SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ALLETE (legally incorporated as Minnesota Power, Inc.)
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[ALLETE LOGO]
Notice
and
Proxy
Statement
Annual Meeting of Shareholders Tuesday, May 8, 2001
--------------------
Duluth, Minnesota
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[ALLETE LOGO]
March 16, 2001
Dear Shareholder:
You are cordially invited to attend ALLETE's 2001 Annual Meeting of
Shareholders on Tuesday, May 8, 2001 at 10:00 a.m. in the auditorium at the
Duluth Entertainment Convention Center (DECC). The DECC is located on the
waterfront at 350 Harbor Drive in Duluth. Free parking is available in the
adjoining lot. On behalf of the Board of Directors, I encourage you to attend.
Our operating results in 2000 exceeded Company-wide goals for growth we set
for ourselves at the beginning of the year. Operating earnings per share
increased by 12 percent, beating our target of 10 percent. Once again, these
strong results were driven in large part by our growing Automotive Services
unit. Our total shareholder return (stock price appreciation plus reinvestment
of dividends) was 54 percent. Shareholders joining us will hear our strategy for
growth in 2001.
At the Shareholders Meeting, 11 nominees will stand for election to the
Board. Dutch Cragun, first elected in 1991, is retiring from service on the
Board. We thank him for his contributions to the success of the Company. Also,
shareholders will vote on a resolution to appoint PricewaterhouseCoopers LLP as
the Company's independent accountants. Finally, shareholders will vote on a
resolution to change the Company's legal name from Minnesota Power, Inc. to
ALLETE, Inc. The Company began doing business under the name ALLETE on September
1, 2000, as we were in the process of doubling the size of ADESA by acquiring 28
auto auctions. Our electric utility business unit appropriately continues to
operate under the name Minnesota Power.
After our Annual Meeting, we invite you to visit with our directors,
officers and employees over a box lunch in the Lake Superior Ballroom located
within the DECC. If you plan to attend, please return the enclosed reservation
card.
It is important that your shares be represented at the Annual Meeting.
Please sign, date and promptly return the enclosed proxy card in the envelope
provided, or, if applicable, follow the easy instructions for phone or Internet
voting.
Thank you for your investment in ALLETE.
Sincerely,
Edwin L. Russell
Edwin L. Russell
Chairman, President and
Chief Executive Officer
ALLETE
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS - MAY 8, 2001
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The Annual Meeting of Shareholders of ALLETE will be held in the auditorium
at the Duluth Entertainment Convention Center, 350 Harbor Drive, Duluth,
Minnesota, on Tuesday, May 8, 2001 at 10:00 a.m. for the following purposes:
1. To elect a Board of 11 directors to serve for the ensuing year;
2. To approve the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for 2001;
3. To amend the Company's Articles of Incorporation to change the Company's
legal name from Minnesota Power, Inc. to ALLETE, Inc.; and
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Shareholders of record on the books of the Company at the close of business
on March 9, 2001 are entitled to notice of and to vote at the Annual Meeting.
All shareholders are cordially invited and encouraged to attend the meeting
in person. The holders of a majority of the shares entitled to vote at the
meeting must be present in person or by proxy to constitute a quorum.
Your early response will facilitate an efficient tally of your votes. If
voting by mail, please sign, date and return the enclosed proxy card in the
envelope provided. Alternatively, follow the enclosed instructions to vote by
phone or the Internet.
By order of the Board of Directors,
Philip R. Halverson
Philip R. Halverson
Vice President, General Counsel and Secretary
Dated at Duluth, Minnesota
March 16, 2001
IF YOU HAVE NOT RECEIVED THE ALLETE 2000 ANNUAL REPORT, WHICH INCLUDES
FINANCIAL STATEMENTS, KINDLY NOTIFY ALLETE SHAREHOLDER SERVICES, 30 WEST
SUPERIOR STREET, DULUTH, MN 55802-2093, TELEPHONE NUMBER 1-800-535-3056 OR
1-218-723-3974, AND A COPY WILL BE SENT TO YOU.
ALLETE
30 West Superior Street
Duluth, Minnesota 55802
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PROXY STATEMENT
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SOLICITATION
The proxy accompanying this Proxy Statement is solicited on behalf of the
Board of Directors of ALLETE (the Company) for use at the Annual Meeting of
Shareholders to be held on May 8, 2001 and any adjournments thereof. Minnesota
Power, Inc. began doing business under the name ALLETE on September 1, 2000. The
purpose of the meeting is to elect a Board of 11 directors to serve for the
ensuing year, to approve the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for 2001, to approve amending the Company's
Articles of Incorporation to change the Company's legal name from Minnesota
Power, Inc. to ALLETE, Inc. and to transact such other business as may properly
come before the meeting. All properly submitted proxies received at or before
the meeting, and entitled to vote, will be voted at the meeting.
This Proxy Statement and the enclosed proxy card were first mailed on or
about March 16, 2001. Each proxy delivered pursuant to this solicitation is
revocable any time before it is voted by written notice delivered to the
Secretary of the Company.
The Company expects to solicit proxies primarily by mail. Proxies also may
be solicited in person and by telephone at a nominal cost by employees or
retirees of the Company. The expenses of such solicitation are the ordinary
ones in connection with preparing, assembling and mailing the material, and also
include charges and expenses of brokerage houses and other custodians, nominees,
or other fiduciaries for communicating with shareholders. Additional
solicitation of proxies will be made by mail, telephone and in person by
Corporate Investor Communications, Inc., a firm specializing in the solicitation
of proxies, at a cost to the Company of approximately $6,000 plus expenses. The
total amount of such costs will be borne by the Company.
OUTSTANDING SHARES AND VOTING PROCEDURES
The outstanding shares of capital stock of the Company as of March 9, 2001
were 75,625,063 shares of Common Stock (without par value).
Each share of the Common Stock of record on the books of the Company at the
close of business on March 9, 2001 is entitled to notice of the Annual Meeting
and to one vote.
The affirmative vote of a majority of the shares of stock entitled to vote
at the Annual Meeting is required for election of each director and the
affirmative vote of a majority of the shares of stock present and entitled to
vote is required for approval of the other items described in this Proxy
Statement to be acted upon by shareholders. An automated system administered by
Wells Fargo Bank Minnesota, N.A. tabulates the votes. Abstentions are included
in determining the number of shares present and voting and are treated as votes
against the particular proposal. Broker non-votes are not counted for or against
any proposal.
Unless contrary instructions are indicated on the proxy, all shares
represented by valid proxies will be voted "FOR" the election of all nominees
for director named herein, "FOR" approval of PricewaterhouseCoopers LLP as the
Company's independent accountants for 2001, and "FOR" approval of amending the
Company's Articles of Incorporation to change the Company's legal name from
Minnesota Power, Inc. to ALLETE, Inc. If any other business is transacted at the
meeting, all shares represented by valid proxies will be voted in accordance
with the best judgment of the appointed Proxies.
