-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, LAymy6PaV6+d4wZAyR2AZI41i2jtEJ2uAO2YlMNXV4qG5o0bnd+kx57UlqctWcVp S19nxjzl/MOa3v1/sACzsw== 0000075129-94-000014.txt : 19940331 0000075129-94-000014.hdr.sgml : 19940331 ACCESSION NUMBER: 0000075129-94-000014 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OTTER TAIL POWER CO CENTRAL INDEX KEY: 0000075129 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 410462685 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-00368 FILM NUMBER: 94519093 BUSINESS ADDRESS: STREET 1: 215 S CASCADE ST STREET 2: PO BOX 496 CITY: FERGUS FALLS STATE: MN ZIP: 56538-0496 BUSINESS PHONE: 2187398200 10-K 1 1993 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (X) Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (fee required) For the fiscal year ended December 31, 1993 OR ( ) Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (no fee required) For the transition period from to Commission File Number 0-368 OTTER TAIL POWER COMPANY (Exact name of registrant as specified in its charter) MINNESOTA 41-0462685 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No. 215 SOUTH CASCADE STREET, BOX 496, FERGUS FALLS, MINNESOTA 56538-0496 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (218) 739-8200 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered NONE NONE Securities registered pursuant to Section 12(g) of the Act: COMMON SHARES, par value $5.00 per share CUMULATIVE PREFERRED SHARES, without par value. (Title of class) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (Yes X No ) State the aggregate market value of the voting stock held by nonaffiliates of the registrant. $347,339,216 as of March 1, 1994 Indicate the number of shares outstanding of each of the registrant's classes of Common Stock, as of the latest practicable date: 11,180,136 Common Shares ($5 par value) as of March 1, 1994 Documents Incorporated by Reference: 1993 Annual Report to Shareholders - Portions incorporated by reference into Part II Proxy Statement dated March 9, 1994 - Portions incorporated by reference into Part III PART I Item 1. BUSINESS (a) General Development of Business Otter Tail Power Company (the "Company") is an operating public utility which was incorporated in 1907 under the laws of the State of Minnesota. Its principal executive office is located at 215 South Cascade Street, Box 496, Fergus Falls, Minnesota 56538-0496; and its telephone number is (218) 739- 8200. The Company's primary business is the production, transmission, distribution and sale of electric energy. The Company, through its subsidiaries, is also engaged in other businesses which are referred to as Health Services Operations and Diversified Operations. Health Services Operations consists of certain businesses acquired in 1993, including a diagnostic medical imaging company, a management company for a number of diagnostic medical imaging companies, and a medical imaging company that sells and services diagnostic medical imaging equipment and associated supplies and accessories. Diversified Operations consists of businesses diversified in such areas as manufacturing (fabricated metal parts and agricultural equipment), electrical and telephone contracting, radio broadcasting, waste incinerating, and telephone/cable TV utility. For a discussion of the Company's results of operations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations," which is incorporated by reference to pages 24 through 31 of the Company's 1993 Annual Report to Shareholders, filed as an Exhibit hereto. (b) Financial Information About Industry Segments The Company and its subsidiaries are engaged in businesses that have been classified into three segments: Electric Operations, Health Services Operations, and Diversified Operations. Financial information about the Company's industry segments is incorporated by reference to note 2 of "Notes to Consolidated Financial Statements" on page 39 of the Company's 1993 Annual Report to Shareholders, filed as an Exhibit hereto. (c) Narrative Description of Business ELECTRIC OPERATIONS General On a fully consolidated basis, the Company derived 73% of its operating revenues from the sale of electric energy during 1993; 85% during 1992; and 90% during 1991. During 1993 the Company derived approximately 54.5% of its electric revenues from Minnesota, 38.4% from North Dakota, and 7.1% from South Dakota. The territory served by the Company is predominantly agricultural, including a part of the Red River Valley. Although there are relatively few large customers, sales to commercial and industrial customers are significant. By customer category, 51.7% of 1993 electric revenues was derived from commercial and industrial customers, 32.6% from residential customers, and 15.7% from other sources, including municipalities, farms and power pools. The Company's two largest oil pipeline customers accounted for about 10.4% of total 1993 retail electric revenues compared to 10.5% of such revenues in 1992. In 1993, retail kwh sales to these pipeline customers increased by 4.2% from the previous year. Sales to a large wood products customer accounted for 1.6% of total retail electric revenues in 1993 as compared to 1.7% in 1992. Sales to a large barley malting plant accounted for 1.4% of total retail electric revenues in 1993 as compared to 1.7% in 1992. No other retail customer accounted for more than 1% of retail electric revenues. Power pool sales to other utilities, which accounted for 26.8% of total 1993 kwh sales, increased 72.9% from 1992. The increase in power pool sales in 1993 can be attributed to the weather, which resulted in low water conditions in the spring in Manitoba and widespread summer flooding in the Midwest. Activity in short-term energy sales is subject to change based on a number of factors and the Company is unable to predict the 1994 level of activity. The Company's other sales of electricity for resale are insignificant. The aggregate population of the Company's retail service area is approximately 230,000. In this service area of 423 communities and adjacent rural areas and farms, approximately 123,600 people lived in communities having a population of more than 1,000, according to the 1990 census. The only communities served which have a population in excess of 10,000 are Jamestown, North Dakota, (15,571); Fergus Falls, Minnesota (12,362); and Bemidji, Minnesota (11,245). Since 1990 when the customer count was at a low of 121,287, the Company has experienced an increase in customers. By year end 1993 total customers had increased to 122,427. During 1993, the Company experienced a net increase of 430 customers, with growth in the number of residential and commercial customers, notwithstanding the loss of 243 customers to the city of Detroit Lakes, Minnesota as a result of annexation of a portion of the Company's service territory. The Company's electric sales are subject to competition in some areas from municipally owned systems, rural cooperatives and, in certain respects, from on-site generators and cogenerators. The Company's electricity also competes with other forms of energy. The degree of competition may vary from time to time depending on relative costs and supplies of other forms of energy. Although the Company cannot predict the precise extent to which its future business may be affected by supply, relative cost or promotion of other electricity or energy suppliers, the Company believes that it will be in a position to compete favorably with other suppliers. Rate Matters The Company is subject to electric rate regulation as follows: Year Ended December 31, 1993 % of Electric % of kwh Rates Regulation Revenues Sales Minnesota retail sales Minnesota Public Utilities Commission 46.4% 38.7% North Dakota retail sales North Dakota Public Service Commission 36.7 28.9 South Dakota retail sales South Dakota Public Utilities Commission 7.0 5.4 Transmission and sales Federal Energy Regulatory for resale Commission ("FERC") 9.9 27.0 100.0% 100.0% The following table summarizes the electric rate proceedings with the Minnesota and the South Dakota Public Utilities Commissions, the North Dakota Public Service Commission, and the Federal Energy Regulatory Commission since January 1, 1989: Increase % Increase Increase (Decrease) Granted Request (Decrease) (Decrease) Commission Filed Requested Effective Amount % (Thousands) Minnesota Last Proceeding was July 1, 1987 North Dakota (1). . . . . January 15, 1989 ($1,000) (1.5%) (2). . . . . June 1, 1990 ($ 315) (0.5%) (3). . . . . September 9, 1992 ($1,000) (1.5%) (4). . . . . September 22, 1993 ($ 300) (0.4%) South Dakota Last Proceeding was November 1, 1987 FERC Last Proceeding was July 1, 1987 ___________ (1) A voluntary settlement agreement reached between the Company and the North Dakota Commission decreased North Dakota retail rates by $1,000,000 annually (or approximately 1.5%) effective January 15, 1989. In addition, the settlement agreement provided for the Company to spend $315,000 annually on additional North Dakota economic development, which expenditures will be offset by reduced North Dakota depreciation expense. (2) This voluntary rate adjustment decreased North Dakota retail rates by $315,000 annually to recognize the positive effect on the Company's customer base in North Dakota as a result of the economic development expenditures referred to in note (1) above. (3) A voluntary settlement agreement reached between the Company and the North Dakota Commission pursuant to which the Company made a refund of $1,000,000 to its North Dakota customers. This settlement does not require a permanent reduction in rates charged by the Company to customers in North Dakota. (4) An agreement for incentive regulation reached between the Company and the North Dakota Commission provides for sharing equally between ratepayers and shareholders any amount earned in 1993 over or under a benchmark overall rate of return. A liability of $300,000 for the Company to its North Dakota customers resulted from sharing earnings above this benchmark for 1993. The status of this liability will be considered in future incentive agreements between the Company and the North Dakota Commission for the years 1994 and following. Under Minnesota law, the Minnesota Commission must allow implementation of an interim rate increase, subject to refund with interest, 60 days after the initial filing date of a rate increase request, except that the Commission is not required to allow implementation of the interim rate increase until four months after the effective date of a previous rate order. The amount of the interim rate increase will be calculated using the proposed test year cost of capital, the rate of return on common equity most recently granted to the Company by the Commission, and rate base and expense items allowed by a currently effective Commission order. In addition, if the Commission fails to make a final determination regarding any rate request within ten months after the initial request is filed, then the requested rate is deemed to be approved, except if (i) an extension of the procedural schedule (in case of a contested rate increase request) has been granted, in which case the schedule of rates will be deemed to have been approved by the Commission on the last day of the extended period of suspension of the rate increase, or (ii) a settlement has been submitted to and rejected by the Commission, and the Commission does not make a final determination concerning the schedule of rates, in which case the schedule of rates will be deemed to have been approved 60 days after the initial or, if applicable, the extended period of suspension of the rate increase. Rate requests filed with the North Dakota Public Service Commission become effective 30 days after the date of filing unless suspended by the Commission. Within seven months after the date of suspension, the North Dakota Commission must act on the request, and during the period of consideration by the Commission a suspended rate can be implemented only with the approval of the Commission. South Dakota law provides that a requested rate increase can be implemented 30 days after the date of filing, unless its effectiveness is suspended by the Commission. The Commission may suspend the effectiveness of the proposed rate change for a period not longer than 90 days beyond the time when the rate change would otherwise go into effect, unless the Commission finds that a longer time is required, in which case the Commission may extend the suspension for a period not to exceed a total of 12 months. A public utility may not put a proposed rate change into effect until at least 45 days after the Commission has made a determination concerning any previously filed rate change. In the event that a requested rate change is suspended by the Commission, such requested rate change can be implemented by the public utility six months after the date of filing (unless previously authorized by the Commission), subject to refund with interest. The Company's wholesale power sales and transmission rates are subject to the jurisdiction of the Federal Energy Regulatory Commission under the Federal Power Act of 1935. Filed rates are effective after a one-day suspension period, subject to ultimate approval by the FERC. Power pool sales are conducted continuously through the Mid-Continent Area Power Pool ("MAPP") on the basis of generating costs, in accordance with schedules filed by MAPP with the FERC. In rate cases, a forward test year procedure enables cost increases to be recovered more promptly than use of an historic test year. The Minnesota Public Utilities Commission has established by regulation a forward test year procedure. The North Dakota Public Service Commission has not formally established a test year procedure; however, it accepted a forward test year in the Company's most recent rate case. The South Dakota Public Utilities Commission uses an historic test year with adjustments for known and measurable changes occurring within 24 months of the last month of the test year. The Company has obtained approval from the regulatory commissions in all three states which it serves for lower rates for residential demand control and controlled service, and in North Dakota and South Dakota for bulk interruptible rates. Each of these special rates is designed to improve efficient use of Company facilities, while encouraging use of electricity instead of other fuels and giving customers more control over the size of their electric bill. All of the Company's electric rate schedules now in effect, except for wheeling, certain municipal and area lighting services and certain interruptible rates, provide for adjustments in rates based upon the cost of fuel delivered to the Company's generating plants, as well as for adjustments based upon the cost of the energy charge for electric power purchased by the Company. Such adjustments are presently based upon a two-month moving average in Minnesota and under the FERC, a three-month moving average in South Dakota, and a four-month moving average in North Dakota and are applied to the next billing after becoming applicable. Capability and Demand At December 31, 1993, the Company had base load net plant capability totaling 550,869 kw, consisting of 242,874 kw from the Big Stone Plant (the Company's 53.9% share), 153,175 kw from the Hoot Lake Plant, 149,450 kw from the Coyote Plant (the Company's 35% share), and 5,370 kw from the Potlatch Co- generation Plant near Bemidji, Minnesota (the Company's 50% share). In addition to its base load capability, the Company has internal combustion units and small diesel units, used chiefly for peaking and standby purposes, with a total capability of 87,993 kw, and 4,030 kw of hydroelectric capability. During 1993, the Company generated about 76% of its total kwh sales and purchased the balance. The Company has made arrangements to help meet its future base load requirements, and continues to investigate other means for meeting such requirements. The Company has an agreement with Northern States Power Company ("NSP") for the annual exchange of 75,000 kw of seasonal diversity capacity. Pursuant to this agreement, NSP began providing the Company with 75,000 kw of capacity for winter seasons on November 1, 1990, and the Company started providing NSP with 75,000 kw of summer capacity on May 1, 1991. This is a fifteen-year agreement which provides the Company a means of increasing the capacity of its winter peaking system and better coordinates use of its generating facilities with no additional investment. In addition, for the 1993-1994 winter season, the Company purchased 20,000 kw of capacity from Lincoln Electric System ("LES"). The Company has extended its winter season agreement with LES through the 1994-1995 winter season. The Company has an agreement with Manitoba Hydro Electric Board to purchase 110,000 kw of capacity for the summer seasons of 1994 through 1996. The Company also has a direct control load management system which provides some flexibility to the Company to effect reductions of peak load. The Company is a member of the Mid-Continent Area Power Pool ("MAPP"), which includes 46 investor-owned utilities, rural cooperatives, municipal utilities, and other power suppliers in the North Central region of the United States and in two Canadian provinces. The objective of MAPP is to coordinate planning and operation of generating and interconnecting transmission facilities to provide reliable and economic electric service to members' customers. Customers served by MAPP members may, therefore, benefit from the regional high voltage interconnections which are capable of transferring large blocks of energy between systems. Also, high voltage interconnections permit companies to buy and sell power among each other according to differing peak demands. The Company is a winter peaking utility and traditionally experiences its peak system demand during the winter season. For the calendar year 1993, the Company established a new record sixty-minute peak demand of 589,239 kw on January 8, 1993. Taking into account additional capacity available to it in January 1993 under power purchase contracts (including short-term arrangements), as well as its own generating capacity, the Company's capability of then meeting system demand, including reserve requirements computed in accordance with accepted industry practice, amounted to 741,623 kw. In 1994 the Company expects moderate growth in peak demand as compared to 1993. Due to very cold temperatures it is likely that a new record sixty-minute peak demand was set early in 1994. The Company's additional capacity available under power purchase contracts (as described above), combined with the Company's generating capability and load management control capabilities, are expected to meet 1994 system demand, including industry reserve requirements. Fuel Supply Lignite coal is the principal fuel burned by the Company at its Big Stone and Coyote generating plants. The majority of coal burned at the Hoot Lake Plant since 1988 has been western subbituminous coal. The following table shows for 1993 the sources of energy used to generate the Company's net output of electricity: Net Kilowatt % of Total Hours Kilowatt Generated Hours Sources (Thousands) Generated Lignite Coal . . . . . . . . . . . . . 2,251,572 82.1% Subbituminous Coal . . . . . . . . . . 466,458 17.0 Hydro . . . . . . . . . . . . . . . . . 25,719 .9 Oil . . . . . . . . . . . . . . . . . . 673 - Total . . . . . . . . . . . . . . . 2,744,422 100.0% The Company's supply of lignite coal (all of which comes from North Dakota) is furnished by Knife River Coal Mining Company (a subsidiary of Montana-Dakota Utilities Co., a co-owner of the Big Stone and Coyote Plants). The Company has a contract for sufficient lignite coal to supply the Big Stone Plant until 1995, with an option to renew for an additional 20 years subject to certain contingencies. In 1992 the parties reached an agreement which resulted in lower coal costs for the life of the contract. The Company has a contract running through 1999 with Knife River Coal Mining Company for sufficient lignite coal to operate its Hoot Lake Plant. The Company has negotiated purchase agreements for fixed quantities of subbituminous coal as needed for Hoot Lake Plant. The lignite coal contract with Knife River Coal Mining Company for the Coyote Plant expires in 2016, with a 15-year renewal option subject to certain contingencies, and is expected to provide the plant's lignite coal requirements during the term of the contract. It is the Company's practice to maintain minimum 30-day inventories (at full output) of coal at the Big Stone and Coyote Plants, and a 10-day inventory at the Hoot Lake Plant. The lignite coal used at Big Stone Plant is transported in unit train cars belonging to the plant owners. The coal transportation contract for the Big Stone Plant with the Burlington Northern Railroad expires in 1995. A freight rate reduction was negotiated for lignite deliveries to the Big Stone Plant, effective in March 1990. Transportation costs of lignite coal to Hoot Lake Plant are governed by tariffs established pursuant to authority of the Interstate Commerce Commission. The existing contract with Burlington Northern Railroad for subbituminous coal deliveries at Hoot Lake was amended in 1993 and will remain in effect for 1994 with annual renewals by mutual agreement. The Company also has a subbituminous coal transportation agreement with Northern Coal Transportation Company effective January 1993 covering coal moved from Kennecott Energy's Spring Creek Mine to Hoot Lake Plant. This agreement expires January, 1996. Freight rates were reduced in 1993 under both agreements. The Coyote Plant is a mine-mouth plant located in western North Dakota, near the source of lignite coal used for generation. Because there are no coal transportation costs, this plant has a relatively low fuel cost compared to other Company units. The average cost of coal consumed (including handling charges to the plant sites) in cents per million BTU for each of the three years 1993, 1992 and 1991, was 100.7 cents, 100.5 cents and 104.1 cents, respectively. The average cost of coal consumed (including handling charges to the plant sites) per ton for each of the three years 1993, 1992 and 1991 was $13.75, $13.33 and $13.60, respectively. North Dakota imposes a severance tax on lignite at a flat rate of $ .75 per ton, plus an additional $ .02 per ton which is deposited in a lignite research fund. The lignite coal used by the Company at its plants is surface mined. The North Dakota laws relating to surface mining and the Federal Surface Mining Control and Reclamation Act will continue to adversely affect the price of lignite to the Company. Any increased costs of lignite would be substantially recovered through the provisions in the Company's rate schedules for adjustments in rates based upon the cost of fuel delivered to the Company's generating plants. See "Rate Matters." During 1990, the Company conducted test burns of tire-derived fuel ("TDF") at the Big Stone Plant and has received approval from the South Dakota Department of Environment and Natural Resources to burn TDF. The quantity of TDF burned as fuel during 1993 (1.6% of total fuel burned at the Big Stone Plant), and expected to be burned in 1994, is insignificant when compared to the lignite coal consumption at the Big Stone Plant. During 1991, test burns of refuse derived fuel ("RDF") were conducted at Big Stone Plant and approval to burn RDF as fuel was granted by the South Dakota Department of Environment and Natural Resources. The quantity of RDF burned in 1993 (.8% of total fuel burned at the Big Stone Plant) and expected to be burned in 1994 is insignificant when compared to Big Stone Plant's lignite coal consumption. General Regulation Under the Minnesota Public Utilities Act, the Company is subject to the jurisdiction of the Minnesota Public Utilities Commission ("MPUC") with respect to rates, issuance of securities, public utility services, construction of major utility facilities, establishment of exclusive assigned service areas, contracts and arrangements with subsidiaries and other affiliated interests, and other matters. The MPUC has the authority to assess the need for large energy facilities and to issue or deny certificates of need, after public hearings, within six months of an application to construct such a facility. The Minnesota Department of Public Service ("DPS") is responsible for investigating all matters subject to the jurisdiction of the DPS or the MPUC, and for the enforcement of MPUC orders. Among other things, the DPS is authorized to collect and analyze data on energy and the consumption of energy, develop recommendations as to energy policies for the Governor and the Legislature of Minnesota and evaluate policies governing the establishment of rates and prices for energy as related to energy conservation. The DPS acts as state advocate in matters heard before the MPUC. The DPS also has the power to prepare and adopt regulations to conserve and allocate energy in the event of energy shortages and on a long term basis. Under Minnesota law, every public utility that furnishes electric service must make annual investments and expenditures in energy conservation improvements, or make a contribution to the State's energy and conservation account, in an amount equal to at least 1.5% of its gross operating revenues from service provided in Minnesota. The DPS may require the Company to make investments and expenditures in energy conservation improvements whenever it finds that the improvement will result in energy savings at a total cost to the utility less than the cost to the utility to produce or purchase an equivalent amount of a new supply of energy. Such DPS orders are appealable to the MPUC. Investments made pursuant to such orders generally are recoverable costs in rate cases, even though ownership of the improvement may be in the property owner rather than the utility. The Company is required to submit, and the MPUC has approved, the Company's incentive mechanism for recovery of conservation related expenditures for 1992 and 1993. The MPUC requires the submission of a 15-year advance integrated resource plan by jurisdictional utilities. The Company submitted its first plan in 1992, which was approved by the MPUC in 1993, and will be required to submit its next plan in 1994. Pursuant to the Minnesota Power Plant Siting Act, the Minnesota Environmental Quality Board ("EQB") has been granted the authority to regulate the siting in Minnesota of large electric power generating facilities in an orderly manner compatible with environmental preservation and the efficient use of resources. To that end, the EQB is empowered, after study, evaluation, and hearings, to select or designate in Minnesota sites for new electric power generating plants (50,000 kw or more) and routes for transmission lines (200 kv or more) and to certify such sites and routes as to environmental compatibility. The Company is subject to the jurisdiction of the Public Service Commission of North Dakota with respect to rates, services, certain issuances of securities and other matters. The North Dakota Energy Conversion and Transmission Facility Siting Act grants the North Dakota Commission the authority to approve sites in North Dakota for large electric generating facilities and high voltage transmission lines. This Act is similar to the Minnesota Power Plant Siting Act described above and affects new electric power generating plants of 50,000 kw or more and new transmission lines of 115 kv or more. The South Dakota Public Utilities Act subjects the Company to the jurisdiction of the South Dakota Public Utilities Commission with respect to rates, public utility services, establishment of assigned service areas, and other matters. The Company is currently exempt from the jurisdiction of the Commission with respect to the issuance of securities. Under the South Dakota Energy Facility Permit Act, the South Dakota Commission has the authority to approve sites in South Dakota for large energy conversion facilities (100,000 kw or more) and transmission lines of 115 kv or more. The Company is also subject to regulation by the Federal Energy Regulatory Commission, successor to the Federal Power Commission, created pursuant to the Federal Power Act of 1935, as amended. The FERC is an independent agency which has jurisdiction over rates for sales for resale, transmission and sale of electric energy in interstate commerce, interconnection of facilities, and accounting policies and practices. The Company is subject to various federal and state laws, including the Federal Public Utility Regulatory Policies Act and the Energy Policy Act of 1992, which are intended to promote the conservation of energy and the development and use of alternative energy sources. The Company is unable to predict the impact on its operations resulting from future regulatory activities by any of the above agencies, from any future legislation or from any future tax which may be imposed upon the source or use of energy. Environmental Regulation Impact of Environmental Laws The Company's existing generating plants are subject to stringent standards and regulations regarding, among other things, air, water and solid waste pollution, by agencies of the federal government and the respective states where the Company's plants are located. The Company estimates that it has expended in the five years ended December 31, 1993, approximately $9,700,000 for environmental control facilities (excluding allowance for funds used during construction). Included in the 1994-1998 construction budget are approximately $980,000 for environmental improvements for existing and new facilities, including $500,000 for 1994. Air Quality Pursuant to the Federal Clean Air Act of 1970, the Clean Air Act Amendments of 1990 and other amendments thereto (collectively the "Act"), the United States Environmental Protection Agency ("EPA") has promulgated national primary and secondary standards for certain air pollutants. All primary fuel burned by the Company at its steam generating plants is North Dakota lignite or western subbituminous coal with sulfur content averaging less than one percent. Electrostatic precipitators have been installed at the Company's principal units at the Hoot Lake Plant and at the Big Stone Plant. A fabric filter to collect particulates from stack gases has been installed on a smaller unit at Hoot Lake Plant. As a result, the Company's units at Big Stone and Hoot Lake currently meet all federal and state air quality and emission standards presently applicable. The Coyote Plant is substantially the same design as the Big Stone Plant, except for site-related items and the inclusion of sulfur dioxide removal equipment. The removal equipment--referred to as a dry scrubber--consists of a spray dryer, followed by a fabric filter, and is designed to desulphurize hot gases from the stack without producing sludge, an unwanted by-product of the conventional wet scrubber system. The Coyote Plant is currently operating within all presently applicable federal and state air quality and emission standards. The Clean Air Act Amendments of 1990, in addressing acid deposition, will impose new requirements on power plants in an effort to reduce national emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx). The national SO2 emission reduction goals are to be achieved through a new market-based system under which power plants are to be allocated "emissions allowances" that will require plants to either reduce their emissions or acquire allowances from others to achieve compliance. The SO2 emission reduction requirements will be imposed in two phases, the first to take effect in 1995 and the second in 2000. The phase one requirements do not apply to any of the Company's plants. The phase two standards apply to the Company's plants in the year 2000. The Company believes that its current use of low sulfur coal at the Hoot Lake Plant and the dry scrubbers installed at the Coyote Plant will enable the facilities to comply with anticipated phase two limitations with regards to SO2. Although the Big Stone Plant's current annual SO2 emissions meet presently applicable standards, they are higher than the levels that will be allowed by the phase two requirements. The Big Stone Plant can maintain current levels of operation and meet the phase two requirements by using allowances (alloted and/or purchased), by installing scrubbers and/or by switching to subbituminous coal which is lower in sulfur emissions than lignite which the plant currently uses. Big Stone Plant's lignite contract expires in 1995. The cost of switching to subbituminous coal from lignite would not adversely affect the Company's power plant operations based upon current market price. In the unlikely event the Company decides to continue to burn lignite, the Company's share of the cost of installing scrubbers at its Big Stone Plant by the year 2000 is estimated to be approximately $54 million. The national NOx emission reduction goals are to be achieved by imposing mandatory emissions standards on individual sources. The standards will not apply to the Company's plants until the year 2000. Based on the NOx emissions limitations set forth in regulations recently issued by the EPA for boilers such as those used at the Company's Hoot Lake Plant, but subject to an evaluation of the results of continuous emission monitoring expected to begin at Hoot Lake in 1994, the Company currently anticipates that the cost of complying with the limitations to be applicable to Hoot Lake will not be material. The Act requires EPA to specify before January 1, 1997 the NOx limitations for cyclone boilers such as those used at Big Stone and Coyote. Because the EPA has not yet issued such regulations, the Company is unable to determine the NOx emissions limitations that will be applicable to those plants in the year 2000 or the cost to comply with such limitations. The Clean Air Act Amendments of 1990 contain a list of toxic air pollutants to be regulated. The list includes certain substances believed to be emitted by the Company's plants. The Act calls for EPA studies of the effects of emissions of the listed pollutants by electric utility steam generating plants. Because promulgation of rules by the EPA has not been completed however, it is not possible to assess at this time whether, or to what extent, this legislation will ultimately impact the Company. Water Quality The Federal Water Pollution Control Act Amendments of 1972, and amendments thereto, provide for, among other things, the imposition of effluent limitations to regulate discharges of pollutants, including thermal discharges, into the water of the United States, and the EPA has established effluent guidelines for the steam electric power generating industry. Discharges must also comply with state water quality standards. The Company has all federal and state water permits presently necessary for the operation of its Big Stone Plant. A water discharge permit for the Hoot Lake Plant was renewed in 1992 for a five year term. A renewal permit for the Coyote Plant was renewed in 1993 also for a five year term. The Company owns five small dams on the Otter Tail River which are subject to FERC licensing requirements. A license for all five dams was issued on December 5, 1991. Total nameplate rating of the five dams is 3,450 kw (net unit capability of 3,480 kw at December 31, 1993). Solid Waste Permits for disposal of ash and other solid wastes have been issued for the Company's Big Stone and Coyote Plants. A renewal permit is pending for the Company's Hoot Lake Plant and the Company anticipates that it will obtain this renewal in due course. The EPA has promulgated various solid and hazardous waste regulations and guidelines pursuant to, among other laws, the Resource Conservation and Recovery Act of 1976, the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984, which provide for, among other things, the comprehensive control of various solid and hazardous wastes from their generation to final disposal. The states of Minnesota, North Dakota and South Dakota have also adopted rules and regulations pertaining to solid and hazardous waste. The total impact on the Company of the various solid and hazardous waste statutes and regulations enacted by the Federal Government or the states of Minnesota, North Dakota and South Dakota is not certain at this time. To date, the Company has incurred no significant costs as a result of these laws. In 1980, the United States enacted the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as the Federal Superfund law, and in 1986, reauthorized and amended the 1980 Act. In 1983, Minnesota adopted the Minnesota Environmental Response and Liability Act, commonly known as the Minnesota Superfund law. In 1988, South Dakota enacted the Regulated Substance Discharges Act, commonly called the South Dakota Superfund law. In 1989, North Dakota enacted the Environmental Emergency Cost Recovery Act. Among other requirements, the federal and state acts establish environmental response funds to pay for remedial actions associated with the release or threatened release of certain regulated substances into the environment. These federal and state Superfund laws also establish liability for cleanup costs and damage to the environment resulting from such releases or threatened releases of regulated substances. The Minnesota Superfund law also creates liability for personal injury and economic loss under certain circumstances. The Company is unable to determine the total impact of the Superfund laws on its operations at this time but has not incurred any significant costs to date related to these laws. The Federal Toxic Substances Control Act of 1976 regulates, among other things, polychlorinated byphenyls (PCBs). The EPA has enacted regulations concerning the use, storage and disposal of PCBs. The Company completed a program for removal of all PCB filled transformers and capacitors by the end of 1987 and received Certificates of Disposal in 1989. The Company completed removal of PCB contaminated mineral oil dielectric fluid from all substation transformers in 1991 and continues to remove such oil from voltage regulators as well as other electrical equipment. Health Effects of Electric and Magnetic Fields Although research conducted to date has found no conclusive evidence that electric and magnetic fields affect health, a few studies have suggested a possible connection with cancer. The utility industry is funding studies. The ultimate impact, if any, of this issue on the Company and the utility industry is impossible to predict. Franchises At December 31, 1993, the Company had franchises in all of the 371 incorporated municipalities which it serves. All franchises are nonexclusive and generally were obtained for 20-year terms, with varying expiration dates. No franchises are required to serve unincorporated communities in any of the three states which the Company serves. The Company believes that the situation with regard to its franchises is satisfactory. HEALTH SERVICES OPERATIONS General Health Services Operations consists of businesses involved in the sale, service, rental, refurbishing and operation of medical imaging equipment and the sale of related supplies and accessories to various medical institutions primarily in the Midwest United States. All of these business were acquired in 1993 by the Company's wholly-owned subsidiary Mid-States Development, Inc. On a fully consolidated basis, the Company derived 12% of its operating revenues from this segment in 1993. Subsidiaries comprising Health Services Operations include the following: Diagnostic Medical Systems, Inc. ("DMS"), located in Fargo, ND, sells, services and refurbishes diagnostic medical imaging equipment manufactured primarily by Philips Medical Systems ("Philips"), including fluoroscopic, radiograhic and mammography equipment, along with ultrasound, computerized tomography ("CT") scanners, magnetic resonance imaging ("MRI") scanners, cardiac cath labs, and radiation therapy equipment for the treatment of cancer. DMS recently entered into a five year dealer agreement with Philips, which can be terminated by Philips upon eighteen months notice and certain other circumstances. DMS is also a supplier for Kodak, DuPont, and Fuji in the medical film and accessory business. DMS markets mainly to hospitals, clinics and mobile services in North Dakota, South Dakota, Minnesota, Montana and Wyoming. Almost 80% of the hospitals served by DMS have 50 or fewer beds. DMS also offers, through its subsidiaries, mobile CT and MRI service in the Upper Midwest and Central United States. Mobile Imaging, Inc., located in Fargo, ND, and its subsidiaries are engaged primarily in providing mobile CT and MRI services in the Upper Midwest, and also provide interim scanner service on a national basis. Imaging Plus, Inc., located in Fargo, ND, provides management, marketing and administrative services for diagnostic medical imaging companies, including Mobile Imaging, Inc. and a subsidiary of DMS. Combined, the Health Service subsidiaries cover the three basics of the medical imaging industry: (1) operating technicians who do the imaging of patients of hospitals and clinics; (2) the equipment function that researches, buys, sells, owns, rents, refurbishes and maintains the imaging machines; and (3) central office specialists who provide scheduling, billing personnel and administrative support. Due to the complex nature of the equipment, the diagnostic medical imaging industry is both technology intensive and capital intensive. The industry is highly competitive, with competition based primarily on the quality of the equipment and the availability of service. The Company's Health Services businesses compete with a number of other companies that make, sell, rent and service diagnostic medical imaging equipment, including large manufacturers other than Philips and their respective distributors. The Company estimates that its market share is greater than fifty percent in the Upper Midwest region. The Company continues to investigate acquisitions of additional businesses and expects continued growth in this area. General Regulation Operation of the Health Services subsidiaries will be subject to the effects of pending health care legislation, the outcome of which cannot be accurately assessed at this time. As an efficient, low-cost provider of certain health services and equipment, management believes that the Health Services businesses are in line with the goals of national health-care reform. DIVERSIFIED OPERATIONS General The Company's Diversified Operations consists of business that are diversified in such areas as manufacturing, electrical and telephone contracting, radio broadcasting, waste incinerating, and telephone/cable TV utility. On a fully consolidated basis, the Company derived 15% of its operating revenues from these smaller diversified business during 1993 and 1992, and 10% during 1991. The following is a brief description of each of these businesses: Precision Machine of North Dakota, Inc., located in West Fargo, ND, uses computer-controlled lathes and milling machines to produce parts for manufacturers. Moorhead Electric, Inc., located in Moorhead, MN, provides commercial and industrial wiring of large buildings, constructs and maintains telecommunications and power distribution systems, and provides computer networking. Aerial Contractors, Inc., with headquarters in West Fargo, ND, constructs and maintains overhead and underground electric, telephone, communications, and cable television lines. Dakota Machine Tool, Inc., located in West Fargo, ND, is primarily engaged in metal fabrication of large machines that handle and refine sugar beets. Tec Steel, a division of Dakota Machine, cuts metal parts for such machines and sells the same service to other manufacturers. Glendale Machining, Inc. of Pelican Rapids, MN, machines parts for manufacturers. KFGO Inc. operates both AM and FM commercial radio stations broadcasting from Fargo, ND. Quadrant Co. ("Quadrant") operates a municipal waste burning facility located in Perham, MN. Pursuant to agreements which expire in 1995, Quadrant receives a processing fee from five Minnesota counties for disposal of mixed waste and sells the steam generated from the incineration process to two customers. During 1994, Quadrant's management will be evaluating its future business plans. Midwest Information Systems, Inc.("MIS"), headquartered in Parkers Prairie, MN, owns two operating telephone companies serving over 4000 customers and a cable television company serving approximately 600 customers. MIS is also involved in long-distance transport, fiber-optic transmission facilities and the sale of direct broadcast satellite television programming and equipment. With the exception of Quadrant, which was founded by the Company in 1985, each of these businesses was acquired by the Company since 1989. An additional acquisition (a radio broadcasting company located in Morris, MN) was finalized in January, 1994. Quadrant is a wholly-owned subsidiary of Minnesota Dakota Generating Company ("MDG"), which in turn is a wholly-owned subsidiary of the Company. MIS is a wholly-owned subsidiary of North Central Utilities, Inc., a subsidiary of MDG formed for the purpose of acquiring regulated telephone companies. Each of the other subsidiaries described above are owned by Mid-States Development, Inc., which is also a wholly-owned subsidiary of MDG. Each of the businesses in Diversified Operations is subject to competition, as well as the effects of general economic conditions, in their respective industries. The Company continues to investigate acquisitions of additional businesses (both utility and nonutility) and expects continued growth in this area. General Regulation The Company's operating telephone subsidiaries are subject to the regulatory authority of the MPUC regarding rates and charges for telephone services, as well as other matters. The operating telephone subsidiaries must keep on file with the Minnesota DPS schedules of such rates and charges, and any requests for changes in such rates and charges must be filed for approval by the MPUC. The telephone industry is also subject generally to rules and regulations of the Federal Communications Commission ("FCC"). The Company's operating cable television subsidiary is regulated by federal and local authorities. The Company's radio broadcasting subsidiaries are regulated by the FCC. Environmental Regulation The Minnesota Pollution Control Agency issued an air emission facility permit, authorizing the incineration of up to 116 tons of municipal solid waste per day at Quadrant's facility in addition to the incineration of other allowable wastes and petroleum derived used oil. The permit expired in May 1990; however the facility has been granted permission by the Minnesota Pollution Control Agency to operate under the conditions of the expired permit until operating rules for incinerators are fully developed (see discussion below). The subsidiary has formally requested a renewal of the permit. The state of Minnesota has recently promulgated rules relating to storage, transport, testing and disposal of ash from municipal solid waste combustors, which are not expected to have a material adverse effect on the operations of Quadrant. The state of Minnesota has proposed, and the EPA is expected to propose, rules covering air emissions from municipal waste combustors of this size. Although the effects of such regulations on Quadrant's operations cannot be accurately predicted at this time, additional costs are expected to result if the regulations take effect. CONSTRUCTION PROGRAM & FINANCING The Company is continually expanding, replacing and improving its electric utility facilities. During 1993, the Company invested approximately $23,781,000 (including allowance for funds used during construction) for additions to its electric utility properties. During the five years ended December 31, 1993, the Company had gross electric property additions, including construction work in progress, of approximately $114,189,000 and gross retirements of approximately $27,934,000. During 1993, capital expenditures of approximately $3,000,000 were also made in each of Health Services Operations and Diversified Operations. Total capital expenditures for the Company and its subsidiaries during the five-year period 1994-1998 are estimated to be approximately $146,000,000. Of this $14,000,000 is for Health Services Operations and $9,000,000 for Diversified Operations. The Company estimates that during the five years 1994 through 1998 it will invest for electric utility construction approximately $123,000,000 (including allowance for funds used during construction). The Company has no firm plans for additional base load construction. The majority of electric utility expenditures for the five-year period 1994 through 1998 will be for work related to the Company's transmission and distribution system. The Company estimates that funds internally generated, combined with funds on hand, will be sufficient to provide for all of its 1994-1998 electric construction program expenditures (including allowance for funds used during construction) and to meet all sinking fund payments for First Mortgage Bonds in the next five years. Additional short or long-term financing will be required in the period 1994-1998 in connection with the maturity of First Mortgage Bonds and a Long-Term Lease Obligation ($21,000,000), in the event the Company decides to refund or retire early any of its presently outstanding debt or Cumulative Preferred Shares, to complete its Common Share repurchase program or for other corporate purposes. The foregoing estimates of capital expenditures and funds internally generated may be subject to substantial changes due to unforeseen factors, such as changed economic conditions, competitive conditions, technological changes, new environmental and other governmental regulations, changed tax laws and rate regulation. On October 13, 1993, the Company sold $4,000,000 of a new series of $6.75 Cumulative Preferred Shares. The proceeds were used for the redemption on November 12, 1993, of the Company's outstanding $9.50 Cumulative Preferred Shares at an aggregate redemption price of $4,080,000, plus accrued dividends to the redemption date. On November 1, 1993, the Company retired $4,970,000 of First Mortgage Bonds, 4.625% Series of 1993. The Company sold on December 7, 1993, $3,010,000 of Industrial Development Refunding Revenue Bonds, 5% Series of 2002, and on December 15, 1993, $10,400,000 of Pollution Control Refunding Revenue Bonds, Variable Series of 2012. The proceeds were used for the redemption of the Company's First Mortgage Bonds, 7.10% Series of 2003 and 5.90% Series of 2004 in the aggregate principal amount of $13,445,000. As of December 31, 1993, the Company had unutilized net fundable property available for the issuance of more than $13,000,000 principal amount of additional First Mortgage Bonds and also was entitled to issue in excess of $102,000,000 principal amount of additional Bonds on the basis of Bonds theretofore retired. The Company's operating subsidiaries are responsible for obtaining their own financing after the Company's initial equity investment and have developed financing arrangements with various banks. The Company does not intend to make or guarantee loans to its subsidiaries, lend a subsidiary money or cosign on any borrowing. The Company has access to short-term borrowing resources and has authority from the Minnesota Public Utilities Commission to have outstanding during 1994 such borrowings in an amount not to exceed $50,000,000. The Company and its subsidiaries currently have established bank lines of credit totaling $19,050,000 of which $4,437,000 was used at December 31, 1993. EMPLOYEES The Company and its subsidiaries had approximately 1,124 full-time employees at December 31, 1993. A total of 465 employees are represented by local unions of the International Brotherhood of Electrical Workers, of which 429 are employees of the Electrical Operations segment and are covered by a three-year labor contract expiring November 1, 1996. The Company has never experienced any strike, work stoppage, or strike vote, and regards its present relations with employees as very good. Item 2. PROPERTIES The Coyote Station, which commenced operation in 1981, is a 414,000 kw (nameplate rating) mine-mouth plant located in the lignite coal fields near Beulah, North Dakota and is jointly owned by the Company, Northern Municipal Power Agency, Montana-Dakota Utilities Co. and Northwestern Public Service Company. The Company has a 35% interest in the plant and was the project manager in charge of construction. Montana-Dakota Utilities Co., in whose service territory the plant is located, is the operating manager of the plant. The Company, jointly with Northwestern Public Service Company and Montana-Dakota Utilities Co., owns the 414,000 kw (nameplate rating) Big Stone Plant in northeastern South Dakota which commenced operation in 1975. The Company, for the benefit of all three utilities, was in charge of construction and is now in charge of operations. The Company owns 53.9% of the plant. Located near Fergus Falls, Minnesota, the Hoot Lake Plant is comprised of three separate generating units with a combined rating of 127,000 kw. The oldest Hoot Lake Plant generating unit was constructed in 1948 (7,500 kw nameplate rating) and a subsequent unit was added in 1959 (53,500 kw nameplate rating). A third unit was added in 1964 (66,000 kw nameplate rating) and later modified during 1988, to provide cycling capability, allowing this unit to be more efficiently brought on-line from a standby mode. At December 31, 1993, the Company's transmission facilities, which are inter-connected with lines of other public utilities, consisted of 48 miles of 345 kv lines; 363 miles of 230 kv lines; 567 miles of 115 kv lines; and 4,268 miles of lower voltage lines, principally 41.6 kv. The Company owns the uprated portion of the 48 miles of the 345 kv line, with Minnkota Power Cooperative retaining title to the original 230 kv construction. All of the Company's electric utility properties, with minor exceptions, are subject to the lien of the Company's Indenture of Mortgage dated July 1, 1936, as amended and supplemented, securing its First Mortgage Bonds. Item 3. LEGAL PROCEEDINGS Not Applicable. