The
construction, startup and operation of power generation facilities may involve
unanticipated changes or delays that could negatively impact our business
and
results of operations.
The
construction, startup and operation of power generation facilities involves
many
risks, including delays; breakdown or failure of equipment; competition;
inability to obtain required governmental permits and approvals; inability
to
negotiate acceptable acquisition, construction, fuel supply, off-take,
transmission or other material agreements; changes in market price for power;
cost increases; as well as the risk of performance below expected levels
of
output or efficiency. Such unanticipated events could negatively
impact our business and results of operations.
Economic
volatility affects our operations, as well as the demand for our products
and
services and, as a result, may have a negative impact on our future
revenues.
The
global demand for natural resources, interest rates, governmental budget
constraints and the ongoing threat of terrorism can create volatility in
the
financial markets. A soft economy could negatively affect the level
of public and private expenditures on projects and the timing of these projects
which, in turn, would negatively affect the demand for our products and
services.
We
rely on financing sources and capital markets. If we are unable to
obtain economic financing in the future, our ability to execute our business
plans, make capital expenditures or pursue acquisitions that we may otherwise
rely on for future growth could be impaired.
We
rely
on access to both short-term borrowings, including the issuance of commercial
paper, and long-term capital markets as sources of liquidity for capital
requirements not satisfied by our cash flow from operations. If we
are not able to access capital at competitive rates, the ability to implement
our business plans may be adversely affected. Market disruptions or a
downgrade of our credit ratings may increase the cost of borrowing or adversely
affect our ability to access one or more financing markets. Such
disruptions could include:
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A
severe prolonged economic downturn
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The
bankruptcy of unrelated industry leaders in the same line of
business
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A
deterioration in capital market
conditions
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Volatility
in commodity prices
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Environmental
and Regulatory Risks
Some
of our operations are subject to extensive environmental laws and regulations
that may increase costs of operations, impact or limit business plans, or
expose
us to environmental liabilities.
We
are
subject to extensive environmental laws and regulations affecting many aspects
of our present and future operations including air quality, water quality,
waste
management and other environmental considerations. These laws and
regulations can result in increased capital, operating and other costs, and
delays as a result of ongoing litigation and administrative proceedings and
compliance, remediation, containment and monitoring obligations, particularly
with regard to laws relating to power plant emissions and coalbed natural
gas
development. These laws and regulations generally require us to
obtain and comply with a wide variety of environmental licenses, permits,
inspections and other approvals. Public officials and entities, as
well as private individuals and organizations, may seek injunctive relief
or
other remedies to enforce applicable environmental laws and
regulations. We cannot predict the outcome (financial or operational)
of any related litigation or administrative proceedings that may
arise. Existing environmental regulations may be revised and new
regulations seeking to protect the environment may be adopted or become
applicable to us. Revised or additional regulations, which
result
in
increased compliance costs or additional operating restrictions, particularly
if
those costs are not fully recoverable from customers, could have a material
effect on our results of operations.
One
of our subsidiaries is subject to ongoing litigation and administrative
proceedings in connection with its coalbed natural gas development
activities. These proceedings have caused delays in coalbed natural
gas drilling activity, and the ultimate outcome of the actions could have
a
material negative effect on existing coalbed natural gas operations and/or
the
future development of its coalbed natural gas properties.
Fidelity
Exploration & Production Company has been named as a defendant in, and/or
certain of its operations are or have been the subject of, more than a dozen
lawsuits filed in connection with its coalbed natural gas development in
the
Powder River Basin in Montana and Wyoming. If the plaintiffs are
successful in these lawsuits, the ultimate outcome of the actions could have
a
material negative effect on Fidelity’s existing coalbed natural gas operations
and/or the future development of its coalbed natural gas
properties.
The
Montana Board of Environmental Review in March 2006 issued a decision in
a
rulemaking proceeding, initiated by the Northern Plains Resource Council,
that
amends the non-degradation policy applicable to water discharged in connection
with coalbed natural gas operations. The amended policy includes
additional limitations on factors deemed harmful, thereby restricting water
discharges even further than under previous standards. Due in part to
this amended policy, in May 2006, the Northern Cheyenne Tribe commenced
litigation in Montana state court challenging two five-year water discharge
permits that the Montana State Department of Environmental Quality granted
to
Fidelity in February 2006 and which are critical to Fidelity’s ability to manage
water produced under present and future coalbed natural gas
operations. If these permits are set aside, Fidelity’s coalbed
natural gas operations in Montana could be significantly and adversely
affected.
We
are subject to extensive government regulations that may delay and/or have
a
negative impact on our business and results of operations.
We
are
subject to regulation by federal, state and local regulatory agencies with
respect to, among other things, allowed rates of return, financings, industry
rate structures, and recovery of purchased power and purchased gas
costs. These governmental regulations significantly influence our
operating environment and may affect our ability to recover costs from our
customers. We are unable to predict the impact on operating results
from the future regulatory activities of any of these agencies.
Changes
in regulations or the imposition of additional regulations could have an
adverse
impact on our results of operations.
Risks
Relating to Foreign Operations
The
value of our investments in foreign operations may diminish because of
political, regulatory and economic conditions and changes in currency exchange
rates in countries where we do business.
We
are
subject to political, regulatory and economic conditions and changes in currency
exchange rates in foreign countries where we do business. Significant
changes in the political, regulatory or economic environment in these countries
could negatively affect the value of our investments located in these
countries. Also, since we are unable to predict the fluctuations in
the foreign currency exchange rates, these fluctuations may have an adverse
impact on our results of operations.
Other
Risks
Our
pending acquisition of Cascade Natural Gas Corporation may be delayed or
may not
occur if certain conditions are not satisfied. Upon completion of the
acquisition, if we are unable to integrate the Cascade operations effectively,
our future financial position or results of operations may be adversely
affected.
We
have
entered into a definitive merger agreement to acquire Cascade Natural Gas
Corporation. The total value of the transaction, including certain
outstanding Cascade indebtedness, is approximately $475
million. The completion of the acquisition is subject to the
satisfaction of various customary closing conditions. Our pending
acquisition of Cascade may be delayed or may not occur if we are unable to
satisfy closing conditions or obtain financing. If we are unable to
integrate the Cascade operations effectively, our future financial position
or
results of operations may be adversely affected.
The
pending sale of our domestic independent power production assets may be delayed
or may not occur if certain conditions are not satisfied.
The
completion of the pending sale is subject to the fulfillment of regulatory
approvals and closing conditions. The inability to complete the sale
in a timely manner could affect our options for funding the Cascade acquisition,
and could result in our having to incur additional indebtedness and financing
costs.
One
of our subsidiaries is engaged in litigation with a nonaffiliated natural
gas
producer that has been conducting drilling and production operations that
the
subsidiary believes is causing diversion and loss of quantities of storage
gas
from one of its storage reservoirs. If the subsidiary is not able to
obtain relief through the courts or the regulatory process, its storage
operations could be materially and adversely affected.
Williston
Basin Interstate Pipeline Company has filed suit in Federal court in Montana
seeking to recover unspecified damages from Anadarko Petroleum Corporation
and
its wholly owned subsidiary, Howell Petroleum Corporation, and to enjoin
Anadarko and Howell’s present and future production operations in and near
Williston Basin’s Elk Basin Storage Reservoir located in Wyoming and
Montana. Based on relevant information, including reservoir and well
pressure data, Williston Basin believes that Elk Basin Storage Reservoir
pressures have decreased and that the storage reservoir has lost gas and
continues to lose gas as a result of Anadarko and Howell’s drilling and
production activities. In related litigation, Howell filed suit in
Wyoming state district court against Williston Basin asserting that it is
entitled to produce any gas that might escape from Williston Basin’s storage
reservoir. Williston Basin has answered Howell’s complaint and has
asserted counterclaims. Williston Basin has sought preliminary
injunctive relief seeking to enjoin the subject Anadarko and Howell wells
from
taking Williston Basin’s storage gas. If Williston Basin is unable to
obtain timely relief through the courts or regulatory process, its present
and
future gas storage operations, including its ability to meet its contractual
storage and transportation obligations to customers, could be materially
and
adversely affected.
Weather
conditions can adversely affect our operations and
revenues.
Our
results of operations can be affected by changes in the
weather. Weather conditions directly influence the demand for
electricity and natural gas, affect the wind-powered operation at the
independent power production business, affect the price of energy commodities,
affect the ability to perform services at the construction services and
construction materials and mining businesses and affect ongoing operation
and
maintenance and construction and drilling activities for the pipeline and
energy
services and natural gas and oil production businesses. In addition,
severe weather can be destructive, causing outages, reduced natural gas and
oil
production, and/or property damage, which could require additional costs
to be
incurred. As a result, adverse weather conditions could negatively
affect our results of operations and financial condition.
Competition
is increasing in all of our businesses.
All
of
our businesses are subject to increased competition. Construction
services’ competition is based primarily on price and reputation for quality,
safety and reliability. The construction materials products are
marketed under highly competitive conditions and are subject to such competitive
forces as price, service, delivery time and proximity to the
customer. The electric utility and natural gas industries also are
experiencing increased competitive pressures as a result of consumer demands,
technological advances, increased natural gas prices and other
factors. Pipeline and energy services competes with several pipelines
for access to natural gas supplies and gathering, transportation and storage
business. The natural gas and oil production business is subject to
competition in the acquisition and development of natural gas and oil
properties. The independent power production industry
has
many
competitors in the operation, acquisition and development of power generation
facilities. The increase in competition could negatively affect our
results of operations and financial condition.
Other
factors that could impact our businesses.
The
following are other factors that should be considered for a better understanding
of our financial condition. These other factors may impact our
financial results in future periods.
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Acquisition,
disposal and impairments of assets or
facilities
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Changes
in operation, performance and construction of plant facilities
or other
assets
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Changes
in present or prospective
generation
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The
availability of economic expansion or development
opportunities
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Population
growth rates and demographic
patterns
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Market
demand for, and/or available supplies of, energy- and construction-related
products and services
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Cyclical
nature of large construction projects at certain
operations
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Changes
in tax rates or policies
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Unanticipated
project delays or changes in project costs (including related energy
costs)
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Unanticipated
changes in operating expenses or capital
expenditures
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Labor
negotiations or disputes
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Inability
of the various contract counterparties to meet their contractual
obligations
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Changes
in accounting principles and/or the application of such principles
to
us
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Changes
in legal or regulatory proceedings
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The
ability to effectively integrate the operations and the internal
controls
of acquired companies
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The
ability to attract and retain skilled labor and key
personnel
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Increases
in employee and retiree benefit
costs
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WHERE
YOU
CAN FIND MORE INFORMATION ABOUT
US
We
file
annual, quarterly and other reports and other information with the Securities
and Exchange Commission. You can read and copy any information filed
by us with the Securities and Exchange Commission at the Securities and Exchange
Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549. You can obtain additional information about the Public
Reference Room by calling the Securities and Exchange Commission at
1-800-SEC-0330.
In
addition, the Securities and Exchange Commission maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the Securities and Exchange Commission, including MDU
Resources. We also make our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to
those
reports available, free of charge, through our website at www.mdu.com as
soon as reasonably practicable after such material is electronically filed
with,
or furnished to, the SEC. Information contained on our website does
not constitute part of this prospectus supplement or the accompanying
prospectus.
The
Securities and Exchange Commission allows us to “incorporate by reference” the
information that we file with the Securities and Exchange Commission, which
means that we may disclose important information to you by referring you
to
those documents in this prospectus supplement and the accompanying
prospectus. The information incorporated by reference is an important
part of this prospectus supplement and the accompanying prospectus. We are
incorporating by reference the documents listed below and any future filings
we
make with the Securities and Exchange Commission under Section 13(a), 13(c),
14
or 15(d) of the Securities Exchange Act of 1934 until we terminate this
offering. Any of those future filings will update, supersede and
replace the information contained in any documents incorporated by reference
in
this prospectus supplement and the accompanying prospectus at the time of
the
future filings.
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1.
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MDU
Resources’ Annual Report on Form 10-K for the year ended December 31, 2006
(including portions of the Annual Report to Stockholders), filed
February
21, 2007 (SEC File No. 1-3480);
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2.
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MDU
Resources’ Amendment No. 1 to Annual Report on Form 10-K/A for the year
ended December 31, 2006 (including portions of the Annual Report
to
Stockholders), filed March 1, 2007 (SEC File No.
1-3480);
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3.
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MDU
Resources’ Quarterly Report on Form 10-Q for the quarter ended March 31,
2007, filed May 8, 2007 (SEC File No.
1-3480);
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4.
|
MDU
Resources’ Current Report on Form 8-K, filed January 30, 2007 (SEC File
No. 1-3480);
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5.
|
MDU
Resources’ Current Report on Form 8-K, filed February 21, 2007 (SEC File
No. 1-3480);
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6.
|
MDU
Resources’ Current Report on Form 8-K, filed March 12, 2007 (SEC File No.
1-3480);
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7.
|
MDU
Resources’ Current Report on Form 8-K, filed April 26, 2007 (SEC File No.
1-3480);
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8.
|
MDU
Resources’ Current Report on Form 8-K, filed June 6, 2007 (SEC File No.
1-3480);
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9.
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MDU
Resources’ Current Report on From 8-K, filed June 19, 2007 (SEC File No.
1-3480);
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10.
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MDU
Resources’ Registration Statement on Form 8-A, filed September 21, 1994,
Amendment No. 1 thereto, filed March 23, 2000, Amendment No. 2
thereto,
filed March 10, 2003, Amendment No. 3 thereto, filed January
21, 2004, and Amendment No. 4 thereto, filed June 27, 2007 (SEC
File No.
1-3480);
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11.
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MDU
Resources’ Registration Statement on Form 8-A filed November 12, 1998, and
Amendment No. 1 thereto, filed March 23, 2000 (SEC File No. 1-3480);
and
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12.
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Certificate
of Adjustment to Purchase Price and Redemption Price, as amended
and
restated, pursuant to the Rights Agreement (filed as Exhibit 4(c)
to Form
10-Q for the quarter ended June 30, 2006, filed on August 4,
2006) (SEC File No. 1-3480);
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13.
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Proxy
Statement for an annual meeting of stockholders held on April 24,
2007,
filed March 6, 2007 (SEC File No. 1-3480);
and
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14.
|
Sales
Agency Financing Agreement, dated as of July 27, 2006, between
MDU
Resources Group, Inc. and Wells Fargo Securities, LLC (filed as
Exhibit 1
to the Current Report on Form 8-K, filed on July 27, 2006) (SEC
File No.
1-3480);
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You
may
request a copy of these documents, at no cost to you, by writing or calling
Office of the Treasurer, MDU Resources Group, Inc., 1200 West Century Avenue,
P.O. Box 5650, Bismarck, North Dakota 58506-5650, telephone (701)
530-1000.
MDU
RESOURCES
GROUP, INC.
We
are a
diversified natural resource company which was incorporated under the laws
of
the State of Delaware in 1924. Our principal executive offices are at
1200 West Century Avenue, P.O. Box 5650, Bismarck, North Dakota 58506-5650,
telephone (701) 530-1000.
Montana-Dakota
Utilities Co., one of our public utility divisions, through the electric
and
natural gas distribution segments, generates, transmits and distributes
electricity and distributes natural gas in Montana, North Dakota, South Dakota
and Wyoming. Great Plains Natural Gas Co., another one of our public
utility divisions, distributes natural gas in southeastern North Dakota and
western Minnesota. These operations also supply related value-added
products and services.
Through
our wholly owned subsidiary, Centennial Energy Holdings, Inc., we own WBI
Holdings, Inc., Knife River Corporation, MDU Construction Services Group,
Inc.,
Centennial Energy Resources LLC and Centennial Holdings Capital
LLC.
WBI
Holdings is comprised of the pipeline and energy services and the natural
gas
and oil production segments. The pipeline and energy services segment
provides natural gas transportation, underground storage and gathering services
through regulated and nonregulated pipeline systems primarily in the Rocky
Mountain and northern Great Plains regions of the United States. The
pipeline and energy services segment also provides energy-related management
services. The natural gas and oil production segment is engaged in
natural gas and oil acquisition, exploration, development and production
activities primarily in the Rocky Mountain and Mid-Continent regions of the
United States and in and around the Gulf of Mexico.
Knife
River mines aggregates and markets crushed stone, sand, gravel and related
construction materials, including ready-mixed concrete, cement, asphalt,
liquid
asphalt and other value-added products, as well as performs integrated
construction services, in the central, southern and western United States
and
Alaska and Hawaii.
MDU
Construction Services specializes in electrical line construction, pipeline
construction, inside electrical wiring, cabling and mechanical work, fire
protection and the manufacture and distribution of specialty
equipment.
Centennial
Resources owns, builds and operates electric generating facilities in the
United
States and has domestic and international investments including
transmission and natural resource-based projects. Electric capacity
and energy produced at its power plants primarily are sold under mid- and
long-term contracts to nonaffiliated entities.
Centennial
Capital insures various types of risks as a captive insurer for certain of
our
subsidiaries. The function of the captive program is to fund the
deductible layers of the insured companies’ general liability and automobile
liability coverages. Centennial Capital also owns certain real and
personal property.
Recent
Developments
Proposed
Acquisition of Cascade Natural Gas Corporation
On
July
8, 2006, we entered into a definitive merger agreement to acquire Cascade
Natural Gas Corporation for cash consideration of $26.50 per
share. The total value of the transaction, including the outstanding
Cascade indebtedness, is approximately $475 million. We expect to
finance the transaction through the issuance of a combination of long-term
debt
and equity, on a basis consistent with our utility capital
structure.
Upon
completion of the acquisition, Cascade will become a wholly owned subsidiary
of
MDU Resources Group, Inc., continuing to operate as Cascade Natural Gas
Corporation. The transaction has been approved by Cascade’s
shareholders and the various regulatory authorities. We anticipate
that the transaction will close in early July 2007.
Cascade
serves 246,000 customers in 93 communities – 65 of which are in Washington and
28 in Oregon. Cascade’s service areas are concentrated in western and
south central Washington and south central and eastern
Oregon. Cascade’s recent customer growth has been more than 4 percent
on a compound annual basis. Cascade was founded in 1953 and employs
nearly 380 people.
Sale
of Domestic Independent Power Production Companies
On
April
25, 2007, our subsidiary, Centennial Energy Resources LLC, entered into a
definitive purchase and sale agreement with Montana Acquisition Company LLC
(now
known as Bicent Power LLC), under which we will sell our domestic independent
power production business unit consisting of Centennial Power, Inc. and Colorado
Energy Management, LLC to Montana Acquisition Company LLC. The
transaction is valued at $636 million, which includes the assumption of
approximately $36 million of project-related debt. The closing of the
sale is expected to occur in July 2007, and is subject to the receipt of
regulatory approvals and fulfillment of other conditions established in the
agreement.