1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The only person known to the Company who as of March 9, 2001 owned
beneficially more than 5 percent of any class of the Company's voting securities
is Mellon Bank, N.A., One Mellon Bank Center, Pittsburgh, PA 15258. Mellon Bank
holds 8,036,844 shares (10.6%) of the Company's Common Stock in its capacity as
Trustee of the Minnesota Power and Affiliated Companies Employee Stock Ownership
Plan and Trust (ESOP). Generally, these shares will be voted in accordance with
instructions received by Mellon Bank from participants in the ESOP.
The following table presents the shares of Common Stock beneficially owned
by directors, nominees for director, executive officers named in the Summary
Compensation Table appearing subsequently in this Proxy Statement, and all
directors and executive officers of the Company as a group, as of March 9, 2001.
Unless otherwise indicated, the persons shown have sole voting and investment
power over the shares listed.
Options Options
Number of Shares Exercisable Number of Shares Exercisable
Name of Beneficially within 60 days Name of Beneficially within 60 days
Beneficial Owner Owned <F1> after March 9, 2001 Beneficial Owner Owned <F1> after March 9, 2001
- ---------------- ----- ------------------- ---------------- ----- -------------------
Kathleen A. Brekken 7,649 4,680 Arend J. Sandbulte 70,144 5,996
Merrill K. Cragun 19,256 6,600 Nick Smith 10,509 6,600
Dennis E. Evans 30,070 6,600 Bruce W. Stender 13,976 6,600
Glenda E. Hood 3,067 0 Donald C. Wegmiller 18,448 6,600
Peter J. Johnson 24,252 6,600 Donnie R. Crandell 24,826 36,938 <F2>
George L. Mayer 17,475 6,116 Robert D. Edwards 45,794 74,577
Jack I. Rajala 14,065 6,600 John E. Fuller 19,294 61,403
Edwin L. Russell 145,927 177,974 James P. Hallett 20,457 68,676
All directors and
executive officers
as a group (26): 653,098 741,642
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<FN>
<F1> Includes (i) shares as to which voting and investment power is shared with the person's spouse: Mr. Johnson - 24,252,
Mr. Russell - 127,482, Mr. Sandbulte - 5,170, Mr. Fuller - 2,030, and all directors and officers as a group - 189,543; (ii)
shares owned by the person's spouse: Mr. Cragun - 1,448, Mr. Smith - 50, Mr. Crandell - 3,909 and all directors and officers as
a group - 26,648; (iii) shares held beneficially for the person's children: Mr. Russell - 12,338; and (iv) shares held as
trustee: Mr. Mayer - 400. Each director and executive officer owns only a fraction of 1 percent of any class of Company stock
and all directors and executive officers as a group also own less than 1 percent of any class of Company stock.
<F2> Includes 6,606 options owned by Mr. Crandell's spouse that are exercisable within 60 days after March 9, 2001.
</FN>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than 10
percent of a registered class of the Company's equity securities, to file
reports of initial ownership of the Company's Common Stock and other equity
securities and subsequent changes in that ownership with the Securities and
Exchange Commission and the New York Stock Exchange. Based on a review of such
reports, the Company believes that all such filing requirements were met during
2000 except that one report covering four transactions, all related to the
exercise of Company stock options, was inadvertently filed less than a month
late by the Company on behalf of Ms. Brenda Flayton.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 30, 2000, the Company loaned James Hallett, Executive Vice
President of ALLETE and President and CEO of ADESA Corporation, $1 million with
interest at a rate of 8 percent per annum, so Mr. Hallett could avoid the
distraction of procuring temporary financing and thereby remain focused on
leading ADESA as it was integrating major acquisitions. The loan was repaid,
with interest, on March 16, 2001.
2
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ITEM NO. 1 - ELECTION OF DIRECTORS
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It is intended that the shares represented by the proxy will be voted,
unless authority is withheld, "FOR" the election of the 11 nominees for director
named below. Directors are elected to serve until the next annual election of
directors and until a successor is elected and qualified or until a director's
earlier resignation or removal. In the event that any nominee should become
unavailable, which is not anticipated, the Board of Directors may provide by
resolution for a lesser number of directors or designate substitute nominees,
who would receive the votes represented by the enclosed proxy.
NOMINEES FOR DIRECTOR
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Pictured from left to right: Nick Smith, Bruce W. Stender, Edwin L. Russell,
Kathleen A. Brekken.
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[GROUP PHOTO]
NICK SMITH, 64, Duluth, MN. Member of the Executive Committee and the
Executive Compensation Committee. Chairman and CEO of Northeast Ventures
Corporation, a venture firm investing in northeastern Minnesota. Chairman of
Community Development Venture Capital Alliance, a national association. Director
of North Shore Bank of Commerce. Director and founding Chair of Great Lakes
Aquarium at Lake Superior Center. Of counsel to Fryberger, Buchanan, Smith &
Frederick, P.A. DIRECTOR SINCE 1995
BRUCE W. STENDER, 59, Duluth, MN. Chairman of the Audit Committee and member of
the Executive Committee. President and CEO of Labovitz Enterprises, Inc. which
owns and manages hotel properties. Trustee of the C. K. Blandin Foundation and
member of the Chancellor's Advisory Committee for the University of Minnesota
Duluth. DIRECTOR SINCE 1995
EDWIN L. RUSSELL, 56, Duluth, MN. Chairman, President and CEO of ALLETE.
Director of Tennant Co., Edison Electric Institute, the Great Lakes Aquarium at
Lake Superior Center, and Minnesota Public Radio. DIRECTOR SINCE 1995
KATHLEEN A. BREKKEN, 51, Cannon Falls, MN. Member of the Executive Compensation
Committee. President and CEO of Midwest of Cannon Falls, Inc., a wholesale
distributor of seasonal gift items, exclusive collectibles, and distinctive home
decor, with 15 showrooms in major markets throughout the United States and
Canada. Board of Regents of St. Olaf College in Minnesota. DIRECTOR SINCE 1997
3
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Pictured from left to right: Peter J. Johnson, Arend J. Sandbulte, Merrill K.
Cragun, Dennis E. Evans.
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[GROUP PHOTO]
PETER J. JOHNSON, 64, Tower, MN. Member of the Audit Committee.
Chairman and CEO of Hoover Construction Company, a highway and heavy
construction contractor. Director of Queen City Federal Savings and of Queen
City Bancorp, Inc. DIRECTOR SINCE 1994
AREND J. SANDBULTE, 67, Duluth, MN. Former Chairman, President and CEO of
ALLETE. Member of the Executive Committee. Director of St. Mary Land and
Exploration Company, and the Community Board of Wells Fargo Bank Minnesota, N.A.
in Duluth. Chairman and Director of Iowa State University Foundation. Director
and immediate past Chairman of the Great Lakes Aquarium at Lake Superior Center.
DIRECTOR SINCE 1983
MERRILL K. CRAGUN, 68, Brainerd, MN, a director since 1991, retires from the
Board this year and is not standing for reelection at the May 8, 2001 Annual
Meeting of Shareholders.
DENNIS E. EVANS, 62, Minneapolis, MN. Member of the Executive Committee and the
Executive Compensation Committee. President and CEO of the Hanrow Financial
Group, Ltd., a merchant banking firm. Director of Angeion Corporation. DIRECTOR
SINCE 1986
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Pictured from left to right: Jack I. Rajala, Glenda E. Hood, Donald C.Wegmiller,
George L. Mayer.
