Filed Pursuant to Rule 424(b)5
Registration Statement No. 333-02109
[ALLETE LOGO]
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PROSPECTUS
FEBRUARY 14, 2005
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[INVEST DIRECT LOGO]
[ALLETE LOGO]
P R O S P E C T U S
1,004,537 Shares of Common Stock
(Without Par Value)
Invest Direct(registered) is ALLETE, Inc.'s direct stock purchase and dividend
reinvestment plan. Invest Direct provides investors with a convenient method of
acquiring shares of ALLETE common stock through cash payments and reinvestment
of dividends.
If you are currently participating in the plan, you will remain enrolled in the
plan and you do not have to take any action unless you wish to terminate your
participation or change your election in the plan.
ALLETE's principal executive offices are located at 30 West Superior Street,
Duluth, Minnesota 55802-2093, telephone number (218) 279-5000.
ALLETE's common stock is listed on the New York Stock Exchange and trades under
the symbol "ALE."
You should keep this prospectus for future reference.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is February 14, 2005.
[INVEST DIRECT LOGO]
TABLE OF CONTENTS
Where You Can Find More Information............................................3
Incorporation by Reference.....................................................3
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995............................................................3
ALLETE, Inc. ..................................................................5
The Plan.......................................................................8
Purpose of Invest Direct....................................................8
Advantages..................................................................8
Disadvantages...............................................................8
Eligibility and Enrollment..................................................8
Plan Administration.........................................................9
Contacting the Plan Administrator..........................................10
Reinvestment of Cash Dividends.............................................10
Optional Cash Payments.....................................................11
Timing of Share Purchases..................................................11
Source and Price of Purchased Shares.......................................12
Safekeeping................................................................13
Transfer or Assignment of Shares...........................................13
Shares Pledged.............................................................13
Shareholder Voting.........................................................13
Sale of Shares.............................................................14
Certificates for Shares; Direct Registration System........................14
Withdrawal from the Plan...................................................15
Statements of Account; Shareholder Communications..........................16
Costs Under the Plan.......................................................16
Rights Offering and Stock Split............................................17
Liability..................................................................17
Modification or Termination of Plan; Termination of Participants;
Governing Law.............................................................18
United States Federal Income Tax Consequences.................................18
Description of Common Stock...................................................19
Use of Proceeds...............................................................23
Experts.......................................................................23
Legal Opinions................................................................24
You should rely only on the information contained or incorporated by
reference in this prospectus or any prospectus supplement. ALLETE has not
authorized anyone else to provide you with different information. ALLETE is
not making an offer of these securities in any jurisdiction where the offer
is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other
than the date on the front of those documents.
2
WHERE YOU CAN FIND MORE INFORMATION
ALLETE files annual, quarterly and other reports and other information with the
Securities and Exchange Commission (SEC). You can read and copy any information
filed by ALLETE with the SEC at the SEC'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 SEC at 1-800-SEC-0330.
In addition, the SEC 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 SEC, including ALLETE.
ALLETE also maintains an Internet site (http://www.allete.com). Information
contained on ALLETE's Internet site does not constitute part of this prospectus.
INCORPORATION BY REFERENCE
The SEC allows ALLETE to "incorporate by reference" the information that ALLETE
files with the SEC, which means that ALLETE may, in this prospectus, disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this prospectus.
ALLETE is incorporating by reference the documents listed below and any future
filings ALLETE makes with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, until this offering is terminated.
Information that ALLETE files in the future with the SEC will automatically
modify and supersede this information.
- ALLETE's Annual Report on Form 10-K for the year ended December 31,
2004; and
- ALLETE's Current Reports on Form 8-K dated January 4, 2005 and February
10, 2005.
You may request a copy of these documents, at no cost to you, by writing or
calling:
Shareholder Services
ALLETE, Inc.
30 West Superior Street
Duluth, Minnesota 55802-2093
Telephone: (218) 723-3974 or (800) 535-3056
Facsimile: (218) 720-2502
e-mail: shareholder@allete.com
You should rely only on the information contained in, or incorporated by
reference in, this prospectus and any prospectus supplement. ALLETE has not
authorized anyone else to provide you with different information. ALLETE is 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 any prospectus supplement is accurate as of any date other than
the date on the front of those documents or that the information incorporated by
reference is accurate as of any date other than the date of the document
incorporated by reference.
SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, we are hereby filing cautionary statements
identifying important factors that could cause our actual results to differ
materially from those projected in forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995)
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made by or on behalf of ALLETE in this prospectus or any supplement to this
prospectus, in presentations, in response to questions or otherwise. Any
statements that express, or involve discussions as to, expectations, beliefs,
plans, objectives, assumptions or future events or performance (often, but not
always, through the use of words or phrases such as "anticipates," "believes,"
"estimates," "expects," "intends," "plans," "projects," "will likely result,"
"will continue" or similar expressions) are not statements of historical facts
and may be forward-looking.
Forward-looking statements involve estimates, assumptions, risks and
uncertainties and are qualified in their entirety by reference to, and are
accompanied by, the following important factors, which are difficult to predict,
contain uncertainties, are beyond our control and may cause actual results or
outcomes to differ materially from those contained in forward-looking
statements:
- our ability to successfully implement our strategic objectives;
- prevailing governmental policies and regulatory actions, including
those of the United States Congress, state legislatures, the Federal
Energy Regulatory Commission, the Minnesota Public Utility Commission,
the Florida Public Service Commission, the Public Service Commission of
Wisconsin, and various local and county regulators, and city
administrators, about allowed rates of return, financings, industry and
rate structure, acquisition and disposal of assets and facilities, real
estate development, operation and construction of plant facilities,
recovery of purchased power and capital investments, present or
prospective wholesale and retail competition (including but not limited
to transmission costs), and zoning and permitting of land held for
resale;
- effects of restructuring initiatives in the electric industry;
- economic and geographic factors, including political and economic risks;
- changes in and compliance with environmental and safety laws and
policies;
- weather conditions;
- natural disasters;
- war and acts of terrorism;
- wholesale power market conditions;
- population growth rates and demographic patterns;
- the effects of competition, including competition for retail and
wholesale customers;
- pricing and transportation of commodities;
- changes in tax rates or policies or in rates of inflation;
- unanticipated project delays or changes in project costs;
- unanticipated changes in operating expenses and capital expenditures;
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- global and domestic economic conditions;
- capital market conditions;
- changes in interest rates and the performance of the financial markets;
- competition for economic expansion or development opportunities;
- our ability to manage expansion and integrate acquisitions; and
- the outcome of legal and administrative proceedings (whether civil or
criminal) and settlements that affect the business and profitability of
ALLETE.
Any forward-looking statement speaks only as of the date on which such statement
is made, and we undertake no obligation to update any forward-looking statement
to reflect events or circumstances after the date on which that 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 these
factors, nor can it assess the impact of each of these factors on the businesses
of ALLETE 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. Readers are urged to carefully review and consider
the various disclosures made by us in our Form 10-K and in our other reports
filed with the SEC that attempt to advise interested parties of the factors that
may affect our business.