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the three months ended December 31, 1993. Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT (AS OF MARCH 1, 1994) Set forth below is a summary of the principal occupations and business experience during the past five years of executive officers of the Company: DATES ELECTED NAME AND AGE TO OFFICE PRESENT POSITION AND BUSINESS EXPERIENCE John C. MacFarlane (54) 4/8/91 Present: Chairman, President and Chief Executive Officer Prior to 4/8/91 President and Chief Executive Officer Dennis R. Emmen (60) 4/13/81 Present: Senior Vice President, Finance,Treasurer and Chief Financial Officer Marlowe E. Johnson (49) 4/12/93 Present: Vice President, Customer Service, North Dakota Prior to 4/12/93 Division Manager, Jamestown Douglas L. Kjellerup (52) 4/12/93 Present: Vice President, Marketing and Development 4/8/91 Vice President, Planning and Development Prior to 4/8/91 Director, Strategic Planning and Productivity LeRoy S. Larson (48) 4/12/93 Present: Vice President, Customer Service, Minnesota and South Dakota 4/13/92 Vice President, Division Operations, Minnesota and South Dakota Prior to 4/13/92 Division Manager, Morris Richard W. Muehlhausen (55) 1/1/78 Present: Vice President, Corporate Services Jay D. Myster (55) 4/12/82 Present: Vice President, Governmental and Legal, and Corporate Secretary Earl D. Sjoberg (61) 4/10/89 Present: Vice President, Electrical Prior to 4/10/89 Manager, Division Engineering Ward L. Uggerud (44) 4/10/89 Present: Vice President, Operations Prior to 4/10/89 Director, System Operations Andrew E. Anderson (54) 1/1/78 Present: Controller The term of office of each of the officers is one year, and there are no arrangements or understanding between individual officers or any other persons pursuant to which he was selected as an officer. No family relationships exist between any officers of the Company. PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this Item is incorporated by reference to Dividends" on page 48, to first sentence under "Buying and Selling" on page 48, to "Selected Consolidated Financial Data" on page 23 and to "Quarterly Information" on page 45, of the Company's 1993 Annual Report to Shareholders, filed as an Exhibit hereto. Item 6. SELECTED FINANCIAL DATA The information required by this Item is incorporated by reference to "Selected Consolidated Financial Data" on Page 23 of the Company's 1993 Annual Report to Shareholders, filed as an Exhibit hereto. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is incorporated by reference to "Management's Discussion and Analysis of Financial Condition and Results of Operations" on Pages 24 through 31 of the Company's 1993 Annual Report to Shareholders, filed as an Exhibit hereto. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is incorporated by reference to "Quarterly Information" on Page 45 and the Company's audited financial statements on Pages 32 through 45 of the Company's 1993 Annual Report to Shareholders excluding "Report of Management" on page 32, filed as an Exhibit hereto. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item is incorporated by reference from the in-formation under "Nominees for Election as Directors" in the Company's definitive Proxy Statement dated March 9, 1994. The information regarding executive officers is set forth in Item 4A hereto. Item 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference from the in-formation under "Summary Compensation Table", "Pension and Supplemental Retirement Plans", "Severance Agreements", "Directors' Compensation", and "Compensation Committee Interlocks and Insider Participation" in the Company's definitive Proxy Statement dated March 9, 1994. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is incorporated by reference from the in-formation under "Outstanding Voting Shares" and "Security Ownership of Management" in the Company's definitive Proxy Statement dated March 9, 1994. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is incorporated by reference from the in-formation under "Nominees for Election as Directors" in the Company's definitive Proxy Statement dated March 9, 1994. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) List of documents filed: (1) and (2) See Table of Contents on Page 20 hereof. (3) See Exhibit Index on Pages 25 through 33 hereof. Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of certain instruments defining the rights of holders of certain long-term debt of the Company are not filed, and in lieu thereof, the Company agrees to furnish copies thereof to the Securities and Exchange Commission upon request. (b) Reports on Form 8-K: No reports on Form 8-K have been filed during the quarter ended December 31, 1993. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OTTER TAIL POWER COMPANY By D. R. Emmen D. R. Emmen Senior Vice President, Finance, Treasurer and Chief Financial Officer Dated: March 25, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature and Title John C. MacFarlane ) Chairman, President and ) Chief Executive Officer ) (principal executive officer) ) and Director ) ) D. R. Emmen ) Senior Vice President, Finance, ) Treasurer and Chief Financial Officer ) (principal financial officer) ) and Director ) ) Andrew E. Anderson ) By D. R. Emmen Controller ) D. R. Emmen (principal accounting officer) ) Pro Se and Attorney-in-Fact ) Dated March 25, 1994 Thomas M. Brown, Director ) ) Dayle Dietz, Director ) ) Maynard D. Helgaas, Director ) ) Kenneth L. Nelson, Director ) ) Nathan I. Partain, Director ) ) Robert N. Spolum, Director ) ) James L. Stengel, Director ) OTTER TAIL POWER COMPANY TABLE OF CONTENTS FINANCIAL STATEMENTS, SUPPLEMENTARY FINANCIAL DATA, SUPPLEMENTAL FINANCIAL SCHEDULES INCLUDED IN ANNUAL REPORT (FORM 10-K) FOR THE YEAR ENDED DECEMBER 31, 1993 The following items are included in this annual report by reference to the registrant's Annual Report to Shareholders for the year ended December 31, 1993: Page in Annual Report to Shareholders Financial Statements: Independent Auditors' Report . . . . . . . . . . . . . . . . . 33 Consolidated Balance Sheets, December 31, 1993 and 1992 . . . 32 & 33 Consolidated Statements of Income for the Three Years Ended December 31, 1993 . . . . . . . . . . . . . . . . . . 34 Consolidated Statements of Cash Flows for the Three Years Ended December 31, 1993 . . . . . . . . . . . . . . . . . . 35 Consolidated Statements of Retained Earnings for the Three Years Ended December 31, 1993 . . . . . . . . . . . . 35 Consolidated Statements of Capitalization, December 31, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Notes to Consolidated Financial Statements . . . . . . . . . . 37-45 Selected Consolidated Financial Data for the Five Years Ended December 31, 1993 . . . . . . . . . . . . . . . . . . . 23 Quarterly Data for the Two Years Ended December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . 45 The following supplemental financial data included herein should be read in conjunction with the financial statements referenced above: Page in Form 10-K Independent Auditors' Report . . . . . . . . . . . . . . . . . . . 21 Supplemental Financial Schedules: V - Property, Plant and Equipment . . . . . . . . . . . . . . 22 VI - Accumulated Provision for Depreciation and Amortization of Property, Plant and Equipment . . . . . 23 IX - Short-Term Borrowings . . . . . . . . . . . . . . . . . . . 24 Schedules other than those listed above are omitted because of the absence of the conditions under which they are required or because the information required is included in the financial statements or the notes thereto. INDEPENDENT AUDITORS' REPORT Otter Tail Power Company: We have audited the consolidated balance sheets and statements of capitalization of Otter Tail Power Company and its subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1993, and have issued our report thereon dated January 31 1994; such consolidated financial statements and report are included in your 1993 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedules of Otter Tail Power Company and its subsidiaries for each of the three years in the period ended December 31, 1993, as listed in the accompanying Table of Contents. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. DELOITTE & TOUCHE Deloitte & Touche Minneapolis, Minnesota January 31, 1994
SCHEDULE V OTTER TAIL POWER COMPANY PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1991, 1992, AND 1993 - ----------------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F RETIREMENTS OR OTHER CHANGES STRAIGHT-LINE BALANCE AT SALES--AT ORIGINAL AND RECLASSI- BALANCE DEPRECIATION BEGINNING ADDITIONS AT COST, ESTIMATED FICATIONS - AT END CLASSIFICATION RATES OF YEAR COST IF NOT KNOWN ADD (DEDUCT) OF YEAR - -------------------------------- -------------- ---------------- ----------------- ------------------- ----------------- ---------- December 31, 1993: (THOUSANDS OF DOLLARS) Electric Utility Plant: Plant In Service: Steam Production 2.57% 284,003 3,344 732 0 286,615 Hydro Production Plant 0.39% 1,870 58 0 0 1,928 Other Production Plant 2.66% 10,058 13 0 0 10,071 Transmission 1.97% 123,225 4,487 564 250 127,398 Distribution 3.30% 180,998 9,837 1,719 (252) 188,864 General 5.77% 61,901 4,512 2,008 1 64,406 Construction Work In Progress 6,812 1,529 0 0 8,341 ---------------- ----------------- ------------------- ----------------- ---------- Total Electric Utility Plant 668,867 23,780 5,023 (1) 687,623 Other Property 22,700 12,651 1,485 760 34,626 ---------------- ----------------- ------------------- ----------------- ---------- Total 691,567 36,431 6,508 759 722,249 ================ ================= =================== ================= ========== December 31, 1992: Electric Utility Plant: Plant In Service: Steam Production 2.85% 281,691 4,468 2,156 0 284,003 Hydro Production Plant 1.19% 1,810 69 9 0 1,870 Other Production Plant 2.60% 10,053 8 3 0 10,058 Transmission 1.87% 120,213 3,525 621 108 123,225 Distribution 2.76% 174,026 8,547 1,465 (110) 180,998 General 5.87% 57,642 6,359 2,082 (18) 61,901 Construction Work In Progress 9,400 (2,588) 0 0 6,812 ---------------- ----------------- ------------------- ----------------- ---------- Total Electric Utility Plant 654,835 20,388 6,336 (20) 668,867 Other Property 14,903 8,059 202 (60) 22,700 ---------------- ----------------- ------------------- ----------------- ---------- Total 669,738 28,447 6,538 (80) 691,567 ================ ================= =================== ================= ========== December 31, 1991: Electric Utility Plant: Plant In Service: Steam Production 2.93% 271,881 11,284 1,474 0 281,691 Hydro Production Plant .092% 1,765 46 1 0 1,810 Other Production Plant 2.60% 10,050 3 0 0 10,053 Transmission 1.85% 117,479 3,047 330 17 120,213 Distribution 2.85% 168,179 7,783 1,937 1 174,026 General 5.87% 54,571 7,013 3,924 (18) 57,642 Construction Work In Progress 14,349 (4,949) 0 0 9,400 ---------------- ----------------- ------------------- ---------------- ------------ Total Electric Utility Plant 638,274 24,227 7,666 0 654,835 Other Property 13,116 1,787 0 0 14,903 ---------------- ----------------- ------------------- ---------------- ------------ Total 651,390 26,014 7,666 0 669,738 ================ ================= =================== ================ ============
OTTER TAIL POWER COMPANY SCHEDULE VI ACCUMULATED PROVISION FOR DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1991, 1992, AND 1993 - ----------------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F DEPRECIATION AND AMORTIZATION CHARGED: DEDUCTIONS: OTHER BALANCE AT TO CLEARING CHANGES BALANCE BEGINNING TO ACCOUNTS PROPERTY NET AND RECLAS- AT END CLASSIFICATION OF YEAR EXPENSE AND OTHER RETIRED SALVAGED SIFICATIONS OF YEAR - ----------------------------------------------------------------------------------------------------------------------------------- December 31, 1993: (THOUSANDS OF DOLLARS) Electric Utility Plant: Steam production 125960 7105 151 732 470 0 132014 Hydro production 1452 6 0 0 0 0 1458 Other production plan 4472 267 0 0 0 0 4739 Transmission 38543 2445 0 542 141 -10 40295 Distribution 58257 6046 0 1578 404 -5 62316 General 19571 2201 1325 2008 -191 -34 21246 ---------- ---------- ---------- ---------- ---------- ---------- --------- Total 248255 18070 1476 4860 824 -49 262068 Other Property 4408 4031 0 122 0 0 8317 ---------- ---------- ---------- ---------- ---------- ---------- --------- TOTAL 252663 22101 1476 4982 824 -49 270385 ========== ========== ========== ========== ========== ========== ========= December 31, 1992: Electric Utility Plant: Steam production 120222 7865 180 2156 151 0 125960 Hydro production 1443 19 0 9 1 0 1452 Other production pla 4214 261 0 3 0 0 4472 Transmission 36990 2262 0 621 88 0 38543 Distribution 55335 4854 0 1465 499 32 58257 General 18302 2116 1258 2082 -154 -177 19571 ---------- ---------- ---------- ---------- ---------- ---------- --------- Total 236506 17377 1438 6336 585 -145 248255 Other Property 2821 1618 0 31 0 0 4408 ---------- ---------- ---------- ---------- ---------- ---------- --------- TOTAL 239327 18995 1438 6367 585 -145 252663 ========== ========== ========== ========== ========== ========== ========= December 31, 1991: Electric Utility Plant: Steam production 114087 7865 180 1271 639 0 120222 Hydro production 1429 15 0 1 0 0 1443 Other production pla 3954 260 0 0 0 0 4214 Transmission 35207 2191 0 330 78 0 36990 Distribution 52340 4850 0 1938 178 261 55335 General 18522 1891 1266 3924 -350 197 18302 ---------- ---------- ---------- ---------- ---------- ---------- --------- Total 225539 17072 1446 7464 545 458 236506 Other Property 1933 888 0 0 0 0 2821 ---------- ---------- ---------- ---------- ---------- ---------- --------- TOTAL 227472 17960 1446 7464 545 458 239327 ========== ========== ========== ========== ========== ========== =========
OTTER TAIL POWER COMPANY SCHEDULE IX SHORT-TERM BORROWINGS COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F MAXIMUM AMOUNT OUTSTANDING AVERAGE AMOUNT WEIGHTED BALANCE WEIGHTED AVERAGE DURING THE OUTSTANDING AVERAGE INTEREST CATEGORY OF AGGREGATE AT END INTEREST RATE PERIOD DURING RATE DURING SHORT-TERM BORROWINGS OF PERIOD (at December 31) (at Month End) THE PERIOD (1) THE PERIOD (2) (in thousands) (in thousands) (in thousands) Year Ended December 31, 1993 Notes Payable -- -- $1,200 $ 28 3.78% Year Ended December 31, 1992 Notes Payable -- -- -- -- -- Year Ended December 31, 1991 Notes Payable -- -- $2,500 $ 176 7.12% (1) Average amount outstanding during the period is computed by dividing the total of daily outstanding principal balances by 365. (2) Average interest rate for the year is computed by dividing the actual short-term interest by the average short- term debt outstanding.
[TEXT] Exhibit Index to Annual Report on Form 10-K For Year Ended December 31, 1993 Previously Filed As Exhibit File No. No. 3-A --Restated Articles of Incorporation, as amended (including resolutions creating outstanding series of Cumulative Preferred Shares). 3-C 33-46071 4-B --Bylaws as amended through April 11, 1988. 4-D-1 2-14209 2-B-1 --Twenty-First Supplemental Indenture from the Company to First Trust Company of Saint Paul and Russel M. Collins, as Trustees, dated as of July 1, 1958. 4-D-2 2-14209 2-B-2 --Twenty-Second Supplemental Indenture dated as of July 15, 1958. 4-D-3 33-32499 4-D-6 --Thirty-First Supplemental Indenture dated as of February 1, 1973. 4-D-4 33-32499 4-D-7 --Thirty-Second Supplemental Indenture dated as of January 18, 1974. 4-D-5 2-66914 2-L-13 --Thirty-Ninth Supplemental Indenture dated as of October 15, 1979. 4-D-6 33-46070 4-D-11 --Forty-Second Supplemental Indenture dated as of December 1, 1990. 4-D-7 33-46070 4-D-12 --Forty-Third Supplemental Indenture dated as of February 1, 1991. 4-D-8 33-46070 4-D-13 --Forty-Fourth Supplemental Indenture dated as of September 1, 1991 4-D-9 8-K dated 4-D-15 --Forty-Fifth Supplemental 7/24/92 Indenture dated as of July 1, 1992 10-A 2-39794 4-C --Integrated Transmission Agreement dated August 25, 1967, between Cooperative Power Association and the Company. 10-A-1 10-K for year 10-A-1 --Amendment No. 1, dated as ended 12/31/92 of September 6, 1979, to Integrated Transmission Agreement, dated as of August 25, 1967, between Cooperative Power Associa- tion and the Company. 10-A-2 10-K for year 10-A-2 --Amendment No. 2, dated as of ended 12/31/92 November 19, 1986, to Integ- rated Transmission Agreement between Cooperative Power Association and the Company. 10-C-1 2-55813 5-E --Contract dated July 1, 1958, between Central Power Elec- tric Corporation, Inc., and the Company. 10-C-2 2-55813 5-E-1 --Supplement Seven dated November 21, 1973. (Supplements Nos. One through Six have been super- seded and are no longer in effect.) 10-C-3 2-55813 5-E-2 --Amendment No. 1 dated December 19, 1973, to Supplement Seven. 10-C-4 10-K for year 10-C-4 --Amendment No. 2 dated ended 12/31/91 June 17, 1986, to Supple- ment Seven. 10-C-5 10-K for year 10-C-5 --Amendment No. 3 dated ended 12/31/92 June 18, 1992, to Supple- ment Seven. 10-C-6 --Amendment No. 4 dated January 18, 1994, to Supple- ment Seven. 10-D 2-55813 5-F --Contract dated April 12, 1973, between the Bureau of Reclamation and the Company. 10-E-1 2-55813 5-G --Contract dated January 8, 1973, between East River Electric Power Cooperative and the Company. 10-E-2 2-62815 5-E-1 --Supplement One dated February 20, 1978. 10-E-3 10-K for year 10-E-3 --Supplement Two dated ended 12/31/89 June 10, 1983. 10-E-4 10-K for year 10-E-4 --Supplement Three dated ended 12/31/90 June 6, 1985. 10-E-5 10-K for year 10-E-5 --Supplement No. Four, dated ended 12/31/92 as of September 10, 1986. 10-E-6 10-K for year 10-E-6 --Supplement No. Five, dated ended 12/31/92 as of January 7, 1993. 10-E-7 --Supplement No. Six, dated as of December 2, 1993. 10-F 10-K for year 10-F --Agreement for Sharing ended 12/31/89 Ownership of Generating Plant by and between the Company, Montana-Dakota Utilities Co., and North- western Public Service Company (dated as of January 7, 1970). 10-F-1 10-K for year 10-F-1 --Letter of Intent for pur- ended 12/31/89 chase of share of Big Stone Plant from Northwestern Public Service Company (dated as of May 8, 1984). 10-F-2 10-K for year 10-F-2 --Supplemental Agreement No. 1 ended 12/31/91 to Agreement for Sharing Ownership of Big Stone Plant (dated as of July 1, 1983). 10-F-3 10-K for year 10-F-3 --Supplemental Agreement No. 2 ended 12/31/91 to Agreement for Sharing Owner- ship of Big Stone Plant (dated as of March 1, 1985). 10-F-4 10-K for year 10-F-4 --Supplemental Agreement No. 3 ended 12/31/91 to Agreement for Sharing Owner- ship of Big Stone Plant (dated as of March 31, 1986). 10-F-5 10-K for year 10-F-5 --Amendment I to Letter of ended 12/31/92 Intent dated May 8, 1984, for purchase of share of Big Stone Plant. 10-G 2-50382 5-F --Big Stone Plant Coal Agreement by and between the Company, Montana-Dakota Utilities Co., Northwestern Public Service Company, and Knife River Coal Mining Company (dated as of January 1, 1972). 10-G-1 10-Q for quarter 19-A --Amendment, dated as of ended 6/30/92 June 25, 1992, to Big Stone Plant Coal Agreement (dated as of January 1, 1972). 10-G-2 10-Q for quarter 19-A --Big Stone Coal Transportation ended 3/31/89 Agreement by and between the Company, Northwestern Public Service Company, Montana- Dakota Utilities Co. and Burlington Northern Railroad Company (dated as of October 5, 1983). 10-G-3 10-Q for quarter 19-A --Amendment No. 1, dated as of ended 6/30/90 May 30, 1990, to Big Stone Coal Transportation Agreement (dated as of October 5, 1983). 10-G-4 10-K for year 10-G-3 --Amendment No. 2, dated as of ended 12/31/91 February 4, 1991, to Big Stone Coal Transportation Agreement (dated as of October 5, 1983). 10-G-5 10-Q for quarter 19-D --Big Stone Plant Tire Derived ended 6/30/93 Fuel Agreement by and between the Company and BFI Tire Recyclers of Minnesota (dated as of November 2, 1992). 10-G-6 10-Q for quarter 19-E --Big Stone Plant Tire Derived ended 6/30/93 Fuel Agreement by and between the Company and National Tire Services (dated as of November 2, 1992). 10-H 2-61043 5-H --Agreement for Sharing Owner- ship of Coyote Station Generating Unit No. 1 by and between the Company, Minnkota Power Cooperative, Inc., Montana-Dakota Utilities Co., Northwestern Public Service Company, and Minnesota Power & Light Company (dated as of July 1, 1977). 10-H-1 10-K for year 10-H-1 --Supplemental Agreement No. ended 12/31/89 One dated as of November 30, 1978, to Agreement for Sharing Ownership of Coyote Generating Unit No. 1. 10-H-2 10-K for year 10-H-2 --Supplemental Agreement No. ended 12/31/89 Two dated as of March 1, 1981, to Agreement for Sharing Owner- ship of Coyote Generating Unit No. 1 and Amendment No. 2 dated March 1, 1981, to Coyote Plant Coal Agreement. 10-H-3 10-K for year 10-H-3 --Amendment dated as of ended 12/31/89 July 29, 1983, to Agreement for Sharing Ownership of Coyote Generating Unit No. 1. 10-H-4 10-K for year 10-H-4 --Agreement dated as of September ended 12/31/92 5, 1985, containing Amendment No. 3 to Agreement for Sharing Ownership of Coyote Generating Unit No. 1, dated as of July 1, 1977, and Amendment No. 5 to Coyote Plant Coal Agreement, dated as of January 1, 1978. 10-I 2-63744 5-I --Coyote Plant Coal Agreement by and between the Company, Minnkota Power Cooperative, Inc., Montana-Dakota Utilities Co., Northwestern Public Service Company, Minnesota Power & Light Company, and Knife River Coal Mining Company (dated as of January 1, 1978). 10-I-1 10-K for year 10-I-1 --Addendum, dated as of March ended 12/31/92 10, 1980, to Coyote Plant Coal Agreement. 10-I-2 10-K for year 10-I-2 --Amendment (No. 3), dated as ended 12/31/92 of May 28, 1980, to Coyote Plant Coal Agreement. 10-I-3 10-K for year 10-I-3 --Fourth Amendment, dated as ended 12/31/92 of August 19, 1985, to Coyote Plant Coal Agreement. 10-I-4 10-Q for quarter 19-A --Sixth Amendment, dated as of ended 6/30/93 February 17, 1993, to Coyote Plant Coal Agreement. 10-J-1 10-K for year 10-J-1 --Mid-Continent Area Power Pool ended 12/31/92 Agreement dated March 31, 1972 (amended through May 1, 1985). 10-J-2 2-66914 5-J-1 --Memorandum of Understanding between Mid-Continent Area Power Pool Parties (dated as of December 1979). 10-K 10-K for year 10-K --Diversity Exchange Agreement ended 12/31/91 Agreement by and between the Company and Northern States Power Company, (dated as of May 21, 1985) and amendment thereto (dated as of August 12, 1985). 10-K-1 10-K for year 10-K-2 --Firm Power Service Agreements ended 12/31/91 by and between Company and Manitoba Electric Hydro Board (dated as of January 27, 1992). 10-K-2 10-K for year 10-K-2 --Firm Power Service Agreement ended 12/31/92 by and between Company and Manitoba Electric Hydro Board (dated as of December 29,1992). 10-K-3 --Firm Power Service Agreements by and between Company and Manitoba Electric Hydro Board (dated as of February 8, 1994). 10-K-4 10-Q for quarter 19-B --Purchased Power and ended 6/30/92 Interconnection Agreement between the Company and Potlatch Corporation dated as of June 3, 1992. 10-K-5 10-K for year 10-K-4 --Capacity and Energy Agreement ended 12/31/92 by and between the Company and Minnkota Power Cooperative, Inc. dated as of May 4, 1992. 10-K-6 10-K for year 10-K-5 --Interchange Agreement by and ended 12/31/92 between the Company and Wisconsin Power and Light Company dated as of February 21, 1992. 10-K-7 10-K for year 10-K-6 --Interchange Agreement by and ended 12/31/92 between the Company and Wisconsin Electric Power Co. dated as of June 26, 1992. 10-K-8 10-K for year 10-K-7 --Firm Power Service Agreement ended 12/31/92 by and between the Company and Lincoln Electric System dated as of September 11, 1992. 10-K-9 10-Q for quarter 19-B --Interchange Agreement by and ended 6/30/93 between the Company and Wisconsin Public Service Corporation dated as of January 20, 1993. 10-L 10-K for year 10-L --Integrated Transmission ended 12/31/91 Agreement by and between the Company, Missouri Basin Municipal Power Agency and Western Minnesota Municipal Power Agency (dated as of March 31, 1986). 10-L-1 10-K for Year 10-L-1 --Amendment No. 1, dated as ended 12/31/88 of December 28, 1988, to Integrated Transmission Agreement (dated as of March 31, 1986). 10-M-1 10-K for year 10-M-1 --Hoot Lake Plant Coal ended 12/31/89 Agreement dated as of October 1, 1980, by and between the Company and Knife River Coal Mining Company. 10-M-2 10-K for year 10-M-2 --First Amendment dated as of ended 12/31/89 August 14, 1985, to Hoot Lake Plant Coal Agreement. 10-M-3 10-K for year 10-M-3 --Hoot Lake Coal Transporta- ended 12/31/89 tion Agreement dated as of September 2, 1988 by and between the Company and Burlington Northern Rail- road Company. 10-M-4 10-K for year 10-M-4 --Supplement One dated as of ended 12/31/89 December 16, 1988, to Hoot Lake Coal Transportation Agreement. 10-M-5 10-K for year 10-M-5 --Supplement Two dated as of ended 12/31/89 April 5, 1989, to Hoot Lake Coal Transportation Agreement. 10-M-6 10-K for year 10-M-6 --Supplement Three dated as ended 12/31/89 of December 18, 1989, to Hoot Lake Coal Transporta- tion Agreement. 10-M-7 10-K for year 10-M-7 --Supplement Four dated as of ended 12/31/91 May 10, 1991, to Hoot Lake Coal Transportation Agreement. 10-M-8 10-K for year 10-M-8 --Supplement Five dated as of ended 12/31/92 December 11, 1992 to Hoot Lake Coal Transportation Agreement. 10-M-9 10-K for year 10-M-9 --Supplement Six dated as of ended 12/31/92 January 11, 1993 to Hoot Lake Coal Transportation Agreement. 10-M-10 --Supplement Seven dated as of November 22, 1993 to Hoot Lake Coal Transportation Agreement. 10-M-11 10-K for year 10-M-10 --Hoot Lake Coal Transportation ended 12/31/92 Agreement dated January 15, 1993 by and between the Company and Northern Coal Transportation Co. 10-M-12 10-Q for quarter 19-C --First Amendment dated as of ended 6/30/93 January 20, 1993 to Hoot Lake Coal Transportation Agreement dated January 15, 1993. 10-N-1 10-K for year 10-N --Deferred Compensation Plan ended 12/31/91 for Directors, dated April 9, 1984.* 10-N-2 10-K for year 10-O --Executive Survivor and Sup- ended 12/31/92 plemental Retirement Plan, as amended.* 10-N-3 10-K for year 10-P --Form of Severance Agreement.* ended 12/31/92 10-N-4 --Nonqualified Pension Plan* 10-N-5 --Nonqualified Profit Sharing Plan.* 10-N-6 --Nonqualified Retirement Savings Plan.* 10-O --Dealer Agreement by and between DMS and Philips Medical Systems North America Company dated January 18, 1994. 13-A --Portions of 1993 Annual Report to Shareholders incorporated by reference in this Form 10-K. 21-A --Subsidiaries of the Registrant 23-A --Independent Auditors' Consent. 24-A --Powers of Attorney. - ------------ * Management contract or compensatory plan or arrangement required to be filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K. EX-3 2 EX-3(A) RESTATED ARTICLES OF INCORPORATION Exhibit 3-A RESTATED ARTICLES OF INCORPORATION OF OTTER TAIL POWER COMPANY (restated as of October 17, 1988) ARTICLE I. The name of the corporation shall be Otter Tail Power Company. ARTICLE II. The purposes of the corporation shall be as follows: (a) To generate, produce, buy or in any manner acquire, and to sell, dispose of, and distribute electricity for light, heat and power and other purposes, and to carry on the business of furnishing, supplying, manufacturing, and selling light, heat, power, gas, water, and steam, and any and all business incidental thereto; and to build, construct, develop, improve, buy, acquire by condemnation or otherwise, hold, own, lease, maintain and operate plants, facilities, systems, and works for the manufacture, generation, production, accumulation, transmission, and distribution of electricity, gas, water, and steam, and to exercise rights of condemnation and eminent domain in connection with the doing of any of its purposes as herein set forth so far as may be permissible by law. (b) To produce, mine, buy, sell, store, market, deal in, and prospect for, coal, oil and minerals of all kinds and the products and by-products thereof. (c) To manufacture, buy, sell, trade, and deal in goods, wares, merchandise, property, and commodities of any and every class and description. (d) To purchase, acquire, and lease, and to sell, lease, and dispose of water, water rights, and power privileges for power, light, heat, mining, milling, irrigation, agricultural, domestic or any other use or purpose. (e) To acquire, hold, mortgage, pledge, or dispose of the shares, bonds, securities, and other evidences of indebtedness of any domestic or foreign corporation. (f) To endorse or guarantee the promissory notes, checks, drafts, evidences of indebtedness or obligations of whatsoever nature of any corporation, domestic or foreign, of which the corporation shall own or control, directly or indirectly a majority of the stock then entitled to elect directors, or a majority thereof. (g) To do or perform any and all lawful business necessary, essential or expedient to the proper conduct of any of the purposes aforesaid. ARTICLE III. The period of duration of the corporation shall be perpetual. ARTICLE IV. The location and post-office address of the registered office of the corporation in Minnesota is 215 Cascade Street South, Fergus Falls, Minnesota 56537. ARTICLE V. The total authorized number of shares of the corporation is 17,500,000, divided into three classes; namely, 1,500,000 Cumulative Preferred Shares without par value (the "Cumulative Preferred Shares"); 1,000,000 Cumulative Preference Shares without par value (the "Cumulative Preference Shares"); and 15,000,000 Common Shares of the par value of $5 per share (the "Common Shares"). No fractional shares of any class or series shall be issued by the corporation. ARTICLE VI. The designations, relative rights, voting power, preferences and restrictions of the Cumulative Preferred Shares, the Cumulative Preference Shares and the Common Shares, respectively, shall be as set forth in Division I through Division VI, inclusive, of this Article VI. The term "subordinate shares," when hereinafter in this Article VI used with reference to shares junior to the Cumulative Preferred Shares, means the Cumulative Preference Shares, the Common Shares and shares of any other class, which may hereafter be authorized, ranking junior to the Cumulative Preferred Shares with respect to the payment of dividends or the distribution of assets; and when hereinafter used with reference to shares junior to the Cumulative Preference Shares, means the Common Shares and shares of any other class, which may hereafter be authorized, ranking junior to the Cumulative Preference Shares with respect to the payment of dividends or the distribution of assets. DIVISION I Provisions Relating to Cumulative Preferred Shares A. Issue in Series. The Cumulative Preferred Shares may be issued from time to time in one or more series, each of which series shall have such designation and such relative rights, voting power, preferences and restrictions as are hereinafter provided and, to the extent hereinafter permitted, as are determined and stated by the Board of Directors in the resolution or resolutions authorizing the creation of shares of such series. All Cumulative Preferred Shares shall be of equal rank and shall be identical, except in respect of their relative voting power (determined as hereinafter provided in Division IV) and the particulars that may be determined by the Board of Directors as hereinafter provided; and each share of each series shall be identical in all respects with the other shares of such series, except as to the dates from which dividends thereon shall be cumulative. Cumulative Preferred Shares shall be issued only as fully paid and nonassessable shares. Subject to the provisions of the last paragraph of this Subdivision A, authority is hereby expressly granted to the Board of Directors to authorize the issuance of Cumulative Preferred Shares in one or more series, and to determine and state, by the resolution or resolutions authorizing the creation of each series: (i) the designation of the series and the number of shares which shall constitute such series, which number may be altered from time to time by like action of the Board of Directors in respect of shares then unallotted; (ii) the annual rate of dividends payable on shares of such series; (iii) the price or prices per share at which the shares of such series shall be redeemable; (iv) the amount payable on shares of such series in the event of any dissolution, liquidation or winding up of the affairs of the corporation, which amount may differ in the case of a voluntary or involuntary dissolution, liquidation or winding up of such affairs; (v) the conversion rights, if any, with respect to the conversion of shares of such series into Common Shares of the corporation; and (vi) the sinking or purchase fund provisions, if any, for the mandatory redemption or purchase of shares of such series. In the case of each series of Cumulative Preferred Shares created after April 1, 1977, the amount (in addition to accrued and unpaid dividends, if any) which the holders of shares of such series shall be entitled to receive in the event of any dissolution, liquidation or winding up of the affairs of the corporation which shall be involuntary shall be equal to the gross consideration received by the corporation upon the issuance thereof (without regard to any premium received or any underwriting discount or commission, private placement fee or other expense incurred by the corporation in connection with the issuance thereof). B. Dividends. Before any dividends on any subordinate shares shall be paid or declared and set apart for payment, the holders of the Cumulative Preferred Shares of each series shall be entitled to receive, when and as declared by the Board of Directors, out of any funds legally available for such purpose, cash dividends at the annual rate for such series theretofore fixed by the Board of Directors as hereinbefore provided, and no more, payable quarterly on such dates as may be fixed in the resolution or resolutions adopted by the Board of Directors authorizing the creation of such series. Such dividends shall be paid to shareholders of record on the respective dates, not exceeding twenty (20) days prior to such payment dates, fixed by the Board of Directors for such purpose. Such dividends shall be cumulative, in the case of shares of each particular series: (1) if issued prior to the record date for the first dividend on shares of such series, then from and including the date fixed for such purpose by the Board of Directors in the resolution or resolutions creating such series; (2) if issued during the period commencing immediately after the record date for a dividend on shares of such series and terminating at the close of the payment date for such dividend, then from and including such last mentioned dividend payment date; (3) otherwise from and including the quarterly dividend payment date next preceding the date of issue of such shares. No dividend shall be paid, or declared and set apart for payment, upon any Cumulative Preferred Shares of any series for any quarterly dividend period unless at the same time a like proportionate dividend for the same or comparable quarterly period, ratable in proportion to the respective annual dividend rates fixed therefor, shall be paid, or declared and set apart for payment, upon all Cumulative Preferred Shares of all series then issued and outstanding. In no event shall any dividend be paid or declared, nor shall any distribution be made, on any subordinate shares, nor shall any subordinate shares be purchased, redeemed or otherwise acquired by the corporation for value, nor shall any moneys be paid to or set aside or made available for a purchase fund or sinking fund for the purchase or redemption of any subordinate shares, unless (i) all dividends on the Cumulative Preferred Shares of all series for all past quarterly dividend periods and for the then current quarterly dividend period shall have been paid or declared and a sum sufficient for the payment thereof set apart for payment; and (ii) the corporation shall not be in default or deficient under any requirement of a sinking or purchase fund established with respect to outstanding Cumulative Preferred Shares of any series for any period then elapsed. Subject to the provisions of this Article VI, and not otherwise, dividends may be declared by the Board of Directors and paid from time to time, out of any funds legally available therefor, upon the then outstanding subordinate shares, and the holders of the Cumulative Preferred Shares shall not be entitled to participate in any such dividends. C. Redemption of Cumulative Preferred Shares. Subject to the limitations stated in Subdivision D of this Division I, the Cumulative Preferred Shares of any or all series may be redeemed, as a whole at any time or in part from time to time, at the option of the corporation by resolution of the Board of Directors, at the applicable redemption price for the shares of such series as determined by the Board of Directors in the resolution or resolutions authorizing the creation of such series, together with an amount (hereinafter referred to as "accrued dividends to the redemption date") in the case of each share, computed at the annual dividend rate for the series of which the particular share is a part, from and including the date on which dividends on such shares become cumulative to and including the date of redemption, less the aggregate amount of all dividends which have theretofore been paid thereon or which have been declared thereon and for which moneys for payment have been set apart and remain available for payment. To the extent that Cumulative Preferred Shares of any series are redeemed through the operation of a sinking or purchase fund provided for in the resolution or resolutions of the Board of Directors creating such series, such shares shall be redeemed by resolution of the Board of Directors at the time and at the applicable redemption price specified for redemption of shares of such series pursuant to such sinking or purchase fund by the resolution or resolutions creating such series. If less than all the outstanding Cumulative Preferred Shares of any series are to be redeemed, the shares to be redeemed shall be determined by lot in such manner as the Board of Directors may prescribe. Notice of every redemption of Cumulative Preferred Shares shall be mailed, addressed to the holders of record of the shares to be redeemed at their respective addresses as they shall appear on the stock books of the corporation, not less than thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption. If notice of redemption shall have been duly given as aforesaid, and if, on or before the redemption date specified in the notice, all funds necessary for the redemption shall have been deposited in trust with a bank or trust company in good standing and doing business at any place within the United States, having capital, surplus and undivided profits aggregating at least $1,000,000 and designated in the notice of redemption, for the pro rata benefit of the holders of the shares so called for redemption, so as to be and continue to be available therefor, then from and after the date of such deposit, notwithstanding that any certificate for Cumulative Preferred Shares so called for redemption shall not have been surrendered for cancellation, the shares represented thereby shall no longer be deemed outstanding, the dividends thereon shall cease to accumulate from and after the date fixed for redemption, and all rights with respect to the Cumulative Preferred Shares so called for redemption shall forthwith on the date of such deposit cease and terminate, except only the right of the holders thereof to receive the redemption price of the shares so redeemed, including accrued dividends to the redemption date, but without interest. Any funds deposited by the corporation pursuant to this paragraph and unclaimed at the end of six (6) years after the date fixed for redemption shall be repaid to the corporation upon its request expressed in a resolution of its Board of Directors, after which repayment the holders of the shares so called for redemption shall look only to the corporation for the payment thereof. All Cumulative Preferred Shares converted, redeemed or purchased voluntarily or pursuant to any sinking fund or purchase fund for the mandatory redemption or purchase of shares shall be retired and cancelled and shall have the status of authorized but unissued Cumulative Preferred Shares of the corporation and may be reissued in the same manner as authorized but unissued Cumulative Preferred Shares undesignated as to series. D. Limitations on Purchase and Redemption of Cumulative Preferred Shares. No Cumulative Preferred Shares of any series shall be purchased, redeemed or otherwise acquired by the corporation for value, nor shall any moneys be paid to or set aside or made available for a purchase fund or sinking fund for the purchase or redemption of Cumulative Preferred Shares of any series, unless all dividends on the Cumulative Preferred Shares of all series for all past quarterly dividend periods and for the current quarterly period shall have been paid or declared and a sum sufficient for the payment thereof set apart for payment, except in the event all of the Cumulative Preferred Shares shall be called for redemption. E. Liquidation Preferences. In the event of any dissolution, liquidation or winding up of the affairs of the corporation, before any distribution or payment shall be made to the holders of any subordinate shares, the holders of the shares of each series of Cumulative Preferred Shares shall be entitled to be paid in full the respective amounts fixed by the Board of Directors in the resolution or resolutions authorizing the issue of such series, together with a sum, in the case of each share, computed at the annual dividend rate for the series of which the particular share is a part, from the date on which dividends on such shares became cumulative to and including the date fixed for such distribution or payment, less the aggregate amount of all dividends which have theretofore been paid thereon or which have been declared thereon and for which moneys have been set apart and remain available for payment. If such distribution or payment shall have been made to the holders of the Cumulative Preferred Shares, or moneys made available for such payment in full, the remaining assets and funds of the corporation shall be distributed among the holders of the classes of subordinate shares, according to their respective rights and preferences and in each case according to their respective shares. If the assets available are not sufficient to pay in full the amounts so payable to the holders of all outstanding Cumulative Preferred Shares, the holders of all series of such shares shall share ratably in any distribution of assets in proportion to the full amounts to which they would otherwise be respectively entitled. The consolidation or merger of the corporation into or with any other corporation or corporations pursuant to the statutes of the State of Minnesota providing for consolidation or merger shall not be deemed a liquidation, dissolution or winding up of the affairs of the corporation within the meaning of any of the provisions of this Subdivision E. F. Voting and Restrictions on Certain Corporate Action. The holders of the Cumulative Preferred Shares shall not be entitled to vote at any meetings of the shareholders of the corporation, except as required by law or as hereinafter otherwise provided in this Subdivision F and in Division IV: (1) So long as any Cumulative Preferred Shares of any series are outstanding, the corporation shall not without the consent (given by vote at a special meeting of shareholders called for the purpose) of the holders of at least two-thirds (2/3) of the aggregate voting power (determined as hereinafter provided in Division IV) vested in the Cumulative Preferred Shares of all series then outstanding: (a) Create, authorize or issue any shares of any class ranking prior to, or any securities of any kind or class convertible into shares of any class ranking prior to, the Cumulative Preferred Shares as to dividends or assets; or (b) Amend the Articles of Incorporation so as to affect adversely any of the preferences or other rights of the holders of the Cumulative Preferred Shares, provided, however, that if any such amendment would affect adversely the holders of one or more, but not all, of the series of Cumulative Preferred Shares at the time outstanding, consent only of the holders of at least two-thirds (2/3) of the aggregate voting power (determined as hereinafter provided in Division IV) vested in the shares of each series so adversely affected shall be required. (2) So long as any Cumulative Preferred Shares of any series are outstanding, the corporation shall not without the consent (given by vote at a special meeting of shareholders called for the purpose) of the holders (i) of at least a majority of the aggregate voting power (determined as hereinafter provided in Division IV) vested in the Cumulative Preferred Shares of all series then outstanding, or (ii) in case of the negative vote at such meeting of the holders of more than one-fourth (1/4) of the aggregate voting power (determined as hereinafter provided in Division IV) vested in the Cumulative Preferred Shares of all series then outstanding, of at least two-thirds (2/3) of aggregate voting power (determined as hereinafter provided in Division IV) vested in the Cumulative Preferred Shares of all series then outstanding: (a) Increase the authorized number of Cumulative Preferred Shares, or create, authorize or issue any shares of any class ranking on a parity with the Cumulative Preferred Shares as to dividends or assets, or any securities of any kind or class convertible into Cumulative Preferred Shares or shares of any class on a parity with the Cumulative Preferred Shares; or (b) Issue any Cumulative Preferred Shares of any series if as a result thereof more than 60,000 Cumulative Preferred Shares of all series will then be outstanding, unless: (i) The corporation's "Adjusted Income Available for Interest," as hereinafter defined, shall be at least equal to one-and-one-half (1-1/2) times the corporation's "Adjusted Interest and Preferred Charges," as hereinafter defined; and (ii) The corporation's "Adjusted Income Available for Preferred Dividends," as hereinafter defined, shall be at least equal to two-and-one-half (2-1/2) times the corporation's "Adjusted Preferred Charges," as hereinafter defined; and (iii) The corporation's "Common Share Equity," as hereinafter defined, shall equal at least one-fourth (1/4) of the corporation's "Total Capitalization," as hereinafter defined; or (c) Declare, pay or set apart for payment any dividend on any subordinate shares, or purchase, redeem or otherwise acquire for value any subordinate shares, or pay or set aside or make available any moneys for a purchase fund or sinking fund for the purchase or redemption of any such subordinate shares, unless after giving effect to the payment of such dividend or such purchase, redemption or other acquisition of such payment or setting aside of moneys in a purchase fund or sinking fund, (i) The "Common Share Equity," as hereinafter defined, shall equal at least one-fourth (1/4) of the "Total Capitalization," as hereinafter defined; and (ii) The earned surplus of the corporation shall be not less than $831,398. (d) Consolidate or merge into or with any other corporation or corporations pursuant to the statutes of the State of Minnesota providing for consolidation or merger, unless, immediately after