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[GROUP PHOTO]
JACK I. RAJALA, 61, Grand Rapids, MN. Member of the Executive
Committee. Chairman and CEO of Rajala Companies and Director and President of
Rajala Mill Company, which manufacture and trade lumber. Director of Grand
Rapids State Bank. Board of Regents of Concordia College in Minnesota. DIRECTOR
SINCE 1985
GLENDA E. HOOD, 51, Orlando, FL. Member of the Audit Committee. Mayor of
Orlando, Florida, since 1992. Chief Executive Officer of Orlando's City
Administration, Chairman of the City Council, and board member of the Orlando
Utilities Commission. Past President of the National League of Cities. DIRECTOR
SINCE 2000
DONALD C. WEGMILLER, 62, Minneapolis, MN. Chairman of the Executive Compensation
Committee. President and CEO of HealthCare Compensation Strategies, a national
executive and physician compensation and benefits consulting firm. Director of
LecTec Corporation, Medical Graphics Corporation, Possis Medical, Inc.,
SelectCare, Inc. and JLJ Medical Devices International, LLC. DIRECTOR SINCE 1992
GEORGE L. MAYER, 56, Essex, CT. Member of the Audit Committee. Founder and
President of Manhattan Realty Group which manages various real estate properties
located predominantly in northeastern United States. A consultant to the board
of directors of Schwaab, Inc., one of the nation's largest manufacturers of
handheld rubber stamps and associated products. DIRECTOR SINCE 1996
4
BOARD AND COMMITTEE MEETINGS IN 2000
During 2000 the Board of Directors held 5 meetings. The Executive
Committee, which held 11 meetings during 2000, provides oversight of corporate
financial matters, performs the functions of a director nominating committee,
and is authorized to exercise the authority of the Board in the intervals
between meetings. Shareholders may recommend nominees for director to the
Executive Committee by addressing the Secretary of the Company, 30 West Superior
Street, Duluth, Minnesota 55802. The Audit Committee, which held 8 meetings in
2000, recommends the selection of independent accountants, reviews and evaluates
the Company's accounting practices, reviews periodic financial reports to be
provided to the public and reviews and recommends approval of the annual audit
report. The Executive Compensation Committee, which held 5 meetings in 2000,
establishes compensation and benefit arrangements for Company officers and other
key executives, intended to be equitable, competitive with the marketplace, and
consistent with corporate objectives. All directors attended 75 percent or more
of the aggregate number of meetings of the Board of Directors and applicable
committee meetings in 2000.
DIRECTOR COMPENSATION
Employee directors receive no additional compensation for their services as
directors. In 2000 the Company paid each non-employee director an annual
retainer fee of $5,000 and 1,300 shares of Common Stock under the terms of the
Company's Director Stock Plan. In addition, each non-employee director was paid
$1,100 for each Board, Committee, and subsidiary board meeting attended, except
that $500 was paid for attendance at a second meeting held the same day as
another meeting. Each non-employee director who is the Chairman of a Committee
received an additional $200 for each Committee meeting attended. A $250 fee was
paid for all conference call meetings. Directors may elect to defer all or a
part of the cash portion of their retainer and meeting fees. The shares of
Common Stock paid to directors with respect to 2000 had an average market price
of $17.24 per share.
Under the Director Long-Term Stock Incentive Plan effective January 1,
1996, non-employee directors receive automatic grants of 1,500 stock options
every year and performance shares valued at $10,000 every other year. The stock
options vest 50 percent after the first year, the remaining 50 percent after the
second year and expire on the tenth anniversary of the date of grant. The
exercise price for each grant is the closing sale price of Company Common Stock
on the date of grant. The performance periods for performance shares end on
December 31 of the year following the date of grant. Dividend equivalents in the
form of additional performance shares accrue during the performance period and
are paid only to the extent the underlying grant is earned. The performance goal
of each performance period is based on Total Shareholder Return for the Company
in comparison to Total Shareholder Return for 16 diversified electric utilities.
Any awards earned are paid out in Common Stock of the Company. No performance
period ended in 2000 and, therefore, no new awards were earned.
PROPOSALS OF SHAREHOLDERS FOR THE 2002 ANNUAL MEETING
All proposals from shareholders to be considered for inclusion in the Proxy
Statement relating to the Annual Meeting scheduled for May 14, 2002 must be
received by the Secretary of the Company at 30 West Superior Street, Duluth,
Minnesota 55802, not later than November 19, 2001. In addition, the persons to
be named as proxies in the proxy cards relating to that Annual Meeting may have
the discretion to vote their proxies in accordance with their judgment on any
matter as to which the Company did not have notice prior to February 5, 2002,
without discussion of such matter in the proxy statement relating to that Annual
Meeting.
5
COMPENSATION OF EXECUTIVE OFFICERS
The following information describes compensation paid in the years 1998
through 2000 for the Company's named executive officers.
SUMMARY COMPENSATION TABLE
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Annual Compensation<F1> Long-Term Compensation
--------------------- ----------------------
Awards Payouts
-------------------------- ---------
Name Restricted Securities All
and Stock Underlying LTIP Other
Principal Salary Bonus Award(s) Options Payouts Comp.<F5>
Position Year ($) ($) ($) (#) ($) ($)
- --------------------------------------------------------------------------------------------------------------------------------
EDWIN L. RUSSELL 2000 512,754 764,834 0 87,466 38,458 303,564
Chairman, President 1999 475,939 744,110 0 94,241 197,396 69,477
and Chief Executive Officer 1998 423,847 580,285 100,000<F3> 40,000 347,318 63,212
JAMES P. HALLETT 2000 288,446 319,899<F2> 0 29,520 213,396<F4> 38,697
Executive Vice President; 1999 271,908 276,210 0 26,004 266,107<F4> 32,963
President and CEO of ADESA 1998 236,178 268,570 0 7,480 28,343 30,660
JOHN E. FULLER 2000 274,551 328,670<F2> 0 28,426 34,653 44,627
Executive Vice President; President 1999 254,923 265,980 0 32,046 78,539 37,672
and CEO of Automotive Finance Corp. 1998 220,231 251,450 0 6,902 28,343 30,723
ROBERT D. EDWARDS 2000 291,193 204,902 0 30,941 30,580 46,307
Executive Vice President; 1999 276,308 234,199 0 27,764 93,192 44,403
President and CEO of Minnesota Power 1998 254,885 223,356 0 8,058 214,942 36,190
DONNIE R. CRANDELL 2000 248,192 247,311 0 26,240 20,898 30,698
Executive Vice President; President, 1999 235,192 149,114 0 23,828 52,187 26,589
ALLETE Properties, Inc. 1998 207,731 134,937 0 6,494 161,444 21,065
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<FN>
<F1> Amounts shown include compensation earned by the named executive officers, as well as amounts earned but deferred
at the election of those officers. The "Bonus" column is comprised of amounts earned pursuant to Results Sharing and the
Executive Annual Incentive Plan.