ALLETE, INC.
ALLETE has been incorporated under the laws of the State of Minnesota since
1906. ALLETE's operations are comprised of four business segments. REGULATED
UTILITY includes retail and wholesale rate-regulated electric, water and gas
services in northeastern Minnesota and northwestern Wisconsin under the
jurisdiction of state and federal regulatory authorities. NONREGULATED ENERGY
OPERATIONS includes nonregulated generation (non-rate base generation sold at
market-based rates to the wholesale market) consisting primarily of generation
from our Taconite Harbor Energy Center in northern Minnesota, and our coal
mining activities in North Dakota. Nonregulated Energy Operations also includes
generation secured through the Kendall County power purchase agreement, which is
expected to be transferred in April 2005. (See Nonregulated Energy Operations.)
REAL ESTATE includes our Florida real estate operations. OTHER includes our
telecommunications activities, investments in emerging technologies, earnings on
cash, and general corporate charges and interest not specifically related to any
one business segment. General corporate charges include employee salaries and
benefits, as well as legal and other outside service fees. Discontinued
Operations includes our Automotive Services business that was spun off on
September 20, 2004, our Water Services businesses, the majority of which were
sold in 2003, and costs incurred by ALLETE associated with the spin-off of
ADESA, Inc.
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FOR THE YEAR ENDED DECEMBER 31,
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2004 2003 2002
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MILLIONS EXCEPT PER SHARE AMOUNTS
Net Income (Loss)
Regulated Utility $ 42.8 $ 37.9 $ 50.4
Nonregulated Energy Operations (0.3) 3.7 (8.7)
Real Estate 14.7 14.1 11.2
Other (18.1) (25.9) (28.2)
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Continuing Operations 39.1 29.8 24.7
Discontinued Operations 73.1 206.6 112.5
Change in Accounting Principle (7.8) - -
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$104.4 $236.4 $137.2
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Diluted Earnings (Loss) Per Share of Common Stock
Continuing Operations $1.37 $1.08 $0.91
Discontinued Operations 2.57 7.44 4.13
Change in Accounting Principle (0.27) - -
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$3.67 $8.52 $5.04
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REGULATED UTILITY
MINNESOTA POWER, an operating division of ALLETE, provides regulated
utility electric service in a 26,000 square mile service territory in
northeastern Minnesota. Minnesota Power supplies regulated utility
electric service to 136,000 retail customers and wholesale electric
service to 16 municipalities. Wholly-owned subsidiary, SUPERIOR WATER,
LIGHT AND POWER COMPANY, provides regulated utility electric, natural
gas and water services in northwestern Wisconsin to 14,000 electric
customers, 12,000 natural gas customers and 10,000 water customers.
Minnesota Power has large power customer contracts with 12 customers
(Large Power Customers), 11 of which require 10 megawatts or more of
generating capacity and one of which requires 8 megawatts or more of
generating capacity. Large Power Customer contracts require Minnesota
Power to have a certain amount of generating capacity available. In
turn, each Large Power Customer is required to pay a minimum monthly
demand charge that covers the fixed costs associated with having this
capacity available to serve the customer, including a return on common
equity. All contracts continue past the contract termination date,
unless the required advance notice of cancellation has been given. The
advance notice of cancellation varies from one to four years.
NONREGULATED ENERGY OPERATIONS
BNI COAL, LTD., another wholly-owned subsidiary, owns and operates a
lignite mine in North Dakota. Two electric generating cooperatives,
Minnkota Power Cooperative, Inc. and Square Butte Electric Cooperative,
presently consume virtually all of BNI Coal's production of lignite
under cost-plus, fixed fee, coal supply agreements expiring in 2027.
Minnkota Power has an option to extend its coal supply agreement to
2042. Under an agreement with Square Butte expiring at the end of 2026,
Minnesota Power is currently entitled to
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approximately 71 percent (66 percent beginning in 2006; 60 percent in
2007) of the output of a 455-megawatt coal-fired generating unit
located near Center, North Dakota.
NONREGULATED GENERATION. Nonregulated generation is primarily non-rate
base generation sold at market-based rates to the wholesale market and
includes generation from our Taconite Harbor Energy Center in northern
Minnesota and generation secured through the Kendall County power
purchase agreement. The generation output from Taconite Harbor is
primarily being sold in the wholesale market and is sold in limited
circumstances to Minnesota Power's utility customers. The Kendall
County power purchase agreement includes the purchase of the output
from a generation unit (approximately 275 megawatts) at a facility
located near Chicago, Illinois. In December 2004, our wholly-owned
subsidiary, RAINY RIVER ENERGY CORPORATION, entered into an agreement
to assign this Kendall County power purchase agreement to Constellation
Energy Commodities Group, Inc. Under the terms of the agreement, Rainy
River Energy will pay Constellation Energy Commodities $73 million in
cash (approximately $47 million after taxes) to assume the Kendall
County power purchase agreement. The proposed transaction is subject to
the approvals of LSP-Kendall Energy, LLC, the owner of the energy
generation facility, as well as of its project lenders and the Federal
Energy Regulatory Commission. Pending these approvals, the transaction
is scheduled to close in April 2005.
REAL ESTATE
ALLETE PROPERTIES, INC. is our real estate business that has operated
in Florida since 1991. Our real estate operations include several
wholly-owned subsidiaries and an 80 percent ownership in LEHIGH
ACQUISITION CORPORATION. ALLETE Properties acquires real estate
portfolios and large land tracts at bulk prices, adds value through
entitlements and/or infrastructure improvements, and resells the
property over time to developers, end-users and investors. Management
at ALLETE Properties uses their business relationships, understanding
of real estate markets, and expertise in the land development and sales
processes, to provide revenue and earnings growth opportunities to
ALLETE.
ALLETE Properties is headquartered in Fort Myers, Florida, the location
of its southwest Florida regional office. Southwest Florida operations
consist of land sales and third-party brokerage businesses, with
limited land development activities. We also have a regional office in
Palm Coast, Florida, which oversees northeast Florida operations that
focus on land sales and development activities. Development activities
involve mainly zoning, permitting, platting and master infrastructure
construction. Our three major development projects include Town Center
at Palm Coast, Palm Coast Park and Ormond Crossings in Ormond Beach.
OTHER
Our Other segment consists of our telecommunications business-ENVENTIS
TELECOM, INC., investments in emerging technologies related to the
electric utility industry, earnings on cash, and general corporate
charges and interest not specifically related to any one business
segment. General corporate charges include employee salaries and
benefits, as well as legal and other outside service fees.
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THE PLAN
The terms of the Invest Direct plan are set forth below.
PURPOSE OF INVEST DIRECT
The purpose of the Invest Direct plan is to provide investors with a
convenient way to purchase shares of ALLETE common stock and to
reinvest all or a portion of the cash dividends paid on an investor's
holdings of ALLETE common stock in additional shares of common stock.