Increased
Number of Authorized Shares of Common Stock
At
the
annual meeting of stockholders held on April 24, 2007, our stockholders approved
an amendment to our restated certificate of incorporation to increase our
authorized common stock from 250,000,000 to 500,000,000 shares. A
restated certificate of incorporation reflecting this amendment was filed
with
the Secretary of State of the State of Delaware on May 17, 2007.
Declassification
of Board of Directors
At
the
annual meeting of stockholders held on April 24, 2007, our stockholders approved
an amendment to our restated certificate of incorporation to provide for
a
declassified board of directors. Beginning with the annual meeting of
stockholders to be held in 2008, each director whose term is ending will
be
elected annually and serve until the next following annual meeting or until
his
or her earlier resignation or termination from the board. A restated
certificate of incorporation reflecting this amendment was filed with the
Secretary of State of the State of Delaware on May 17, 2007.
Stock
Split
On
May
11, 2006, our board of directors approved a three-for-two common stock split
to
be effected in the form of a 50 percent common stock dividend. The
additional shares of common stock were distributed on July 26, 2006, to common
stockholders of record on July 12, 2006. As a result of the stock
split, and of a similar three-for-two common stock split in October 2003,
each
preference share purchase right under our rights agreement was adjusted to
allow
its holder to purchase from us four-ninths of one one-thousandth of a share
of
Series B preference stock for $125 per one one-thousandth of a share of Series
B
preference stock, once the preference share purchase rights become exercisable,
as discussed under “DESCRIPTION OF THE PREFERENCE SHARE PURCHASE RIGHTS –
Exercise Price” in the accompanying prospectus. In addition, our
board of directors may redeem the preference share purchase rights for $.00444
per preference share purchase right at any time before any person or group
becomes an acquiring person, as described under “DESCRIPTION OF THE PREFERENCE
SHARE PURCHASE RIGHTS – Redemption” in the accompanying prospectus.
Common
Stock -
General
The
following is a description of all material attributes of our common
stock. This description is not complete, and we qualify it by
referring to the laws of the state of Delaware and our restated certificate
of
incorporation, amended bylaws and Mortgage. The amended bylaws and
Mortgage are exhibits 3(b) and 4(a), respectively, to the registration statement
that this prospectus is included within and all of these documents are
incorporated into this prospectus by reference. The restated
certificate of incorporation is exhibit 3.1 to amendment no. 4 to Form 8-A
and
is incorporated into this prospectus by reference. We also refer you
to the rights agreement, dated as of November 12, 1998, between us and Norwest
Bank Minnesota, NA (now, Wells Fargo Bank Minnesota,
N.A.),
as
rights agent, that we incorporate into this document by reference to exhibit
4(c) to the registration statement that this prospectus is included within,
and
the certificate of adjustment to purchase price and redemption price that
we
incorporate into this document by reference to exhibit 4(c) to our quarterly
report on Form 10-Q for the quarter ended June 30, 2006.
Our
restated certificate of incorporation authorizes us to issue 502,000,000
shares
of stock, divided into four classes:
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500,000
shares of preferred stock, $100 par
value;
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1,000,000
shares of preferred stock A, without par
value;
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500,000
shares of preference stock, without par value;
and
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500,000,000
shares of common stock, $1.00 par
value.
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Dividend
Rights
Under
our
restated certificate of incorporation, we may declare and pay dividends on
our
common stock, out of surplus or net profits, only if we have paid or provided
for full cumulative dividends on all outstanding shares of preferred and
preference stock. As of June 27, 2007, we had no preference stock
outstanding.
In
addition to these provisions, our first mortgage bond indenture includes
a
covenant generally to the effect that we may declare and pay dividends in
cash
or property on our common stock only either (1) out of “surplus” or (2) in case
there is no “surplus,” out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. For purposes
of this test, “surplus” means the excess of our net assets over our “capital”;
and “capital” means that part of the consideration received by us for any of our
shares of common stock which has been determined to be “capital.”
Voting
Rights
Our
common stock has one vote per share. The holders of our common stock
are entitled to vote on all matters to be voted on by
stockholders. The holders of our common stock do not have cumulative
voting rights.
The
holders of our preferred stock, preferred stock A and preference stock do
not
have the right to vote, except as our board of directors establishes
or as provided in our restated certificate of incorporation or bylaws or
as
determined by state law.
Our
restated certificate of incorporation gives the holders of our preferred
stock, preferred stock A or the preference stock the right to vote if
dividends are unpaid, in whole or in part, on their shares for one
year. The holders have one vote per share until we pay the dividend
arrearage, declare dividends for the current dividend period and set aside
the
funds to pay the current dividends. In addition, the holders of some
series of our preferred stock and preferred stock A, and/or the holders of
our
preference stock, must approve amendments to the restated certificate of
incorporation in some instances.
Liquidation
Rights
If
we
were to liquidate, the holders of the preferred stock, preferred stock A
and the
preference stock have the right to receive specified amounts, as set forth
in
our restated certificate of incorporation, before we can make any payments
to
the holders of our common stock. After the preferred and preference
stock payments are made, the holders of our common stock are entitled to
share
in all of our remaining assets available for distribution to
stockholders.
Other
Rights
Our
common stock is not liable to further calls or assessment. The
holders of our common stock have no preemptive rights. Our common
stock cannot be redeemed, and it does not have any conversion rights or sinking
fund provisions.
Effects
on Our Common Stock if We Issue Preferred or Preference
Stock
Our
board
of directors has the authority, without further action by the stockholders,
to
issue up to 500,000 shares of preferred stock, 1,000,000 shares of preferred
stock A and 500,000 shares of preference stock, each in one or more
series. Our board of directors has the authority to determine the
terms of each series of any preferred or preference stock, within the limits
of
the restated certificate of incorporation and the laws of the state of
Delaware. These terms include the number of shares in a series,
dividend rights, liquidation preferences, terms of redemption, conversion
rights
and voting rights.
If
we
issue any preferred or preference stock, we may negatively affect the holders
of
our common stock. These possible negative effects include diluting
the voting power of shares of our common stock and affecting the market price
of
our common stock. In addition, the ability of our board of directors
to issue preferred or preference stock may delay or prevent a change in control
of MDU Resources.
As
of
June 27, 2007, we had 161,000 shares of preferred stock outstanding, and
we have
reserved 125,000 shares of Series B preference stock for issuance in connection
with our rights plan.
Provisions
of our Restated Certificate of Incorporation and our Bylaws That Could Delay
or
Prevent a Change in Control
Our
restated certificate of incorporation and bylaws contain provisions which
will
make it difficult to obtain control of MDU Resources if our board of directors
does not approve the transaction. The provisions include the
following:
Provisions
Relating to our Board of Directors
Classified
Board
At
the
annual meeting of stockholders held on April 24, 2007, our stockholders approved
an amendment to our restated certificate of incorporation to provide for
a
declassified board of directors. Beginning with the annual meeting of
stockholders to be held in 2008, each director whose terms is ending will
be
elected annually for a one-year term. Those directors elected at the
annual meetings of stockholders held in 2005, 2006, and 2007 shall continue
to
serve for the full three-year term to which each such director was
elected.
The
declassification of our board of directors will be phased in from
2008-2010. During this period, the remaining classifications may
prevent stockholders from changing the membership of the entire board of
directors in a relatively short period of time. At least two annual
meetings, instead of one, generally will be required to change the majority
of
directors. The classified board provisions could have the effect of
prolonging the time required for a stockholder with significant voting power
to
gain majority representation on our board of directors. Where
majority or supermajority board of directors approval is necessary for a
transaction, like in the case of an interested stockholder business combination,
the inability immediately to gain majority representation on the board of
directors could discourage takeovers and tender offers.
Number
of Directors, Vacancies, Removal of Directors
Our
restated certificate of incorporation provides that our board of directors
will
have at least six and at most 15 directors. Two-thirds of the
continuing directors decide the exact number of directors at a given
time. Our board fills any new directorships it creates and any
vacancies.
Our
directors may be removed only for cause and then only by a majority of the
shares entitled to vote.
Meetings
of Stockholders
No
Cumulative Voting
Our
restated certificate of incorporation does not provide for cumulative
voting.
Advance
Notice Provisions
Our
bylaws require that for a stockholder to nominate a director or bring other
business before an annual meeting, the stockholder must give notice not less
than 120 days prior to the date corresponding to the date on which we first
mailed our proxy materials for the prior year’s annual meeting.
Our
restated certificate of incorporation prevents stockholders from calling
a
special meeting. In addition, our restated certificate of
incorporation provides that stockholder action may be taken only at a
stockholders’ meeting.
Amendment
of Restated Certificate of Incorporation
Our
restated certificate of incorporation requires the affirmative vote of 80%
of
the common stock entitled to vote in order to amend Articles Twelfth,
Thirteenth, Fourteenth, Fifteenth and Sixteenth of our restated certificate
of
incorporation, unless two-thirds of the continuing directors approve the
amendment. Article Twelfth of our restated certificate of
incorporation specifies fair price and other requirements applicable to a
business combination involving an interested stockholder. Article
Thirteenth of our restated certificate of incorporation contains provisions
relating to our board of directors. Article Fourteenth of our
restated certificate of incorporation expressly permits our board of directors
to consider the factors described below under “Provisions Relating to the
Authorization of Business Combinations” in determining whether or not to approve
some types of business combinations. Article Fifteenth of our
restated certificate of incorporation contains the requirement described
in the
first sentence of this paragraph that 80% of the common stock entitled to
vote
must vote in favor of an amendment to the articles specified above unless
two-thirds of the continuing directors approve the
amendment. Finally, Article Sixteenth of the restated certificate of
incorporation prohibits stockholders from taking action by written consent
and
describes the persons who may call special meetings of our
stockholders.
Provisions
Relating to the Authorization of Business Combinations
Our
restated certificate of incorporation requires the affirmative vote of 80%
of
the common stock entitled to vote for directors in order to authorize business
combinations with interested stockholders. Any business combination
must also meet specified fair price and procedural
requirements. However, if two-thirds of our continuing directors
approve the business combination, then the vote of 80% of the common stock
and
the fair price provisions will not be required.
There
is
also a provision in our restated certificate of incorporation permitting
our
board of directors to consider the following factors in determining whether
or
not to approve some types of business combinations:
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The
consideration to be received by us or our stockholders in connection
with
the business combination in relation not only to the then current
market
price for our outstanding capital stock, but also to the market
price for
our capital stock over a period of years, the estimated price that
might
be achieved in a negotiated sale of us as a whole or in part through
orderly liquidation, the premiums over market price for the securities
of
other corporations in similar transactions, current political,
economic
and other factors bearing on securities prices and our financial
condition, future prospects and future value as an independent
corporation;
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The
character, integrity and business philosophy of the other party
or parties
to the business combination transaction and the management of that
party
or those parties;
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The
business and financial conditions and earnings prospects of the
other
party or parties to the business combination transaction, including,
but
not limited to, debt service and other existing or likely financial
obligations of that party or those parties, the intention of the
other
party or parties to the business combination transaction regarding
the use
of our assets to finance the acquisition, and the possible effect
of the
conditions upon us and our subsidiaries and the other elements
of the
communities in which we and our subsidiaries operate or are
located;
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The
projected social, legal and economic effects of the proposed action
or
transaction upon us or our subsidiaries, employees, suppliers,
customers
and others having similar relationships with us, and the communities
in
which we and our subsidiaries do
business;
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The
general desirability of our continuance as an independent entity;
and
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Such
other factors as the continuing directors may deem
relevant.
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Provisions
of Delaware Law That Could Delay or Prevent a Change in
Control
We
are
subject to the provisions of Section 203 of the General Corporation Law of
Delaware. With some exceptions, this law prohibits us from engaging
in some types of business combinations with a person who owns 15% or more
of our
outstanding voting stock for a three-year period after that person acquires
the
stock. This prohibition does not apply if our board of directors
approved of the business combination or the acquisition of our stock before
the
person acquired 15% of the stock. A business combination includes
mergers, consolidations, stock sales, asset sales and other transactions
resulting in a financial benefit to the interested stockholder.
Transfer
Agent; Registrar
The
transfer agent and registrar for our common stock is Wells Fargo Bank Minnesota,
N.A., Saint Paul, Minnesota.
We
expect
to use proceeds from the sale of shares of common stock under the sales agency
financing agreement for corporate development purposes (including the
acquisition of other businesses and/or business assets) and other general
corporate purposes.
We
have
entered into a sales agency financing agreement, dated as of July 27, 2006,
and
an amendment to such sales agency financing agreement, dated as of June 25,
2007, which we refer to collectively as the sales agency financing agreement,
each with Wells Fargo Securities, LLC, or Wells Fargo, under which we may
offer
and sell up to 3,000,000 shares of our common stock from time to time through
Wells Fargo, as our agent for the offer and sale of the shares. The
sales, if any, of the shares of common stock under this sales agency financing
agreement will be made in “at-the-market” offerings as defined in Rule 415 of
the Securities Act of 1933, including sales made directly on the New York
Stock
Exchange, the principal existing trading market for our common stock, or
on any
other exchange on which the common stock is then listed or admitted to trading
and sales made to or through a market maker or through an electronic
communications network.
From
time
to time during the term of the sales agency financing agreement, and subject
to
the terms and conditions set forth therein, we may deliver an issuance notice
to
Wells Fargo specifying the length of the selling period (not to exceed 20
consecutive trading days), the amount of common stock to be sold (the aggregate
number of such shares not to exceed the product of (1) 45,000 times (2) the
number of trading days in any selling period without Wells Fargo’s prior written
consent) and the monthly floor price below which sales may not be
made. Upon receipt of an issuance notice from us, and subject to the
terms and conditions of the sales agency financing agreement, Wells Fargo
has
agreed to use its commercially reasonable efforts consistent with its normal
trading and sales practices to sell such shares on such terms and subject
to the
conditions set forth in the sales agency financing agreement. We or
Wells Fargo may suspend the offering of shares of common stock at any time
upon
proper notice
to
the
other, upon which the selling period will immediately
terminate. Settlement between us and Wells Fargo for sales of common
stock will occur on the third (3rd) trading
day
immediately following the sale of any shares pursuant to the sales agency
financing agreement. The obligation of Wells Fargo under the sales
agency financing agreement to settle such purchases with us pursuant to any
issuance notice is subject to a number of conditions, which Wells Fargo reserves
the right to waive in its sole discretion.
We
will
pay Wells Fargo a commission equal to 1% of the sales price of all shares
sold
through it as agent under the sales agency financing agreement. We
have also agreed to reimburse Wells Fargo for its reasonable documented
out-of-pocket expenses up to a maximum of $125,000, including fees and expenses
of counsel, in connection with the sales agency financing
agreement.
We
will
deliver to the New York Stock Exchange copies of this prospectus supplement
and
the accompanying prospectus pursuant to the rules of the exchange. We
will report at least quarterly the number of shares of common stock sold
through
Wells Fargo, as agent, in at-the-market offerings, the net proceeds to us
and
the compensation paid by us to Wells Fargo in connection with such sales
of
common stock.
Wells
Fargo and its affiliates have performed certain investment banking and advisory
and general financing, trustee and banking services for us from time to time
for
which they have received customary fees and expenses. Wells Fargo and
its affiliates may, from time to time, engage in transactions with, and perform
services for, us in the ordinary course of our business.
An
affiliate of Wells Fargo is the administrative agent, and a lender to us,
under
a credit facility and may receive a portion of any amounts repaid from the
proceeds of this offering. Because more than 10% of the net proceeds
of this offering may be paid to affiliates of a member of the NASD which
is
participating in this offering, this offering is being conducted in compliance
with Rule 2710(h) of the Conduct Rules of the NASD.
In
connection with the sale of the common stock hereunder, Wells Fargo may be
deemed to be an “underwriter” within the meaning of the Securities Act of 1933,
and the compensation paid to Wells Fargo may be deemed to be underwriting
commissions or discounts. We have agreed to indemnify Wells Fargo
against certain civil liabilities, including under the Securities Act of
1933.
The
offering of common stock pursuant to the sales agency financing agreement
will
terminate upon the earlier of (1) the sale of all shares of common stock
subject
to the sales agency financing agreement, (2) termination of the sales agency
financing agreement by either Wells Fargo or us and (3) December 1,
2008. The sales agency financing agreement may be terminated by Wells
Fargo or us at any time upon 10 days notice, and without notice by Wells
Fargo
in certain circumstances, including certain bankruptcy events relating to
us or
any material subsidiary, our failure to maintain a listing of our common
stock
on the New York Stock Exchange or the occurrence of a material adverse change
in
our Company.
We
have
agreed not to directly or indirectly sell, offer to sell, contract to sell,
grant any option to sell or otherwise dispose of, shares of our common stock
or
securities convertible into or exchangeable for shares of our common stock,
warrants or any rights to purchase or acquire our common stock for a period
beginning on the first trading day prior to the delivery of any issuance
notice
to Wells Fargo and ending on the first trading day following the last settlement
date with respect to shares of common stock sold pursuant to the applicable
issuance notice, without the prior written consent of Wells
Fargo. This consent may be given at any time without public
notice. The restriction described in this paragraph does not apply to
sales of:
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shares
we offer or sell pursuant to the sales agency financing
agreement;
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shares
we issue in connection with
acquisitions;
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shares
we issue upon conversion of convertible securities, or the exercise
of
warrants, options or other rights;
or
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shares
and options to purchase shares we issue, in either case, pursuant
to any
employee or director stock option or benefit plan, stock purchase
or
ownership plan or dividend reinvestment
plan.
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The
consolidated financial statements, the related financial statement schedule,
and
management’s report on the effectiveness of internal control over financial
reporting, incorporated in this prospectus supplement and the accompanying
prospectus by reference from the Company’s Annual Report on Form 10-K for the
year ended December 31, 2006, have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in their reports
which
are incorporated herein by reference (which reports (1) express an unqualified
opinion on the financial statements and financial statement schedule and
include
an explanatory paragraph referring to our change in 2006 in the method of
accounting for defined benefit pension and other postretirement plans, (2)
express an unqualified opinion on management’s assessment regarding the
effectiveness of internal control over financial reporting, and (3) express
an
unqualified opinion on the effectiveness of internal control over financial
reporting), and have been so incorporated in reliance upon the reports of
such
firm given upon their authority as experts in accounting and
auditing.
The
validity of the shares will be passed upon for us by Paul K. Sandness, Esq.,
our
General Counsel, and also by Thelen Reid Brown Raysman & Steiner LLP, New
York, New York. Wells Fargo is being represented by Pillsbury
Winthrop Shaw Pittman LLP, New York, New York.