<F2> Included in this amount is $108,500 representing 5,000 shares of Common Stock granted on January 3, 2000 pursuant to
the Executive Long-Term Incentive Compensation Plan as a retention bonus for completing the year of service.
<F3> The amount shown represents the value of 5,094 shares of restricted Common Stock granted on May 7, 1998 pursuant to
the Executive Long-Term Incentive Compensation Plan. The award vested in full on January 2, 2000.
<F4> Includes a supplemental payment based upon significantly exceeding multi-year financial performance targets established in
1996.
<F5> The amounts shown for 2000 include the following Company contributions for the named executive officers:
Annual Company
Annual Company Annual Company Contribution to the
Contribution to the Contribution to the Supplemental
Flexible Benefit/ Employee Stock Executive
Name 401(k) Plans Ownership Plan Retirement Plan
---------------------- ------------------- ------------------- -------------------
Edwin L. Russell* $9,180 $4,935 $86,659
James P. Hallett 1,700 0 36,997
John E. Fuller 4,080 0 40,547
Robert D. Edwards** 9,180 4,935 27,916
Donnie R. Crandell 9,180 4,935 16,583
----------------------
*The amount shown in the Summary Compensation Table for Mr. Russell in 2000 also includes (i) $137,733
representing the benefit of the interest-free use of the non-term portion of the premium contributed by the
Company on a life insurance policy owned by Mr. Russell under a split dollar arrangement (such benefit was
estimated as the present value of the interest payments which are not required to be made, assuming Mr.
Russell would not repay the premiums advanced until age 71, discounted at a market rate of 7.82%); (ii)
$33,816 representing the "economic value" premium (including tax gross-up) contributed by the Company in
connection with the life insurance policy; and (iii) $31,241 paid as a reimbursement for taxes.
**The amount shown in the Summary Compensation Table for Mr. Edwards in 2000 also includes $4,276 of
above-market interest on compensation deferred under an executive investment plan. The Company made
investments in corporate-owned life insurance which will recover the cost of this above-market benefit if
actuarial factors and other assumptions are realized.
</FN>
6
OPTIONS GRANTS IN LAST FISCAL YEAR
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Grant
Individual Grants Date Value
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Number of % of Total
Securities Options
Underlying Granted to Exercise or Grant Date
Options Employees in Base Price Expiration Present Value
Name Granted (#)<F1> Fiscal Year ($/Sh) Date ($)<F2>
---------------- --------------- ------------ ----------- ---------- -------------
Edwin L. Russell 87,466 8.7 16.25 Jan. 3, 2010 280,001
James P. Hallett 29,520 2.9 16.25 Jan. 3, 2010 94,501
John E. Fuller 28,426 2.8 16.25 Jan. 3, 2010 90,999
Robert D. Edwards 30,941 3.1 16.25 Jan. 3, 2010 99,050
Donnie R. Crandell 26,240 2.6 16.25 Jan. 3, 2010 84,001
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Options vest 50 percent on January 3, 2001 and 50 percent on January 3, 2002. Options granted to the top 7
executives of the Company include a replacement option feature and are subject to a change-in-control
acceleration provision. Replacement options (also known as ownership retention options or reload options) are
intended to encourage share ownership. They typically do not provide stock appreciation opportunity greater than
the original options. In addition, they do not result in an increase in equity position, which is the total
combined number of shares and options held. Replacement options are granted when the executive uses his shares of
Common Stock to fund the exercise price of stock options. One replacement option is granted to replace each share
that is delivered by the executive as payment for the purchase price of shares being acquired through the
exercise of a stock option. Replacement options become exercisable 12 months after their grant date and
terminate on the expiration date of the option that they replace. The exercise price of replacement options is
equal to the closing price of ALLETE's Common Stock on the grant date of the replacement options.
<F2> The grant date dollar value of options is based on ALLETE's binomial ratio (as of January 3, 2000) of .197.
The binomial method is a complicated mathematical formula premised on immediate exercisability and
transferability of the options, which are not features of the Company's options granted to executive officers and
other employees. The values shown are theoretical and do not necessarily reflect the actual values the recipients
may eventually realize. Any actual value to the officer or other employee will depend on the extent to which the
market value of the Company's Common Stock at a future date exceeds the exercise price. In addition to the option
exercise price, and the 10-year term of each option, the following assumptions for modeling were used to
calculate the values shown for the options granted in 2000: expected dividend yield of 5.633 percent (based on
the most recent quarterly dividend), expected stock price volatility of .200 (based on 250 trading days previous
to January 3, 2000), a risk-free rate of return of 6.45 percent (based on Treasury yields).
</FN>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
-------------------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at FY-End (#) Options at FY-End ($)
Shares Acquired Value Realized --------------------- ---------------------
Name on Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
------------------ --------------- -------------- ----------- ------------- ----------- -------------
Edwin L. Russell 0 0 106,296 115,411 402,878 832,745
James P. Hallett 0 0 40,914 42,522 288,529 290,146
John E. Fuller 0 0 34,344 41,272 203,045 280,330
Robert D. Edwards 0 0 45,224 44,823 317,668 304,843
Donnie R. Crandell 0 0 34,526 38,154 229,408 258,933
------------------------------------------------------------------------------------------------------------------------------
7
LONG-TERM INCENTIVE PLANS - AWARDS IN THE LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------------------------------
Number of Performance Estimated Future Payouts Under
Shares, Units or Other Non-Stock Price-Based Plans
or Other Period Until ---------------------------------
Rights Maturation or Threshold Target Maximum
Name (#) Payout (#) (#) (#)
- ------------------ ------------- ------------- --------- ------ -------
Edwin L. Russell 14,769 1/00 - 12/01 7,385 14,769 29,538
James P. Hallett 4,985 1/00 - 12/01 2,493 4,985 9,970
John E. Fuller 4,800 1/00 - 12/01 2,400 4,800 9,600
Robert D. Edwards 5,225 1/00 - 12/01 2,613 5,225 10,450
Donnie R. Crandell 4,431 1/00 - 12/01 2,216 4,431 8,862
- ---------------------------------------------------------------------------------------------------------------------
The table directly above reflects the number of shares of Common Stock that
can be earned pursuant to the Executive Long-Term Incentive Compensation Plan
for the 2000-2001 performance period if the Total Shareholder Return of the
Company (and, for business unit executives, other financial measures established
for business units that correlate to Total Shareholder Return) meets goals
established by the Executive Compensation Committee. These goals are based on
the Company's ranking against a peer group of 16 diversified electric utilities.
Mr. Russell's threshold performance share award will be earned if the Company's
Total Shareholder Return ranks at least within the 3rd quartile, the target
award will be earned if the Company ranks in the 2nd quartile, and the maximum
award will be earned if the Company ranks in the 1st quartile. For this
comparison the Total Shareholder Return ranking will be computed over the 2-year
period January 1, 2000 through December 31, 2001. Twenty-five percent of the
performance share award of the other executives in the table is based on the
foregoing, and the remaining 75 percent is based on 2-year performance periods,
using other financial measures selected by the Executive Compensation Committee
because of their correlation over time with Total Shareholder Return. Dividend
equivalents accrue during the performance period and are paid in shares only to
the extent performance goals are achieved. If earned, 50 percent of the
performance shares will be paid in Common Stock after the end of the performance
period; the remaining 50 percent will be paid in Common Stock on the second
anniversary of the end of the performance period. Payment is accelerated upon a
change in control of the Company at 200 percent of the target number of
performance shares granted as increased by dividend equivalents for the
performance period.