When shares of common stock purchased under the plan are acquired
directly from ALLETE, ALLETE will receive additional equity funds which
are expected to be used for general corporate purposes as described in
"Use of Proceeds."
ADVANTAGES
Some of the advantages of the plan include:
- The plan provides a convenient way to purchase ALLETE common stock
without paying fees or commissions.
- You may choose to have cash dividends payable on all or a portion
of your shares of ALLETE common stock reinvested.
- You may make optional cash investments in ALLETE common stock.
- Common stock certificates may be deposited with the plan for
safekeeping.
DISADVANTAGES
Some of the disadvantages of the plan include:
- You will not be able to precisely time your purchases and sales
through the plan; therefore you will bear the market risk
associated with fluctuations in the price of ALLETE common stock
pending investment or sale.
- You will need to transfer shares of ALLETE common stock out of your
plan account if you wish to sell more than 200 shares from your
plan account in any calendar year.
- No interest is paid on cash dividends to be reinvested, initial
cash investments or optional cash investments received by the plan.
ELIGIBILITY AND ENROLLMENT
IF YOU ARE CURRENTLY PARTICIPATING IN THE PLAN, YOU WILL REMAIN
ENROLLED IN THE PLAN AND YOU DO NOT HAVE TO TAKE ANY ACTION UNLESS YOU
WISH TO TERMINATE YOUR PARTICIPATION OR CHANGE YOUR ELECTION IN THE
PLAN.
You are eligible, whether or not you own ALLETE common stock, to join
the plan, provided that:
1) you properly enroll in the plan; and
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2) your participation in the plan would not violate securities or
other laws of the state, territory or country where you reside
that are applicable to ALLETE, the plan or you.
We reserve the right to restrict participation in the plan if we
believe that your participation may be contrary to the general intent
of the plan or in violation of applicable law.
Shareholders of ALLETE common stock with shares registered in their own
names may join the plan by returning a completed Shareholder
Authorization Form to the plan administrator. If your shares of ALLETE
common stock are held in and registered in the name of a brokerage,
bank, or other intermediary account, you can instruct the broker, bank,
or intermediary to register some or all of your shares directly in your
name, and you can then join the plan with those shares by returning a
completed Shareholder Authorization Form to the plan administrator. A
Shareholder Authorization Form may be obtained by contacting the plan
administrator as provided under "Contacting the Plan Administrator"
below.
Other eligible investors may participate in the plan by making a
minimum initial cash investment to purchase ALLETE common stock through
the plan and by obtaining from, and returning to, the plan
administrator a completed Shareholder Authorization Form.
If you are not an ALLETE customer, as defined below, the minimum
initial cash investment is $250. ALLETE customers are permitted to make
a minimum initial cash investment of $10. Interest will not be paid on
any initial cash investments held pending investment in the plan. See
"Timing of Share Purchases" below. We will not return initial cash
investments unless we receive a written request no later than the last
day of the Investment Period within which we receive such initial cash
investments.
An "ALLETE customer" means any person who is:
1) a customer of the ALLETE family of companies (including, but not
limited to, Minnesota Power and Superior Water, Light and Power
Company);
2) a lessee of real property owned by an ALLETE company; or
3) a member of another category of persons with an ongoing business
relationship with an ALLETE company as such category may be
approved for ALLETE customer status under the plan by the plan
administrator.
The laws of certain jurisdictions require that shares of ALLETE common
stock offered under the plan to persons, including ALLETE customers,
who are not presently record holders of common stock can be offered
only through a registered broker-dealer. Also, the laws of certain
jurisdictions prohibit the offer or sale of shares of common stock
offered under the plan to persons other than ALLETE's employees,
executives, consultants, existing shareholders and lenders. We will not
make offers or sales in those jurisdictions unless we have satisfied
the requirements of the securities laws applicable to the operation of
the plan.
PLAN ADMINISTRATION
ALLETE Shareholder Services, as plan administrator, administers the
plan for you, keeps records and performs other duties relating to the
plan. The responsibilities of ALLETE Shareholder Services in connection
with the administration of the plan are administrative in nature.
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If the plan purchases shares on the open market, we will appoint an
independent agent to act on your behalf in buying such shares. An
independent agent will also sell plan shares on behalf of participants.
ALLETE Shareholder Services, as custodian under the plan, holds shares
acquired under the plan and shares deposited into the plan for
safekeeping. ALLETE Shareholder Services may resign as plan
administrator or as custodian at any time upon the appointment of a
successor.
CONTACTING THE PLAN ADMINISTRATOR
All questions, requests for the various forms referred to in this
prospectus and other communications concerning Invest Direct should be
directed to the plan administrator at:
Shareholder Services
ALLETE, Inc.
30 West Superior Street
Duluth, Minnesota 55802-2093
Telephone: (218) 723-3974 or (800) 535-3056
Fax: (218) 720-2502
e-mail: shareholder@allete.com
www.allete.com
REINVESTMENT OF CASH DIVIDENDS
Through the plan, you may reinvest all or a portion of cash dividends
earned on your shares (whether held in certificate form, through
ALLETE's direct registration system, or in your plan account). If you
elect "reinvest all cash dividends," all cash dividend payments on all
shares will be reinvested. If you elect "partial dividend
reinvestment," dividends received on the percentage of shares you
specify will be reinvested and you will receive cash dividends on the
remaining shares. If you do not indicate an investment option on the
Shareholder Authorization Form, your plan account will be automatically
enrolled in the "reinvest all cash dividends" option.
You may change your method of receiving cash dividends at any time by
sending a completed Shareholder Authorization Form to the plan
administrator.
Dividend instructions must be received on or before a Dividend Record
Date in order to be effective for the next Dividend Payment Date. If
the plan administrator receives a Shareholder Authorization Form after
the Dividend Record Date, the new instructions will not take effect
until the next Dividend Payment Date.
A "Dividend Payment Date" is the date on which dividends are payable on
the shares of ALLETE common stock, as determined by ALLETE's Board of
Directors. These dates are normally the first day of March, June,
September and December.
A "Dividend Record Date" is the date on which shareholders, including
plan participants, must be shareholders in order to receive dividends
on their shares of ALLETE common stock. Generally, the Dividend Record
Date is the 15th of the month preceding the Dividend Payment Date.
Without withdrawing from the plan, you may request the plan
administrator to stop the reinvestment of any cash dividends on shares
of common stock registered in your name by giving the plan
administrator written notice. In order to stop the reinvestment of a
cash dividend payment, the plan administrator must receive such written
notice not later than the Dividend Record Date for that dividend
payment.
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OPTIONAL CASH PAYMENTS
After enrollment in the plan, you may purchase additional shares under
the plan by delivering to the plan administrator:
1) an Optional Cash Payment Form; and
2) a check or money order payable to ALLETE.
