salaries obtained from three primary sources:
Towers Perrin/Compensation Data Bank 1994 Executive Compensation Survey
of March 1994 ("General Industry Survey"); Towers Perrin/Edison Electric
Institute 1994 Executive Compensation Survey of March 1994 ("EEI
Survey"); and Wyatt Data Services, Inc./ECS 1994-95 Top Management
Report of May 1994 ("ECS Survey"). The data of all such surveys was
updated to reflect March 1, 1995 levels, using a 4% annual update
factor. All data was adjusted to take into account the relative size
(based on sales) of each company reporting data in the surveys. In
preparing the Company Analysis, the Company used the TP Analysis in
arriving at a competitive mid-point for base salaries in each of the
listed management positions. Since it was believed that the EEI Survey
most nearly reflected the market in which the Company competes, the
competitive mid-point in the Company Analysis was based 80% on the EEI
Survey median salaries and 20% on the ECS Survey median salaries. The
Company Analysis showed, in addition to the competitive mid-points so
determined, salary ranges for each management position of 20% below and
20% above the mid-points. The Company Analysis also reflected the years
of service of each of the executive officers along with their current
base salaries.
The Chief Executive Officer then makes specific recommendations to the
Committee with respect to adjustments in base salary for certain
executive officers (other than himself) based on various factors which
are typically subjective and reflect individual performances by such
officers during the year or changes in their corporate responsibilities.
These recommendations for officer base salaries are then reviewed by the
Committee against the ranges (minimum/mid-point/maximum) shown on the
Company Analysis to determine if the Company's executive base salaries
are within the ranges in the Company Analysis. Thereafter, further
upward or downward adjustments in base salary may be made by the
Committee from those recommended by the Chief Executive Officer;
however, the final base salaries so determined by the Committee are
primarily subjective and not targeted specifically to any of the salary
levels reflected in the TP Analysis, nor are they set in accordance with
any other objective criteria. It should be noted that the groups of
companies which make up the TP Analysis, the General Industry Survey,
the EEI Survey and the ECS Survey are not the same as those included in
the EEI Index in the Stock Performance Graph appearing in this Proxy
Statement.
Incentive bonuses for executive officers (including the Chief Executive
Officer) are awarded only if the Company exceeds a targeted year-end
corporate performance objective. This performance objective is based on
the Company's operating results as indicated by year-end earnings per
share. The earnings per share objective for each fiscal year is set by
the Board of Directors, upon the recommendation of the Committee, near
the end of the first fiscal quarter of such year. The incentive bonus
is paid in cash following the close of the fiscal year, after it has
been determined whether the targeted earnings per share has been
exceeded. The amount of the incentive bonus increases by a fixed amount
for each $0.01 per share that actual earnings per share exceeds targeted
earnings per share. Each executive officer receives the same dollar
amount of incentive bonus. Targeted performance was exceeded in 1995.
In addition to the incentive bonus paid to all executive officers, Mr.
Kjellerup, the Company's Vice President of Marketing and Development, is
eligible to receive a special bonus based on targeted earnings realized
by a company subsidiary. This special bonus is tied to Mr. Kjellerup's
responsibility for and participation in the Company's diversification
efforts and is determined by the Board of Directors of a Company
subsidiary and is paid from earnings of that subsidiary. The
Compensation Committee recommended, and the Board of Directors approved,
a special bonus payable to Mr. Emmen upon his retirement as Senior Vice
President-Finance, Treasurer and Chief Financial Officer on June 30,
1995, in recognition of Mr. Emmen's prior services as an executive
officer and his agreement to provide consulting services following
retirement.
The base salary of the Chief Executive Officer is set by the Board upon
the recommendation of the Committee. The Chief Executive Officer's base
salary is determined generally in accordance with the criteria discussed
above pertaining to other executive officers; however, the Chief
Executive Officer's base salary is determined solely by the Committee
without any recommendation by the Chief Executive Officer. The Chief
Executive Officer's incentive bonus, if any, is determined in the same
manner as the other executive officers. If the Company exceeds the
targeted performance objective for per share earnings, the Chief
Executive Officer receives an incentive bonus in the same amount as the
incentive bonus awarded to the other executive officers.
The Company currently maintains a variety of employee benefit plans and
programs, which are generally available to all employees of the Company,
including executive officers, such as the Gain Share Program,
Performance Incentive Program, Retirement Savings (401k) Plan, Employee
Stock Ownership Plan (ESOP), Pension Plan, Life and Living Plans, and
Employee Stock Purchase Plan. The Gain Share Program provides for the
payment of an annual cash bonus to all Company employees, including
executive officers, to the extent that actual earnings per share exceeds
targeted earnings per share for the year. Awards under the Gain Share
Program are based on a fixed formula agreed to in the context of prior
union negotiations and are computed as a percent of base pay. The
Compensation Committee does not set the performance objectives or make
awards under the Gain Share Program. The Company also maintains an
Executive Survivor and Supplemental Retirement Plan and nonqualified
profit-sharing and retirement savings plans for certain senior
executives.