PROSPECTUS
$500,000,000
MDU
RESOURCES GROUP, INC.
Debt
Securities
Common
Stock
and
Preference
Share Purchase Rights
We
may
offer from time to time up to an aggregate of $500,000,000 of our
securities. We will provide the specific terms of our securities,
including their offering prices, in supplements to this
prospectus. The supplements may also add, update or change
information contained in this prospectus. The names of any
underwriters or agents will also be stated in an accompanying prospectus
supplement. You should read this prospectus and any supplements
carefully before you invest.
Our
common stock is listed on the New York Stock Exchange and the Pacific Exchange
under the symbol “MDU.” Any common stock sold in this offering will
be listed on the New York Stock Exchange and the Pacific Exchange.
See
“Risk Factors” beginning on page 3 to read about certain factors you should
consider before investing in the securities.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these
securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
Our
principal executive offices are located at MDU Resources Group, Inc., Schuchart
Building, 918 East Divide Avenue, P.O. Box 5650, Bismarck, North Dakota
58506-5650, and our telephone number is (701) 222-7900.
We
may
offer our securities directly or through agents, underwriters or
dealers. If an agent or any underwriter is involved in the sale of
any of our securities covered by this prospectus, the names of those agents
or
underwriters, any applicable discounts, commissions or allowances and a
description of any indemnification arrangements will be contained in a
prospectus supplement. The “Plan of Distribution” section beginning
on page 36 of this prospectus provides more information on this
topic.
The
date
of this Prospectus is September 26, 2003.
TABLE
OF CONTENTS
Page
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Risk
Factors
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3
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Forward-Looking
Statements
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5
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Where
You Can Find More Information About Us
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6
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MDU
Resources Group, Inc.
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8
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Ratio
of Earnings to Fixed Charges
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9
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Use
of Proceeds
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9
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Selected
Consolidated Financial Data
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9
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Description
of the Debt Securities
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10
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Description
of the First Mortgage Bonds
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27
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Description
of the Common Stock
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30
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Description
of the Preference Share Purchase Rights
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34
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Plan
of Distribution
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36
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Experts
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37
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Legal
Opinions
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38
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In
considering whether to purchase any of the securities being offered, you
should
carefully consider all the information we have included or incorporated by
reference in this prospectus. In particular, you should carefully
consider the risk factors described below.
Economic
Risks
The
recent events leading to the current adverse economic environment may have
a
general negative impact on our future revenues and may result in a goodwill
impairment for Innovatum, Inc., our indirect wholly owned
subsidiary.
In
response to the occurrence of several recent events, including the September
11,
2001, terrorist attack on the United States, the ongoing war against terrorism
by the United States and the bankruptcy of several large energy and
telecommunications companies and other large enterprises, the financial markets
have been highly volatile. An adverse economy could negatively affect
the level of governmental expenditures on public projects and the timing
of
these projects which, in turn, would negatively affect the demand for our
products and services.
Innovatum,
which specializes in cable and pipeline magnetization and locating, is subject
to the economic conditions within the telecommunications and energy
industries. Innovatum could face a future goodwill impairment if
there is a continued downturn in these sectors. At June 30, 2003, the
goodwill amount at Innovatum was approximately $8.3 million. The
determination of whether an impairment will occur is dependent on a number
of
factors, including the level of spending in the telecommunications and energy
industries, rapid changes in technology, competitors and potential new
customers.
We
rely on financing sources and capital markets. Our inability to
access financing may impair our ability to execute our business plans, make
capital expenditures or pursue acquisitions that we may otherwise rely on
for
future growth.
We
rely
on access to both short-term borrowings, including the issuance of commercial
paper, and long-term capital markets as a source of liquidity for capital
requirements not satisfied by the cash flow from operations. If we
are not able to access capital at competitive rates, the ability to implement
our business plans may be adversely affected. Market disruptions or a
downgrade of our credit ratings may increase the cost of borrowing or adversely
affect our ability to access one or more financial markets. Such
disruptions could include:
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A
severe prolonged economic downturn
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The
bankruptcy of unrelated industry leaders in the same lines of
business
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Capital
market conditions generally
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Volatility
in commodity prices
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Our
natural gas and oil production business is dependent on factors, including
commodity prices, which cannot be predicted or controlled.
These
factors include: price fluctuations in natural gas and crude oil prices;
availability of economic supplies of natural gas; drilling successes in natural
gas and oil operations; the ability to contract for or to secure necessary
drilling rig contracts and to retain employees to drill for and develop
reserves; the ability to acquire natural gas and oil properties; and other
risks
incidental to the operations of natural gas and oil wells.
Environmental
And Regulatory Risks
Some
of our operations are subject to extensive environmental laws and regulations
that may increase our costs of operations, impact or limit our business plans,
or expose us to environmental liabilities. One of our subsidiaries
has been sued in connection with its coalbed natural gas development
activities.
We
are
subject to extensive environmental laws and regulations affecting many aspects
of our present and future operations including air quality, water quality,
waste
management and other environmental considerations. These laws and
regulations can result in increased capital, operating and other costs, as
a
result of compliance, remediation, containment and monitoring obligations,
particularly with regard to laws relating to power plant emissions and coalbed
natural gas development. These laws and regulations generally require
us to obtain and comply with a wide variety of environmental licenses, permits,
inspections and other approvals. Both public officials and private
individuals may seek to enforce applicable environmental laws and
regulations. We cannot predict the outcome (financial or operational)
of any related litigation that may arise.
Existing
environmental regulations may be revised and new regulations seeking to protect
the environment may be adopted or become applicable to us. Revised or
additional regulations, which result in increased compliance costs or additional
operating restrictions, particularly if those costs are not fully recoverable
from customers, could have a material affect on our results of
operations.
Fidelity
Exploration & Production Company, our indirect wholly owned subsidiary, has
been named as a defendant in several lawsuits filed in connection with its
coalbed natural gas development in the Powder River Basin in Montana and
Wyoming. If the plaintiffs are successful in these lawsuits, the
ultimate outcome of the actions could have a material effect on Fidelity’s
future development of its coalbed natural gas properties.
We
are subject to extensive government regulations that may have a negative
impact
on our business and our results of operations.
We
are
subject to regulation by federal, state and local regulatory agencies with
respect to, among other things, allowed rates of return, financings, industry
rate structures, and recovery of purchased power and purchased gas
costs. These governmental regulations significantly influence our
operating environment and may affect our ability to recover costs from our
customers. We are unable to predict the impact on operating results
from the future regulatory activities of any of these agencies.
Changes
in regulations or the imposition of additional regulations could have an
adverse
impact on our results of operations.
Risks
Relating To Our Independent Power Production Business
There
are risks involved with the growth strategies of our independent power
production business. If we are unable to access markets previously
unavailable to a proposed 113-megawatt coal-fired electric generation station
in
Montana, we may not complete construction or commence operation of that
facility, which may result in an asset impairment.
The
operation of power generation facilities involves many risks, including start
up
risks, breakdown or failure of equipment, competition, inability to obtain
required governmental permits and approvals and inability to negotiate
acceptable acquisition, construction, fuel supply or other material agreements,
as well as the risk of performance below expected levels of output or
efficiency.
Our
plans
to construct a 113-megawatt coal-fired electric generation station in Montana
are pending. We purchased plant equipment and obtained all permits
necessary to begin construction. NorthWestern Energy terminated the
power purchase agreement for the energy from this plant in July 2002; however,
we are in the process of accessing markets previously unavailable to this
project and plan to resume construction in the near future to the extent
access
to such markets is secured. We have suspended construction activities
except for those items of a critical nature. At June 30, 2003, our
investment in this project was approximately $29.6 million. If it is
not economically feasible for us to construct and operate this facility or
if
alternate markets cannot be identified, an asset impairment may
occur.
Risks
Relating To Foreign Operations
The
value of our investment in foreign operations may diminish due to political,
regulatory and economic conditions and changes in currency exchange rates
in
countries where we do business.
We
are
subject to political, regulatory and economic conditions and changes in currency
exchange rates in foreign countries where we do business. Significant
changes in the political, regulatory or economic environment in these countries
could negatively affect the value of our investments located in these
countries. Also, since we are unable to predict the fluctuations in
the foreign currency exchange rates, these fluctuations may have an adverse
impact on our results of operations.
Our
49
percent equity method investment in a 220-megawatt natural gas-fired electric
generation project in Brazil includes a power purchase agreement that contains
an embedded derivative. This embedded derivative derives its value
from an annual adjustment factor that largely indexes the contract capacity
payments to the U.S. dollar. In addition, from time to time, other
derivative instruments may be utilized. The valuation of these
financial instruments, including the embedded derivative, can involve judgments,
uncertainties and the use of estimates. As a result, changes in the
underlying assumptions could affect the reported fair value of these
instruments. These instruments could recognize financial losses as a
result of volatility in the underlying fair values, or if a counterparty
fails
to perform.
Other
Risks
Competition
is increasing in all of our businesses.
All
of
our businesses are subject to increased competition. The independent
power industry includes numerous strong and capable competitors, many of
which
have greater resources and more experience in the operation, acquisition
and
development of power generation facilities. Utility services’
competition is based primarily on price and reputation for quality, safety
and
reliability. The construction materials products are marketed under
highly competitive conditions and are subject to such competitive forces
as
price, service, delivery time and proximity to the customer. The
electric utility and natural gas industries are also experiencing increased
competitive pressures as a result of consumer demands, technological advances,
deregulation, greater availability of natural gas-fired generation and other
factors. Pipeline and energy services competes with several pipelines
for access to natural gas supplies and gathering, transportation and storage
business. The natural gas and oil production business is subject to
competition in the acquisition and development of natural gas and oil
properties.
Weather
conditions can adversely affect our operations and
revenues.
Our
results of operations can be affected by changes in the
weather. Weather conditions directly influence the demand for
electricity and natural gas, affect the price of energy commodities, affect
the
ability to perform services at the utility services and construction materials
and mining businesses and affect ongoing operation and maintenance activities
for the pipeline and energy services and natural gas and oil production
businesses. In addition, severe weather can be destructive, causing
outages and/or property damage, which could require additional costs to be
incurred. As a result, adverse weather conditions could negatively
affect our results of operations and financial conditions.
We
are
including these cautionary statements in this prospectus to make applicable
and
to take advantage of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 for any forward-looking statements made by
us or
on our behalf. Forward-looking statements include statements
concerning plans, objectives, goals, strategies, future events or performance,
and underlying assumptions (many of which are based, in turn, upon further
assumptions) and other statements which are other than statements of historical
facts. From time to time, we may publish or otherwise make available
forward-looking statements of this nature. All these subsequent
forward-looking statements, whether written or oral and whether made by us
or on
our behalf, are also expressly qualified by these cautionary
statements.
Forward-looking
statements involve risks and uncertainties, which could cause actual results
or
outcomes to differ materially from those expressed. Our expectations,
beliefs and projections are expressed in good faith and are believed by us
to
have a reasonable basis, including without limitation management’s examination
of historical operating trends, data contained in our records and other data
available from third parties. Nonetheless, our expectations, beliefs
or projections may not be achieved or accomplished.
Any
forward-looking statement contained in this document or any document
incorporated by reference into this document speaks only as of the date on
which
the statement is made, and we undertake no obligation to update any
forward-looking statement or statements to reflect events or circumstances
that
occur after the date on which the statement is made or to reflect the occurrence
of unanticipated events. New factors emerge from time to time, and it
is not possible for management to predict all of the factors, nor can it
assess
the effect of each factor on our business or the extent to which any factor,
or
combination of factors, may cause actual results to differ materially from
those
contained in any forward-looking statement.
Following
are some specific factors that should be considered for a better understanding
of our financial condition. These factors are important factors that
could cause our actual results or outcomes to differ materially from those
discussed in the forward-looking statements included elsewhere in this
prospectus.
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Acquisition
and disposal of assets or
facilities
|
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Changes
in operation and construction of plant
facilities
|
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Changes
in present or prospective
generation
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Changes
in anticipated tourism levels
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The
availability of economic expansion or development
opportunities
|
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Population
growth rates and demographic
patterns
|
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Market
demand for energy from plants or
facilities
|
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Changes
in tax rates or policies
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Unanticipated
project delays or changes in project
costs
|
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Unanticipated
changes in operating expenses or capital
expenditures
|
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Labor
negotiations or disputes
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Inability
of various counterparties to meet their contractual
obligations
|
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Changes
in accounting principles and/or the application of such principles
to
us
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Changes
in technology and legal proceedings
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The
ability to effectively integrate the operations of acquired
companies
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·
|
Unanticipated
increases in competition
|
|
|
·
|
Changes
in currency exchange rates
|
|
|
·
|
Increased
governmental regulation
|
|
|
·
|
Fluctuations
in natural gas and crude oil prices
|
|
|
·
|
Decline
in general economic environment
|
WHERE
YOU
CAN FIND MORE INFORMATION ABOUT
US
We
file
annual, quarterly and other reports and other information with the Securities
and Exchange Commission. You can read and copy any information filed
by us with the Securities and Exchange Commission at the Securities and Exchange
Commission’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. You can obtain additional information about the Public
Reference Room by calling the Securities and Exchange Commission at
1-800-SEC-0330.
In
addition, the Securities and Exchange Commission maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the Securities and Exchange Commission, including MDU
Resources.
The
Securities and Exchange Commission allows us to “incorporate by reference” the
information that we file with the Securities and Exchange Commission which
means
that we may disclose important information to you by referring you to those
documents in this prospectus. The information incorporated by
reference is an important
part
of
this prospectus. We are incorporating by reference the documents listed below
and any future filings we make with the Securities and Exchange Commission
under
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until
we terminate this offering. Any of those future filings will update,
supersede and replace the information contained in any documents incorporated
by
reference in this prospectus at the time of the future filings.
|
|
1.
|
MDU
Resources’ Annual Report on Form 10-K for the year ended December 31, 2002
(including portions of the Annual Report to Stockholders), filed
February
28, 2003 (SEC File No. 1-3480);
|
|
|
2.
|
MDU
Resources’ Quarterly Report on Form 10-Q for the quarter ended March 31,
2003, filed May 14, 2003 (SEC File No.
1-3480);
|
|
|
3.
|
MDU
Resources’ Quarterly Report on Form 10-Q for the quarter ended June 30,
2003, filed August 13, 2003 (SEC File No.
1-3480);
|
|
|
4.
|
MDU
Resources’ Current Report on Form 8-K, filed January 29, 2003 (SEC File
No. 1-3480);
|
|
|
5.
|
MDU
Resources’ Current Report on Form 8-K, filed March 13, 2003 (SEC File No.
1-3480);
|
|
|
6.
|
MDU
Resources’ Current Report on Form 8-K, filed September 10, 2003 (SEC File
No. 1-3480);
|
|
|
7.
|
MDU
Resources’ Registration Statement on Form 8-A, filed September 21, 1994,
Amendment No. 1 thereto, filed March 23, 2000 and Amendment No.
2 thereto,
filed March 10, 2003 (SEC File No.
1-3480);
|
|
|
8.
|
MDU
Resources’ Registration Statement on Form 8-A filed November 12, 1998, and
Amendment No. 1 thereto, filed March 23, 2000 (SEC File No. 1-3480);
and
|
|
|
9.
|
Proxy
Statement for an annual meeting of stockholders held on April 22,
2003,
filed March 6, 2003 (SEC File No.
1-3480).
|
You
may
request a copy of these documents, at no cost to you, by writing or calling
Office of the Treasurer, MDU Resources Group, Inc., Schuchart Building, 918
East
Divide Avenue, P.O. Box 5650, Bismarck, North Dakota 58506-5650, telephone
(701)
222-7900.
You
should rely only on the information contained in, or incorporated by reference
in, this prospectus and the prospectus supplement. We have not, and
any underwriters, agents or dealers have not, authorized anyone else to provide
you with different information. We are not, and any underwriters,
agents or dealers are not, making an offer of these securities in any state
where the offer is not permitted. You should not assume that the
information contained in this prospectus and the prospectus supplement is
accurate as of any date other than the date on the front of the prospectus
supplement or that the information incorporated by reference in this prospectus
is accurate as of any date other than the date on the front of those
documents.
Our
consolidated financial statements for the year ended December 31, 2001,
incorporated into this document by reference were audited by Arthur Andersen
LLP. After reasonable efforts, we have not been able to obtain Arthur
Andersen LLP’s consent to the incorporation by reference of its audit report
dated January 23, 2002 into the registration statement of which this prospectus
is a part. Rule 437a under the Securities Act of 1933 permits us to
file the registration statement and this prospectus without Arthur Andersen
LLP’s written consent, but as a result of the lack of Arthur Andersen LLP’s
consent, you may not be able to sue Arthur Andersen LLP pursuant to Section
11(a)(4) of the Securities Act of 1933 and your right of recovery under that
section may be limited.
Upon
the
recommendations of the audit committee, our Board of Directors, in February
2002, approved the dismissal of Arthur Andersen LLP as our independent public
accountants following the 2001 audit and, in March 2002, approved the selection
of Deloitte & Touche LLP as independent public accountants for the 2002
fiscal year.
MDU
RESOURCES
GROUP, INC.
We
are a
diversified natural resource company which was incorporated under the laws
of
the state of Delaware in 1924. Our principal executive offices are at
the Schuchart Building, 918 East Divide Avenue, P.O. Box 5650, Bismarck,
North
Dakota 58506-5650, telephone (701) 222-7900.
Montana-Dakota
Utilities Co., one of our public utility divisions, through the electric
and
natural gas distribution segments, generates, transmits and distributes
electricity and distributes natural gas in the northern Great
Plains. Great Plains Natural Gas Co., another one of our public
utility divisions, distributes natural gas in southeastern North Dakota and
western Minnesota. These operations also supply related value-added
products and services in the northern Great Plains.
Through
our wholly owned subsidiary, Centennial Energy Holdings, Inc., we own WBI
Holdings, Inc., Knife River Corporation, Utility Services, Inc., Centennial
Energy Resources LLC and Centennial Holdings Capital LLC.
WBI
Holdings is comprised of the pipeline and energy services and the natural
gas
and oil production segments. The pipeline and energy services segment
provides natural gas transportation, underground storage and gathering services
through regulated and nonregulated pipeline systems primarily in the Rocky
Mountain and northern Great Plains regions of the United States. The
pipeline and energy services segment also provides energy-related management
services, including cable and pipeline magnetization and
locating. The natural gas and oil production segment is engaged in
natural gas and oil acquisition, exploration and production activities primarily
in the Rocky Mountain region of the United States and in the Gulf of
Mexico.