Optional cash payments may vary in amount, but may not be less than $10
per payment nor more than $100,000 per calendar year. Once enrolled in
the plan, you may arrange for investments by automatic monthly
deductions from your checking or savings account by returning an
Automatic Cash Withdrawal and Investment Form to the plan
administrator. Funds are generally withdrawn five or six business days
prior to the Investment Date.
The plan administrator will include an Optional Cash Payment Form with
each Statement of Account or send one upon request.
We will not pay interest on any optional cash payments held pending
investment in the plan. See "Timing of Share Purchases" below. We will
not return optional cash payments unless we receive a written request
no later than the last day of the Investment Period within which we
received such optional cash payments.
You may stop making optional cash payments at any time without
withdrawing from the plan.
TIMING OF SHARE PURCHASES
Initial cash investments and optional cash payments will be used to
purchase newly-issued shares on the applicable Investment Date and
shares acquired on the open market will be purchased during an
Investment Period, and will be credited to your plan account as of the
next Investment Date. Note that since each Investment Period runs from
the fourth business day before the end of the month, if an investment
is received during those last few days of the month, it will not be
credited to your plan account until the second following Investment
Date. In all cases, we will purchase common stock under the plan within
35 days following receipt of an initial cash investment or optional
cash payment or promptly return any remaining funds to you, without
interest.
"Investment Date" means the date on which a participant's account is
allocated shares of ALLETE common stock for investments made during a
particular Investment Period:
1) If newly-issued shares are purchased under the plan, the Investment
Date will be the first day of the month following the end of the
Investment Period.
2) If open market purchases are made, the Investment Date will be the
later of:
a) the first day of the month following the end of the Investment
Period; or
b) the day following the end of the Investment Period on which all
purchases on the open market are completed by the independent
agent.
"Investment Period" means the period during which cash payments are
accepted from participants for investment in ALLETE common stock to be
credited to plan accounts on the Investment Date. The Investment Period
begins
11
on the fourth business day before the end of a month and ends on the
fifth business day before the end of the following month.
If the plan administrator receives any Shareholder Authorization Form
directing reinvestment of cash dividends on or before a Dividend Record
Date, we will reinvest that dividend in shares of common stock in
accordance with your instructions and credit the shares to your
account. If the plan administrator receives the Shareholder
Authorization Form after the Dividend Record Date, we will pay those
dividends in cash and begin reinvestment under the plan with the next
dividend. To the extent shares will not be purchased on the Dividend
Payment Date or are to be purchased on the open market, cash dividends
will be delivered to an escrow account pending investment. The Dividend
Record Dates for the payment of dividends on ALLETE common stock are
customarily fifteen days before the Dividend Payment Dates. The
Dividend Payment Dates usually are the first day of March, June,
September and December.
For example, in the case of a common stock dividend paid by ALLETE on
March 1, for which the record date was February 15:
- If we receive the Shareholder Authorization Form directing
reinvestment on or before February 15, then we will reinvest the
March 1 dividend in shares of common stock and credit those shares
to your plan account as of the Investment Date following that
February 15 record date.
- If we receive the Shareholder Authorization Form after February 15,
then we will pay the March 1 dividend in cash and not begin
reinvestment under the plan until the next dividend.
- Even though we may have received optional cash payments for the
February Investment Period on or before February 15, your plan
account will not be credited with the March dividend on the shares
of common stock newly acquired with those optional cash payments
because you did not own those newly acquired shares on the
February 15 record date.
In all cases, we will use dividends to purchase common stock under the
plan within 30 days following the related Dividend Payment Date. We
will not pay interest on any cash dividends held by us pending
reinvestment in the plan.
SOURCE AND PRICE OF PURCHASED SHARES
At ALLETE's option, common stock will be obtained through purchases of
newly-issued shares, directly from ALLETE or through open market
purchases of shares or in privately negotiated transactions. The price
per share for newly-issued shares will be the average of the closing
prices on the composite tape on the last three business days before the
applicable Investment Date. Shares purchased on the open market or in
negotiated transactions will have a price per share equal to the
weighted average price (excluding any related brokerage fees,
commissions or other service charges) at which such shares are
purchased by the independent agent during the applicable Investment
Period.
Neither you, ALLETE nor any of its affiliates may exercise any control
or influence over the timing, price, amount or manner of purchases of
the common stock purchased by the independent agent.
We cannot change our determination that shares will be purchased on the
open market or in negotiated transactions or directly from ALLETE more
frequently than once every three months.
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The number of shares purchased for your plan account with respect to
any Investment Period depends upon:
1) the amount of the cash dividends to be reinvested and optional cash
payments to be invested; and
2) the price of the shares of ALLETE common stock purchased.
In every case, available funds will be fully invested in both whole and
fractional shares of ALLETE common stock (computed to three decimal
places). No one can predict the number of shares that will be purchased
with respect to any Investment Period, and the plan does not permit the
plan administrator to honor a request that a specific number of shares
be purchased.
SAFEKEEPING
Shares of ALLETE common stock that you buy under the plan will be
maintained in your account in book-entry form.
If you hold ALLETE common stock in certificate form, you may deposit
your certificate with the plan administrator for safekeeping into your
plan account. Certificates representing shares to be deposited for
safekeeping should be sent to the plan administrator, together with a
completed Shareholder Authorization Form. You should use certified or
registered mail when sending stock certificates. YOU SHOULD NOT ENDORSE
CERTIFICATES SURRENDERED FOR SAFEKEEPING. We will send you a
notification when we receive certificates sent to us for safekeeping.
It is your responsibility to retain records relative to the cost of any
shares represented by certificates deposited for safekeeping. COMMON
STOCK SURRENDERED FOR SAFEKEEPING WILL BE TREATED IN THE SAME MANNER AS
SHARES PURCHASED THROUGH THE PLAN.
Safekeeping protects your shares against loss, theft or accidental
destruction. This also provides a convenient way for you to keep track
of your shares.
TRANSFER OR ASSIGNMENT OF SHARES
You may instruct the plan administrator to transfer or assign plan
shares to another account or to a new account. These instructions must
be sent with appropriate documentation and comply with transfer
regulations and applicable laws.
Please call the plan administrator for specific instructions for
transferring shares.
SHARES PLEDGED
You may not pledge shares held in a plan account as collateral. If you
wish to use plan shares as collateral, you must have those shares
registered in your name by withdrawing the shares from the plan. See
"Certificates for Shares; Direct Registration System" below.
SHAREHOLDER VOTING
For each meeting of shareholders, you will receive notices of meetings,
proxy statements and proxy cards covering the total full and fractional
shares held, including shares held directly and shares held under the
plan. If you return a proxy card properly signed and marked for voting,
the covered shares will be voted as marked. If you return a proxy card
properly signed, but without instructions as to how shares are to be
voted with respect to any item on
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the proxy card, the covered shares are voted in accordance with the
recommendations of ALLETE's Board of Directors. If you do not return a
proxy card, or return a card unexecuted or improperly executed, the
covered shares will not be voted unless you vote in person at the
meeting.