such consolidation or merger shall become effective: (i) The Cumulative Preferred Shares of the corporation outstanding immediately prior to such consolidation or merger shall remain outstanding or be constituted as shares of the corporation resulting from such consolidation or merger in the same number and with the same relative rights, voting power, preferences and restrictions as theretofore, the authorized number thereof shall not be increased, there shall be no shares of the resulting corporation outstanding or authorized ranking prior to or on a parity with the Cumulative Preferred Shares, except shares of the corporation outstanding or authorized immediately prior to such consolidation or merger, and the indebtedness for borrowed money of the resulting corporation immediately after such consolidation or merger shall be no greater than the indebtedness for borrowed money of the corporation immediately preceding such consolidation or merger; or (ii) (aa) The "Adjusted Income Available for Interest," as hereinafter defined, of the resulting corporation shall be at least equal to one-and-one-half (1-1/2) times its "Adjusted Interest and Preferred Charges," as hereinafter defined; and (bb) The "Adjusted Income Available for Preferred Dividends," as hereinafter defined, of the resulting corporation shall be at least equal to two-and-one-half (2-1/2) times its "Adjusted Preferred Charges," as hereinafter defined; and (cc) The "Common Share Equity," as hereinafter defined, of the resulting corporation shall equal at least one-fourth (1/4) of its "Total Capitalization," as hereinafter defined. (e) Sell, lease or exchange all or substantially all of its property and assets, unless, after the completion of such transaction, the fair value of the assets of the corporation shall at least equal the preference on voluntary liquidation of all Cumulative Preferred Shares of all series then outstanding and of all shares then outstanding of a class on parity with the Cumulative Preferred Shares, after first deducting an amount equal to all then existing indebtedness of the corporation and an amount equal to the preference on voluntary liquidation of all shares ranking prior to the Cumulative Preferred Shares. (3) For the purposes of the foregoing provisions of this Subdivision F: (a) The term "Adjusted Income Available for Interest" shall mean the gross income of the corporation for a period of twelve (12) consecutive calendar months selected by the corporation out of the fifteen (15) calendar months immediately preceding the proposed issuance of additional Cumulative Preferred Shares, or the proposed consolidation or merger, determined in accordance with such system of accounts as may be prescribed by governmental authorities having jurisdiction in the premises or, in the absence thereof, in accordance with generally accepted accounting practice, available for the payment of interest, but after deduction of taxes of all kinds (including taxes based on income) including for a like period such gross income (similarly computed and with similar deductions and eliminating any duplication of income) of any property which was or will have been an operating unit or a part of an operating unit preceding its acquisition by the corporation and which has been acquired within the past twelve (12) months immediately preceding or is to be acquired by the corporation substantially contemporaneously with the proposed issuance of additional Cumulative Preferred Shares, or the proposed consolidation or merger. (b) The term "Adjusted Interest and Preferred Charges" is hereby defined as the sum of (i) the interest charges for one year upon all interest bearing indebtedness of the corporation outstanding at the time of issuance of such Cumulative Preferred Shares or of the proposed consolidation or merger, including that, if any, proposed to be issued or assumed substantially contemporaneously, or to which property theretofore acquired or to be acquired substantially contemporaneously is or will be subject (adjusted for all amortization of debt discount and expense, or of premium on debt, as the case may be), and (ii) the dividend requirements for one year on all outstanding Cumulative Preferred Shares, and on all other shares of a class ranking prior to or on a parity with the Cumulative Preferred Shares as to dividends or assets, outstanding at the time of issuance of such additional Cumulative Preferred Shares, or of such consolidation or merger, including all such shares proposed to be issued, or all such shares of the resulting corporation, as the case may be. (c) The term "Adjusted Income Available for Preferred Dividends" is hereby defined as the "Adjusted Income Available for Interest" for the aforesaid twelve (12) months' period, less the interest charges for one year and the dividend requirements for one year on any shares ranking prior to the Cumulative Preferred Shares, included in determining the "Adjusted Interest and Preferred Charges." (d) The term "Adjusted Preferred Charges" is hereby defined as the "Adjusted Interest and Preferred Charges" for one year determined at the time of issuance of such Cumulative Preferred Shares or of the proposed consolidation or merger, less the interest charges for one year and the dividend requirements for one year on any shares ranking prior to the Cumulative Preferred Shares, included in determining the "Adjusted Interest and Preferred Charges." (e) The term "Common Share Equity" is hereby defined as the sum of (i) the stated capital of the corporation applicable to its Common Shares and to all other subordinate shares (including shares, if any, proposed to be issued substantially contemporaneously or any additional such shares of the resulting corporation, as the case may be), (ii) capital surplus to the extent of premium on Common Shares and on all other subordinate shares (including premium, if any, on shares proposed to be issued substantially contemporaneously or any additional such shares of the resulting corporation, as the case may be), (iii) contributions in aid of construction, and (iv) earned surplus, all determined in accordance with such system of accounts as may be prescribed by governmental authorities having jurisdiction in the premises or, in the absence thereof, in accordance with generally accepted accounting practice. (f) The term "Total Capitalization" is hereby defined as the sum of (i) the Common Share Equity, (ii) the involuntary liquidation preference of all Cumulative Preferred Shares and all other shares prior to or on a parity with the Cumulative Preferred Shares to be outstanding after the proposed event, and (iii) the principal amount of all interest bearing debt (including debt to which property theretofore acquired or to be acquired substantially contemporaneously is or will be subject) to be outstanding after the proposed event, excluding, however, all indebtedness maturing by its terms within one year from the time of creation thereof unless the corporation, without the consent of the lender, has the right to extend the maturity of such indebtedness for a period or periods which, with the original period of such indebtedness, aggregates one year or more. DIVISION II Provisions Relating to Cumulative Preference Shares A. Issue in Series. The Cumulative Preference Shares may be issued from time to time in one or more series, each of which series shall have such designation and such relative rights, voting power, preferences and restrictions as are hereinafter provided and, to the extent hereinafter permitted, as are determined and stated by the Board of Directors in the resolution or resolutions authorizing the creation of shares of such series. All Cumulative Preference Shares shall be of equal rank and shall be identical, except in respect of their relative voting power (determined as hereinafter provided in Division IV) and the particulars that may be determined by the Board of Directors as hereinafter provided; and each share of each series shall be identical in all respects with the other shares of such series, except as to the dates from which dividends thereon shall be cumulative. Cumulative Preference Shares shall be issued only as fully paid and nonassessable shares. Subject to the provisions of the last paragraph of this Subdivision A, authority is hereby expressly granted to the Board of Directors to authorize the issuance of Cumulative Preference Shares in one or more series, and to determine and state, by the resolution or resolutions authorizing the creation of each series: (i) the designation of the series and the number of shares which shall constitute such series, which number may be altered from time to time by like action of the Board of Directors in respect of shares then unallotted; (ii) the annual rate of dividends payable on shares of such series; (iii) the price or prices per share at which the shares of such series shall be redeemable; (iv) the amount payable on shares of such series in the event of any dissolution, liquidation or winding up of the affairs of the corporation, which amount may differ in the case of a voluntary or involuntary dissolution, liquidation or winding up of such affairs, provided that the amount in the case of an involuntary dissolution, liquidation or winding up of such affairs shall be determined as provided in the following paragraph; (v) the conversion rights, if any, with respect to the conversion of shares of such series into Common Shares of the corporation; and (vi) the sinking or purchase fund provisions, if any, for the mandatory redemption or purchase of shares of such series. The amount (in addition to accrued and unpaid dividends, if any) which the holders of Cumulative Preference Shares of each series shall be entitled to receive in the event of any dissolution, liquidation or winding up of the affairs of the corporation which shall be involuntary shall be equal to the gross consideration received by the corporation upon the issuance thereof (without regard to any premium received or any underwriting discount or commission, private placement fee or other expense incurred by the corporation in connection with the issuance thereof). B. Dividends. Subject to the preferential rights of the holders of Cumulative Preferred Shares with respect to payment of dividends as set forth in Subdivision B of Division I, the holders of the Cumulative Preference Shares of each series shall be entitled to receive, when and as declared by the Board of Directors, out of any funds legally available for such purpose, cash dividends at the annual rate for such series theretofore fixed by the Board of Directors as hereinbefore provided, and no more, payable quarterly on such dates as may be fixed in the resolution or resolutions adopted by the Board of Directors authorizing the creation of such series. Such dividends shall be paid to shareholders of record on the respective dates, not exceeding twenty (20) days prior to such payment dates, fixed by the Board of Directors for such purpose. Such dividends shall be cumulative from and including the date or dates fixed for such purpose by the Board of Directors in the resolution or resolutions authorizing the creation of such series. No dividend shall be paid, or declared and set apart for payment, upon any Cumulative Preference Shares of any series for any quarterly dividend period unless at the same time a like proportionate dividend for the same or comparable quarterly period, ratable in proportion to the respective annual dividend rates fixed therefor, shall be paid, or declared and set apart for payment, upon all Cumulative Preference Shares of all series then issued and outstanding. In no event shall any dividend be paid or declared, nor shall any distribution be made, on any subordinate shares, other than a dividend or distribution payable solely in subordinate shares, nor shall any subordinate shares be purchased, redeemed or otherwise acquired by the corporation for value, nor shall any moneys be paid to or set aside or made available for a purchase fund or sinking fund for the purchase or redemption of any subordinate shares, unless (i) all dividends on the Cumulative Preference Shares of all series for all past quarterly dividend periods and for the then current quarterly dividend period shall have been paid or declared and a sum sufficient for the payment thereof set apart for payment; and (ii) the corporation shall not be in default or deficient under any requirement of a sinking or purchase fund established with respect to outstanding Cumulative Preference Shares of any series for any period then elapsed. Subject to the provisions of this Article VI, and not otherwise, dividends may be declared by the Board of Directors and paid from time to time, out of any funds legally available therefor, upon the then outstanding subordinate shares, and the holders of the Cumulative Preference Shares shall not be entitled to participate in any such dividends. C. Redemption of Cumulative Preference Shares. Subject to the limitations stated in Subdivision B of Division I and in Subdivision D of this Division II, the Cumulative Preference Shares of any or all series may be redeemed, as a whole at any time or in part from time to time, at the option of the corporation by resolution of the Board of Directors, at the applicable redemption price for the shares of such series as determined by the Board of Directors in the resolution or resolutions authorizing the creation of such series, together with an amount (hereinafter referred to as "accrued dividends to the redemption date") in the case of each share, computed at the annual dividend rate for the series of which the particular share is a part, from and including the date on which dividends on such share became cumulative to and including the date of redemption, less the aggregate amount of all dividends which have theretofore been paid thereon or which have been declared thereon and for which moneys for payment have been set apart and remain available for payment. Each such redemption shall be effected upon the same notice as provided in Subdivision C of Division I in respect of the redemption of Cumulative Preferred Shares, and all other provisions of said Subdivision C with respect to the method and effect of redemption of Cumulative Preferred Shares shall be applicable to the redemption of Cumulative Preference Shares in the same manner and with the same force and effect as though such provisions were set forth in full in this Subdivision C. All Cumulative Preference Shares converted, redeemed or purchased voluntarily or pursuant to any sinking fund or purchase fund for the mandatory redemption or purchase of shares shall be retired and cancelled and shall have the status of authorized but unissued Cumulative Preference Shares of the corporation and may be reissued in the same manner as authorized but unissued Cumulative Preference Shares undesignated as to series. D. Limitation on Purchase and Redemption of Cumulative Preference Shares. No Cumulative Preference Shares of any series shall be purchased, redeemed or otherwise acquired by the corporation for value, nor shall any moneys be paid to or set aside or made available for a purchase fund or sinking fund for the purchase or redemption of Cumulative Preference Shares of any series, unless all dividends on the Cumulative Preference Shares of all series for all past quarterly dividend periods and for the current quarterly period shall have been paid or declared and a sum sufficient for the payment thereof set apart for payment, except in event all of the Cumulative Preference Shares shall be called for redemption. E. Liquidation Preferences. In the event of any dissolution, liquidation or winding up of the affairs of the corporation, before any distribution or payment shall be made to the holders of any class of subordinate shares, the holders of the shares of each series of Cumulative Preference Shares shall be entitled to be paid in full the respective amounts fixed by the Board of Directors in the resolution or resolutions authorizing the creation of such series together with an amount, in the case of each share, computed at the annual dividend rate for the series of which the particular share is a part, from and including the date on which dividends on such share became cumulative to and including the date fixed for such payment, less the aggregate amount of all dividends which have theretofore been paid thereon or which have been declared thereon and for which moneys have been set apart and remain available for payment; provided, however, that no such payment to the holders of Cumulative Preference Shares shall be made until payment in full shall have been made to the holders of Cumulative Preferred Shares, or moneys made available for such payment in full, in accordance with the provisions of Subdivision E of Division I. If such payment shall have been made to the holders of the Cumulative Preference Shares, or moneys made available for such payment in full, the remaining assets and funds of the corporation shall be distributed among the holders of the classes of subordinate shares according to their respective rights and preferences and in each case according to their respective shares. If the assets available are not sufficient to pay in full the amounts so payable to the holders of all outstanding Cumulative Preference Shares, the holders of all series of such shares shall share ratably in any distribution of assets in proportion to the full amounts to which they would otherwise be respectively entitled. The consolidation or merger of the corporation into or with any other corporation or corporations pursuant to the statutes of the State of Minnesota providing for consolidation or merger shall not be deemed a liquidation, dissolution or winding up of the affairs of the corporation within the meaning of any of the provisions of this Subdivision E. F. Voting and Restrictions on Certain Corporate Action. The holders of the Cumulative Preference Shares shall not be entitled to vote at any meetings of the shareholders of the corporation, except as required by law or as hereinafter otherwise provided in this Subdivision F and in Division IV: (1) So long as any Cumulative Preference Shares of any series are outstanding, the corporation shall not, without the consent (given by vote at a special meeting of shareholders called for the purpose) of the holders of at least two-thirds (2/3) of the aggregate voting power (determined as hereinafter provided in Division IV) vested in the Cumulative Preference Shares of all series then outstanding: (a) Create or authorize any shares of any class (other than the Cumulative Preferred Shares, whether now or hereafter authorized) ranking prior to the Cumulative Preference Shares as to dividends or assets; or (b) Amend the Articles of Incorporation so as to affect adversely any of the preferences or other rights of the holders of the Cumulative Preference Shares, provided, however, that if any such amendment would affect adversely the holders of one or more, but not all, of the series of Cumulative Preference Shares at the time outstanding, consent only of the holders of at least two-thirds (2/3) of the aggregate voting power (determined as hereinafter provided in Division IV) vested in the shares of each series so adversely affected shall be required. (2) So long as any Cumulative Preference Shares of any series are outstanding, the corporation shall not, without the consent (given by vote at a special meeting of shareholders called for the purpose) of the holders (i) of at least a majority of the aggregate voting power (determined as hereinafter provided in Division IV) vested in the Cumulative Preference Shares of all series then outstanding, or (ii) in case of the negative vote at such meeting of the holders of more than one-fourth (1/4) of the aggregate voting power (determined as hereinafter provided in Division IV) vested in the Cumulative Preference Shares of all series then outstanding, of at least two-thirds (2/3) of the aggregate voting power (determined as hereinafter provided in Division IV) vested in the Cumulative Preference Shares of all series then outstanding: (a) Increase the authorized number of Cumulative Preference Shares, or create or authorize any shares of any class ranking on a parity with the Cumulative Preference Shares as to dividends or assets; or (b) Consolidate or merge into or with any other corporation or corporations pursuant to the statutes of the State of Minnesota providing for consolidation or merger unless, immediately after such consolidation or merger shall become effective, the Cumulative Preference Shares of the corporation outstanding immediately prior to such consolidation or merger shall remain outstanding or be constituted as shares of the corporation resulting from such consolidation or merger in the same number and with the same relative rights, voting power, preferences and restrictions as theretofore, the authorized number thereof shall not be increased, and there shall be no shares of the resulting corporation outstanding or authorized ranking prior to or on a parity with the Cumulative Preference Shares, except shares of the corporation outstanding or authorized immediately prior to such consolidation or merger; or (c) Sell, lease or exchange all or substantially all of its property and assets, unless, after the completion of such transaction, the fair value of the assets of the corporation shall at least equal the preference on voluntary liquidation of all Cumulative Preference Shares of all series then outstanding and of all shares then outstanding of a class on a parity with the Cumulative Preference Shares, after first deducting an amount equal to all then existing indebtedness of the corporation and an amount equal to the preference on voluntary liquidation of all shares ranking prior to the Cumulative Preference Shares. DIVISION III Provisions Relating to Common Shares A. Dividends. Subject to the preferential rights of the holders of the Cumulative Preferred Shares and the Cumulative Preference Shares with respect to the payment of dividends, as set forth in Subdivision B of Division I and Subdivision B of Division II, respectively, holders of the Common Shares shall be entitled to receive dividends, out of any funds legally available therefor, when and as declared by the Board of Directors. B. Liquidation Preferences. In the event of any dissolution, liquidation or winding-up of the affairs of the corporation, whether voluntary or involuntary, holders of the Common Shares shall be entitled to receive ratably, in accordance with the numbers of shares held by them respectively, the assets of the corporation available for payment to shareholders remaining after payment in full shall have been made to holders of the Cumulative Preferred Shares and the Cumulative Preference Shares in accordance with the provisions of Subdivision E of Division I and Subdivision E of Division II, respectively. DIVISION IV Voting Rights and Other Provisions Relating to Cumulative Preferred Shares, Cumulative Preference Shares and Common Shares A. Voting Rights of Common Shares. Except as otherwise expressly set forth in this Article VI and as provided by law, the holders of Common Shares shall have the sole voting rights of shareholders of the corporation and shall be entitled to one vote for each share held, and the holders of a majority of the Common Shares outstanding shall have power to authorize the sale, lease, exchange or other disposal of all, or substantially all, of the property and assets of the corporation, including its good will, to adopt or reject an agreement of consolidation or merger and to amend the Articles of Incorporation. B. Voting Rights of Cumulative Preferred Shares. (1) After an amount equivalent to four (4) full quarterly dividend installments on the Cumulative Preferred Shares of any series outstanding shall be in default, the holders of Cumulative Preferred Shares of all series at the time outstanding, voting separately as a class, shall, at any annual meeting of the shareholders or any special meeting of the shareholders called as herein provided occurring during such period, elect three members of the Board of Directors, and the holders of the Common Shares, voting separately as a class, shall, subject to any rights of the holders of Cumulative Preference Shares to elect directors as provided in Subdivision C of this Division IV, elect the remaining directors of the corporation. (2) After an amount equivalent to twelve (12) full quarterly dividend installments on the Cumulative Preferred Shares of any series outstanding shall be in default, the holders of Cumulative Preferred Shares of all series at the time outstanding, voting separately as a class, shall at any annual meeting of the shareholders or any special meeting of the shareholders called as herein provided occurring during such period, elect the smallest number of directors necessary to constitute a majority of the full Board of Directors, and the holders of the Common Shares, voting separately as a class, shall, subject to any rights of the holders of Cumulative Preference Shares to elect directors as provided in Subdivision C of this Division IV, elect the remaining directors of the corporation. (3) At any annual meeting or special meeting of the shareholders for the election of directors occurring after all dividends then in default on the Cumulative Preferred Shares then outstanding shall be paid (and such dividends shall be declared and paid out of any funds legally available therefor as soon as reasonably practical), the Cumulative Preferred Shares shall thereupon be divested of any special rights with respect to the election of directors provided in paragraphs (1) and (2) of this Subdivision B, but always subject to the same provisions for the vesting of such voting power in the holders of the Cumulative Preferred Shares in the case of a future like default or defaults in dividends thereon. (4) Voting power vested in the holders of the Cumulative Preferred Shares as provided in paragraphs (1) and (2) of this Subdivision B may be exercised at any annual meeting of shareholders or at a special meeting of shareholders held for such purpose, which special meeting of shareholders shall be called by the proper officers of the corporation at any time when such voting power shall be so vested, within twenty (20) days after written request therefor signed by the holders of not less than five percent (5%) of the aggregate voting power (determined as hereinafter provided in Subdivision D of this Division IV) vested in the Cumulative Preferred Shares of all series then outstanding, the date of such special meeting to be not more than forty (40) days from the date of giving of notice thereof. (5) Notice of any annual or special meeting of shareholders for the election of directors held when voting powers as aforesaid shall be vested in the holders of Cumulative Preferred Shares shall be given to all holders of Cumulative Preferred Shares not less than fifteen (15) days prior to said meeting, and such notice shall describe with particularity the voting rights of the holders of each series of Cumulative Preferred Shares. (6) At any such annual or special meeting the presence in person or by proxy of the holders of a majority of the aggregate voting power (determined as hereinafter provided in Subdivision D of this Division IV) vested in the Cumulative Preferred Shares of all series then outstanding shall be required to constitute a quorum of the holders of the Cumulative Preferred Shares for the election by them of the directors whom they are entitled to elect; provided, however, that the holders of a majority of the aggregate voting power (determined as hereinafter provided in Subdivision D of this Division IV) vested in the Cumulative Preferred Shares who are present in person or by proxy shall have power to adjourn such meeting for the election of directors by the holders of the Cumulative Preferred Shares from time to time, without notice other than announcement at the meeting. C. Voting Rights of Cumulative Preference Shares. (1) After an amount equivalent to four (4) full quarterly dividend installments on the Cumulative Preference Shares of any series outstanding shall be in default, the holders of Cumulative Preference Shares of all series at the time outstanding, voting separately as a class, shall, at any annual meeting of the shareholders or any special meeting of the shareholders called as herein provided occurring during such period, elect two members of the Board of Directors, and the holders of the Common Shares, voting separately as a class, shall, subject to any rights of the holders of Cumulative Preferred Shares to elect directors as provided in Subdivision B of this Division IV, elect the remaining directors of the corporation. (2) At any annual meeting or special meeting of the shareholders for the election of directors occurring after all dividends then in default on the Cumulative Preference Shares then outstanding shall be paid (and such dividends shall be declared and paid out of any funds legally available therefor as soon as reasonably practical), the Cumulative Preference Shares shall thereupon be divested of any special rights with respect to the election of directors provided for in paragraph (1) of this Subdivision C, but always subject to the same provisions for the vesting of such voting power in the holders of the Cumulative Preference Shares in the case of a future like default or defaults in dividends thereon. (3) All provisions of paragraphs (4), (5) and (6) of Subdivision B of this Division IV with respect to the method of exercising the special voting rights of the holders of Cumulative Preferred Shares shall be applicable to the special voting rights of the holders of Cumulative Preference Shares in the same manner and with the same force and effect as though such provisions were set forth in full in this Subdivision C. D. Number of Votes Applicable to Each Cumulative Preferred Share and to Each Cumulative Preference Share. For the purpose of each vote or consent under the Articles of Incorporation or pursuant to applicable law, the number of votes to which each Cumulative Preferred Share and each Cumulative Preference Share shall be entitled shall be determined as follows: (a) In voting by holders of Cumulative Preferred Shares, separately as a class, or by series, each Cumulative Preferred Share entitled to receive the smallest fixed amount (in addition to accrued and unpaid dividends, if any) in the event of any dissolution, liquidation or winding up of the affairs of the corporation which shall be involuntary shall have one vote, and each Cumulative Preferred Share entitled to receive a greater fixed amount (in addition to accrued and unpaid dividends, if any) in any such event shall have the number of votes which is in the same proportion as such greater amount shall be to such smallest amount; (b) In voting by holders of Cumulative Preference Shares, separately as a class, or by series, each Cumulative Preference Share entitled to receive the smallest fixed amount (in addition to accrued and unpaid dividends, if any) in the event of any dissolution, liquidation or winding up of the affairs of the corporation which shall be involuntary shall have one vote, and each Cumulative Preference Share entitled to receive a greater fixed amount (in addition to accrued and unpaid dividends, if any) in any such event shall have the number of votes which is in the same proportion as such greater amount shall be to such smallest amount; and (c) In voting by holders of Cumulative Preferred Shares and/or Cumulative Preference Shares and/or holders of Common Shares, together as a single class, each Common Share shall have one vote, each Cumulative Preferred Share and each Cumulative Preference Share entitled to receive $100 (in addition to accrued and unpaid dividends, if any) in the event of any dissolution, liquidation or winding up of the affairs of the corporation which shall be involuntary shall have one vote and each Cumulative Preferred Share and each Cumulative Preference Share entitled to receive a different fixed amount (in addition to accrued and unpaid dividends, if any) in such event shall be entitled to such greater or lesser number of votes which is in the same proportion as such different amount shall be to $100. E. Number and Term of Directors and Manner of Election. (1) Except at such times as the holders of Cumulative Preferred Shares and/or Cumulative Preference Shares shall have voting rights for the election of directors, (a) the Board of Directors shall consist of such number of persons, not less than seven (7) nor more than nine (9), as may be determined by the shareholders from time to time at annual meetings thereof (subject to the authority of the Board of Directors to increase or decrease the number of directors as permitted by law), (b) the term of office of each director other than directors elected to fill vacancies shall be for the period ending at the third annual meeting following his election and until his successor is elected and qualified, (c) vacancies in the Board of Directors occurring by reason of death, resignation, removal or disqualification shall be filled for the unexpired term of the director with respect to whom the vacancy occurred by a majority of the remaining directors of the Board of Directors, although less than a quorum, and (d) vacancies in the Board of Directors occurring by reason of newly created directorships resulting from an increase in the authorized number of directors by action of the Board of Directors as permitted by these Articles of Incorporation and the Bylaws of the corporation shall be filled by a majority vote of the directors serving at the time of such increase, each director so elected to a newly created directorship to serve for the appropriate term so as to maintain, as near as may be, an equal division between the classes of directors. Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the corporation or the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the corporation, the affirmative vote of the holders of at least 75% of the voting power of the then outstanding Common Shares shall be required to amend, alter, adopt any provision inconsistent with or repeal this paragraph (1) of Subdivision E of this Division IV unless the Board of Directors, if all such directors are Continuing Directors, as defined in this Article VI, shall unanimously recommend such amendment, alteration, adoption or repeal. (2) If at any time the holders of Cumulative Preferred Shares and/or Cumulative Preference Shares of the corporation shall, under the provisions of paragraph (1) of Subdivision B of this Division IV or of paragraph (1) of Subdivision C of this Division IV, become entitled to elect any directors, then the terms of all incumbent directors shall expire at the time of the first annual meeting thereafter at which such holders of Cumulative Preferred Shares and/or Cumulative Preference Shares are so entitled to elect directors. If at any time the holders of Cumulative Preferred Shares of the corporation shall, under the provisions of paragraph (2) of Subdivision B of this Division IV, become entitled to elect a majority of the Board of Directors, the terms of all incumbent directors shall expire whenever such majority has been duly elected and qualified. During any period during which the holders of Cumulative Preferred Shares and/or Cumulative Preference Shares of the corporation shall have voting rights with respect to directors under the provisions of this Division IV, the Board of Directors shall consist of eleven (11) persons and the entire number of persons composing such Board shall be elected at each annual or special meeting of shareholders for the election of directors and shall serve until the next such annual or special meeting or until their successors have been elected and qualified, provided, however, that whenever the holders of Cumulative Preferred Shares and/or Cumulative Preference Shares acquire voting rights under paragraph (1) of Subdivision B of this Division IV or under paragraph (1) of Subdivision C of this Division IV, and exercise such rights at a special meeting called therefor, the terms of office of directors theretofore elected by the holders of Common Shares will not expire until the next annual meeting. If a vacancy or vacancies in the Board of Directors shall exist with respect to a director or directors who shall have been elected by the holders of either Cumulative Preferred Shares or Cumulative Preference Shares, the remaining directors elected by the holders of Cumulative Preferred Shares or Cumulative Preference Shares, as the case may be, by affirmative vote of a majority thereof, or the remaining director so elected if there be but one, may elect a successor or successors to hold office for the unexpired term of the director or directors whose place or places shall be vacant. Likewise, if a vacancy or vacancies shall exist with respect to a director or directors who shall have been elected by the holders of Common Shares, the remaining directors elected by the holders of Common Shares, by affirmative vote of a majority thereof, or the remaining director so elected if there be but one, may elect a successor or successors to hold office for the unexpired term of the director or directors whose place or places shall be vacant. (3) Whenever the Cumulative Preferred Shares shall be divested of voting powers with respect to the election of directors as provided in paragraph (3) of Subdivision B of this Division IV, the terms of all incumbent directors, other than directors elected by the holders of Cumulative Preference Shares pursuant to Subdivision C of this Division IV, shall expire upon the election of their successors by the holders of the Common Shares at the next annual or special meeting of shareholders for the election of directors. A special meeting shall be called for such purpose within twenty (20) days after the written request therefor signed by the holders of not less than five percent (5%) of the Common Shares outstanding, the date of such special meeting to be not more than forty (40) days from the date of giving of notice thereof. Upon the election and qualification of directors by the holders of Common Shares as aforesaid the provisions of paragraph (1) of Subdivision E of this Division IV shall again control, unless at that time the holders of Cumulative Preference Shares have voting rights for the election of directors. (4) Whenever the Cumulative Preference Shares shall be divested of voting powers with respect to the election of directors as provided in paragraph (2) of Subdivision C of this Division IV, the terms of all incumbent directors, other than directors elected by the holders of Cumulative Preferred Shares pursuant to Subdivision B of this Division IV, shall expire on the election of their successors by the holders of the Common Shares at the next annual or special meeting of shareholders for the election of directors. A special meeting shall be called for such purpose within twenty (20) days after the written request therefor signed by the holders of not less than five percent (5%) of the Common Shares outstanding, the date of such special meeting to be not more than forty (40) days from the date of giving of notice thereof. Upon the election and qualification of directors by the holders of Common Shares as aforesaid, the provisions of paragraph (1) of Subdivision E of this Division IV shall again control, unless at that time the holders of Cumulative Preferred Shares have voting rights for the election of directors. F. Cumulative Voting. The holders of Common Shares of the corporation shall have no right to cumulate votes in the election of directors. If notice in writing is given by any holder of Cumulative Preferred Shares or Cumulative Preference Shares to any officer of the corporation before a meeting for the election of directors at which such shareholder is entitled to vote, or to the presiding officer at such meeting at any time before the election of directors takes place, that he intends to cumulate his votes in such election, each holder of shares of the class with respect to which such notice has been given shall have the right to multiply the number of votes to which he may be entitled by the number of directors to be elected by the holders of shares of such class, and he may cast all such votes for one candidate or distribute them among any two or more candidates. In such case, it shall be the duty of the presiding officer, before the election of directors at the meeting, to announce that all shareholders of the class with respect to which such notice has been given shall cumulate their votes. G. Preemptive Rights. No holder of shares of the corporation of any class or of any security or obligation convertible into, or of any warrant, option or right to purchase, subscribe for or otherwise acquire, shares of any class of the corporation, whether now or hereafter authorized, shall, as such holder, have any preemptive or preferential right whatsoever to purchase, subscribe for or otherwise acquire shares of any class of the corporation or of any security or obligation convertible into, or of any warrant, option or right to purchase, subscribe for or otherwise acquire, shares of any class of the corporation, whether now or hereafter authorized, other than such rights of subscription, if any, as the Board of Directors may from time to time determine. DIVISION V Voting Rights of Common Shares Relating To Certain Business Combinations A. In addition to any other affirmative vote required by law or these Articles of Incorporation, and except as otherwise expressly provided in Subdivision B of this Division V, 1. any merger or consolidation of the corporation or any Subsidiary (as hereinafter defined) with (a) an Interested Shareholder (as hereinafter defined) or (b) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate or Associate (as such terms are hereinafter defined) of an Interested Shareholder, or 2. any sale, lease, exchange, mortgage, pledge, grant of a security interest, transfer or other disposition (in one transaction or a series of transactions), other than in the ordinary course of business, to or with (a) an Interested Shareholder or (b) any other person (whether or not itself an Interested Shareholder) which is, or after such sale, lease, exchange, mortgage, pledge, grant of a security interest, transfer or other disposition would be, an Affiliate or Associate of an Interested Shareholder, directly or indirectly, of all or any Substantial Part (as hereinafter defined) of the assets of the corporation (including, without limitation, any voting securities of a Subsidiary) or any Subsidiary, or both, or 3. the issuance or transfer by the corporation or any Subsidiary (in one transaction or a series of transactions) of any securities (except pursuant to stock dividends, stock splits or similar transactions which would not have the effect of increasing the proportionate voting power of an Interested Shareholder) of the corporation or any Subsidiary, or both, to (a) an Interested Shareholder or (b) any other person (whether or not itself an Interested Shareholder) which is, or after such issuance or transfer would be, an Affiliate or Associate of an Interested Shareholder, or 4. the adoption of any plan or proposal for the liquidation or dissolution of the corporation proposed by or on behalf of an Interested Shareholder or any Affiliate or Associate of an Interested Shareholder, or 5. any reclassification of securities (including any reverse stock split), or recapitalization of the corporation, or any merger or consolidation of the corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the corporation or any subsidiary directly or indirectly beneficially owned by (a) an Interested Shareholder or (b) any other person (whether or not itself an Interested Shareholder) which is, or after such reclassification, recapitalization, merger or consolidation or other transaction would be, an Affiliate or Associate of an Interested Shareholder, shall not be consummated unless such consummation shall have been approved by the affirmative vote of the holders of at least 75% of the voting power of the then outstanding Common Shares. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law, in these Articles of Incorporation or in any agreement with any national securities exchange or otherwise. B. The provisions of Subdivision A of this Division V shall not be applicable to any particular Business Combination (as hereinafter defined) and such Business Combination shall require only such affirmative vote as is required by law and any other provision of these Articles of Incorporation, if the Business Combination shall have been approved by a majority of the Continuing Directors (as hereinafter defined) or all of the following conditions shall have been met: 1. The transaction constituting the Business Combination shall provide for a consideration to be received by all holders of Common Shares in exchange for all their Common Shares, and the aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of Common Shares in such Business Combination shall be at least equal to the higher of the following: (a) (if applicable) the highest per-share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any Common Shares beneficially owned by an Interested Shareholder (i) within the two-year period immediately prior to the Announcement Date (as hereinafter defined), (ii) within the two-year period immediately prior to the Determination Date (as hereinafter defined) or (iii) in the transaction in which it became an Interested Shareholder, whichever is highest; or (b) the Fair Market Value per Common Share on the Announcement Date or on the Determination Date, whichever is higher. 2. The consideration to be received by holders of Common Shares shall be in cash or in the same form as was previously paid in order to acquire the Common Shares that are beneficially owned by an Interested Shareholder and, if an Interested Shareholder beneficially owns Common Shares that were acquired with varying forms of consideration, the form of consideration for such Common Shares shall be either cash or the form used to acquire the largest number beneficially owned by it. The price determined in accordance with paragraph 1 of this Subdivision B shall be subject to appropriate adjustment in the event of any recapitalization, stock dividend, stock split, combination of shares or similar event. 3. After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination: (a) except as approved by a majority of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor the full amount of any dividends (whether or not cumulative) payable on any outstanding Cumulative Preferred Shares or Cumulative Preference Shares; (b) there shall have been (i) no reduction in the annual rate of dividends paid on the Common Shares (except as necessary to reflect any subdivision of the Common Shares) other than as approved by a majority of the Continuing Directors and (ii) an increase in such annual rate of dividends as necessary to prevent any such reduction in the event of any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding Common Shares, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors; and (c) such Interested Shareholder shall not have become the beneficial owner of any additional Common Shares except as part of the transaction in which it became an Interested Shareholder. 4. After such Interested Shareholder has become an Interested Shareholder, such Interested Shareholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the corporation, whether in anticipation of or in connection with such Business Combination or otherwise; and 5. A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to the shareholders of the corporation, no later than the earlier of (a) 30 days prior to any vote on the proposed Business Combination or (b) if no vote on such Business Combination is required, 60 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). Such proxy statement shall contain at the front thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the Business Combination which the Continuing Directors, or any of them, may have furnished in writing and, if deemed advisable by a majority of the Continuing Directors, an opinion of a reputable investment banking firm as to the fairness (or lack of fairness) of the terms of such Business Combination, from the point of view of the holders of the Common Shares other than an Interested Shareholder (such investment banking firm to be selected by a majority of the Continuing Directors, to be furnished with all information it reasonably requests and to be paid a reasonable fee for its services upon receipt by the corporation of such opinion). C. For the purposes of this Division V: 1. "Business Combination" shall mean any transaction that is referred to in any one or more of paragraphs 1 through 5 of Subdivision A of this Division V. 2. "Person" shall mean any individual, firm, trust, partnership, association, corporation or other entity. 3. "Interested Shareholder" shall mean any person (other than the corporation or any Subsidiary) who or which: (a) is the beneficial owner, directly or indirectly, of more than 10% of the voting power of the then outstanding Common Shares; or (b) is an Affiliate of the corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of more than 10% of the voting power of the then outstanding Common Shares; or (c) is an assignee of or has otherwise succeeded to the beneficial ownership of any Common Shares which were, at any time within the two-year period immediately prior to the date in question, beneficially owned by an Interested Shareholder, unless such assignment or succession shall have occurred pursuant to a Public Transaction (as hereinafter defined) or any series of transactions involving a Public Transaction. For the purpose of determining whether a person is an Interested Shareholder, the number of Common Shares deemed to be outstanding shall include shares deemed owned through application of paragraph 5 below, but shall not include any other Common Shares that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. 4. "Public Transaction" shall mean any (a) purchase of shares offered pursuant to an effective registration statement under the Securities Act of 1933 or (b) open-market purchase of shares on a national securities exchange or in the over-the-counter market if, in either such case, the price and other terms of sale are not negotiated by the purchaser and the seller of the beneficial interest in the shares. 5. A person shall be a "beneficial owner" of any Common Shares: (a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or (b) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise or (ii) the right to vote or to direct the voting thereof pursuant to any agreement, arrangement or understanding; or (c) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Common Shares. 