8
RETIREMENT PLANS
The following table sets forth examples of the estimated annual retirement
benefits that would be payable to participants in the Company's Retirement Plan
and Supplemental Executive Retirement Plan after various periods of service,
assuming no changes to the plans and retirement at the normal retirement age of
65:
PENSION PLAN
Years of Service
- --------------------------------------------------------------------------------------------------------------------------
Remuneration* 15 20 25 30 35
- --------------------------------------------------------------------------------------------------------------------------
$100,000 $12,000 $16,000 $31,000 $36,000 $41,000
125,000 15,000 20,000 38,750 45,000 51,250
150,000 18,000 24,000 46,500 54,000 61,500
175,000 21,000 28,000 54,250 63,000 71,750
200,000 24,000 32,000 62,000 72,000 82,000
225,000 27,000 36,000 69,750 81,000 92,250
250,000 30,000 40,000 77,500 90,000 102,500
300,000 36,000 48,000 93,000 108,000 123,000
400,000 48,000 64,000 124,000 144,000 164,000
450,000 54,000 72,000 139,500 162,000 184,500
500,000 60,000 80,000 155,000 180,000 205,000
600,000 72,000 96,000 186,000 216,000 246,000
700,000 84,000 112,000 217,000 252,000 287,000
800,000 96,000 128,000 248,000 288,000 328,000
900,000 108,000 144,000 279,000 324,000 369,000
1,000,000 120,000 160,000 310,000 360,000 410,000
1,100,000 132,000 176,000 341,000 396,000 451,000
1,200,000 144,000 192,000 372,000 432,000 492,000
1,300,000 156,000 208,000 403,000 468,000 533,000
1,400,000 168,000 224,000 434,000 504,000 574,000
1,500,000 180,000 240,000 465,000 540,000 615,000
- --------------------------------------------------------------------------------------------------------------------------
*Represents the highest annualized average compensation (salary and bonus) received for 48 consecutive months
during the employee's last 15 years of service with the Company. For determination of the pension benefit, the
48-month period for highest average salary may be different from the 48-month period of highest aggregate bonus
compensation.
Retirement benefit amounts shown are in the form of a straight-life annuity
to the employee and are based on amounts listed in the Summary Compensation
Table under the headings Salary and Bonus. Retirement benefit amounts shown are
not subject to any deduction for Social Security or other offset amounts. The
Retirement Plan provides that the benefit amount at retirement is subject to
adjustment in future years to reflect cost of living increases to a maximum
adjustment of 3 percent per year. As of December 31, 2000, the executive
officers named in the Summary Compensation Table had the following number of
years of credited service under the plan:
Edwin L. Russell 6 years Robert D. Edwards 24 years
James P. Hallett 6 years Donnie R. Crandell 20 years
John E. Fuller 6 years
With certain exceptions, the Internal Revenue Code of 1986, as amended,
(Code) restricts the aggregate amount of annual pension which may be paid to an
employee under the Retirement Plan to $135,000 for 2000. This amount is subject
to adjustment in future years to reflect cost of living increases. The Company's
Supplemental Executive Retirement Plan provides for supplemental payments by the
Company to eligible executives (including the executive officers named in the
Summary Compensation Table) in amounts sufficient to maintain total retirement
benefits upon retirement at a level which would have been provided by the
Retirement Plan if benefits were not restricted by the Code.
9
REPORT OF BOARD'S EXECUTIVE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Described below are the compensation policies of the Executive Compensation
Committee of the Board of Directors effective for 2000 with respect to the
executive officers of the Company. Composed entirely of independent outside
directors, the Executive Compensation Committee is responsible for recommending
to the Board policies which govern the executive compensation program of the
Company and for administering those policies. Since 1995 the Board has retained
the services of William M. Mercer, Incorporated (Mercer), a benefits and
compensation consulting firm, to assist the Executive Compensation Committee in
connection with the performance of such responsibilities.
The role of the executive compensation program is to help the Company
achieve its corporate goals by motivating performance, rewarding positive
results, and enhancing Total Shareholder Return. Recognizing that the potential
impact an individual employee has on the attainment of corporate goals tends to
increase at higher levels within the Company, the executive compensation program
provides greater variability in compensating individuals based on results
achieved as their levels within the Company rise. In other words, individuals
with the greatest potential impact on achieving the stated goals have the
greatest amount to gain when goals are achieved and the greatest amount at risk
when goals are not achieved.
The program recognizes that, in order to attract and retain exceptional
executive talent needed to lead and grow the Company's businesses, compensation
must be competitive in the national market. To determine market levels of
compensation for executive officers in 2000, the Executive Compensation
Committee relied upon comparative information for general industrial companies
provided or reviewed by Mercer. The Committee determined that, because of the
Company's diversified operations, general industry data is the most appropriate
market benchmark for the executive officers. All data were analyzed to determine
median compensation levels for comparable positions in comparably sized
companies, as measured by revenue. While the companies represented in the Mercer
survey data are not the same as those in the peer group used in the performance
graph, the Committee believes that these companies are appropriate for market
compensation comparison, primarily because they are approximately the same size
as the Company as measured by revenue.
Code Section 162(m) generally disallows a tax deduction to public companies
for compensation over $1 million paid for any fiscal year to each of the
corporation's CEO and 4 other most highly compensated executive officers as of
the end of any fiscal year. Qualifying performance-based compensation will not
be subject to the deduction limit if certain requirements are met. The stock
options and performance shares granted to the executive officers under the
Executive Long-Term Incentive Compensation Plan are intended to qualify as
performance-based compensation within the meaning of Code Section 162(m) and
should therefore be fully deductible for federal income tax purposes.
As described below, executive officers of the Company receive a
compensation package which consists of three basic elements: base salary,
performance-based compensation, and supplemental executive benefits. The CEO's
compensation is discussed separately.
BASE SALARY
Base salaries are set at a level so that, if the target level of
performance is achieved under the performance-based plans as described below,
executive officers' total compensation, including amounts paid under each of the
performance-based compensation plans, will be near the midpoint of market
compensation as described above.
PERFORMANCE-BASED COMPENSATION
The performance-based compensation plans of the Company are intended by the
Executive Compensation Committee to reward executives for achieving financial
and non-financial goals which the Committee determines will be required to
achieve the Company's strategic and budgeted goals.
Performance goals under performance-based plans are established in advance
by the Executive Compensation Committee and the Board of Directors. A target
level of performance under the performance-based
10
plans generally meets budget or represents a Total Shareholder Return ranking in
the top half of the peer group described below. Total Shareholder Return is
defined as stock price appreciation plus dividends reinvested on the ex-dividend
date throughout the relevant performance period, divided by the fair market
value of a share at the beginning of the performance period. With target
performance, plus the value of stock options granted, executive compensation
will be near the midpoint of the relevant market. If no performance awards are
earned, and no value is attributed to the stock options granted, compensation of
the Company's executive officers would be significantly below the midpoint
market compensation level, while performance at increments above the target
level will result in total compensation above the midpoint of the market.