SALE OF SHARES
Invest Direct allows you to sell up to 200 plan shares in one
transaction per calendar year. This includes shares of common stock
deposited in the plan for safekeeping. We will not charge you an
administrative and/or broker commission fee for this service if less
than one share is sold. We will charge you a nominal administrative fee
for sales of one or more shares, up to 200 shares.
To sell plan shares, you must make a written request to the plan
administrator by:
1) completing the Share Transaction Request Form on the reverse side
of the Optional Cash Payment Form; or
2) submitting a letter of instruction indicating the plan account
number and registration.
The request should indicate the number of shares to be sold and must be
signed by all plan account owners.
We will generally sell shares within five business days after receiving
a request. However, we may delay sale requests received during the
dividend processing period until completion of dividend processing.
You cannot control the terms and conditions of the sale of your plan
shares. Neither you, ALLETE nor any of its affiliates may exercise any
control or influence over the timing, price, amount or manner of the
sale of the common stock sold by the independent agent. The independent
agent will sell the shares.
We will issue a check for the proceeds of the sale minus applicable
administrative fees and taxes as soon as practicable after the sale of
the shares. The check will be made payable to the registered holders
only.
If you wish to sell more than once per calendar year or more than 200
shares, you or your stockbroker may request that the shares be moved to
ALLETE's direct registration system, or DRS, or that a certificate be
issued to you for the shares. See "Certificates for Shares; Direct
Registration System." Once you receive a certificate or move your
shares to DRS, you can place an order to sell through your stockbroker.
Shares held outside the plan may not be sold through the plan.
CERTIFICATES FOR SHARES; DIRECT REGISTRATION SYSTEM
You can request stock certificates or can request to move to the direct
registration system any number of full shares credited to your plan
account, and may make such request without withdrawing from the plan.
There is no charge for this service. The direct registration system
permits an investor to hold ALLETE common stock as the registered owner
in book-entry registration form on the stock transfer books of ALLETE,
with no need for a physical stock certificate.
You must make a written request to the plan administrator by:
1) completing the Share Transaction Request Form on the reverse side
of the Optional Cash Payment Form; or
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2) submitting a letter of instruction indicating the plan account
number and registration.
The request should indicate the number of shares to be certificated or
moved to DRS and must be signed by all plan account owners. You must
make a separate request each time a certificate or movement to DRS is
requested. We process requests as soon as practicable after we receive
them. We will continue to hold any remaining full and fractional shares
in your plan account. Fractional shares cannot be issued in certificate
form or moved to DRS.
Certificating your shares or moving them to DRS does not automatically
stop dividend reinvestment. We will continue to follow existing
instructions regarding payment or reinvestment of dividends on shares
moved to certificate or DRS form until we receive new instructions. To
make a change in method of dividend payment, you must make a request in
writing as more fully described under "Reinvestment of Dividends"
above.
WITHDRAWAL FROM THE PLAN
You may withdraw from the plan at any time by notifying the plan
administrator in writing of your decision by:
1) completing the Share Transaction Request Form on the reverse side
of the Optional Cash Payment Form; or
2) submitting a letter of instruction indicating the plan account
number and registration.
The request should indicate that you wish to terminate participation in
the plan. All plan account owners must sign the request and indicate
whether they wish to receive a stock certificate, move their shares to
DRS, or sell their shares (if the number of shares is 200 or less and
they have not sold any other shares from their plan account that year).
As explained above, you may terminate participation in the plan either
by:
1) selling all the shares in your plan account through the plan (if
that number of shares is 200 or less and you have not sold any
other shares credited to your plan account in the year of
termination); or
2) having a certificate issued for a specific number of whole shares
or move a specific number of whole shares to DRS and sell the
remaining shares through the plan. If a termination request does
not specify the manner of distribution of shares, we will move the
whole number of shares in that account to DRS and issue a check
for the value of any remaining fractional shares. The plan
administrator will only issue certificates for whole shares.
If, during the same Investment Period, we receive an optional cash
payment and a timely request to terminate participation in the plan, we
will return the amount of the optional cash payment. If the request is
not timely received we will use those funds to purchase shares in
accordance with the terms of the plan. Such shares will be sold and the
proceeds of the sale will be returned to you. In any event,
certificates for whole shares allocated to a plan account upon
termination and/or the proceeds from the sale of any shares held in
that plan account will be sent to you no later than 30 days following
the notice of termination.
Your withdrawal from the plan will stop all investment under the plan
if in the case of:
1) reinvestment of dividends, we receive notification of withdrawal
not later than the Dividend Record Date for a cash dividend
payment normally reinvested; and
15
2) optional cash payments, we receive notice of withdrawal on or
before the end of the Investment Period during which we receive the
optional cash payment.
We will pay to you, without interest, any cash dividend or optional
cash payment we receive for which investment has been stopped by timely
notification of withdrawal from the plan.
If you sell or otherwise dispose of all the shares of stock registered
in your name in certificate form, the plan administrator will continue
to reinvest the dividends on the shares credited to your plan account
until the plan administrator is notified in writing of your intent to
withdraw from the plan.
STATEMENTS OF ACCOUNT; SHAREHOLDER COMMUNICATIONS
You will receive quarterly Statements of Account, if there is any
activity in your plan account in that quarter. In any event, you will
receive a Statement of Account at least annually. In addition, you will
receive a statement for the following transactions:
1) purchase of additional shares with optional cash payments;
2) deposit of shares into the plan for safekeeping;
3) sale of shares held in the plan;
4) withdrawal of plan shares;
5) transfer of plan shares; and
6) upon termination of the plan.
YOUR STATEMENTS OF ACCOUNT ARE YOUR CONTINUING RECORD OF THE COST OF
SHARES PURCHASED, THEIR BASIS FOR FEDERAL INCOME TAX PURPOSES, THE
PROCEEDS OF SALES AND THE AMOUNT OF DIVIDENDS REPORTABLE FOR FEDERAL
INCOME TAX PURPOSES. YOU SHOULD KEEP YOUR STATEMENTS OF ACCOUNT FOR
INCOME TAX PURPOSES.
You will also receive copies of the same communications sent to all
holders of ALLETE common stock, including ALLETE's Annual Report to
Shareholders, Notice of Annual Meeting and Proxy Statement and tax
information for reporting dividends paid.
Statements of Account and other communications will be sent to your
address on record with us. If you move, you must promptly notify us of
your change of address to avoid delays in receiving up-to-date
information.
COSTS UNDER THE PLAN
You will not incur any brokerage fees, commissions or other charges for
shares purchased for your plan account. However, if we pay any such
charges, we are required to report them to the Internal Revenue Service
(IRS) as income to you. Because of the volume of shares purchased
through the plan, commissions that we pay on your behalf should be less
than those that you would otherwise pay if you purchased, individually,
the same number of shares on the open market.