6. "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on January 1, 1986. 7. "Subsidiary" shall mean any corporation of which a majority of any class of equity security (as defined in Rule 3all-1 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on January 1, 1986) is owned, directly or indirectly, by the corporation; provided, however, that, for purposes of the definition of Interested Shareholder set forth in paragraph 3, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the corporation. 8. "Continuing Director" shall mean any member of the Board of Directors of the corporation who (1) is not an Affiliate or Associate of, and not a nominee of, an Interested Shareholder having any interest, direct or indirect, in the proposed Business Combination and (2) was a member of the Board of Directors prior to the time that such Interested Shareholder became an Interested Shareholder, and any successor of a Continuing Director who is not an Affiliate or Associate of, and not a nominee of, such Interested Shareholder and is recommended to succeed a Continuing Director by a majority of Continuing Directors then on the Board of Directors. 9. "Announcement Date" shall mean the date of the first public announcement of the proposed Business Combination. 10. "Determination Date" shall mean the date on which an Interested Shareholder became an Interested Shareholder. 11. "Fair Market Value" shall mean: (a) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation or last reported sale price, whichever is applicable, with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (b) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the Continuing Directors in good faith. 12. "Substantial Part" shall mean more than 30% of the fair market value of the total assets of the corporation as of the end of its most recent fiscal year ending prior to the time the determination is being made. D. A majority of the Continuing Directors shall have the power and duty to determine for the purposes of this Division V, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Division V, including, without limitation, (1) whether a person is an Interested Shareholder, (2) the number of Common Shares beneficially owned by any person, (3) whether a person is an Affiliate or Associate of another, (4) whether the assets which are the subject of any Business Combination constitute a Substantial Part of the assets of the corporation or the Subsidiary, or both, (5) whether the requirements of Subdivision B of this Division V have been met, and (6) such other matters with respect to which a determination is required under this Division V. The good faith determination of a majority of the Continuing Directors on such matters shall be conclusive and binding for all purposes of this Division V. E. Nothing contained in this Division V shall be construed to relieve an Interested Shareholder from any fiduciary obligation imposed by law. F. Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the corporation or the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the corporation, the affirmative vote of the holders of at least 75% of the voting power of the then outstanding Common Shares, shall be required to amend, alter, adopt any provision inconsistent with or repeal this Division V unless the Board of Directors, if all such directors are Continuing Directors, shall unanimously recommend such amendment, alteration, adoption or repeal. DIVISION VI Provisions Relating to Purchases Of Common Shares Of The Corporation A. Except as otherwise expressly provided in this Division VI, the corporation may not purchase any Common Shares at a per-share price in excess of the Fair Market Price (as hereinafter defined) as of the time of such purchase from a person known by the corporation to be a Substantial Shareholder (as hereinafter defined), unless such purchase has been approved by the affirmative vote of the holders of at least two-thirds (2/3) of the Common Shares voted thereon held by Disinterested Shareholders (as hereinafter defined). Such affirmative vote shall be required notwithstanding the fact that no vote may be required or that a lesser percentage may be specified by law, in these Articles of Incorporation or in any agreement with any national securities exchange or otherwise. B. The provisions of this Division VI shall not apply to (1) any purchase pursuant to an offer to purchase which is made on the same terms and conditions to the holders of all of the outstanding Common Shares or (2) any open market purchase that constitutes a Public Transaction (as hereinafter defined). C. For the purposes of this Division VI: 1. The terms "Continuing Director," "Person," "Public Transaction," "Affiliate" and "Associate" shall have the meanings given to them in Division V of this Article VI. 2. "Substantial Shareholder" shall mean any person (other than any employee benefit plan or trust of the corporation or any similar entity) who or which: (a) is the beneficial owner of more than 10% of the voting power of the then outstanding Common Shares, the acquisition of any shares of which has occurred within the two-year period immediately prior to the date on which the corporation purchases any such shares; or (b) is an assignee of or has otherwise succeeded to the beneficial ownership of any Common Shares beneficially owned by a Substantial Shareholder, unless such assignment or succession shall have occurred pursuant to a Public Transaction or any series of transactions involving a Public Transaction and, with respect to all Common Shares owned by such person, such person has been the beneficial owner of any such shares for a period of less than two years (including, for these purposes, the holding period of the Substantial Shareholder from whom such person acquired shares). For the purposes of determining whether a person is a Substantial Shareholder, the number of Common Shares deemed to be outstanding shall include shares deemed owned through application of paragraph 5 below, but shall not include any other Common Shares which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. 3. "Disinterested Shareholders" shall mean those holders of Common Shares who are not Substantial Shareholders. 4. "Fair Market Price" shall mean the highest closing sale price on the Composite Tape for New York Stock Exchange-Listed Stocks during the 30-day period immediately preceding the date in question of a Common Share or, if such Common Shares are not quoted on the Composite Tape, on the New York Stock Exchange or, if such Common Shares are not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such Common Shares are listed, or, if such Common Shares are not listed on any such exchange, the highest closing bid quotation with respect to a Common Share during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or, if no such quotations are available, the fair market value on the date in question of a Common Share, as determined by a majority of the Board of Directors in good faith. 5. A person shall be a "beneficial owner" of any Common Shares: (a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or (b) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise or (ii) the right to vote or to direct the voting thereof pursuant to any agreement, arrangement or understanding; or (c) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Common Shares. D. A majority of the Board of Directors shall have the power and duty to determine for the purposes of this Division VI, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Division VI, including without limitation, (1) whether a person is a Substantial Shareholder, (2) the number of Common Shares beneficially owned by any person, (3) whether a person is an Affiliate or Associate of another, (4) whether a price is in excess of the Fair Market Price, (5) whether a purchase constitutes a Public Transaction, and (6) such other matters with respect to which a determination is required under this Division VI. The good faith determination of a majority of the Board of Directors on such matters shall be conclusive and binding for all purposes of this Division VI. E. Nothing contained in this Division VI shall be construed to relieve a Substantial Shareholder from any fiduciary obligation imposed by law. F. Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the corporation or the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the corporation, the affirmative vote of the holders of at least 75% of voting power of the then outstanding Common Shares shall be required to amend, alter, adopt any provision inconsistent with or repeal this Division VI unless the Board of Directors, if all such directors are Continuing Directors, shall unanimously recommend such amendment, alteration, adoption or repeal. ARTICLE VII. The Board of Directors of the corporation shall have authority to accept or reject subscriptions for shares. ARTICLE VIII. Except as herein otherwise limited or qualified, the corporation reserves the right to amend, alter, change or repeal any of the terms or provisions of these Articles of Incorporation, all in the manner now or hereafter prescribed by the laws of the State of Minnesota, and all rights conferred herein upon officers, directors and shareholders of the corporation are granted subject to this reservation. ARTICLE IX. The Board of Directors shall have the power, to the extent permitted by law, to adopt, amend or repeal the Bylaws of the corporation, subject to the power of the shareholders to adopt, amend or repeal such Bylaws. Bylaws fixing the number of directors or their classifications, qualifications, or terms of office, or prescribing procedures for removing such directors may be adopted, amended or repealed only by (i) the Board of Directors, to the extent permitted by law, or (ii) the affirmative vote of the holders of 75% of the outstanding Common Shares of the corporation or such lesser percentage of the outstanding Common Shares as may from time to time be provided in such Bylaws. Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the corporation or the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the corporation, the affirmative vote of the holders of at least 75% of the voting power of the then outstanding Common Shares shall be required to amend, alter, adopt any provision inconsistent with, or repeal this Article IX unless the Board of Directors, if all such directors are Continuing Directors, as defined in Article VI of the Articles of Incorporation, shall unanimously recommend such amendment, alteration, adoption or repeal. ARTICLE X. A director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its shareholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Sections 302A.559 or 80A.23 of the Minnesota Statutes; (iv) for any transaction from which the director derived an improper personal benefit; or (v) for any act or omission occurring prior to the date when this Article X became effective. Any repeal or modification of the foregoing provisions of this Article X shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. -*- RESOLUTIONS OF BOARD OF DIRECTORS ESTABLISHING SERIES OF CUMULATIVE PREFERRED SHARES $3.60 Cumulative Preferred Shares The Board of Directors of the corporation adopted the following resolution on August 12, 1946, which was filed with the Secretary of State of Minnesota on August 13, 1946: Resolution Pursuant to authority conferred on the Board of Directors of Otter Tail Power Company, a Minnesota corporation, by Article VI of the Articles of Incorporation, as amended, BE IT RESOLVED that an initial series of Cumulative Preferred Shares be and it hereby is created as follows: A. The designation of such series shall be "$3.60 Cumulative Preferred Shares," and the number of shares of such series shall be sixty thousand (60,000); B. The rate of dividends payable on the $3.60 Cumulative Preferred Shares shall be Three & 60/100 Dollars -- ($3.60) per annum, payable quarterly on the first days of March, June, September and December in each year and such dividends shall be cumulative and accrue in the case of shares issued prior to the record date for the first dividend thereon from and including September 1, 1946; C. The $3.60 Cumulative Preferred Shares shall be redeemable at One Hundred Two & 25/100 dollars -- ($102.25) per share, together, as provided in said Articles of Incorporation, with accrued dividends to the redemption date; D. The amount payable on $3.60 Cumulative Preferred Shares, in the event of any dissolution, liquidation or winding up of the affairs of the corporation which shall be voluntary, shall be the sum of One Hundred Two & 25/100 Dollars ($102.25) per share, and the amount payable on $3.60 Cumulative Preferred Shares, in the event of any dissolution, liquidation or winding up of the affairs of the corporation which shall be involuntary, shall be One Hundred Dollars ($100) per share, together in either event, as provided in said Articles of Incorporation, with a sum, in the case of each share, computed at the annual dividend rate for the $3.60 Cumulative Preferred Shares, from the date on which dividends on such share become cumulative to and including the date fixed for such distribution or payment, less the aggregate amount of all dividends which have theretofore been paid thereon or which have been declared thereon and for which moneys for payment have been set apart and remain available for payment. $4.40 Cumulative Preferred Shares The Board of Directors of the corporation adopted the following resolution on March 6, 1950, which was filed with the Secretary of State of Minnesota on March 8, 1950: Resolution Pursuant to authority conferred on the Board of Directors of Otter Tail Power Company, a Minnesota corporation, by Article VI of its Articles of Incorporation, as amended, BE IT RESOLVED that a second series of Cumulative Preferred Shares be and it hereby is created as follows: A. The designation of such series shall be "$4.40 Cumulative Preferred Shares," and the number of shares of such series shall be twenty-five thousand (25,000); B. The rate of dividends payable on the $4.40 Cumulative Preferred Shares shall be $4.40 per share per annum, payable quarterly on the first days of March, June, September and December of each year and such dividends shall be cumulative and accrue in the case of shares issued prior to the record date for the first dividend thereon from and including March 15, 1950; C. The $4.40 Cumulative Preferred Shares shall be redeemable at $104 per share if redeemed on or before March 15, 1955; at $103 if redeemed thereafter and on or before March 15, 1960; and at $102 per share if redeemed thereafter, together, as provided in said Articles of Incorporation, in each instance with accrued dividends to the redemption date; D. The amount payable on $4.40 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the corporation which shall be voluntary, shall be the price at which said shares are at the time redeemable, and the amount payable on $4.40 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be involuntary, shall be One Hundred Dollars ($100.00) per share together in either event as provided in said Articles of Incorporation, with a sum, in the case of each share, computed at the annual dividend rate for the $4.40 Cumulative Preferred Shares from the date on which dividends on such share become cumulative to and including the date fixed for such distribution or payment, less the aggregate amount of all dividends which have heretofore been paid thereon or which have been declared thereon and for which moneys for payment have been set apart and remain available for payment. $4.65 Cumulative Preferred Shares The Board of Directors of the corporation adopted the following resolution on March 24, 1964, which was filed with the Secretary of State of Minnesota on March 25, 1964: Resolution Pursuant to authority conferred on the Board of Directors of Otter Tail Power Company, a Minnesota corporation, by Article VI of its Articles of Incorporation, as amended, BE IT RESOLVED that a third series of Cumulative Preferred Shares be, and it hereby is, created as follows: A. The designation of such series shall be "$4.65 Cumulative Preferred Shares," and the number of shares of such series shall be thirty thousand (30,000); B. The rate of dividends payable on the $4.65 Cumulative Preferred Shares shall be $4.65 per share per annum, payable quarterly on the first days of March, June, September and December of each year, and such dividends shall be cumulative and accrue in the case of shares issued prior to the record date for the first dividend thereon from and including the date of issuance thereof; C. The $4.65 Cumulative Preferred Shares shall be redeemable at $107.50 per share if redeemed on or before April 1, 1969; at $106.00 per share if redeemed thereafter and on or before April 1, 1974; at $104.50 per share if redeemed thereafter and on or before April 1, 1979; at $103.00 per share if redeemed thereafter and on or before April 1, 1984; and at $101.50 per share if redeemed thereafter together, as provided in said Articles of Incorporation, in each instance, with accrued dividends to the redemption date; and D. The amount payable on $4.65 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the corporation which shall be voluntary shall be the price at which said shares are at the time redeemable, and the amount payable on $4.65 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be involuntary shall be One Hundred Dollars ($100.00) per share together in either event as provided in said Articles of Incorporation, with a sum, in the case of each share, computed at the annual dividend rate for the $4.65 Cumulative Preferred Shares from the date on which dividends on such share become cumulative to and including the date fixed for such distribution or payment, less the aggregate amount of all dividends which have heretofore been paid thereon or which have been declared thereon and for which moneys for payment have been set apart and remain available for payment. $9.50 Cumulative Preferred Shares The Board of Directors of the corporation adopted the following resolution on August 9, 1971, which was filed with the Secretary of State of Minnesota on August 20, 1971: Resolution Pursuant to authority conferred on the Board of Directors of Otter Tail Power Company, a Minnesota corporation, by Article VI of its Articles of Incorporation, as amended, BE IT RESOLVED that a fourth series of Cumulative Preferred Shares be, and it hereby is, created as follows: A. The designation of such series shall be "$9.50 Cumulative Preferred Shares," and the number of shares of such series shall be forty thousand (40,000); B. The rate of dividends payable on the $9.50 Cumulative Preferred Shares shall be $9.50 per share per annum, payable quarterly on the first days of March, June, September and December of each year, commencing December 1, 1971, and such dividends shall be cumulative and accrue in the case of shares issued prior to the record date for the first dividend thereon from and including the date of issuance thereof; C. The $9.50 Cumulative Preferred Shares shall be redeemable at $109.50 per share if redeemed before September 1, 1979 and, if redeemed thereafter, at a redemption price which shall decrease by $0.50 on September 1, 1979 and on each succeeding September 1 to and including September 1, 1997, on and after which date the redemption price shall be $100.00 per share, together, as provided in said Articles of Incorporation, in each instance, with accrued dividends to the redemption date; provided, however, that the $9.50 Cumulative Preferred Shares shall not be redeemable, in whole or in part, prior to September 1, 1978 as a part of or in contemplation of any refunding operation including the application, directly or indirectly, of money borrowed or the proceeds of preferred stock sold at an interest or dividend cost to the corporation (calculated in accordance with generally accepted financial practice) of less than 9 1/2% per annum; and D. The amount payable on the $9.50 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the corporation which shall be voluntary shall be the price at which said shares are at the time redeemable, and the amount payable on the $9.50 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the corporation which shall be involuntary shall be One Hundred dollars ($100.00) per share, together, as provided in said Articles of Incorporation, in either event, with a sum, in the case of each share, computed at the annual dividend rate for the $9.50 Cumulative Preferred Shares from the date on which dividends on such share became cumulative to and including the date fixed for such distribution or payment, less the aggregate amount of all dividends which shall have theretofore been paid thereon or which shall have been declared thereon and for which moneys for payment shall have been set apart and remain available for payment. $11.50 Cumulative Preferred Shares The Board of Directors of the corporation adopted the following resolution on July 28, 1975, which was filed with the Secretary of State of Minnesota on July 28, 1975: Resolution BE IT FURTHER RESOLVED That, pursuant to authority conferred on the Board of Directors of Otter Tail Power Company, a Minnesota corporation, by Article VI of its Articles of Incorporation, as amended, a fifth series of Cumulative Preferred Shares be, and it hereby is, created as follows: A. The designation of such series shall be "$11.50 Cumulative Preferred Shares," and the number of shares of such series shall be one hundred thousand (100,000). B. The rate of dividends payable on the $11.50 Cumulative Preferred Shares shall be $11.50 per share per annum, payable quarterly on the first day of March, June, September and December of each year, commencing September 1, 1975, and such dividends shall be cumulative and accrue in the case of shares issued prior to the record date for the first dividend thereon from and including the date of issuance thereof. C. The $11.50 Cumulative Preferred Shares shall be redeemable (otherwise than with respect to any redemption effected through or by the sinking funds hereafter described in subdivision E below) at $111.50 per share if redeemed before June 1, 1976, and at the following redemption prices per share if redeemed thereafter: If redeemed during the twelve months' period beginning Redemption Redemption June 1 Price June 1 Price 1976 $110.86 1985 $105.11 1977 $110.22 1986 $104.48 1978 $109.58 1987 $103.83 1979 $108.94 1988 $103.19 1980 $108.31 1989 $102.56 1981 $107.77 1990 $101.92 1982 $107.03 1991 $101.28 1983 $106.39 1992 $100.64 1984 $105.75 1993 $100.00 together, as provided in said Articles of Incorporation, in each instance, with accrued dividends to the redemption date; provided, however, that, except for redemptions effected through or by the sinking funds described in subdivision E below, the $11.50 Cumulative Preferred Shares shall not be redeemable, in whole or in part, prior to July 15, 1985, as a part of or in contemplation of any refunding operation including the application, directly or indirectly, of (i) the proceeds from the sale of common shares of the Company, or (ii) money borrowed or the proceeds of preferred or preference shares of the Company sold at an interest or dividend cost to the Company (calculated in accordance with generally accepted financial practice) of less than 11.5% per annum. D. The amount payable on the $11.50 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be voluntary shall be the price at which said shares are at the time redeemable (as set forth in subdivision C above), and the amount payable on the $11.50 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be involuntary shall be One Hundred Dollars ($100.00) per share, together, as provided in said Articles of Incorporation, in either event, with a sum, in the case of each share, computed at the annual dividend rate for the $11.50 Cumulative Preferred Shares from the date on which dividends on such share became cumulative to and including the date fixed for such distribution or payment, less the aggregate amount of all dividends which shall have theretofore been paid thereon or which shall have been declared thereon and for which moneys for payment shall have been set apart and remain available for payment. E. So long as any of the $11.50 Cumulative Preferred Shares remain outstanding, after all dividends on all Cumulative Preferred Shares of all series for all past quarterly dividend periods and for the current quarterly period shall have been paid or declared and a sum sufficient for the payment thereof set apart for payment, the Company shall, as and for a mandatory sinking fund for the benefit of the $11.50 Cumulative Preferred Shares, redeem, in the manner and upon the notice and with the effect provided in Section C of Article VI of said Articles of Incorporation, on June 1, 1979, and on each succeeding June 1 to and including June 1, 1993 (each such June 1 being hereinafter called a "sinking fund redemption date"), 6.50% of the maximum number of $11.50 Cumulative Preferred Shares which shall theretofore have been issued, and on June 1, 1994, the balance of the $11.50 Cumulative Preferred Shares then outstanding (such required redemptions being hereinafter called the "mandatory sinking fund requirement"). The price at which the $11.50 Cumulative Preferred Shares shall be redeemed in satisfaction of the mandatory sinking fund requirement shall be $100.00 per share, together, as provided in said Articles of Incorporation, in each instance, with accrued dividends to the redemption date. The mandatory sinking fund requirement for the $11.50 Cumulative Preferred Shares shall be cumulative so that if, in any year, the Company shall not satisfy in full the sinking fund requirement for such year, the amount of the deficiency shall be added to the mandatory sinking fund requirement for succeeding years until the deficiency shall have been fully satisfied. In addition to the mandatory sinking fund requirement of the immediately preceding paragraph, the Company may, at its option, redeem, in the manner and upon the notice and with the effect provided in Section C of Article VI of said Articles of Incorporation, on any sinking fund redemption date $11.50 Cumulative Preferred Shares not in excess of 6.50% of the maximum number of $11.50 Cumulative Preferred Shares which shall theretofore have been issued at the mandatory sinking fund redemption price hereinbefore specified in this subdivision E. The privilege of so redeeming $11.50 Cumulative Preferred Shares shall not be cumulative and shall not relieve the Company to any extent from its obligation to redeem shares pursuant to the mandatory sinking fund requirement. $8.30 Cumulative Preferred Shares The Board of Directors of the corporation adopted the following resolution on March 30, 1977, which was filed with the Secretary of State of Minnesota on March 30, 1977: Resolution BE IT FURTHER RESOLVED That, pursuant to authority conferred on the Board of Directors of Otter Tail Power Company, a Minnesota corporation, by Article VI of its Articles of Incorporation, as amended, a sixth series of Cumulative Preferred Shares be, and it hereby is, created as follows: A. The designation of such series shall be "$8.30 Cumulative Preferred Shares," and the number of shares of such series shall be forty-five thousand (45,000). B. The rate of dividends payable on the $8.30 Cumulative Preferred Shares shall be $8.30 per share per annum, payable quarterly on the first day of March, June, September and December of each year, commencing June 1, 1977, and such dividends shall be cumulative and accrue in the case of shares issued prior to the record date for the first dividend thereon from and including the date of issuance thereof. C. The $8.30 Cumulative Preferred Shares shall be redeemable (otherwise than with respect to any redemption effected through or by the sinking funds hereafter described in subdivision E below) at $108.30 per share if redeemed before March 1, 1978, and at the following redemption prices per share if redeemed thereafter: If redeemed during the twelve months' period beginning Redemption Redemption March 1 Price March 1 Price 1978 $107.95 1990 $103.80 1979 $107.61 1991 $103.46 1980 $107.26 1992 $103.11 1981 $106.92 1993 $102.77 1982 $106.57 1994 $102.42 1983 $106.23 1995 $102.08 1984 $105.88 1996 $101.73 1985 $105.53 1997 $101.38 1986 $105.19 1998 $101.04 1987 $104.84 1999 $100.69 1988 $104.50 2000 $100.35 1989 $104.15 2001 $100.00 together, as provided in said Articles of Incorporation, in each instance, with accrued dividends to the redemption date; provided, however, that, except for redemptions effected through or by the sinking funds described in subdivision E below, the $8.30 Cumulative Preferred Shares shall not be redeemable, in whole or in part, prior to March 1, 1987 as a part of, or in contemplation of, any refunding operation including the application, directly or indirectly, of the proceeds of (i) indebtedness for money borrowed by the Company or any affiliate if such indebtedness (a) has an effective interest cost (computed in accordance with generally accepted financial practice) of less than 8.30% per annum or (b) has a Weighted Average Life to Maturity, at the time of such redemption, of less than the remaining Weighted Average Life to Maturity of the $8.30 Cumulative Preferred Shares or (ii) the issue or sale of preferred or preference shares of the Company or any affiliate if such shares have an effective dividend rate (based on the proceeds to the Company or such affiliate from such issue or sale net of any discount or commission to underwriters) of less than 8.30% per annum. The term "Weighted Average Life to Maturity" shall mean, at any date, the number of years obtained by dividing the then Remaining Dollar-years of such indebtedness or the $8.30 Cumulative Preferred Shares by the then outstanding principal amount of such indebtedness or by the product of $100.00 times the number of $8.30 Cumulative Preferred Shares which are then outstanding, as the case may be; and for the purpose of this definition, the term "Remaining Dollar-years" of any indebtedness or the $8.30 Cumulative Preferred Shares shall mean, at any date, the total of the products obtained by multiplying (i) the amount of each then remaining installment, mandatory sinking fund, serial maturity or other required payment, including payment at final maturity, in respect thereof by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the date on which such payment is required to be made. D. The amount payable on the $8.30 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be voluntary shall be the price at which said shares are at the time redeemable (as set forth in subdivision C above), and the amount payable on the $8.30 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be involuntary shall be $100.00 per share, together, as provided in said Articles of Incorporation, in either event, with a sum, in the case of each share, computed at the annual dividend rate for the $8.30 Cumulative Preferred Shares from the date on which dividends on such share became cumulative to and including the date fixed for such distribution or payment, less the aggregate amount of all dividends which shall have theretofore been paid thereon or which shall have been declared thereon and for which moneys for payment shall have been set apart and remain available for payment. E. So long as any of the $8.30 Cumulative Preferred Shares remain outstanding, after all dividends on all Cumulative Preferred Shares of all series for all past quarterly dividend periods and for the current quarterly dividend period shall have been paid or declared and a sum sufficient for the payment thereof set apart for payment, the Company shall, as and for a mandatory sinking fund for the benefit of the $8.30 Cumulative Preferred Shares, redeem, in the manner and upon the notice and with the effect provided in Section C of Article VI of said Articles of Incorporation, (i) on March 1, 1983, and on each succeeding March 1 to and including March 1, 1997, 4% of the maximum number of $8.30 Cumulative Preferred Shares which shall theretofore have been issued, (ii) on March 1, 1998, and on each succeeding March 1 to and including March 1, 2001, 8% of the maximum number of $8.30 Cumulative Preferred Shares which shall theretofore have been issued (each March 1 referred to in clause (i) or (ii) above of this sentence being hereinafter called a "sinking fund redemption date") and (iii) on March 1, 2002, the balance of the $8.30 Cumulative Preferred Shares then outstanding (such required redemptions being hereinafter called the "mandatory sinking fund requirement"). The price at which the $8.30 Cumulative Preferred Shares shall be redeemed in satisfaction of the mandatory sinking fund requirement shall be $100.00 per share, together, as provided in said Articles of Incorporation, in each instance, with accrued dividends to the redemption date. The mandatory sinking fund requirement for the $8.30 Cumulative Preferred Shares shall be cumulative so that if, in any year, the Company shall not satisfy in full the mandatory sinking fund requirement for such year, the amount of the deficiency shall be added to the mandatory sinking fund requirement for succeeding years until the deficiency shall have been fully satisfied. In addition to the mandatory sinking fund requirement, the Company may, at its option, redeem, in the manner and upon the notice and with the effect provided in Section C of Article VI of said Articles of Incorporation, on any sinking fund redemption date $8.30 Cumulative Preferred Shares in an amount not to exceed the number of $8.30 Cumulative Preferred Shares which shall be redeemed on such sinking fund redemption date through the mandatory sinking fund requirement at the mandatory sinking fund redemption price hereinbefore specified in this subdivision E. The privilege of so redeeming $8.30 Cumulative Preferred Shares shall not be cumulative and shall not relieve the Company to any extent from its obligation to redeem shares pursuant to the mandatory sinking fund requirement. $8.375 Cumulative Preferred Shares The Board of directors of the corporation adopted the following resolution on March 6, 1978, which was filed with the Secretary of State of Minnesota on March 21, 1978: Resolution BE IT FURTHER RESOLVED That, pursuant to authority conferred on the Board of Directors of Otter Tail Power Company, a Minnesota corporation, by Article VI of its Articles of Incorporation, as amended, a seventh series of Cumulative Preferred Shares be, and it hereby is, created as follows: A. The designation of such series shall be "$8.375 Cumulative Preferred Shares," and the number of shares of such series shall be one hundred Thousand (100,000). B. The rate of dividends payable on the $8.375 Cumulative Preferred Shares shall be $8.375 per share per annum, payable quarterly on the first day of March, June, September and December of each year, commencing June 1, 1978. Such dividends shall be cumulative and accrue in the case of each share from and including the date of original issuance thereof; and the amount of the dividend for any period of less than a full quarter shall be computed on the basis of a 360-day year of twelve 30-day months. C. The $8.375 Cumulative Preferred Shares shall be redeemable (otherwise than with respect to any redemption effected through or by the sinking funds hereafter described in subdivision E below) at $108.375 per share if redeemed on or before June 1, 1979, and at the following redemption prices per share if redeemed thereafter: If redeemed during the twelve months' period ending Redemption Redemption June 1 Price June 1 Price 1980 $108.026 1992 $103.839 1981 $107.677 1993 $103.490 1982 $107.329 1994 $103.141 1983 $106.979 1995 $102.792 1984 $106.630 1996 $102.443 1985 $106.281 1997 $102.094 1986 $105.932 1998 $101.745 1987 $105.583 1999 $101.396 1988 $105.234 2000 $101.047 1989 $104.886 2001 $100.698 1990 $104.537 2002 $100.349 1991 $104.188 2003 $100.000 together, as provided in said Articles of Incorporation, in each instance, with accrued dividends to the redemption date; provided, however, that, except for redemptions effected through or by the sinking funds described in subdivision E below, the $8.375 Cumulative Preferred Shares shall not be redeemable, in whole or in part, prior to June 1, 1988 as a part of, or in contemplation of, any refunding operation including the application, directly or indirectly, of the proceeds of (i) indebtedness for money borrowed by the Company or any affiliate if such indebtedness (a) has an effective interest cost (computed in accordance with generally accepted financial practice) of less than 8.375% per annum or (b) has a Weighted Average Life to Maturity, at the time of such redemption, of less than the remaining Weighted Average Life to Maturity of the $8.375 Cumulative Preferred Shares or (ii) the issue or sale of shares of the Company ranking prior to or on a parity with the $8.375 Cumulative Preferred Shares as to dividends or on liquidation if such shares have an effective dividend rate (based on the proceeds to the Company from such issue or sale net of any discount or commission to underwriters) of less than 8.375% per annum. The term "Weighted Average Life to Maturity" shall mean, at any date, the number of years obtained by dividing the then Remaining Dollar-years of such indebtedness or the $8.375 Cumulative Preferred Shares by the then outstanding principal amount of such indebtedness or by the product of $100.00 times the number of $8.375 Cumulative Preferred Shares which are then outstanding, as the case may be; and for the purpose of this definition, the term "Remaining Dollar-years" of any indebtedness or the $8.375 Cumulative Preferred Shares shall mean, at any date, the total of the products obtained by multiplying (i) the amount of each then remaining installment, mandatory sinking fund, serial maturity or other required payment, including payment at final maturity, in respect thereof by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the date on which such payment is required to be made. D. The amount payable on the $8.375 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be voluntary shall be the price at which said shares are at the time redeemable (as set forth in subdivision C above), and the amount payable on the $8.375 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be involuntary shall be $100.00 per share, together, as provided in said Articles of Incorporation, in either event, with a sum, in the case of each share, computed at the annual dividend rate for the $8.375 Cumulative Preferred Shares from the date on which dividends on such share became cumulative to and including the date fixed for such distribution or payment, less the aggregate amount of all dividends which shall have theretofore been paid thereon or which shall have been declared thereon and for which moneys for payment shall have been set apart and remain available for payment. E. So long as any of the $8.375 Cumulative Preferred Shares remain outstanding, after all dividends on all Cumulative Preferred Shares of all series for all past quarterly dividend periods and for the current quarterly dividend period shall have been paid or declared and a sum sufficient for the payment thereof set apart for payment, the Company shall, as and for a mandatory sinking fund for the benefit of the $8.375 Cumulative Preferred Shares, redeem, in the manner and upon the notice and with the effect provided in Section C of Article VI of said Articles of Incorporation (i) on June 1, 1984, and on each succeeding June 1 to and including June 1, 1993, 2% of the maximum number of $8.375 Cumulative Preferred Shares which shall theretofore have been issued, (ii) on June 1, 1994, and on each succeeding June 1 to and including June 1, 2002, 6.67% of the maximum number of $8.375 Cumulative Preferred Shares which shall theretofore have been issued (each June 1 referred to in clause (i) or (ii) above of this sentence being hereinafter called a "sinking fund redemption date") and (iii) on June 1, 2003, the balance of the $8.375 Cumulative Preferred Shares then outstanding (such required redemptions being hereinafter called the "mandatory sinking fund requirement"). The price at which the $8.375 Cumulative Preferred Shares shall be redeemed in satisfaction of the mandatory sinking fund requirement shall be $100.00 per share, together, as provided in said Articles of Incorporation, in each instance, with accrued dividends to the redemption date. The mandatory sinking fund requirement for the $8.375 Cumulative Preferred Shares shall be cumulative so that if, in any year, the Company shall not satisfy in full the mandatory sinking fund requirement for such year, the amount of the deficiency shall be added to the mandatory sinking fund requirement for succeeding years until the deficiency shall have been fully satisfied. In addition to the mandatory sinking fund requirement, the Company may, at its option, redeem, in the manner and upon the notice and with the effect provided in Section C of Article VI of said Articles of Incorporation, on any sinking fund redemption date $8.375 Cumulative Preferred Shares in an amount not to exceed the number of $8.375 Cumulative Preferred Shares which shall be redeemed on such sinking fund redemption date through the mandatory sinking fund requirement at the mandatory sinking fund redemption price hereinbefore specified in this subdivision E. The privilege of so redeeming $8.375 Cumulative Preferred Shares shall not be cumulative and shall not relieve the Company to any extent from its obligation to redeem shares pursuant to the mandatory sinking fund requirement. $8.90 Cumulative Preferred Shares The Board of directors of the corporation adopted the following resolution on July 23, 1979, which was filed with the Secretary of State of Minnesota on July 26, 1979: Resolution BE IT FURTHER RESOLVED That, pursuant to authority conferred on the Board of Directors of Otter Tail Power Company, a Minnesota corporation, by Subdivision A of Division I of Article VI of its Articles of Incorporation, as amended, an eighth series of Cumulative Preferred Shares be, and it hereby is, created as follows: A. The designation of such series shall be "$8.90 Cumulative Preferred Shares," and the number of shares of such series shall be seventy thousand (70,000). B. The rate of dividends payable on the $8.90 Cumulative Preferred Shares shall be $8.90 per share per annum, payable quarterly on the first day of March, June, September and December of each year, commencing September 1, 1979. Such dividends shall be cumulative and accrue in the case of each share from and including the date of original issuance thereof; and the amount of the dividend for any period of less than a full quarter shall be computed on the basis of a 360-day year of twelve 30-day months. C. The $8.90 Cumulative Preferred Shares shall be redeemable (otherwise than with respect to any redemption effected through or by the sinking funds hereafter described in subdivision E below) at $108.90 per share if redeemed on or before September 1, 1980, and at the following redemption prices per share if redeemed thereafter: If redeemed during the twelve months' period ending Redemption Redemption September 1 Price September 1 Price 1981 $108.529 1993 $104.079 1982 $108.158 1994 $103.708 1983 $107.788 1995 $103.338 1984 $107.417 1996 $102.967 1985 $107.046 1997 $102.596 1986 $106.675 1998 $102.225 1987 $106.304 1999 $101.854 1988 $105.933 2000 $101.483 1989 $105.563 2001 $101.113 1990 $105.192 2002 $100.742 1991 $104.821 2003 $100.371 1992 $104.450 2004 $100.000 together, as provided in Subdivision C of said Division I, in each instance, with accrued dividends to the redemption date; provided, however, that, except for redemptions effected through or by the sinking funds described in subdivision E below, the $8.90 Cumulative Preferred Shares shall not be redeemable, in whole or in part, prior to September 1, 1989 as a part of, or in contemplation of, any refunding operation including the application, directly or indirectly, of the proceeds of (i) indebtedness for money borrowed by the Company or any affiliate if such indebtedness (a) has an effective interest cost (computed in accordance with generally accepted financial practice) of less than 8.90% per annum or (b) has a Weighted Average Life to Maturity, at the time of such redemption, of less than the remaining Weighted Average Life to Maturity of the $8.90 Cumulative Preferred Shares or (ii) the issue or sale of shares of the Company ranking prior to the Common Shares of the Company as to dividends or on liquidation if such shares have an effective dividend rate (based on the proceeds to the Company from such issue or sale net of any discount or commission to underwriters) of less than 8.90% per annum. The term "Weighted Average Life to Maturity" shall mean, at any date, the number of years obtained by dividing the then Remaining Dollar-years of such indebtedness or the $8.90 Cumulative Preferred Shares by the then outstanding principal amount of such indebtedness or by the product of $100.00 times the number of $8.90 Cumulative Preferred Shares which are then outstanding, as the case may be; and for the purpose of this definition, the term "Remaining Dollar-years" of any indebtedness or the $8.90 Cumulative Preferred Shares shall mean, at any date, the total of the products obtained by multiplying (i) the amount of each then remaining installment, mandatory sinking fund, serial maturity or other required payment, including payment at final maturity, in respect thereof by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the date on which such payment is required to be made. D. The amount payable on the $8.90 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be voluntary shall be the price at which said shares are at the time redeemable (as set forth in subdivision C above), and the amount payable on the $8.90 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be involuntary shall be $100.00 per share, together, as provided in Subdivision E of said Division I, in either event, with a sum, in the case of each share, computed at the annual dividend rate for the $8.90 Cumulative Preferred Shares from the date on which dividends on such share became cumulative to and including the date fixed for such distribution or payment, less the aggregate amount of all dividends which shall have theretofore been paid thereon or which shall have been declared thereon and for which moneys for payment shall have been set apart and remain available for payment. E. So long as any of the $8.90 Cumulative Preferred Shares remain outstanding, after all dividends on all Cumulative Preferred Shares of all series for all past quarterly dividend periods and for the current quarterly dividend period shall have been paid or declared and a sum sufficient for the payment thereof set apart for payment, the Company shall, as and for a mandatory sinking fund for the benefit of the $8.90 Cumulative Preferred Shares, redeem, in the manner and upon the notice and with the effect provided in Subdivision C of said Division I, (i) on September 1, 1985, and on each succeeding September 1 to and including September 1, 1994, 2 1/2% of the maximum number of $8.90 Cumulative Preferred Shares which shall theretofore have been issued, (ii) on September 1, 1995, and on each succeeding September 1 to and including September 1, 2003, 7.5% of the maximum number of $8.90 Cumulative Preferred Shares which shall theretofore have been issued (each September 1 referred to in clause (i) or (ii) above of this sentence being hereinafter called a "sinking fund redemption date") and (iii) on September 1, 2004, the balance of the $8.90 Cumulative Preferred Shares then outstanding (such required redemptions being hereinafter called the "mandatory sinking fund requirement"). The price at which the $8.90 Cumulative Preferred Shares shall be redeemed in satisfaction of the mandatory sinking fund requirement shall be $100.00 per share, together, as provided in Subdivision C of said Division I, in each instance, with accrued dividends to the redemption date. The mandatory sinking fund requirement for the $8.90 Cumulative Preferred Shares shall be cumulative so that if, in any year, the Company shall not satisfy in full the mandatory sinking fund requirement for such year, the amount of the deficiency shall be added to the mandatory sinking fund requirement for succeeding years until the deficiency shall have been fully satisfied. In addition to the mandatory sinking fund requirement, the Company may, at its option, redeem, in the manner and upon the notice and with the effect provided in Subdivision C of said Division I, on any sinking fund redemption date $8.90 Cumulative Preferred Shares in an amount not to exceed the number of $8.90 Cumulative Preferred Shares which shall be redeemed on such sinking fund redemption date through the mandatory sinking fund requirement at the mandatory sinking fund redemption price hereinbefore specified in this subdivision E; provided that not more than 30% of the maximum number of $8.90 Cumulative Preferred Shares which shall theretofore have been issued may be so redeemed. The privilege of so redeeming $8.90 Cumulative Preferred Shares shall not be cumulative and shall not relieve the Company to any extent from its obligation to redeem shares pursuant to the mandatory sinking fund requirement. $11.50 Cumulative Preferred Shares (Series A) The Board of Directors of the corporation adopted the following resolution on June 18, 1980, which was filed with the Secretary of State of Minnesota on June 20, 1980: Resolution BE IT FURTHER RESOLVED That, pursuant to authority conferred on the Board of Directors of Otter Tail Power Company, a Minnesota corporation, by Subdivision A of Division I of Article VI of its Articles of Incorporation, as amended, a ninth series of Cumulative Preferred Shares be, and it hereby is, created as follows: A. The designation of such series shall be "$11.50 Cumulative Preferred Shares (Series A)," and the number of shares of such series shall be eighty thousand (80,000). B. The rate of dividends payable on the $11.50 Cumulative Preferred Shares (Series A) shall be $11.50 per share per annum, payable quarterly on the first day of March, June, September and December of each year, commencing September 1, 1980. Such dividends shall be cumulative and accrue in the case of each share from and including the date of original issuance thereof; and the amount of the dividend for any period of less than a full quarter shall be computed on the basis of a 360-day year of twelve 30-day months. C. The $11.50 Cumulative Preferred Shares (Series A) shall be redeemable (otherwise than with respect to any redemption effected through or by the sinking funds hereafter described in subdivision E below) at $111.50 per share if redeemed on or before June 1, 1981, and at the following redemption prices per share if redeemed thereafter: If redeemed