The Company's performance-based compensation plans include:
- RESULTS SHARING. The Results Sharing award opportunity rewards annual
performance of the executive's responsibility area as well as overall
corporate performance. Awards are available to all employees in the
electric, water and corporate groups on the same percentage-of-pay
basis. Target financial performance will result in an award of 5
percent of base salary, assuming non-financial goals established by the
Executive Compensation Committee are also accomplished.
- EXECUTIVE ANNUAL INCENTIVE PLAN. The Executive Annual Incentive Plan is
intended to focus executive attention on meeting and exceeding annual
financial and non-financial business unit goals established by the
Executive Compensation Committee. For 2000, financial goals were
business unit contributions to net income, operating cash returns on
investment, operating free cash flow, and earnings per share. These
financial performance measures were chosen by the Committee because of
their positive correlation over time with the Total Shareholder Return
achieved by the Company for its shareholders. Target level performance
is earned if budgeted financial results are achieved. The results shown
on the Summary Compensation Table reflect substantially above-budget
financial operating performance of the Company in 2000.
- LONG-TERM INCENTIVE PLAN (LTIP). Under the Executive Long-Term
Incentive Compensation Plan implemented in 1996, the executive
officers, other than the CEO, of the Company have been awarded stock
options annually and performance shares biennially having in the
aggregate target award values ranging from 25 percent to 50 percent of
their base salaries. The value of the award opportunity is allocated
between stock options and performance shares. The stock options will
have value only if the Common Stock price appreciates. The performance
shares granted to the corporate group have value if, in 2 years from
the grant date, the Total Shareholder Return of the Company, over a
2-year performance measurement period determined in advance by the
Board of Directors, ranks at least in the 3rd quartile of a peer group
of 16 diversified electric utilities adopted by the Executive
Compensation Committee as appropriate comparators. Twenty-five percent
of the performance share award to business unit executives is based on
the foregoing ranking, and 75 percent is based on other financial
measures selected by the Committee because of their correlation over
time with Total Shareholder Return. Dividend equivalents accrue on
performance shares during the performance period and are paid in Common
Stock only to the extent performance goals are achieved. The maximum
payout is 200 percent of the target award. If earned, the performance
shares will be paid in Common Stock with 50 percent of the award paid
after the end of the performance period, and the remaining 50 percent
on the second anniversary thereof. The LTIP payout for 2000 shown in
the Summary Compensation Table includes a payout of 25 percent of the
award earned for the performance period ending December 31, 1999, 50
percent of which was reported for 1999.
The Executive Compensation Committee has determined that these awards
are consistent with its philosophy of aligning executive officers' interests
with those of shareholders and to the performance of the Company.
11
SUPPLEMENTAL EXECUTIVE BENEFITS
The Company has established a Supplemental Executive Retirement Plan (SERP)
to compensate certain employees, including the executive officers, equitably by
replacing benefits not provided by the Company's Flexible Benefit Plan and the
Employee Stock Ownership Plan due to government-imposed limits and to provide
retirement benefits which are competitive with those offered by other businesses
with which the Company competes for executive talent. The SERP also provides
employees whose salaries exceed the salary limitations for tax-qualified plans
imposed by the Code with additional benefits such that they receive in aggregate
the benefits they would have been entitled to receive had such limitations not
been imposed.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Executive Compensation Committee has endeavored to provide Mr. Russell
with a compensation package that is at the 50th percentile of compensation paid
by general industrial companies with revenue comparable to the Company. The
Committee has designed Mr. Russell's compensation package to provide substantial
incentive to achieve and exceed the Board's financial performance goals for the
Company and Total Shareholder Return goals for the Company's shareholders.
In June 2000, the Board of Directors increased Mr. Russell's annual base
salary 7.7 percent. Approximately half of this increase was to align his base
salary with the median of comparably sized companies and the other half related
to his contributions to the performance of the Company. Under the Company's
Results Sharing Plan, Mr. Russell was awarded $38,559, or 7.3 percent of his
base salary, based 50 percent on earnings performance and 50 percent on an
average of business unit Results Sharing awards. Under the Executive Annual
Incentive Plan in 2000, Mr. Russell earned an award of $725,040, or 137 percent
of his base salary, which rewarded Mr. Russell for achieving 2000 earnings
results significantly above target, as well as for achievement of non-financial
goals, all established by the Executive Compensation Committee.
Mr. Russell's compensation also contains elements which motivate him to
focus on the longer-term performance of the Company. Under the Executive
Long-Term Incentive Compensation Plan, Mr. Russell was awarded annual target
opportunities with a value equal to 80 percent of his base salary. This value
has been allocated 70 percent to stock options awarded annually and 30 percent
to performance shares awarded in even-numbered years. The stock options and
performance shares have the same characteristics as those issued to other
executive officers as described above. The LTIP payout for 2000 shown in the
Summary Compensation Table includes a payout of 25 percent of the award earned
for the performance period ending December 31, 1999, 50 percent of which was
reported for 1999.
In fiscal 2000, the Company provided Mr. Russell a split dollar life
insurance arrangement insuring his life. This insurance program is structured so
that all the premium contributions are returned to the Company at Mr. Russell's
attaining age 71 or at death if earlier. The arrangement covers an 8-year period
beginning January 1, 2000 and provides that if Mr. Russell leaves prior to the
end of such period, Company funding of this program will be reduced accordingly.
This arrangement is provided as an incentive for Mr. Russell's continued
employment and is in lieu of other retention considerations investigated by the
Executive Compensation Committee.
March 16, 2001
Executive Compensation Committee
Donald C. Wegmiller, Chairman Dennis E. Evans
Kathleen A. Brekken Nick Smith
12
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors, consisting of 4 independent,
non-employee directors, assists the Board in carrying out its oversight
responsibilities for the Company's financial reporting process, audit process
and internal controls. The responsibilities of the Audit Committee are set forth
in the Audit Committee Charter which is reproduced in the appendix of this Proxy
Statement. The Audit Committee reviews and recommends to the Board of Directors
(i) that the audited financial statements be included in the Company's Annual
Report on Form 10-K; and (ii) the selection of the independent public
accountants to audit the books and records of the Company.
The Audit Committee (i) reviewed and discussed the Company's audited
financial statements for the year ending December 31, 2000 with the Company's
management and with the Company's independent accountants; (ii) met with
management to discuss all financial statements prior to their issuance and to
discuss significant accounting issues; (iii) discussed with the Company's
independent accountants the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards) which includes, among other
items, matters related to the conduct of the audit of the Company's financial
statements; and (iv) received and discussed the written disclosures and the
letter from the Company's independent accountants required by Independence
Standards Board Statement No. 1 (Independence discussions with audit committees)
which relates to the accountants' independence from the Company. Based on the
review and discussions with management and the independent accountants, the
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ending December 31, 2000 for filing with the SEC.