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If you request that we sell shares of common stock through the plan
(other than a request for the sale of less than one share), you will be
charged a nominal administrative fee and applicable taxes.
There are no other service charges for participating in the plan. We
pay all costs of administration of the plan. However, we reserve the
right at any time to charge an administrative fee for costs that are
reasonably related to actual administrative costs incurred by us as
plan administrator. These costs include printing and mailing costs for
prospectuses, brochures and forms, administrative handling fees for
paperwork requested by you, and other similar costs. If we decide to
charge such fees, you will be notified 90 days before their effective
date.
RIGHTS OFFERING AND STOCK SPLIT
A rights offering takes place if ALLETE issues to its existing
shareholders the right to purchase additional shares of ALLETE common
stock in proportion to the shares they already own. In a rights
offering, warrants representing rights on all shares held directly by
you, including those credited to your plan account, will be mailed
directly to you in the same manner as to shareholders not participating
in the plan.
Rights based on a fractional share held in the plan will be sold by the
plan administrator and the proceeds will be credited to your plan
account under the plan and applied as cash dividends to purchase common
stock to be credited to your plan account as of the Investment Date
following the next Investment Period in which common stock is purchased
with reinvested dividends. A rights offering is not related to the
Rights attached to the shares of ALLETE common stock. See "Description
of Common Stock--Description of Preferred Share Purchase Rights" below.
Any shares issued in connection with a stock split distributed by
ALLETE on shares credited to your plan account under the plan will be
added to your plan account. If you hold your plan shares in certificate
form, any shares issued in connection with a stock split will be mailed
to you directly in the same manner as to shareholders who are not
participating in the plan. If you hold your plan shares in DRS, any
shares issued in connection with a stock split will similarly be
registered in DRS.
LIABILITY
Neither ALLETE, in its individual capacity or as plan administrator,
nor any independent agent appointed by ALLETE under the plan will be
liable for any act done in good faith or for any good faith omission to
act with respect to the plan, including, without limitation, any claim
of liability:
1) arising out of failure to terminate a plan account upon a
participant's death before receipt of notice from an authorized
representative of the estate of such death in writing (all
instructions and requests by authorized representatives of a
participant's estate must be accompanied by appropriate
documentation and must comply with the transfer requirements of
the plan and any applicable laws);
2) with respect to the prices or times at which, or sources from
which, shares are purchased or sold; or
3) with respect to any fluctuation in market value before or after any
purchase or sale of shares,
provided that nothing contained herein shall be construed to affect any
right to bring suit under the federal securities laws of the United
States.
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YOU MUST RECOGNIZE THAT ALLETE CANNOT ASSURE YOU A PROFIT, OR PROTECT
YOU AGAINST LOSSES, ON SHARES PURCHASED UNDER THE PLAN. THE MARKET
PRICE OF ALLETE COMMON STOCK CAN FLUCTUATE SUBSTANTIALLY. YOU ACCEPT
THE RISKS AS WELL AS THE BENEFITS OF THE PLAN. YOU PARTICIPATE IN THE
PLAN AT YOUR SOLE DISCRETION, RISK AND RESPONSIBILITY.
MODIFICATION OR TERMINATION OF PLAN; TERMINATION OF PARTICIPANTS; GOVERNING LAW
We reserve the right to suspend, modify, amend or terminate the plan at
any time and to interpret and regulate the plan as we deem necessary or
desirable in connection with the operation of the plan. We also reserve
the right, at our discretion, to terminate participation in the plan if
your plan account is no longer active. ALLETE will provide notice of
any such suspension, modification, amendment or termination. If we
terminate your plan account, we will deliver or sell your shares in the
manner described under the heading "Withdrawal from the Plan" above.
In addition, we may terminate your participation in the plan if we
believe that your participation may be contrary to the general intent
of the plan or in violation of applicable law. We will send you a
certificate for whole shares and a check for the cash value of the
fractional shares in any plan account so terminated.
The terms and conditions of the plan and its operation shall be
governed by and construed in accordance with the laws of the State of
Minnesota.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, you will be treated as having received
a distribution on the Dividend Payment Date in an amount equal to the
fair market value on that date of the full and fractional number of
shares purchased with the reinvested amount used to purchase authorized
but unissued shares directly from ALLETE. The tax basis of the
purchased shares will be equal to the fair market value of such shares
on the Dividend Payment Date.
For federal income tax purposes, you will be treated as having received
a distribution on the Dividend Payment Date in an amount equal to the
reinvested amount plus brokerage fees, commissions or other service
charges used to purchase shares in the open market, if paid by us to
obtain the shares. The tax basis of the purchased shares will be equal
to the amount of the distribution.
If you purchase shares with optional cash payments, any brokerage fees,
commissions or other service charges paid by us to obtain the shares
will be treated as a distribution to you for federal income tax
purposes. The tax basis of shares purchased in this manner will be
equal to the amount of the optional cash payment plus the amount of the
distribution.
For federal income tax purposes, distributions will be treated as
dividends to the extent paid out of current or accumulated earnings and
profits and will be includible in your income and taxable as ordinary
income. If a distribution exceeds our current and accumulated earnings
and profits, the excess will be first treated as a tax-free return of
your investment, up to your tax basis in our common stock. Any
remaining excess will be treated as a capital gain. Dividends received
by noncorporate persons on common stock in tax years beginning on or
before December 31, 2008 generally are subject to U.S. federal income
tax at lower rates than other types of ordinary income, subject to
certain exceptions.
The holding period for shares acquired under the plan begins on the day
after the shares are credited to your plan accounts. Your distribution
for federal income tax purposes, including any brokerage fees,
commissions or other
18
service charges we pay in respect of reinvested dividends or optional
cash investments, will be reported on your year-end Form 1099-DIV.
Upon sale, exchange or other disposition of any shares, you will
generally realize gain or loss equal to the difference between the
amount realized on the disposition and your tax basis in the shares.
Such gain or loss will be capital gain or loss and generally will be
long-term capital gain or loss if you held the shares for more than one
year immediately prior to such disposition. Long-term capital gains of
individuals are eligible for reduced rates of taxation. The
deductibility of capital losses is subject to limitations. Unless an
exemption applies, we will send you a Form 1099-B for any shares sold
through the plan.
If you are a foreign shareholder whose distributions are subject to
United States income tax withholding, or a domestic shareholder subject
to backup withholding, the amount of the distribution either sent to
you in cash or reinvested in shares will be reduced by such tax
withholding. The regular Statements of Account sent to you will
indicate the amount of tax withheld. We will similarly withhold taxes
on any sale of shares if you are subject to income tax withholding or
backup withholding. We will reduce the amount we send to you for such
sale by the amount of tax withheld and any applicable administrative
fees or broker commissions. Any income tax we withhold may be claimed
as a credit on your federal income tax return.