Knife
River mines aggregates and markets crushed stone, sand, gravel and other
related
construction materials, including ready-mixed concrete, cement, asphalt and
other value-added products, as well as performs integrated construction
services, in the north central and western United States and in the states
of
Alaska, Hawaii and Texas.
Utility
Services is a diversified infrastructure company specializing in electric,
gas
and telecommunication utility construction, as well as industrial and commercial
electrical, exterior lighting and traffic signalization throughout most of
the
United States. Utility Services also provides related specialty
equipment manufacturing, sales and rental services.
Centennial
Resources owns electric generating facilities in the United States and has
an
investment in an electric generating facility in Brazil. Electric
capacity and energy produced at these facilities are sold under long-term
contracts to nonaffiliated entities. Centennial Resources includes
investments in potential new growth opportunities that are not directly being
pursued by the other business units, as well as projects outside the United
States which are consistent with our philosophy, growth strategy and areas
of
expertise. These activities are reflected in independent power
production and other.
Centennial
Capital insures and reinsures various types of risks as a captive insurer
for
certain of our subsidiaries. The function of the captive program is
to fund the deductible layers of the insured companies’ general liability and
automobile liability coverages. Centennial Capital also owns certain
real and personal property and contract rights. These activities are
reflected in independent power production and other.
Recent
Developments
On
August
14, 2003, the Company’s Board of Directors voted to split the common stock of
the Company on a three-for-two basis subject to obtaining the approval of
the
appropriate regulatory agencies. The stock split will be effected in
the form of a 50 percent stock dividend. It is expected that the
necessary regulatory approvals can be obtained so the split can be effective
on
October 29, 2003, for shareholders of record on October 10, 2003.
RATIO
OF
EARNINGS TO FIXED
CHARGES
The
following table shows our ratio of earnings to fixed charges for the periods
indicated:
|
Fiscal
Quarter Ended June 30,
|
Fiscal
Years Ended December 31,
|
|
2003
|
2002
|
2001
|
2000
|
1999
|
1998
|
| |
|
|
|
|
|
|
5.0
|
4.9
|
5.4
|
4.2
|
4.5
|
2.5
|
| |
|
|
|
|
|
Except
as
may otherwise be set forth in the prospectus supplement, the net proceeds
from
the sale of the securities may be used for the refunding of outstanding debt
obligations, for corporate development purposes (including the potential
acquisition of businesses and/or assets), and for other general business
purposes.
The
selected consolidated financial data presented below was derived from our
audited consolidated financial statements and related notes. This
information is qualified in its entirety by and should be read together with
our
audited consolidated financial statements and related notes incorporated
by
reference in this prospectus. See “Where You Can Find More
Information About Us.”
|
Year
Ended December 31,
|
|
2002
|
|
|
2001
|
|
|
2000
|
|
| |
|
|
|
|
|
|
|
|
|
|
Proforma
amounts assuming
|
|
|
|
|
|
|
|
|
|
|
retroactive application of
|
|
|
|
|
|
|
|
|
|
|
accounting change:
|
|
|
|
|
|
|
|
|
|
|
Net income (1)
|
|
$ |
146,052
|
|
|
$ |
152,933
|
|
|
$ |
108,951
|
|
|
Earnings per common share -- basic (1)
|
|
$ |
2.05
|
|
|
$ |
2.26
|
|
|
$ |
1.77
|
|
|
Earnings per common share -- diluted (1)
|
|
$ |
2.04
|
|
|
$ |
2.24
|
|
|
$ |
1.76
|
|
|
|
(1)
|
On
January 1, 2003, we adopted Statement of Financial Accounting Standards
(SFAS) No. 143, “Accounting for Asset Retirement
Obligations.” SFAS No. 143 requires entities to record the fair
value of a liability for an asset retirement obligation in the
period in
which it is incurred. When the liability is initially recorded,
the entity capitalizes a cost by increasing the carrying amount
of the
related long-lived asset. Over time, the liability is accreted
to its present value each period, and the capitalized cost is depreciated
over the useful life of the related asset. Upon settlement of
the liability, an entity either settles the obligation for the
recorded
amount or incurs a gain or loss upon
settlement.
|
Upon
adoption of SFAS No. 143, we recorded obligations related to the plugging
and
abandonment of natural gas and oil wells; decommissioning of certain electric
generating facilities; reclamation of certain aggregate properties and certain
other obligations associated with leased properties. Removal costs
associated with certain natural gas distribution, transmission, storage and
gathering facilities have not been recognized as these facilities have been
determined to have indeterminate useful lives.
In
addition, upon adoption of SFAS No. 143, we recorded an additional discounted
liability of $22.5 million and a regulatory asset of $493,000, increased
net
property, plant and equipment by $9.6 million and recognized a one-time
cumulative effect charge of $7.6 million (net of deferred income tax benefits
of
$4.8 million). We believe that any expenses under SFAS No. 143 as
they relate to regulated operations will be recovered in rates over time
and
accordingly, deferred such expenses as a regulatory asset upon
adoption. We will continue to defer those SFAS No. 143 expenses that
we believe will be recovered in rates over time. In addition to the
$22.5 million liability recorded upon the adoption of SFAS No. 143, we had
previously recorded a $7.5 million liability related to retirement
obligations.
If
SFAS
No. 143 had been in effect during 2002 and 2001, our liability would have
been
approximately $27.0 million and $31.4 million at January 1, 2002 and January
1,
2001, respectively, including previously recorded liabilities of $6.1 million
and $15.1 million related to retirement obligations at January 1, 2002 and
January 1, 2001, respectively.
The
following description sets forth the general terms and provisions of the
Debt
Securities that we may offer by this prospectus. We will describe the
particular terms of the Debt Securities, and provisions that vary from those
described below, in one or more prospectus supplements.
We
may
issue the Debt Securities from time to time in the future, in one or more
series, under an indenture as it may be supplemented from time to time
(Indenture) between us and The Bank of New York, as trustee, or the Indenture
Trustee. A form of the Indenture is filed as an exhibit to the
registration statement relating to the Debt Securities.
This
section of the prospectus contains a summary of all material provisions of
the
Indenture. The Indenture and its associated documents contain the
full legal text of the matters described in this section. Because
this section is a summary, it does not describe every aspect of the Debt
Securities or the Indenture. This summary is subject to and qualified
in its entirety by reference to all the provisions of the Indenture, including
definitions of some of the terms used in the Indenture. We also
include references in parentheses to some of the sections of the Indenture.
Whenever we refer to particular sections or defined terms of the Indenture
in
this prospectus or in a prospectus supplement, these sections or defined
terms
are incorporated by reference into this document or in the prospectus
supplement. This summary also is subject to and qualified by
reference to the description of the particular terms of each series of Debt
Securities described in the applicable prospectus supplement or
supplements. The Indenture has been qualified under the Trust
Indenture Act, and you should also refer to the Trust Indenture Act for
provisions that apply to the Debt Securities.
There
is
no requirement under the Indenture that future issuances of debt securities
be
issued exclusively under the Indenture, and we will be free to employ other
indentures or agreements containing provisions different from those included
in
the Indenture or applicable to one or more issues of debt securities, in
connection with future issues of the other debt securities.
General
The
Indenture permits us to issue an unlimited amount of Debt Securities from
time
to time. All Debt Securities of any one series need not be issued at
the same time, and a series may be reopened for issuances of additional Debt
Securities of that series. This means that we may from time to time,
without the consent of the existing holders of the Debt Securities of any
series, create and issue additional Debt Securities of a series having the
same
terms and conditions as the previously-issued Debt Securities of that series
in
all respects, except for issue date, issue price and, if applicable, the
initial
interest payment on those additional Debt Securities. Additional Debt
Securities issued in this manner will be consolidated with, and will form
a
single series with, the previously-issued Debt Securities of that
series. For more information, see the discussion below under
“Issuance of Additional Debt Securities.”
Until
the
Release Date (described below), the Debt Securities will be issued on the
basis
of, and primarily secured by, (a) the lien of one or more series of First
Mortgage Bonds issued by us under the Mortgage (as these terms are defined
below
under DESCRIPTION OF THE FIRST MORTGAGE BONDS) and any other Class A Bonds
issued by us and delivered by us to the Indenture Trustee and (b) the lien
of
the Indenture on our Electric and Gas Utility Property (as defined below
under
“Lien of the Indenture”). On the Release Date, the Debt Securities
will cease to be secured and will become our unsecured general obligations,
ranking on a parity with our other senior unsecured indebtedness. For
more information, see the discussions below under
“Security,” “Issuance of Additional Debt Securities” and “Discharge
of Lien; Release Date”).
A
prospectus supplement and an officer’s certificate relating to any series of
Debt Securities being offered will include specific terms relating to that
offering. These terms will include some or all of the following terms
that apply to that series:
|
·
|
the
title of the Debt Securities;
|
|
·
|
any
limit upon the total principal amount of the Debt
Securities;
|
|
·
|
the
dates, or the method to determine these dates, on which the principal
of
the Debt Securities will be payable and how it will be
paid;
|
|
·
|
the
interest rate or rates which the Debt Securities will bear, or
how the
rate or rates will be determined, the interest payment dates for
the Debt
Securities and the regular record dates for interest
payments;
|
|
·
|
any
right to delay the interest payments for the Debt
Securities;
|
|
·
|
the
percentage, if less than 100%, of the principal amount of the Debt
Securities that will be payable if the maturity of the Debt Securities
is
accelerated;
|
|
·
|
any
date or dates on which the Debt Securities may be redeemed at our
option
and any restrictions on those
redemptions;
|
|
·
|
any
sinking fund or other provisions that would obligate us to repurchase
or
otherwise redeem the Debt
Securities;
|
|
·
|
any
additions to the events of default under the Indenture or additions
to our
covenants under the Indenture for the benefit of the holders of
Debt
Securities;
|
|
·
|
if
the Debt Securities will be issued in denominations other than
multiples
of $1,000;
|
|
·
|
if
payments on the Debt Securities may be made in a currency or currencies
other than United States dollars; and, if so, the means through
which the
equivalent principal amount of any payment in United States dollars
is to
be determined for any purpose;
|
|
·
|
any
rights or duties of another entity to assume our obligations with
respect
to the Debt Securities;
|
|
·
|
any
collateral, security, assurance or guarantee for the Debt Securities;
and
|
|
·
|
any
other terms of the Debt Securities not inconsistent with the terms
of the
Indenture.
|
(Indenture,
Section 301.)
We
may
sell Debt Securities at a discount below their principal
amount. United States federal income tax considerations applicable to
Debt Securities sold at an original issue discount will be described in the
prospectus supplement if we sell Debt Securities at an original issue
discount. In addition, important United States federal income tax or
other tax considerations applicable to any Debt Securities denominated or
payable in a currency or currency unit other than United States dollars will
be
described in the prospectus supplement if we sell Debt Securities denominated
or
payable in a currency or currency unit other than United States
dollars.
Except
as
may otherwise be described in the applicable prospectus supplement, the
covenants contained in the Indenture will not afford holders of Debt Securities
protection in the event of a highly-leveraged transaction involving
us.
Redemption
We
will
set forth any terms for the redemption of Debt Securities of any series in
the
applicable prospectus supplement. Unless we indicate differently in a
prospectus supplement, and except with respect to Debt Securities redeemable
at
the option of the holder of those Debt Securities, Debt Securities will be
redeemable upon notice to holders by mail at least 30 days prior to the
redemption date. (Indenture, Section 504.) If less than all of the
Debt Securities of any series or any tranche thereof are to be redeemed,
the
Indenture Trustee will select the Debt Securities to be redeemed. In
the absence of any provision for selection, the Indenture Trustee will choose
a
method of random selection as it deems fair and
appropriate. (Indenture, Section 503.)
Debt
securities will cease to bear interest on the redemption date. We
will pay the redemption price and any accrued interest to the redemption
date
upon surrender of any Debt Security for redemption. (Indenture,
Section 505.) If only part of a Debt Security is redeemed, the
Indenture Trustee will deliver to the holder of the Debt Security a new Debt
Security of the same series for the remaining portion without
charge. (Indenture, Section 506.)
We
may
make any redemption at our option conditional upon the receipt by the paying
agent, on or prior to the date fixed for redemption, of money sufficient
to pay
the redemption price. If the paying agent has not received the money
by the date fixed for redemption, we will not be required to redeem the Debt
Securities. (Indenture, Section 504.)
Payment
and Paying Agents
Except
as
may be provided in the applicable prospectus supplement, interest, if any,
on
each Debt Security payable on any interest payment date will be paid to the
person in whose name that Debt Security is registered at the close of business
on the regular record date for that interest payment date. However,
interest payable at maturity will be paid to the person to whom the principal
is
paid. If there has been a default in the payment of interest on any
Debt Security, the defaulted interest may be paid to the holder of that Debt
Security as of the close of business on a date between 10 and 15 days before
the
date proposed by us for payment of the defaulted interest or in any other
manner
permitted by any securities exchange on which that Debt Security may be listed,
if the Indenture Trustee finds it workable. (Indenture, Section
307.)
Unless
otherwise specified in the applicable prospectus supplement, principal, premium,
if any, and interest on the Debt Securities at maturity will be payable upon
presentation of the Debt Securities at the corporate trust office of The
Bank of
New York, in the city of New York, as our paying agent. However, we
may choose to make payment of interest by check mailed to the address of
the
persons entitled to payment. We may change the place of payment on
the Debt Securities, appoint one or more additional paying agents (including
MDU) and remove any paying agent, all at our discretion. (Indenture,
Section 702.)
Registration
and Transfer
Unless
otherwise specified in the applicable prospectus supplement, the transfer
of
Debt Securities may be registered, and Debt Securities may be exchanged for
other Debt Securities of the same series or tranche, of authorized denominations
and with the same terms and principal amount, at the offices of the Indenture
Trustee in New York, New York. (Indenture, Section
305.) We may designate one or more additional places, or change the
place or places previously designated, for registration of transfer and exchange
of the Debt Securities. (Indenture, Section 702.) Unless
otherwise specified in the applicable prospectus supplement, no service charge
will be made for any registration of transfer or exchange of the Debt
Securities. However, we may require payment to cover any tax or other
governmental charge that may be imposed in connection with a registration
of
transfer or exchange. We will not be required to execute or to
provide for the registration, transfer or exchange of any Debt
Security
|
·
|
during
the 15 days before an interest payment
date;
|
|
·
|
during
the 15 days before giving any notice of redemption;
or
|
|
·
|
selected
for redemption except the unredeemed portion of any Debt Security
being
redeemed in part.
|
(Indenture,
Section 305.)
Security
Except
as
described below under this heading and under “Issuance of Additional Debt
Securities,” and subject to the exceptions discussed under “Discharge of Lien;
Release Date,” all Debt Securities will be secured, equally and ratably,
by:
|
|
(1)
|
the
first lien of an equal principal amount of First Mortgage Bonds
delivered
by us to the Indenture Trustee, and other Class A Bonds as described
below; as discussed under DESCRIPTION OF THE FIRST MORTGAGE BONDS
–
“Security and Priority,” the Mortgage constitutes a first mortgage lien on
the Mortgaged Property; and
|
|
|
(2)
|
the
lien of the Indenture, which is junior to the lien of the Mortgage,
upon
our Electric and Gas Utility Property (as defined below under Lien
of the
Indenture). If we acquire any property that is subject to a
Class A Mortgage (as described below), the lien of the Indenture
would be
junior to the lien of that Class A Mortgage with respect to any
of our
Electric and Gas Utility Property subject to the lien of that Class
A
Mortgage.
|
See
“Discharge of Lien; Release Date” for a discussion of provisions of the
Indenture pursuant to which, subject to the satisfaction of the specified
conditions, the lien of the Indenture would be discharged and the Debt
Securities would become our unsecured obligations.
Class
A Bonds
As
discussed below under “Consolidation, Merger and Conveyance of Assets,” we will
be permitted to merge or consolidate with another company upon meeting specified
requirements. Following a merger or consolidation of another company
into us, we could deliver to the Indenture Trustee first mortgage bonds issued
under an existing mortgage on the properties of the other company as the
basis
for the issuance of additional Debt Securities. In this event, the
Debt Securities would be secured, additionally, by the first lien of the
first
mortgage bonds and by the lien of the Indenture on the mortgaged property
acquired from the other company, which would be junior to the lien of the
existing mortgage. The Mortgage and all the other mortgages are
collectively referred to in this document as the “Class A Mortgages,” and
all first mortgage bonds issued under the Class A Mortgages are
collectively referred to in this document as the “Class A
Bonds.” (Indenture, Section 1706.)
Class
A
Bonds, including First Mortgage Bonds, that are the basis for the authentication
and delivery of Debt Securities (a) will be delivered to, and registered in
the name of, the Indenture Trustee or its nominee and will be owned and held
by
the Indenture Trustee, subject to the provisions of the Indenture, for the
benefit of the holders of all Debt Securities outstanding from time to time;
(b) will mature or be subject to mandatory redemption on the same dates,
and in the same principal amounts, as the Debt Securities; and (c)(i) may,
but need not, bear interest and (ii) may, but need not, contain provisions
for their redemption at our option, any redemption to be made at a redemption
price or prices not less than the principal amount of the Class A
Bonds. (Indenture, Sections 1602 and 1701.) To the extent
that Class A Bonds do not bear interest, holders of Debt Securities will
not
have the benefit of the lien of a Class A Mortgage in respect of an amount
equal to accrued interest, if any, on the Debt Securities; however, the holders
will nevertheless have the benefit of the lien of the Indenture in respect
of
the amount of accrued interest.
Any
payment by us of principal of or premium or interest on the Class A Bonds
delivered to and held by the Indenture Trustee will be applied by the Indenture
Trustee to the payment of any principal, premium or interest, as the case
may
be, in respect of the Debt Securities which is then due. Our
obligation under the Indenture to make payment in respect of the Debt Securities
will be deemed satisfied and discharged to the extent of the
payment. If, at the time of any payment of principal of Class A
Bonds, there is no principal then due in respect of the Debt Securities,
the
proceeds of the payment will constitute “Funded Cash” and will be held by the
Indenture Trustee as part of the collateral for the Debt Securities, to be
withdrawn, used or applied as provided in the Indenture. If, at the
time of any payment of premium or interest on Class A Bonds, there is no
premium
or interest then due on the Debt
Securities,
the payment will be remitted to us at our request; except that, if any event
of
default under the Indenture, as described below, has occurred and is continuing,
the payment will be held as part of the collateral for the Debt Securities
until
the event of default under the Indenture has been cured or
waived. (Indenture, Section 1702.) See “Withdrawal of
Cash” below.
Any
payment by us on Debt Securities authenticated and delivered on the basis
of the
delivery to the Indenture Trustee of Class A Bonds (other than by application
of
the proceeds of a payment in respect of the Class A Bonds) will, to that
extent,
be deemed to satisfy and discharge our obligations, if any, to make a
corresponding payment, in respect of the Class A Bonds which is then
due. (Indenture, Section 1702.)