during the twelve months' period ending Redemption Redemption June 1 Price June 1 Price 1982 $111.02 1994 $105.27 1983 $110.54 1995 $104.79 1984 $110.06 1996 $104.31 1985 $109.58 1997 $103.83 1986 $109.10 1998 $103.35 1987 $108.63 1999 $102.88 1988 $108.15 2000 $102.40 1989 $107.67 2001 $101.92 1990 $107.19 2002 $101.44 1991 $106.71 2003 $100.96 1992 $106.23 2004 $100.48 1993 $105.75 2005 $100.00 together, as provided in Subdivision C of said Division I, in each instance, with accrued dividends to the redemption date; provided, however, that, except for redemptions effected through or by the sinking funds described in subdivision E below, the $11.50 Cumulative Preferred Shares (Series A) shall not be redeemable, in whole or in part, prior to June 1, 1990 as a part of, or in contemplation of, any refunding operation including the application, directly or indirectly, of the proceeds of (i) indebtedness for money borrowed by the Company or any affiliate if such indebtedness (a) has an effective interest cost (computed in accordance with generally accepted financial practice) of less than 11.50% per annum or (b) has a Weighted Average Life to Maturity, at the time of such redemption, of less than the remaining Weighted Average Life to Maturity of the $11.50 Cumulative Preferred Shares (Series A) or (ii) the issue or sale of shares of the Company ranking prior to the Common Shares of the Company as to dividends or on liquidation if such shares have an effective dividend rate (based on the proceeds to the Company from such issue or sale net of any discount or commission to underwriters) of less than $11.50% per annum. The term "Weighted Average Life to Maturity" shall mean, at any date, the number of years obtained by dividing the then Remaining Dollar-years of such indebtedness or the $11.50 Cumulative Preferred Shares (Series A) by the then outstanding principal amount of such indebtedness or by the product of $100.00 times the number of $11.50 Cumulative Preferred Shares (Series A) which are then outstanding, as the case may be; and for the purpose of this definition, the term "Remaining Dollar-years" of any indebtedness or the $11.50 Cumulative Preferred Shares (Series A) shall mean, at any date, the total of the products obtained by multiplying (i) the amount of each then remaining installment, mandatory sinking fund, serial maturity or other required payment, including payment at final maturity, in respect thereof by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the date on which such payment is required to be made. D. The amount payable on the $11.50 Cumulative Preferred Shares (Series A) in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be voluntary shall be the price at which said shares are at the time redeemable (as set forth in subdivision C above), and the amount payable on the $11.50 Cumulative Preferred Shares (Series A) in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be involuntary shall be $100.00 per share, together, as provided in Subdivision E of said Division I, in either event, with a sum, in the case of each share, computed at the annual dividend rate for the $11.50 Cumulative Preferred Shares (Series A) from the date on which dividends on such share became cumulative to and including the date fixed for such distribution or payment, less the aggregate amount of all dividends which shall have theretofore been paid thereon or which shall have been declared thereon and for which moneys for payment shall have been set apart and remain available for payment. E. So long as any of the $11.50 Cumulative Preferred Shares (Series A) remain outstanding, after all dividends on all Cumulative Preferred Shares of all series for all past quarterly dividend periods and for the current quarterly dividend period shall have been paid or declared and a sum sufficient for the payment therof set apart for payment, the Company shall, as and for a mandatory sinking fund for the benefit of the $11.50 Cumulative Preferred Shares (Series A), redeem, in the manner and upon the notice and with the effect provided in Subdivision C of said Division I, (i) on June 1, 1986, and on each succeeding June 1 to and including June 1, 2004 (each such June 1 being hereinafter called a "sinking fund redemption date"), 5% of the maximum number of $11.50 Cumulative Preferred Shares (Series A) which shall theretofore have been issued and (ii) on June 1, 2005, the balance of the $11.50 Cumulative Preferred Shares (Series A) then outstanding (such required redemptions being hereinafter called the "mandatory sinking fund requirement"). The price at which the $11.50 Cumulative Preferred Shares (Series A) shall be redeemed in satisfaction of the mandatory sinking fund requirement shall be $100.00 per share, together, as provided in Subdivision C of said Division I, in each instance, with accrued dividends to the redemption date. The mandatory sinking fund requirement for the $11.50 Cumulative Preferred Shares (Series A) shall be cumulative so that if, in any year, the Company shall not satisfy in full the mandatory sinking fund requirement for such year, the amount of the deficiency shall be added to the mandatory sinking fund requirement for succeeding years until the deficiency shall have been fully satisfied. In addition to the mandatory sinking fund requirement, the Company may, at its option, redeem, in the manner and upon the notice and with the effect provided in Subdivision C of said Division I, on any sinking fund redemption date $11.50 Cumulative Preferred Shares (Series A) in an amount not to exceed the number of $11.50 Cumulative Preferred Shares (Series A) which shall be redeemed on such sinking fund redemption date through the mandatory sinking fund requirement at the mandatory sinking fund redemption price hereinbefore specified in this subdivision E; provided that not more than 25% of the maximum number of $11.50 Cumulative Preferred Shares (Series A) which shall theretofore have been issued may be so redeemed. The privilege of so redeeming $11.50 Cumulative Preferred Shares (Series A) shall not be cumulative and shall not relieve the Company to any extent from its obligation to redeem shares pursuant to the mandatory sinking fund requirement. CERTIFICATE The undersigned, D. R. EMMEN and JAY D. MYSTER, do hereby certify that we are duly elected, qualified and acting as the Senior Vice President, Finance and Treasurer and the Vice President, Governmental and Legal and Secretary, respectively, of Otter Tail Power Company, a Minnesota corporation (the "Company"), and that the following is a true and correct copy of a resolution duly adopted at a meeting of the Board of Directors of the Company duly called and held on April 13, 1992, at which a quorum was present and acted throughout: BE IT RESOLVED That, pursuant to authority conferred on the Board of Directors of Otter Tail Power Company, a Minnesota corporation, by Subdivision A of Division I of Article VI of its Articles of Incorporation, as amended, a tenth series of Cumulative Preferred Shares be, and it hereby is, created as follows: A. The designation of such series shall be "$9.00 Exchangeable Cumulative Preferred Shares," and the number of shares of such series shall be fifty-three thousand three hundred eleven (53,311). B. The rate of dividends payable on the $9.00 Exchangeable Cumulative Preferred Shares shall be $9.00 per share per annum, payable quarterly on the first day of March, June, September and December of each year, commencing on the first day of the first such month following the date of original issuance of the $9.00 Exchangeable Cumulative Preferred Shares. Such dividends shall be cumulative and accrue in the case of each share from and including the date of original issuance thereof; and the amount of the dividend for any period of less than a full quarter shall be computed on the basis of a 360-day year of twelve 30-day months. C. The $9.00 Exchangeable Cumulative Preferred Shares shall be redeemable at any time on or after the seventh anniversary of the date of original issuance thereof at $100.00 per share together, as provided in Subdivision C of said Division I, in each instance, with accrued dividends to the redemption date; provided, however, that the holder of any $9.00 Exchangeable Cumulative Preferred Shares to be redeemed pursuant to this Section C shall have the right, at such holder's option, to exchange any or all of the $9.00 Exchangeable Cumulative Preferred Shares held by such holder and so to be redeemed into Common Shares (as defined below) pursuant to, and subject to and upon compliance with, the provisions of Section E hereof. D. The amount payable on the $9.00 Exchangeable Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company, whether voluntary or involuntary, shall be $100.00 per share, together, as provided in Subdivision E of said Division I, with a sum, in the case of each share, computed at the annual dividend rate for the $9.00 Exchangeable Cumulative Preferred Shares from the date on which dividends on such share became cumulative to and including the date fixed for such distribution or payment, less the aggregate amount of all dividends which shall have theretofore been paid thereon or which shall have been declared thereon and for which moneys for payment shall have been set apart and remain available for payment. E. (1) Subject to and upon compliance with the provisions of this Section E, each holder of $9.00 Exchangeable Cumulative Preferred Shares shall have the right, at each such holder's option, at any time on or after the seventh anniversary of the date of original issuance thereof, to exchange any or all of the $9.00 Exchangeable Cumulative Preferred Shares held by each such holder into either (a) cash in the amount of $100.00 per each $9.00 Exchangeable Cumulative Preferred Share so exchanged, together, in each instance, with accrued dividends to the Exchange Date (as defined below), or (b) the number of fully paid and nonassessable Common Shares obtained by dividing (i) the sum of (A) the $100.00 liquidation value of a $9.00 Exchangeable Cumulative Preferred Share and (B) any accrued dividends to the Exchange Date with respect to the $9.00 Exchangeable Cumulative Preferred Share to be exchanged, by (ii) the Fair Market Value (as defined below) of a Common Share, and multiplying such resulting number by the number of $9.00 Exchangeable Cumulative Preferred Shares to be so exchanged (rounding such product, for the purpose of determining the amount of any cash payments provided for under subsection (3) of this Section E, to the nearest 1/100 Common Share, with 1/200 of a Common Share being rounded upward), and in the case of either clause (a) or (b), by surrender of such $9.00 Exchangeable Cumulative Preferred Shares to be so exchanged, such surrender to be made in the manner provided in subsection (2) of this Section E. For purposes of this Section E, the term "Common Shares" shall mean the Common Shares of the Company as the same exists at the date of original issue of the $9.00 Exchangeable Cumulative Preferred Shares or as such shares may be constituted from time to time thereafter. For purposes of this Section E, the term "Exchange Date" shall mean (x), if the $9.00 Exchangeable Cumulative Preferred Shares are being exchanged for cash, the date which is 10 calendar days after the date such shares have been duly surrendered to the Registrar or (y), if the $9.00 Exchangeable Cumulative Preferred Shares are being exchanged for Common Shares, the date which is 60 Trading Days (as defined below) after the date such shares have been duly surrendered to the Registrar, or, in the case of either clause (x) or (y), if such day is not a business day, the next succeeding business day. For purposes of this Section E, the term "Fair Market Value" with respect to the Common Shares shall mean the average of the reported last sale prices for the 60 consecutive Trading Days immediately preceding the relevant Exchange Date. The reported last sale price for each Trading Day shall be the reported last sale price, regular way, or, in case no sale takes place on such day, the average of the reported closing bid and asked prices, regular way, in either case as reported on the New York Stock Exchange Composite Tape or, if the Common Shares are not listed or admitted to trading on the New York Stock Exchange, in the principal national securities exchange on which the Common Shares are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, on the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or, if the Common Shares are not quoted on such National Market System, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by NASDAQ or, if bid and asked prices for Common Shares on each such day shall not have been reported through NASDAQ, the average of the bid and asked prices for such day as furnished by any New York Stock Exchange member firm regularly making a market in the Common Shares selected for such purpose by the Company and if no such quotations are available, the fair market value of the Common Shares as determined by a New York Stock Exchange member firm regularly making a market in the Common Shares selected for such purpose by the Company. For purposes of this Section E, the term "Trading Day" means (x), if the Common Shares are listed or admitted for trading on the New York Stock Exchange or another national securities exchange, a day on which the New York Stock Exchange or such other national securities exchange is open for business or (y), if the Common Shares are quoted on the National Market System of NASDAQ, a day on which trades may be made on such National Market System or (z), otherwise, any day other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. (2) In order to validly exercise the exchange privilege pursuant to this Section E, the holder of each $9.00 Exchangeable Cumulative Preferred Share to be exchanged shall surrender the certificate representing such share at the office of the Registrar for the $9.00 Exchangeable Cumulative Preferred Shares in Fergus Falls, Minnesota, appointed for such purpose by the Company (which may be the Company), with the Notice of Election to Exchange on the back of such certificate completed and signed. Unless the shares issuable on exchange are to be issued in the same name as the name in which the share to be exchanged is registered, each share surrendered for exchange shall be accompanied by instruments of transfer, in form satisfactory to the Registrar, duly executed by the holder or the holder's duly authorized attorney, and by an amount sufficient to pay any transfer or similar tax. If the $9.00 Exchangeable Cumulative Preferred Shares have been called for redemption and are being surrendered for exchange pursuant to the proviso contained in Section C hereof, then the certificate representing such shares must be duly surrendered, as aforesaid, to the Registrar on or before the twentieth day following the date of the notice of redemption relating to such shares in order for the exchange privilege to be validly exercised, and any such shares with respect to which the exchange privilege is not validly exercised shall be redeemed on the redemption date. On or before the Exchange Date, the Company shall deliver at the office of the Registrar, for the account of each holder of $9.00 Exchangeable Cumulative Preferred Shares surrendered for exchange on such Exchange Date, (i) if such $9.00 Exchangeable Cumulative Preferred Shares are being exchanged for cash, funds in the amount provided in clause (a) of subsection (1) of this Section E, or (ii) if such $9.00 Exchangeable Cumulative Preferred Shares are being exchanged for Common Shares, a certificate or certificates for the number of full Common Shares issuable upon the exchange of such shares in accordance with the provisions of clause (b) of subsection (1) of this Section E, and funds for the settlement of any fractional interest in respect of a Common Share arising upon such exchange as provided in subsection (3) of this Section E. At the option of the Company, the Common Shares so delivered may be newly issued shares, treasury shares or shares reacquired by or on behalf of the Company, including shares purchased in the open market at any time in the sole discretion of the Company. Each holder of $9.00 Exchangeable Cumulative Preferred Shares acknowledges by acceptance thereof that (i) the Common Shares deliverable upon any exchange of $9.00 Exchangeable Cumulative Preferred Shares will not be registered under the Securities Act of 1933, as amended, or any applicable state securities laws and that any such Common Shares may not be resold except pursuant to an exemption from such Act and all such applicable laws or pursuant to registrations thereunder; (ii) such Common Shares may not be sold, transferred or otherwise disposed of in any manner without first obtaining (a) an opinion of counsel reasonably acceptable to the Company, both as to opinion and as to counsel, that such proposed sale, transfer or other disposition can lawfully be made without registration pursuant to the Securities Act of 1933, as then amended, and applicable state securities laws, or (b) such registrations (it being expressly understood that the Company shall not have any obligation to register such securities for such purpose); (iii) certificates representing such Common Shares may bear a legend stating that such Common Shares have not been registered under the Securities Act of 1933, as amended, and applicable state securities laws and referring to the foregoing restrictions on transferability of such Common Shares; and (iv) the Company may place stop transfer orders or notations on the Company's stock record referring to such restrictions on transferability. All Common Shares delivered upon exchange of the $9.00 Exchangeable Cumulative Preferred Shares pursuant to this Section E will, upon delivery, be duly and validly issued and fully paid and nonassessable, free of all liens and charges and not subject to any preemptive rights. Each exchange of $9.00 Exchangeable Cumulative Preferred Shares pursuant to this Section E shall be deemed to have been effected immediately prior to the close of business on the Exchange Date. Until such time on the Exchange Date, any $9.00 Exchangeable Cumulative Preferred Shares which have been surrendered for exchange with respect to such Exchange Date shall be treated as outstanding and the person or persons in whose name or names a certificate for any such shares is registered (or any prior holder who was the holder of record of such shares on the relevant record date) shall remain the holder of record for the purpose of voting such shares and receiving any dividends paid with respect to such shares prior to such time on the Exchange Date, notwithstanding that such shares might have been redeemed on a date prior to the Exchange Date but for the exercise of the right to exchange such shares pursuant to the proviso contained in Section C hereof. At such time on such Exchange Date, the person or persons in whose name or names any certificate or certificates for Common Shares shall be deliverable upon such exchange shall be deemed to have become the holder or holders of record of the Common Shares represented thereby unless the stock transfer books of the Company are closed on such date, in which event such person or persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open. (3) In connection with the exchange of any $9.00 Exchangeable Cumulative Preferred Shares for Common Shares pursuant to this Section E, no fractional Common Share or scrip representing fractions of a Common Share shall be issued. Instead of any fractional interest in a Common Share which would otherwise be deliverable upon the exchange of $9.00 Exchangeable Cumulative Preferred Shares, the Company shall pay to the holder of such $9.00 Exchangeable Cumulative Preferred Shares an amount in cash (computed to the nearest cent, with one-half cent being rounded upward) equal to the Fair Market Value of a Common Share multiplied by the fraction of a Common Share represented by such fractional interest. (4) The number of $9.00 Exchangeable Cumulative Preferred Shares which may be exchanged pursuant to this Section E in any twelve-month period shall be limited to a total of 10,662 $9.00 Exchangeable Cumulative Preferred Shares, and the Company shall have no obligation to exchange any shares surrendered in excess of that amount; provided, however, that $9.00 Exchangeable Cumulative Preferred Shares called for redemption and surrendered for exchange pursuant to the proviso contained in Section C hereof shall not be subject to the limitation set forth in this subsection (4) and shall not be counted for purposes of determining the limitation set forth in this subsection (4) as it applies to shares otherwise surrendered for exchange. (5) On any Exchange Date, the Company shall have no obligation to exchange for Common Shares, whether pursuant to the proviso contained in Section C hereof or otherwise, $9.00 Exchangeable Cumulative Preferred Shares held by any holder unless either (i) the total number of $9.00 Exchangeable Cumulative Preferred Shares surrendered for exchange by such holder with respect to such Exchange Date equals or exceeds 500 or (ii) the total number of $9.00 Exchangeable Cumulative Preferred Shares surrendered for exchange by all holders of $9.00 Exchangeable Cumulative Preferred Shares with respect to such Exchange Date equals or exceeds 500. IN WITNESS WHEREOF, the undersigned have hereunto set their hands as the Senior Vice President, Finance and Treasurer and the Vice President, Governmental and Legal and Secretary, respectively, of Otter Tail Power Company and have affixed the seal of Otter Tail Power Company this 10th day of August, 1992. D. R. Emmen D. R. Emmen Senior Vice President, Finance and Treasurer Jay D. Myster Jay D. Myster Vice President, Governmental and Legal and Secretary [CORPORATE SEAL] STATE OF MINNESOTA ) ) SS COUNTY OF OTTER TAIL ) ON this 10th day of August, 1992 before me a Notary Public and for said County and State, personally appeared D. R. EMMEN and JAY D. MYSTER, to me personally known to be the Senior Vice President, Finance and Treasurer and the Vice President, Governmental and Legal and Secretary, respectively, of Otter Tail Power Company, who, being by me duly sworn, did say that they are, respectively, the Senior Vice President, Finance and Treasurer and the Vice President, Governmental and Legal and Secretary of said corporation, and that the seal affixed to the within certificate is the corporate seal of said corporation, and that said certificate was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said D. R. EMMEN and JAY D. MYSTER acknowledged said certificate to be the free act and deed of said corporation. Raymond J. Holmgren [NOTARIAL SEAL] CERTIFICATE The undersigned, D. R. EMMEN and JAY D. MYSTER, do hereby certify that we are duly elected, qualified and acting as the Senior Vice President, Finance and Treasurer and the Vice President, Governmental and Legal and Secretary, respectively, of Otter Tail Power Company, a Minnesota corporation (the "Company"), and that the following is a true and correct copy of a resolution duly adopted by a Written Action of the Pricing Committee of the Board of Directors of the Company, dated September 29, 1992, executed by all the members of said Pricing Committee, duly established by the Board of Directors of the Company at a meeting thereof duly called and held on February 3, 1992, at which a quorum was present and acted throughout, to act for the Board of Directors with respect to the matters set forth in said Written Action: RESOLUTION BE IT RESOLVED That, pursuant to authority conferred on the Board of Directors of Otter Tail Power Company, a Minnesota corporation, by Subdivision A of Division I of Article VI of its Articles of Incorporation, as amended, an eleventh series of Cumulative Preferred Shares be, and it hereby is, created as follows: A. The designation of such series shall be "$6.35 Cumulative Preferred Shares," and the number of shares of such series shall be one hundred eighty thousand (180,000). B. The rate of dividends payable on the $6.35 Cumulative Preferred Shares shall be $6.35 per share per annum, payable quarterly on the first day of March, June, September and December of each year, commencing December 1, 1992. Such dividends shall be cumulative and accrue in the case of each share from and including the date of original issuance thereof; and the amount of the dividend for any period of less than a full quarter shall be computed on the basis of a 360-day year of twelve 30-day months. C. The $6.35 Cumulative Preferred Shares shall be redeemable (otherwise than with respect to any redemption effected through or by the sinking fund hereafter described in subdivision E below), at the option of the Company, in whole or in part, at $103.175 per share if redeemed before December 1, 1998, and at the following redemption prices per share if redeemed thereafter: If redeemed during the twelve months' period beginning: Redemption December 1 Price 1998 . . . . . . . . . . . . . . . . . $102.540 1999 . . . . . . . . . . . . . . . . . $101.905 2000 . . . . . . . . . . . . . . . . . $101.270 2001 . . . . . . . . . . . . . . . . . $100.635 2002 and thereafter . . . . . . . . . $100.000 together, as provided in Subdivision C of said Division I, in each instance, with accrued dividends to the redemption date; provided, however, that the $6.35 Cumulative Preferred Shares shall not be redeemable, in whole or in part, prior to December 1, 1997. D. The amount payable on the $6.35 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be voluntary shall be $106.350 per share prior to December 1, 1993, and will decrease by $0.635 per share on December 1, 1993 and on each December 1 thereafter to $100.00 per share on December 1, 2002, and the amount payable on the $6.35 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be involuntary shall be $100.00 per share, together, as provided in Subdivision E of said Division I, in either event, with a sum, in the case of each share, computed at the annual dividend rate for the $6.35 Cumulative Preferred Shares from the date on which dividends on such share became cumulative to and including the date fixed for such distribution or payment, less the aggregate amount of all dividends which shall have theretofore been paid thereon or which shall have been declared thereon and for which moneys for payment shall have been set apart and remain available for payment. E. So long as any of the $6.35 Cumulative Preferred Shares remain outstanding, after all dividends on all Cumulative Preferred Shares of all series for all past quarterly dividend periods and for the current quarterly dividend period shall have been paid or declared and a sum sufficient for the payment thereof set apart for payment, the Company shall, as and for a mandatory sinking fund for the benefit of the $6.35 Cumulative Preferred Shares, redeem, in the manner and upon the notice and with the effect provided in Subdivision C of said Division I, (i) on December 1, 2002, and on each succeeding December 1 to and including December 1, 2006, 5% of the maximum number of $6.35 Cumulative Preferred Shares which shall theretofore have been issued and (ii) on December 1, 2007, the balance of the $6.35 Cumulative Preferred Shares then outstanding (such required redemptions being hereinafter called the "mandatory sinking fund requirement"). The price at which the $6.35 Cumulative Preferred Shares shall be redeemed in satisfaction of the mandatory sinking fund requirement shall be $100.00 per share, together, as provided in Subdivision C of said Division I, in each instance, with accrued dividends to the redemption date. The mandatory sinking fund requirement for the $6.35 Cumulative Preferred Shares shall be cumulative so that if, in any year, the Company shall not satisfy in full the mandatory sinking fund requirement for such year, the amount of the deficiency shall be added to the mandatory sinking fund requirement for succeeding years until the deficiency shall have been fully satisfied. IN WITNESS WHEREOF, the undersigned have hereunto set their hands as the Senior Vice President, Finance and Treasurer and the Vice President, Governmental and Legal and Secretary, respectively, of Otter Tail Power Company and have affixed the seal of Otter Tail Power Company this 1st day of October, 1992. D. R. Emmen D. R. Emmen Senior Vice president, Finance and Treasurer Jay D. Myster Vice President, Governmental and Legal and Secretary [CORPORATE SEAL] STATE OF MINNESOTA ) )SS COUNTY OF OTTER TAIL ) On this 1st day of October, 1992, before me a Notary Public within and for said County and State, personally appeared D. R. EMMEN and JAY D. MYSTER, to me personally known to be the Senior Vice President, Finance and Treasurer and the Vice President, Governmental and Legal and Secretary, respectively, of Otter Tail Power Company, who, being by me duly sworn, did say that they are, respectively, the Senior Vice President, Finance and Treasurer and the Vice President, Governmental and Legal and Secretary of said corporation, and that the seal affixed to the within certificate is the corporate seal of said corporation, and that said certificate was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said D. R. EMMEN and JAY D. MYSTER acknowledged said certificate to be the free act and deed of said corporation. Larry W. Marquard [NOTARIAL SEAL] CERTIFICATE The undersigned, D. R. EMMEN and JAY D. MYSTER, do hereby certify that we are duly elected, qualified and acting as the Senior Vice President, Finance and Treasurer and the Vice President, Governmental and Legal and Secretary, respectively, of Otter Tail Power Company, a Minnesota corporation (the "Company"), and that the following is a true and correct copy of a resolution duly adopted by a Written Action of the Pricing Committee of the Board of Directors of the Company, dated October 11, 1993, executed by all the members of said Pricing Committee, duly established by the Board of Directors of the Company at a meeting thereof duly called and held on February 3, 1992, at which a quorum was present and acted throughout, to act for the Board of Directors with respect to the matters set forth in said Written Action: RESOLUTION BE IT RESOLVED That, pursuant to authority conferred on the Board of Directors of Otter Tail Power Company, a Minnesota corporation, by Subdivision A of Division I of Article VI of its Articles of Incorporation, as amended, a twelfth series of Cumulative Preferred Shares be, and it hereby is, created as follows: A. The designation of such series shall be "$6.75 Cumulative Preferred Shares," and the number of shares of such series shall be forty thousand (40,000). B. The rate of dividends payable on the $6.75 Cumulative Preferred Shares shall be $6.75 per share per annum, payable quarterly on the first day of March, June, September and December of each year, commencing December 1, 1993. Such dividends shall be cumulative and accrue in the case of each share from and including the date of original issuance thereof; and the amount of the dividend for any period of less than a full quarter shall be computed on the basis of a 360-day year of twelve 30-day months. C. The $6.75 Cumulative Preferred Shares shall be redeemable at the option of the Company, in whole or in part, at $103.375 per share if redeemed before December 1, 2004, and at the following redemption prices per share if redeemed thereafter: If redeemed during the twelve months' period beginning: Redemption December 1 Price 2004 . . . . . . . . . . . . . . . . . $103.0375 2005 . . . . . . . . . . . . . . . . . $102.7000 2006 . . . . . . . . . . . . . . . . . $102.3625 2007 . . . . . . . . . . . . . . . . . $102.0250 2008 . . . . . . . . . . . . . . . . . $101.6875 2009 . . . . . . . . . . . . . . . . . $101.3500 2010 . . . . . . . . . . . . . . . . . $101.0125 2011 . . . . . . . . . . . . . . . . . $100.6750 2012 . . . . . . . . . . . . . . . . . $100.3375 2013 and thereafter . . . . . . . . . $100.0000 together, as provided in Subdivision C of said Division I, in each instance, with accrued dividends to the redemption date; provided, however, that the $6.75 Cumulative Preferred Shares shall not be redeemable, in whole or in part, prior to December 1, 2003. D. The amount payable on the $6.75 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be voluntary shall be $106.75 per share prior to December 1, 1994, and will decrease by $0.3375 per share on December 1, 1994 and on each December 1 thereafter to $100.00 per share on December 1, 2013, and the amount payable on the $6.75 Cumulative Preferred Shares in the event of any dissolution, liquidation or winding up of the affairs of the Company which shall be involuntary shall be $100.00 per share, together, as provided in Subdivision E of said Division I, in either event, with a sum, in the case of each share, computed at the annual dividend rate for the $6.75 Cumulative Preferred Shares from the date on which dividends on such share became cumulative to and including the date fixed for such distribution or payment, less the aggregate amount of all dividends which shall have theretofore been paid thereon or which shall have been declared thereon and for which moneys for payment shall have been set apart and remain available for payment. IN WITNESS WHEREOF, the undersigned have hereunto set their hands as the Senior Vice President, Finance and Treasurer and the Vice President, Governmental and Legal and Secretary, respectively, of Otter Tail Power Company and have affixed the seal of Otter Tail Power Company this 11th day of October, 1993. D. R. Emmen D. R. Emmen Senior Vice President, Finance and Treasurer Jay D. Myster Jay D. Myster Vice President, Governmental and Legal and Secretary [CORPORATE SEAL] STATE OF MINNESOTA ) )SS COUNTY OF OTTER TAIL ) On this 11th day of October, 1993, before me a Notary Public within and for said County and State, personally appeared D. R. EMMEN and JAY D. MYSTER, to me personally known to be the Senior Vice President, Finance and Treasurer and the Vice President, Governmental and Legal and Secretary, respectively, of Otter Tail Power company, who, being by me duly sworn, did say that they are, respectively, the Senior Vice President, Finance and Treasurer and the Vice President, Governmental and Legal and Secretary of said corporation, and that the seal affixed to the within certificate is the corporate seal of said corporation, and that said certificate was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said D. R. EMMEN and JAY D. MYSTER acknowledged said certificate to be the free act and deed of said corporation. Larry W. Marquard [NOTARIAL SEAL] EX-10 3 MATERIAL CONTRACTS Exhibit 10-C-6 CONTRACT FOR ELECTRIC SERVICE INTEGRATED SYSTEMS SUPPLEMENT NO. 7 OTTER TAIL POWER COMPANY and CENTRAL POWER ELECTRIC COOPERATIVE, INC. AMENDMENT NO. 4 THIS AGREEMENT made this date January 18, 1994, by and between CENTRAL POWER ELECTRIC COOPERATIVE, INC., a North Dakota corporation, herein called "Central" and OTTER TAIL POWER COMPANY, a Minnesota corporation, herein called "Otter Tail", such Parties referred to individually as "Party" or collectively as "Parties", and 0.1 WHEREAS, Central and Otter Tail are presently Parties to a contract for Electric Service, Integrated Systems Supplement No. 7 dated November 21, 1973, which includes Supplements and Amendments, herein together called the "Integrated Systems Agreement", and 0.2 WHEREAS, the Integrated Systems Agreement provides for established Points of Delivery identified in the Agreement Exhibits and Amendments, and 0.3 WHEREAS, the Integrated Systems Agreement provides that the Parties may from time to time add other Points of Delivery and connections to loads from the facilities within the Integrated System, and 0.4 WHEREAS, Central has requested that additional Points of Delivery be made to Otter Tail's 41,600-volt transmission system, and 0.5 WHEREAS, Central and Otter Tail desire to append to and make part of Exhibit B-2, Points of Delivery, thereto what is herein contained, NOW THEREFORE, the Parties agree as follows: 1.1 Pursuant to Paragraph F, Section IV of the 1973 Agreement, Supplement No. 7, Central and Otter Tail agree to add the following locations to the Points of Delivery specified in Exhibit B-2 and amendments thereof subject to the conditions specified herein: POINTS OF DELIVERY AT 41.6-KV OTP-MCCLUSKY At a point located on OTP's 41,600-volt circuit in the SE Quarter of Section 2, Township 146N, Range 77W, Sheridan County, North Dakota. BUFFALO At a point located on the 41,600-volt circuit at the CPEC Barlow Station in the SW Quarter of Section 8, Township 148N, Range 66W, Eddy County, North Dakota. 1.2 METERING OTP-MCCLUSKY. Deliveries of electric power and energy for the OTP-McClusky Point of Delivery shall be metered on the 480/277-volt circuit at the Kirschmann Manufacturing load. Adjustment for losses for transformation and distribution facilities shall be made by multiplying the applicable proportion of the meter reading by a loss percentage established by separate agreement between Otter Tail, Central, and Capital Electric Cooperative, Inc. The proportion of the meter reading attributable to Central shall be the same proportion as established by separate agreement between Otter Tail and Capital Electric Cooperative, Inc. 1.3 TERM. This Agreement shall become effective upon execution and shall continue in effect until terminated under the same terms and conditions as provided for in the Integrated Systems Agreement. This Agreement shall be subject to all applicable provisions of Integrated Systems Supplement No. 7 dated November 21, 1973, as amended or supplemented. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized officers as of this day and year first written above. ATTEST: CENTRAL POWER ELECTRIC COOPERATIVE, INC. Clifford Haro BY: Armand Tiegs Secretary President ATTEST: OTTER TAIL POWER COMPANY Jay D. Myster BY: Earl Sjoberg Secretary Vice President Exhibit 10-E-7 SUPPLEMENT NO. 6 to the INTERCONNECTION AND TRANSMISSION SERVICE AGREEMENT Between EAST RIVER ELECTRIC POWER COOPERATIVE, INC. Madison, South Dakota and OTTER TAIL POWER COMPANY Fergus Falls, Minnesota THIS AGREEMENT, made this 2nd day of December, 1993, by and between Otter Tail Power Company, a Minnesota corporation (hereinafter referred to as "Otter Tail"), and East River Electric Power Cooperative, Inc. (hereinafter referred to as "East River"), a cooperative corporation incorporated under the laws of South Dakota, which corporations are referred to herein individually as Party and collectively as Parties. WITNESSETH WHEREAS, the Parties have entered into an Interconnection and Transmission Service Agreement dated January 8, 1973, as supplemented; and WHEREAS, the Wendell Point of Delivery has been relocated; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Parties agree as follows: 1.0 WENDELL POINT OF DELIVERY 1.1 Revision of Exhibit "A". Exhibit "A" as revised by Supplement No. 5 and dated November 4, 1992 is hereby deleted and replaced by Exhibit "A" dated June 2, 1993 to this Supplement No. 6 hereto and made a part hereof. 1.2 Revision of Wendell Exhibit "D". Exhibit "D", Wendell, Minnesota Substation of the Original Contract is hereby deleted and replaced by Exhibit "D" to this Supplement No. 6 hereto and made a part hereof. 2.0 GENERAL 2.1 Subject to the terms of Paragraph 2.4 hereof this Agreement shall become effective on the date of its execution and shall terminate coincidentally with the Original Contract. 2.2 No waiver or a breach of any of the agreements or provisions contained in this contract shall be construed to be a waiver of any subsequent breach of the same, or of any other common provision of the contract. 2.3 Except as expressly modified by this Supplement, the Original Contract shall remain in full force and effect and this Supplement shall be subject to all the applicable provisions of the Original Contract except as herein provided or modified. 2.4 This Agreement is subject to the approval of the Administrator of the Rural Electrification Administration and any regulatory body having jurisdiction thereof. IN WITNESS WHEREOF, the Parties hereto have caused this agreement to be duly executed as of the date and year first above written. EAST RIVER ELECTRIC POWER OTTER TAIL POWER COMPANY COOPERATIVE, INC. Wayne Wright Earl Sjoberg President Vice President, Electrical Keith Kleppin Jay D. Myster Secretary Secretary
EXHIBIT "A" TRANSMISSION SERVICE AGREEMENT BETWEEN EAST RIVER ELECTRIC COOPERATIVE, INC. AND OTTER TAIL POWER COMPANY SUPPLEMENT NO. 6 LOCATION OF POINTS OF NAME OF AGREED SUB. DELIVERY FROM OTTER TAIL LOCATION OF SUBSTATION CAPACITY POWER COMPANY'S SYSTEM VOLTAGE POINTS OF METERING VOLTAGE Beardsley 3,750 kVA At or near the NE corner 41,600 At or near the NE corner 7,200/12,500 of the NE 1/4 of Sec. 6, of the NE 1/4 of Sec. 6, T 124 N., R 48 W., Big T 124 N., R 48 W., Big Stone County, Minnesota Stone County, Minnesota Doran 1,500 kVA At or near the SE corner 41,600 At or near the SE corner 7/200/12,500 of Sec. 5, T 131 N., of Sec. 20, T 131 N., R 46 W., Wilkin County, R 46 W., Wilkin County, Minnesota Minnesota Graceville 2,500 kVA Near the SW corner of the 41,600 Near the SW corner of 7,200/12,500 SE 1/4, Sec. 4, T 124 N., Sec. 34, T 125 N., R 46 W., Big Stone County, R 46 W., Traverse County, Minnesota Minnesota Wendell 2,500 kVA Near the SW corner of Sec. 41,600 Near the NE corner of 7,200/12,500 30, T 129 N., R 43 W., Sec. 36, T 129 N., Grant County, Minnesota R 45 W., Traverse County, Minnesota Wheaton 7,500 kVA At or near the NE corner 41,600 At or near the NE corner 7,200/12,500 of the NW 1/4 of the of the NW 1/4 of the NW 1/4 of Sec. 29, NW 1/4 of Sec. 29, T 127 N., R 46 W., T 127 N., R 46 W., Traverse County, Minnesota Traverse County, Minnesota Hillhead 3,750 kVA The NE 1/4 of Sec. 34, 41,600 The NE 1/4 of Sec. 34, 72,000/12,500 T 128 N., R 54 W., 8 miles T 128 N., R 54 W., 8 miles north of Lake City on north of Lake City on Highway 23, Marshall Highway 23, Marshall County, South Dakota County, South Dakota Dumont 3,750 kVA At or near the NE corner 41,600 The SW corner of the SW 7,200/12,500 of the NW 1/4, Sec. 6, 1/4 of Sec. 17, T 126 N., T 124 N., R 44 W., Stevens R 44 W., Stevens County, County, Minnesota Minnesota Dome 5,000 kVA SW corner of the SW 1/4 41,600 Near the SE corner of the 4,160 of Sec. 14, T 128 N., NE 1/4 of Sec. 19, T 128 N., R 47 W., Traverse County, R 47 W., Traverse County, Minnesota Minnesota
[TEXT] "Exhibit D" Wendell, MN, Substation INTERCONNECTION AND TRANSMISSION SERVICE AGREEMENT BETWEEN EAST RIVER ELECTRIC POWER COOPERATIVE, INC. AND OTTER TAIL POWER COMPANY ELECTRIC LINE CONNECTING AGREEMENT 1. Otter Tail is the owner of an electric transmission line that East River Electric Power Cooperative, Inc. (hereinafter referred to as East River), is presently connected to in the vicinity of Wendell, Minnesota. East River will be abandoning this connection and wishes to reconnect to Otter Tail again for the purpose of receiving deliveries of electric power and energy pursuant and subject to the interconnection and transmission service agreement between East River and Otter Tail, dated January 8, 1973, as supplemented. Otter Tail agrees to permit said connection to its line in accordance with the terms concerning ownership of the connecting facilities specified herein. 2. The line connection hereunder is located at or near the S.W. corner of Section 30, T. 129 N., R. 43 W., Grant County, Minnesota. 3. Electric power and energy delivered at the specified connection shall be three-phase alternating current approximately 41,600 volts. 4. East River shall install, own, and maintain in Otter Tail's line a junction pole or structure of a design approved by Otter Tail for the purpose of supporting and terminating the lines of the parties and providing for the East River connection thereof. In addition thereto, East River shall install, own, and maintain switching equipment at the point of connection complete with the supporting structures therefore as listed below: a. One gang-operated, three-pole air break switch in each of Otter Tail's lines North and South from said point of connection. b. One gang-operated, three-pole air break switch in East River's tap line West from said point of connection. Said switching equipment shall be of standard make and design with voltage and current ratings approved by Otter Tail. Otter Tail will provide insulation and fittings as required for the support or termination of its lines on East River's structures. 5. East River shall, at its own expense, maintain and keep in repair its structures, attachments, and equipment. Otter Tail shall cooperate in temporarily releasing the use of its transmission lines when possible for normal maintenance of East River's equipment connected to said lines. East River shall reimburse Otter Tail for all switching costs including labor incurred for such line switching. Upon request by East River, Otter Tail shall perform maintenance work on the East River electrical installations and equipment specified herein. East River shall reimburse Otter Tail for all costs incurred in the performance of such maintenance work, including administrative and generation expenses. 6. Operation of the switches specified herein which are located in Otter Tail's transmission lines shall be done only upon specific orders from Otter Tail's system dispatchers at Fergus Falls. Employees of Otter Tail shall have access at all times to operate East River switching equipment specified hereunder. East River shall operate the switching equipment specified herein without delay when so requested by Otter Tail's dispatchers. No charge shall be made by East River to Otter Tail for switching performed hereunder. 7. If East River decides to discontinue use of its connection to Otter Tail's line or if the connection is no longer usable in its present location, East River shall, at its own expense, remove its property, installed in conformance with this Agreement and restore Otter Tail's line and supporting structures to their original condition or that condition satisfactory with Otter Tail. 8. If it shall be determined by the parties hereto that it has become necessary for Otter Tail to relocate its transmission line serving the connection specified herein to eliminate interference with other utilities, with conflicting rights of way, such as roads, ditches, etc., or for similar reasons, East River, if it wishes to continue to receive service, shall at its own expense, relocate the connecting facilities specified under Paragraph 4 hereof and build the necessary connecting lines to such relocated point of connection as may be agreed between the parties hereto. 9. Each party shall pay any and all taxes levied and assessed on their respective properties as specified by the Agreement. 10. Otter Tail does not in any manner warrant or covenant unto East River the existence or validity of any easement, franchise or other authorization for the erection, maintenance, or repair of East River installations specified herein. East River shall procure all necessary easements, franchise, or authorization required for the construction, operation, and maintenance of its structures, wires, equipment, guys, or other installations. IN WITNESS WHEREOF, the parties have caused this agreement to be executed as of this 2nd day of December, 1993. EAST RIVER ELECTRIC POWER COOPERATIVE, INC. By Wayne Wright President ATTEST: Keith Kleppin Title Secretary OTTER TAIL POWER COMPANY By Earl Sjoberg Vice President, Electrical ATTEST: Jay D. Myster Title Secretary Exhibit 10-K-3 Firm Power Transaction May 1, 1995 - October 31, 1995 as provided for under Interconnection, Facilities and Coordinating Agreement Respecting Winnipeg - Grand Forks 230 Interconnection dated January 16, 1969, as amended between Otter Tail Power Company and Manitoba Hydro Electric Board Governing Agreements: Interconnection, Facilities and Coordinating Agreement Respecting Winnipeg - Grand Forks 230 Interconnection dated January 16, 1969, as amended between Otter Tail Power Company and Manitoba Hydro Electric Board. and Mid-Continent Area Power Pool Agreement, as Amended (MAPP) Transaction type: Firm Power Interchange Service (Service Schedule X -- identical to MAPP Service schedule J). Selling Party: Manitoba Hydro Electric Board (MH) Purchasing Party: Otter Tail Power Company (OTP) Terms: The period shall cover the MAPP Summer Season (six- months season May 1 through October 31) commencing May 1, 1995 and ending October 31, 1995. Quantity and Price: The quantity of electric Capacity shall be 35 MW and the capacity price MH sells to OTP shall be $1650 (One Thousand Six Hundred and Fifty dollars) per MW-month. The capacity quantity includes reserves. Energy Charge: Shall be determined by MH at a later date, but shall not exceed $100 (One Hundred dollars) / MWh. Other Provisions: OTP shall inform MH not later than 3 P.M. of the weekday preceding delivery of the amounts of energy to be delivered the following day or weekend. Schedule changes will require a mutual agreement between MH and OTP. This Transaction Agreement is contingent on receipt of approval of applicable regulatory authorities, Canadian National Energy Board, Federal Energy Regulatory Commission (FERC) and OTP's receipt of Mid Continent Area Power Pool's (MAPP) accreditation approval. Otter Tail Power Company Manitoba Hydro-Electric Board By: Wallace Ness By: D. W. Gunter Title: Director Title: Division Manager System Operations System Operating Division Date: February 8, 1994 Date: February 16, 1994 Firm Power Transaction May 1, 1996 - October 31, 1996 as provided for under Interconnection, Facilities and Coordinating Agreement Respecting Winnipeg - Grand Forks 230 Interconnection dated January 16, 1969, as amended between Otter Tail Power Company and Manitoba Hydro Electric Board Governing Agreements: Interconnection, Facilities and Coordinating Agreement Respecting Winnipeg - Grand Forks 230 Interconnection dated January 16, 1969, as amended between Otter Tail Power Company and Manitoba Hydro Electric Board. and Mid-Continent Area Power Pool Agreement, as Amended (MAPP) Transaction type: Firm Power Interchange Service (Service Schedule X -- identical to MAPP Service schedule J). Selling Party: Manitoba Hydro Electric Board (MH) Purchasing Party: Otter Tail Power Company (OTP) Terms: The period shall cover the MAPP Summer Season (six- months season May 1 through October 31) commencing May 1, 1996 and ending October 31, 1996. Quantity and Price: The quantity of electric Capacity shall be 35 MW and the capacity price MH sells to OTP shall be $1700 (Seventeen Hundred dollars) per MW-month. The capacity quantity includes reserves. Energy Charge: Shall be determined by MH at a later date, but shall not exceed $100 (One Hundred dollars) / MWh. Other Provisions: OTP shall inform MH not later than 3 P.M. of the weekday preceding delivery of the amounts of energy to be delivered the following day or weekend. Schedule changes will require a mutual agreement between MH and OTP. This Transaction Agreement is contingent on receipt of approval of applicable regulatory authorities, Canadian National Energy Board, Federal Energy Regulatory Commission (FERC) and OTP's receipt of Mid Continent Area Power Pool's (MAPP) accreditation approval. Otter Tail Power Company Manitoba Hydro-Electric Board By: Wallace Ness By: D. W. Gunter Title: Director Title: Division Manager System Operations System Operating Division Date: February 8, 1994 Date: February 16, 1994 Exhibit 10-M-10 SEVENTH AMENDMENT TO COAL TRANSPORTATION AGREEMENT ICC-BN-C-2420 This Seventh Amendment is made pursuant to 49 U.S.C. Section 10713, on this 22nd day of November, 1993, by and between Burlington Northern Railroad Company ("BN") and Otter Tail Power Company ("Otter Tail"). WITNESS THAT: WHEREAS, BN and Otter Tail are parties to a Coal Transportation Agreement dated September 2, 1988, ICC-BN-C-2420, and amended December 16, 1988, April 5, 1989, December 18, 1989, May 10, 1991, December 7, 1992, and January 11, 1993, (hereinafter the Base Agreement and previous Amendments there to are collectively referred to as the "Original Agreement"); and WHEREAS, BN and Otter Tail desire to extend the term of the Agreement. NOW, THEREFORE, in consideration of the premises, covenants and provisions set out herein, the parties hereto agree as follows: 1. This Seventh Amendment shall be effective on December 31, 1993, subject to 49 C.F.R. Section 1313(c). If the ICC does not approve this Seventh Amendment, it shall be null and void and the Original Agreement shall remain in full force and effect as written. 