The information explained above is only a summary and does not purport
to be a complete description of all tax consequences of participation
in the plan. The description may be affected by future legislation, IRS
rulings and regulations, or court decisions. In addition, the taxation
of foreign shareholders, except as noted, is not discussed in this
prospectus. Accordingly, you should consult your own tax advisors with
respect to the federal, state, local and foreign tax consequences of
your participation in the plan.
DESCRIPTION OF COMMON STOCK
GENERAL. The following statements describing our common stock are not
intended to be a complete description. They are qualified in their
entirety by reference to our Articles of Incorporation, Rights Plan, as
defined below, and mortgage and deed of trust. We also refer you to the
laws of the State of Minnesota.
We have the following authorized capital stock by our Articles of
Incorporation: 43,333,333 shares of common stock, without par value,
and 3,616,000 shares of preferred stock. As of the date of this
prospectus, 29,701,774 shares of common stock were issued and
outstanding and no shares of preferred stock were issued and
outstanding.
DIVIDEND RIGHTS. Our common stock is entitled to dividends only after
we have provided for dividends and any sinking fund requirements on any
issued and outstanding preferred stock.
Our Articles of Incorporation contain provisions which would restrict
net income available for the payment of cash dividends on outstanding
common stock in the event that shares of ALLETE's preferred stock were
outstanding and certain common stock equity capitalization ratios were
not met.
VOTING RIGHTS (NON-CUMULATIVE VOTING). Holders of our common stock are
entitled to receive notice of and to vote at any meeting of our
shareholders. Each share of our common stock, as well as each share of
any of our issued and outstanding preferred stock, is entitled to one
vote. Since the holders of these shares do not have cumulative voting
rights, the holders of more than 50 percent of the shares voting can
elect all our directors. If that happens, the holders of the remaining
shares voting (less than 50 percent) cannot elect any directors. In
addition, whenever dividends on any of our preferred stock are in
default in the amount of four quarterly payments, and until all the
19
dividends in default are paid, the holders of our preferred stock are
entitled, as one class, to elect a majority of the directors. Our
common stock, as one class, would then elect the minority.
Our Articles of Incorporation include detailed procedures and other
provisions relating to these rights and their termination, including:
- quorums;
- terms of directors elected;
- vacancies;
- class voting;
- meetings; and
- adjournments.
Our Articles of Incorporation contain provisions that make it difficult
to obtain control of ALLETE through transactions not having the
approval of our Board of Directors. These provisions include:
1) a provision requiring the affirmative vote of 75 percent of the
outstanding shares of all classes of our capital stock, present and
entitled to vote, in order to authorize certain mergers or
consolidations, or sales or leases of a significant amount of assets,
of ALLETE, and other significant transactions that may have an effect
on the control of ALLETE. Any of those transactions are required to
meet certain "fair price" and procedural requirements. Neither a 75
percent shareholder vote nor a "fair price" is required for any of
those transactions that have been approved by a majority of the
"Disinterested Directors," as that term is defined in our Articles of
Incorporation;
2) a provision permitting a majority of the Disinterested Directors to
determine whether the above requirements have been satisfied; and
3) a provision providing that some parts of our Articles of
Incorporation cannot be altered unless approved by 75 percent of the
outstanding shares of all classes of our capital stock, present and
entitled to vote, unless the alteration is recommended to the
shareholders by a majority of the Disinterested Directors. The parts of
our Articles of Incorporation that cannot be altered except as stated
above include parts relating to:
a. mergers or consolidations, or sales or leases of a significant
amount of assets, of ALLETE, and other significant transactions
that may have an effect on the control of ALLETE; and
b. the number, election, terms of office and removal of directors
of ALLETE and the way in which vacancies on the Board of
Directors are filled.
LIQUIDATION RIGHTS. After we have satisfied creditors and the
preferential liquidation rights of any of our outstanding preferred
stock, the holders of our common stock are entitled to share ratably in
the distribution of all remaining assets.
20
MISCELLANEOUS. Holders of our common stock have no preemptive or
conversion rights. Our common stock is listed on the New York Stock
Exchange. The transfer agents and registrars for our common stock are
Wells Fargo Bank, N.A. and ALLETE.
DESCRIPTION OF PREFERRED SHARE PURCHASE RIGHTS. The following
statements describing our preferred share purchase rights (each a
Right) are not intended to be a complete description. They are
qualified in their entirety by reference to the Rights Agreement, dated
as of July 24, 1996 (Rights Plan), between ALLETE and ALLETE's
Corporate Secretary, as Rights Agent. We also refer you to the laws of
the State of Minnesota.
In July 1996, our Board of Directors declared a dividend distribution
of one Right for each outstanding share of our common stock to
shareholders of record at the close of business on July 24, 1996
(Record Date). Our Board of Directors also authorized the issuance of
one Right for each share of our common stock that becomes outstanding
between the Record Date and July 23, 2006, or an earlier date on which
the Rights are redeemed. Except as described below, each Right, when
exercisable, entitles the registered holder to purchase from us
one-and-a-half one-hundredths (three two-hundredths) of a share of
Junior Serial Preferred Stock A, without par value (Serial Preferred)
at a price of $90.00 (the Purchase Price). The Purchase Price is
subject to adjustment.
Initially, no separate Right Certificates were distributed. Until the
Distribution Date, our common stock certificates together with a copy
of the Summary of Rights Plan are proof of the Rights. The Distribution
Date is the earlier to occur of:
1) 10 days following a public announcement that a person or group of
affiliated or associated persons (an Acquiring Person) has acquired, or
obtained the right to acquire, beneficial ownership of 15 percent or
more of the outstanding shares of our common stock (the Stock
Acquisition Date); or
2) 15 business days following the commencement of (or a public
announcement of an intention to make) a tender or exchange offer where
a person or group would become the beneficial owner of 15 percent or
more of our outstanding shares of common stock. At any time before a
person becomes an Acquiring Person, our Board of Directors may extend
the 15-business day time period.
Until the Distribution Date (or the earlier redemption, expiration or
termination of the Rights), the Rights will be transferred only with
our common stock. The transfer of any of our common stock (whether by
certificate or DRS), with or without a copy of the Summary of Rights
Plan, will also constitute the transfer of the Rights associated with
that common stock. As soon as practicable following the Distribution
Date, we will mail separate certificates for the Rights to holders of
record of our common stock as of the close of business on the
Distribution Date. After the Distribution Date, separate certificates
for the Rights will be given as proof of the Rights.
Each whole share of our Serial Preferred will have a minimum
preferential quarterly dividend rate equal to the greater of $51 per
share or, subject to anti-dilution adjustment, 200 times the dividend
declared on our common stock. If ALLETE liquidates, no distribution
will be made to the holders of our common stock until the holders of
our Serial Preferred have received a liquidation preference of $100 per
share, plus accrued and unpaid dividends. Holders of our Serial
Preferred will be entitled to receive notice of and to vote at any
meeting of our shareholders. Each whole share of our Serial Preferred
is entitled to one vote. These shares do not have cumulative voting
rights. Whenever dividends on any of our preferred stock are in default
in the amount of four quarterly payments, and until all the dividends
in default are paid, the holders of our Serial Preferred and other
preferred stock will be entitled, together as one class, to elect a
majority of directors. Our common stock would then elect the minority.