Thomas M. Brown Maynard D. Helgaas Arvid R. Liebe
Summary Compensation Table
The following table sets forth information concerning compensation for
services in all capacities to the Company and its subsidiaries for each
of the last three fiscal years of the Chief Executive Officer of the
Company, Mr. Emmen, who retired on June 30, 1995, and the other four
most highly compensated executive officers whose salary and bonus for
1995 exceeded $100,000 (the "Named Officers").
Annual Compensation
All Other
Name and Principal Position Year Salary Bonus(1) Compensation(2)
John C. MacFarlane 1995 $241,250 $16,308 $11,182
Chairman of the Board, 1994 S211,750 $18,623 $ 9,706
President and Chief 1993 $197,300 $14,708 $ 9,835
Executive Officer
Dennis R. Emmen 1995 $ 68,600 $42,509 $27,829
Senior Vice President- 1994 $133,350 $15,801 $ 6,346
Finance, Treasurer and 1993 $126,850 $12,313 $ 6,573
Chief Financial Officer
(Retired)
Douglas L. Kjellerup 1995 $ 89,250 $42,964 $ 4,724
Vice President, 1994 $ 86,250 $44,306 $ 4,352
Marketing & Development 1993 $ 82,300 $24,701 $ 4,510
Richard W. Muehlhausen 1995 $127,500 $13,804 $ 6,448
Vice President, Corporate 1994 $115,770 $15,168 $ 5,602
Services 1993 $110,735 $11,765 $ 5,826
Jay D. Myster 1995 $113,500 $13,497 $ 5,817
Vice President, Governmental 1994 $108,000 $14,888 $ 5,373
& Legal, Corporate Secretary 1993 $103,750 $11,528 $ 5,504
Ward L. Uggerud 1995 $105,750 $13,327 $ 4,727
Vice President, Operations 1994 $ 97,650 $30,635 $ 4,151
1993 $ 91,950 $11,120 $ 4,150
(1) Included (i) awards under the incentive bonus program for
executive officers described above in the Compensation Committee
Report on Executive Compensation, (ii) awards under the Gain Share
bonus program for all Company employees described above in the
Compensation Committee Report, (iii) the special bonus award to
Mr. Emmen described above in the Compensation Committee Report,
and (iv) the special bonus award to Mr. Kjellerup described above
in the Compensation Committee Report.
(2) Amounts of All Other Compensation for 1995 consist of (i)
amounts contributed by the Company under the Retirement Savings
Plan for 1995, as follows: Mr. MacFarlane, $3,234; Mr. Emmen,
$960; Mr. Kjellerup, $1,250; Mr. Muehlhausen, $1,785; Mr. Myster,
$1,589; and Mr. Uggerud, $740; (ii) the amount of the Company's
contribution under the Employee Stock Ownership Plan which was
invested in Common Shares for the account of each Named Officer
for 1995, as follows: Mr. MacFarlane, $4,662; Mr. Emmen, $1,774;
Mr. Kjellerup, $2,774; Mr. Muehlhausen, $3,963; Mr. Myster,
$3,528; and Mr. Uggerud, $3,287; (iii) amounts contributed by the
Company under the nonqualified Profit Sharing Plan for 1995, as
follows: Mr. MacFarlane, $2,586; (iv) $24,395 for accrued vacation
paid to Mr. Emmen upon his retirement; and (v) $700 for each Named
Officer pursuant to the Company's program to reimburse employees
for unreimbursed medical expenses.