The
Indenture Trustee may not sell, assign or otherwise transfer any Class A
Bonds
except to a successor trustee under the Indenture. (Indenture,
Section 1704.) At the time any Debt Securities that have been
authenticated and delivered upon the basis of Class A Bonds cease to be
outstanding (other than as a result of the application of the proceeds of
the
payment or redemption of the Class A Bonds), the Indenture Trustee will
surrender to us, or upon our order, an equal principal amount of the Class
A
Bonds. (Indenture, Section 1703.)
When
the
aggregate principal amount of all Class A Bonds outstanding under all Class
A
Mortgages, other than those held by the Indenture Trustee, does not exceed
the
greater of 5% of the net book value of our Electric and Gas Utility Property
(as
described below) or 5% of our Capitalization (as described below), then,
at our
request and subject to satisfaction of specified conditions, the Class A
Bonds
held by the Indenture Trustee will be deemed satisfied and discharged, the
Indenture Trustee will surrender the Class A Bonds for cancellation, and
the
Debt Securities will become our senior unsecured debt, subject to Permitted
Secured Debt and the exceptions described below. (Indenture, Section
1811.) See “Discharge of Lien; Release Date” below.
At
the
date of this prospectus, the only Class A Mortgage is the Mortgage, and the
only Class A Bonds issuable at this time are First Mortgage Bonds issuable
under
the Mortgage. When all of the outstanding First Mortgage Bonds which
are not held by the Indenture Trustee do not exceed the greater of 5% of
the net
book value of our Electric and Gas Utility Property or 5% of our Capitalization,
and assuming no other Class A Mortgage exists at the time, the Indenture
may become unsecured.
“Capitalization”
means the total of all the following items appearing on, or included in,
our
unconsolidated balance sheet: (i) liabilities for indebtedness maturing more
than 12 months from the date of determination, and (ii) common stock, common
stock expense, accumulated other comprehensive income or loss, preferred
stock,
preference stock, premium on common stock and retained earnings (however
the
foregoing may be designated), less, to the extent not otherwise deducted,
the
cost of shares of our capital stock held in our treasury, if
any. Capitalization is determined in accordance with generally
accepted accounting principles and practices applicable to the type of business
in which we are engaged, and may be determined as of the date not more than
60
days prior to the happening of the event for which the determination is being
made.
Lien
of the Indenture
The
Indenture creates a lien on substantially all of our real and fixed electricity
generation, transmission and distribution, and natural gas distribution,
properties owned by us immediately prior to July 1, 2000, together with
improvements, extensions and additions to, and renewals, replacements and
substitutions of or for, any part or parts of these properties, other than
Excepted Property (as defined below). At the date of this prospectus,
these properties are located in the states of North Dakota, South Dakota,
Montana and Wyoming. These properties, regardless of whether the
Release Date has occurred, are sometimes referred to as our “Electric and Gas
Utility Property.” At the date of this prospectus, substantially all
of this property is included within the category of property, plant and
equipment on our balance sheet, this property had a net book value as of
June
30, 2003 of approximately $364.6 million, and this property, while subject
to
the lien of the Indenture, is also subject to the prior lien of the
Mortgage. For so long as the Release Date has not occurred, the Debt
Securities will have the benefit of the first mortgage lien of the Mortgage
on
the Mortgaged Property to the extent of the aggregate principal amount of
First
Mortgage Bonds held by the Indenture Trustee, and also the benefit of the
lien
of any additional Class A Mortgage on any property subject to that Class A
Mortgage to the extent of the aggregate principal amount of Class A Bonds,
issued under that Class A Mortgage, held by the Indenture
Trustee.
Permitted
Liens
The
lien
of the Indenture is subject to Permitted Liens described in the Indenture.
These
Permitted Liens include, among others, liens existing at the execution date
of
the Indenture such as the lien of the Mortgage, liens on property at the
time we
acquire the property such as the lien of any other Class A Mortgage, tax
liens
and other governmental charges which are not delinquent or which are being
contested in good faith, mechanics’, construction and materialmen’s liens,
specified judgment liens, easements, reservations and rights of others
(including governmental entities) in, and defects of title in, our property,
specified leases and leasehold interests, liens to secure public obligations,
rights of others to take minerals, timber, electric energy or capacity, gas,
water, steam or other products produced by us or by others on our property,
rights and interests of Persons other than us arising out of agreements relating
to the common ownership or joint use of property, and liens on the interests
of
those Persons in the property, liens which have been bonded or for which
other
security arrangements have been made, liens created in connection with the
issuance of tax-exempt bonds, purchase money liens and liens related to the
construction or acquisition of property, or the development or expansion
of
property, liens which secure specified Debt Securities equally and ratably
with
other obligations, liens securing debt which matures within one year from
date
of issuance, and additional liens on any of our property (other than Excepted
Property, as described below) to secure debt for borrowed money in an aggregate
principal amount not exceeding the greater of 10% of our Net Tangible Assets
(as
described below) or 10% of our Capitalization. (Indenture, Granting
Clauses and Sections 101 and 707.)
The
Indenture provides that the Indenture Trustee will have a lien, prior to
the
lien on behalf of the holders of Debt Securities, upon the collateral for
the
Debt Securities for the payment of its reasonable compensation and expenses
and
for indemnity against specified liabilities. (Indenture, Section
1007.) This lien would be a Permitted Lien under the
Indenture.
Excepted
Property
The
lien
of the Indenture does not cover, among other things, the following types
of
property:
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all
properties acquired by us on or after July 1, 2000, including the
properties acquired in the merger with Great Plains Energy Corp.
and Great
Plains Natural Gas Co. (which include all our gas distribution
properties
located in the state of Minnesota and certain gas distribution
properties
located in the southeastern part of North Dakota), but excluding
improvements, extensions and additions to, and renewals, replacements
and
substitutions of or for, any part or parts of the fixed electricity
generation, transmission and distribution, and natural gas distribution,
properties owned by us immediately prior to July 1, 2000 unless
otherwise
excepted from the lien of the
Indenture;
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all
property of subsidiaries, including Centennial Energy Holdings,
Inc., WBI
Holdings, Inc., Knife River Corporation, Utility Services, Inc.,
Centennial Energy Resources LLC, Centennial Holdings Capital LLC,
Centennial Energy Resources International Inc, Fidelity Exploration
&
Production Company and any other
subsidiaries;
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all
cash and securities (including the capital stock of the subsidiaries
mentioned in the preceding bullet and any other subsidiaries) not
paid,
deposited or held under the Indenture, and all policies of insurance
on
the lives of our officers;
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all
contracts, leases and other agreements of all kinds, contract rights,
bills, notes and other instruments, accounts receivable, transition
property, claims, demands and
judgments;
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all
governmental and other licenses, permits, franchises, consents
and
allowances; intellectual property rights and other general
intangibles;
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all
vehicles, movable equipment, aircraft and
vessels;
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all
merchandise and appliances acquired for the purpose of resale in
the
ordinary course and conduct of our business, and all materials
and
supplies held for consumption in operation or held in advance of
use
thereof for fixed capital purposes;
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all
electric energy, gas, steam and other materials and products generated,
manufactured, produced or purchased by us for sale, distribution
or use in
the ordinary course and conduct of our
business;
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all
property which is the subject of a lease agreement designating
us as
lessee, and all our right, title and interest in and to the property
and
in, to and under the lease agreement, whether or not the lease
agreement
is intended as security;
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all
property which prior to the execution date of the Indenture has
been
released from the lien of the
Mortgage;
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all
property which subsequent to the execution date of the Indenture
has been
released from the lien of the Indenture;
and
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any
and all property not acquired or constructed by us for use in our
electricity generation, transmission and distribution, and natural
gas
distribution business.
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We
sometimes refer to property of ours not covered by the lien of the Indenture
as
“Excepted Property.” (Indenture, Granting Clauses.)
We
may
enter into supplemental indentures with the Indenture Trustee, without the
consent of the holders, in order to subject additional property (including
property that would otherwise be excepted from the lien) to the lien of the
Indenture. (Indenture, Section 1301.) This property would
then constitute Property Additions and part of the collateral for the Debt
Securities, and would be available as a basis for the issuance of Debt
Securities. See “Issuance of Additional Debt
Securities.”
The
Indenture provides that after-acquired properties (other than Excepted Property)
that are improvements, extensions or additions to, or renewals, replacements
or
substitutions of or for, any part or parts of our Electric and Gas Utility
Property will be subject to the lien of the Indenture. (Indenture,
Second Granting Clause.) We may also elect to subject additional
property to the lien of the Indenture by amending the Indenture.
See
“Discharge of Lien; Release Date” for a discussion of provisions of the
Indenture pursuant to which, subject to the satisfaction of specified
conditions, all the collateral for the Debt Securities would be released
from
the lien of the Indenture, the Class A Bonds held by the Indenture Trustee
would
be surrendered for cancellation, and Debt Securities would become our unsecured
obligations.
Issuance
of Additional Debt Securities
Subject
to the issuance restrictions described below, the maximum principal amount
of
Debt Securities that may be authenticated and delivered under the Indenture
is
unlimited. (Indenture, Section 301.) Prior to the Release
Date, Debt Securities of any series may be issued from time to time on the
basis
of, and in an aggregate principal amount not exceeding:
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the
aggregate principal amount of Class A Bonds delivered to the Indenture
Trustee;
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70%
of the Cost or Fair Value to us (whichever is less) of Property
Additions
(as described below) which do not constitute Funded Property (generally,
Property Additions to the extent that they are subject to the lien
of a
Class A Mortgage or which have been made the basis of the authentication
and delivery of Debt Securities, the release of collateral for
the Debt
Securities or the withdrawal of cash, which have been substituted
for
retired Funded Property or which have been used for other specified
purposes (Indenture, Section 102)) after specified deductions and
additions, primarily including adjustments to offset property
retirements;
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the
aggregate principal amount of retired Debt Securities, but if Class
A
Bonds had been made the basis for the authentication and delivery
of the
retired Debt Securities, only after the discharge of the related
Class A Mortgage; or
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an
amount of cash deposited with the Indenture
Trustee.
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(Indenture,
Sections 1601 through 1605.)
Property
Additions generally include any property that is owned by us and is subject
to
the lien of the Indenture. (Indenture, Section 103.)
We
expect
that, until the Release Date, we will issue Debt Securities primarily on
the
basis of First Mortgage Bonds. However, we have the right to issue
additional Debt Securities on the basis of Property Additions, retired Debt
Securities and cash deposits, and Class A Bonds not issued under the
Mortgage.
Release
of Property
Unless
an
event of default under the Indenture has occurred and is continuing, we may
obtain the release from the lien of the Indenture of any collateral for the
Debt
Securities, except for cash held by the Indenture Trustee, upon delivery
to the
Indenture Trustee of an amount in cash equal to the amount, if any, by which
the
Cost of the property to be released (or, if less, the Fair Value to us of
the
property at the time it became Funded Property) exceeds the aggregate
of:
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an
amount equal to the aggregate principal amount of obligations secured
by
Purchase Money Liens upon the property to be released and delivered
to the
Indenture Trustee;
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an
amount equal to the Cost or Fair Value to us (whichever is less)
of
certified Property Additions not constituting Funded Property after
specified deductions and additions, primarily including adjustments
to
offset property retirements (except that these adjustments need
not be
made if the Property Additions were acquired or made within the
90-day
period preceding the release);
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the
aggregate principal amount of Debt Securities that we would be
entitled to
issue on the basis of retired Debt Securities (with the entitlement
being
waived by operation of the
release);
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any
amount of cash and/or an amount equal to the aggregate principal
amount of
obligations secured by Purchase Money Liens upon the property released
delivered to the trustee or other holder of a lien prior to the
lien of
the Indenture, subject to specified limitations described
below;
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the
aggregate principal amount of Debt Securities delivered to the
Indenture
Trustee (with the Debt Securities to be canceled by the Indenture
Trustee); and
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any
taxes and expenses incidental to any sale, exchange, dedication
or other
disposition of the property to be
released.
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(Indenture,
Section 1803.)
Property
that is not Funded Property may generally be released from the lien of the
Indenture without depositing any cash or property with the Indenture Trustee
as
long as (a) the aggregate amount of Cost or Fair Value to us (whichever is
less) of all Property Additions which do not constitute Funded Property
(excluding the property to be released) after some deductions and additions,
primarily including adjustments to offset property retirements, is not less
than
zero or (b) the Cost or Fair Value (whichever is less) of property to be
released does not exceed the aggregate amount of the Cost or Fair Value to
us
(whichever is less) of Property Additions acquired or made within the 90-day
period preceding the release. (Indenture, Section 1804.)
The
Indenture provides simplified procedures for the release of property which
has
been released from the lien of a Class A Mortgage, minor properties and
property taken by eminent domain, and provides for dispositions of certain
obsolete property and grants or surrender of certain rights without any release
or consent by the Indenture Trustee. (Indenture Sections 1802, 1805,
1807 and 1808.)
If
we
retain any interest in any property released from the lien of the Indenture,
the
Indenture will not become a lien on the property or the interest in the property
or any improvements, extensions or additions to, or any renewals, replacements
or substitutions of or for, any part or parts of the
property. (Indenture, Section 1810.)
Withdrawal
of Cash
Unless
an
event of default under the Indenture has occurred and is continuing, and
subject
to specified limitations, cash held by the Indenture Trustee may, generally,
(1) be withdrawn by us (a) to the extent of the Cost or Fair Value to
us (whichever is less) of Property Additions not constituting Funded Property,
after specified deductions and additions, primarily including adjustments
to
offset retirements (except that these adjustments need not be made if the
Property Additions were acquired or made within the 90-day period preceding
the
withdrawal) or (b) in an amount equal to the aggregate principal amount of
Debt Securities that we would be entitled to issue on the basis of retired
Debt
Securities (with the entitlement to the issuance being waived by operation
of
the withdrawal) or (c) in an amount equal to the aggregate principal amount
of any outstanding Debt Securities delivered to the Indenture Trustee, or
(2) upon our request, be applied to (a) the purchase of Debt
Securities or (b) the payment (or provision for payment) at stated maturity
of any Debt Securities or the redemption (or provision for payment) of any
Debt
Securities which are redeemable (Indenture, Section 1806); except that cash
deposited with the Indenture Trustee as the basis for the authentication
and
delivery of Debt Securities, as well as cash representing a payment of principal
of Class A Bonds, may, in addition, be withdrawn in an amount equal to the
aggregate principal amount of Class A Bonds delivered to the Indenture
Trustee. (Indenture, Sections 1605 and 1702.)
Discharge
of Lien; Release Date
At
any
time when the aggregate principal amount of all Class A Bonds outstanding
under
all Class A Mortgages, other than those held by the Indenture Trustee, does
not
exceed the greater of 5% of the net book value of our Electric and Gas Utility
Property or 5% of our Capitalization, the Indenture may be amended and
supplemented, without the consent of the holders of Debt Securities, to
eliminate all terms and conditions relating to collateral for the Debt
Securities, with the result that our obligations under the Indenture and
the
Debt Securities would be entirely unsecured. We refer to the date on
which the elimination of collateral occurs as the “Release Date.”
The
occurrence of the Release Date is subject to our delivery of the following
documents to the Indenture Trustee:
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a
company order requesting execution and delivery by the Indenture
Trustee
of a supplemental indenture and other instruments necessary to
discharge,
cancel, terminate or satisfy the lien of the
Indenture;
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an
officer’s certificate stating that
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(1)
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to
the knowledge of the officer, no event of default under the Indenture
has
occurred and is continuing; and
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(2)
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the
aggregate principal amount of all Class A Bonds outstanding under
all
Class A Mortgages, other than those held by the Indenture Trustee,
does
not exceed the greater of 5% of the net book value of our Electric
and Gas
Utility Property or 5% of our Capitalization;
and
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an
opinion of counsel to the effect that none of our Electric and
Gas Utility
Property, other than Excepted Property, is subject to any lien
other than
the lien of the Indenture and Permitted
Liens.
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Upon
the
execution and delivery of the amendment of the Indenture as contemplated
above,
the lien of the Indenture will be deemed to have been satisfied and discharged
and the Indenture Trustee will release the collateral for the Debt Securities
from the lien of the Indenture and surrender all Class A Bonds held by the
Indenture Trustee under the Indenture to the respective Class A Trustee for
cancellation. (Indenture, Section 1811.)
As
of
June 30, 2003, we had $35 million aggregate principal amount outstanding
of a
series of First Mortgage Bonds that is not redeemable prior to maturity and
matures on April 1, 2012. Unless we purchase or defease some of this
series of First Mortgage Bonds or increase the net book value of our Electric
and Gas Utility Property or our Capitalization to at least $700 million,
a
Release Date is unlikely to occur prior to April 1, 2012.
Limitation
on Secured Debt
So
long
as any of the Debt Securities remain outstanding, we will not issue any Secured
Debt other than Permitted Secured Debt (in each case as defined below) without
the consent of the holders of a majority in principal amount of the outstanding
Debt Securities of all series with respect to which this covenant is made,
considered as one class; provided, however, that this covenant will not prohibit
the creation or existence of any Secured Debt if either:
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we
make effective provision whereby all Debt Securities then outstanding
will
be secured equally and ratably with the Secured Debt;
or
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we
deliver to the Indenture Trustee bonds, notes or other evidences
of
indebtedness secured by the lien which secures the Secured Debt
in an
aggregate principal amount equal to the aggregate principal amount
of the
Debt Securities then outstanding and meeting other requirements
set forth
in the Indenture.
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“Secured
Debt” means Debt created, issued, incurred or assumed by us which is secured by
a lien upon any of our property (other than Excepted Property). For
purposes of this covenant, any Capitalized Lease Liabilities will be deemed
to
be Debt secured by a lien on our property.
“Debt”
means:
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our
indebtedness for borrowed money evidenced by a bond, debenture,
note or
other written instrument or agreement by which we are obligated
to repay
the borrowed money;
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any
guaranty by us of any indebtedness of another person;
and
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any
Capitalized Lease Liabilities.
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“Debt”
does not include, among other things:
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indebtedness
under any installment sale or conditional sale agreement or any
other
agreement relating to indebtedness for the deferred purchase price
of
property or services;
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any
trade obligations (including any obligations under power or other
commodity purchase agreements and any associated hedges or derivatives)
or
other obligations in the ordinary course of
business;
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obligations
under any lease agreement that are not Capitalized Lease Liabilities;
or
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any
liens securing indebtedness, neither assumed nor guaranteed by
us nor on
which we customarily pay interest, existing upon real estate or
rights in
or relating to real estate acquired by us for substation, transmission
line, transportation line, distribution line or right of way
purposes.