2. Amend Section 1. EFFECTIVE DATE by changing the expiration date to "December 31, 1994" subject to a one year extension, provided both parties consent and notification is given BN by Otter Tail at least sixty (60) days before the expiration of the contract term set out above. 3. Nothing in this Seventh Amendment shall alter the rights or obligations of the parties under the Original Agreement except and specifically provided for above. IN WITNESS WHEREOF, the parties have caused this Seventh Amendment to be executed by their duly authorized representatives on the day and year first written above. OTTER TAIL POWER COMPANY By: Ward Uggerud Title: Vice President, Operations BURLINGTON NORTHERN RAILROAD COMPANY By: T.R. Jacobson Title: AVP Market & Strategic Planning Exhibit 10-N-4 OTTER TAIL POWER COMPANY NONQUALIFIED PENSION PLAN WITNESSETH: That WHEREAS, Otter Tail Power Company, a Minnesota corporation, by action of its Board of Directors taken on December 13, 1993, has authorized the creation of a nonqualified, unfunded, deferred compensation and excess benefits plan effective January 1, 1994, for the benefit of a select group of management or highly compensated eligible employees as set forth in the document entitled Nonqualified Pension Plan; and WHEREAS, This is the document so approved and adopted; NOW, THEREFORE, Otter Tail Power Company does hereby create and establish such deferred compensation and excess benefit plan to read in full as follows: 1. Plan Purposes. The Otter Tail Power Company Nonqualified Pension Plan ( Nonqualified Pension Plan or Plan ) is an unfunded deferred compensation and excess benefit plan established by Otter Tail Power Company, a Minnesota corporation ( Employer ) for the purpose of providing a select group of management or highly compensated employees of the Employer and certain affiliated corporations who are participants in the Otter Tail Power Company 1975 Amended Employees Pension Plan (the Qualified Pension Plan ) with benefits which would have been provided under the Qualified Pension Plan but for the limitations of sections 401(a)(17) and 415 of the Internal Revenue Code ( Code ). 2. Effective Date. January 1, 1994. 3. Coverage. An individual shall participate in and receive benefits under the Nonqualified Pension Plan if that individual: (i) is, on or after January 1, 1994, actively employed by the Employer or by any subsidiary or affiliate of the Employer which is a participating employer under the Qualified Pension Plan, and (ii) is on or after January 1, 1994, a participant in the Qualified Pension Plan, and (iii) is affirmatively selected for participation in the Nonqualified Pension Plan by the Administrative Committee of the Qualified Pension Plan ( Committee ). Any employee who receives a benefit in the Plan is hereinafter called a Participant. 4. Specific Exclusions from Coverage. Notwithstanding anything apparently to the contrary in this Plan or in any written communication, summary, resolution or document or oral communication, no individual shall be a Participant in this Plan, develop benefits under this Plan or be entitled to receive benefits under this Plan (either for himself or his survivors) unless such individual is a member of a select group of management or highly compensated employees (as that expression is used in the Employee Retirement Income Security Act of 1974 ( ERISA ). If a court of competent jurisdiction, any representative of the U.S. Department of Labor or any other governmental, regulatory or similar body makes any direct or indirect, formal or informal, determination that an individual is not a member of a select group of management or highly compensated employees (as that expression is used in ERISA), such individual shall not be (and shall not have ever been) a Participant in this Plan at any time. If any person not so defined has been erroneously treated as a Participant in this Plan, upon discovery of such error, such person's erroneous participation shall immediately terminate ab initio, all benefits erroneously treated as having accrued for the individual shall be immediately and irrevocably forfeited and the individual (or his or her beneficiaries and estate) shall be obligated to repay any benefits previously and erroneously paid. 5. Payments to Participants. 5.1. Amount of Payment. Benefits shall be paid to the Participant or, in the event of death, to the beneficiary designated by the Participant for the purposes of the Qualified Pension Plan (or established by operation of the rules of the Qualified Pension Plan) in an amount equal to (a) over (b) where: (a) is the amount that would have been payable to such person under the Qualified Pension Plan if such benefit had been determined without regard to the benefit limitations under section 415 of the Code and without regard to the compensation limitation of section 401(a)(17) of the Code, and (b) is the amount actually paid to such person from the Qualified Pension Plan as limited by sections 401(a)(17) and 415 of the Code. This benefit shall be determined by comparing single sum present values determined by the actuary of the Qualified Pension Plan under the actuarial factors then in effect under the Qualified Pension Plan. 5.2. Time and Form of Payment. Benefits shall be paid to the Participant in a single lump sum cash payment not more than 30 days after the earliest date the Participant could receive any benefit (on account of retirement or other termination of employment) directly under the Qualified Pension Plan. Benefits shall be paid to a Participant s beneficiary in a single lump sum cash payment not more than 30 days after the earliest date such person could receive any survivor benefit directly under the Qualified Pension Plan. 5.3. In General. Except for the limited purposes of determining the actuarial factors and the date when payment shall be determined and made, elections and optional forms of settlement in effect and all other rules governing the payment of benefits under the Qualified Pension Plan shall be given no effect under this Nonqualified Pension Plan in determining the time or form in which excess benefits are paid under this Plan. 6. Nontransferability. Participants and beneficiaries shall not have the right to assign, encumber or otherwise anticipate the payments to be made under this Plan, and the benefits provided hereunder shall not be subject to seizure for payment of any debts or judgments against any Participant or any beneficiary. 7. Tax Withholding. The Employer may deduct from any benefit payment (and transmit to the proper taxing authority) such amount as it may be required to withhold under any federal, state or other law. 8. Not Funded. The obligation of the Employer to make payments under the Nonqualified Pension Plan constitutes only the unsecured (but legally enforceable) promise of the Employer to make such payments, and the Participant shall have no lien, prior claim or other security interest in any property of the Employer. No fund, trust or account (other than an bookkeeping account or reserve) will be established or maintained by the Employer for the purpose of funding or paying the benefits promised under the Plan. If such a fund is established, the property therein shall remain the sole and exclusive property of the Employer. the Employer will pay the cost of the Plan out of its general assets. All references to accounts, credits, gains, losses, income, expenses, payments and the like are included merely for the purpose of measuring the Employer s obligation to Participants in this Plan and shall not be construed to impose on the Employer the obligation to create any separate fund for purposes of the Plan. 9. Claims Procedure. Payments will be paid to each Participant automatically. Payments will be made to a beneficiary only after a proper written claim for payment as been filed with the Committee. If any Participant or beneficiary is in disagreement with any determination that has been made, a claim may be presented. 9.1. Making a Claim. The claim must be written and must be delivered to the Committee. Within 90 days after the claim is delivered the claimant will receive either: (a) a decision; or (b) a notice describing specific special circumstances requiring a specified amount of additional time (but no more than 180 days from the date the claim was delivered) to reach a decision. If the claim wholly or partially denied, the claimant will receive a written notice specifying: (a) the reasons for the denial; (b) the Plan provisions on which the denial is based; and (c) any additional information needed in connection with the claim and the reason such information is needed. A copy of Paragraph 9.2 below concerning the claimant s right to request a review will also be given to the claimant. 9.2. Requesting Review of Denied Claim. A claimant may request that a denied claim be reviewed. The request for review must be written and must be delivered to the Committee within 60 days after the claimant s receipt of notice that the claim was denied. A request for review may (but is not required to) include issues and comments the claimant wants considered in the review. The claimant may examine pertinent Plan documents by asking the Committee. Within 60 days after the delivery of the request for review, the claimant will receive either (a) a decision; or (b) a notice describing specific special circumstances requiring a specified amount of additional time (but not more than 120 days from the date the request for review was delivered) to reach a decision. The decision will be in writing and will specify the Plan provisions on which it is based. 9.3. In General. All decisions on claims and on requests for a review of denied claims shall be made by the Committee. The Committee may, in its discretion, hold one or more hearings on a claim or a request for a review of a denied claim. If a claimant does not receive a decision within the time specified, the claimant should assume the claim was denied or re-denied on the date the specified time expired. The claimant may, at claimant s own expense, have an attorney or other representative act on behalf of the claimant, but the Committee reserves the right to require a written authorization. The Committee also reserves the right to delegate its authority to make decisions. 10. Employment Rights and Other Benefit Programs. The provisions of this Plan shall not give any Participant any right to be retained in the employment of the Employer. This Plan shall not replace any contract of employment, whether oral or written, between the Employer and any Participant, but shall be considered a supplement thereto. This Plan is in addition to, and not in lieu of, any other employee benefit plan or program in which any Participant may be or become eligible to participate by reason of employment with the Employer. The receipt of benefits hereunder shall have such effect on contributions to and benefits under such other plans or programs as the provisions of each such other plan or program may specify. 11. Applicability to Successors. This Plan shall be binding upon and inure to the benefit of the Employer and each Participant, the successors and assigns of the Employer, and the beneficiaries, personal representatives and heirs of each Participant. If the Employer becomes a party to any merger, consolidation or reorganization, this Plan shall remain in full force and effect as an obligation of the Employer or its successors in interest. 12. Amendment and Termination. The Board of Directors of the Employer may amend this Nonqualified Pension Plan prospectively, retroactively, or both, at any time and for any reason deemed sufficient by it without notice to any person affected by this Plan and may likewise terminate or curtail the benefits of this Plan both with regard to persons expecting to receive benefits hereunder in the future and persons already receiving benefits at the time of such action. 13. Plan Administrator. The Employer shall be the plan administrator of this Plan. 14. Conflicts of Interest. If any officer or employee of the Employer, or any member of the Board of Directors of the Employer shall also be a Participant in the Plan, such Participant shall have no authority as such officer, employee or member with respect to any matter specially affecting such Participant's individual interest hereunder, all such authority being reserved exclusively to the other officers, employees or members as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participant's individual capacity in connection with any such matter. 15. Construction. This Nonqualified Pension Plan is adopted with the understanding that it is both an unfunded excess benefit plan within the meaning of sections 3(36) and 4(b)(5) of ERISA and an unfunded plan of deferred compensation for a select group of management or highly compensated employees with the meaning of sections 3(36), 201, 301 and 401 of ERISA, and each provision hereof shall be interpreted and administered accordingly. This Plan will not provide any excess benefits with respect to any defined contribution profit sharing plan, stock bonus plan, employee stock ownership plan or PAYSOP nor shall it duplicate any benefits which are provided pursuant to any other agreement, arrangement or plan. References to the Board of Directors shall include any committee of the Board to whom a function under this Plan may have been assigned. This Plan is adopted in the State of Minnesota and shall be construed and enforced according to the laws of that State. December 13, 1993 OTTER TAIL POWER COMPANY By Richard W. Muehlhausen Its Vice President Corporate Services And Jay D. Myster Its Vice President Governmental & Legal Corporate Secretary Exhibit 10-N-5 OTTER TAIL POWER COMPANY NONQUALIFIED PROFIT SHARING PLAN WITNESSETH: That WHEREAS, Otter Tail Power Company, a Minnesota corporation, by action of its Board of Directors taken on December 13, 1993, has authorized the creation of a nonqualified, unfunded, deferred compensation and excess benefits plan effective January 1, 1994, for the benefit of a select group of management or highly compensated eligible employees as set forth in the document entitled Nonqualified Profit Sharing Plan; and WHEREAS, This is the document so approved and adopted; NOW, THEREFORE, Otter Tail Power Company does hereby create and establish such deferred compensation and excess benefit plan to read in full as follows: 1. Plan Purposes. The Otter Tail Power Company Nonqualified Profit Sharing Plan ( Nonqualified Profit Sharing Plan or Plan ) is an unfunded, deferred compensation and excess benefit plan established by Otter Tail Power Company, a Minnesota corporation ( Employer ) for the purpose of providing a select group of management or highly compensated employees of the Employer and certain affiliated corporations who are participants in the Otter Tail Power Company Employee Stock Ownership Plan (the ESOP ) with benefits which would have been provided under the ESOP but for the limitations of sections 401(a)(17) and 415 of the Internal Revenue Code ( CODE ). 2. Effective Date. January 1, 1994. 3. Coverage. An individual shall participate in and receive benefits under the Nonqualified Profit Sharing Plan if that individual: (i) is, on or after January 1, 1994, actively employed by the Employer or by any subsidiary or affiliate of the Employer which is a participating employer under ESOP, and (ii) is on or after January 1, 1994, a participant in the ESOP, and (iii) is affirmatively selected for participation in the Nonqualified Profit Sharing Plan by the Administrative Committee of the ESOP ( Committee ). Any employee who receives a benefit in the Plan is hereinafter called a Participant. 4. Specific Exclusions from Coverage. Notwithstanding anything apparently to the contrary in this Plan or in any written communication, summary, resolution or document or oral communication, no individual shall be a Participant in this Plan, develop benefits under this Plan or be entitled to receive benefits under this Plan (either for himself or his survivors) unless such individual is a member of a select group of management or highly compensated employees (as that expression is used in the Employee Retirement Income Security Act of 1974 ( ERISA ). If a court of competent jurisdiction, any representative of the U.S. Department of Labor or any other governmental, regulatory or similar body makes any direct or indirect, formal or informal, determination that an individual is not a member of a select group of management or highly compensated employees (as that expression is used in ERISA), such individual shall not be (and shall not have ever been) a Participant in this Plan at any time. If any person not so defined has been erroneously treated as a Participant in this Plan, upon discovery of such error, such person s erroneous participation shall immediately terminate ab initio, all benefits erroneously treated as having accrued for the individual shall be immediately and irrevocably forfeited and the individual (or his or her beneficiaries and estate) shall be obligated to repay any benefits previously and erroneously paid. 5. Nonqualified Profit Sharing Account. Subject to the following rules, there shall be created and maintained for each Participant an unfunded bookkeeping account ( Nonqualified Account ) on the books of the Employer. 5.1. Credits to the Account. The credit to each account for each calendar year shall equal the excess, if any, of (a) over (b), where (a) is the dollar amount of the that would have been credited to the Participant s account or accounts in the ESOP for such calendar year if the dollar amount had been determined without regard to the benefit limitations in section 415 of the Code and without regard to the compensation limitation in section 401(a)(17) of the Code, and (b) is the dollar amount actually credited to the Participant s account or accounts in the ESOP as limited by sections 401(a)(17) and 415 of the Code. Insofar as is practicable, the amount described in this Section 5.1 shall be credited to the Nonqualified Account at the time or times when such amount (or comparable amount) would have in fact been contributed (not accrued) to the ESOP but for the limitations of sections 401(a)(17) and 415 of the Code as described above. 5.2. Value of the Account. The value of the Nonqualified Account shall be determined as if the credits to the Account had in fact been immediately invested in accordance with the terms of the ESOP, and any dividends, interest and similar amounts that would have been received with respect to such investment under the ESOP had been immediately reinvested under the ESOP. No amount shall be credited under this Section 5 to the Nonqualified Account with respect to any period of time following the first business day of the calendar year immediately following the calendar year in which the Participant terminates employment with the Employer. 6. Benefit Payments. 6.1. Eligibility for Payments. Each Participant or, in the event of death, the beneficiary designated by the Participant for the purposes of the ESOP (or established by operation of the rules of the ESOP) shall be entitled to benefits under this Plan upon the Participant s termination of employment with the Employer (or affiliate of the Employer), whether voluntary or involuntary, upon the Participant s permanent and total disability or upon the Participant s death. A transfer of employment from the Employer to an affiliate of the Employer shall not be considered a termination of employment. 6.2. Time and Form of Payments. Benefits shall be paid to the Participant in a single lump sum cash payment as of the Valuation Date (as that term is defined in the ESOP) immediately following the date on which the event referred to in Section 6.1 occurs. Benefits shall be paid to a beneficiary in a single lump sum cash payment as of the Valuation Date immediately following the date of the Participant s death. Actual payment shall occur as soon as administratively feasible after such dates. Rules governing the payment of benefits under the ESOP shall be given no effect under this Plan in determining the time or form in which the Nonqualified Account is paid under this Plan. 6.3. Amount of Payment. The amount of the benefit shall be the fair market value of the credits in the Nonqualified Account on the Valuation Date as of which of such payment is made. 6.4. Nontransferability. Participants and beneficiaries shall not have the right to assign, encumber or otherwise anticipate the payments to be made under this Plan, and the benefits provided hereunder shall not be subject to seizure for payment of any debts or judgments against any Participant or any beneficiary. 6.5. Tax Withholding. The Employer may deduct from any benefit payment (and transmit to the proper taxing authority) such amount as it may be required to withhold under any federal, state or other law. 7. Not Funded. The obligation of the Employer to make payments under the Nonqualified Profit Sharing Plan constitutes only the unsecured (but legally enforceable) promise of the Employer to make such payments, and the Participant shall have no lien, prior claim or other security interest in any property of the Employer. No fund, trust or account (other than an bookkeeping account or reserve) will be established or maintained by the Employer for the purpose of funding or paying the benefits promised under the Plan. If such a fund is established, the property therein shall remain the sole and exclusive property of the Employer. the Employer will pay the cost of the Plan out of its general assets. All references to accounts, credits, gains, losses, income, expenses, payments and the like are included merely for the purpose of measuring the Employer s obligation to Participants in this Plan and shall not be construed to impose on the Employer the obligation to create any separate fund for purposes of the Plan. 8. Claims Procedure. Payments will be paid to each Participant automatically. Payments will be made to a beneficiary only after a proper written claim for payment as been filed with the Committee. If any Participant or beneficiary is in disagreement with any determination that has been made, a claim may be presented. 8.1. Making a Claim. The claim must be written and must be delivered to the Committee. Within 90 days after the claim is delivered the claimant will receive either: (a) a decision; or (b) a notice describing specific special circumstances requiring a specified amount of additional time (but no more than 180 days from the date the claim was delivered) to reach a decision. If the claim wholly or partially denied, the claimant will receive a written notice specifying: (a) the reasons for the denial; (b) the Plan provisions on which the denial is based; and (c) any additional information needed in connection with the claim and the reason such information is needed. A copy of Paragraph 8.2 below concerning the claimant s right to request a review will also be given to the claimant. 8.2. Requesting Review of Denied Claim. A claimant may request that a denied claim be reviewed. The request for review must be written and must be delivered to the Committee within 60 days after the claimant s receipt of notice that the claim was denied. A request for review may (but is not required to) include issues and comments the claimant wants considered in the review. The claimant may examine pertinent Plan documents by asking the Committee. Within 60 days after the delivery of the request for review, the claimant will receive either (a) a decision; or (b) a notice describing specific special circumstances requiring a specified amount of additional time (but not more than 120 days from the date the request for review was delivered) to reach a decision. The decision will be in writing and will specify the Plan provisions on which it is based. 8.3. In General. All decisions on claims and on requests for a review of denied claims shall be made by the Committee. The Committee may, in its discretion, hold one or more hearings on a claim or a request for a review of a denied claim. If a claimant does not receive a decision within the time specified, the claimant should assume the claim was denied or re-denied on the date the specified time expired. The claimant may, at claimant s own expense, have an attorney or other representative act on behalf of the claimant, but the Committee reserves the right to require a written authorization. The Committee also reserves the right to delegate its authority to make decisions. 9. Employment Rights and Other Benefit Programs. The provisions of this Plan shall not give any Participant any right to be retained in the employment of the Employer. This Plan shall not replace any contract of employment, whether oral or written, between the Employer and any Participant, but shall be considered a supplement thereto. This Plan is in addition to, and not in lieu of, any other employee benefit plan or program in which any Participant may be or become eligible to participate by reason of employment with the Employer. Deferral of compensation and receipt of benefits hereunder shall have such effect on contributions to and benefits under such other plans or programs as the provisions of each such other plan or program may specify. 10. Applicability to Successors. This Plan shall be binding upon and inure to the benefit of the Employer and each Participant, the successors and assigns of the Employer, and the beneficiaries, personal representatives and heirs of each Participant. If the Employer becomes a party to any merger, consolidation or reorganization, this Plan shall remain in full force and effect as an obligation of the Employer or its successors in interest. 11. Amendment and Termination. The Board of Directors of the Employer may amend this Nonqualified Profit Sharing Plan prospectively, retroactively, or both, at any time and for any reason deemed sufficient by it without notice to any person affected by this Plan and may likewise terminate or curtail the benefits of this Plan both with regard to persons expecting to receive benefits hereunder in the future and persons already receiving benefits at the time of such action 12. Plan Administrator. The Employer shall be the plan administrator of this Plan. 13. Conflicts of Interest. If any officer or employee of the Employer, or any member of the Board of Directors of the Employer shall also be a Participant in the Plan, such Participant shall have no authority as such officer, employee or member with respect to any matter specially affecting such Participant s individual interest hereunder, all such authority being reserved exclusively to the other officers, employees or members as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participant s individual capacity in connection with any such matter. 14. Construction. This Nonqualified Profit Sharing Plan is adopted with the understanding that it is an unfunded excess benefit plan within the meaning of ERISA sections 3(36) and 4(b)(5) and an unfunded plan of deferred compensation for a select group of management or highly compensated employees with the meaning of ERISA sections 3(36), 201, 301 and 401, and each provision hereof shall be interpreted and administered accordingly. This Plan will not provide any excess benefits with respect to any defined benefit pension plan nor shall it duplicate any benefits which are provided pursuant to any other agreement, arrangement or plan. References to the Board of Directors shall include any committee of the Board to whom a function under this Plan may have been assigned. This Plan is adopted in the State of Minnesota and shall be construed and enforced according to the laws of that State. December 13, 1993 OTTER TAIL POWER COMPANY By R. W. Muehlhausen Its Vice President Corporate Services And Jay D. Myster Its Vice President Governmenal & Legal Corporate Secretary Exhibit 10-N-6 OTTER TAIL POWER COMPANY NONQUALIFIED RETIREMENT SAVINGS PLAN WITNESSETH: That WHEREAS, Otter Tail Power Company, a Minnesota corporation, by action of its Board of Directors taken on December 13, 1993, has authorized the creation of a nonqualified, unfunded, deferred compensation plan effective January 1, 1994, for the benefit of a select group of management or highly compensated eligible employees as set forth in the document entitled Nonqualified Retirement Savings Plan; and WHEREAS, This is the document so approved and adopted; NOW, THEREFORE, Otter Tail Power Company does hereby create and establish such deferred compensation plan to read in full as follows: 1. Plan Purpose. The purpose of the Otter Tail Power Company Nonqualified Retirement Savings Plan ( Nonqualified Retirement Savings Plan or Plan ) is to provide eligible employees of Otter Tail Power Company (the Employer ) and certain affiliated corporations the opportunity to defer compensation in addition to the amounts such employees are allowed to defer under the Otter Tail Power Company Nonunion Employees Retirement Savings Plan ( Qualified Retirement Savings Plan ). 2. Effective Date. January 1, 1994. 3. Coverage. The Nonqualified Retirement Savings Plan shall be made available to a group of management or highly compensated employees of the Employer and certain affiliated corporations who are affirmatively selected by the Administrative Committee of the Qualified Retirement Savings Plan (the Committee ). Any such employee who elects to participate in the Nonqualified Retirement Savings Plan is hereinafter called a Participant. 4. Specific Exclusions from Coverage. Notwithstanding anything apparently to the contrary herein or in any written communication, summary, resolution or document or oral communication, no individual shall be a Participant in the Plan, develop benefits under the Plan or be entitled to receive benefits under the Plan (either for himself or his survivors) unless such individual is a member of a select group of management or highly compensated employees (as that expression is used in the Employee Retirement Income Security Act of 1974 ( ERISA )). If a court of competent jurisdiction, any representative of the U.S. Department of Labor or any other governmental, regulatory or similar body makes any direct or indirect, formal or informal, determination that an individual is not a member of a select group of management or highly compensated employees (as that expression is used in ERISA), such individual shall not be (and shall not have ever been) a Participant in this Plan at any time. If any person not so defined has been erroneously treated as a Participant in the Plan, upon discovery of such error, such person s erroneous participation shall immediately terminate ab initio, all benefits erroneously treated as having accrued for the individual shall be immediately and irrevocably forfeited and the individual (or his or her beneficiaries and estate) shall be obligated to repay any benefits previously and erroneously paid. 5. Elections to Defer Compensation. A Participant may enroll in the Nonqualified Retirement Savings Plan by electing to have an amount, expressed as a percentage, of such Participant s annual compensation (excluding Gain Share payments, if any) which would otherwise be received and included in gross income deferred in accordance with the provisions herein. A separate election, also expressed as a percentage, may be made with respect to the Participant s annual Gain Share payment, if any. Such elections must be in writing and must be received by the Committee prior to the January 1 on which such elections are to be first effective. An election will remain in effect until revised or revoked by the Participant. The revised election or the revocation of an election must be in writing and must be received by the Committee before the January 1 on which it is to take effect. 6. Nonqualified Retirement Savings Accounts. 6.1. Establishment of Accounts. The amount of benefits to be paid by the Employer to each Participant under this Plan shall be determined by reference to an unfunded bookkeeping account ( Nonqualified Account ), which the Employer shall establish and maintain for each Participant and which shall be adjusted as of each Valuation Date, which dates shall be the same as the valuation dates under the Qualified Retirement Savings Plan. 6.2. Compensation Credits to Accounts. As of each Valuation Date, the Nonqualified Account shall be credited with the amount of compensation which, but for an election under Section 5, would have been paid to the Participant on or before such Valuation Date but after the immediately preceding Valuation Date. 6.3. Investment Credits to or Charges Against Accounts. The Employer shall be deemed to have invested all compensation that is credited to the Nonqualified Account in the Balanced Fund (or a comparable fund designated by the Committee) established under the Qualified Retirement Savings Plan. As of each Valuation Date, there shall be credited to (or charged against) each Nonqualified Account the pro rata increase (or decrease) in the such Fund from the immediately preceding Valuation Date. 6.4. Charges Against Accounts for Benefit Payments. On each date that a benefit payment is made by the Employer under the Nonqualified Retirement Savings Plan, the amount of such payment shall be charged against the appropriate Nonqualified Account. 6.5. Reports. As soon as administratively feasible after each December 31, the Employer shall make a report to each Participant (or, in the event of death, to the beneficiary) showing: (a) The balance of the Nonqualified Account as of the preceding December 31, (b) The amounts and dates of the credits to the Nonqualified Account since such date, (c) The amounts and dates of the charges against the Nonqualified Account since such date, (d) The balance of the Nonqualified Account as of the December 31 in question. 7. Benefit Payments. 7.1. Eligibility for Payments. Each Participant or, in the event of death, the beneficiary designated by the Participant for the purposes of the Qualified Retirement Savings Plan (or established by operation of the rules of the Qualified Retirement Savings Plan) shall be entitled to benefits under this Plan upon the Participant s termination of employment with the Employer or affiliate of the Employer, whether voluntary or involuntary, upon the Participant s permanent and total disability or upon the Participant s death. A transfer of employment from the Employer to an affiliate of the Employer shall not be considered a termination of employment. 7.2. Time and Form of Payments. Benefits shall be paid to a Participant in a single lump sum cash payment as of the Valuation Date immediately following the date on which the event referred to in Section 7.1 occurs. Benefits shall be paid to a beneficiary in a single lump sum cash payment as of the Valuation Date immediately following the date of the Participant s death. Actual payment shall occur as soon as administratively feasible after such dates. Rules governing the payment of benefits under the Qualified Retirement Savings Plan shall be given no effect under this Plan in determining the time or form in which the Nonqualified Account is paid. 7.3. Amount of Payments. The amount of the lump sum payment shall be the fair market value of the credits in the Nonqualified Account on the Valuation Date as of which such payment is made. 7.4. Nontransferability. Participants and beneficiaries shall not have the right to assign, encumber or otherwise anticipate the payments to be made under this Plan, and the benefits provided hereunder shall not be subject to seizure for payment of any debts or judgments against any Participant or any beneficiary. 7.5. Tax Withholding. The Employer may deduct from any benefit payment (and transmit to the proper taxing authority) such amount as it may be required to withhold under any federal, state or other law. The Employer may deduct FICA taxes on compensation deferred under this Plan from the Participant s nondeferred compensation. 8. Not Funded. The obligation of the Employer to make payments under the Nonqualified Retirement Savings Plan constitutes only the unsecured (but legally enforceable) promise of the Employer to make such payments, and the Participant shall have no lien, prior claim or other security interest in any property of the Employer. No fund, trust or account (other than a bookkeeping account or reserve) will be established or maintained by the Employer for the purpose of funding or paying the benefits promised under the Plan. If such a fund is established, the property therein shall remain the sole and exclusive property of the Employer. The Employer will pay the cost of the Plan out of its general assets. All references to accounts, credits, gains, losses, income, expenses, payments, custodial funds and the like are included merely for the purpose of measuring the Employer s obligation to Participants in this Plan and shall not be construed to impose on the Employer the obligation to create any separate fund for purposes of the Plan. 9. Claims Procedure. Payments will be paid to each Participant automatically. Payments will be made to a beneficiary only after a proper written claim for payment has been filed with the Committee. If any Participant or beneficiary is in disagreement with any determination that has been made, a claim may be presented. 9.1. Making a Claim. The claim must be written and must be delivered to the Committee. Within 90 days after the claim is delivered, the claimant will receive either: (a) a decision; or (b) a notice describing special circumstances requiring a specified amount of additional time (but no more than 180 days from the day the claim was delivered) to reach a decision. If the claim is wholly or partially denied, the claimant will receive a written notice specifying: (a) the reasons for denial; (b) the Plan provisions on which the denial is based; and (c) any additional information needed in connection with the claim and the reason such information is needed. A copy of Paragraph 9.2 below concerning the claimant s right to request a review will also be given to the claimant. 9.2. Requesting Review of a Denied Claim. A claimant may request that a denied claim be reviewed. The request for review must be written and must be delivered to the Committee within 60 days after claimant s receipt of written notice that the claim was denied. A request for review may (but is not required to) include issues and comments the claimant wants considered in the review. The claimant may examine pertinent Plan documents by asking the Committee. Within 60 days after delivery of a request for review, claimant will receive either: (a) a decision; or (b) a notice describing special circumstances requiring a specified amount of additional time (but no more than 120 days from the day the request for review was delivered) to reach a decision. The decision will be in writing and will specify the Plan provisions on which it is based. 9.3. In General. All decisions on claims and on reviews of denied claims will be made by the Committee. The Committee may, in its discretion, hold one or more hearings. If a claimant does not receive a decision within the specified time, the claimant should assume the claim was denied or re-denied on the date the specified time expired. The claimant may, at the claimant s own expense, have an attorney or other representative act on behalf of the claimant, but the Committee reserves the right to require a written authorization. The Committee also reserves the right to delegate its authority to make decisions. 10. Employment Rights and Other Benefit Programs. The provisions of this Plan shall not give any Participant any right to be retained in the employment of the Employer. This Plan shall not replace any contract of employment, whether oral or written, between the Employer and any Participant, but shall be considered a supplement thereto. This Plan is in addition to, and not in lieu of, any other employee benefit plan or program in which any Participant may be or become eligible to participate by reason of employment with the Employer. Deferral of compensation and receipt of benefits hereunder shall have such effect on contributions to and benefits under such other plans or programs as the provisions of each such other plan or program may specify. 11. Applicability to Successors. This Plan shall be binding upon and inure to the benefit of the Employer and each Participant, the successors and assigns of the Employer, and the beneficiaries, personal representatives and heirs of each Participant. If the Employer becomes a party to any merger, consolidation or reorganization, this Plan shall remain in full force and effect as an obligation of the Employer or its successors in interest. 12. Amendment and Termination. The Board of Directors of the Employer may amend this Nonqualified Retirement Savings Plan prospectively, retroactively, or both, at any time and for any reason deemed sufficient by it without notice to any person affected by this Plan and may likewise terminate or curtail the benefits of this Plan both with regard to persons expecting to receive benefits hereunder in the future and persons already receiving benefits at the time of such action 13. Plan Administrator. The Employer shall be the plan administrator of this Plan. 14. Conflicts of Interest. If any officer or employee of the Employer, or any member of the Board of Directors of the Employer shall also be a Participant in the Plan, such Participant shall have no authority as such officer, employee or member with respect to any matter specially affecting such Participant s individual interest hereunder, all such authority being reserved exclusively to the other officers, employees or members as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participant s individual capacity in connection with any such matter. 15. Construction. This Nonqualified Retirement Savings Plan is adopted with the understanding that it is an unfunded, deferred compensation plan for a select group of management or highly compensated employees within the meaning of sections 3(36), 201, 301 and 401 of the Employee Retirement Income Security Act of 1974, as amended, and each provision hereof shall be interpreted and administered accordingly. This Plan will not provide any benefits with respect to any defined benefit pension plan nor shall it duplicate any benefits which are provided pursuant to any other agreement, arrangement or plan. References to the Board of Directors shall include any committee of the Board to whom a function under this Plan may have been assigned. This Plan is adopted in the State of Minnesota and shall be construed and enforced according to the laws of that State. December 13, 1993 OTTER TAIL POWER COMPANY By R. W. Muehlhausen Its Vice President Corporate Services And Jay D. Myster Its Vice President Governmental & Legal Corporate Secretary Exhibit 10-O DEALER AGREEMENT BETWEEN PHILIPS MEDICAL SYSTEMS NORTH AMERICA COMPANY AND DIAGNOSTIC MEDICAL SYSTEMS, INC. THIS AGREEMENT is entered into on this 18th day of January, 1994, by and between Philips Medical Systems North America Company, a division of Philips Electronics North America Corporation, with its principal place of business at 710 Bridgeport Avenue, Shelton, Connecticut 06484 (hereinafter "PMSNA") and Diagnostic Medical Systems, Inc. (hereinafter "Dealer"), a wholly owned subsidiary of Mid-States Development, Inc. with its principal place of business at 2101 North University Drive, Fargo, North Dakota 58102. WHEREAS, PMSNA is engaged in, among other things, the design, development, manufacture and sales of diagnostic imaging equipment to the medical profession, hospitals, clinics, national accounts and the government. WHEREAS, Dealer desires to be a dealer for certain PMSNA products and accounts. NOW, THEREFORE, in consideration of the mutual covenants and agreements between the parties hereto, it is agreed as follows: 1. SCOPE PMSNA grants to Dealer the right to purchase the products identified on Schedule A, which is attached hereto and incorporated by reference herein ("Product(s)") on terms and conditions which are set forth below. PMSNA has the option of adding or deleting products from this list upon sixty (60) days prior written notice. 2. TERRITORY PMSNA grants to Dealer an exclusive right to sell Products in the Territory as described more fully in Schedule B, which is attached hereto and incorporated by reference herein. PMSNA may however directly sell products in the Territory as follows: (a) Any Products or related components to manufacturers for incorporation in or as replacement parts for systems manufactured by PMSNA . (b) Any specially designed Products which may or may not be listed in Schedule A. (c) Any Products to any agency of the United States government and to national accounts in accordance with Schedule D, which is attached hereto and incorporated by reference herein. The Dealer agrees that neither it nor any of its employees or agents will, without the prior written approval of PMSNA, sell Products, equipment (including used or refurbished Philips equipment), or spare parts outside the Territory, and it will sell Products, equipment, spare parts, testing equipment, service tools and any other documentation which is designated by PMSNA as proprietary, only to end users of Philips equipment within the Territory. Breach of this provision shall be considered a material breach of this Agreement and may result in termination pursuant to Paragraph 20 below. 3. LIMITATIONS ON SALE OF EQUIPMENT AND PARTS Dealer agrees to sell only PMSNA's equipment and parts. PMSNA may, however, grant exceptions, in writing, for diagnostic X-ray equipment which is not regarded as competitive and for certain parts. Such exceptions are not perpetual and must be renewed via the annual Dealer Agreement. The sale of competitive equipment to any third party, shall constitute a material breach of this Agreement, and may result in termination under the terms and conditions of Paragraph 20 below. 4. PRICING PMSNA agrees to sell to Dealer those products included in Schedule A based on "Dealer Net Price List." PMSNA will honor prices in the "Dealer Net Price List" for a period of thirty (30) days after any change has been made in such list. 5. FINAL SELLING PRICE A PMSNA suggested selling price is not a requirement to sell Products at a particular price. 6. ORDERS AND DELIVERY Orders for equipment or subsystems shall not be binding on PMSNA until approved and accepted in writing by PMSNA's Commercial Operations Department in Shelton, CT. All orders for Products shall be subject to the terms of this Agreement and any provision of Dealer's order inconsistent with this Agreement or which seeks to impose additional or different obligations shall not be valid. PMSNA shall not be responsible for any special terms agreed to by Dealer, outside the standard terms and conditions including, but not limited to penalty clauses, liquidated damages, extended warranties and training. The following provisions shall apply to all Dealer orders: (a) All orders for equipment, components and upgrades over $15,000, (defined as acknowledgment of a clean, noncontingent order, accompanied by a deposit), placed by Dealer, shall include a ten percent (10%) down payment. Such orders will be at the then current Dealer net price, providing Dealer accepts shipment within twelve (12) months. Down payments are waived for orders placed for shipment to National Account hospitals set forth in Schedule D. (b) Final Dealer net prices for orders requesting delivery beyond the twelve (12) month period will be forward priced to the lower of either the Dealer Net Price in effect at the time of delivery or the original Dealer Net Price plus one percent (1%) per month beginning with the thirteenth (13) month, unless the delivery delay is caused by PMSNA. Dealer Net Price for orders accompanied by delivery requests greater than eighteen (18) months from the date of order will be determined after consultation with PMSNA's Vice President of Sales. (c) PMSNA will treat contingent orders as "Entered" upon the showing of the actual customer order, presentation of standard down payment and PMSNA's acceptance consistent with paragraph 6(a) above. Dealer must include a complete description of the nature and scope of the contingency. All contingencies must be removed within six (6) months of original order and delivery must be accepted within twelve (12) months of original Dealer order, otherwise paragraph 6(b) above shall apply. Contingent orders shall only be scheduled for delivery upon receipt of written notice by Dealer to PMSNA of the contingency release. (d) PMSNA will exercise its best efforts to schedule deliveries consistent with the dates specified on Dealer's order, provided that the requested shipment time equals or exceeds the normal factory delivery schedule. Changes or deferrals of the requested delivery date must be made in writing to PMSNA at least sixty (60) days prior to the scheduled factory shipment. If the required notice for change of delivery is not provided, Dealer will accept shipment on the original requested date and honor all payment terms as specified herein. (e) PMSNA will charge a restocking fee of five percent (5%) or the specific factory restocking charge as invoiced, whichever is higher for any order canceled within the 60 day frozen period. Dealer shall also be responsible for rehandling and transportation costs associated with any orders canceled while in transit from factories or Shelton. (f) Dealer shall pay a 15% restocking fee if change orders deleting equipment are made after shipment, provided that the change order was not caused by PMSNA. (g) If a request for return and credit is made in writing within more than three (3) but less than nine (9) months after shipment, the maximum credit shall be 50% of original invoice price. No credit is available if the request is made more than nine (9) months after shipment. (h) Dealer shall update the backlog status on all orders in the backlog on a bi-weekly basis. 