Pension and Supplemental Retirement Plans
The following table estimates the aggregate annual amount of lifetime
benefits, as of January 1, 1996, that would be payable under the
Company's tax-qualified defined benefit pension plan to participants in
the final average earnings and years of credited service categories
indicated:
Annual Final Years of Service
Average Earnings 15 20 25 30 40 or more
$40,000 $ 8,467 $ 11,290 $ 14,112 $ 16,934 $ 18,628
60,000 13,867 18,490 23,112 27,734 30,508
80,000 19,267 25,690 32,112 38,534 42,388
100,000 24,667 32,890 41,112 49,334 54,268
120,000 30,067 40,090 50,112 60,134 66,148
140,000 35,467 47,290 59,112 70,934 78,028
160,000 * 38,167 50,890 63,612 76,334 83,968
180,000 * 38,167 50,890 63,612 76,334 83,968
200,000 * 38,167 50,890 63,612 76,334 83,968
220,000 * 38,167 50,890 63,612 76,334 83,968
240,000 * 38,167 50,890 63,612 76,334 83,968
* Compensation used for benefits is limited to $150,000 from the
qualified plan
A participant's annual final average earnings is determined using the 42
consecutive months out of the last 10 consecutive years prior to the
participant's retirement which produces the highest average salary. As
of December 31, 1995, the annual final average earnings and actual
credited years of service for each of the Named Officers were as
follows: Mr. MacFarlane, $211,968 (34.5 years); Mr. Emmen, $128,412
(30.5 years); Mr. Kjellerup, $84,686 (33 years); Mr. Muehlhausen,
$116,387 (31.5 years); Mr. Myster, $107,214 (22 years); Mr. Uggerud,
$96,643 (24.5 years).
The benefits in the foregoing table were calculated as a straight life
annuity. Because covered compensation takes into account an average of
annual Social Security benefits, there is no deduction for Social
Security under the Pension Plan. The amounts shown in the above table
reflect the limits imposed by Sections 415 or 401(a)(17) of the Internal
Revenue Code.
The Company maintains the Executive Survivor and Supplemental Retirement
Plan which was amended effective July 1, 1994. This Plan is designed to
provide survivor and retirement benefits for certain executive officers
and other key management employees in order to attract and retain
employees of outstanding competence. Each of the Named Officers is a
participant in this Plan. If a participant dies while employed or
disabled, the Company will pay the participant's beneficiary an amount
equal to four times the participant's annual salary at the time of
death. If a participant dies after retirement or dies after termination
for other reasons with a vested benefit, the Company will pay the
participant's beneficiary a lesser amount, depending upon the
participant's age at death and his or her vested percentage.
Participants in this Plan are not eligible to receive life insurance
benefits under any group term life insurance policies (other than group
travel or accident policies) purchased by the Company until retirement.
In addition to these survivor benefits, the Plan provides retirement
benefits. Under the Plan, the Company will pay a participant who
retires at age 65 an annual retirement benefit for life (or, if more,
for 15 years) equal to 70% of the participant's salary and bonuses
during the 12 months before retirement offset by the participant's
Social Security benefit and the amount of the participant's benefit from
the Company's qualified pension plan if it were paid in the form of a
single life annuity. A participant who retires early (after 10 years of
service and age 55) or who terminates before retirement with a vested
benefit in the Plan will be paid a reduced amount. If a participant
dies while still employed, his or her beneficiary will be paid the
actuarial equivalent of the participant's benefit in 15 annual
installments. At any time after a change in control or following
termination of employment, a participant is entitled to receive upon
request a lump sum distribution of 90% of his or her benefits in the
Plan with forfeiture of the remaining benefits. The Board of Directors
has the right to amend, suspend, or terminate the Plan, but no such
action can reduce the benefits already accrued. The Company has
purchased insurance on the lives of most of the participants to provide
sufficient revenues to satisfy the benefit obligations payable under
this Plan. The annual benefits payable under the Plan to Mr. Emmen are
$53,977. The estimated annual benefits payable under the Plan upon
retirement at age 65 for each of the other Named Officers, assuming
salary is unchanged from 1995, and bonus determined by actuarial
assumptions based on past financial performance, is as follows: Mr.
MacFarlane, $66,057, Mr. Kjellerup, $17,521, Mr. Muehlhausen, $23,167,
Mr. Myster, $22,062, and Mr. Uggerud, $21,390.
Severance Agreements
The Company has entered into change of control severance agreements (the
"Severance Agreements") with each of its executive officers, including
the Named Officers. The Severance Agreements provide for certain
payments and other benefits if, following a Change in Control, the
Company terminates the officer's employment without Cause or the officer
terminates his employment for Good Reason. Such payments and benefits
include: (i) severance pay equal to three times the officer's salary
(at the highest annual rate in effect during the three years prior to
the termination) and benefits; (ii) a lump-sum payment equal to the
difference between (a) the actuarial equivalent of the benefit the
officer would have received under the Company's Pension Plan if he had
remained employed by the Company at the compensation level provided by
the Severance Agreement for three years following the date of
termination and (b) the actuarial equivalent of the benefit to which he
is otherwise then entitled under the Pension Plan; (iii) the payment of
legal fees and expenses relating to the termination; (iv) the
termination of any noncompetition arrangement between the Company and
the officer; and (v) a gross-up payment for any excise tax imposed on
such payments or benefits and for any tax imposed on such gross-up.