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“Permitted
Secured Debt” means, as of any particular time:
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Class
A Bonds and Debt Securities issued prior to the Release
Date;
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Secured
Debt which matures less than one year from the date of the issuance
or
incurrence and is not extendible at the option of the issuer; and
any
refundings, refinancings and/or replacements of any the Secured
Debt by or
with Secured Debt that matures less than one year from the date
of the
refunding, refinancing and/or replacement and is not extendible
at the
option of the issuer;
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Secured
Debt secured by Purchase Money Liens or any other liens existing
or placed
upon property at the time of, or within one hundred eighty (180)
days
after, the acquisition thereof by us, and any refundings, refinancings
and/or replacements of any the Secured Debt; provided, however,
that no
Purchase Money Lien or other Lien of this type will extend to or
cover any
of our property other than (1) the property so acquired and
improvements, extensions and additions to the property and renewals,
replacements and substitutions of or for the property or any part
or parts
of the property and (2) with respect to Purchase Money Liens, other
property subsequently acquired by
us;
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Secured
Debt relating to governmental obligations the interest on which
is not
included in gross income for purposes of federal income taxation
pursuant
to Section 103 of the Internal Revenue Code of 1986, as amended
(or any
successor provision of law), for the purpose of financing or refinancing,
in whole or in part, costs of acquisition or construction of property
to
be used by us, to the extent that the lien which secures the Secured
Debt
is required either by applicable law or by the issuer of the governmental
obligations or is otherwise necessary in order to establish or
maintain
the exclusion from gross income; and any refundings, refinancings
and/or
replacements of any Secured Debt by or with similar Secured
Debt;
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Secured
Debt (i) which is related to the construction or acquisition of
property not previously owned by us or (ii) which is related to the
financing of a project involving the development or expansion of
our
property and (iii) in either case, the obligee in respect of which
has no recourse to us or any of our property other than the property
constructed or acquired with the proceeds of the transaction or
the
project financed with the proceeds of the transaction (or the proceeds
of
the property or the project); and any refundings, refinancings
and/or
replacements of any Secured Debt by or with Secured Debt described
in
clause (iii) above; and
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in
addition to the Permitted Secured Debt described above, Secured
Debt not
otherwise so permitted in an aggregate principal amount not exceeding
the
greater of 10% of our Net Tangible Assets or 10% of our
Capitalization.
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“Net
Tangible Assets” means the amount shown as total assets on our unconsolidated
balance sheet, less (i) intangible assets including, but without limitation,
such items as goodwill, trademarks, trade names, patents, unamortized debt
discount and expense and other regulatory assets carried as assets on our
unconsolidated balance sheet and (ii) appropriate adjustments, if any, on
account of minority interests. Net Tangible Assets will be determined
in accordance with generally accepted accounting principles and practices
applicable to the type of business in which we are engaged.
“Capitalized
Lease Liabilities” means the amount, if any, shown as liabilities on our
unconsolidated balance sheet for capitalized leases of electric transmission
and
distribution property not owned by us, which amount will be determined in
accordance with generally accepted accounting principles and practices
applicable to the type of business in which we are engaged.
(Indenture,
Section 707.)
Defeasance
We
will
be discharged from our obligations on the Debt Securities of a particular
series
if we irrevocably deposit with the Indenture Trustee or any paying agent,
other
than us, sufficient cash or government securities to pay the principal,
interest, any premium and any other sums when due on the stated maturity
date or
a redemption date of that series of Debt Securities. (Indenture,
Section 801.)
Consolidation,
Merger and Conveyance of Assets
Under
the
terms of the Indenture, we may not consolidate with or merge into any other
entity or convey, transfer or lease as, or substantially as, an entirety
to any
entity our Electric and Gas Utility Property, unless:
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the
surviving or successor entity, or an entity which acquires by conveyance
or transfer or which leases our Electric and Gas Utility Property
as, or
substantially as, an entirety, is organized and validly existing
under the
laws of any domestic jurisdiction and it expressly assumes our
obligations
on all Debt Securities then outstanding under the Indenture and
if the
consolidation, merger, conveyance, sale or other transfer occurs
prior to
the Release Date, confirms the lien of the Indenture on the collateral
for
the Debt Securities;
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in
the case of a lease, the lease is made expressly subject to termination
by
us or by the Indenture Trustee and by the purchaser of the property
so
leased at any sale thereof at any time during the continuance of
an event
of default under the Indenture;
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we
shall have delivered to the Indenture Trustee an officer’s certificate and
an opinion of counsel as provided in the Indenture;
and
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immediately
after giving effect to the transaction, no event of default under
the
Indenture, or event which, after notice or lapse of time or both,
would
become an event of default under the Indenture, shall have occurred
and be
continuing.
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(Indenture,
Section 1201.) In the case of the conveyance or other transfer of the Electric
and Gas Utility Property as, or substantially as, an entirety to any other
person, upon the satisfaction of all the conditions described above, we would
be
released and discharged from all our obligations under the Indenture and
on the
Debt Securities then outstanding unless we elect to waive release and
discharge. (Indenture, Section 1204.)
The
Indenture does not prevent or restrict:
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any
conveyance or other transfer, or lease, of any part of our Electric
and
Gas Utility Property that does not constitute the entirety, or
substantially the entirety, of our Electric and Gas Utility Property;
or
(Indenture, Section 1205.)
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any
conveyance, transfer or lease of any of our properties where we
retain
Electric and Gas Utility Property with a fair value in excess of
143% of
the aggregate principal amount of all outstanding Debt Securities,
and any
other outstanding debt securities that rank equally with, or senior
to,
the Debt Securities with respect to the Electric and Gas Utility
Property,
other than any Class A Bonds held by the Indenture
Trustee. This fair value will be determined within 90 days of
the conveyance, transfer or lease by an independent expert that
we select
and that is approved by the Indenture Trustee. (Indenture,
Section 1206.)
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The
terms
of the Indenture do not restrict us in a merger in which we are the surviving
entity. (Indenture, Section 1205.)
Events
of Default
“Event
of
default,” when used in the Indenture with respect to Debt Securities, means any
of the following:
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failure
to pay interest on any Debt Security for 30 days after it is
due;
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·
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failure
to pay the principal of or any premium on any Debt Security when
due;
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·
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failure
to perform any other covenant in the Indenture that continues for
90 days
after we receive written notice from the Indenture Trustee, or
we and the
Indenture Trustee receive a written notice from the holders of
at least
33% in aggregate principal amount of the outstanding Debt Securities,
unless the Trustee, or the Trustee and the holders of a principal
amount
of Debt Securities not less than the principal amount of Debt Securities
the
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holders
of which gave such notice, as the case may be, agree in writing
to an
extension of such period prior to its expiration; provided, however,
that
the Trustee, or the Trustee and the holders of such principal amount
of
Debt Securities, as the case may be, shall be deemed to have agreed
to an
extension of such period if corrective action is initiated by us
within
such period and is being diligently
pursued;
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·
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events
of bankruptcy, insolvency or our reorganization as specified in
the
Indenture;
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·
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as
long as the Indenture Trustee holds any outstanding Class A Bonds
which
were delivered as the basis for the authentication and delivery
of
outstanding Debt Securities, the occurrence of a matured event
of default
under the related Class A Mortgage (other than a matured event
of default
which (i) is not a failure to make payments on Class A Bonds and
is not of
similar kind or character to the event of default relating to events
of
bankruptcy, insolvency or reorganization, referred to above, and
(ii) has
not resulted in the acceleration of the outstanding Class A Bonds
under
the Class A Mortgage); provided, however, that the waiver or cure
of the
event of default under a Class A Mortgage will constitute a waiver
and
cure of the corresponding event of default under the Indenture,
and the
rescission and annulment of the consequences thereof will constitute
a
rescission and annulment of the corresponding consequences under
the
Indenture; or
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·
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any
other event of default included in any supplemental indenture,
board
resolution or officer’s certificate establishing that series of Debt
Securities.
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(Indenture,
Sections 301, 901 and 1301.)
Remedies
If
an
event of default under the Indenture occurs and is continuing, then the
Indenture Trustee or the holders of at least 33% in aggregate principal amount
of the outstanding Debt Securities may declare the principal amount of all
of
the Debt Securities to be due and payable immediately.
At
any
time after a declaration of acceleration has been made and before a judgment
or
decree for payment of the money due has been obtained by the Indenture Trustee,
the event of default under the Indenture giving rise to the declaration of
acceleration will be considered cured, and the declaration and its consequences
will be considered rescinded and annulled, if:
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·
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we
have paid or deposited with the Indenture Trustee a sum sufficient
to
pay:
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(1)
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all
overdue interest on all outstanding Debt
Securities;
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(2)
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the
principal of and premium, if any, on the outstanding Debt Securities
that
have become due otherwise than by the declaration of acceleration
and
overdue interest thereon;
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(3)
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interest
on overdue interest to the extent lawful;
and
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(4)
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all
amounts due to the Indenture Trustee under the Indenture;
and
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·
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any
other event of default under the Indenture with respect to the
Debt
Securities of that series has been cured or waived as provided
in the
Indenture.
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(Indenture,
Section 902.)
There
is
no automatic acceleration, even in the event of our bankruptcy, insolvency
or
reorganization.
Subject
to the Indenture, under specified circumstances and to the extent permitted
by
law, if an event of default under the Indenture occurs and is continuing
prior
to the Release Date, the Indenture Trustee has the power to appoint a receiver
of the collateral for the Debt Securities, and is entitled to all other remedies
available to mortgagees and secured parties under the Uniform Commercial
Code or
any other applicable law. (Indenture, Section 917.)
Upon
the
occurrence and continuance of an event of default under the Indenture after
the
Release Date, the remedies of the Indenture Trustee and the holders under
the
Indenture would be limited to the rights of unsecured creditors.
In
addition to every other right and remedy provided in the Indenture, the
Indenture Trustee may exercise any right or remedy available to the Indenture
Trustee in its capacity as owner and holder of Class A Bonds which arises
as a
result of a default or matured event of default under any Class A Mortgage,
whether or not an event of default under the Indenture has occurred and is
continuing. (Indenture, Section 916.)
Other
than its duties in case of an event of default under the Indenture, the
Indenture Trustee is not obligated to exercise any of its rights or powers
under
the Indenture at the request, order or direction of any of the holders, unless
the holders offer the Indenture Trustee a reasonable
indemnity. (Indenture, Section 1003.) If they provide this reasonable
indemnity, the holders of a majority in principal amount of the outstanding
Debt
Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee,
or
exercising any power conferred upon the Indenture Trustee. The
Indenture Trustee is not obligated to comply with directions that conflict
with
law or other provisions of the Indenture. (Indenture,
Section 912.)
No
holder
of Debt Securities will have any right to institute any proceeding under
the
Indenture, or any remedy under the Indenture, unless:
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the
holder has previously given to the Indenture Trustee written notice
of a
continuing event of default under the
Indenture;
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·
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the
holders of a majority in aggregate principal amount of the outstanding
Debt Securities of all series have made a written request to the
Indenture
Trustee, and have offered reasonable indemnity to the Indenture
Trustee to
institute proceedings; and
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·
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the
Indenture Trustee has failed to institute any proceeding for 60
days after
notice and has not received during that period any direction from
the
holders of a majority in aggregate principal amount of the outstanding
Debt Securities, inconsistent with the written request of holders
referred
to above.
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(Indenture,
Section 907.) However, these limitations do not apply to a suit by a
holder of an Debt Security for payment of the principal, premium, if any,
or
interest on the Debt Security on or after the applicable due
date. (Indenture, Section 908.)
We
will
provide to the Indenture Trustee an annual statement by an appropriate officer
as to our compliance with all conditions and covenants under the
Indenture. (Indenture, Section 705.)
Modification
and Waiver
Without
the consent of any holder of Debt Securities, we and the Indenture Trustee
may
enter into one or more supplemental indentures for any of the following
purposes:
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to
evidence the assumption by any permitted successor of our covenants
in the
Indenture and in the Debt
Securities;
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to
permit an entity acquiring a substantial portion of our Electric
and Gas
Utility Property to assume a pro rata share of the outstanding
Debt
Securities based upon the net book value of the Electric and Gas
Utility
Property acquired by that entity and to release us and our properties
from
any obligations or liens under the Indenture with respect to those
assumed
Debt Securities, provided that the assumed Debt Securities will
be secured
by a lien on the acquired Electric and Gas Utility Property to
substantially the same extent and upon substantially the same terms
as
provided in the Indenture except for the substitution of the acquiring
entity for us;
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to
add one or more covenants or other provisions for the benefit of
the
holders of all or any series or tranche of Debt Securities, or
to
surrender any right or power conferred upon
us;
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·
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to
add additional events of default under the Indenture for all or
any series
of Debt Securities;
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·
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to
change or eliminate or add any provision to the Indenture; provided,
however, if the change will adversely affect the interests of the
holders
of Debt Securities of any series in any material respect, the change,
elimination or addition will become effective
only:
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(1)
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when
the consent of the holders of Debt Securities of such series has
been
obtained in accordance with the Indenture;
or
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(2)
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when
no Debt Securities of the affected series remain outstanding under
the
Indenture;
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·
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to
provide additional security for any Debt
Securities;
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·
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to
establish the form or terms of Debt Securities of any other series
as
permitted by the Indenture;
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·
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to
provide for the authentication and delivery of bearer securities
with or
without coupons;
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·
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to
evidence and provide for the acceptance of appointment by a separate
or
successor Trustee or co-trustee;
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·
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to
provide for the procedures required for use of a noncertificated
system of
registration for the Debt Securities of all or any
series;
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to
change any place where principal, premium, if any, and interest
shall be
payable, Debt Securities may be surrendered for registration of
transfer
or exchange and notices to us may be
served;
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to
amend and restate the Indenture as originally executed and as amended
from
time to time, with additions, deletions and other changes that
do not
adversely affect the interests of the holders of Debt Securities
of any
series in any material respect;
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to
cure any ambiguity or inconsistency;
or
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after
the Release Date, to amend the Indenture to eliminate any provisions
related to the lien of the Indenture, collateral for the Debt Securities
and Class A Bonds which are no longer
applicable.
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(Indenture,
Section 1301.)
The
holders of at least a majority in aggregate principal amount of the Debt
Securities of all series then outstanding may waive compliance by us with
some
restrictive provisions of the Indenture. (Indenture, Section 706.)
The holders of not less than a majority in principal amount of the outstanding
Debt Securities may waive any past default under the Indenture, except a
default
in the payment of principal, premium, if any, or interest and certain covenants
and provisions of the Indenture that cannot be modified or be amended without
the consent of the holder of each outstanding Debt Security of any series
affected. (Indenture, Section 913.)
Except
as
provided below, the consent of the holders of a majority in aggregate principal
amount of the Debt Securities of all series then outstanding, considered
as one
class, is required for all other modifications to the
Indenture. However, if less than all of the series of Debt Securities
outstanding are directly affected by a proposed supplemental indenture, then
the
consent only of the holders of a majority in aggregate principal amount of
the
outstanding Debt Securities of all series that are directly affected, considered
as one class, will be required. Notwithstanding the foregoing, no
amendment or modification may without the consent of the holders of each
Debt
Security of all directly affected series then outstanding:
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change
the stated maturity of the principal of, or any installment of
principal
of or interest on, any Debt Security, or reduce the principal amount
of
any Debt Security or its rate of interest or change the method
of
calculating that interest rate or reduce any premium payable upon
redemption, or change the currency in which payments are made,
or impair
the right to institute suit for the enforcement of any payment
on or after
the stated maturity of any Debt
Security;
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create
any lien ranking prior to the lien of the Indenture with respect
to more
than 10% of the collateral for the Debt Securities or, except as
provided
in the Indenture in connection with releases, the withdrawal of
cash held
by the Indenture Trustee and the Release Date, terminate the lien
of the
Indenture on more than 10% of the collateral for the Debt Securities
or
deprive any holder of the benefits of the security of the lien
of the
Indenture;
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reduce
the percentage in principal amount of the outstanding Debt Securities
of
any series the consent of the holders of which is required for
any
supplemental indenture or any waiver of compliance with a provision
of the
Indenture or any default thereunder and its consequences, or reduce
the
requirements for quorum or voting;
or
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·
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modify
some of the provisions of the Indenture relating to supplemental
indentures, waivers of some covenants and waivers of past defaults
with
respect to the Debt Securities of any
series.
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A
supplemental indenture that changes the Indenture solely for the benefit
of one
or more particular series of Debt Securities, or modifies the rights of the
holders of Debt Securities of one or more series, will not affect the rights
under the Indenture of the holders of the Debt Securities of any other
series. (Indenture, Section 1302.)
The
Indenture provides that Debt Securities owned by us or anyone else required
to
make payment on the Debt Securities shall be disregarded and considered not
to
be outstanding in determining whether the required holders have given a request
or consent. (Indenture, Section 101.)
We
may
fix in advance a record date to determine the required number of holders
entitled to give any request, demand, authorization, direction, notice, consent,
waiver or similar act of the holders, but we have no obligation to do
so. If we fix a record date, that request, demand, authorization,
direction, notice, consent, waiver or other act of the holders may be given
before or after that record date, but only the holders of record at the close
of
business on that record date will be considered holders for the purposes
of
determining whether holders of the required percentage of the outstanding
Debt
Securities have authorized or agreed or consented to the request, demand,
authorization, direction, notice, consent, waiver or other act of the
holders. For that purpose, the outstanding Debt Securities will be
computed as of the record date.
Any
request, demand, authorization, direction, notice, consent, election, waiver
or
other act of a holder of any Debt Security will bind every future holder
of that
Debt Security and the holder of every Debt Security issued upon the registration
of transfer of or in exchange for that Debt Security. A transferee
will also be bound by acts of the Indenture Trustee or us in reliance thereon,
whether or not notation of that action is made upon the Debt
Security. (Indenture, Section 106.)