Management has advised the Audit Committee that for the year ended December
31, 2000, the Company paid fees to PricewaterhouseCoopers LLP for services in
the following categories:
Audit Fees $1.4 million
All Other Fees $1.5 million
All Other Fees in the foregoing table include $1.1 million for tax advice
and tax return assistance. We have considered and determined that the provision
of the non-audit services noted in the foregoing table is compatible with
maintaining PricewaterhouseCoopers' independence.
Audit Committee
Bruce W. Stender, Chair Glenda E. Hood
Peter J. Johnson George L. Mayer
13
ALLETE COMMON STOCK PERFORMANCE
The following graph compares the Company's cumulative Total Shareholder
Return on its Common Stock with the cumulative return of the S&P 500 Index and
the S&P Utilities Index, a capitalization-weighted index of 26 stocks, which is
designed to measure the performance of the electric power utility company sector
of the S&P 500 Index. The S&P 500 Index is a capitalization-weighted index of
500 stocks designed to measure performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks representing all major
industries. Because this composite index has a broad industry base, its
performance may not closely track that of a composite index comprised solely of
electric utilities. The calculations assume a $100 investment on December 31,
1995 and reinvestment of dividends on the ex-dividend date.
[GRAPHIC MATERIAL OMITTED-PERFORMANCE GRAPH]
TOTAL SHAREHOLDER RETURN FOR THE FIVE YEARS ENDING DECEMBER 31, 2000
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
ALLETE 100.00 104.36 176.12 186.90 152.17 235.61
S&P Utilities Index (Electric) 100.00 99.69 125.85 145.32 117.27 179.94
S&P 500 Index 100.00 122.94 163.94 210.79 255.15 231.93
- --------------------------------------------------------------------------------
ITEM NO. 2 - APPOINTMENT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
The Audit Committee of the Board of Directors of the Company has
recommended the appointment of PricewaterhouseCoopers LLP as independent
accountants for the Company for the year 2001. PricewaterhouseCoopers LLP has
acted in this capacity since October 1963.
A representative of the accounting firm will be present at the Annual
Meeting of Shareholders, will have an opportunity to make a statement if he or
she so desires, and will be available to respond to appropriate questions.
In connection with the 2000 audit, PricewaterhouseCoopers LLP reviewed the
Company's annual report, examined the related financial statements, and reviewed
interim financial statements and certain of the Company's filings with the
Federal Energy Regulatory Commission and the Securities and Exchange Commission.
The Board of Directors recommends a vote "FOR" approving the appointment of
PricewaterhouseCoopers LLP as the Company's independent accountants for 2001.
14
- --------------------------------------------------------------------------------
ITEM NO. 3 - AMEND THE ARTICLES OF INCORPORATION TO CHANGE COMPANY'S LEGAL
NAME FROM MINNESOTA POWER, INC. TO ALLETE, INC.
- --------------------------------------------------------------------------------
The Board of Directors proposes that the Company's Articles of
Incorporation be amended to change the Company's legal name from Minnesota
Power, Inc. to ALLETE, Inc. On September 1, 2000, the Company began doing
business under the name ALLETE and began trading under the symbol ALE on the New
York Stock Exchange. The new name reflects the Company's evolution from a
Minnesota electric utility to a diversified, multi-services business with
operations across North America. We are clearly more than Minnesota and more
than power. The Company's electric utility business unit continues to operate
under the name Minnesota Power.
The Board of Directors recommends a vote "FOR" the proposed amendment.
- --------------------------------------------------------------------------------
OTHER BUSINESS
- --------------------------------------------------------------------------------
The Board of Directors does not know of any other business to be presented
at the meeting. However, if any other matters properly come before the meeting,
it is the intention of the persons named in the accompanying proxy card to vote
pursuant to the proxies in accordance with their judgment in such matters.
All shareholders are asked to promptly return their proxy in order that the
necessary vote may be present at the meeting. We respectfully request that you
sign and return the accompanying proxy card at your earliest convenience.
By order of the Board of Directors,
Dated March 16, 2001
Philip R. Halverson
Philip R. Halverson
Vice President, General Counsel and Secretary
15
APPENDIX
ALLETE
CHARTER - AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
(Effective January 17, 2000)
PURPOSE
- -------
The Audit Committee's primary function is to assist the Board in fulfilling its
oversight responsibilities by reviewing the financial information which will be
provided to the shareholders and others, the system of internal controls which
management and the Board of Directors have established, and the audit process.
ORGANIZATION
- ------------
The Audit Committee shall be composed of at least 3 Directors who are
independent of the management of the Company and are free of any relationships
with the Company that, in the opinion of the Board of Directors, would interfere
with their exercise of independent judgment as a Committee member. At least 1
member of the Committee shall have accounting or related financial management
expertise.
PRIMARY RESPONSIBILITIES
- ------------------------
As delegated by the Board of Directors:
1. Review the form and content of the annual consolidated financial
statements and determine whether management and the independent
accountants are in agreement that the proposed audited financial
statements, including all necessary disclosures, were prepared in
accordance with generally accepted accounting principles, consistently
applied. Review filings with the SEC and other published documents
containing the Company's consolidated financial statements and consider
whether the information contained in these documents is consistent with
the information contained in the financial statements. Review the
quality of financial reporting with the independent accountants; for
example, clarity of financial disclosures and degree of aggressiveness
or conservatism in the Company's accounting principles.
2. Review quarterly and other financial reports and disclosures before
they are filed with the SEC.
3. Review with management, the independent accountants, and the Director
of Internal Audit the adequacy of the Company's internal controls, any
significant changes in accounting policies, procedures or practices,
and compliance with Corporate policies, directives and applicable laws.
4. Assess the qualifications, independence, and performance of the
Company's independent accountants. Review formal written statement from
the outside auditors delineating all relationships between the auditor
and the Company; actively discuss and resolve any disclosed
relationships or services that may impact the objectivity and
independence of the auditor. Recommend annually to the Board of
Directors the independent accounting firm to be nominated.
5. Review and concur with management in the appointment, replacement,
reassignment or dismissal of the Director of Internal Audit.
16
6. Review the independent accountants' scope and results of their annual
and special audits. Recommend the acceptance of such audits where
accompanied by certification.
7. Review with the Director of Internal Audit the annual audit plan and
scope of internal audits.
8. Review the action taken by management on the internal auditors' and
independent accountants' recommendations.
9. Provide sufficient opportunity for the internal and independent
auditors to meet with the members of the Audit Committee without
members of management present.
10. Prepare a report for inclusion in the annual proxy statement that
specifies the Directors who sit on the Committee, describes the
Committee's responsibilities as outlined in this Charter, and discusses
how these responsibilities were discharged during the year.
17
"Printed with soy based inks on recycled paper containing at least 10
percent fibers from paper recycled by consumers."