7. PAYMENT AND LATE PAYMENT Dealer shall pay for equipment, within forty-five (45) days and for subsystems and all service and spare parts within thirty (30) days of receipt of PMSNA's invoice for all Products ordered and shipped under this Agreement. Unless Dealer notifies PMSNA in writing that an invoice is being disputed, detailing reasons for such dispute, PMSNA reserves the right to charge interest at five percent (5%) above the prime rate for business loans charged by the Citibank of New York at the end of the calendar month that payment is due, or the maximum rate allowed by law, whichever is lower. Any disputed issues must be resolved within sixty (60) days from date of invoice, and if no resolution is achieved, then interest shall be charged following said sixty (60) day period. Dealer must immediately notify PMSNA's Manager of Dealer Operations if it intends to withhold payment. Only payment for that portion of an order which is in dispute may be withheld, and not payment for the entire order. The authorized senior representatives of both parties must communicate by telephone within ten (10) working days following such notification. If resolution cannot be achieved, then PMSNA will enforce the original invoice. The Dealer shall, however, retain its remedies at law to dispute PMSNA's decision if it so wishes. 8. F.O.B. TERMS All Dealer Net Prices shall be F.O.B. point of shipment utilizing land or sea freight. After the equipment has reached the U.S., all surface freight costs from distribution center to Dealer will be paid by PMSNA. 9. DEALER FORECASTS Dealer will exercise its best efforts in providing accurate estimates of Products to be purchased over a twelve (12) month period and to participate in PMSNA's Market Activity Profile ("MAPS") on a monthly basis or as requested by PMSNA. Dealer will also provide, as requested by PMSNA, detailed business plans supporting these forecasts, including semiannual operations reviews in writing, discussing its plans, results, personnel, support requirements and financial details. Dealer shall provide profit and loss statements and balance sheets on a quarterly basis (unless waived by PMSNA) and submit audited statements on an annual basis for credit evaluation purposes. Failure to provide this information will be deemed a material breach of the Agreement. 10. SALES, INSTALLATION AND SERVICE Dealer shall use its best efforts to sell, distribute, install and service Products to meet or exceed the performance goals and quotas established by PMSNA as set forth in Schedule C, which is attached hereto and incorporated by reference herein. In order to accomplish this, Dealer shall maintain such facilities for sales and service as are reasonably considered by PMSNA to be necessary for compliance with this Agreement. In addition, Dealer shall maintain a sales and service staff considered by PMSNA adequate in size, education, ability and experience to sell, distribute, install and service Products. PMSNA may, at its option, make joint service calls with Dealer. Failure to meet PMSNA's requirements in this regard shall be considered a material breach of this Agreement and may result in termination under Paragraph 20 below. 11. REPAIR PMSNA guarantees all Products sold hereunder according to the terms and conditions of the standard printed warranties as set forth in Schedule E. NO OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, SHALL APPLY TO ANY PRODUCTS SOLD HEREUNDER, and Dealer shall not obligate nor shall it attempt to obligate PMSNA to any third parties by means of warranties or guarantees on the Products other than such standard warranties. Dealer shall, at its expense, perform warranty service on all Products sold, at no additional charge to the customer and, shall buy parts for that purpose except that costs associated with mandatory modifications shall be borne by PMSNA. Expenses associated with such replacement shall, however, be factored into the discount on equipment. Dealer agrees to comply with the warranty procedures set forth in Schedule E which is attached hereto and incorporated by reference herein. If PMSNA incurs any expense in the exchange of Products or the repair thereof caused by the failure of Dealer to fulfill its obligations hereunder, then PMSNA shall invoice Dealer for such costs. In doing so, PMSNA does not waive any other rights it may have with respect to this Agreement. Dealer agrees to maintain sufficient equipment and replacement parts to adequately maintain and service the Products sold hereunder and shall purchase such tools and test equipment as PMSNA considers necessary for the proper installation, maintenance and service of the Products . PMSNA shall replace parts or credit Dealer for parts required to repair failures during the standard installation period (See Schedule F) at no cost to the Dealer. If the Product is not directly shipped to a customer site, or if installations do not start, then the Dealer must notify PMSNA in writing when installation actually begins. This period shall not generally be longer than ninety (90) days from shipment by PMSNA; however, if Dealer can demonstrate, to PMSNA's satisfaction that, through no fault of the Dealer, an installation cannot be accomplished within the 90 day time frame, PMSNA may grant an extension. 12. NOTIFICATION TO PMSNA OF COMPLAINTS If a Product allegedly caused an injury to persons or property or if a Product allegedly failed to meet any of its performance specifications or otherwise allegedly failed to perform as intended or if Dealer receives any information regarding dissatisfaction by a customer relative to the identity, quality, durability, reliability, effectiveness or performance of a Product, Dealer will immediately notify PMSNA's Manager of Regulatory Affairs and the Manager of Dealer Operations in Shelton of such occurrences. In all other respects, Dealer will cooperate with PMSNA in the investigation of all complaints for regulatory and product liability purposes. Dealer shall, in addition, make required repairs as well as mandatory and performance modifications at Dealer's cost and assist in whatever corrective actions are necessary. PMSNA shall supply parts to Dealer free of charge, for mandatory modifications, with all labor expenses to be borne by Dealer. 13. LICENSES Philips may, from time to time, provide, at Dealer's request and expense, service documentation and service software. This information shall remain the sole and exclusive property of PMSNA. In order to protect its right, title and interest in and to such documentation and software, Philips grants to Dealer, non-transferable and non-exclusive licenses to use the information contained therein, upon the terms and conditions set forth in Schedules G and H to this Agreement. 14. COMPLIANCE WITH LAWS Dealer represents that it is in compliance with all applicable local, state and Federal statutes, orders, rules, regulations and ordinances with respect to conducting its business in the Territory. Dealer represents that it has all permits, licenses, and other authorizations necessary to conduct business in the Territory. 15. FORCE MAJEURE PMSNA shall not be responsible for indirect, direct or consequential damages alleged to be sustained by Dealer for failure to deliver Products for any reasons beyond its control. 16. TRADENAMES Dealer may use the name "Philips" including, without limitation, Philips Medical Systems North America Company, or any other trademarks or word mark names owned by Philips Medical Systems North America Company or its affiliates, parent company or subsidiaries only with the prior written consent of PMSNA. If Dealer wishes to use any such trademarks or tradenames for purposes not connected with the marketing or sale of Products, Dealer must obtain prior written approval from PMSNA. 17. RECORDS AND REPORTS Dealer shall maintain complete records (including serial number, date of purchase and name and address of purchaser) of all Products sold and furnish such data to PMSNA upon request. Dealer shall also furnish information to PMSNA relating to sales, inventories, installation, servicing, repair and similar data in such manner and at such times as PMSNA may request. 18. TRAINING AND APPLICATIONS Dealer agrees to assure that its sales and service personnel are adequately trained and will, at Dealers own expense, require its personnel to attend periodic sales and service training conducted by PMSNA or Philips Medical Systems International, B.V. at times and locations to be determined by PMSNA. Dealer will provide equipment turnover and applications training on the Equipment. If Dealer elects to use PMSNA's Application Staff, PMSNA will bill Dealer for the services according to current rates. 19. SHOWS AND EXHIBITIONS Dealer shall cooperate with PMSNA by assisting at all industry and professional shows and exhibitions as may be reasonably requested by PMSNA. 20. TERM AND TERMINATION This Agreement shall commence on the date entered into and shall continue until December 31, 1998. It shall be automatically terminated unless renewed by mutual written agreement within thirty (30) days prior to December 31, 1998. During this 60 month period, the parties will renegotiate the sales target at least 60 days before the end of each calendar year. The basic terms and conditions of the Agreement, over the 60 month period shall reflect, in general, those offered to other Philips dealers. Notwithstanding the above, this Agreement may be terminated by either party for a material breach upon ten (10) days written notice or upon the occurrence of one or more of the following: (a) Any change in the ownership, structure of ownership, financial interests or operational management of Dealer and/or its subsidiary, Diagnostic Medical Systems, Inc. (including the retirement, disability or death of Michael J. Hofer) upon one hundred twenty (120) days written notice by PMSNA. (b) Any merger, acquisition, joint venture or change in ownership of all or part of PMSNA. (c) Failure of Dealer to achieve performance quotas as set forth in Schedule C, if such failure is due principally to acts or omissions of Dealer with respect to pursuing the objectives set forth in Schedule C. (d) Upon eighteen (18) months prior written notice by PMSNA to Dealer, during which time dealer may begin exploring opportunities for alternative suppliers, but may not begin selling competitive equipment until the end of the eighteen (18) month notification period. Upon termination of this Agreement, PMSNA shall, at its option: (a) Deliver Products to Dealer to meet any purchase order accepted by Dealer prior to termination, or (b) Either permit Dealer to complete all obligations with respect to the purchase order and receive its usual compensation, or accept an assignment of such purchase order, in which case PMSNA shall reimburse Dealer for any reasonable and supportable expenses incurred in obtaining such order. Following termination by PMSNA, Dealer shall be reimbursed for any verifiable, authorized expenses it may have incurred directly or indirectly as a result of written requests made by PMSNA. 21. INDEMNIFICATION AND INSURANCE (a) Dealer agrees to indemnify and hold PMSNA harmless from and against any losses, damages, deficiencies, liabilities, costs and expenses, including without limitation, interest, penalties and attorneys' fees and expenses asserted against, relating to, imposed upon or incurred by PMSNA directly or indirectly by reason of or resulting from liabilities, obligations or claims arising out of actions, omissions or events with respect to Dealer's activities, if such damages were incurred by Third Parties pursuant to the negligent acts or omissions of Dealer or for Dealer's violation of laws. Dealer shall make every effort to obtain adequate insurance coverage for the acts or omissions of its employees. Under no circumstances or for any reason shall PMSNA be responsible for indirect or consequential damages associated with the acts of any employee, agent or other party associated with the Dealer. (b) PMSNA agrees to indemnify and hold Dealer harmless from and against any losses, damages, deficiencies, liabilities, costs and expenses, including without limitation, interest, penalties and attorneys' fees and expenses asserted against, relating to, imposed upon or incurred by Dealer directly or indirectly by reason of or resulting from liabilities, obligations or claims arising out of actions, omissions or events with respect to PMSNA's activities, if such damages were incurred by Third Parties pursuant to the negligent acts or omissions of PMSNA or for PMSNA's violation of laws. PMSNA shall make every effort to obtain adequate insurance coverage for the acts or omissions of its employees. Under no circumstances or for any reason shall Dealer be responsible for indirect or consequential damages associated with the acts of any employee, agent or other party associated with PMSNA. 22. CONFIDENTIALITY Dealer shall keep in confidence and not divulge to third parties any proprietary information relating to Philips product development efforts, technology, trade secrets, service software, service documentation, specialized service tools, and financial or business data, without the express written consent of PMSNA. For purposes of this section, Philips shall mean: Philips Medical Systems North America Company (PMSNA), Philips Medical Systems International B.V. (PMSI B.V.), Philips Ultrasound International (PUI), Philips Electronics North America Corporation (PENAC) Philips Electronics N.V. 23. GENERAL PROVISIONS (a) If any provision of this Agreement shall be determined to be unlawful then such provision shall be deemed to be severed from this Agreement and every other provision shall remain in full force and effect. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns except as otherwise set forth herein. (c) This Agreement embodies the entire Agreement and understanding hereto and supersedes all prior agreements and understandings between the parties relating to the subject matter hereof. (d) This Agreement may be amended only by an instrument in writing signed on behalf of each of the parties hereto. (e) This Agreement shall not be effective or binding upon PMSNA until signed or countersigned on its behalf by an officer of PMSNA, nor shall any modification, renewal, termination or waiver of any of the provisions herein contained or any future representations, promises, conditions or waivers in connection with the subject matter hereof be binding upon PMSNA unless made in writing and signed on its behalf by one of its officers. (f) This Agreement shall be governed by and construed under the laws of the State of Connecticut. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written. PHILIPS MEDICAL SYSTEMS NORTH AMERICA COMPANY By: M. P. Moakley, Presdient M. P. Moakley, President DIAGNOSTIC MEDICAL SYSTEMS, INC. By: Michael J. Hofer Michael J. Hofer President, Diagnostic Medical Systems, Inc. TABLE OF CONTENTS DEALER CONTRACT Schedule A Exclusivity Schedule B Territory Schedule C Performance Quotas Schedule D National Accounts Schedule E Standard Warranty Schedule F Standard Installation Period Schedule G Service Documentation License Agreement Schedule H Service Software License Agreement SCHEDULE A EXCLUSIVE All X-ray equipment and accessories as designated in the Philips Medical Systems North America Company Price Book, except Computed Tomography Systems, MRI Systems, Therapy Systems, PACS/PCR, Ultrasound Systems and other products which may be deemed by PMSNA to be unavailable to Dealer from time to time, including new products introduced by PMSNA. SCHEDULE B Territory: South Dakota: All counties Minnesota: All counties north of and including Rock, Murray, Pipestone, Lincoln, Lyon, Yellow Medicine, Lac Qui Parle, Swift, Pope, Todd, Cass, Crow Wing, Aitkin Carlson, St. Louis, Lake, and Cook North Dakota: All counties Montana: All counties Michigan: Counties of Gogebic, Ontanagon and Iron Wisconsin: Counties of Douglas, Bayfield and Ashland Wyoming: Counties of Park, Teton, Big Horn, Johnson, Sheridan, Campbell, Crook, Hot Springs, Washakie, and Weston SCHEDULE C Performance Targets January 1, 1994 - December 31, 1994 Targets Radiographic - Radiographic/fluoroscopic - Cardiac - Vascular - Surgery - Performance targets are net of credits, freight, returns and other adjustments. SCHEDULE D NATIONAL ACCOUNTS 1. Columbia 2. Healthtrust, Inc. 3. National Medical Enterprises and affiliates 4. Daughters of Charity, Inc. 5. University Hospital Consortium 6. Mercy National Purchasing 7. C+R+O+S+S 8. SunHealth 9. Quorum 10. Other National Accounts which may from time to time be designated for direct sales status by PMSNA. SCHEDULE E STANDARD WARRANTY R & F, Radiographic, Vascular and DVI - Doc. # 4535 983 01024 MRC 200 X-ray Tubes - Doc. # 4535 983 01036 SRC X-ray Tubes - Doc. # 4535 983 00747 EX-13 4 ANNUAL REPORT Exhibit 13-A DIVIDENDS We have paid quarterly dividends on our common stock since 1938 without interruption or reduction. Dividends paid in 1993 totaled $1.68 per common share. The indicated annual rate for 1994 is $1.72. BUYING AND SELLING Otter Tail common stock is traded on NASDAQ's National Market System. (NASDAQ: National Association of Securities Dealers Automated Quotation.)
SELECTED CONSOLIDATED FINANCIAL DATA 1993 1992 1991 1990 1989 1988 1983 (thousands except per-share data) Revenues Electric Residential........................ $ 62,167 $ 59,038 $ 61,844 $ 60,326 $ 61,891 $ 62,591 $ 58,978 Commercial and Farms............... 36,971 35,342 36,246 35,443 35,725 36,210 32,768 Industrial......................... 65,757 63,522 62,284 58,812 59,173 60,739 50,451 Other Electric..................... 27,395 19,203 19,082 17,758 15,818 18,681 20,937 --------- -------- -------- --------- --------- --------- --------- Total Electric....................... $ 192,290 $ 177,105 $ 179,456 $ 172,339 $ 172,607 $ 178,221 $ 163,134 Health Services...................... 32,068 - - - - - - Diversified Operations............... 40,869 32,433 20,389 8,009 1,756 - - --------- --------- --------- --------- --------- --------- --------- Total Operating Revenues........... $ 265,227 $ 209,538 $ 199,845 $ 180,348 $ 174,363 $ 178,221 $ 163,134 Net Income........................... $ 27,369 $ 26,538 $ 26,096 $ 24,852 $ 25,266 $ 25,317 $ 21,455 Cash Flow from Operations............ $ 53,255 $ 44,866 $ 46,667 $ 46,681 $ 46,902 $ 47,675 N/A Total Assets......................... $ 563,905 $ 530,456 $ 491,633 $ 477,224 $ 462,596 $ 476,363 $ 446,465 Long-Term Debt....................... $ 166,563 $ 159,295 $ 146,326 $ 135,186 $ 119,711 $ 121,815 $ 155,961 Redeemable Preferred................. $ 18,000 $ 18,000 $ 13,150 $ 13,705 $ 14,815 $ 15,925 $ 33,740 Common Shares Outstanding (1) (thousands).................... 11,180 11,180 11,185 11,223 11,795 11,968 11,029 Number of Common Shareholders (2).... 13,634 13,812 13,928 13,984 14,277 14,595 17,161 Earnings per Common Share (3)........ $ 2.23 $ 2.17 $ 2.15 $ 1.99 $ 1.94 $ 1.92 $ 1.60 Dividends per Common Share........... $ 1.68 $ 1.64 $ 1.60 $ 1.56 $ 1.52 $ 1.48 $ 1.22 NOTES: (1) Number of shares outstanding at year end (2) Holders of record at year end (3) Based on average number of shares outstanding
[TEXT] MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's major financial objective is to earn a reasonable return on the Company's capital. This will enable the Company to preserve and enhance its financial capability by maintaining acceptable capitalization ratios, maintaining a strong interest coverage position, providing a reasonable return to the common shareholder, maintaining a reasonable level of internal cash generation, and preserving and strengthening its current credit ratings on outstanding securities. Liquidity: Liquidity is the ability to generate adequate amounts of cash to meet the Company's needs, both short-term and long-term. An electric utility's liquidity is a function of its construction program and debt service requirements, its net internal funds generation and its access to long-term securities markets and credit facilities for external capital. The Company's operating subsidiaries are responsible for obtaining their own financing after the Company's initial equity investment and have developed financing arrangements with various banks. The Company does not intend to make or guarantee loans to its subsidiaries, lend a subsidiary money or cosign on any borrowing. Otter Tail Power Company has achieved a high degree of long-term liquidity by maintaining strong bond ratings, implementing cost containment programs, evaluating operations and projects on a cost-benefit approach, pursuing rate adjustments to keep pace with utility operating expenses and obtaining adequate depreciation rates. The Company has had a stock repurchase program in place since May of 1989, pursuant to which it has purchased 787,376 common shares. The stock repurchase program was extended by approval of the Company's Board of Directors on April 12, 1993. Under the extension, up to 611,481 common shares (the unpurchased remainder from previous authorizations) may be purchased during the period ending December 31, 1995. No common shares were repurchased during 1993. Cash provided from operations, as indicated by the Consolidated Statement of Cash Flows for the year ended December 31, 1993 of $53,255,000 combined with funds on hand of $18,024,000 at December 31, 1992, allowed the Company to finance its construction program, pay dividends, participate in a preferred stock investment program, redeem First Mortgage Bonds at maturity and through sinking fund operations, and invest in additional subsidiary companies. On October 13, 1993, the Company sold $4,000,000 of a new series of $6.75 Cumulative Preferred Shares. The proceeds were used for the redemption on November 12, 1993, of the Company's outstanding $9.50 Cumulative Preferred Shares at an aggregate redemption price of $4,080,000, plus accrued dividends to the redemption date. On November 1, 1993, the Company retired $4,970,000 of First Mortgage Bonds, 4.625% Series of 1993. The Company sold on December 7, 1993, $3,010,000 of Industrial Development Refunding Revenue Bonds, 5% Series of 2002, and on December 15, 1993, $10,400,000 of Pollution Control Refunding Revenue Bonds, Variable Series of 2012. The proceeds were used for the redemption of the Company's First Mortgage Bonds, 7.10% Series of 2003 and 5.90% Series of 2004 in the aggregate principal amount of $13,445,000. The Company estimates that funds internally generated combined with funds on hand will be sufficient to provide for all of its 1994-1998 electric construction program expenditures (including allowance for funds used during construction) and to meet all sinking fund payments for First Mortgage Bonds in the next five years. (Internally generated funds consist of cash provided by operations less dividends and certain other adjustments.) Additional short or long-term financing will be required in the period 1994- 1998 in connection with maturity of First Mortgage Bonds and Long-Term Lease Obligation ($21,000,000), in the event the Company decides to refund or retire early any of its presently outstanding debt or cumulative preferred shares, to complete the common stock repurchase program or for other corporate purposes. The Company had $4.3 million in cash, cash equivalents and temporary cash investments at December 31, 1993, and $18 million at December 31, 1992. Capital Requirements: The Company has a construction and capital investment program to provide facilities necessary to meet forecasted customer demands and provide reliable service. This includes, primarily, improvements to existing power plants, acquisition or construction of additional generating capacity, and upgrading or replacing portions of the distribution and transmission systems and other buildings and equipment. The construction program is subject to continuing review and is revised annually in light of changes in demands for energy, in environmental laws, in technology affecting the electric utility industry, in the costs of labor, materials and equipment, and in the Company's financial condition (including cash flow, earnings and adequacy of timely rate relief). Capital expenditures for the years 1993, 1992 and 1991 were $31 million, $23 million, and $25 million, respectively. Capital expenditures for 1993 included $25 million for the electric utility, $3 million for health services, and $3 million for diversified operations. The estimated capital expenditures for 1994 are $29 million, and the total expenditures for the five-year period 1994-1998 are expected to be approximately $146 million. The 1994 amount includes $26 million for the electric utility, $2 million for health services and $1 million for diversified operations. The 1994-1998 amount includes $123 million for the electric utility, $14 million for health services, and $9 million for diversified operations. In addition to these capital requirements, funds totaling approximately $55,063,000 will be needed during the five-year period 1994 through 1998 to retire First Mortgage Bonds and other long-term obligations at maturity and through sinking fund payments. In addition, funds may be needed to complete the common stock repurchase program. Capital Resources: Financial flexibility is provided by unused lines of credit, by financial coverages well in excess of the minimum levels required for issuance of securities and by strong credit ratings. As of December 31, 1993, unused credit lines totaling $14.6 million were available to meet interim financing of working capital and other capital requirements, if needed. During 1993 the Company's coverage ratios remained at almost the same levels as in 1992. The fixed charge coverage ratio after taxes was 3.2 for both 1993 and 1992. The long-term debt interest coverage ratio before taxes was 4.2, as compared to 4.3 in 1992. The Company expects these coverages will remain approximately the same or rise slightly in 1994. The Company's credit ratings affect its access to the capital market. The current credit ratings for the Company's First Mortgage Bonds are as follows: Moody's Investors Service Aa3 Duff and Phelps AA Fitch Investors Service AA Standard and Poor's AA- The Company's disclosure of these security ratings is not a recommendation to buy, sell, or hold the Company's securities. As of December 31, 1993, the Company had the capacity under its Indenture of Mortgage to issue an additional $115 million principal amount of First Mortgage Bonds. Results of Operations: Otter Tail Power Company provides electrical service to over 120,000 customers in a service territory of 50,000 square miles. The Company has purchased health service companies, and various diversified businesses referred to throughout this report as diversified operations. Electric Operations Operating Revenues: The change in revenues may be summarized as follows: Revenue Increase (Decrease) From Prior Year 1993 1992 1991 (in thousands) Volume Variance (1) $15,326 $(1,109) $ 9,413 Price Variance (2) (1,525) (1,543) (1,999) Other 1,384 301 (297) Total Electric $15,185 $(2,351) $ 7,117 (1) Derived for each customer class by multiplying year-to-year change in units sold by the average revenue per kwh for the prior year. (2) Derived for each customer class by multiplying the year-to-year change in average revenue per kwh by the units sold during the year. The 1993 volume variance was due to increased kwh sales in almost every retail customer classification and a 84% increase in noncontractual power pool sales. The increase in retail kwh sales can be attributed to the return of normal winter weather in 1993 coupled with increased usage in the commercial category. The increase in power pool sales can be attributed to the weather, which resulted in low water conditions in the spring in Manitoba and the wide- spread summer flooding in the Midwest. The 1992 volume variance was due to a 4.2% decrease in kwh sales to residential customers, offset to a smaller extent by a 2.6% increase in kwh sales to industrial customers. A warmer winter coupled with an abnormally cool summer in 1992 contributed heavily to the decrease. The 1991 volume variance was the result of increased kwh sales in almost every retail customer classification and an 18% increase in kwh power pool sales to other utilities. The oil pipeline and large commercial customers had the biggest increase in retail kwh sales of 9% and 7%, respectively. Consumption of electricity by the oil pipeline customers is a result of both the volume of product they move and the efficiencies of their systems. Colder winter weather experienced in 1991 also accounted for some of the increased kwh sales. Heating degree days, which contribute to increases or decreases in usage by residential customers, were 9,523 for 1993, 8,253 for 1992, and 8,869 for 1991. The average revenue per retail kilowatt-hour was 5.53 cents in 1993, 5.54 cents in 1992, and 5.60 cents in 1991. The 1993 price variance was primarily due to noncontractual power pool sales, residential sales, and the cost of energy adjustment clause. Noncontractual power pool sales had a 4.3% decrease in revenue per kwh sold in 1993. The price variance from residential sales was due to the increase in volume sold. In 1993 slightly over $7,100,000 (an increase of $350,000 over 1992) was returned to the Company's retail customers through the Cost of Energy Adjustment clause. (See the explanation under Production Fuel and Purchased Power Expense.) The 1992 price variance was chiefly the result of an Order entered by the North Dakota Public Service Commission (NDPSC) pursuant to which the Company made a refund to its North Dakota customers in the aggregate amount of $1,000,000. The 1991 price variance was the result of a decrease in retail rates chiefly due to the operation of the Cost of Energy Adjustment clause coupled with an increase in volume sold. The increase in the other variance is due to the Company recognizing $1,446,000 of unbilled revenue in 1993. The Company changed its method of accounting in North Dakota from billing dates to energy delivery dates as a result of an Order entered by the NDPSC in September 1993. The change in method of revenue recognition increased net income by $870,000 and earnings per share by $.08 in 1993. (See notes 1 and 3 to Financial Statements for further information.) Expenses: The percentage changes in operating expenses may be summarized as follows: Percentage Increase (Decrease) From Prior Year 1993 1992 1991 Production Fuel 10 .5 4 Purchased Power 22 2 (8) Electric Operation Expenses 14 (1) 11 Electric Maintenance 18 (8) 10 Depreciation and Amortization 4 (2) 2 Property Taxes 7 5 1 Production Fuel and Purchased Power Expense: The 10% increase in production fuel in 1993 is due primarily to a 11% increase in generation. Of the increased generation, 56% was for power pool sales and 44% was for system use. The slight increase in production fuel in 1992 is chiefly due to a 4% increase in generation offset by a 3.7% decrease in cost per kwh produced. In 1992 the Company replaced some power pool purchases for system use with increased generation. The decrease in cost per kwh produced results from decreased generation at the Company's highest-cost unit. Production fuel expense increased 4% in 1991 due to a 12% increase in generation at Big Stone Plant. Generation at the Coyote Plant increased only slightly due to an extended spring plant overhaul and an unanticipated fall outage. The longer spring overhaul was due to converting the dry scrubber from soda ash to less-expensive lime as the reagent in the sulfur-removal process. The fall outage resulted from the failure of the generator current transformers. Big Stone is not a mine-mouth plant like Coyote. This results in a higher fuel cost per kwh produced at Big Stone Plant than at Coyote Plant. The increase in purchased power costs of 22% in 1993 is related directly to the increase in power pool sales. Purchased power costs increased by 2% in 1992 due to a 7.5% increase in cost per kwh purchased, offset to a smaller extent by a 5.3% decrease in kwh purchased. As stated before, replacing system purchases with the Company's own generation accounted for a significant portion of the decrease in kwh purchased. However, when the Company did purchase for system use, the purchases were sometimes made at peak demand times increasing the purchase price per kwh. Purchased power costs decreased 8% for 1991 primarily as a result of decreased costs per kwh purchased, offset somewhat by increased purchases for resale to other utilities in the power pool. The Company was able to obtain favorably priced contracts by buying from summer-peaking utilities in the winter, spring, and fall. The increase or decrease in fuel and purchased power costs, arising from changing prices, results in adjustments to the Company's rate schedules through the Cost of Energy Adjustment clauses. Over the last five years, this has resulted in savings of slightly over $28.7 million to the Company's customers. Electric Operation and Maintenance Expenses: The increase of 14% in electric operation expense in 1993 was due primarily to increases in labor expenses (SFAS 106 costs), in North Dakota conservation programs, and in administrative and general expenses. The decrease of 1% for 1992 in electric operation expense was mainly due to decreases in administration and general expenses relating to outside services employed and by decreases in uninsured losses. The increase of 11% for 1991 in electric operation expense was chiefly due to increases in administrative and general expenses and customer-related expenses. The increase in administrative and general expenses was principally due to an increase in compensation, increased outside consulting services, and an increase in research and development expenditures. Customer-related expenses increased mainly due to increases in marketing and customer account expenses. The 18% increase in electric maintenance expense in 1993 was due to an increase in production maintenance of the steam plants (generator, turbine, and coal handling equipment). The 8% decrease in 1992 and 10% increase in 1991 in electric maintenance expense were mainly due to increased maintenance cost at the Coyote Plant in 1991. Coyote Plant had a longer-than-anticipated spring overhaul and an unanticipated fall outage because of failure of the generator current transformers. Depreciation and Amortization: The 4% increase in depreciation expense in 1993 is due to additional plant in service and higher depreciation rates. The 2% decrease in depreciation expense in 1992 resulted from extending the life of Hoot Lake Plant due to additional investment and switching the plant's fuel to subbituminous coal. The 2% increase in depreciation expense for 1991 is due to more property placed in service. Property Taxes: The 7% increase in property taxes for 1993 is due to property additions and increased mill rates. The 5% increase in property taxes for 1992 results from a higher tax rate in Minnesota. The slight increase in property taxes for 1991 was due to increased assessable property placed in service and increased mill rates which more than offset a significant reduction in South Dakota due to a change in the valuation system. Health Services Operations 1993 (thousands) Operating Revenues $32,068 Operating Expenses 30,101 Pretax Operating Income $ 1,967 Health Services Operations are composed of businesses that were acquired in 1993. On January 1, 1993, the Company purchased a diagnostic medical imaging company and a management company for a number of diagnostic medical imaging companies. As of February 26, 1993, the Company acquired a medical imaging company that sells and services diagnostic medical imaging equipment and associated supplies and accessories. For 1993 the Health Services financial results have met the Company's expectations. Diversified Operations 1993 1992 1991 (thousands) Operating Revenues $40,869 $32,433 $20,389 Operating Expenses 35,964 28,565 18,434 Pretax Operating Income $ 4,905 $ 3,868 $ 1,955 The Company's Diversified Operations are composed of businesses that are diversified in such areas as manufacturing (fabricated metal parts and agricultural equipment), electrical and telephone contracting, radio broadcasting, waste incinerating, and telephone utility. The 26% increase in Operating Revenues in 1993 is due to the purchase of an additional business in the third quarter of 1992 as well as increased sales in the Company's electrical and telephone contracting subsidiaries. The 26% increase in Operating Expenses in 1993 is also due to the additional business purchased in the third quarter of 1992 as well as increased expenses in the Company's electrical and telephone contracting subsidiaries. The 59% increase in Operating Revenues and 55% increase in Operating Expenses in 1992 are due to the purchase of two additional businesses. The 155% increase in Operating Revenues and 169% increase in Operating Expenses in 1991 are due to purchasing one additional business in 1991 and operating the five businesses purchased in 1990. Consolidated Income Taxes The 2% increase in income tax expense for 1993 is due to an increase in taxable income and higher corporate tax rates imposed by the Omnibus Budget Reconciliation Act of 1993. The 5% decrease in income tax expense for 1992 resulted from favorable adjustments related to a premature property retirement. The 5% increase in income tax expense for 1991 is due to higher taxable income. Consolidated Interest Charges Interest charges increased 5% in 1993 due to the new businesses acquired. Interest charges increased 9% in 1992 due to the issuance in July of $50 million of First Mortgage Bonds. Interest increases in 1992 were offset to a smaller extent by the retirement in August of $28,280,000 of First Mortgage Bonds, and the retirement in September of $12,758,000 of First Mortgage Bonds. Interest charges increased 16% during 1991 due to the issuance in December 1990 of $20 million of First Mortgage Bonds, and the issuance in September 1991 of an additional $20 million of First Mortgage Bonds. Interest increases in 1991 were offset to a smaller extent by the retirement of $12,559,000 of First Mortgage Bonds, and the refunding of the two series of Pollution Control Bonds. Impact of Inflation: For an electric utility, the regulatory process limits the amount of depreciation expense included in the Company's revenue allowance and limits electric utility plant in the rate base to original cost. Such amounts produce cash flows which are inadequate to replace such property in the future or preserve the purchasing power of common equity capital previously invested. However, the Company expects that it will be able to establish rates which will cover the increased costs of new plant when such costs are incurred. The Company operates under regulatory provisions which allow price increases in the cost of fuel and purchased power to be passed to customers through automatic adjustments to the Company's rate schedules under Cost of Energy Adjustment clauses. Other increases in the cost of electric service must be recovered through timely filings for rate relief with the appropriate regulatory agency. The Company's Health Services and Diversified Operations consist almost entirely of unregulated businesses. Increased operating costs are passed on to customers with any limitations on price increases determined by the marketplace. Factors Affecting Future Earnings: The results of operations discussed above are not necessarily indicative of future earnings. Anticipated higher operating costs and carrying charges on increased investment in plant, if not offset by proportionate increases in operating revenues and other income (either by appropriate rate increases, increases in unit sales, or increases in nonelectric operations), will affect future earnings. Growth in electric sales will be subject to a number of factors, including the volume of power pool sales to other utilities, the effectiveness of demand- side management programs, weather, competition, and the rate of economic growth or decline in the Company's service area. The Company's electric business is primarily dependent upon the use of electricity by customers in our service area. Percentage changes in the Company's electric kwh sales to retail customers over the prior year for the last three years were: an increase of 4.4% in 1993, a decrease of .5% for 1992, and an increase of 5.3% for 1991. Demand-side management (DSM) efforts will continue to increase in all the jurisdictions that the Company serves. DSM will reduce electric sales in the short term, but it is not anticipated to reduce profits. The goal of DSM is to encourage the wise and efficient use of electricity by customers. Successful DSM will contribute to the more efficient and cost effective operation of existing and future generation and distribution facilities. Currently, Minnesota is the only jurisdiction that mandates investments in DSM, and indications are that the Minnesota Public Utilities Commission's emphasis in this area will continue into the foreseeable future. The Federal Clean Air Act (the Act) is not currently expected to have a significant impact on future capital requirements or operating costs. However, future regulations under the Act, changes in the future coal supply market, and/or other governmental laws and regulations could impact such requirements or costs. It is anticipated that, under current regulatory principles, any such costs could be recovered through rates. The Company's plants are not subject to the Act's phase one requirements. Phase two standards of the Act must be met by the year 2000. The Big Stone Plant can maintain current levels of operation and meet phase two requirements by using allowances (allotted and/or purchased), by installing scrubbers and/or by switching to subbituminous coal which is much lower in sulfur emissions than lignite which the plant currently uses. Big Stone Plant's lignite contract expires in 1995. The cost of switching to subbituminous coal from lignite would not adversely affect the Company's power plant operations based upon current market price. In the unlikely event the Company decides to continue to burn lignite, the Company's share of the cost of installing scrubbers at its Big Stone Plant by the year 2000 is estimated to be $54 million. The Company's Coyote Plant is equipped with sulfur dioxide removal equipment. Compliance with the phase two requirements is not expected to significantly impact operations at that plant. Minor modifications may be required to meet the phase two requirements by the year 2000 at the Hoot Lake Plant, which already uses subbituminous coal. The Company has continued to diversify by purchasing nonutility businesses-one in 1991, one in 1992, and six more in 1993. In 1992 the Company also purchased its first utility business, an independent telephone company. (See note 2 to Financial Statements for further information.) The Company continues to investigate acquisitions of additional businesses (both utility and nonutility) and expects continued growth in this area. The success of these businesses and any future business purchases will affect future earnings. Operation of the Health Services subsidiaries will be subject to the effects of pending health care legislation. As an efficient low-cost provider of certain health services and equipment, management believes that the Health Services businesses are in line with the goals of national health-care reform. On September 22, 1993, the NDPSC entered an Order approving an Agreement for Incentive Regulation for 1993. The Agreement for Incentive Regulation provides a mechanism of sharing equally between ratepayers and shareholders of any amounts earned in 1993 over or under a specified return on rate base in North Dakota. The impact on the Company of Incentive Regulation for 1993 was immaterial. The Company intends to negotiate an incentive plan for 1994 and beyond. The NDPSC Order required the Company to change its method of revenue recognition from billing dates to energy delivery dates. The North Dakota unbilled revenue amount as of January 1, 1993, ($4.4 million) is required by the Order to be amortized over 36 months. (See notes 1 and 3 to the Financial Statements for further information.) Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 106 - Employers' Accounting for Postretirement Benefits Other than Pensions. The Company has elected to recognize the initial postretirement benefit obligation of $17,619,000 over a period of twenty years. (See note 8 to the Financial Statements for further information.) In November 1992 the Financial Accounting Standards Board (FASB) issued Financial Accounting Standards No. 112 - Employers' Accounting for Postemployment Benefits (SFAS 112). SFAS 112, which will be effective for fiscal years beginning after December 15, 1993, establishes standards of financial accounting and reporting for the estimated cost of benefits provided by an employer to former or inactive employees after employment but before retirement. In May 1993, the FASB issued Financial Accounting Standards No. 115 - Accounting for Certain Investments in Debt and Equity Securities (SFAS 115) which will be effective for fiscal years beginning after December 15, 1993. SFAS 115 establishes standards of financial accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. The adoption of SFAS 112 and SFAS 115 in 1994 will not have a material impact on the Company's financial statements.
O T T E R T A I L P O W E R C O M P A N Y Consolidated Statements of Income For the Years Ended December 31 1993 1992 1991 (in thousands) Operating Revenues: Electric.................................................... $192,290 $177,105 $179,456 Health Services............................................. 32,068 -- -- Diversified Operations...................................... 40,869 32,433 20,389 -------- -------- -------- Total Operating Revenues............................ 265,227 209,538 199,845 Operating Expenses: Production Fuel............................................. 31,325 28,428 28,300 Purchased Power............................................. 27,438 22,582 22,208 Electric Operation Expenses................................. 44,593 39,082 39,450 Electric Maintenance........................................ 12,914 10,927 11,866 Cost of Health Services Sold................................ 16,695 -- -- Other Health Services Expenses.............................. 12,971 -- -- Diversified Cost of Goods................................... 26,203 20,914 14,680 Other Diversified Expenses.................................. 7,862 6,488 3,156 Depreciation and Amortization............................... 20,512 18,697 18,414 Property Taxes.............................................. 10,728 10,034 9,571 Income Taxes................................................ 14,331 14,024 14,828 -------- -------- -------- Total Operating Expenses............................ 225,572 171,176 162,473 Operating Income.............................................. 39,655 38,362 37,372 Other Income and Deductions: Allowance for Equity (Other) Funds Used During Construction 120 116 409 Other Income and Deductions and Applicable Taxes............ 1,419 1,225 350 -------- -------- -------- Total Other Income and Deductions................... 1,539 1,341 759 Income Before Interest Charges................................ 41,194 39,703 38,131 Interest Charges: Interest.................................................... 13,881 13,222 12,237 Allowance for Borrowed Funds Used During Construction -- Credit (56) (57) (202) ------- ------- ------- Interest Charges -- Net............................. 13,825 13,165 12,035 Net Income.................................................... 27,369 26,538 26,096 Preferred Dividend Requirements............................... 2,477 2,280 2,037 ------- ------- ------- Earnings Available for Common Shares.......................... $ 24,892 $ 24,258 $ 24,059 ======== ======== ======== Average Number of Common Shares Outstanding................... 11,180 11,185 11,196 Earnings Per Average Common Share............................. $ 2.23 $ 2.17 $ 2.15 Dividends Per Common Share.................................... $ 1.68 $ 1.64 $ 1.60 See accompanying notes to consolidated financial statements.
O T T E R T A I L P O W E R C O M P A N Y Consolidated Balance Sheets, December 31 1993 1992 (in thousands) ASSETS Plant: Electric Plant in Service........................................... $679,282 $662,055 Other............................................................... 34,626 22,700 -------- -------- Total............................................................. 713,908 684,755 Less Accumulated Depreciation and Amortization...................... 270,385 252,663 -------- -------- 443,523 432,092 Construction Work in Progress....................................... 8,341 6,812 -------- -------- Net Plant......................................................... 451,864 438,904 Investments and Other Assets.......................................... 43,853 32,048 Current Assets: Cash and Cash Equivalents........................................... 3,808 8,369 Temporary Cash Investments.......................................... 451 9,655 Accounts Receivable: Trade (Less Accumulated Provision for Uncollectible Accounts: 1993, $398,000; 1992, $384,000)................................... 10,120 10,072 Other............................................................. 12,772 7,697 Materials and Supplies: Fuel.............................................................. 3,667 3,610 Plant Materials and Operating Supplies............................ 15,378 10,554 Deferred Income Taxes............................................... 4,482 -- Accrued Utility Revenues............................................ 4,368 -- Other............................................................... 1,651 701 -------- -------- Total Current Assets........................................ 56,697 50,658 Deferred Debits: Unamortized Debt Expense and Reacquisition Premiums................. 5,611 5,890 Other............................................................... 5,880 2,956 ------- -------- Total Deferred Debits....................................... 11,491 8,846 TOTAL..................................................... $563,905 $530,456 ======== ======== See accompanying notes to consolidated financial statements.