Voting
of Class A Bonds
The
Indenture provides that the Indenture Trustee will, as holder of Class A
Bonds
delivered as the basis for the issuance of Debt Securities, attend meetings
of
bondholders under the related Class A Mortgage, or deliver its proxy in
connection with those meetings, that relate to matters with respect to which
it,
as a holder, is entitled to vote or consent. The Indenture provides
that, so long as no event of default under the Indenture has occurred and
is
continuing, the Indenture Trustee will, as holder of the Class A Bonds, vote
or
consent (without any consent or other action by the holders of the Debt
Securities, except as described in the proviso of paragraph (7) below) in
favor
of any amendments or modifications to the Class A Mortgage of substantially
the
same tenor and effect as follows:
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(1)
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to
modify any Class A Mortgage to allow us to issue Class A Bonds
up to 70%
of the lower of (a) the fair value to us of the property subject
to the
lien of that Class A Mortgage as of a valuation date specified
by us and
(b) the cost of that property as of the valuation
date;
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(2)
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to
make certain technical amendments to the
Mortgage;
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(3)
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to
delete the net earnings test for the issuance of Class A Bonds
and all
references to it in any Class A
Mortgage;
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(4)
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to
amend any Class A Mortgage so we may pay dividends and distributions
to
our common stockholders and repurchase our common stock so long
as our
shareholders’ equity is positive;
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(5)
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to
amend any Class A Mortgage to permit an entity acquiring a substantial
portion of the property subject to the lien of that Class A Mortgage
to
assume a pro rata share of the outstanding Class A Bonds issued
under that
Class A Mortgage based upon the net book value of that property
acquired
by that entity and to release us and our properties from any obligations
or liens under that Class A Mortgage with respect to those assumed
Class A
Bonds, provided that the assumed Class A Bonds will be secured
by a first
lien on that acquired property to substantially the same extent
and upon
substantially the same terms as provided in that Class A Mortgage
except
for the substitution of the acquiring entity for
us;
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(6)
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to
conform any provision of a Class A Mortgage in all material respects
to
the correlative provision of the Indenture, to add to a Class A
Mortgage
any provision not otherwise contained therein which conforms in
all
material respects to a provision contained in the Indenture, to
delete
from a Class A Mortgage any provision to which the Indenture contains
no
correlative provision and any combination of the foregoing;
and/or
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(7)
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with
respect to any amendments or modifications to any Class A Mortgage
other than those amendments or modifications referred to in clauses
(1)
through (6) above, vote all the Class A Bonds delivered under the
Class A Mortgage, or consent with respect thereto, proportionately
with the vote or consent of holders of all other Class A Bonds
outstanding
under the Class A Mortgage the holders of which are eligible to vote
or consent, as evidenced by a certificate delivered by the trustee
under
the Class A Mortgage; provided, however, that the Indenture Trustee
will not vote in favor of, or consent to, any amendment or modification
of
a Class A Mortgage which, if it were an amendment or modification of
the Indenture, would require the consent of holders of Debt Securities
as
described under “Modification and Waiver,” without the prior consent of
holders of Debt Securities which would be required for an amendment
or
modification of the Indenture. (Indenture, Section
1705.)
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As
described more fully in DESCRIPTION OF THE FIRST MORTGAGE BONDS – “Modification”
below, we may make amendments to, or eliminate some of the covenants in,
the
Mortgage with the consent of the holders of 60% of the outstanding First
Mortgage Bonds issued under the Mortgage. A holder of Debt Securities
would no longer benefit from the covenants contained in the Mortgage should
the
Indenture Trustee vote these First Mortgage Bonds to amend or eliminate the
covenants as described above.
Resignation
of a Trustee
The
Indenture Trustee may resign at any time by giving written notice to us or
may
be removed at any time by an act of the holders of a majority in principal
amount of all series of Debt Securities then outstanding delivered to the
Indenture Trustee and us. No resignation or removal of the Indenture
Trustee and no appointment of a successor trustee will be effective until
the
acceptance of appointment by a successor trustee. So long as no event
of default or event which, after notice or lapse of time, or both, would
become
an event of default has occurred and is continuing and except with respect
to a
trustee appointed by act of the holders, if we have delivered to the Indenture
Trustee a resolution of our Board of Directors appointing a successor trustee
and the successor has accepted the appointment in accordance with the terms
of
the Indenture, the Indenture Trustee will be deemed to have resigned and
the
successor will be deemed to have been appointed as trustee in accordance
with
the Indenture. (Indenture, Section 1010.)
Notices
Notices
to holders of Debt Securities will be given by mail to the addresses of the
holders as they may appear in the security register for Debt
Securities. (Indenture, Section 108.)
Title
We,
the
Indenture Trustee, and any of our or the Indenture Trustee’s agents, may treat
the person in whose name Debt Securities are registered as the absolute owner
thereof, whether or not the Debt Securities may be overdue, for the purpose
of
making payments and for all other purposes irrespective of notice to the
contrary. (Indenture, Section 308.)
Governing
Law
The
Indenture is, and the Debt Securities will be, governed by, and construed
in
accordance with, the laws of the state of New York except where otherwise
required by law. (Indenture, Section 114.)
Information
about the Indenture Trustee
The
Indenture Trustee will be The Bank of New York. In addition to acting
as Indenture Trustee, The Bank of New York also acts as the Mortgage
Trustee. The Bank of New York also acts, and may act, as trustee
under various other of our and our affiliates’ indentures, trusts and
guarantees. We and our affiliates maintain deposit accounts and
credit and liquidity facilities and conduct other banking transactions with
the
trustee and its affiliates in the ordinary course of our respective
businesses.
As
discussed above under DESCRIPTION OF THE DEBT SECURITIES – “Security” and
“Discharge of Lien; Release Date,” the Debt Securities will be issued on the
basis of, and primarily secured by, one or more series of first mortgage
bonds
issued by us under the Indenture of Mortgage, dated as of May 1, 1939, made
by
and between MDU (formerly Montana-Dakota Utilities Co.) and The New York
Trust
Company (The Bank of New York, as successor Corporate Trustee (the “Mortgage
Trustee”)) and all indentures supplemental thereto (including the (Forty-Fifth)
Supplemental Indenture, dated as of April 21, 1992, which contains, in Part
II
thereof, a Restatement of Indenture) (collectively, the “Mortgage”) and
delivered by us to the Indenture Trustee. In this prospectus we refer
to all first mortgage bonds issued or to be issued under the Mortgage, including
the first mortgage bonds to be delivered to the Indenture Trustee, as,
collectively, the “First Mortgage Bonds.”
We
will
issue First Mortgage Bonds in an aggregate principal amount equal to the
aggregate principal amount of the Debt Securities, in one or more series,
under
the Mortgage, in fully registered form. First Mortgage Bonds are, or will
be,
secured by a first mortgage lien on the Mortgaged Property as described below
under “Security and Priority.” All First Mortgage Bonds are equally
secured and rank equally with respect to each other.
The
Mortgage is filed as an exhibit to the registration statement. This section
of
the prospectus contains a summary of all material provisions of the
Mortgage. The Mortgage and its associated documents contain the full
legal text of the matters described in this section. Because this
section is a summary, it does not describe every aspect of the First Mortgage
Bonds or the Mortgage. This summary is subject to and qualified in
its entirety by reference to all the provisions of the Mortgage, including
definitions of terms used in the Mortgage, which may be used in this document
without definition. We also include references in parentheses to
sections of the Mortgage. Whenever we refer to particular sections or
defined terms of the Mortgage in this prospectus or in a prospectus supplement,
the references are to the Restatement of Indenture described above, and all
amendments or modifications to the Restatement of Indenture, if any; and
the
sections or defined terms are incorporated by reference into this document
or in
the prospectus supplement. This summary also is subject to and
qualified by reference to the description of the particular terms of the
First
Mortgage Bonds described in the applicable prospectus supplement or
supplements. The Mortgage has been qualified under the Trust
Indenture Act, and you should refer to the Trust Indenture Act for provisions
that apply to the First Mortgage Bonds.
Security
and Priority
In
the
opinion of our General Counsel, the First Mortgage Bonds now or hereafter
issued
will be secured, together with all other First Mortgage Bonds, by a valid
and
direct first mortgage lien on substantially all of the real and fixed properties
owned and all franchises held by us immediately prior to July 1, 2000, together
with improvements, extensions and additions to, and renewals, replacements
and
substitutions of or for, any part or parts of these properties, other than
property expressly excepted or released from the Mortgage (as described below),
subject to the lien of taxes for the current year and the lien of taxes and
assessments not yet delinquent and to specified exceptions and reservations
which do not, in the opinion of counsel, materially affect our title to or
right
to use the properties. This property, other than property
excepted and released from the Mortgage, is sometimes referred to as the
“Mortgaged Property.” There are excepted from Mortgaged
Property all properties acquired by us on or after July 1, 2000, including
the
properties acquired in the merger with Great Plains Energy Corp. and Great
Plains Natural Gas Co. (which include all properties of the Company located
in
the state of Minnesota and all gas distribution properties located in the
southeastern part of North Dakota), but excluding improvements, extensions
and
additions to, and renewals, replacements and substitutions of or for, any
part
or parts of the Mortgaged Property owned by us immediately prior to July
1, 2000
unless otherwise excepted from the lien of the Mortgage. There are
also excepted from Mortgaged Property all cash, receivables and securities
(including the capital stock of Centennial Energy Holdings, Inc., WBI Holdings,
Inc., Knife River Corporation, Utility Services, Inc., Centennial Energy
Resources LLC, Centennial Holdings Capital LLC, Centennial Energy Resources
International Inc, Fidelity Exploration & Production Company and any other
subsidiaries); some contracts; merchandise, appliances, materials or supplies;
electric energy, gas, steam and other products; and automobiles, tractors,
ships, railroad cars and aircraft and various other transportation
equipment. The property of subsidiaries, including Centennial Energy
Holdings, Inc., WBI Holdings, Inc., Knife River Corporation, Utility Services,
Inc., Centennial Energy Resources LLC, Centennial Holdings Capital LLC,
Centennial Energy Resources International Inc, Fidelity Exploration &
Production Company and any other subsidiaries), is not subject to the lien
of
the Mortgage. We have released and transferred certain properties from the
lien
of the Mortgage since July 1, 2000, and may release additional property subject
to the lien of the Mortgage against various credits, including:
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cash
deposited with the Mortgage
Trustee,
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·
|
the
principal amount of bonds or other obligations deposited with the
Mortgage
Trustee secured by a purchase money mortgage on the property released
up
to 70% of the fair value to us of that property,
or
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·
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the
fair value in cash of bonds or other obligations of municipal corporations
or other governmental subdivisions possessing taxing
power.
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We
may
withdraw cash held by the Mortgage Trustee against various credits,
including
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·
|
the
principal amount of refundable bonds not previously used under
the
Mortgage,
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·
|
70%
of the net bondable value of property additions,
or
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·
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the
lesser of cost or fair value to us of property which is already
subject to
the lien of the Mortgage, but which has not yet been used as a
credit
under any provisions of the
Mortgage.
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Property
not used as the basis for the issuance of First Mortgage Bonds or otherwise
as a
credit under the Mortgage may in effect be released without substitution
of
equivalent property.
The
Mortgage provides that after-acquired properties (other than the excepted
property and released property described above) that are improvements,
extensions or additions to, or renewals, replacements or substitutions of
or
for, any part or parts of the Mortgaged Property will be subject to the lien
of
the Mortgage. (Mortgage, Forty-Ninth Supplemental Indenture.) We also
may elect to subject additional property to the lien of the Mortgage by amending
the Mortgage.
Issuance
of Additional First Mortgage Bonds
We
may
issue additional First Mortgage Bonds ranking equally with outstanding First
Mortgage Bonds in a principal amount equal to:
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(1)
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70%
of the net bondable value of property additions we
acquire;
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(2)
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the
amount of cash deposited with the Mortgage Trustee;
and
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(3)
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the
amount of refundable First Mortgage Bonds surrendered to the Mortgage
Trustee.
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(Mortgage,
Sections 3.04 through 3.06.)
The
First
Mortgage Bonds will be issued against property additions, refunded First
Mortgage Bonds and/or the deposit of cash. On June 30, 2003, we had
approximately $251 million of available Property Additions and $163 million
of
refunded First Mortgage Bonds. See the discussion above under
“Security and Priority.”
With
some
exceptions in the case of (3) above, additional First Mortgage Bonds may
be
issued only if our net earnings available for interest after depletion, as
defined in the Mortgage, for any twelve consecutive calendar months within
the
fifteen calendar months immediately preceding the month in which the application
for the additional First Mortgage Bonds is made, are in the aggregate equal
to
at least two times the amount of the annual stated interest charges on all
First
Mortgage Bonds thereafter to be outstanding, and on all permitted equal or
prior
lien debt, if any. (Mortgage, Sections 1.01 and 3.03.) For
the twelve months ended June 30, 2003, our net earnings available for interest
after depletion were $79 million or 8.1 times the annual stated interest
charges
on all First Mortgage Bonds and permitted equal or prior lien debt outstanding
on that date, which would have permitted us to issue approximately $339 million
of additional First Mortgage Bonds.
Property
available for use as property additions includes property useful in the energy
business in any form (other than gas but including gas distribution property)
and water and steam heat property. The property may be located
anywhere in the United States of America or its coastal waters and may also
include space satellites (including solar power satellites), space stations
and
other analogous facilities. (Mortgage, Section 1.01.)
Any
additional First Mortgage Bonds issued by us would not be included as Debt
Securities covered by this prospectus or the registration statement that
this
prospectus is included within.
Dividend
Restrictions
So
long
as any of the First Mortgage Bonds are outstanding, we may declare and pay
dividends in cash or property on our common stock only out of Surplus, as
defined in the Mortgage, or out of net profits for the fiscal year or the
preceding fiscal year. However, we may not pay dividends out of net
profits if the Capital of the Company, as defined in the Mortgage, has been
diminished to a specified extent. (Mortgage, Section
2.01.)
Maintenance
and Depreciation Provisions
We
are
required to make expenditures necessary to maintain the mortgaged property
in
good repair, except that we may abandon any property, and to make provisions
for
depreciation and for depletion of depletable fixed assets in accordance with
good accounting practices and in accordance with any applicable rules of
any
regulatory authority having jurisdiction. (Mortgage, Section
6.06.)
Modification
Modifications
of the terms of the Mortgage may be made with our consent by an affirmative
vote
of at least 60% in principal amount of outstanding First Mortgage Bonds and
of
at least 60% in principal amount of outstanding First Mortgage Bonds of any
series especially affected by the modification; but no modification may
be
made
which will affect the terms of payment of the principal at maturity of, or
interest on, any First Mortgage Bond. (Mortgage, Article
XV.)
Voting
of First Mortgage Bonds Held by the Indenture Trustee
The
Indenture Trustee will, as holder of the First Mortgage Bonds, attend meetings
of bondholders under the Mortgage, or deliver its proxy in connection with
those
meetings, as to matters with respect to which it is entitled to vote or
consent. See DESCRIPTION OF THE DEBT SECURITIES – “Voting of Class A
Bonds.”
Defaults
and Notice of Defaults
“Events
of default” include the failure to pay principal, failure for 30 days to pay
interest or to make any required deposit in any fund for the purchase or
redemption of First Mortgage Bonds (including any sinking fund or improvement
and sinking fund), failure for 90 days after written notice to perform any
other
covenant, and various events in bankruptcy or insolvency. (Mortgage,
Article IX.)
The
Trustees under the Mortgage are required to give notice to Bondholders of
any
continuing event of default known to them, but other than for a default in
the
payment of principal or interest or a sinking fund installment, the Trustees
may
withhold notice if the responsible officers of the Corporate Trustee in good
faith determine that the withholding is in the interests of the
Bondholders. (Mortgage, Section 13.03.)
Satisfaction
and Discharge
Once
we
make due provision for the payment of all of the First Mortgage Bonds and
paying
all other sums due under the Mortgage, the Mortgage will cease to be of further
effect and may be discharged. (Mortgage, Article XVI.)
Annual
Report to the Mortgage Trustee
We
must
give the Mortgage Trustee an annual statement as to whether or not we have
fulfilled our obligations under the Mortgage throughout the preceding calendar
year.
Common
Stock -
General
The
following is a description of all material attributes of our common
stock. This description is not complete, and we qualify it by
referring to the laws of the state of Delaware and our restated certificate
of
incorporation, amended bylaws and Mortgage. The restated certificate
of incorporation, amended bylaws and Mortgage are exhibits 3(a), 3(b) and
4(a),
respectively, to the registration statement that this prospectus is included
within and all of these documents are incorporated into this prospectus by
reference. We also refer you to the rights agreement, dated as of
November 12, 1998, between us and Norwest Bank Minnesota, NA (now, Wells
Fargo
Bank Minnesota, N.A.), as rights agent, that we incorporate into this document
by reference to Exhibit 4(c) to the registration statement that this prospectus
is included within.
Our
restated certificate of incorporation authorizes us to issue 252,000,000
shares
of stock, divided into four classes:
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500,000
shares of preferred stock, $100 par
value;
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1,000,000
shares of preferred stock A, without par
value;
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500,000
shares of preference stock, without par value;
and
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250,000,000
shares of common stock, $1.00 par
value.
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Dividend
Rights
Under
our
restated certificate of incorporation, we may declare and pay dividends on
our
common stock, out of surplus or net profits, only if we have paid or provided
for full cumulative dividends on all outstanding shares of preferred and
preference stock. As of June 30, 2003, we had no preference stock
outstanding.
In
addition to these provisions, our first mortgage bond indenture includes
a
covenant generally to the effect that we may declare and pay dividends in
cash
or property on our common stock only either (1) out of “surplus” or (2) in case
there is no “surplus,” out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. For purposes
of this test, “surplus” means the excess of our net assets over our “capital”;
and “capital” means that part of the consideration received by us for any of our
shares of common stock which has been determined to be “capital.”
Voting
Rights
Our
common stock has one vote per share. The holders of our common stock
are entitled to vote on all matters to be voted on by
stockholders. The holders of our common stock do not have cumulative
voting rights.
The
holders of our preferred stock, preferred stock A and preference stock do
not
have the right to vote, except as our board of directors establishes
or as provided in our restated certificate of incorporation or bylaws or
as
determined by state law.
Our
restated certificate of incorporation gives the holders of our preferred
stock, preferred stock A or the preference stock the right to vote if
dividends are unpaid, in whole or in part, on their shares for one
year. The holders have one vote per share until we pay the dividend
arrearage, declare dividends for the current dividend period and set aside
the
funds to pay the current dividends. In addition, the holders of some
series of our preferred stock and preferred stock A, and/or the holders of
our
preference stock, must approve amendments to the restated certificate of
incorporation in some instances.
Liquidation
Rights
If
we
were to liquidate, the holders of the preferred stock, preferred stock A
and the
preference stock have the right to receive specified amounts, as set forth
in
our restated certificate of incorporation, before we can make any payments
to
the holders of our common stock. After the preferred and preference
stock payments are made, the holders of our common stock are entitled to
share
in all of our remaining assets available for distribution to
stockholders.
Other
Rights
Our
common stock is not liable to further calls or assessment. The
holders of our common stock have no preemptive rights. Our common
stock cannot be redeemed, and it does not have any conversion rights or sinking
fund provisions.