Under the Severance Agreements, "Cause" is defined as willful and
continued failure to perform duties and obligations or willful
misconduct materially injurious to the Company; "Good Reason" is defined
to include a change in the employee's responsibility or status, a
reduction in salary or benefits, or a mandatory relocation; and "Change
in Control" is defined to include a change in control of the type
required to be disclosed under Securities and Exchange Commission proxy
rules, acquisition by a person or group of 35% of the outstanding voting
stock of the Company, a proxy fight or contested election which results
in Continuing Directors (as defined) not constituting a majority of the
Company's Board of Directors, or another event the majority of the
Continuing Directors determines to be a change in control.
<PAGE>
Stock Performance Graph
The graph below compares the cumulative total shareholder return on the
Company's Common Shares for the last five fiscal years with the
cumulative total return of the NASDAQ Market Index and the Edison
Electric Institute Index over the same period (assuming the investment
of $100 in each vehicle on December 31, 1990, and reinvestment of all
dividends).
Comparison of five-year cumulative total return among Otter Tail Power,
NASDAQ Market Index, and Edison Electric Institute Index.
1991 1992 1993 1994 1995
Otter Tail Power 127.57 145.90 155.47 157.89 182.70
NASDAQ 128.38 129.64 155.50 163.26 211.77
EEI Index 128.87 138.69 154.11 136.28 178.55
<PAGE>
Approval of Auditors
There will be presented to the Annual Meeting a proposal to approve the
appointment by the Board of Directors of the firm of Deloitte & Touche
LLP as the Certified Public Accountants to audit the accounts of the
Company for 1996. This firm has no direct or indirect financial interest
in the Company. A partner of the certified public accounting firm of
Deloitte & Touche LLP will be present at the Annual Meeting to answer
questions and to make a statement if he desires to do so. It is the
intention that the Proxies, unless otherwise directed thereon, will be
voted in favor of said approval.
Shareholder Proposals for 1997 Annual Meeting
Any holder of Common Shares of the Company who intends to present a
proposal which may properly be acted upon at the 1997 Annual Meeting of
Shareholders of the Company must submit such proposal to the Company so
that it is received at the Company's principal executive offices at Box
496, Fergus Falls, Minnesota 56538-0496, on or before November 8, 1996,
for inclusion in the Company's Proxy Statement and form of Proxy
relating to that meeting.
Other Business
As of the date hereof, the Board of Directors of the Company does not
know of any matters to be presented to the meeting other than as
described above. If any other matters properly come before the meeting,
it is intended that the Proxies will vote thereon at their discretion.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, including financial statements and schedules thereto,
filed with the Securities and Exchange Commission, is available without
charge to shareholders. Address written requests to:
The Corporate Secretary
Otter Tail Power Company
Box 496
Fergus Falls, MN 56538-0496
Dated: March 8, 1996 By order of the Board of Directors
JAY D. MYSTER, Corporate Secretary
PROXY
Solicited on Behalf of the Board of Directors of
OTTER TAIL POWER COMPANY
The undersigned hereby appoints DAYLE DIETZ, ROBERT N. SPOLUM, and JAY D.
MYSTER (each with power to act alone and with full power of substitution) the
proxies of the undersigned to vote all Common Shares which the undersigned is
entitled to vote at the Annual Meeting of Otter Tail Power Company to be held
April 8, 1996, and at any adjournment thereof, and hereby directs that this
proxy be voted as follows:
1. ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to to vote for all
the contrary below) nominees listed
below
Dennis R. Emmen Kenneth L. Nelson Nathan I. Partain
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
_________________________________________________________________
2. PROPOSAL TO APPROVE THE APPOINTMENT OF DELOITTE & TOUCHE LLP as auditors.
FOR__ AGAINST__ ABSTAIN__
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
SEE OTHER SIDE
This proxy will be voted as directed. In the absence of specific directions,
the proxy will be voted for the election of Directors and for Item 2.
Please sign exactly as name appears hereon. When signing as attorney,
administrator, trustee, or guardian, please give your full title.
Dated:
______________________, 1996
_________________________________ _______________________________
Signature Signature, if held jointly
WHAT IS YOUR QUESTION?
Otter Tail management welcomes the questions of all shareholders--whether or
not they can attend the annual meeting. Questions of general interest will be
answered at the meeting. All questions will be answered by letter. This
blank is for your use in submitting your question. It may be mailed to the
Company with your Proxy.
I wish to ask:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Name _____________________________________
Street or P.O. Box _____________________________________
City __________________State ____ Zip_____
1996
(over)
<PAGE>
PLEASE SEND IN YOUR PROXY . . . NOW!
You are urged to date and sign the enclosed Proxy and return it promptly. This
will help save the expense of follow-up letters to stockholders who have not
responded.
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