If, in any merger or other transaction, shares of our common stock are
exchanged for or converted into other securities and/or property, each
whole share of our Serial Preferred will be entitled to receive,
subject to
21
anti-dilution adjustment, 200 times the amount for or into which each
share of our common stock is exchanged or converted. We cannot redeem
the shares of Serial Preferred.
The Rights are not exercisable until the Distribution Date and will
expire at the earliest of:
1) July 23, 2006 (Final Expiration Date);
2) the redemption of the Rights by ALLETE as described below; or
3) the exchange of all Rights for our common stock as described below.
If any person (other than ALLETE, its affiliates or any person
receiving newly-issued shares of common stock directly from ALLETE)
becomes the beneficial owner of 15 percent or more of the then
outstanding shares of common stock, each holder of a Right will have a
right to receive, upon exercise at the then current exercise price of
the Right, common stock (or, in the discretion of the Board of
Directors, cash, property or other securities of ALLETE) with a value
equal to two times the exercise price of the Right. The Rights Plan
contains an exemption for common stock we issue directly to any person.
This exemption applies even if the person would become the beneficial
owner of 15 percent or more of our common stock, provided that the
person does not acquire any additional shares of our common stock.
Examples of situations where we might issue common stock directly
include private placements or acquisitions we make using our common
stock as consideration.
If following the Stock Acquisition Date we are acquired in a merger or
other business combination transaction, or 50 percent or more of our
assets or earning power are sold, we will make proper provision so that
each holder of a Right will, after the transaction, have the right to
receive, upon exercise at the then current exercise price of the Right,
common stock of the acquiring or surviving company with a value equal
to two times the exercise price of the Right.
If the events described in the preceding two paragraphs happen (the
Triggering Events), any Rights that an Acquiring Person beneficially
owns or transferred to certain persons, will immediately become null
and void.
The Purchase Price payable and the number of shares of our Serial
Preferred or other securities or property issuable if the Rights are
exercised, are subject to adjustment. An adjustment would be made to
prevent dilution, if there was a stock dividend on, or a subdivision,
split, combination, consolidation or reclassification of, our Serial
Preferred or our common stock, or a reverse split of our outstanding
shares of Serial Preferred or common stock.
Our Board of Directors may exchange the Rights at an exchange ratio of
one share of common stock per Right at any time that is:
1) after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15 percent or more of
the outstanding common stock; and
2) before the acquisition by that person or group of 50 percent or
more of the outstanding common stock.
This exchange ratio is subject to adjustment and does not include
Rights that have become null and void.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least
one percent in the Purchase Price. We will not be required to issue
fractional shares of
22
Serial Preferred or common stock (other than fractions in multiples of
one one-hundredths of a share of Serial Preferred). Instead, we may
make an adjustment in cash based on the market price of the Serial
Preferred or common stock on the last trading date before the date of
exercise.
Our Board of Directors may redeem the Rights in whole, but not in part,
at a price of $.015 per Right (Redemption Price) anytime before a
person becomes an Acquiring Person. At our option, we may pay the
Redemption Price in cash, shares of our common stock or other
consideration that our Board of Directors deems appropriate. If we
redeem the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
If the Rights are exercised, issuance of our Serial Preferred or our
common stock will be subject to any necessary regulatory approvals.
Until a Right is exercised, the holder of the Right will have no rights
as a shareholder of ALLETE, including, without limitation, the right to
vote or to receive dividends. One million shares of our Serial
Preferred were reserved for issuance if the Rights are exercised.
We may amend the provisions of the Rights Plan. However, any amendment
adopted after the time that a person becomes an Acquiring Person may
not adversely affect the interests of holders of Rights.
The Rights have anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire
ALLETE without conditioning the offer on the redemption of the Rights
or on the acquisition of a substantial number of Rights. The Rights
beneficially owned by that person or group may become null and void.
The Rights should not interfere with any merger or other business
combination approved by our Board of Directors. This is because, at any
time before a person becomes an Acquiring Person, our Board of
Directors may redeem all of the outstanding Rights at the Redemption
Price.
USE OF PROCEEDS
We will receive no proceeds from the offering of common stock through
the plan unless shares of common stock are purchased directly from
ALLETE. To the extent that shares are purchased directly from ALLETE,
we expect that the net proceeds received will be used for general
corporate purposes. We have no basis for estimating either the number
of shares of common stock that may be sold under the plan, the prices
at which those shares will be sold or the number of shares that will be
purchased directly from ALLETE.
EXPERTS
The consolidated financial statements and management's assessment of
the effectiveness of internal control over financial reporting (which
is included in Management's Report on Internal Control Over Financial
Reporting) incorporated in this prospectus by reference to the Annual
Report on Form 10-K for the year ended December 31, 2004, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
an independent registered public accounting firm, given on the
authority of said firm as experts in auditing and accounting.
The statements as to matters of law and legal conclusions under
"Description of the Common Stock" in this prospectus and in the
documents incorporated in this prospectus by reference, will be
reviewed by Deborah A. Amberg, Esq., Duluth, Minnesota, Vice President,
General Counsel and Secretary of ALLETE. The statements under "United
States Federal Income Tax Consequences" in this prospectus have been
reviewed by Thelen Reid & Priest LLP. All of such statements and
conclusions are presented or incorporated by reference in this
prospectus in reliance upon the opinions of such individual and firms,
respectively as experts.
23
As of the date of this prospectus, Ms. Amberg owned 2,003 shares of
ALLETE common stock. Ms. Amberg is acquiring additional shares of
ALLETE common stock at regular intervals as a participant in the ALLETE
Retirement Savings and Stock Ownership Plan. Under the Executive
Long-Term Incentive Compensation Plan, Ms. Amberg has:
- been granted options to purchase 15,950 shares of ALLETE common
stock, of which 11,688 options are fully vested, the remainder of
which shall vest over the next three years, and all of which will
expire ten years from the date of grant; and
- an award opportunity for up to 2,460 additional performance shares
contingent upon the attainment of certain performance goals of
ALLETE for the periods January 1, 2004 through December 31, 2005,
January 1, 2004 through December 31, 2006, and January 1, 2005
through December 31, 2007.
LEGAL OPINIONS
The legality of the shares of common stock offered hereby will be
passed upon for ALLETE by Deborah A. Amberg, Duluth, Minnesota, Vice
President, General Counsel and Secretary of ALLETE and by Thelen Reid &
Priest LLP, New York, New York, counsel for ALLETE. Thelen Reid &
Priest LLP may rely as to all matters of Minnesota law upon the opinion
of Ms. Amberg.
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