[RECYCLE LOGO] [LOGO PRINTED WITH SOY INK]
[ALLETE LOGO]
[ALLETE LOGO] PROXY CARD AND VOTING INSTRUCTIONS
ALLETE, 30 West Superior Street, Duluth, Minnesota 55802-2093
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Edwin L. Russell and Philip R. Halverson or either of them, with power of
substitution, are hereby appointed Proxies of the undersigned to vote all shares
of ALLETE stock owned by the undersigned at the Annual Meeting of Shareholders
to be held in the auditorium at the Duluth Entertainment Convention Center, 350
Harbor Drive, Duluth, Minnesota, at 10:00 a.m. on Tuesday, May 8, 2001, or any
adjournments thereof, with respect to the election of Directors, the appointment
of independent accountants, changing the Company's legal name to ALLETE, Inc.,
and any other matters as may properly come before the meeting.
THIS PROXY CONFERS AUTHORITY TO VOTE EACH PROPOSAL LISTED ON THE OTHER SIDE
UNLESS OTHERWISE INDICATED. If any other business is transacted at said meeting,
this Proxy shall be voted in accordance with the best judgment of the Proxies.
The Board of Directors recommends a vote "FOR" each of the listed proposals.
This Proxy is solicited on behalf of the Board of Directors of ALLETE and may be
revoked prior to its exercise. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD USING THE ENCLOSED ENVELOPE. Shares cannot be voted unless this Proxy card
is signed and returned, or other specific arrangements are made to have the
shares represented at the meeting. By returning your Proxy promptly, you may
help save the costs of additional Proxy solicitations.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
THERE ARE THREE WAYS TO VOTE YOUR PROXY COMPANY #
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO CONTROL #
VOTE YOUR SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND
RETURNED YOUR PROXY CARD.
VOTE BY PHONE - TOLL FREE - 1-800-240-6326 - QUICK --- EASY --- IMMEDIATE
- - Use any touch-tone telephone to vote your Proxy 24 hours a day, 7 days a week,
until 12:00 p.m. (ET) on May 7, 2001.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
- - Follow the simple instructions the Voice provides you.
VOTE BY INTERNET - http://www.eproxy.com/ale/ - QUICK --- EASY --- IMMEDIATE
- - Use the Internet to vote your Proxy 24 hours a day, 7 days a week, until 12:00
p.m. (CT) on May 7, 2001.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your Proxy card and return it in the postage-paid envelope
we've provided or return it to ALLETE.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, AND 3.
1. Election of Directors 01 Brekken 04 Evans 07 Hood 10 Johnson
02 Mayer 05 Rajala 08 Russell 11 Sandbulte
03 Smith 06 Stender 09 Wegmiller
/ / Vote FOR all nominees / / Vote WITHHELD from all nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY ----------------------
INDICATED NOMINEE, WRITE THE NUMBER(S) OF THE NOMINEE(S)
IN THE BOX PROVIDED TO THE RIGHT.) ----------------------
- PLEASE FOLD HERE -
2. Appointment of PricewaterhouseCoopers LLP as independent accountants.
/ / For / / Against / / Abstain
3. Change the Company's legal name to ALLETE, Inc.
/ / For / / Against / / Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
---
Address Change? Mark Box / / Date
Indicate changes below -----------------------
-----------------------------------
-----------------------------------
Signature(s) in Box
Please sign exactly as your name(s)
appear on Proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc.,
should include title and authority.
Corporations should provide full
name of corporation and title of
authorized officer signing the
Proxy.
YOU'RE INVITED!
ALLETE'S 2001 ANNUAL MEETING [PHOTO OMITTED: Photograph shows
OF SHAREHOLDERS the new ALLETE sign being mounted
- ------------------------------------- on ALLETE's corporate office.]
10:00 A.M. TUESDAY, MAY 8, 2001
AT THE DULUTH ENTERTAINMENT CONVENTION CENTER (DECC)
DULUTH, MINNESOTA
Dear Shareholder:
I'm pleased to invite you to ALLETE's Annual Meeting of Shareholders on Tuesday,
May 8 beginning at 10 a.m. at the Duluth Entertainment Convention Center. Lunch
will be served in the DECC's Lake Superior Ballroom after the meeting.
Highlighting our informative agenda this year will be:
- A discussion on the impact of our new corporate identity.
- A look at how our four business segments successfully deal with change.
- Reports on the significant progress we achieved in 2000.
Please join us on May 8. We look forward to seeing you.
Sincerely,
Edwin L. Russell
Chief Executive Officer [ALLETE LOGO]
- --------------------------------------------------------------------------------
REGISTRATION
Registration begins at 9 a.m. inside the entrance to the DECC. Parking is free,
so be sure to tell the gate attendant you're a shareholder.
When you register, you'll receive a ticket to lunch and a ticket for a chance to
win 10 shares of ALLETE stock.
ANNUAL MEETING
The meeting begins promptly at 10 a.m. in the DECC Auditorium. Before the
meeting, between 9 and 10 a.m. in the Auditorium, we will be showing several
informative videos about corporate business initiatives within ALLETE.
LUNCH
A box lunch will be served following the meeting in the Lake Superior Ballroom
located within the DECC.
RESERVATION INSTRUCTIONS
PLEASE COMPLETE THE CARD BELOW, DETACH AND MAIL. IF YOU HAVE QUESTIONS, CALL
SHAREDHOLDER SERVICES TOLL-FREE AT 1-800-535-3056, OR 218-723-3974.
IF YOUR PLANS CHANGE AFTER YOU'VE SENT THE RESERVATION CARD AND YOU CAN'T
ATTEND, PLEASE LET US KNOW BY CALLING SHAREHOLDER SERVICES.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RESERVATION CARD-COMPLETE AND MAIL THIS POSTAGE-PAID CARD AS SOON AS POSSIBLE.
PLEASE DO NOT ENCLOSE WITH YOUR PROXY
- --------------------------------------------------------------------------------
Yes, I will attend the Annual Meeting and the lunch.
- ---
Each shareholder may bring ONE guest. Please PRINT clearly your name and your
guest's name.
SHAREHOLDER'S NAME:
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Guest's name:
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SHAREHOLDER'S NAME:
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Guest's name:
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NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
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below indicia]
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BUSINESS REPLY MAIL
FIRST CLASS Permit No. 74 Duluth, MN
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POSTAGE WILL BE PAID BY ADDRESSEE
ALLETE
ATTN: VAL HANSEN
30 WEST SUPERIOR STREET
DULUTH, MINNESOTA 55802-9986
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April __, 2001
Dear Shareholder:
We have not yet received your vote on issues to come before the Annual
Meeting of ALLETE shareholders on May 8, 2001. Proxy materials were sent to you
on March 16, 2001. Please take time to vote the enclosed copy of your proxy
using one of the three options available to you:
1. MAIL - Complete the enclosed duplicate proxy card and return it in
the self-addressed stamped envelope;
2. TELEPHONE - Call the 800 number listed on the proxy card and follow
the instructions; or
3. INTERNET - Log onto the web site listed on the proxy card and follow
the instructions.
We again extend to you a cordial invitation to attend ALLETE's
Annual Meeting of Shareholders to be held in the auditorium of the Duluth
Entertainment Convention Center, 350 Harbor Drive, Duluth, Minnesota on Tuesday,
May 8, 2001 at 10:00 a.m.
Your prompt response will be appreciated.
Sincerely,
Philip R. Halverson
Enclosures