O T T E R T A I L P O W E R C O M P A N Y Consolidated Balance Sheets, December 31 1993 1992 (in thousands) LIABILITIES Capitalization (page 36): Common Shares, Par Value $5 Per Share -- Authorized, 15,000,000 Shares; Outstanding, 1993 and 1992- 11,180,136 Shares.................... $ 55,901 $ 55,901 Premium on Common Shares............................................ 30,336 30,421 Retained Earnings................................................... 84,209 78,189 -------- -------- Total............................................................. 170,446 164,511 Cumulative Preferred Shares: Subject to Mandatory Redemption................................... 18,000 18,000 Other............................................................. 20,831 20,831 Long-Term Debt...................................................... 166,563 159,295 --------- -------- Total Capitalization........................................ 375,840 362,637 Current Liabilities: Sinking Fund Requirements and Current Maturities.................... 9,356 8,941 Accounts Payable.................................................... 15,987 12,495 Accrued Salaries and Wages.......................................... 3,552 3,666 Federal and State Income Taxes Accrued.............................. - 598 Other Taxes Accrued................................................. 11,187 10,576 Interest Accrued.................................................... 3,522 3,908 Other............................................................... 2,135 1,194 --------- -------- Total Current Liabilities................................... 45,739 41,378 Noncurrent Liabilities................................................ 5,690 3,589 Commitments (note 6).................................................. - - Deferred Credits: Accumulated Deferred Income Taxes................................... 92,940 97,964 Accumulated Deferred Investment Tax Credit.......................... 23,518 24,752 Regulatory Liability................................................ 16,046 -- Other............................................................... 4,132 136 -------- -------- Total Deferred Credits...................................... 136,636 122,852 TOTAL..................................................... $563,905 $530,456 ======== ======== See accompanying notes to consolidated financial statements.
O T T E R T A I L P O W E R C O M P A N Y Consolidated Statements of Cash Flows For the Years Ended December 31 1993 1992 1991 (in thousands) Cash Flows From Operating Activities: Net Income.................................................. $ 27,369 $ 26,538 $ 26,096 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization ............................ 25,348 21,115 20,461 Deferred Investment Tax Credit -- Net..................... (1,234) (1,220) (1,210) Deferred Income Taxes..................................... 3,937 4,505 4,183 Change in Deferred Debits and Other Assets................ (1,996) (2,909) (1,972) (Gain)/Loss on Disposal of Noncurrent Assets.............. (77) 105 -- Change in Noncurrent Liabilities and Deferred Credits..... 5,509 (239) 194 Allowance for Equity (Other) Funds Used During Construction (120) (116) (409) Cash Provided by (Used For) Current Assets and Current Liabilities: Change in Receivables, Materials and Supplies.............. (357) (3,103) (1,119) Change in Other Current Assets............................. (4,389) (116) (294) Change in Payables and Other Current Liabilities........... 250 912 (84) Change in Interest and Income Taxes Payable................ (985) (606) 821 -------- -------- -------- Net Cash Provided by Operating Activities............... 53,255 44,866 46,667 Cash Flows From Investing Activities: Gross Capital Expenditures.................................. (30,894) (22,616) (24,642) Proceeds from Disposal of Noncurrent Assets................. 1,574 196 290 Purchase of Subsidiaries Net of Cash Acquired............... (4,056) (1,813) (1,161) Change in Temporary Cash Investments........................ 9,204 (7,011) 2,750 Change in Marketable Securities and Other Investments....... (7,329) (6,410) (6,354) -------- -------- -------- Net Cash Used in Investing Activities.................. (31,501) (37,654) (29,117) Cash Flows From Financing Activities: Proceeds from Issuance of Long-Term Debt.................... 33,156 59,848 50,668 Proceeds from Issuance of Preferred Stock................... 4,000 18,000 -- Payments for Debt and Preferred Stock Issuance Expense...... (245) (611) (937) Payments for Repurchase of Common Stock..................... -- (157) (950) Payments for Retirement of Long-Term Debt................... (24,432) (48,903) (48,586) Payments to Trustee for Retirement of Long-Term Debt........ (13,445) -- -- Payments for Retirement of Preferred Stock.................. (4,080) (14,184) (555) Dividends Paid.............................................. (21,269) (20,586) (19,952) -------- -------- -------- Net Cash Used In Financing Activities.................... (26,315) (6,593) (20,312) Net Change in Cash and Cash Equivalents....................... (4,561) 619 (2,762) Cash and Cash Equivalents at Beginning of Year................ 8,369 7,750 10,512 -------- -------- -------- Cash and Cash Equivalents at End of Year...................... $ 3,808 $ 8,369 $ 7,750 Supplemental Disclosures of Cash Flow Information: Cash Paid During the Year for: Interest (net of amount capitalized)..................... $ 13,371 $ 11,653 $ 11,933 Income Taxes.............................................. $ 12,009 $ 10,996 $ 10,532 Consolidated Statements of Retained Earnings For the Years Ended December 31 1993 1992 1991 (in thousands) Retained Earnings at Beginning of Year........................ $ 78,189 $ 72,752 $ 66,867 Net Income.................................................... 27,369 26,538 26,096 Other......................................................... (80) (515) (259) -------- -------- -------- TOTAL............................................. 105,478 98,775 92,704 Dividends Paid: Cumulative Preferred Shares at Required Annual Rates........ 2,486 2,242 2,041 Common Shares .............................................. 18,783 18,344 17,911 -------- -------- -------- TOTAL............................................. 21,269 20,586 19,952 Retained Earnings at End of Year.............................. $ 84,209 $ 78,189 $ 72,752 See accompanying notes to consolidated financial statements.
O T T E R T A I L P O W E R C O M P A N Y Consolidated Statements of Capitalization December 31 1993 1992 (in thousands) Total Common Shareholders' Equity..................................... $ 170,446 $164,511 Cumulative Preferred Shares -- Without Par Value (Stated and Liquidating Value $100 a Share) -- Authorized 1,500,000 Shares; Outstanding: Series Subject to Mandatory Redemption $6.35, 180,000 Shares; 9,000 Shares due 2002-06; 135,000 Shares due 2007............................................. 18,000 18,000 --------- -------- Total..................................................... 18,000 18,000 Less Current Sinking Fund Requirement............................. - - --------- -------- Total Preferred Subject to Mandatory Redemption............. 18,000 18,000 Other Series: $3.60, 60,000 Shares............................................ 6,000 6,000 $4.40, 25,000 Shares............................................ 2,500 2,500 $4.65, 30,000 Shares............................................ 3,000 3,000 $6.75, 40,000 Shares............................................ 4,000 - $9.00, 53,311 Shares............................................ 5,331 5,331 $9.50, 40,000 Shares............................................ - 4,000 ------- -------- Total Other Preferred....................................... 20,831 20,831 Cumulative Preference Shares -- Without Par Value, Authorized 1,000,000 Shares; Outstanding: None Long-Term Debt: First Mortgage Bond Series: 4.625%, due November 1, 1993...................................... - 4,970 8.75%, due December 15, 1997...................................... 19,400 19,600 7.25%, due August 1, 2002......................................... 19,800 20,000 7.625%, due February 1, 2003...................................... 9,600 9,719 8.75%, due September 15, 2021..................................... 19,600 19,800 8.25%, due August 1, 2022......................................... 29,700 30,000 Pollution Control and Industrial Development Series: 7.10%, due August 1, 2003....................................... - 3,010 5.90%, due February 1, 2004, Series A........................... - 10,560 5.60-6.80%, due February 1, 2006, Big Stone Project............. 5,607 5,667 8.125%, due August 1, 2009, Coyote Project, Series B............ 860 870 5.60-6.90%, due February 1, 2019, Coyote Project................ 22,439 22,674 --------- ------- Total....................................................... 127,006 146,870 Subsidiary and Other Long-Term Debt: Long-Term Lease Obligation (5.625% Pollution Control Revenue Bonds due July 1, 1998)......................................... 2,200 2,200 Industrial Development Refunding Revenue Bonds 5.00%, due December 1, 2002..................................... 3,010 - Pollution Control Refunding Revenue Bonds Variable 3.15% at December 31,1993, due December 1, 2012......... 10,400 - Industrial Development Revenue Bond (Quadrant Co. Project Variable 3.78% at December 31, 1993, due April 1, 1996 -- Otter Tail Power Company Guarantor)............................. 1,000 1,400 Obligations of Mid-States Development, Inc. Rates 3.9% to 13.65% at December 31, 1993....................... 22,014 7,869 Obligations of North Central Utilities, Inc. Rates 4.78% to 4.93% at December 31, 1993....................... 10,912 10,490 Other (Less Unamortized Discount Based on Imputed Interest Rate of 15%: 1993, $0; 1992, $11,000)................................ 155 245 ----------- -------- Total....................................................... 176,697 169,074 Less: Current Maturity.................................................. 8,031 7,489 Sinking Fund Requirement of which $0 and $58,000 were Satisfied with Reacquired Bonds................................. 1,325 1,452 Unamortized Debt Discount and Premium -- Net...................... 778 838 ------------ -------- Total Long-Term Debt........................................ 166,563 159,295 ------------ -------- Total Capitalization.................................................. $ 375,840 $362,637 See accompanying notes to consolidated financial statements.
[TEXT] Otter Tail Power Company Notes to Consolidated Financial Statements For the Three Years Ended December 31, 1993 1. Summary of Accounting Policies System of Accounts--The accounting records of the Company conform to the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission (FERC), the Public Service Commission of North Dakota, and the Public Utilities Commissions of Minnesota and South Dakota. Principles of Consolidation--The consolidated financial statements include the accounts of the Company and all wholly owned subsidiaries. All significant intercompany transactions have been eliminated. Plant, Retirements, and Depreciation--Utility plant is stated at original cost and the cost of additions includes contracted work, direct labor and materials, allocable overheads, and allowance for funds used during construction. The cost of depreciable units of property retired plus removal costs less salvage is charged to the accumulated provision for depreciation. Maintenance, repairs, and replacement of minor items of property are charged to operating expenses. Repairs to property made necessary by storm damage are charged to the reserve therefor. The provisions for depreciation for financial reporting purposes are made on the straight-line method based on the estimated service lives of the properties. Such provisions as a percent of the average balance of depreciable property were 2.95% in 1993; 2.90% in 1992; and 2.95% in 1991. Health Services' and Diversified Operations' property and equipment are carried at historical cost, or at the current appraised value if acquired in a business combination, and are depreciated on a straight-line basis over the useful lives (5 to 15 years) of the related assets. Upon sale or retirement of property and equipment, the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in the consolidated financial statements. Jointly Owned Plants--The consolidated financial statements include the Company's 53.9% and 35% ownership interests in the assets, liabilities and expenses of the Big Stone and Coyote Plants, respectively. Amounts at December 31, 1993 and 1992 included in Plant in Service for Big Stone were $107,243,000 and $105,315,000, respectively, and the Accumulated Provision for Depreciation and Amortization was $57,159,000 and $54,674,000, respectively. Amounts at December 31, 1993 and 1992 included in Plant in Service for Coyote were $143,078,000 and $142,723,000, respectively, and the Accumulated Provision for Depreciation and Amortization was $47,729,000 and $43,873,000, respectively. The Company's share of direct expenses of the jointly owned plants in service is included in the corresponding operating expenses in the statement of income. Allowance for Funds Used During Construction (AFC)--AFC, a noncash item, is included in construction work in progress based on a composite rate which assumes that funds used for construction were provided by borrowed funds and equity funds. The AFC so included in construction work in progress will ultimately be included in the rate base used in establishing rates for utility services. The composite rate for AFC was 10.25% for 1993, 10.50% for 1992, and 10.75% for 1991. Income Taxes--Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109 - Accounting for Income Taxes (SFAS 109). SFAS 109 required a change in the accounting and reporting for income taxes from a deferral method to a liability method. The adoption of SFAS 109 resulted in no significant change in the Company's components of income tax expense. However, the adoption of SFAS 109 did impact the financial position of the Company with the establishment of a regulatory liability and a corresponding reduction in accumulated deferred taxes of approximately $19.8 million. Comprehensive interperiod income tax allocation is used for substantially all book and tax temporary differences. Deferred income taxes arise for all temporary differences between pretax financial and taxable income, and between the book and tax basis of assets and liabilities. Deferred taxes are recorded using the tax rates scheduled by tax law to be in effect when the temporary differences reverse. The Company amortizes the investment tax credit over the estimated lives of the related property. Operating Revenues--Electric customers' meters are read and bills are rendered on a cycle basis. Prior to 1993 the Company in all of its jurisdictions recorded electric revenues based on billing dates. Effective as of January 1, 1993, due to a North Dakota Public Service Commission's (NDPSC) Order, the Company changed its method of revenue recognition in North Dakota from billing dates to energy delivery dates. (See note 3 for further information on the Order.) The North Dakota unbilled revenue amount as of January 1, 1993, ($4.4 million) is required by the Order to be amortized to electric revenues over 36 months. The impact of changing the North Dakota method of revenue recognition was to increase net income by $870,000 and earnings per share by $.08 in 1993. The Company's rate schedules applicable to substantially all customers include a Cost of Energy adjustment clause under which the rates are adjusted to reflect changes in average cost of fuels and purchased power. Health Services' operating revenues on major equipment and installation contracts are recorded using the percentage-of-completion method. Amounts received in advance under customer service contracts are deferred and recognized on a straight-line basis over the contract period. Diversified Operations' operating revenues are recorded when services are rendered, products are shipped, and in the case of construction contracts, the percentage-of-completion method is used. Storm Damage Reserve--The Company is required under its Indenture of Mortgage to make annual provisions for storm damage of not less than .5% of gross electric operating revenues. Provisions for loss have been used in determination of rates approved by the applicable regulatory commissions. Provisions for 1993, 1992, and 1991 were $1,164,000, $886,000, and $1,098,000, respectively, and repairs charged to such reserves were $1,083,000, $1,063,000, and $1,494,000, respectively. Accrued liabilities included $1,131,000 and $1,050,000 for storm damage at December 31, 1993 and 1992, respectively. Employee Incentive Plan--Effective January 1, 1988, the Company established a gain sharing plan for the benefit of all employees. The totals received by all employees for 1993, 1992, and 1991 were $1,172,000, $1,367,000, and $1,775,000, respectively. Reclassifications--Certain prior year amounts have been reclassified to conform to 1993 presentation. Such reclassification had no impact on net income and shareholders' equity. Cash Equivalents--The Company considers all highly liquid debt instruments purchased with a maturity of 90 days or less to be cash equivalents. Debt Reacquisition Premiums--In accordance with regulatory treatment, the Company defers debt redemption premiums and amortizes such costs over the original life of the reacquired bonds. Investments--The Company's temporary cash investments consist of tax-free municipal bonds and money market funds, recorded at cost which approximates market. In addition, the Company has noncurrent investments of preferred stock which are recorded at the lower of cost or market. Inventories--The Electric Operations' inventories are reported at average cost. The Health Services' and Diversified Operations' inventories are stated at the lower of cost (first-in, first-out) or market. Intangible Assets--The majority of the Company's intangible assets consist of Goodwill and are amortized on a straight-line basis over a period from 15 to 40 years.
2. Segment Information The Company's wholly-owned subsidiary Mid-States Development, Inc. purchased one additional business in both 1991 and 1992, and six additional businesses in 1993. The Company's wholly-owned subsidiary North Central Utilities, Inc. acquired in 1992 RD Communications, Inc., an independent telephone company serving Parkers Prairie, Minnesota, and the surrounding area. As part of the acquisition consideration, the Company issued $5,331,000 of a new series of $9.00 Exchangeable Cumulative Preferred Shares. The balance of consideration consisted of cash and Common Shares acquired by a subsidiary of the Company in the open market. In all acquisitions, the purchase method of accounting was used and the acquisitions would have had no significant pro forma effect on the Company's net income or earnings per share for 1993 and 1992. Operating revenues for 1992 would have been $248,909,000. The total acquisition price for all businesses was $22,925,000. The Company has operations in three business areas. Electric Operations includes the electric utility only. Health Services Operations includes certain businesses purchased in 1993, including a diagnostic medical imaging company, a management company for a number of diagnostic imaging companies, and a medical imaging company that sells and services diagnostic medical imaging equipment and associated supplies and accessories. Diversified Operations consists of businesses diversified in such areas as manufacturing (fabricated metal parts and agricultural equipment), electrical and telephone contracting, radio broadcasting, waste incinerating, and telephone utility. The businesses were not significant enough to warrant segment information until 1993. Information for the business segments for 1993 is presented in the table below: Health Diversified Electric Services Operations Total (in thousands) Operating Revenues $192,290 $32,068 $40,869 $265,227 Pretax Operating Income $ 47,114 $ 1,967 $ 4,905 $ 53,986 Income Taxes 14,331 Consolidated Operating Income $ 39,655 Depreciation and Amortization $ 18,219 $ 435 $ 1,858 $ 20,512 Capital Expenditures $ 24,526 $ 3,471 $ 2,897 $ 30,894 Identifiable Assets $498,440 $23,175 $42,290 $563,905 3. Rate Matters On September 22, 1993, the NDPSC entered an Order approving an Agreement for Incentive Regulation for 1993. The Agreement provides a mechanism for sharing equally between ratepayers and shareholders of any amounts earned in 1993 over or under a specified return on rate base in North Dakota. As part of the calculation, the NDPSC will allow the Company to recognize postretirement benefits other than pensions under the accrual method required by SFAS 106. The NDPSC's Order also requires the Company to change its method of revenue recognition in North Dakota as of January 1, 1993, from billing dates to energy delivery dates. (See Operating Revenues under note 1 for more information on the accounting for unbilled revenue.) On September 9, 1992, following an audit by the staff of the NDPSC, the NDPSC entered an Order approving a settlement agreement with the Company pursuant to which the Company made a refund to its North Dakota customers in the aggregate amount of $1,000,000. The refund was reflected in electric revenues for the quarter ended September 30, 1992. 4. Common Shares The Company's stock repurchase program was extended by approval of the Board of Directors on April 12, 1993. Under the extension, up to 611,481 common shares (the unpurchased remainder from previous authorizations) may be purchased during the period ending December 31, 1995. The purpose for implementing this stock repurchase plan is to reduce the common equity portion of the Company's capital structure. There were no shares purchased in 1993. During 1992 the Company purchased 5,000 shares at a cost of $157,000. 5. Retained Earnings Restriction The Company's Indenture of Mortgage and Articles of Incorporation, as amended, contain provisions which limit the amount of the dividends which may be paid to common shareholders. Under the most restrictive of these provisions, retained earnings at December 31, 1993, were restricted by $9,686,000. 6. Commitments At December 31, 1993, the Company had commitments under contracts in connection with construction programs aggregating approximately $2,500,000. For capacity requirements the Company has an agreement with Lincoln Electric System, to purchase 20 mw for the winter seasons of 1993 through 1995 at an approximate annual cost of $1,300,000 for 1994 and $800,000 for 1995. The Company also has an agreement with Manitoba Hydro Electric Board to purchase 110 mw annually for 1994 through 1996 at a minimum annual cost of approximately $3,900,000 for 1994 and $4,100,000 for 1995 and 1996. The Company also has several long-term coal contracts in which the Company is responsible for making payment only upon the delivery of the coal. The risk of loss from nonperformance of the contracts is considered nominal because of the availability of other suppliers and the expected continued reliability of the current fuel suppliers. Furthermore, the Cost of Energy Adjustment provision in the rate-making process lessens the risk of loss (in the form of increased costs) from market price changes because it assures recovery of almost all fuel costs. Lease rental commitments are not considered significant. 7. Long-Term Obligations Preferred Shares--On November 12, 1993, the Company retired 40,000 shares of the $9.50 series. This redemption resulted in a reduction to Retained Earnings of $80,000. On November 5, 1992, the Company retired the remaining 18,000 shares of the $8.30 series, 68,000 shares of the $8.375 series, and the 45,500 shares of the $8.90 series. This redemption resulted in a reduction to Retained Earnings of $479,000. The $6.35 Cumulative Preferred Shares are redeemable in whole or in part at the option of the Company after December 1, 1997, at $103.175. The $9.00 Exchangeable Cumulative Preferred Shares are redeemable in whole or in part at the option of the Company after August 9, 1999, for $100.00 per share payable in cash or, at the holder's election, Common Shares. Subject to certain conditions, such shares are exchangeable at the option of the holder after August 9, 1999, for $100.00 per share in cash or Common Shares. Long-Term Debt--All utility property, with certain minor exceptions, is subject to the lien of the Indenture of Mortgage of the Company securing its First Mortgage Bonds. The Company is required by the Indenture to make annual payments (exclusive of redemption premiums) for sinking fund purposes, except that the requirement with respect to certain series may be satisfied by the delivery of bonds of such series of equal principal amount. The Company issued First Mortgage Bonds of its pollution control and industrial development series to secure payment of a like principal amount of revenue bonds which were issued by local governmental units to finance facilities leased or purchased and which the Company has capitalized. The aggregate amounts of maturities and sinking fund requirements on bonds outstanding and other long-term obligations at December 31, 1993, for each of the next five years are $9,356,000 for 1994, $9,538,000 for 1995, $5,670,000 for 1996, $25,463,000 for 1997, and $5,036,000 for 1998. In December 1993, the Company defeased its First Mortgage Bonds, 7.10% Series of 2003, and 5.9% Series of 2004. Cash and U.S. Government Obligations were deposited in an irrevocable trust to cover the principal, interest, and call premium payable in February 1994. 8. Pension Plan and Other Postretirement Benefits The Company's noncontributory funded pension plan covers substantially all employees. The plan provides for 100% vesting after 5 "vesting years" of service and for retirement compensation at age 65, with reduced compensation in cases of retirement prior to age 62. The Company reserves the right to discontinue the plan, but no change or discontinuance may affect the pensions theretofore vested. The Company's policy is to fund pension costs accrued. All past service costs have been provided for. The total pension expense was $1,333,000 for 1993, $1,293,000 for 1992, and $1,123,000 for 1991. A portion of the pension expense is capitalized as a part of utility plant construction. The pension plan has a trustee who is responsible for pension payments to retirees. Two investment managers have responsibility for management of the plan's assets. In addition, an independent actuary performs the necessary actuarial valuations for the plan. Net periodic pension cost for 1993, 1992, and 1991 includes the following components:
1993 1992 1991 (in thousands) Service Cost - Benefit Earned During the Period $ 1,774 $ 1,699 $ 1,469 Interest Cost on Projected Benefit Obligation 5,867 5,570 5,194 ------- ------- ------- $ 7,641 $ 7,269 $ 6,663 Less: Actual Return on Assets 7,636 6,223 17,813 Plus/(Less): Net Deferral and Amortization 1,328 247 12,273 ------- ------- ------- Net Periodic Pension Cost $ 1,333 $ 1,293 $ 1,123 The assumptions used for actuarial valuations were: 1993 1992 1991 Discount Rate 7.5% 8.0% 8.0% Rate of Increase in Future Compensation Level 4.5% 5.0% 5.0% Long-Term Rate of Return on Assets 8.0% 8.5% 8.5% The plan assets consist of common stock and bonds of public companies, U.S. Government Securities, cash and cash equivalents. The funded status of the plan and amounts recognized on the balance sheet at December 31, 1993 and 1992, are as follows:
1993 1992 (in thousands) Actuarial present value of benefit obligation: Vested Benefits $ 58,462 $ 56,769 Nonvested Benefits 6,113 3,525 -------- -------- Accumulated Benefit Obligation $ 64,575 $ 60,294 Projected Benefit Obligation $ 80,006 $ 75,291 Plan Assets at Fair Value 94,945 91,416 -------- -------- Funded Status $ 14,939 $ 16,125 Unrecognized Transition Asset (1,957) (2,193) Unrecognized Prior Service Cost 6,206 6,804 Unrecognized Net Actuarial (Gain) or Loss (13,395) (15,021) -------- -------- Net Pension Asset $ 5,793 $ 5,715 In addition to providing pension benefits, the Company provides a portion of health insurance and life insurance benefits for retired employees. Substantially all of the Company's employees may become eligible for health insurance and life insurance benefits if they reach age 55 and have 10 years of service. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106 - Employers' Accounting for Postretirement Benefits Other Than Pensions (SFAS 106). SFAS 106 requires the Company to accrue the estimated cost of retiree benefit payments during the years the employee provides service. The Company previously expensed the cost of these benefits, which are principally health care, as claims were incurred. The Company has elected to recognize the transitional obligation of approximately $17,619,000 over a period of twenty years. The Company's cash flows are not affected by implementation of this Statement, but implementation of this Statement decreased net income by $837,000 and earnings per share by $.07 in 1993. In 1992 and 1991, the Company recognized $960,000 and $850,000, respectively, as an expense for postretirement health care and life insurance benefits. The net postretirement benefit cost for 1993 includes the following components: 1993 (in thousands) Service Cost - Benefit Earned During the Period $ 502 Interest Cost on Accumulated Postretirement Benefit Obligation 1,367 Amortization of Transition Obligation 881 ------- Net Postretirement Benefit Cost $ 2,750 The funded status of the plan and the amounts recognized on the balance sheet are as follows:
December 31, January 31, 1993 1993 (in thousands) Actuarial present value of benefit obligation: Retirees $ 10,694 $ 10,520 Fully Eligible Plan Participants 5,194 4,548 Other Active Plan Participants 3,565 2,551 -------- -------- Accumulated Postretirement Benefit Obligation $ 19,453 $ 17,619 Plan Assets at Fair Value 0 0 -------- -------- Funded Status $(19,453) $(17,619) Unrecognized Loss 981 0 Unrecognized Transitional Obligation 16,738 17,619 -------- -------- Postretirement Benefit Liability $ (1,734) $ 0 The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation as of December 31, 1993 was 11.5% for 1994 decreasing linearly each successive year until it reaches 5% in 2001, after which it remains constant. A one-percentage-point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement obligation as of December 31, 1993 and the service and interest cost components of the net postretirement health care cost in 1993 by approximately 13.1% and 14.9%, respectively. The assumed discount rate used in determining the accumulated postretirement benefit obligation was 7.5%. The Company has a leveraged employee stock ownership plan (ESOP) for the benefit of all its employees. Contributions made by the Company were $940,000 for 1993, $880,000 for 1992, and $850,000 for 1991. 9. Compensating Balances and Short-Term Borrowings At December 31, 1993, the Company had no compensating balances to support formal bank lines of credit. The Company's bank lines of credit totaled $19,050,000 of which $4,437,000 was used at December 31, 1993. They make available to the Company bank loans for short-term financing and provide backup financing for commercial paper notes. 10. Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash and Short-Term Investments--The carrying amount approximates fair value because of the short-term maturity of those instruments. Marketable Securities--The fair value of investments are estimated based on quoted market prices. Redeemable Preferred Stock-- The fair value is estimated based on the current rates available to the Company for the issuance of redeemable preferred stock. Long-Term Debt-- The fair value of the Company's long-term debt is estimated based on the current rates available to the Company for the issuance of debt.
1993 1992 (in thousands) Carrying Fair Carrying Fair Amount Value Amount Value Cash and Short-Term Investments $ 4,259 $ 4,259 $ 18,024 $ 18,024 Marketable Securities 17,025 17,406 10,277 10,382 Redeemable Preferred Stock (18,000) (18,728) (18,000) (18,000) Long-Term Debt (166,563) (181,669) (159,295) (165,227) 11. Income Tax Expense The total income tax expense differs from the amount computed by applying the federal income tax rate (35% in 1993 and 34% in 1992 and 1991) to net income before total income tax expense for the following reasons:
1993 1992 1991 (in thousands) Tax Computed at Federal Statutory Rate............ $14,495 $13,739 $14,214 Increases (Decreases) in Tax from: State Income Taxes Net of Federal Income Tax Benefit....................................... 1,926 1,932 1,853 Investment Tax Credit Amortization.............. (1,234) (1,220) (1,210) Depreciation Timing Differences -- Flow-Through Method Reversal............................... 649 380 486 Timing Differences Reversing in Excess of Federal Rates................................... (635) (560) (429) Dividend Received/Paid Deduction................ (824) (225) (150) Permanent and Other Differences................. (333) (176) 469 ------- ------- ------- Total Income Tax Expense................ $14,044 $13,870 $15,233 Overall Effective Federal and State Income Tax Rate............................................ 33.9% 34.3% 36.9% Income Tax Expense is Comprised of the Following: Charged (Credited) to Operations: Current Federal Income Taxes................ $ 9,288 $ 9,189 $10,264 Current State Income Taxes.................. 2,344 2,096 2,057 Deferred Federal Income Taxes............... 3,275 3,216 3,059 Deferred State Income Taxes................. 658 743 658 Investment Tax Credit Amortization.......... (1,234) (1,220) (1,210) ------- ------- ------- Total.................................. 14,331 14,024 14,828 Charged (Credited) to Other Income and Deductions: Current Federal Income Taxes.............. (192) (639) (38) Current State Income Taxes................ (11) (121) 6 Deferred Federal and State Income Taxes... (84) 606 437 ------- ------- ------- Total Income Tax Expense.............. $14,044 $13,870 $15,233
Deferred Income Tax Expense is Comprised of the Following: Accelerated Depreciation (Tax over Book)-Net $ 3,580 $ 3,802 Overhead Costs Capitalized.................... (145) (200) Unbilled Revenues............................. (274) (52) Deductible Net Pension Asset.................. 455 425 Premium On Bond Redemption.................... 610 442 Other......................................... 339 (263) ------- ------- Total................................... $ 4,565 $ 4,154 The Company's deferred tax assets and liabilities were comprised of the following on December 31, 1993:
[TEXT] 1993 (in thousands) Deferred Income Taxes Deferred Tax Assets Amortization of Tax Credits $ 15,376 Unbilled/Unearned Revenue 4,501 Operating Reserves 2,340 Non Deductible Land - Plant Abandonment 1,134 Other 1,661 Transfer to Regulatory Asset (938) -------- Total Deferred Tax Assets $ 24,074 Deferred Tax Liabilities Differences Related to Property (107,317) Excess Tax Over Book - Pensions (2,298) Other (3,161) Transfer to Regulatory Asset (501) Transfer to Regulatory Liability 745 --------- Total Deferred Tax Liabilities $(112,532) Deferred Income Taxes $ (88,458)
12. Quarterly Information (Unaudited) The quarterly data shown below reflects seasonal and timing variations which are common in the utility industry. Because of changes in the number of common shares outstanding, the sum of quarterly earnings per common share may not equal total earnings per common share. The information for the first three quarters in 1993 has been restated to reflect the change in method of electric revenue recognition for North Dakota from billing dates to energy delivery dates. The effects of the restatement on net income, by quarter and for the nine months ended September 30, 1993, are immaterial. (See note 1 and 3 for further information.) Three Months Ended March 31 June 30 September 30 December 31 1993 1992 1993 1992 1993 1992 1993 1992 (in thousands except per share data) Operating Revenues..................... $58,714 $52,559 $71,183 $49,994 $67,882 $48,145 $67,448 $58,840 Operating Income....................... 12,257 11,595 8,438 9,217 9,423 8,298 9,537 9,252 Net Income............................. 8,990 8,885 5,447 6,421 6,225 4,599 6,707 6,633 Earnings Available for Common Shares........................ 8,373 8,382 4,830 5,922 5,608 4,035 6,081 5,919 Earnings Per Common Share.............. .75 .75 .43 .53 .50 .36 .54 .53 Dividends Paid Per Common Share........ .42 .41 .42 .41 .42 .41 .42 .41 Price Range: High................................. 39 1/2 36 1/4 41 1/4 35 1/2 35 1/2 35 1/4 34 1/4 34 3/4 Low.................................. 33 30 1/2 33 1/2 32 3/4 31 1/2 31 1/2 30 5/8 31 Average Number of Common Shares Outstanding................... 11,180 11,185 11,180 11,185 11,180 11,185 11,180 11,183
[TEXT] INDEPENDENT AUDITORS' REPORT To the Shareholders of Otter Tail Power Company: We have audited the accompanying consolidated balance sheets and statements of capitalization of Otter Tail Power Company and its subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, retained earnings, and cash flows for each of the three years in the period ended December 31, 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Companies at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in notes 1 and 8 to the financial statements, in 1993 the Company made required changes in its method of accounting for income taxes and postretirement health-care costs. DELOITTE & TOUCHE Deloitte & Touche January 31, 1994 Minneapolis, Minnesota EX-21 5 SUBSIDIARIES Exhibit 21-A OTTER TAIL POWER COMPANY Subsidiaries of the Registrant March 1, 1994 Company State of Incorporation Minnesota Dakota Generating Company Minnesota Otter Tail Realty Company Minnesota Otter Tail Management Corporation* Minnesota ORD Corporation* Minnesota Quadrant Co. Minnesota North Central Utilities, Inc. Minnesota Midwest Information Systems, Inc. Minnesota Midwest Telephone Co. Minnesota Osakis Telephone Company Minnesota Data Video Systems, Inc. Minnesota MIS Investments, Inc. Minnesota Mid-States Development, Inc. Minnesota Hylden Industries, Inc.* Minnesota Glendale Machining, Inc. Minnesota Precision Machine of North Dakota, Inc. North Dakota Dakota Machine Tool, Inc. North Dakota Aerial Contractors, Inc. North Dakota Moorhead Electric, Inc. Minnesota KFGO, Inc. North Dakota Western Minnesota Broadcasting Company Minnesota Imaging Plus, Inc. North Dakota Mobile Imaging. Inc. North Dakota International Falls Imaging, Inc. North Dakota Scanners, Inc. Minnesota Great Plains Imaging, Inc. North Dakota Diagnostic Medical Systems, Inc. North Dakota DMS Leasing Corporation North Dakota Medical Operators and Management Corp. North Dakota *Inactive EX-23 6 CONSENT Exhibit 23-A We consent to the incorporation by reference in Registration Statement No. 33- 46071 of Otter Tail Power Company on Form S-3 of our reports dated January 31, 1994 appearing and incorporated by reference in this Annual Report on Form 10- K of Otter Tail Power Company for the year ended December 31, 1993. Deloitte & Touche Deloitte & Touche Minneapolis, Minnesota March 25, 1994 EX-24 7 POWERS OF ATTORNEY Exhibit 24-A POWER OF ATTORNEY __________ I, JOHN C. MAC FARLANE, do hereby constitute and appoint D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN, or any one of them, my Attorney-in-Fact for the purpose of signing, in my name and on my behalf as President and Chief Executive Officer, Principal Executive Officer and Director of Otter Tail Power Company, the Annual Report of Otter Tail Power Company on Form 10-K for its fiscal year ended December 31, 1993, and any and all amendments to said Annual Report, and to deliver on my behalf said Annual Report and any and all amendments thereto, as each thereof is so signed, for filing with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Date: ____January 6_______, 1994. ______ John C. MacFarlane____ John C. MacFarlane In Presence of: Lori D. Dawkins____________________ Penny Mosher_______________________ POWER OF ATTORNEY __________ I, DENNIS R. EMMEN, do hereby constitute and appoint JOHN C. MAC FARLANE, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN, or any one of them, my Attorney-in-Fact for the purpose of signing, in my name and on my behalf as Sr. Vice President, Finance of Otter Tail Power Company, the Annual Report of Otter Tail Power Company on Form 10-K for its fiscal year ended December 31, 1993, and any and all amendments to said Annual Report, and to deliver on my behalf said Annual Report and any and all amendments thereto, as each thereof is so signed, for filing with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Date: ____January 6_______, 1994. _______ Dennis R. Emmen_________ Dennis R. Emmen In Presence of: Penny Mosher_______________________ Lori D. Dawkins____________________ POWER OF ATTORNEY __________ I, ANDREW E. ANDERSON, do hereby constitute and appoint JOHN C. MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN, or any one of them, my Attorney-in-Fact for the purpose of signing, in my name and on my behalf as Controller and Principal Accounting Officer of Otter Tail Power Company, the Annual Report of Otter Tail Power Company on Form 10-K for its fiscal year ended December 31, 1993, and any and all amendments to said Annual Report, and to deliver on my behalf said Annual Report and any and all amendments thereto, as each thereof is so signed, for filing with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Date: _____January 7______, 1994. ___________Andrew E. Anderson________ Andrew E. Anderson In Presence of: Lori D. Dawkins____________________ Penny Mosher_______________________ POWER OF ATTORNEY __________ I, DAYLE DIETZ, do hereby constitute and appoint JOHN C. MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN, or any one of them, my Attorney-in-Fact for the purpose of signing, in my name and on my behalf as Director of Otter Tail Power Company, the Annual Report of Otter Tail Power Company on Form 10-K for its fiscal year ended December 31, 1993, and any and all amendments to said Annual Report, and to deliver on my behalf said Annual Report and any and all amendments thereto, as each thereof is so signed, for filing with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Date: _____January 14_____, 1994. ___________Dayle Dietz_______________ Dayle Dietz In Presence of: Owen E. Jensen_____________________ M. D. Isley________________________ POWER OF ATTORNEY __________ I, MAYNARD D. HELGAAS, do hereby constitute and appoint JOHN C. MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN, or any one of them, my Attorney-in-Fact for the purpose of signing, in my name and on my behalf as Director of Otter Tail Power Company, the Annual Report of Otter Tail Power Company on Form 10-K for its fiscal year ended December 31, 1993, and any and all amendments to said Annual Report, and to deliver on my behalf said Annual Report and any and all amendments thereto, as each thereof is so signed, for filing with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Date: ____January 17______, 1994. ___________Maynard D. Helgaas________ Maynard D. Helgaas In Presence of: Colleen A. Weatherly_______________ Jayme L. Kautzman__________________ POWER OF ATTORNEY __________ I, NATHAN I. PARTAIN, do hereby constitute and appoint JOHN C. MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN, or any one of them, my Attorney-in-Fact for the purpose of signing, in my name and on my behalf as Director of Otter Tail Power Company, the Annual Report of Otter Tail Power Company on Form 10-K for its fiscal year ended December 31, 1993, and any and all amendments to said Annual Report, and to deliver on my behalf said Annual Report and any and all amendments thereto, as each thereof is so signed, for filing with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Date: _____January 18_____, 1994. ___________Nathan I. Partain_________ Nathan I. Partain In Presence of: M. Broyle__________________________ Jeffrey Miller_____________________ POWER OF ATTORNEY __________ I, JAMES L. STENGEL, do hereby constitute and appoint JOHN C. MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN, or any one of them, my Attorney-in-Fact for the purpose of signing, in my name and on my behalf as Director of Otter Tail Power Company, the Annual Report of Otter Tail Power Company on Form 10-K for its fiscal year ended December 31, 1993, and any and all amendments to said Annual Report, and to deliver on my behalf said Annual Report and any and all amendments thereto, as each thereof is so signed, for filing with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Date: ______January 10____, 1994. ___________J. L. Stengel_____________ James L. Stengel In Presence of: Robert L. Abram____________________ Marjorie A. Abram__________________ POWER OF ATTORNEY __________ I, ROBERT N. SPOLUM, do hereby constitute and appoint JOHN C. MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN, or any one of them, my Attorney-in-Fact for the purpose of signing, in my name and on my behalf as Director of Otter Tail Power Company, the Annual Report of Otter Tail Power Company on Form 10-K for its fiscal year ended December 31, 1993, and any and all amendments to said Annual Report, and to deliver on my behalf said Annual Report and any and all amendments thereto, as each thereof is so signed, for filing with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Date: _____January 8_____, 1994. ___________Robert N. Spolum__________ Robert N. Spolum In Presence of: John M. Grove______________________ Charles E. Lattes__________________ POWER OF ATTORNEY __________ I, THOMAS M. BROWN, do hereby constitute and appoint JOHN C. MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN, or any one of them, my Attorney-in-Fact for the purpose of signing, in my name and on my behalf as Director of Otter Tail Power Company, the Annual Report of Otter Tail Power Company on Form 10-K for its fiscal year ended December 31, 1993, and any and all amendments to said Annual Report, and to deliver on my behalf said Annual Report and any and all amendments thereto, as each thereof is so signed, for filing with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Date: ____January 10______, 1994. ___________Thomas M. Brown___________ Thomas M. Brown In Presence of: Linda J. Barnes____________________ Joyce N. Bliss_____________________ POWER OF ATTORNEY __________ I, KENNETH L. NELSON, do hereby constitute and appoint JOHN C. MAC FARLANE, D. R. EMMEN, JAY D. MYSTER, C. E. BRUNKO, and BEVERLY A. NORLIN, or any one of them, my Attorney-in-Fact for the purpose of signing, in my name and on my behalf as Director of Otter Tail Power Company, the Annual Report of Otter Tail Power Company on Form 10-K for its fiscal year ended December 31, 1993, and any and all amendments to said Annual Report, and to deliver on my behalf said Annual Report and any and all amendments thereto, as each thereof is so signed, for filing with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Date: _____January 8______, 1994. ___________Kenneth L. Nelson_________ Kenneth L. Nelson In Presence of: Becky Luhning______________________ Lori D. Dawkins____________________ -----END PRIVACY-ENHANCED MESSAGE-----