Effects
on Our Common Stock if We Issue Preferred or Preference
Stock
Our
board
of directors has the authority, without further action by the stockholders,
to
issue up to 500,000 shares of preferred stock, 1,000,000 shares of preferred
stock A and 500,000 shares of preference stock, each in one or more
series. Our board of directors has the authority to determine the
terms of each series of any preferred or preference stock, within the limits
of
the restated certificate of incorporation and the laws of the state of
Delaware. These terms include the number of shares in a series,
dividend rights, liquidation preferences, terms of redemption, conversion
rights
and voting rights.
If
we
issue any preferred or preference stock, we may negatively affect the holders
of
our common stock. These possible negative effects include diluting
the voting power of shares of our common stock and affecting the
market
price of our common stock. In addition, the ability of our board of
directors to issue preferred or preference stock may delay or prevent a change
in control of MDU Resources.
As
of
June 30, 2003, we had 163,000 shares of preferred stock outstanding, and
we have
reserved 125,000 shares of Series B preference stock for issuance in connection
with our rights plan.
Provisions
of our Restated Certificate of Incorporation and our Bylaws That Could Delay
or
Prevent a Change in Control
Our
restated certificate of incorporation and bylaws contain provisions which
will
make it difficult to obtain control of MDU Resources if our board of directors
does not approve the transaction. The provisions include the
following:
Provisions
Relating to our Board of Directors
Classified
Board
We
have
divided the members of our board of directors into three classes as nearly
equal
in number as may be. Directors in each class are elected for a
three-year term.
This
classification of our board of directors may prevent stockholders from changing
the membership of the entire board of directors in a relatively short period
of
time. At least two annual meetings, instead of one, generally will be
required to change the majority of directors. The classified board
provisions could have the effect of prolonging the time required for a
stockholder with significant voting power to gain majority representation
on our
board of directors. Where majority or supermajority board of
directors approval is necessary for a transaction, like in the case of an
interested stockholder business combination, the inability immediately to
gain
majority representation on the board of directors could discourage takeovers
and
tender offers.
Number
of Directors, Vacancies, Removal of Directors
Our
restated certificate of incorporation provides that our board of directors
will
have at least six and at most 15 directors. Two-thirds of the
continuing directors decide the exact number of directors at a given
time. Our board fills any new directorships it creates and any
vacancies.
Our
directors may be removed only for cause and then only by a majority of the
shares entitled to vote.
Meetings
of Stockholders
No
Cumulative Voting
Our
restated certificate of incorporation does not provide for cumulative
voting.
Advance
Notice Provisions
Our
bylaws require that for a stockholder to nominate a director or bring other
business before an annual meeting, the stockholder must give notice not less
than 120 days prior to the date corresponding to the date on which we first
mailed our proxy materials for the prior year’s annual meeting.
Our
restated certificate of incorporation prevents stockholders from calling
a
special meeting. In addition, our restated certificate of
incorporation provides that stockholder action may be taken only at a
stockholders’ meeting.
Amendment
of Restated Certificate of Incorporation
Our
restated certificate of incorporation requires the affirmative vote of 80%
of
the common stock entitled to vote in order to amend Articles Twelfth,
Thirteenth, Fourteenth, Fifteenth and Sixteenth of our restated certificate
of
incorporation, unless two-thirds of the continuing directors approve the
amendment. Article Twelfth of our restated certificate of
incorporation specifies fair price and other requirements applicable to a
business combination involving an interested stockholder (e.g., a stockholder
who is our affiliate). Article Thirteenth of our restated certificate
of incorporation contains provisions relating to our board of directors,
including provisions establishing a classified board. Article
Fourteenth of our restated certificate of incorporation expressly permits
our
board of directors to consider the factors described below under “Provisions
Relating to the Authorization of Business Combinations” in determining whether
or not to approve some types of business combinations. Article
Fifteenth of our restated certificate of incorporation contains the requirement
described in the first sentence of this paragraph that 80% of the common
stock
entitled to vote must vote in favor of an amendment to the articles specified
above unless two-thirds of the continuing directors approve the
amendment. Finally, Article Sixteenth of the restated certificate of
incorporation prohibits stockholders from taking action by written consent
and
describes the persons who may call special meetings of our
stockholders.
Provisions
Relating to the Authorization of Business Combinations
Our
restated certificate of incorporation requires the affirmative vote of 80%
of
the common stock entitled to vote for directors in order to authorize business
combinations with interested stockholders. Any business combination
must also meet specified fair price and procedural
requirements. However, if two-thirds of our continuing directors
approve the business combination, then the vote of 80% of the common stock
and
the fair price provisions will not be required.
There
is
also a provision in our restated certificate of incorporation permitting
our
board of directors to consider the following factors in determining whether
or
not to approve some types of business combinations:
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The
consideration to be received by us or our stockholders in connection
with
the business combination in relation not only to the then current
market
price for our outstanding capital stock, but also to the market
price for
our capital stock over a period of years, the estimated price that
might
be achieved in a negotiated sale of us as a whole or in part through
orderly liquidation, the premiums over market price for the securities
of
other corporations in similar transactions, current political,
economic
and other factors bearing on securities prices and our financial
condition, future prospects and future value as an independent
corporation;
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The
character, integrity and business philosophy of the other party
or parties
to the business combination transaction and the management of that
party
or those parties;
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The
business and financial conditions and earnings prospects of the
other
party or parties to the business combination transaction, including,
but
not limited to, debt service and other existing or likely financial
obligations of that party or those parties, the intention of the
other
party or parties to the business combination transaction regarding
the use
of our assets to finance the acquisition, and the possible effect
of the
conditions upon us and our subsidiaries and the other elements
of the
communities in which we and our subsidiaries operate or are
located;
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The
projected social, legal and economic effects of the proposed action
or
transaction upon us or our subsidiaries, employees, suppliers,
customers
and others having similar relationships with us, and the communities
in
which we and our subsidiaries do
business;
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The
general desirability of our continuance as an independent entity;
and
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Such
other factors as the continuing directors may deem
relevant.
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Provisions
of Delaware Law That Could Delay or Prevent a Change in
Control
We
are
subject to the provisions of Section 203 of the General Corporation Law of
Delaware. With some exceptions, this law prohibits us from engaging
in some types of business combinations with a person who owns 15% or more
of our
outstanding voting stock for a three-year period after that person acquires
the
stock. This prohibition does not apply if our board of directors
approved of the business combination or the acquisition of our stock before
the
person acquired 15% of the stock. A business combination includes
mergers, consolidations, stock sales, asset sales and other transactions
resulting in a financial benefit to the interested stockholder.
Transfer
Agent; Registrar
The
transfer agent and registrar for our common stock is Wells Fargo Bank Minnesota,
N.A., Saint Paul, Minnesota.
General
On
November 12, 1998, the board of directors declared a dividend of one preference
share purchase right for each outstanding share of common stock, par value
$1.00
per share. The dividend was paid on December 1, 1998 to the
stockholders of record on that date.
Our
board
of directors has adopted a rights agreement to protect our stockholders from
coercive or otherwise unfair takeover tactics. In general terms, it
works by imposing a significant penalty upon any person or group which acquires
15% or more of our outstanding common stock without the approval of the board
of
directors. The rights agreement should not interfere with any merger
or other business combination approved by our board of directors.
For
those
interested in the specific terms of the rights agreement between us and Wells
Fargo Bank Minnesota, N.A., as the rights agent, dated as of November 12,
1998,
we are providing the following summary description of all of the material
terms
of the rights agreement. Please note, however, that this description
is only a summary, and is not complete, and should be read together with
the
entire rights agreement, a copy of which is available from us free of
charge.
The
Rights
Our
board
of directors authorized the issuance of a preference share purchase right
with
respect to each issued and outstanding share of our common stock on December
1,
1998. The preference share purchase rights will initially trade with,
and will be inseparable from, the common stock. The preference share
purchase rights are evidenced only by certificates that represent shares
of
common stock. New preference share purchase rights will accompany any
new shares of common stock that we issue after December 1, 1998 until the
distribution date described below.
Exercise
Price
Each
preference share purchase right will allow its holder to purchase from us
one
one-thousandth of a share of Series B preference stock for $125, once the
preference share purchase rights become exercisable. This portion of
a share of Series B preference stock will give the stockholder approximately
the
same dividend and liquidation rights as would one share of common
stock. Prior to exercise, the preference share purchase right does
not give its holder any dividend, voting, or liquidation rights.
Exercisability
The
preference share purchase rights will not be exercisable until:
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10
days after the public announcement that a person or group has become
an
“acquiring person” by obtaining beneficial ownership of 15% or more of MDU
Resources’ outstanding common stock, or, if
earlier,
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10
business days (or a later date determined by our board of directors
before
any person or group becomes an acquiring person) after a person
or group
begins a tender or exchange offer which, if consummated, would
result in
that person or group becoming an acquiring
person.
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We
refer
to the date when the preference share purchase rights become exercisable
as the
“distribution date.” Until that date, the common stock certificates
will also evidence the preference share purchase rights, and any transfer
of
shares of common stock will constitute a transfer of preference share purchase
rights. After that date, the preference share purchase rights will
separate from the common stock and be evidenced by book-entry credits or
by
preference share purchase rights certificates that we would mail to all eligible
holders of common stock. Any preference share purchase rights held by
an acquiring person are void and may not be exercised.
Our
board
of directors may reduce the threshold at which a person or group becomes
an
acquiring person from 15% to not less than 10% of the outstanding common
stock.
Consequences
of a Person or Group Becoming an Acquiring Person
Flip
In. If a person or group becomes an acquiring person, all holders of
preference share purchase rights except the acquiring person may, for $125,
purchase shares of our common stock with a market value of $250, based on
the
market price of the common stock prior to the acquisition.
Flip
Over. If we are later acquired in a merger or similar transaction
after the “preference share purchase rights distribution date,” all holders of
preference share purchase rights except the acquiring person may, for $125,
purchase shares of the acquiring corporation with a market value of $250,
based
on the market price of the acquiring corporation’s stock prior to the
merger.
Preference
Share Provisions
Each
one
one-thousandth of a share of Series B preference stock, if issued:
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will
not be redeemable.
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will
entitle holders to quarterly dividend payments of $.001 per share,
or an
amount equal to the dividend paid on one share of common stock,
whichever
is greater.
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will
entitle holders upon liquidation either to receive $1.00 per share
or an
amount equal to the payment made on one share of common stock,
whichever
is greater.
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will
have no voting power, except as otherwise provided by Delaware
law or our
restated certificate of
incorporation.
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will
entitle holders to a per share payment equal to the payment made
on one
share of common stock, if shares of our common stock are exchanged
via
merger, consolidation, or a similar
transaction.
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The
value
of one one-thousandth interest in a share of Series B preference stock should
approximate the value of one share of common stock.
Expiration
The
preference share purchase rights will expire on December 31, 2008.
Redemption
Our board
of directors may redeem the preference share purchase rights for $.01 per
preference share purchase right at any time before any person or group becomes
an acquiring person. If the board of directors redeems any preference
share purchase rights, it must redeem all of the preference share purchase
rights. Once the preference share purchase rights are redeemed, the
only right of the holders of preference share purchase rights will be to
receive
the redemption price of $.01 per preference share purchase right. The
redemption price will be adjusted if we have a stock split of, or stock
dividends on, our common stock.
Exchange
After
a
person or group becomes an acquiring person, but before an acquiring person
owns
50% or more of our outstanding common stock, our board of directors may
extinguish the preference share purchase rights by exchanging one share of
common stock or an equivalent security for each preference share purchase
right,
other than preference share purchase rights held by the acquiring
person.
Anti-Dilution
Provisions
Our
board
of directors may adjust the purchase price of a share of Series B preference
stock, the number of shares of Series B preference stock issuable and the
number
of outstanding preference share purchase rights to prevent dilution that
may
occur from a stock dividend, a stock split, a reclassification of the Series
B
preference stock or common stock. No adjustments to the exercise
price of less than 1% will be made.
Amendments
The
terms
of the rights agreement may be amended by our board of directors without
the
consent of the holders of the preference share purchase
rights. However, our board may not amend the rights agreement to
lower the threshold at which a person or group becomes an acquiring person
to
below 10% of our outstanding common stock. In addition, our board may
not cause a person or group to become an acquiring person by lowering this
threshold below the percentage interest that the person or group already
owns. After a person or group becomes an acquiring person, the board
may not amend the agreement in a way that adversely affects holders of the
preference share purchase rights.
We
may
sell the securities offered by this prospectus in one or more of the following
ways from time to time: (i) to underwriters for resale to the public
or to institutional investors; (ii) directly to institutional investors;
or
(iii) through agents to the public or to institutional investors. The
prospectus supplement with respect to the securities being sold will set
forth
the terms of the offering of those securities, including the name or names
of
any underwriters or agents, the purchase price of the securities and the
net
proceeds to us from the sale, any underwriting discounts or agency fees and
other items constituting underwriters’ or agents’ compensation, any initial
public offering price, and any discounts or concessions allowed or reallowed
or
paid to dealers.
If
underwriters participate in the sale, the securities will be acquired by
the
underwriters for their own account and may be resold from time to time in
one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale.
If
the
securities are sold by agents, commissions payable by us to those agents
will be
set forth in a related prospectus supplement. Unless otherwise
indicated in a prospectus supplement, any agent will be acting on a reasonable
efforts basis for the period of its appointment.
Unless
otherwise set forth in the prospectus supplement, the obligations of the
underwriters to purchase the securities will be subject to conditions precedent
and the underwriters will be obligated to purchase all the securities being
offered if any are purchased.
We
may
make sales of our common stock to or through one or more underwriters or
agents
in at-the-market offerings, and, if we engage in such transactions, we will
do
so pursuant to the terms of a distribution agreement between us and the
underwriters or agents. If we engage in at-the-market sales pursuant
to a distribution agreement, we will issue and sell shares of our common
stock
to or through one or more underwriters or agents, which may act on an agency
basis or on a principal basis. During the term of any such
distribution agreement, we may sell shares on a daily basis in exchange
transactions or otherwise as we agree with the underwriters or
agent. The distribution agreement may provide that any shares of our
common stock sold will be sold at prices related to the then prevailing market
prices for our securities. Therefore, exact figures regarding net
proceeds to us or commissions to be paid are impossible to determine and
will be
described in a prospectus supplement. Pursuant to the terms of the
distribution agreement, we also may agree to sell, and the relevant underwriters
or dealers may agree to solicit offers to purchase, blocks of our common
stock. The terms of each such distribution agreement will be
set forth in more detail in a prospectus supplement to this
prospectus. To the extent that any named underwriter or agent acts as
principal pursuant to the terms of a distribution agreement, or if we offer
to
sell shares of our common stock through another broker-dealer acting as
underwriter, then such named underwriter may engage in certain transactions
that
stabilize, maintain or otherwise affect the price of our common
stock. We will describe any such activities in the prospectus
supplement relating to the transaction. To the extent that any named
broker dealer or agent acts as agent on a best efforts basis pursuant to
the
terms of a distribution agreement, such broker dealer or agent will not engage
in any such stabilization transactions.
Underwriters
and agents may be entitled under agreements entered into with us to
indemnification against securities civil liabilities, including liabilities
under the Securities Act of 1933. Underwriters and agents may engage
in transactions with, or perform services for, us in the ordinary course
of
business.
Each
series of securities offered by this prospectus will be a new issue and,
except
for the common stock, which is listed on the New York Stock Exchange and
the
Pacific Exchange, will have no established trading market. We may
elect to list any series of new securities on an exchange, or in the case
of the
common stock, on any additional exchange, but unless otherwise indicated
in the
prospectus supplement, we have no obligation to cause any securities to be
so
listed. Any underwriters that purchase securities for public offering
and sale may make a market in the securities, but such underwriters will
not be
obligated to do so and may discontinue any market making at any time without
notice. We make no assurance as to the liquidity of, or the trading
markets for, any securities.
The
consolidated financial statements and consolidated financial statement schedule
incorporated by reference from our Annual Report on Form 10-K for the year
ended
December 31, 2002, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports which are incorporated herein by reference
(which express an unqualified opinion and include an explanatory paragraph
relating to the application of certain procedures relating to certain other
disclosures and reclassifications of financial statement amounts related
to the
2001 and 2000 consolidated financial statements that were audited by other
auditors for which Deloitte & Touche LLP has expressed no opinion or other
form of assurance other than with respect to such disclosures and
reclassifications), and have been so incorporated in reliance upon the reports
of such firm given upon their authority as experts in accounting and
auditing.
Our
consolidated financial statements and schedule as of December 31, 2001, and
for
the years ended December 31, 2001 and 2000 incorporated in this prospectus
by reference from our Annual Report on Form 10-K for the year ended December
31,
2002 were audited by Arthur Andersen LLP, independent public accountants,
as
indicated in their report with respect thereto (which expresses an unqualified
opinion and includes an explanatory paragraph relating to the adoption of
a new
accounting principle), and have been so incorporated in reliance upon the
report
and upon the authority of that firm as experts in accounting and auditing
in
giving the report. On February 14, 2002, we dismissed Arthur Andersen
LLP as our independent public accounting firm, and on March 25, 2002, we
hired
Deloitte & Touche LLP as our independent auditors for the 2002 fiscal
year. Since that time,
Arthur
Andersen LLP was convicted on federal charges of obstruction of justice,
and in
August 2002, Arthur Andersen LLP ceased performing auditing services
worldwide. These events may materially and adversely affect the
ability of Arthur Andersen LLP to satisfy all of their existing and future
obligations, including claims under the federal securities
laws. Accordingly, purchasers of our securities may be limited in
their ability to recover damages from Arthur Andersen LLP for any claims
that
may arise out of Arthur Andersen LLP’s audit of our financial statements. In
addition, we were not able to obtain the consent of Arthur Andersen LLP as
required by Section 7 of the Securities Act to the incorporation by reference
of
their report on the audited financial statements into the registration
statement. As a result of Arthur Andersen LLP not having provided a consent,
the
ability of purchasers of our securities to assert claims and seek remedies
against Arthur Andersen LLP may be limited with respect to their report,
particularly those remedies arising under Section 11 of the Securities
Act.
The
validity of the securities has been passed upon for us by Lester H. Loble,
II,
Esq., our General Counsel, and also by Thelen Reid & Priest LLP, 875 Third
Avenue, New York, New York 10022.
________________________
No
dealer, salesperson or other person is authorized to give any information
or to
represent anything not contained in this prospectus. You must not
rely on any unauthorized information or representations. This
prospectus is an offer to sell only the securities offered hereby, but only
under circumstances and in jurisdictions where it is lawful to do
so. The information contained in this prospectus is current only as
of its date.
Up
to 3,000,000 Shares
MDU
RESOURCES GROUP, INC.
Common
Stock
Wells
Fargo Securities, LLC
The
date of this prospectus supplement is June 28, 2007